Time Warner Cable 2009 Annual Report Download - page 27

Restrictions on transfer—A/N Partner. A/N is generally permitted to directly or indirectly transfer its entire partnership interest at
any time to certain members of the Newhouse family or specified affiliates of A/N. A/N is also permitted to dispose of its partnership
interest through a pledge to secure a loan and in connection with specified restructurings of A/N.
Restructuring rights of the partners. TWE and A/N each has the right to cause TWE-A/N to be restructured at any time. Upon a
restructuring, TWE-A/N is required to distribute the A/N Subsidiary with all of the A/N Systems to A/N in complete redemption of A/N’s
interests in TWE-A/N, and A/N is required to assume all liabilities of the A/N Subsidiary and the A/N Systems. To date, neither TWE nor
A/N has delivered notice of the intent to cause a restructuring of TWE-A/N.
TWE’s regular right of first offer. Subject to exceptions, A/N and its affiliates are obligated to grant TWE a right of first offer prior
to any sale of assets of the A/N Systems to a third party.
TWE’s special right of first offer. Within a specified time period following the first, seventh, thirteenth and nineteenth
anniversaries of the deaths of two specified members of the Newhouse family (those deaths have not yet occurred), A/N has the
right to deliver notice to TWE stating that it wishes to transfer some or all of the assets of the A/N Systems, thereby granting TWE the
right of first offer to purchase the specified assets. Following delivery of this notice, an appraiser will determine the value of the assets
proposed to be transferred. Once the value of the assets has been determined, A/N has the right to terminate its offer to sell the specified
assets. If A/N does not terminate its offer, TWE will have the right to purchase the specified assets at a price equal to the value of the
specified assets determined by the appraiser. If TWE does not exercise its right to purchase the specified assets, A/N has the right to sell
the specified assets to an unrelated third party within 180 days on substantially the same terms as were available to TWE.
Clearwire Investment
TWC holds an indirect equity interest in Clearwire, which was formed by the combination of the respective wireless broadband
businesses of Sprint and Clearwire Communications LLC, an operating subsidiary of Clearwire (the “Clearwire Investment”). The
Clearwire Invesment is focused on deploying the first nationwide 4G wireless network to provide mobile broadband services to
wholesale and retail customers. Clearwire’s Class A Common Stock is listed for trading on the NASDAQ Global Select Market. In
November 2008, TWC, Intel Corporation (“Intel”), Google Inc., Comcast and Bright House Networks, LLC (collectively, the “Clearwire
Investors”) invested $3.2 billion (the “Initial Clearwire Investment”) in Clearwire Communications LLC. TWC initially invested
$550 million for membership interests in Clearwire Communications, LLC, which represented an ownership interest in Clearwire, after
post-closing adjustments, of approximately 4.47%. In connection with the transaction, TWC entered into wholesale agreements with
Clearwire and Sprint that allow TWC to offer wireless services utilizing Clearwire’s 4G WiMax network and Sprint’s 3G CDMA
network. See “—Services—Residential Services—High-speed Data Services” above.
In November 2009, TWC, Sprint, Intel, Comcast, Bright House Networks, LLC and Eagle River Holdings, LLC (the “Participating
Equityholders”) collectively agreed to invest up to an additional $1.564 billion in Clearwire Communications LLC, of which TWC
agreed to fund approximately $103 million (the “Follow-On Clearwire Investment”). Through December 31, 2009, $1.497 billion of the
investment had been funded, of which TWC had invested $99 million. Following the completion of the transaction in the first quarter of
2010, TWC expects its ownership in Clearwire will be approximately 4.93%.
In exchange for TWC investing in the Follow-On Clearwire Investment in amounts in excess of its pro rata ownership in Clearwire
prior to such investment, Clearwire agreed to pay TWC a cash fee of $2 million. Certain other Participating Equityholders received
similar fees in connection with the Follow-On Clearwire Investment.
In connection with the Initial Clearwire Investment, affiliates of TWC and the other Clearwire Investors entered into an operating
agreement, an equity holders’ agreement and a registration rights agreement (the “Registration Rights Agreement”) with Clearwire, and,
other than Intel, a strategic investor agreement governing certain rights and obligations of the parties with respect to the governance of
Clearwire, including director nominations, transfer and purchase restrictions on Clearwire’s common stock, rights of first refusal,
pre-emptive rights and tag-along rights. Under the Registration Rights Agreement, TWC is entitled to two demand registration rights
(other than demands to file a registration statement on Form S-3) as long as the securities to be registered have an aggregate price to the
public of not less than $50 million. On December 21, 2009, Clearwire filed a shelf registration statement providing for the registration
and sale of all Clearwire securities held by TWC as of such date.
Wireless Spectrum Joint Venture
TWC is a participant in a joint venture with certain other cable companies (“SpectrumCo”) that holds advanced wireless spectrum
(“AWS”) licenses. In January 2009, SpectrumCo redeemed the 10.9% interest held by an affiliate of Cox Communications, Inc. (“Cox”)
and Cox received AWS licenses, principally covering the areas in which Cox provides cable services, and approximately $70 million in
cash (of which TWC’s share was $22 million). Following the closing of the Cox transaction, SpectrumCo’s AWS licenses cover 20 MHz
over 80% of the continental United States and Hawaii.
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