Time Warner Cable 2008 Annual Report Download - page 36

• change or adopt a provision inconsistent with the provisions of the TWC Certificate of Incorporation that
set forth:
• the approvals required in connection with any merger, consolidation or business combination of TWC;
• the number of independent directors required on the TWC board of directors;
• the approvals required to change the TWC By-laws; and
• the approvals required to change the TWC Certificate of Incorporation.
The TWC Second Amended and Restated Certificate of Incorporation will include provisions regarding
required approvals that are substantially similar to those described above, except that, while the approval of the
holders of a majority of the voting power of the outstanding shares of TWC Class A common stock held by persons
other than Time Warner is currently required in certain circumstances, pursuant to the TWC Second Amended and
Restated Certificate of Incorporation, the approval of the holders of a majority of the voting power of the
outstanding shares of TWC Common Stock held by persons other than Time Warner will be required.
Matters Affecting the Relationship between Time Warner and TWC
Indebtedness approval right. Pursuant to a shareholder agreement between TWC and Time Warner (the
“Shareholder Agreement”), until such time as the indebtedness of TWC is no longer attributable to Time Warner, in
Time Warner’s reasonable judgment, TWC, its subsidiaries and entities that it manages may not, without the
consent of Time Warner, create, incur or guarantee any indebtedness (except for the issuance of commercial paper
or borrowings under TWC’s current revolving credit facility up to the limit of that credit facility, to which Time
Warner has consented), including preferred equity, or rental obligations if its ratio of indebtedness plus six times its
annual rental expense to EBITDA (as EBITDA is defined in the Shareholder Agreement) plus rental expense, or
“EBITDAR,” then exceeds or would exceed 3:1. In the Separation Agreement, Time Warner agreed that the
calculation of indebtedness under the Shareholder Agreement would exclude (i) any indebtedness incurred pursuant
to the 2008 Bridge Facility to fund, in part, the Special Dividend and (ii) any indebtedness that reduces, on a dollar-
for-dollar basis, the commitments of the lenders under the 2008 Bridge Facility.
Time Warner standstill. Under the Shareholder Agreement, so long as Time Warner has the power to elect a
majority of TWC’s board of directors, Time Warner has agreed that, prior to August 1, 2009, Time Warner will not
make or announce a tender offer or exchange offer for TWC Class A common stock without the approval of a
majority of the independent directors of TWC; and prior to August 1, 2016, Time Warner will not enter into any
business combination with TWC, including a short-form merger, without the approval of a majority of the
independent directors of TWC.
Other Time Warner rights. Pursuant to the Shareholder Agreement, so long as Time Warner has the power to
elect a majority of TWC’s board of directors, TWC must obtain Time Warner’s consent before (i) entering into any
agreement that binds or purports to bind Time Warner or its affiliates or that would subject TWC or its subsidiaries
to significant penalties or restrictions as a result of any action or omission of Time Warner or its affiliates; or
(ii) adopting a stockholder rights plan, becoming subject to section 203 of the Delaware General Corporation Law,
adopting a “fair price” provision in the TWC Certificate of Incorporation or taking any similar action.
Furthermore, pursuant to the Shareholder Agreement, so long as Time Warner has the power to elect a majority
of TWC’s board of directors, Time Warner may purchase debt securities issued by TWE only after giving notice to
TWC of the approximate amount of debt securities it intends to purchase and the general time period for the
purchase, which period may not be greater than 90 days, subject to TWC’s right to give notice to Time Warner that it
intends to purchase such amount of TWE debt securities itself.
Concurrently with the execution of the Separation Agreement, TWC and Time Warner entered into Amend-
ment No. 1 to the Shareholder Agreement. Under this amendment, all of Time Warner’s and TWC’s rights and
obligations under the Shareholder Agreement will terminate upon the completion of the Separation.
Transactions between Time Warner and TWC. The TWC By-laws provide that Time Warner may only enter
into transactions with TWC and its subsidiaries, including TWE, that are on terms that, at the time of entering into
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