Time Warner Cable 2008 Annual Report Download - page 125

TW NY Cable Preferred Membership Units
In connection with the financing of the Adelphia Acquisition, TW NY Cable issued $300 million of its
Series A Preferred Membership Units (the “TW NY Cable Preferred Membership Units”) to a limited number of
third parties. The TW NY Cable Preferred Membership Units pay cash dividends at an annual rate equal to 8.21% of
the sum of the liquidation preference thereof and any accrued but unpaid dividends thereon, on a quarterly basis.
The TW NY Cable Preferred Membership Units are subject to mandatory redemption by TW NY Cable on
August 1, 2013 and are not redeemable by TW NY Cable at any time prior to that date. The redemption price of the
TW NY Cable Preferred Membership Units is equal to their liquidation preference plus any accrued and unpaid
dividends through the redemption date. Except under limited circumstances, holders of TW NY Cable Preferred
Membership Units have no voting rights.
The terms of the TW NY Cable Preferred Membership Units require that holders owning a majority of the TW
NY Cable Preferred Membership Units must approve any agreement for a material sale or transfer by TW NY Cable
and its subsidiaries of assets at any time during which TW NY Cable and its subsidiaries maintain, collectively,
cable systems serving fewer than 500,000 cable subscribers, or that would (after giving effect to such asset sale)
cause TW NY Cable to maintain, directly or indirectly, fewer than 500,000 cable subscribers, unless the net
proceeds of the asset sale are applied to fund the redemption of the TW NY Cable Preferred Membership Units and
the sale occurs on or immediately prior to the redemption date. Additionally, for so long as the TW NY Cable
Preferred Membership Units remain outstanding, TW NY Cable may not merge or consolidate with another
company, or convert from a limited liability company to a corporation, partnership or other entity, unless (i) such
merger or consolidation is permitted by the asset sale covenant described above, (ii) if TW NY Cable is not the
surviving entity or is no longer a limited liability company, the then holders of the TW NY Cable Preferred
Membership Units have the right to receive from the surviving entity securities with terms at least as favorable as the
TW NY Cable Preferred Membership Units and (iii) if TW NY Cable is the surviving entity, the tax characterization
of the TW NY Cable Preferred Membership Units would not be affected by the merger or consolidation. Any
securities received from a surviving entity as a result of a merger or consolidation or the conversion into a
corporation, partnership or other entity must rank senior to any other securities of the surviving entity with respect to
dividends and distributions or rights upon a liquidation.
Time Warner Approval Rights
Under a shareholder agreement entered into between TWC and Time Warner on April 20, 2005 (the
“Shareholder Agreement”), TWC is required to obtain Time Warner’s approval prior to incurring additional debt
(except for ordinary course issuances of commercial paper or borrowings under the Revolving Credit Facility up to
the limit of that credit facility, to which Time Warner has consented) or rental expenses (other than with respect to
certain approved leases) or issuing preferred equity, if its consolidated ratio of debt, including preferred equity, plus
six times its annual rental expense to EBITDAR (the “TW Leverage Ratio”) then exceeds, or would as a result of the
incurrence or issuance exceed, 3:1. Under certain circumstances, TWC is required to include the indebtedness,
annual rental expense obligations and EBITDAR of certain unconsolidated entities that it manages and/or in which
it owns an equity interest, in the calculation of the TW Leverage Ratio. The Shareholder Agreement defines
EBITDAR, at any time of measurement, as operating income (loss) plus depreciation, amortization and rental
expense (for any lease that is not accounted for as a capital lease) for the twelve months ending on the last day of
TWC’s most recent fiscal quarter, including certain adjustments to reflect the impact of significant transactions as if
they had occurred at the beginning of the period. In the Separation Agreement, Time Warner agreed that the
calculation of indebtedness under the Shareholder Agreement would exclude any indebtedness incurred pursuant to
the 2008 Bridge Facility and any indebtedness that reduces, on a dollar-for-dollar basis, the commitments of the
lenders under the 2008 Bridge Facility. All of Time Warner’s and TWC’s rights and obligations under the
Shareholder Agreement will terminate upon completion of the Separation.
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TIME WARNER CABLE INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)