EXHIBIT: 10.5
EXECUTION COPY
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PARENT AGREEMENT
AMONG
TIME WARNER CABLE INC.,
AOL TIME WARNER INC.
AND
TWE HOLDINGS II TRUST
DATED AS OF: MARCH 31, 2003
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TABLE OF CONTENTS
Page
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1. Definitions................................................... 1
2. Actions Requiring Consent of AOLTW............................ 4
3. Certain Rights of Trust II.................................... 5
3.1 Independent Directors................................ 5
3.2 Financial Statements and Other Information........... 5
4. AOLTW Covenants............................................... 6
4.1 Tender Offers and Exchange Offers.................... 6
4.2 Mergers.............................................. 6
4.3 TWE Public Debt...................................... 6
4.4 Closing Date Balance Sheet........................... 7
5. Miscellaneous................................................. 7
5.1 Notices.............................................. 7
5.2 Successors and Assigns............................... 8
5.3 Amendment and Waiver................................. 9
5.4 Counterparts; Effectiveness.......................... 9
5.5 Specific Performance................................. 9
5.6 Headings............................................. 9
5.7 Governing Law........................................ 9
5.8 Jurisdiction......................................... 9
5.9 WAIVER OF JURY TRIAL................................. 10
5.10 Severability......................................... 10
5.11 Rules of Construction................................ 10
5.12 Entire Agreement; No Third Party Beneficiaries....... 10
5.13 Termination.......................................... 10
5.14 Further Assurances................................... 10
PARENT AGREEMENT
PARENT AGREEMENT, dated as of March 31, 2003, among AOL Time
Warner Inc., a Delaware corporation ("AOLTW"), TWE Holdings II Trust, a Delaware
statutory trust ("Trust II"), and Time Warner Cable Inc., a Delaware corporation
(the "Company").
WHEREAS, AOLTW, the Company, Comcast Corporation, a
Pennsylvania corporation (formerly named AT&T Comcast Corporation, "Comcast"),
and the other parties thereto have entered into a Restructuring Agreement, dated
as of August 20, 2002 (as amended, the "Restructuring Agreement"), pursuant to
which the parties will, among other things, restructure and recapitalize the
Company; and
WHEREAS, the parties wish to grant certain rights to AOLTW and
Trust II in respect of the Company.
NOW, THEREFORE, in consideration of the mutual covenants and
agreements set forth herein and for good and valuable consideration, the receipt
and adequacy of which are hereby acknowledged, the parties hereto agree as
follows:
1. Definitions. As used in this Agreement, and unless
the context requires a different meaning, the following terms have the meanings
indicated:
"Affiliate" means, with respect to any Person, any other
Person directly or indirectly controlling, controlled by or under common control
with such Person; provided, that, for purposes of this definition, "control"
(including with correlative meanings, the terms "controlled by" and "under
common control with"), as used with respect to any Person, shall mean the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such Person, whether through the
ownership of voting securities or other equity securities, by contract or
otherwise.
"Agreement" means this Agreement, as the same may be amended,
supplemented or modified in accordance with the terms hereof.
"AOLTW" has the meaning set forth in the preamble to this
Agreement.
"Attribution Entity" means (i) any Managed Entity other than a
Managed 50% Entity or (ii) any other Person (other than a Subsidiary of the
Company or a Managed Entity) of which the Company owns, directly or indirectly,
at least 20% of the outstanding equity.
"Board of Directors" means the Board of Directors of the
Company.
"Business Combination" means a merger, consolidation, share
exchange, business combination, reorganization, recapitalization or similar
corporate transaction. Notwithstanding the foregoing, a Business Combination
shall include any transaction
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effected pursuant to Section 253 of the General Corporation Law of the State of
Delaware.
"Business Day" means any day other than a Saturday, Sunday or
other day on which commercial banks in the State of New York are authorized or
required by law or executive order to close.
"Charter Documents" means the Restated Certificate of
Incorporation and the By-laws of the Company as in effect from time to time.
"Class A Common Stock" means the Class A Common Stock, par
value $0.01 per share, of the Company.
"Class B Common Stock" means the Class B Common Stock, par
value $0.01 per share, of the Company.
"Comcast" has the meaning set forth in the preamble to this
Agreement.
"Common Stock" means the Class A Common Stock and Class B
Common Stock.
"Company" has the meaning set forth in the preamble to this
Agreement.
"Designated Director" has the meaning set forth in Section 3.1
of this Agreement.
"EBITDA" means, at any time of measurement, with respect to
any Person, for the twelve months ending on the last day of the most recent
fiscal quarter for which such information is available, operating income plus
depreciation and amortization of such Person, in each case determined in
accordance with GAAP as applied as of the date hereof and consistent with the
presentation and manner of calculation in the consolidated statement of
operations contained in the consolidated financial statements included in the
Form 10-Q filed by TWE for the period ended June 30, 2002.
"EBITDAR" means, EBITDA plus Rental Expense.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated thereunder.
"GAAP" means generally accepted accounting principles in the
United States in effect from time to time.
"Governmental Authority" means any supranational, national,
state, municipal or local government, political subdivision or other
governmental department, court, commission, board, bureau, agency,
instrumentality, or other authority thereof, or any quasi-governmental or
private body exercising any regulatory, taxing, importing or other governmental
or quasi-governmental authority, whether domestic or foreign.
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"Incurrence" has the meaning set forth in Section 2 of this
Agreement.
"Indebtedness" means, with respect to any Person, (a) any
obligation of such Person (i) for borrowed money, (ii) evidenced by a note,
debenture or similar instrument (including a purchase money obligation) given in
connection with the acquisition of any property or assets, including securities,
(iii) for the deferred purchase price of property or services, except trade
accounts payable arising in the ordinary course of business or (iv) under any
lease or similar arrangement that would be required to be accounted for by the
lessee as a capital lease in accordance with GAAP; (b) any guarantee (or
keepwell agreement) by such Person of any indebtedness of others described in
the preceding clause (a); (c) any obligation to reimburse any bank or other
Person for amounts paid under a letter of credit or similar instrument (other
than those issued in respect of the performance obligations in the ordinary
course); and (d) any preferred stock or similar security or equity interest
having a preference over the common equity of such Person in a liquidation,
dissolution, or winding-up of such Person; provided, however, that any such
preferred stock or similar security or equity interest held by AOLTW or its
Subsidiaries shall not be deemed Indebtedness of the Company, any Subsidiary of
the Company or any Managed Entity for so long as it is held by any such Person.
"Independent Director" has the meaning set forth in Section
303.01 or any successor provision of the Listed Company Manual of the New York
Stock Exchange, as such rules may be amended from time to time.
"Initial Offering Date" means the date upon which shares of
the Common Stock shall have been sold in an initial public offering (whether a
primary or secondary offering) of the Company pursuant to an effective
registration statement filed by the Company.
"Managed Entity" means any Person in which the Company or any
of its Subsidiaries owns any equity and the cable operations of which are
managed by the Company or any of its Subsidiaries pursuant to a management or
similar agreement or arrangement. Each of the Persons included in the Selected
Business shall be deemed not to be a Managed Entity.
"Managed 50% Entity" means any Managed Entity in which the
Company or any of its Subsidiaries owns 50% or more of the outstanding equity.
Without limitation of the foregoing, Texas Cable Partners, L.P. and Kansas City
Cable Partners, L.P. shall be deemed to be Managed 50% Entities.
"Operating Lease Obligations" means, with respect to any
Person, an amount equal to six (6) times such Person's Rental Expense.
"Permitted AT&T Disposition" has the meaning set forth in the
Restructuring Agreement.
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"Person" means any individual, firm, corporation, partnership,
trust, incorporated or unincorporated association, joint venture, joint stock
company, limited liability company, Governmental Authority or other entity of
any kind, and shall include any successor (by merger or otherwise) of such
entity or any "group" (as defined under Rule 13-d of the Exchange Act).
"Rental Expense" means, with respect to any Person, the
aggregate amount of rent payable under all leases, the obligation with respect
to which is not included under the definition of Indebtedness, of such Person
for the twelve (12) months ending on the last day of the calendar month
immediately prior to the date of determination.
"Restructuring Agreement" has the meaning set forth in the
recitals to this Agreement.
"Selected Business" has the meaning set forth in the
Restructuring Agreement.
"Specified Period" has the meaning set forth in Section 4.3 of
this Agreement.
"Subsidiary" means, with respect to any Person, any other
Person of which securities or other ownership interests having voting power to
elect a majority of the board of directors or other body performing similar
functions are at any time directly or indirectly owned by such Person.
"TWE" means Time Warner Entertainment Company, L.P., a
Delaware limited partnership.
"TWE Indenture" means that certain Indenture, dated as of
April 30, 1992, by and among Time Warner Inc., a Delaware corporation, TWE and
The Bank of New York, a New York banking corporation, as trustee, as the same
may be amended, amended and restated, supplemented or otherwise modified from
time to time.
2. Actions Requiring Consent of AOLTW. In addition to
any approval required under applicable law or the Charter Documents, the Company
will not (and will cause its Subsidiaries and Managed Entities not to) take,
approve or otherwise ratify any of the following actions (whether or not such
actions have been otherwise approved by the Board of Directors or any committee
thereof) without the prior written approval of AOLTW:
(a) create, incur, assume (including,
without limitation, by acquiring any entity that has outstanding Indebtedness or
Rental Expense), enter into or guarantee (each such action, an "Incurrence") any
Indebtedness or Rental Expense if the Company's ratio of Indebtedness plus
Operating Lease Obligations to EBITDAR then exceeds, or would exceed as a result
of such Incurrence, 3:1. For purposes of determining the Company's Indebtedness,
Operating Lease Obligations and EBITDAR,
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there shall be deemed to be included the following: (A) 100% of the
Indebtedness, Operating Lease Obligations and EBITDAR of all Subsidiaries of the
Company and all Managed 50% Entities and (B) a percentage of Indebtedness,
Operating Lease Obligations and EBITDAR of each Attribution Entity equal to the
percentage of the equity of such Attribution Entity owned, directly or
indirectly, by the Company; provided that (i) in calculating the Company's
Indebtedness, no portion of Indebtedness of any Person shall be included in the
calculation to the extent the Indebtedness has already been included (whether by
guarantee or otherwise) as Indebtedness of the Company in such calculation, (ii)
none of the Indebtedness, Operating Lease Obligations, or EBITDAR attributable
to the Selected Business shall be included in the Indebtedness, Operating Lease
Obligations or EBITDAR of the Company, (iii) this Section 2(a) shall not
prohibit or restrict the Incurrence of the Company Indebtedness on the Closing
(each, as defined in the Restructuring Agreement) and (iv) no Indebtedness owed
by the Company or any of its Subsidiaries or any Managed Entity shall be
included if it is owed to AOLTW or any of its Subsidiaries (except to the extent
such Subsidiary to which such Indebtedness is owed is not directly or indirectly
wholly-owned by AOLTW) or the Company or any of its Subsidiaries or Managed
Entities (except to the extent such Subsidiary or Managed Entity to which such
Indebtedness is owed is not directly or indirectly wholly-owned by the Company
or TWE).
(b) enter into any agreement or
arrangement that (i) binds or purports to bind AOLTW or any of its Affiliates
(other than the Company and its Subsidiaries) in any manner, or (ii) would
impose significant penalties or restrictions on the Company or its Subsidiaries
as a result of any action or omission of AOLTW or its Affiliates (other than the
Company or its Subsidiaries).
(c) adopt a shareholder rights plan,
cause the Company to be subject to Section 203 of the General Corporation Law of
the State of Delaware, amend its certificate of incorporation to impose a "fair
price provision", or take any similar action.
3. Certain Rights of Trust II.
3.1 Independent Directors. Prior to the Initial
Offering Date, at least fifty percent (50%) of the Independent Directors serving
on the Board of Directors (the directors designated as such by AOLTW being
referred to as the Designated Directors") shall, at the time of their nomination
to the Board of Directors, be reasonably satisfactory to Trust II; provided that
if Trust II does not object in writing to the nomination of any such Designated
Directors within five (5) days following receipt of written notice thereof then
such Designated Directors shall be deemed to be reasonably satisfactory to Trust
II. To the extent possible, Designated Directors shall be Class A Directors (as
defined in the Restated Certificate of Incorporation of the Company).
3.2 Financial Statements and Other Information.
Until the Initial Offering Date, the Company shall deliver to Trust II:
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(a) as soon as available, but not later
than ninety (90) days after the end of each fiscal year of the Company, a copy
of the audited consolidated balance sheet of the Company and its Subsidiaries as
of the end of such fiscal year and the related statements of operations and cash
flows for such fiscal year, setting forth in each case in comparative form the
figures for the previous year, all in reasonable detail and accompanied by a
management summary and analysis of the operations of the Company for such fiscal
year and by the opinion of a nationally recognized independent certified public
accounting firm which report shall state without qualification that such
financial statements present fairly the consolidated financial condition as of
such date and consolidated results of operations and cash flows for the periods
indicated in conformity with GAAP applied on a consistent basis; and
(b) commencing with the first fiscal
period ending following the date hereof, as soon as available but in any event
not later than forty-five (45) days after the end of each of the first three
fiscal quarters of each fiscal year, the unaudited consolidated balance sheet of
the Company and its Subsidiaries, and the related statements of operations and
cash flows for such quarter and for the period commencing on the first day of
the fiscal year and ending on the last day of such quarter, all certified by an
appropriate officer of the Company as presenting fairly the consolidated
financial condition as of such date and results of operations and cash flows for
the periods indicated in conformity with GAAP applied on a consistent basis,
subject to normal year-end adjustments and the absence of footnotes required by
GAAP.
4. AOLTW Covenants. AOLTW hereby agrees as follows:
4.1 Tender Offers and Exchange Offers. For a
period of three (3) years following the Initial Offering Date, AOLTW shall not
(and shall cause its controlled Affiliates not to) make any tender offer or
exchange offer for any shares of Class A Common Stock (or announce any intention
to do so) without the approval of a majority of the Independent Directors then
serving on the Board of Directors.
4.2 Mergers. For a period of ten (10) years
following the Initial Offering Date, AOLTW shall not (and shall cause its
controlled Affiliates not to) enter into or effect a Business Combination with
the Company without the approval of a majority of the Independent Directors then
serving on the Board of Directors.
4.3 TWE Public Debt. In the event that AOLTW or
its Subsidiaries (other than the Company and its Subsidiaries) wishes to
purchase any debt securities issued by TWE under the TWE Indenture, AOLTW shall
first give written notice to the Company of the approximate amount of debt
securities it intends to purchase and the general time period within which it
intends to purchase such debt securities, which time period shall not be greater
than ninety (90) days (the "Specified Period"). The Company shall have five (5)
Business Days following receipt of such notice to indicate its good faith
intention to purchase such amount of debt securities within the Specified
Period. If the Company so indicates, AOLTW shall not, and shall cause its
Subsidiaries (other than the Company and its Subsidiaries) not to, purchase any
such debt securities within the Specified Period and shall thereafter comply
with the provisions of
7
this Section 4.3 prior to any subsequent purchase of any debt securities issued
under the TWE Indenture. If the Company does not indicate its good faith
intention to purchase such debt securities, AOLTW shall be entitled to proceed
with its purchase of debt securities for the duration of the Specified Period.
4.4 Closing Date Balance Sheet. On or prior to
the date that is 120 days following the Closing Date (as defined in the
Restructuring Agreement), AOLTW shall cause the Company to prepare and deliver
to Trust II a consolidated balance sheet for the Company as of the Closing Date
(after giving effect to all transactions consummated at the Closing (as defined
in the Restructuring Agreement)).
5. Miscellaneous.
5.1 Notices. All notices, demands or other
communications provided for or permitted hereunder shall be made in writing and
shall be by registered or certified first class mail, return receipt requested,
telecopier, courier service or personal delivery:
(a) if to the Company:
Time Warner Cable Inc.
00 Xxxxxxxxxxx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000-0000
Telecopy: (000) 000-0000
Attention: Executive Vice
President,
General Counsel and
Secretary
With a copy to:
Xxxx, Weiss, Rifkind, Xxxxxxx &
Xxxxxxxx LLP
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxxx X. Xxxxxxx
Fax: (000) 000-0000
(b) if to AOLTW:
AOL Time Warner Inc.
00 Xxxxxxxxxxx Xxxxx
Xxx Xxxx, XX 00000
Telecopy: (000) 000-0000
Attention: Executive Vice
President,
General Counsel and
Secretary
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With a copy to:
Xxxx, Weiss, Rifkind, Xxxxxxx &
Xxxxxxxx LLP
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxxx X. Xxxxxxx
Fax: (000) 000-0000
(c) if to Trust II to:
TWE Holdings II Trust
c/o Xxxxx X. Holiday
000 Xxxx Xxxxxx
0xx Xxxxx
Xxxxxxxxxx, XX 00000
Fax: (000) 000-0000
With a copy to:
Xxxxxxxx & Xxxxxxxx LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxx X. Xxxxxx, Esq.
Fax: (000) 000-0000
And a copy to:
Potter Xxxxxxxx & Xxxxxxx LLP
Hercules Plaza, 0000 X. Xxxxxx
Xxxxxx
X.X. Xxx 000
Xxxxxxxxxx, Xxxxxxxx 00000-0000
Attention: Xxxxxxx X. Xxxxxx
Fax: (000) 000-0000
or such other address or facsimile number as such party hereto may hereafter
specify for such purpose by notice to the other parties hereto. All such
notices, requests and other communications shall be deemed received on the date
of receipt by the recipient thereof if received prior to 5 p.m. on a Business
Day, in the place of receipt. Otherwise, any such notice, request or
communication shall be deemed not to have been received until the next
succeeding Business Day in the place of receipt.
5.2 Successors and Assigns. The provisions of
this Agreement shall be binding upon and inure to the benefit of the parties
hereto and their respective successors and assigns; provided that no party
hereto may assign, delegate or transfer any of its rights or obligations
hereunder without the consent of the other parties hereto; and provided,
further, that the rights granted to Trust II pursuant to Section 3 of this
Agreement are personal to it and may not be transferred or assigned except to an
Affiliate of Comcast.
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5.3 Amendment and Waiver.
Any amendment, supplement or modification of or to any
provision of this Agreement, any waiver of any provision of this Agreement, and
any consent to any departure by any party from the terms of any provision of
this Agreement, shall be effective only if it is made or given in writing and
signed by (i) the Company (upon a vote of a majority of the Independent
Directors then serving on the Board of Directors), (ii) AOLTW and (iii) with
respect to any amendment, supplement or modification of or of any defined term
used in Section 3, Section 4 or this Section 5 of this Agreement, Trust II. Any
such amendment, supplement, modification, waiver or consent shall be binding
upon the Company, AOLTW and Trust II.
No failure or delay on the part of any party hereto in
exercising any right, power or remedy hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise thereof preclude any other or
further exercise thereof or the exercise of any other right, power or remedy.
The rights and remedies provided for herein are cumulative and are not exclusive
of any rights and remedies that may be available to the parties hereto at law,
in equity or otherwise.
5.4 Counterparts; Effectiveness. This Agreement
may be signed in counterparts, each of which shall be an original, with the same
effect as if the signatures thereto and hereto were upon the same instrument.
This Agreement shall become effective when each party hereto shall have received
a counterpart hereof signed by the other parties hereto.
5.5 Specific Performance. The parties hereto
agree that irreparable damage would occur if any provision of this Agreement
were not performed in accordance with the terms hereof and that the parties
shall be entitled to an injunction or injunctions to enforce specifically the
performance of the terms and provisions hereof in any federal court located in
the State of New York or any New York state court, in addition to any other
remedy to which they are entitled at law or in equity.
5.6 Headings. The headings in this Agreement are
for convenience of reference only and shall not limit or otherwise affect the
meaning hereof.
5.7 Governing Law. This Agreement shall be
governed by and construed in accordance with the laws of the State of New York,
without regard to the conflicts of law rules of the State of New York.
5.8 Jurisdiction. Any suit, action or proceeding
seeking to enforce any provision of, or based on any matter arising out of or in
connection with, this Agreement or the transactions contemplated hereby shall be
brought in any federal court located in the State of New York or any New York
state court, and each of the parties hereby consents to the exclusive
jurisdiction of such courts (and of the appropriate appellate courts therefrom)
in any such suit, action or proceeding and irrevocably waives, to the fullest
extent permitted by law, any objection that it may now or hereafter have to the
laying of the venue of any such suit, action or proceeding in any such court or
that
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any such suit, action or proceeding brought in any such court has been brought
in an inconvenient forum. Process in any such suit, action or proceeding may be
served on either party hereto anywhere in the world, whether within or without
the jurisdiction of any such court.
5.9 WAIVER OF JURY TRIAL. EACH OF THE PARTIES
HERETO HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL
PROCEEDING ARISING OUT OF OR RELATED TO THIS AGREEMENT OR THE TRANSACTIONS
CONTEMPLATED HEREBY.
5.10 Severability. If any term, provision,
covenant or restriction of this Agreement is determined by a court of competent
jurisdiction or other authority to be invalid, void or unenforceable, the
remainder of the terms, provisions, covenants and restrictions of this Agreement
shall remain in full force and effect and shall in no way be affected, impaired
or invalidated so long as the economic or legal substance of the transactions
contemplated hereby is not affected in any manner adverse to any party hereto.
Upon such a determination, the parties hereto shall negotiate in good faith to
modify this Agreement so as to effect the original intent of the parties as
closely as possible in an acceptable manner so that the transactions
contemplated hereby may be consummated as originally contemplated to the fullest
extent possible.
5.11 Rules of Construction. Unless the context
otherwise requires, references to sections or subsections refer to sections or
subsections of this Agreement.
5.12 Entire Agreement; No Third Party
Beneficiaries.
(a) This Agreement constitutes the
entire agreement between the parties with respect to the subject matter hereof
and supersedes all prior agreements and understandings, both oral and written,
between the parties with respect to such subject matter.
(b) This Agreement shall be binding
upon and inure solely to the benefit of each party hereto and their respective
successors and permitted assigns, and nothing in this Agreement, express or
implied, is intended to or shall confer upon any other Person any right, benefit
or remedy of any nature whatsoever under or by reason of this Agreement.
5.13 Termination. Section 2(a) of this Agreement
shall terminate at such time as the Indebtedness of the Company is no longer
attributable to AOLTW (such determination to be made in AOLTW's reasonable
judgment). Sections 2(b), 2(c), 4.1, 4.2 and 4.3 of this Agreement shall
terminate at such time as the Company is no longer a Subsidiary of AOLTW.
5.14 Further Assurances. Each of the parties
shall, and shall cause their respective Affiliates to, execute such documents
and perform such further acts
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as may be reasonably required or desirable to carry out or to perform the
provisions of this Agreement.
[Remainder of page intentionally left blank]
IN WITNESS WHEREOF, the undersigned have executed, or have
caused to be executed, this Parent Agreement on the date first written above.
TIME WARNER CABLE INC.
By: /s/ Xxxx X. Xxxxxxxxx
-----------------------------------------
Name: Xxxx X. Xxxxxxxxx
Title: Executive Vice President,
General Counsel & Secretary
AOL TIME WARNER INC.
By: /s/ Xxxxxxx X. Xxxx
-----------------------------------------
Name: Xxxxxxx X. Xxxx
Title: Senior Vice President
TWE HOLDINGS II TRUST
By: /s/ Xxxxx X. Holiday
-----------------------------------------
Name: Xxxxx X. Holiday, solely in her
capacity as operating trustee
