<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 2, 1995
REGISTRATION NO. 33-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------
TIME WARNER INC. TIME WARNER CAPITAL I
(EXACT NAME OF REGISTRANT AS SPECIFIED (EXACT NAME OF REGISTRANT AS SPECIFIED
IN ITS CHARTER) IN ITS CHARTER)
13-1388520 TO BE APPLIED FOR
(I.R.S. EMPLOYER IDENTIFICATION NO.) (I.R.S. EMPLOYER IDENTIFICATION NO.)
DELAWARE DELAWARE
(STATE OR OTHER JURISDICTION OF (STATE OR OTHER JURISDICTION OF
INCORPORATION OR ORGANIZATION) INCORPORATION OR ORGANIZATION)
TIME WARNER CAPITAL II TIME WARNER CAPITAL III
(EXACT NAME OF REGISTRANT AS SPECIFIED (EXACT NAME OF REGISTRANT AS SPECIFIED
IN ITS CHARTER) IN ITS CHARTER)
TO BE APPLIED FOR TO BE APPLIED FOR
(I.R.S. EMPLOYER IDENTIFICATION NO.) (I.R.S. EMPLOYER IDENTIFICATION NO.)
DELAWARE DELAWARE
(STATE OR OTHER JURISDICTION OF (STATE OR OTHER JURISDICTION OF
INCORPORATION OR ORGANIZATION) INCORPORATION OR ORGANIZATION)
75 ROCKEFELLER PLAZA
NEW YORK, N.Y. 10019
(212) 484-8000
(ADDRESS, INCLUDING EACH ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
---------------
PETER R. HAJE
EXECUTIVE VICE PRESIDENT, SECRETARY AND GENERAL COUNSEL
TIME WARNER INC.
75 ROCKEFELLER PLAZA
NEW YORK, N.Y. 10019
(212) 484-8000
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
---------------
COPIES TO:
WILLIAM P. ROGERS, JR. FAITH D. GROSSNICKLE
CRAVATH, SWAINE & MOORE SHEARMAN & STERLING
WORLDWIDE PLAZA 599 LEXINGTON AVENUE
825 EIGHTH AVENUE NEW YORK, N.Y. 10022
NEW YORK, N.Y. 10019-7415 (212) 848-8015
(212) 474-1270
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: From time
to time after the effective date of the registration statement, as determined
by market conditions.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the
following box. [_]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or
interest reinvestment plans, please check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check thefollowing
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [X]
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CALCULATION OF REGISTRATION FEE
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<TABLE>
<CAPTION>
PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
TITLE OF EACH CLASS AMOUNT TO BE OFFERING PRICE AGGREGATE OFFERING REGISTRATION
OF SECURITIES TO BE REGISTERED REGISTERED (1) PER UNIT (1)(2)(3) PRICE (1)(2)(3) FEE (2)
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<S> <C> <C> <C> <C>
Preferred Trust Securi-
ties of the Trusts.....
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Subordinated Debentures
of Time Warner Inc.....
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Guarantees of Preferred
Securities of the
Trusts by Time
Warner Inc.(4).........
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Total................... $500,000,000 100% $500,000,000 $172,414
</TABLE>
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(1) Such indeterminate number of Preferred Trust Securities of Time Warner
Capital I, Time Warner Capital II and Time Warner Capital III (each a
"Trust") and such indeterminate principal amount of Subordinated
Debentures of Time Warner Inc. as may from time to time be issued at
indeterminate prices. Subordinated Debentures may be issued and sold to
any Trust, in which event such Subordinated Debentures may later be
distributed to the holders of Preferred Securities upon a dissolution of
such Trust and the distribution of the assets thereof.
(2) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457. The aggregate public offering price of the Preferred
Securities of the Trusts and the Subordinated Debentures of Time Warner
Inc. registered hereby will not exceed $500,000,000.
(3) Exclusive of accrued interest and distributions, if any.
(4) No separate consideration will be received for any Guarantees.
THE REGISTRANTS HEREBY AMEND THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANTS
SHALL FILE A FURTHER AMENDMENT THAT SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(A), MAY DETERMINE.
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<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED , 1995
PROSPECTUS SUPPLEMENT
- ---------------------
(TO PROSPECTUS DATED , 1995)
PREFERRED TRUST SECURITIES
TIME WARNER CAPITAL I
% PREFERRED TRUST SECURITIES
(LIQUIDATION AMOUNT $25 PER PREFERRED TRUST SECURITY)
GUARANTEED TO THE EXTENT SET FORTH HEREIN BY
TIME WARNER INC.
-----------
The % Preferred Trust Securities (the "Preferred Securities") offered
hereby represent preferred undivided beneficial interests in the assets of Time
Warner Capital I, a statutory business trust formed under the laws of the State
of Delaware ("Time Warner Capital"). Time Warner Inc., a Delaware corporation
("Time Warner"), will directly or indirectly own all the common securities (the
"Common Securities" and, together with the Preferred Securities, the "Trust
Securities") representing undivided beneficial interests in the assets of Time
Warner Capital. Time Warner Capital exists for the sole purpose of issuing the
Trust Securities and investing the proceeds thereof in an equivalent amount of
% Subordinated Debentures Due , 2025 (the "Subordinated Debentures") of
Time Warner. Upon an event of a default under the Declaration (as defined
herein), the holders of Preferred Securities will have a preference over the
holders of the Common Securities with respect to payments in respect of
distributions and payments upon redemption, liquidation and otherwise.
(continued on next page)
SEE "RISK FACTORS" ON PAGE S-7 FOR CERTAIN INFORMATION RELEVANT TO AN
INVESTMENT IN THE PREFERRED SECURITIES.
Application will be made to list the Preferred Securities on the New York
Stock Exchange under the symbol " ". Trading of the Preferred Securities on the
New York Stock Exchange is expected to commence within a 30-day period after
the initial delivery of the Preferred Securities. See "Underwriting".
-----------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS TO
WHICH IT RELATES. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
PRICE $25 PER PREFERRED SECURITY PLUS ACCRUED DISTRIBUTIONS, IF ANY.
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<TABLE>
<CAPTION>
PROCEEDS TO
INITIAL PUBLIC UNDERWRITING TIME WARNER
OFFERING PRICE(1) COMMISSIONS(2) CAPITAL(3)(4)
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<S> <C> <C> <C>
Per Preferred Security.......... $ (3) $
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Total........................... $ (3) $
</TABLE>
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(1) Plus accrued distributions, if any, from , 1995.
(2) Time Warner Capital and Time Warner have agreed to indemnify the several
Underwriters against certain liabilities, including liabilities under the
Securities Act of 1933, as amended. See "Underwriting".
(3) Because the gross proceeds of the sale of the Preferred Securities will be
invested in the Subordinated Debentures, Time Warner has agreed to pay to
the Underwriters a commission of $ per Preferred Security (or $ in
the aggregate); provided that such compensation for sales to certain
institutions will be $ per Preferred Security. See "Underwriting".
(4) Expenses of the offering which are payable by Time Warner are estimated to
be $ .
-----------
The Preferred Securities offered hereby are offered severally by the
Underwriters, as specified herein, subject to receipt and acceptance by them
and subject to their right to reject any order in whole or in part. It is
expected that delivery of the Preferred Securities will be made on or about
, 1995 through the book-entry facilities of The Depository Trust Company,
against payment therefor in immediately available funds.
-----------
MERRILL LYNCH & CO. MORGAN STANLEY & CO. BEAR, STEARNS & CO. INC.
INCORPORATED
-----------
The date of this Prospectus Supplement is , 1995.
<PAGE>
(continued from previous page)
Holders of the Preferred Securities are entitled to receive cumulative cash
distributions at an annual rate of % of the liquidation amount of $25 per
Preferred Security, accruing from , 1995 (the "Issue Date") and payable
quarterly in arrears on , , and of each year. The
payment of distributions out of moneys held by Time Warner Capital and payments
on liquidation of Time Warner Capital or the redemption of Preferred
Securities, as set forth below, are guaranteed by Time Warner (the "Guarantee")
to the extent Time Warner has made payments under the Subordinated Debentures
as described under "Description of the Guarantee". The obligations of Time
Warner under the Guarantee are subordinate and junior in right of payment to
all other liabilities of Time Warner and pari passu with the most senior
preferred stock issued, from time to time, if any, by Time Warner. The
obligations of Time Warner under the Subordinated Debentures are subordinate
and junior in right of payment to all present and future Senior Indebtedness
(as defined herein to include Time Warner's outstanding indebtedness (including
its 8 3/4% Convertible Subordinated Debentures due 2015), guarantees, letters
of credit and certain other obligations) of Time Warner, which aggregated
approximately $10.1 billion at March 31, 1995. In addition to such Senior
Indebtedness, Time Warner's obligations under the Guarantee and the
Subordinated Debentures are effectively subordinated to all liabilities
(including indebtedness) of its consolidated and unconsolidated subsidiaries,
which aggregated approximately $13.9 billion at March 31, 1995. Certain
capitalized terms used in this Prospectus Supplement have the meaning ascribed
to them under "Glossary of Terms" in Annex I hereto.
The distribution rate and the distribution and other payment dates for the
Preferred Securities will correspond to the interest rate and interest and
other payment dates on the Subordinated Debentures. As a result, if principal
or interest is not paid on the Subordinated Debentures, no amounts will be paid
on the Preferred Securities. If Time Warner does not make principal or interest
payments on the Subordinated Debentures, Time Warner Capital will not have
sufficient funds to make distributions on the Preferred Securities, in which
event, the Guarantee will not apply to such distributions until Time Warner
Capital has sufficient funds available therefor.
Time Warner has the right to defer payments of interest on the Subordinated
Debentures by extending the interest payment period on the Subordinated
Debentures at any time for up to 20 consecutive quarters (each an "Extension
Period"). If such interest payments are so deferred, distributions on the
Preferred Securities will also be deferred. During such Extension Period,
distributions will continue to accrue with interest thereon and holders of
Preferred Securities will be required to include deferred interest income in
their gross income for United States Federal income tax purposes in advance of
receipt of the cash distributions with respect to such deferred interest
payments. There could be multiple Extension Periods of varying lengths
throughout the term of the Subordinated Debentures. See "Risk Factors--Option
to Extend Interest Payment Period", "Description of the Subordinated
Debentures--Option To Extend Interest Payment Period" and "United States
Federal Income Taxation--Original Issue Discount".
The maturity date of the Subordinated Debentures is , 2025 (the "Maturity
Date") at which time Time Warner Capital must redeem the Trust Securities in
whole at a redemption price equal to (a) $25 per Trust Security plus (b)
accrued and unpaid distributions to but excluding the date of redemption (the
"Preferred Redemption Price"). The Subordinated Debentures are redeemable by
Time Warner in whole or in part, from time to time, on or after , 2000, or
at any time in certain circumstances upon the occurrence of a Special Event (as
defined herein). If Time Warner redeems Subordinated Debentures prior to the
Maturity Date, Time Warner Capital must redeem Trust Securities having an
aggregate liquidation amount equal to the aggregate principal amount of the
Subordinated Debentures so redeemed at the Preferred Redemption Price. See
"Description of the Preferred Securities--Redemption of the Preferred
Securities at Maturity or Upon Optional Redemption of the Subordinated
Debentures". In addition, upon the occurrence of a Special Event, unless the
Subordinated Debentures are redeemed in the limited circumstances described
herein, Time Warner Capital shall be dissolved, with the result that the
Subordinated Debentures will be distributed to the holders of the Trust
Securities as described herein, in lieu of any cash distribution. See
"Description of the Preferred Securities--Special Event Redemption or
Distribution".
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS THAT STABILIZE OR MAINTAIN THE MARKET PRICE OF THE SECURITIES
OFFERED HEREBY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NEW YORK STOCK EXCHANGE, IN
THE OVER-THE-COUNTER MARKET OR OTHERWISE. SUCH STABILIZING TRANSACTIONS, IF
COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
The following information concerning Time Warner, Time Warner Capital, the
Preferred Securities, the Guarantee and the Subordinated Debentures
supplements, and should be read in conjunction with, the information contained
in the accompanying Prospectus. Capitalized terms used in this Prospectus
Supplement have the same meanings as in the accompanying Prospectus.
S-2
<PAGE>
SUMMARY OF THE OFFERING
The following summary of provisions relating to the Preferred Securities is
qualified in its entirety by the more detailed information contained elsewhere
or incorporated by reference in this Prospectus Supplement and the Prospectus
of which this Prospectus Supplement constitutes a part. Prospective purchasers
of Preferred Securities should carefully review such information.
GENERAL
The Preferred Securities represent preferred undivided beneficial interests
in Time Warner Capital's assets, which will consist of the Subordinated
Debentures. The Subordinated Debentures, in which the proceeds of the Preferred
Securities offered hereby are invested, mature on , 2025 (which is the
Maturity Date), are redeemable by Time Warner in whole or in part, from time to
time, on or after , 2000, or at any time in certain circumstances upon
the occurrence of a Special Event. The Preferred Securities will be redeemed
upon the Maturity Date of the Subordinated Debentures at the Preferred
Redemption Price, which is equal to the sum of (a) $25 per Preferred Security
plus (b) accrued and unpaid distributions thereon to but excluding the date of
redemption. In addition, if Time Warner redeems Subordinated Debentures prior
to the Maturity Date, Time Warner Capital must redeem Trust Securities having
an aggregate liquidation amount equal to the aggregate principal amount of the
Subordinated Debentures so redeemed at the Preferred Redemption Price. See
"Description of the Preferred Securities--Redemption of the Preferred
Securities at Maturity or Upon Optional Redemption of the Subordinated
Debentures". In addition, upon the occurrence of a Special Event, unless the
Subordinated Debentures are redeemed in the limited circumstances described
below, Time Warner Capital shall be dissolved, with the result that the
Subordinated Debentures will be distributed to the holders of the Preferred
Securities, on a Pro Rata Basis (determined without regard to the proviso in
the definition of such term), in lieu of any cash distribution. See
"Description of the Preferred Securities--Special Event Redemption or
Distribution".
DISTRIBUTIONS
The holders of the Preferred Securities are entitled to receive cumulative
cash distributions at the rate of % per annum on the $25 liquidation amount
per Preferred Securities, accruing from the Issue Date, and payable quarterly
in arrears on , , and of each year, commencing ,
1995, or, if any such date is not a Business Day (as defined herein), the next
succeeding Business Day (and without any interest or other payment in respect
of any such delay), except that, if such Business Day is in the next succeeding
calendar year, such payment shall be made on the immediately preceding Business
Day, in each case with the same force and effect as if made on such date,
except as otherwise described below. Distributions in arrears for more than one
quarter will bear interest thereon at a rate per annum of % thereof
compounding quarterly. See "Description of the Preferred Securities--
Distributions".
OPTION TO EXTEND INTEREST PAYMENT PERIOD
Time Warner has the right under the Indenture (as defined herein) to defer
payments of interest on the Subordinated Debentures by extending the interest
payment period at any time, and from time to time, on the Subordinated
Debentures. As a consequence of such an extension, distributions on the
Preferred Securities would be deferred (but despite such deferral would
continue to accrue with interest thereon compounded quarterly) by Time Warner
Capital during any such extended interest payment period. Such right to extend
the interest payment period for the Subordinated Debentures is limited to a
period not exceeding 20 consecutive quarters. Prior to the termination of any
such Extension Period, Time Warner may further extend the interest payment
period; provided that such Extension Period, together with all such previous
and further extensions thereof, may not exceed 20 consecutive quarters. Upon
the termination of any Extension Period and the payment of all amounts then
due, Time Warner may commence a new Extension Period for up to
S-3
<PAGE>
20 consecutive quarters, subject to the above requirements. See "Description of
the Preferred Securities--Distributions" and "Description of the Subordinated
Debentures--Option To Extend Interest Payment Period".
Should Time Warner exercise its right to commence an Extension Period, each
holder of Preferred Securities will continue to accrue income (as original
issue discount) in respect of the deferred interest allocable to its Preferred
Securities for United States Federal income tax purposes, which will be
allocated but not distributed, to holders of record of Preferred Securities. As
a result, each such holder of Preferred Securities will recognize income for
United States Federal income tax purposes in advance of the receipt of cash and
will not receive the cash from Time Warner Capital related to such income if
such holder disposes of its Preferred Securities prior to the record date for
the date on which distributions of such amounts are made.
Time Warner has no current intention to exercise its option to defer interest
payments on the Subordinated Debentures.
MANDATORY REDEMPTION OF PREFERRED SECURITIES
Unless previously redeemed pursuant to the optional or special redemption
provisions described below, each of the outstanding Trust Securities, including
the Preferred Securities, will be redeemed by Time Warner Capital, in cash, on
, 2025, which is the Maturity Date of the Subordinated Debentures, at the
Preferred Redemption Price, which is equal to (a) $25 per Trust Securities plus
(b) accrued and unpaid distributions thereon to but excluding the date of
redemption. See "Description of the Preferred Securities--Redemption of the
Preferred Securities at Maturity or Upon Optional Redemption of the
Subordinated Debentures".
OPTIONAL REDEMPTION
The Subordinated Debentures, in which the proceeds of the Preferred
Securities offered hereby will be invested by Time Warner Capital, are
redeemable by Time Warner in whole or in part, from time to time, on or after
, 2000 ("Optional Redemption"), or at any time in certain circumstances
upon the occurrence of a Special Event ("Special Redemption"), in each case at
a price equal to (a) 100% of the principal amount of Subordinated Debentures to
be redeemed plus (b) accrued and unpaid interest thereon to but excluding the
date of redemption (the "Debenture Redemption Price"). If Time Warner redeems
Subordinated Debentures, Time Warner Capital must redeem Trust Securities,
including the Preferred Securities, having an aggregate liquidation amount
equal to the aggregate principal amount of the Subordinated Debentures so
redeemed at the Preferred Redemption Price. See "Description of the Preferred
Securities--Redemption of the Preferred Securities at Maturity or Upon Optional
Redemption of the Subordinated Debentures".
On any date of redemption (and on the Maturity Date), the Preferred
Redemption Price will be the same per Trust Security as the Debenture
Redemption Price per $25 in principal amount of Subordinated Debentures.
SPECIAL EVENT DISTRIBUTION OR REDEMPTION
Upon the occurrence and during the continuation of a Tax Event or an
Investment Company Event (each as defined below), Time Warner may dissolve Time
Warner Capital with the result that the Subordinated Debentures will be
distributed to the holders of the Trust Securities on a Pro Rata Basis
(determined without regard to the proviso in the definition of such term), in
lieu of any cash distribution. In certain limited circumstances Time Warner
also will have the right to redeem the Subordinated Debentures for cash, with
the result that Time Warner Capital will redeem the Trust Securities on a Pro
Rata Basis for cash at the Redemption Price, or, in the case of a Tax Event,
allow the Subordinated Debentures and the Trust Securities to remain
outstanding and indemnify Time Warner Capital for all taxes payable by it as a
result of such Tax Event. If the Subordinated Debentures are distributed to the
holders of the Preferred
S-4
<PAGE>
Securities, Time Warner will use its reasonable best efforts to have the
Subordinated Debentures listed on the New York Stock Exchange. See "Description
of the Preferred Securities--Special Event Distribution or Redemption".
THE GUARANTEE
The Guarantee guarantees to the holders of the Preferred Securities the
payment of (i)(A) any accrued and unpaid distributions that are required to be
paid on the Preferred Securities and (B) the Preferred Redemption Price, but if
and only if to the extent that, in each case, Time Warner has made payment of
interest or principal on the Subordinated Debentures, as the case may be, and
(ii) upon a Liquidation Event (other than in connection with the distribution
of Subordinated Debentures to the holders of Preferred Securities or a
redemption of all the Preferred Securities upon maturity or redemption of
Subordinated Debentures), the lesser of (A) the aggregate of the liquidation
amount and all accrued and unpaid distributions on the Preferred Securities to
the date of the payment to the extent Time Warner Capital has funds available
therefor and (B) the amount of assets of Time Warner Capital remaining
available for distribution to holders of the Preferred Securities upon such
Liquidation Event. Time Warner's obligations under the Guarantee will be
subordinated and junior in right of payment to all liabilities of Time Warner,
pari passu with the most senior preferred stock issued, from time to time, if
any, by Time Warner and senior to the common stock of Time Warner. The
Guarantee will also rank pari passu with the guarantee to be delivered by Time
Warner in connection with the offering of the $ Preferred Exchangeable
Redeemable Cumulative Securities (the "PERCS"). See "Recent Developments--PERCS
Offering".
Time Warner and Time Warner Capital believe that the mechanisms and
obligations relating to the Guarantee and the Subordinated Debentures, taken
together, are equivalent to a full and unconditional subordinated guarantee by
Time Warner of payments due on the Preferred Securities. See "Risk Factors--
Ranking of Subordinated Obligations Under the Guarantee and the Subordinated
Debentures", "Description of the Guarantee", "Description of the Subordinated
Debentures" and "Effect of Obligations Under the Subordinated Debentures and
the Guarantee".
SUBORDINATED DEBENTURES
The Subordinated Debentures will be issued as unsecured, subordinated
obligations of Time Warner, limited in aggregate principal amount to
approximately $ , such amount being the sum of (i) the aggregate stated
liquidation amount of the Preferred Securities and (ii) the proceeds received
by Time Warner Capital upon the issuance to Time Warner of the Common
Securities. The Subordinated Debentures will mature on the Maturity Date, and
will bear interest at an annual rate of % (which is equivalent to the annual
distribution rate with respect to the Preferred Securities), payable quarterly
in arrears on , , and , commencing on ,
1995. The amount payable upon maturity for each Subordinated Debenture will be
the Debenture Redemption Price.
Time Warner shall have the right to redeem the Subordinated Debentures, in
whole or in part, on or after , 2000, upon not less than 20 nor more than
45 Business Days' notice, at the Debenture Redemption Price. Time Warner may
also, under certain limited circumstances, redeem the Subordinated Debentures
in whole upon the occurrence of a Tax Event or an Investment Company Event at
the Debenture Redemption Price. In each of the above cases, upon any such
redemption, Time Warner Capital shall redeem an equal amount of Preferred
Securities at the Preferred Redemption Price. See "Description of the
Subordinated Debentures--Special Event Redemption or Distribution".
The obligations of Time Warner under the Subordinated Debentures will be
subordinated and junior in right of payment to all present and future Senior
Indebtedness (as defined below to include Time Warner's outstanding
indebtedness (including its 8 3/4% Convertible Subordinated Debentures due
2015), guarantees,
S-5
<PAGE>
letters of credit and certain other obligations), which aggregated $10.1
billion at March 31, 1995. The Subordinated Debentures rank pari passu with the
Subordinated Notes to be issued by Time Warner in connection with the offering
of the PERCS. In addition to such Senior Indebtedness, Time Warner's
obligations under the Guarantee and the Subordinated Debentures are effectively
subordinated to all liabilities (including indebtedness) of its consolidated
and unconsolidated subsidiaries, which aggregated approximately $13.9 billion
at March 31, 1995.
VOTING RIGHTS
Holders of Preferred Securities will have limited voting rights and, except
for the rights of holders of Preferred Securities to appoint a Special Regular
Trustee upon the occurrence of certain events described herein, will not be
entitled to vote to appoint, remove or replace, or to increase or decrease the
number of, Time Warner Trustees, which voting rights are vested exclusively in
the holder of the Common Securities. See "Description of the Preferred
Securities--Voting Rights" and "--Modification of the Declaration".
USE OF PROCEEDS
Time Warner Capital will invest the proceeds from the sale of the Preferred
Securities offered hereby in the Subordinated Debentures, the proceeds of which
will be used by Time Warner to repurchase, redeem or otherwise repay
outstanding indebtedness. The weighted average interest rate on Time Warner's
outstanding indebtedness as of March 31, 1995, was approximately 8.3%. The
weighted average maturity of Time Warner's outstanding indebtedness as of March
31, 1995, was approximately 15 years. See "Use of Proceeds".
LISTING
Application will be made to list the Preferred Securities on the New York
Stock Exchange under the symbol " ". Trading of the Preferred Securities on the
New York Stock Exchange is expected to commence within a 30-day period after
the date of this Prospectus Supplement.
S-6
<PAGE>
RISK FACTORS
Prospective purchasers of Preferred Securities should carefully review the
information contained elsewhere in this Prospectus Supplement and in the
accompanying Prospectus and should particularly consider the following matters.
RANKING OF SUBORDINATED OBLIGATIONS UNDER THE GUARANTEE AND SUBORDINATED
DEBENTURES
Time Warner's obligations under the Guarantee will be subordinated and junior
in right of payment to all liabilities of Time Warner, pari passu with the most
senior preferred stock issued, from time to time, if any, by Time Warner and
senior to the common stock of Time Warner. The Guarantee will also rank pari
passu with the guarantee to be delivered by Time Warner in connection with the
offering of the PERCS. The obligations of Time Warner under the Subordinated
Debentures will be subordinated and junior in right of payment to all present
and future Senior Indebtedness (as defined herein to include Time Warner's
outstanding indebtedness (including its 8 3/4% Convertible Subordinated
Debentures due 2015), guarantees, letters of credit and certain other
obligations), which aggregated $10.1 billion at March 31, 1995. The
Subordinated Debentures rank pari passu with the Subordinated Notes to be
issued by Time Warner in connection with the offering of the PERCS. See "Recent
Developments--PERCS Offering". Time Warner's obligations under the Guarantee
and the Subordinated Debentures are also effectively subordinated to all
liabilities (including indebtedness) of its consolidated and unconsolidated
subsidiaries, which aggregated approximately $13.9 billion at March 31, 1995.
Time Warner's ability to service its indebtedness, including the Subordinated
Debentures, is dependent primarily on the earnings of its consolidated
subsidiaries and certain affiliates, and the distribution of such earnings to
Time Warner. Certain agreements between Time Warner and certain of its
subsidiaries, affiliates, partners or creditors limit distributions and other
transfers of funds to Time Warner. In addition, as a result of the acquisition
by subsidiaries of Time Warner of certain cable systems, certain subsidiaries
of Time Warner expect to have outstanding indebtedness and bank credit
facilities that contain limitations on the ability of such subsidiaries to make
distributions or other payments to Time Warner. See "Description of the
Guarantee--Status of the Guarantee" and "Description of the Subordinated
Debentures--Subordination".
OPTION TO EXTEND INTEREST PAYMENT PERIOD
Time Warner has the right under the Indenture to defer payments of interest
on the Subordinated Debentures by extending the interest payment period at any
time, and from time to time, on the Subordinated Debentures. As a consequence
of such an extension, distributions on the Preferred Securities would be
deferred (but despite such deferral would continue to accrue with interest
thereon compounded quarterly) by Time Warner Capital during any such extended
interest payment period. Such right to extend the interest payment period for
the Subordinated Debentures is limited to a period not exceeding 20 consecutive
quarters. Upon the termination of any Extension Period and the payment of all
amounts then due, Time Warner may commence a new Extension Period for up to 20
consecutive quarters, subject to certain requirements. In the event that Time
Warner exercises its right to commence an Extension Period, then (a) Time
Warner shall not declare or pay dividends on, make distributions with respect
to, or redeem, purchase or acquire, or make a liquidation payment with respect
to, any of its capital stock and (b) Time Warner shall not make any payment of
interest, principal or premium, if any, on or repay, repurchase or redeem any
debt securities issued by Time Warner that rank pari passu with or junior to
the Subordinated Debentures; provided, however, that the foregoing restrictions
do not apply to any interest or dividend payment by Time Warner where the
interest or dividend is paid by way of the issuance of securities that rank
junior to the Subordinated Debentures. Prior to the termination of any such
Extension Period, Time Warner may further extend the interest payment period;
provided that such Extension Period, together with all such previous and
further extensions thereof, may not exceed 20 consecutive quarters. See
"Description of the Preferred Securities--Distributions" and "Description of
the Subordinated Debentures--Option To Extend Interest Payment Period".
S-7
<PAGE>
Should Time Warner exercise its right to commence an Extension Period, each
holder of Preferred Securities will continue to accrue income (as original
issue discount) in respect of the deferred interest allocable to its Preferred
Securities for United States Federal income tax purposes, which will be
allocated but not distributed, to holders of record of Preferred Securities. As
a result, each such holder of Preferred Securities will recognize income for
United States Federal income tax purposes in advance of the receipt of cash and
will not receive the cash from Time Warner Capital related to such income if
such holder disposes of its Preferred Securities prior to the record date for
the date on which distributions of such amounts are made.
Time Warner has no current intention of exercising its right to defer
payments of interest by extending the interest payment period on the
Subordinated Debentures. However, should Time Warner determine to exercise such
right in the future, the market price of the Preferred Securities is likely to
be adversely affected. A holder that disposes of its Preferred Securities
during an Extension Period, therefore, might not receive the same return on its
investment as a holder that continues to hold its Preferred Securities. In
addition, as a result of the existence of Time Warner's right to defer interest
payments, the market price of the Preferred Securities (which represent an
undivided beneficial interest in the Subordinated Debentures) may be more
volatile than other securities on which original issue discount accrues that do
not have such rights. See "United States Federal Income Taxation--Original
Issue Discount".
SPECIAL EVENT REDEMPTION OR DISTRIBUTION
Upon the occurrence of a Special Event, Time Warner Capital shall be
dissolved, except in the limited circumstance described below, with the result
that the Subordinated Debentures would be distributed to the holders of the
Trust Securities in connection with the liquidation of Time Warner Capital. In
certain circumstances, Time Warner shall have the right to redeem the
Subordinated Debentures, in whole or in part, in lieu of a distribution of the
Subordinated Debentures by Time Warner Capital; in which event Time Warner
Capital will redeem the Trust Securities on a Pro Rata Basis to the same extent
as the Subordinated Debentures are redeemed by Time Warner.
As described in more detail below, a Special Event includes (i) a Tax Event
(as defined below) and (ii) an Investment Company Event. See "Description of
the Preferred Securities--Special Event Redemption or Distribution".
There can be no assurance as to the market prices for the Preferred
Securities or the Subordinated Debentures that may be distributed in exchange
for Preferred Securities if a dissolution or liquidation of Time Warner Capital
were to occur as a result of a Special Event. Accordingly, the Preferred
Securities that an investor may purchase, whether pursuant to the offer made
hereby or in the secondary market, or the Subordinated Debentures that a holder
of Preferred Securities may receive on dissolution and liquidation of Time
Warner Capital, may trade at a discount to the price that the investor paid to
purchase the Preferred Securities offered hereby.
Because holders of Preferred Securities may receive Subordinated Debentures
upon the occurrence of a Special Event, prospective purchasers of Preferred
Securities are also making an investment decision with regard to the
Subordinated Debentures and should carefully review all the information
regarding the Subordinated Debentures contained herein and in the accompanying
Prospectus. See "Description of the Preferred Securities--Special Event
Redemption or Distribution" and "Description of the Subordinated Debentures".
LIMITED VOTING RIGHTS
Holders of Preferred Securities will have limited voting rights and, except
for the rights of holders of Preferred Securities to appoint a Special Regular
Trustee upon the occurrence of certain events described herein, will not be
entitled to vote to appoint, remove or replace, or to increase or decrease the
number of, Time Warner Trustees, which voting rights are vested exclusively in
the holder of the Common Securities. See "Description of the Preferred
Securities--Voting Rights" and "--Modification of the Declaration".
S-8
<PAGE>
TRADING PRICE
Application will be made to list the Preferred Securities as equity
securities on the New York Stock Exchange under the Symbol " ". Accordingly,
the Preferred Securities are expected to trade at a price that takes into
account the value, if any, of accrued and unpaid distributions; thus,
purchasers will not pay and sellers will not receive any accrued and unpaid
interest with respect to their undivided interests in the Subordinated
Debentures owned through the Preferred Securities that is not included in the
trading price of the Preferred Securities. However, interest on the
Subordinated Debentures will be included in the gross income of holders of
Preferred Securities as it accrues, rather than when it is paid. See "United
States Federal Income Taxation--Original Issue Discount" and "Sales of
Preferred Securities".
HOLDING COMPANY STRUCTURE
Time Warner is a holding company and its assets consist primarily of
investments in its subsidiaries and affiliates, some of which have substantial
indebtedness and are not consolidated with Time Warner for financial reporting
purposes. A substantial portion of the consolidated liabilities of Time Warner
have been incurred by its subsidiaries and affiliates. Time Warner's rights and
the rights of its creditors, including holders of Subordinated Debentures, to
participate in the distribution of assets of any person in which Time Warner
owns an equity interest (including subsidiaries and affiliates) upon such
person's liquidation or reorganization will be subject to prior claims of the
person's creditors, including trade creditors, except to the extent that Time
Warner may itself be a creditor with recognized claims against such person (in
which case the claims of Time Warner would still be subject to the prior claims
of any secured creditor of such person and of any holder of indebtedness of
such person that is senior to that held by Time Warner). Accordingly, the
holders of Subordinated Debentures may be deemed to be effectively subordinated
to such claims.
Time Warner's ability to service its indebtedness, including the Subordinated
Debentures, and perform its obligations under the Guarantee is dependent
primarily upon the earnings of its subsidiaries and affiliates and the
distribution or other payment of such earnings to Time Warner. Certain
agreements between Time Warner and certain of its subsidiaries, affiliates,
partners or creditors limit distributions and other transfers of funds to Time
Warner. Generally, distributions other than tax distributions are subject to
restricted payments limitations and availability under certain financial ratios
applicable to Time Warner Entertainment Company, L.P. ("TWE") contained in
certain bank credit facilities. As a result of the acquisition by subsidiaries
of Time Warner of certain cable systems, certain subsidiaries of Time Warner
have or expect to have outstanding indebtedness and bank credit facilities that
contain limitations on the ability of such subsidiaries or affiliates to make
distributions or other payments to Time Warner. See "Recent Developments".
TIME WARNER INC.
Time Warner is the largest media and entertainment company in the world. Its
businesses are conducted in five principal areas: Publishing, Music, Filmed
Entertainment, Programming-HBO and Cable. Publishing consists principally of
the publication and distribution of magazines and books; Music consists
principally of the production and distribution of recorded music and the
ownership and administration of music copyrights; Filmed Entertainment consists
principally of the production and distribution of motion pictures and
television programming, the distribution of video cassettes and the ownership
and operation of retail stores and theme parks; Programming-HBO consists
principally of the production and distribution of pay television and cable
programming; and Cable consists principally of the operation of cable
television systems.
Time Warner was incorporated in the State of Delaware in August 1983 and is
the successor to a New York corporation that was originally organized in 1922.
Time Warner changed its name from Time Incorporated to Time Warner Inc.
following its acquisition of 59.3% of the common stock of Warner Communications
Inc. ("WCI") in July 1989. WCI became a wholly owned subsidiary of Time Warner
in January 1990 upon the completion of the merger of WCI and a subsidiary of
Time Warner.
S-9
<PAGE>
TWE was formed as a Delaware limited partnership in 1992 to own and operate
substantially all of the Filmed Entertainment, Programming-HBO and Cable
businesses owned and operated by Time Warner prior to such date. Certain wholly
owned subsidiaries of Time Warner (the "Time Warner General Partners")
collectively own 63.27% of the pro rata priority capital and residual equity
interests in TWE and wholly owned subsidiaries of ITOCHU Corporation, Toshiba
Corporation and U S West Inc. ("U S West") own pro rata priority capital and
residual equity interests in TWE of 5.61%, 5.61% and 25.51%, respectively. In
addition, the Time Warner General Partners own priority capital interests
senior and junior to the pro rata priority capital interests.
TWE is the principal component of Time Warner's Entertainment Group, which is
not consolidated with Time Warner for financial reporting purposes. Certain
cable systems acquired or to be acquired as a result of the Transactions
referred to in "Recent Developments" are or will be owned by consolidated
subsidiaries of Time Warner. The balance of Time Warner's cable systems are
owned by TWE or the TWE-A/N Partnership (as defined herein), in which TWE owns
a two-thirds interest. Accordingly, although TWE will manage substantially all
the cable systems owned by Time Warner, TWE and the TWE-A/N Partnership, the
results of operations of the cable systems owned by Time Warner's consolidated
subsidiaries will be included in Time Warner's consolidated results, while the
results of operations of the cable systems owned by TWE and the TWE-A/N
Partnership will be included in the consolidated results of the Entertainment
Group. See "Selected Historical and Pro Forma Financial Information".
Time Warner is a holding company and its assets consist primarily of
investments in its consolidated and unconsolidated subsidiaries, including TWE.
Time Warner's ability to service its indebtedness, including the Subordinated
Debentures, is dependent primarily upon the earnings of its consolidated and
unconsolidated subsidiaries, including TWE, and the distribution or other
payment of such earnings to Time Warner. See "Risk Factors--Holding Company
Structure".
As used in this Prospectus Supplement, unless the context otherwise requires,
the term "Time Warner" refers to Time Warner Inc. and its consolidated and
unconsolidated subsidiaries and includes TWE.
Time Warner's principal executive offices are located at 75 Rockefeller
Plaza, New York, NY 10019, and its telephone number is (212) 484-8000.
S-10
<PAGE>
TIME WARNER CAPITAL
Time Warner Capital is a statutory business trust formed under Delaware law
pursuant to (i) a declaration of trust, dated as of August 2, 1995, executed by
Time Warner, as sponsor (the "Sponsor"), and the trustees of Time Warner
Capital (the "Time Warner Trustees") and (ii) the filing of a certificate of
trust with the Secretary of State of the State of Delaware on August 2, 1995.
Such declaration will be amended and restated in its entirety (as so amended
and restated, the "Declaration") substantially in the form filed as an exhibit
to the Registration Statement of which this Prospectus Supplement and the
accompanying Prospectus form a part. The Declaration will be qualified as an
indenture under the Trust Indenture Act of 1939, as amended (the "Trust
Indenture Act"). Upon issuance of the Preferred Securities, the purchasers
thereof will own all of the Preferred Securities. See "Description of the
Preferred Securities--Book-Entry Only Issuance--The Depository Trust Company".
Time Warner will directly or indirectly acquire Common Securities in an
aggregate liquidation amount equal to 3% of the total capital of Time Warner
Capital. Time Warner Capital exists for the exclusive purposes of (i) issuing
the Trust Securities representing undivided beneficial interests in the assets
of the Trust, (ii) investing the gross proceeds of the Trust Securities in the
Subordinated Debentures and (iii) engaging in only those other activities
necessary or incidental thereto.
Pursuant to the Declaration, the number of Time Warner Trustees will
initially be five. Three of the Time Warner Trustees (the "Regular Trustees")
will be persons who are employees or officers of or who are affiliated with
Time Warner. The fourth trustee will be a financial institution that is
unaffiliated with Time Warner, which trustee will serve as property trustee
under the Declaration and as indenture trustee for the purposes of the Trust
Indenture Act (the "Property Trustee"). The fifth Time Warner Trustee will be a
financial institution or an affiliate thereof that maintains a principal place
of business or residence in the State of Delaware, meeting the requirements of
the Trust Act (the "Delaware Trustee"). Initially, The First National Bank of
Chicago, a Delaware banking corporation, will be the Property Trustee until
removed or replaced by the holder of the Common Securities. The First National
Bank of Chicago will also act as indenture trustee under the Guarantee (the
"Guarantee Trustee"). See "Description of the Guarantee". In certain
circumstances, the holders of a majority of the Preferred Securities will be
entitled to appoint one Regular Trustee (a "Special Regular Trustee"), who need
not be an officer or employee of or otherwise affiliated with Time Warner. See
"Description of the Preferred Securities--Voting Rights".
The Property Trustee will hold title to the Subordinated Debentures for the
benefit of the holders of the Trust Securities and the Property Trustee will
have the power to exercise all rights, power, and privileges under the
Indenture as the holder of the Subordinated Debentures. In addition, the
Property Trustee will maintain exclusive control of a segregated noninterest-
bearing bank account (the "Property Account") to hold all payments made in
respect of the Subordinated Debentures for the benefit of the holders of the
Trust Securities. The Property Trustee will make payments of distributions and
payments on liquidation, redemption and otherwise to the holders of the Trust
Securities out of funds from the Property Account. The Guarantee Trustee will
hold the Guarantee for the benefit of the holders of the Preferred Securities.
Subject to the right of the holders of the Preferred Securities to appoint a
Special Regular Trustee, Time Warner, as the direct or indirect holder of all
the Common Securities, will have the right to appoint, remove or replace any
Time Warner Trustee and to increase or decrease the number of Time Warner
Trustees; provided that (i) the number of Time Warner Trustees shall be at
least three and (ii) a majority shall be Regular Trustees.
The Declaration provides that Time Warner will pay for all debts and
obligations (other than with respect to the Trust Securities) and all costs and
expenses of Time Warner Capital, including any taxes and all costs and expenses
with respect thereto, to which Time Warner Capital may become subject, except
for United States withholding taxes. Time Warner has agreed that any person to
whom such debts, obligations, costs and expenses are owed and the Property
Trustee will have the right to enforce Time Warner's obligations in respect of
such debts, obligations, costs and expenses directly against Time Warner
without first proceeding against Time Warner Capital.
S-11
<PAGE>
The rights of the holders of the Preferred Securities, including economic
rights, rights to information and voting rights, are set forth in the
Declaration, the Delaware Business Trust Act (the "Trust Act") and the Trust
Indenture Act. See "Description of the Preferred Securities".
RECENT DEVELOPMENTS
CERTAIN TRANSACTIONS
As summarized below and more fully described in Time Warner's Current Report
on Form 8-K dated May 30, 1995, Time Warner has recently entered into or
consummated a number of transactions to acquire, operate or dispose of cable
television systems and certain other assets. These transactions will, among
other things, result in the acquisition of cable systems by subsidiaries of
Time Warner serving approximately 2.2 million subscribers and a 50% interest in
Paragon Communications ("Paragon"), which serves 972,000 subscribers (the other
50% interest in Paragon is already owned by TWE).
Time Warner (i) closed on May 2, 1995, its acquisition of Summit
Communications Group, Inc. ("Summit"); (ii) closed on July 6, 1995, its
acquisition of KBLCOM Incorporated ("KBLCOM"), a subsidiary of Houston
Industries Incorporated; and (iii) agreed on February 6, 1995, to acquire
Cablevision Industries Corporation ("CVI") and certain related companies
(collectively, the "Acquisitions"). To acquire Summit, Time Warner issued
approximately 1.55 million shares of its common stock, and approximately 3.26
million shares of a new convertible preferred stock ("Series C Preferred
Stock") and assumed or incurred $146 million of indebtedness. To acquire
KBLCOM, Time Warner issued one million shares of its common stock and 11
million shares of a new convertible preferred stock ("Series D Preferred
Stock") and assumed or incurred approximately $1.2 billion of indebtedness,
including $113 million of Time Warner's allocable share of Paragon's
indebtedness. To acquire CVI and certain related companies, Time Warner will
issue 2.5 million shares of its common stock and 6.5 million shares of new
convertible preferred stock (3.25 million shares of Series E Preferred Stock
and 3.25 million shares of Series F Preferred Stock) and assume or incur
approximately $2 billion of debt of CVI and its related companies.
On April 1, 1995, TWE and the Advance/Newhouse Partnership
("Advance/Newhouse"), a New York general partnership between Newhouse
Broadcasting Corporation and a wholly-owned subsidiary of Advance Publications,
Inc., formed a New York general partnership known as the Time Warner
Entertainment-Advance/Newhouse Partnership (the "TWE-A/N Partnership"), in
which TWE owns a two-thirds equity interest and is the managing partner. The
TWE-A/N Partnership was formed to own and operate cable television systems (or
interests therein) serving approximately 4.5 million subscribers and certain
foreign cable investments and programming investments (the "TWE-A/N
Transaction").
TWE (i) on June 23, 1995, recapitalized Six Flags Entertainment Corporation
("Six Flags"), sold 51% of its interest therein and granted certain licenses to
Six Flags and (ii) on May 18, 1995, announced the sale of 15 of its unclustered
cable television systems serving approximately 144,000 subscribers (the "Asset
Sale Transactions"). The net proceeds from the Asset Sale Transactions will be
used to reduce outstanding indebtedness of TWE.
On June 30, 1995, Time Warner and TWE executed a five-year revolving credit
facility (the "New Credit Agreement"), pursuant to which TWE, the TWE-A/N
Partnership and a wholly owned subsidiary of Time Warner are the borrowers. The
New Credit Agreement enables such entities to refinance certain indebtedness
assumed from the companies acquired or to be acquired in the Acquisitions, to
refinance existing indebtedness of TWE and to finance the ongoing working
capital, capital expenditure and other corporate needs of each borrower (the
"1995 Debt Refinancing").
The Acquisitions, TWE-A/N Transaction, Asset Sale Transactions and 1995 Debt
Refinancing are collectively referred to herein as the "Transactions". For a
further discussion of the Transactions, reference is made to Time Warner's
Current Report on Form 8-K dated May 30, 1995, which is incorporated herein by
reference.
S-12
<PAGE>
PERCS OFFERING
On June 14, 1995, Time Warner filed a registration statement with the
Securities and Exchange Commission (the "Commission") for the offering of
12,057,561 PERCS of Time Warner Financing Trust. The PERCS will be subject to
mandatory redemption on December 23, 1997, for an amount per PERCS equal to the
lesser of $54.41 and the then market value of a share of common stock of
Hasbro, Inc. ("Hasbro"), payable in cash or, at Time Warner's option, Hasbro
common stock. The net proceeds to Time Warner of the PERCS offering, which will
be based on the price of the Hasbro common stock at the time of the offering,
are estimated to be approximately $400 million and will be used to reduce
outstanding indebtedness. There can be no assurance, however, that the PERCS
offering will be completed.
REDEMPTION OF RESET NOTES
On July 31, 1995, Time Warner announced the redemption on August 15, 1995, of
all of its $1.828 billion principal amount of outstanding Redeemable Reset
Notes Due August 15, 2002 (the "Reset Notes") in exchange for new securities.
The Reset Notes will be redeemed in exchange for approximately $457 million
aggregate principal amount of Floating Rate Notes Due August 15, 2000,
approximately $274 million aggregate principal amount of 7.975% Notes Due
August 15, 2004, approximately $548 million aggregate principal amount of 8.11%
Debentures Due August 15, 2006, and approximately $549 million aggregate
principal amount of 8.18% Debentures Due August 15, 2007 (collectively the
"Exchange Securities"). The Exchange Securities will be issued under Time
Warner's senior indenture dated January 15, 1993 and will rank pari passu with
all other senior indebtedness of Time Warner.
RECENT FINANCIAL PERFORMANCE
Set forth below are unaudited summarized operating results of Time Warner and
the Entertainment Group for the three and six month periods ended June 30, 1995
and 1994. Summarized operating results of the Entertainment Group reflect the
consolidation by TWE of the TWE-Advance/Newhouse Partnership effective as of
April 1, 1995.
TIME WARNER
<TABLE>
<CAPTION>
THREE MONTHS SIX MONTHS
ENDED JUNE 30, ENDED JUNE 30,
---------------- ----------------
1995 1994 1995 1994
------- ------- ------- -------
(MILLIONS)
<S> <C> <C> <C> <C>
Revenues................................... $ 1,907 $ 1,667 $ 3,724 $ 3,225
Depreciation and amortization.............. 119 105 231 210
Business segment operating income.......... 184 170 322 282
Equity in pretax income of Entertainment
Group..................................... 84 66 106 111
Interest and other, net.................... 201 179 356 337
Net loss................................... (8) (20) (55) (71)
Net loss applicable to common shares (after
preferred dividends)...................... (13) (23) (63) (77)
Net loss per common share.................. $ (.03) $ (.06) $ (.17) $ (.20)
Average common shares...................... 381.4 378.8 380.5 378.7
ENTERTAINMENT GROUP
<CAPTION>
THREE MONTHS SIX MONTHS
ENDED JUNE 30, ENDED JUNE 30,
---------------- ----------------
1995 1994 1995 1994
------- ------- ------- -------
(MILLIONS)
<S> <C> <C> <C> <C>
Revenues................................... $ 2,435 $ 2,063 $ 4,508 $ 3,990
Depreciation and amortization.............. 283 242 513 458
Business segment operating income.......... 274 231 475 437
Interest and other, net.................... 175 150 339 296
Net income................................. 59 54 70 95
</TABLE>
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<PAGE>
SELECTED HISTORICAL AND PRO FORMA FINANCIAL INFORMATION
TIME WARNER SELECTED HISTORICAL FINANCIAL INFORMATION
The selected historical financial information of Time Warner set forth below
has been derived from and should be read in conjunction with the consolidated
financial statements and other financial information of Time Warner contained
in Time Warner's Annual Report on Form 10-K for the year ended December 31,
1994, as amended, and with the unaudited consolidated condensed financial
statements contained in Time Warner's Quarterly Report on Form 10-Q for the
quarter ended March 31, 1995, which are incorporated herein by reference. The
selected historical financial information for all periods after 1992 reflect
the deconsolidation of the Entertainment Group, principally TWE, effective
January 1, 1993. The selected historical financial information for 1992 and
periods prior to such date have not been changed; however, selected financial
information for 1992 retroactively reflecting the deconsolidation is presented
as supplementary information under the column heading "restated" to facilitate
comparative analysis. Capitalized terms are as defined and described in such
historical financial statements, or elsewhere herein.
The selected historical financial information for 1993 reflects the issuance
of $6.1 billion of long-term debt and the use of $500 million of cash and
equivalents in 1993 for the exchange or redemption of preferred stock having an
aggregate liquidation preference of $6.4 billion. The selected historical
financial information for 1992 reflects the capitalization of TWE on June 30,
1992 and associated refinancings, and the acquisition of the 18.7% minority
interest in American Television and Communications Corporation ("ATC") as of
June 30, 1992, using the purchase method of accounting for business
combinations. Per common share amounts and average common shares have been
restated to give effect to the four-for-one common stock split that occurred on
September 10, 1992.
<TABLE>
<CAPTION>
THREE MONTHS
ENDED YEARS ENDED DECEMBER 31,
MARCH 31, -------------------------------------------------------
--------------- RESTATED
1995 1994 1994 1993 1992 1992 1991 1990
------------------------ ------- ------- -------- -------- --------
(UNAUDITED) (MILLIONS, EXCEPT PER SHARE AMOUNTS AND RATIOS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
OPERATING STATEMENT INFORMATION
Revenues................. $ 1,817 $1,558 $ 7,396 $ 6,581 $ 6,309 $ 13,070 $ 12,021 $ 11,517
Depreciation and
amortization............ 112 105 437 424 384 1,172 1,109 1,138
Business segment
operating income........ 138 112 713 591 529 1,343 1,154 1,114
Equity in pretax income
of Entertainment Group.. 22 45 176 281 226 -- -- --
Interest and other, net.. 155 158 724 718 351 882 966 1,133
Net income (loss)(a)(b).. (47) (51) (91) (221) 86 86 (99) (227)
Net loss applicable to
common shares (after
preferred dividends).... (50) (54) (104) (339) (542) (542) (692) (786)
Per share of common
stock:
Net loss(a)(b)......... $ (.13) $ (.14) $ (.27) $ (.90) $ (1.46) $ (1.46) $ (2.40) $ (3.42)
Dividends.............. $ .09 .08 $ .35 $ .31 $ .265 $ .265 $ .25 .25
Average common shares(b). 379.5 $378.6 378.9 374.7 371.0 371.0 288.2 229.9
Ratio of earnings to
fixed charges
(deficiency in the
coverage of fixed
charges by earnings
before fixed
charges)(c)............. 1.0x 1.0x 1.1x 1.1x 1.4x 1.4x 1.1x $ (101)
Ratio of earnings to
combined fixed charges
and preferred stock
dividends (deficiency in
the coverage of combined
fixed charges and
preferred stock
dividends by earnings
before fixed charges and
preferred stock
dividends)(c)........... $ (3) 1.0x 1.1x $ (91) $ (506) $ (509) $ (1,240) $ (1,335)
</TABLE>
S-14
<PAGE>
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------------------------------
MARCH 31, RESTATED
1995 1994 1993 1992 1992 1991 1990
----------- ------- ------- ------- ------- ------- -------
(UNAUDITED) (MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET
INFORMATION
Investments in and
amounts due to and from
Entertainment Group.... $ 5,443 $ 5,350 $ 5,627 $ 5,392 $ -- $ -- $ --
Total assets............ 16,608 16,716 16,892 17,043 27,366 24,889 25,337
Long-term debt.......... 9,001 8,839 9,291 2,897 10,068 8,716 11,184
Shareholders' equity:
Preferred stock
liquidation
preference............ 140 140 140 6,532 6,532 6,256 5,954
Equity applicable to
common stock.......... 973 1,008 1,230 1,635 1,635 2,242 360
Total shareholders'
equity................ 1,113 1,148 1,370 8,167 8,167 8,498 6,314
</TABLE>
- --------
(a) The net loss for the year ended December 31, 1993 includes an extraordinary
loss on the retirement of debt of $57 million ($.15 per common share) and
an unusual charge of $70 million ($.19 per common share) from the effect of
the new income tax law on Time Warner's deferred income tax liability. The
net loss for the year ended December 31, 1991 includes a $36 million after-
tax charge ($.12 per common share) relating to the restructuring of the
Publishing division.
(b) In August 1991, Time Warner completed the sale of 137.9 million shares of
common stock pursuant to a rights offering. Net proceeds of $2.558 billion
from the rights offering were used to reduce indebtedness under Time
Warner's bank credit agreement. If the rights offering had been completed
at the beginning of 1991, net loss for the year would have been reduced to
$33 million, or $1.70 per common share, and there would have been 369.3
million shares of common stock outstanding during the year.
(c) For purposes of the ratio of earnings to fixed charges and the ratio of
earnings to combined fixed charges and preferred stock dividends, earnings
were calculated by adding pretax income, interest expense, previously
capitalized interest amortized to expense, the portion of rents
representative of an interest factor, Time Warner's proportionate share of
such items for its partially-owned subsidiaries and50%-owned companies, and
undistributed losses of less-than-50%-owned companies. Fixed charges
consist of interest expense, interest capitalized, the portion of rents
representative of an interest factor and Time Warner's proportionate share
of such items for partially-owned subsidiaries and 50%-owned companies.
Combined fixed charges and preferred stock dividends also include the
amount of pretax income necessary to cover preferred stock dividend
requirements. For periods in which earnings before fixed charges were
insufficient to cover fixed charges or combined fixed charges and preferred
stock dividends, the dollar amount of coverage deficiency, instead of the
ratio, is disclosed. Earnings as defined include significant noncash
charges for depreciation and amortization. Fixed charges for the three
months ended March 31, 1995 and 1994 and the year ended December 31, 1994
include noncash interest expense of $57 million, $52 million and $219
million, respectively, relating to the Reset Notes and Time Warner's Liquid
Yield Option Notes due 2012 and 2013.
ENTERTAINMENT GROUP SELECTED HISTORICAL FINANCIAL INFORMATION
The selected historical financial information of the Entertainment Group set
forth below has been derived from and should be read in conjunction with the
consolidated financial statements and other financial information of Time
Warner and TWE contained in Time Warner's Annual Report on Form 10-K for the
year ended December 31, 1994, as amended, and with the unaudited consolidated
condensed financial statements and other financial information of Time Warner
and TWE contained in Time Warner's Quarterly Report on Form 10-Q for the
quarter ended March 31, 1995, which are incorporated herein by reference. The
selected historical financial information for all periods after 1992 give
effect to TWE's consolidation of Six Flags effective as of January 1, 1993, as
a result of the 1993 Six Flags acquisition. The selected historical financial
information for periods prior to such date has not been changed; however,
selected financial information for 1992 retroactively reflecting the
consolidation is presented as supplementary information
S-15
<PAGE>
under the column heading "restated" to facilitate comparative analysis. For
periods prior to January 1, 1993, the Entertainment Group is consolidated with
Time Warner for financial reporting purposes and, accordingly, is also
reflected in Time Warner's summary historical financial data.
The selected historical financial information for 1993 gives effect to the
admission of U S WEST as an additional limited partner of TWE as of September
15, 1993 and the issuance of $2.6 billion of TWE debentures during the year to
reduce indebtedness under the TWE credit agreement, and for 1992 gives effect
to the initial capitalization of TWE and associated refinancings as of the
dates such transactions were consummated and Time Warner's acquisition of the
ATC minority interest as of June 30, 1992, using the purchase method of
accounting and reflected in the consolidated financial statements of TWE under
the pushdown method of accounting.
<TABLE>
<CAPTION>
THREE MONTHS ENDED YEARS ENDED DECEMBER 31,
MARCH 31, ----------------------------------------------
-------------------- RESTATED
1995 1994 1994 1993 1992 1992 1991 1990
--------- --------- ------ ------ ------ ------ ------ ------
(UNAUDITED) (MILLIONS, EXCEPT RATIOS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
OPERATING STATEMENT
INFORMATION
Revenues................ $ 2,073 $ 1,927 $8,509 $7,963 $7,251 $6,761 $6,068 $5,671
Depreciation and
amortization........... 230 216 959 909 857 788 733 775
Business segment
operating income....... 201 206 852 905 855 814 724 549
Interest and other, net. 164 146 616 564 569 531 526 648
Net income (loss)(a).... 11 41 136 207 173 173 103 (180)
TWE ratio of earnings to
fixed charges
(deficiency in the
coverage of fixed
charges by earnings
before fixed
charges)(b)............ 1.1x 1.4x 1.4x 1.4x 1.4x 1.4x 1.4x $ (138)
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------------------------------
MARCH 31, RESTATED
1995 1994 1993 1992 1992 1991 1990
----------- ------- ------- ------- ------- ------- -------
(UNAUDITED) (MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET
INFORMATION
Total assets............ $19,043 $18,992 $18,202 $16,733 $15,886 $14,230 $14,415
Long-term debt.......... 7,162 7,160 7,125 7,684 7,171 4,571 6,516
Time Warner General
Partners' senior
capital................ 1,696 1,663 1,536 -- -- -- --
Partners' capital....... 6,463 6,491 6,228 6,483 6,483 6,717 5,809
</TABLE>
- --------
(a) Net income for the year ended December 31, 1993 includes an extraordinary
loss on the retirement of debt of $10 million.
(b) For purposes of the ratio of earnings to fixed charges, earnings were
calculated by adding pretax income, interest expense, previously
capitalized interest amortized to expense, the portion of rents
representative of an interest factor, TWE's proportionate share of such
items for its partially-owned subsidiaries and 50%-owned companies, and
undistributed losses of less-than-50%-owned companies. Fixed charges
consist of interest expense, interest capitalized, the portion of rents
representative of an interest factor and TWE's proportionate share of such
items for partially-owned subsidiaries and 50%-owned companies. For periods
in which earnings before fixed charges were insufficient to cover fixed
charges, the dollar amount of coverage deficiency, instead of the ratio, is
disclosed. Earnings as defined include significant noncash charges for
depreciation and amortization.
TIME WARNER AND ENTERTAINMENT GROUP SELECTED PRO FORMA FINANCIAL INFORMATION
The unaudited selected pro forma balance sheet information of Time Warner and
the Entertainment Group at March 31, 1995 set forth below gives effect to the
Asset Sale Transactions, the TWE-A/N
S-16
<PAGE>
Transaction and the 1995 Debt Refinancing and, with respect to Time Warner
only, also gives effect to the Acquisitions in each case as if such
transactions occurred at such date. The unaudited selected pro forma operating
statement information of Time Warner and the Entertainment Group for the three
months ended March 31, 1995 and the year ended December 31, 1994 set forth
below gives effect to each applicable transaction as if it had occurred at the
beginning of such periods. No pro forma effect has been given in the
information set forth below to (i)(A) the issuance of the Preferred Securities
offered hereby, (B) the issuance of the PERCS and (C) the issuance by Time
Warner on June 19, 1995 of its $500 million 7.75% Notes due 2005 (the "7.75%
Notes") and the use of the net proceeds therefrom to repurchase, redeem or
otherwise repay outstanding indebtedness and (ii) the redemption of the Reset
Notes in exchange for the Exchange Securities, because such transactions will
not have a material effect on Time Warner (see "Consolidated Capitalization").
The selected pro forma financial information should be read in conjunction with
the "Time Warner Inc. and the Entertainment Group Pro Forma Consolidated
Condensed Financial Statements" included in Time Warner's Current Report on
Form 8-K dated May 30, 1995, which is incorporated herein by reference.
The selected pro forma financial information is presented for informational
purposes only and is not necessarily indicative of the financial position or
operating results that would have occurred if the transactions given
retroactive effect therein had been consummated as of the dates indicated, nor
is it necessarily indicative of future financial conditions or operating
results.
<TABLE>
<CAPTION>
THREE MONTHS YEAR ENDED
ENDED MARCH 31, 1995 DECEMBER 31, 1994
---------------------------- ----------------------------
TIME ENTERTAINMENT TIME ENTERTAINMENT
WARNER GROUP WARNER GROUP
----------- --------------- ----------- ---------------
(MILLIONS, EXCEPT PER SHARE AMOUNTS AND RATIOS)
<S> <C> <C> <C> <C>
PRO FORMA OPERATING
STATEMENT INFORMATION
Revenues................ $ 2,025 $ 2,264 $ 8,217 $ 8,790
Depreciation and
amortization........... 232 270 918 1,040
Business segment
operating income....... 149 239 645 928
Equity in pretax income
of Entertainment Group. 56 -- 217 --
Interest and other, net. 220 168 938 651
Net income (loss)....... (59) 41 (263) 183
Net loss applicable to
common shares (after
preferred dividends)... (81) -- (353) --
Per share of common
stock:
Net loss.............. (.21) -- (.92) --
Dividends............. (.09) -- (.35) --
Average common shares... 384.6 -- 384.0 --
Time Warner and TWE
ratio of earnings to
fixed charges
(deficiency in the
coverage of fixed
charges by earnings
before fixed
charges)(a)............ $ (18) 1.6x $ (73) 1.7x
Time Warner deficiency
in the coverage of
combined fixed charges
and preferred stock
dividends by earnings
before fixed charges
and preferred stock
dividends(a)........... $ (55) -- $ (209) --
</TABLE>
- --------
(a) For purposes of the ratio of earnings to fixed charges and the ratio of
earnings to combined fixed charges and preferred stock dividends, earnings
were calculated by adding pretax income, interest expense, previously
capitalized interest amortized to expense, the portion of rents
representative of an interest factor, the proportionate share for each of
Time Warner and TWE, respectively, of such items for its partially-owned
subsidiaries and 50%-owned companies, and undistributed losses of less-
than-50%-owned companies. Fixed charges consist of interest expense,
interest capitalized, the portion of rents representative of an interest
factor and the proportionate share for each of Time Warner and TWE,
respectively, of such items for partially-owned subsidiaries and 50%-owned
companies. Combined fixed
S-17
<PAGE>
charges and preferred stock dividends also include the amount of pretax
income necessary to cover preferred stock dividend requirements. For periods
in which earnings before fixed charges were insufficient to cover fixed
charges or combined fixed charges and preferred stock dividends, the dollar
amount of coverage deficiency, instead of the ratio, is disclosed. Earnings
as defined include significant noncash charges for depreciation and
amortization. Fixed charges for Time Warner for the three months ended March
31, 1995 and the year ended December 31, 1994 included noncash interest
expense of $57 million and $219 million, respectively, relating to the Reset
Notes and Time Warner's Liquid Yield Option Notes due 2012 and 2013.
<TABLE>
<CAPTION>
MARCH 31, 1995
---------------------
TIME ENTERTAINMENT
WARNER GROUP
------- -------------
(MILLIONS)
<S> <C> <C>
PRO FORMA BALANCE SHEET INFORMATION
Investments in and amounts due to and from Entertainment
Group................................................... $ 5,401 $ --
Total assets............................................. 24,566 18,916
Long-term debt........................................... 12,374 6,268
Shareholders' equity:
Preferred stock liquidation preference.................. 2,240 --
Equity applicable to common stock....................... 1,200 --
Total shareholders' equity.............................. 3,440 --
Time Warner General Partners' senior capital............. -- 1,696
Partners' capital........................................ -- 6,421
</TABLE>
S-18
<PAGE>
CONSOLIDATED CAPITALIZATION
The consolidated historical and pro forma capitalization of Time Warner and
Time Warner's Entertainment Group, consisting principally of TWE, at March 31,
1995, is set forth below. The Entertainment Group is not consolidated with Time
Warner for financial reporting purposes. The consolidated pro forma
capitalization of Time Warner and the Entertainment Group gives effect to the
Asset Sale Transactions, the TWE-A/N Transaction and the 1995 Debt Refinancing
and, with respect to Time Warner only, also gives effect to the Acquisitions,
in each case as if such transactions occurred at such date. The consolidated
pro forma as adjusted capitalization of Time Warner gives effect to (i) the
Transactions, (ii) the issuance of (A) the Preferred Securities offered hereby,
(B) the PERCS (see "Recent Developments--PERCS Offering") and (C) the 7.75%
Notes and (iii) the redemption of the Reset Notes in exchange for the Exchange
Securities, as if such transactions occurred at such date. Although the
proceeds to Time Warner of the issuance of the Preferred Securities offered
hereby, the PERCS and the 7.75% Notes will be used to reduce outstanding
indebtedness of Time Warner, Time Warner has not yet determined which
indebtedness it will repurchase, redeem or otherwise repay. See "Use of
Proceeds". The pro forma capitalization is presented for informational purposes
only and is not necessarily indicative of the future capitalization of Time
Warner and the Entertainment Group.
<TABLE>
<CAPTION>
TIME WARNER INC. ENTERTAINMENT GROUP
------------------------------- ---------------------
PRO PRO FORMA PRO
HISTORICAL FORMA AS ADJUSTED HISTORICAL FORMA
---------- ------- ----------- ---------------------
(MILLIONS)
<S> <C> <C> <C> <C> <C>
Long-term debt:
7.45% and 7.95% notes.. $ 1,000 $ 1,000 $ 1,000 -- --
Reset Notes (8.7%
yield)................ 1,755 1,755 -- -- --
Exchange Securities.... -- -- 1,755 (a)
Zero coupon liquid
yield option notes due
2012 (6.25% yield).... 555 555 555 -- --
Zero coupon convertible
notes (5% yield)...... 982 982 982 -- --
8.75%, 9.125% and 9.15%
Debentures............ 2,248 2,248 2,248 -- --
8.75% Convertible
subordinated
debentures............ 2,226 2,226 2,226 -- --
7.75% Notes............ -- -- 497 (b) -- --
Debt due to TWE (7.13%
interest rate)(c)..... 400 400 400 -- --
CVI 10 3/4% Senior
notes................. -- 300 300 -- --
CVI 9 1/4% Senior
debentures............ -- 200 200 -- --
Summit 10 1/2% Senior
subordinated
debentures............ -- 140 140 -- --
New credit
agreement(d).......... -- 2,733 2,733 -- 1,682
TWE credit agreement
(weighted average
interest rate of
6.8%)(e)(f)........... -- -- -- 2,450 --
TWE commercial paper
(weighted average
interest rate of
6.5%)(f).............. -- -- -- 748 748
Six Flags 9.25% zero
coupon notes(g)....... -- -- -- 126 --
TWE 8 7/8%, 9 5/8% and
10.15% Notes(f)....... -- -- -- 1,197 1,197
TWE 7 1/4%, 8 3/8% and
8 3/8% Debentures(f).. -- -- -- 2,583 2,583
Other.................. 235 235 235 58 58
Reduction of debt with
proceeds from the
issuance of the PERCS,
the 7.75% Notes and
the Preferred
Securities offered
hereby................ -- -- (b) -- --
------- ------- ------- --------- ---------
Subtotal............... 9,401 12,774 7,162 6,268
Reclassification of
debt due to TWE to
investments in and
amounts due to the
Entertainment
Group(c).............. (400) (400) (400) -- --
------- ------- ------- --------- ---------
Total long-term
debt............... 9,001 12,374 7,162 6,268
Company obligated
mandatorily redeemable
preferred securities of
subsidiaries (*)....... -- -- (b) -- --
Shareholders' equity:
Preferred stock
liquidation
preference............ 140 2,240 2,240 -- --
Equity applicable to
common stock.......... 973 1,200 1,200 -- --
------- ------- ------- --------- ---------
Total shareholders'
equity................ 1,113 3,440 3,440 -- --
Time Warner General
Partners' senior
capital................ -- -- -- 1,696 1,696
Partners' capital....... -- -- -- 6,463 6,421
------- ------- ------- --------- ---------
Total capitalization.... $10,114 $15,814 $ $ 15,321 $ 14,385
======= ======= ======= ========= =========
</TABLE>
- -------
(*) The sole assets of each subsidiary that is an obligor on an issue of
preferred securities are subordinated notes or subordinated debentures of
Time Warner.
S-19
<PAGE>
(a) Reflects the accreted value of the Reset Notes on March 31, 1995. The
accreted value of the Reset Notes on the redemption date, August 15, 1995,
will be $1,827,948,000; and the aggregate principal amount of the Exchange
Securities issued on that date will be equal to $1,827,948,000.
(b) Although the proceeds to Time Warner of the issuance of the Preferred
Securities offered hereby, the PERCS and the 7.75% Notes will be used to
reduce outstanding indebtedness of Time Warner, Time Warner has not yet
determined which indebtedness it will repurchase, redeem or otherwise
repay.
(c) Time Warner and TWE entered into a credit agreement in 1994 that allows
Time Warner to borrow up to $400 million from TWE through September 15,
2000. Outstanding borrowings from TWE bear interest at LIBOR plus 1% per
annum. Under TWE's bank credit agreement, TWE is permitted (effective July
1, 1995) to loan to Time Warner up to $1.5 billion. For financial reporting
purposes, the $400 million of currently outstanding loans from TWE to Time
Warner have been reclassified and shown as a reduction in Time Warner's
investments in and amounts due to the Entertainment Group.
(d) The New Credit Agreement permits borrowings in an aggregate amount of up to
$8.3 billion. Borrowings are limited to $4 billion in the case of TWI
Cable, $5 billion in the case of the TWE-Advance/Newhouse Partnership and
$8.3 billion in the case of TWE, subject in each case to certain
limitations and adjustments. Such borrowings will bear interest at
different rates for each of the three borrowers, generally equal to LIBOR
plus a margin ranging from 50 to 87.5 basis points based on the credit
rating or financial leverage of the applicable borrower. The New Credit
Agreement contains certain covenants for each borrower relating to, among
other things, additional indebtedness; liens on assets; cash flow coverage
and leverage ratios; and loans, advances, distributions and other cash
payments or transfers of assets from the borrowers to their respective
partners or affiliates. See "Recent Developments" and Time Warner's Current
Report on Form 8-K dated May 30, 1995, incorporated by reference herein for
a description of the New Credit Agreement.
(e) As of March 31, 1995, the TWE bank credit agreement provided for up to $5.2
billion of borrowings and consisted of a $4.2 billion revolving credit
facility with available credit reducing at June 30, 1995 and thereafter by
$200 million per quarter through June 30, 1996, by $125 million per quarter
from September 30, 1996 through September 30, 1999, and by $1.575 billion
at final maturity on December 31, 1999; and a $986 million term loan with
repayments of $66 million on June 30, 1995, $98 million per quarter
beginning September 30, 1995 through March 31, 1996, $27 million per
quarter beginning June 30, 1996 through June 30, 1999, $20 million on
September 30, 1999 and a final repayment of $255 million on December 31,
1999. Unused credit is available for general business purposes and to
support commercial paper borrowings. Outstanding borrowings under the
credit agreement generally bear interest at LIBOR plus 5/8% per annum.
(f) Guaranteed by certain subsidiaries of Time Warner which are the general
partners of TWE.
(g) Guaranteed by TWE.
S-20
<PAGE>
USE OF PROCEEDS
Time Warner Capital will invest the proceeds from the sale of the Preferred
Securities offered hereby in Subordinated Debentures of Time Warner, the
proceeds of which will be used by Time Warner to repurchase, redeem or
otherwise repay outstanding indebtedness. The weighted average interest rate on
Time Warner's outstanding indebtedness as of March 31, 1995, was 8.3%. The
weighted average maturity of Time Warner's outstanding indebtedness as of March
31, 1995, was approximately 15 years.
DESCRIPTION OF THE PREFERRED SECURITIES
The Preferred Securities will be issued pursuant to the terms of the
Declaration. The Declaration will be qualified as an indenture under the Trust
Indenture Act. The Property Trustee, The First National Bank of Chicago, will
act as the indenture trustee for purposes of compliance with the provisions of
the Trust Indenture Act. The terms of the Preferred Securities will include
those stated in the Declaration and those made part of the Declaration by the
Trust Indenture Act. The following summary of the principal terms and
provisions of the Preferred Securities does not purport to be complete and is
subject to, and qualified in its entirety by reference to, the Declaration, a
copy of which is filed as an exhibit to the Registration Statement of which
this Prospectus Supplement is a part, the Trust Act and the Trust Indenture
Act.
GENERAL
The Declaration authorizes the Regular Trustees to issue on behalf of Time
Warner Capital the Trust Securities, which represent undivided beneficial
interests in the assets of Time Warner Capital. All of the Common Securities
will be owned, directly or indirectly, by Time Warner. The Common Securities
rank pari passu, and payments will be made thereon on a Pro Rata Basis, with
the Preferred Securities, except that upon the occurrence of a Declaration
Event of Default, the rights of the holders of the Common Securities to receive
payment of periodic distributions and payments upon liquidation, redemption or
otherwise will be subordinated to the rights of the holders of the Preferred
Securities. The Declaration does not permit the issuance by Time Warner Capital
of any securities other than the Trust Securities or the incurrence of any
indebtedness by Time Warner Capital. Pursuant to the Declaration, the Property
Trustee will own the Subordinated Debentures purchased by Time Warner Capital
for the benefit of the holders of the Trust Securities. The payment of
distributions out of money held by Time Warner Capital, and payments upon
redemption of the Preferred Securities or liquidation of Time Warner Capital,
are guaranteed by Time Warner to the extent described under "Description of the
Guarantee". The Guarantee will be held by The First National Bank of Chicago,
the Guarantee Trustee, for the benefit of the holders of the Preferred
Securities. The Guarantee does not cover payment of distributions when Time
Warner has not made payment of principal or interest, as applicable, on the
Subordinated Debentures. In such event, the remedy of a holder of Preferred
Securities is to vote to appoint a Special Regular Trustee and to direct the
Property Trustee to enforce the Property Trustee's rights under the
Subordinated Debentures. See "--Voting Rights" and "Effect of Obligations Under
the Subordinated Debentures and the Guarantee".
The term "Pro Rata Basis" shall mean, with respect to any payment, pro rata
to each holder of Trust Securities according to the aggregate amount of the
Trust Securities held by such holder in relation to the aggregate amount of all
Trust Securities outstanding; provided, however, that if the assets of the
Trust are insufficient to make such payment in full as a result of a default
with respect to the Subordinated Debentures, any funds available to make such
payment shall be paid (i) first to each holder of Preferred Securities pro rata
according to the aggregate amount of the Preferred Securities held by such
holder in relation to the aggregate amount of all the Preferred Securities
outstanding up to an aggregate amount equal to the amount then owed to the
holders of the Preferred Securities and (ii) only after satisfaction of all
amounts owed to the holders of the Preferred Securities, to each holder of
Common Securities pro rata according to the aggregate
S-21
<PAGE>
amount of the Common Securities held by such holder in relation to the
aggregate amount of all the Common Securities outstanding.
DISTRIBUTIONS
Distributions on the Preferred Securities will be fixed at a rate per annum
of % of the liquidation amount of $25 per Preferred Security. Distributions in
arrears for more than one quarter will bear interest thereon at the rate per
annum of % thereof compounded quarterly. The term "distribution" as used
herein includes any such interest payable unless otherwise stated. The amount
of distributions payable for any period will be computed on the basis of a 360-
day year of twelve 30-day months and will include the first day but exclude the
last day of such period.
Distributions on the Preferred Securities will be cumulative, will accrue
from and including , 1995, and will be payable quarterly in arrears on
, , and of each year, commencing , 1995, when, as
and if available for payment, subject to the existence of any Extension Period.
Distributions on the Preferred Securities will be payable to the holders
thereof as they appear on the books and records of Time Warner Capital on the
relevant record dates, which, as long as the Preferred Securities remain in
book-entry only form, will be one Business Day prior to the relevant payment
dates. Such distributions will be paid through the Property Trustee who will
hold amounts received in respect of the Subordinated Debentures in the Property
Account for the benefit of the holders of the Trust Securities. Subject to any
applicable laws and regulations and the provisions of the Declaration, each
such payment will be made as described under "Book-Entry Only Issuance--The
Depository Trust Company" below.
In the event that the Preferred Securities do not continue to remain in book-
entry only form, the Regular Trustees shall have the right to select relevant
record dates, which shall be more than one Business Day prior to the relevant
payment dates. In the event that any date on which distributions are to be made
on the Preferred Securities is not a Business Day, then payment of the
distributions payable on such date will be made on the next succeeding day
which is a Business Day (and without any interest or other payment in respect
of any such delay), except that, if such Business Day is in the next succeeding
calendar year, such payment shall be made on the immediately preceding Business
Day, in each case with the same force and effect as if made on such date. A
"Business Day" shall mean any day other than Saturday, Sunday or any other day
on which banking institutions in New York, New York are permitted or required
by any applicable law to close.
The payment of distributions on the Preferred Securities out of moneys held
by Time Warner Capital is guaranteed by Time Warner on a subordinated basis as
and to the extent set forth under "Description of the Guarantee". The Guarantee
is a full and unconditional guarantee from the time of issuance of the
Preferred Securities, but the Guarantee covers distributions and other payments
on the Preferred Securities only if and to the extent that Time Warner has made
a payment to the Property Trustee of interest or principal on the Subordinated
Debentures, as the case may be.
OPTION TO EXTEND INTEREST PAYMENT PERIOD
Time Warner has the right under the Indenture to defer payments of interest
on the Subordinated Debentures by extending the interest payment period from
time to time thereon, which, if exercised, would defer distributions on the
Preferred Securities (though such distributions would continue to accrue with
interest) during any Extension Period. Such right to extend the interest
payment period for the Subordinated Debentures is limited to a period not
exceeding 20 consecutive quarters for any particular Extension Period. In the
event that Time Warner exercises this right, then (a) Time Warner shall not
declare or pay dividends on, make distributions with respect to, or redeem,
purchase or acquire, or make a liquidation payment with respect to, any of its
capital stock and (b) Time Warner shall not make any payment of interest,
principal or
S-22
<PAGE>
premium, if any, on or repay, repurchase or redeem any debt securities issued
by Time Warner that rank pari passu with or junior to the Subordinated
Debentures; provided, however, that the foregoing restrictions do not apply to
any interest or dividend payment by Time Warner where the interest or
dividend is paid by way of the issuance of securities that rank junior to the
Subordinated Debentures. Prior to the termination of any such Extension Period,
Time Warner may further extend the interest payment period; provided that such
Extension Period, together with all such previous and further extensions
thereof, may not exceed 20 consecutive quarters. Upon the termination of any
Extension Period and the payment of all amounts then due, Time Warner may
select a new Extension Period, subject to the above requirements. Time Warner
Capital will provide notice of any extension of the interest period on a date
not less than 20 nor more than 45 Business Days prior to such extension to all
holders of the Subordinated Debentures stating, among other things, the date
such Extension Period shall commence. Such notice shall be provided by mail to
the holders of record of the Preferred Securities to the address appearing for
such holder in the books and records of Time Warner Capital. See "Description
of the Subordinated Debentures--Interest" and "--Option To Extend Interest
Payment Period". If distributions are deferred, the deferred distributions and
accrued interest thereon shall be paid to holders of record of the Preferred
Securities as they appear on the books and records of Time Warner Capital on
the record date next following the termination of such deferral period.
REDEMPTION OF THE PREFERRED SECURITIES AT MATURITY OR UPON OPTIONAL REDEMPTION
OF THE SUBORDINATED DEBENTURES
The Subordinated Debentures will mature on the Maturity Date. In addition,
the Subordinated Debentures are subject to optional redemption, in whole or in
part, at any time on or after , 2000 or at any time in certain circumstances
upon the occurrence of a Special Event. Upon the repayment of the Subordinated
Debentures, whether at maturity or upon redemption, the proceeds from such
repayment or payment shall simultaneously be applied to redeem Trust Securities
having an aggregate liquidation amount equal to the aggregate principal amount
of the Subordinated Debentures so repaid or redeemed at the Preferred
Redemption Price; provided that holders of Trust Securities shall be given not
less than 20 nor more than 45 Business Days' notice of such redemption. See
"Description of the Subordinated Debentures--Optional Redemption". In the event
that fewer than all of the outstanding Trust Securities are to be redeemed, the
Trust Securities will be redeemed on a Pro Rata Basis.
SPECIAL EVENT REDEMPTION OR DISTRIBUTION
"Tax Event" means that the Regular Trustees shall have obtained an opinion of
nationally recognized independent tax counsel experienced in such matters (a
"Dissolution Tax Opinion") to the effect that, as a result of (a) any amendment
to, or change (including any announced prospective change) in, the laws (or any
regulations thereunder) of the United States or any political subdivision or
taxing authority thereof or therein, (b) any amendment to, or change in, an
interpretation or application of such laws or regulations, by any legislative
body, court, governmental agency or regulatory authority (including the
enactment of any legislation and the publication of any judicial decision or
regulatory determination), (c) any interpretation or pronouncement that
provides for a position with respect to such laws or regulations that differs
from the theretofore generally accepted position or (d) any action taken by any
governmental agency or regulatory authority, which amendment or change is
enacted, promulgated, issued or announced or which interpretation or
pronouncement is issued or announced or which action is taken, in each case on
or after the date of this Prospectus Supplement, there is more than an
insubstantial risk that at such time or within 90 days of the date thereof (i)
Time Warner Capital is or would be subject to United States Federal income tax
with respect to income accrued or received on the Subordinated Debentures, (ii)
the interest payable on the Subordinated Debentures is not or would not be
deductible by Time Warner for United States Federal income tax purposes or
(iii) Time Warner Capital is or would be subject to more than a de minimis
amount of other taxes, duties, assessments or other governmental charges.
"Investment Company Event" means that the Regular Trustees shall have
received an opinion of a nationally recognized independent counsel experienced
in such matters to the effect that, as a result of the
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occurrence of a change in law or regulation or a written change in
interpretation or application of law or regulation by any legislative body,
court, governmental agency or regulatory authority (a "Change in 1940 Act
Law"), there is more than an insubstantial risk that Time Warner Capital is or
will be considered an "investment company" that is required to be registered
under the Investment Company Act of 1940, as amended (the "1940 Act"), which
Change in 1940 Act Law becomes effective on or after the date of this
Prospectus Supplement.
If, at any time a Tax Event or an Investment Company Event (each a "Special
Event") shall occur and be continuing, the Regular Trustees shall notify Time
Warner thereof and Time Warner shall elect to either:
(a) direct the Regular Trustees to dissolve Time Warner Capital and cause
the Subordinated Debentures with an aggregate principal amount equal to the
aggregate liquidation amount of, and accrued and unpaid interest equal to
accrued and unpaid distributions on, and having the same record date for
payment as, the Trust Securities outstanding at such time to be distributed
to the holders of Trust Securities on a Pro Rata Basis (determined without
regard to the proviso in the definition of such term), in liquidation of
such holders' interests in the Trust, within 90 days following the
occurrence of such Special Event; provided, however, that in the case of
the occurrence of a Tax Event, as a condition of any such dissolution and
distribution, the Regular Trustees shall have received an opinion of
nationally recognized independent tax counsel experienced in such matters
(a "No Recognition Opinion"), which opinion may rely on any then applicable
published revenue rulings of the Internal Revenue Service, to the effect
that the holders of the Trust Securities will not recognize any gain or
loss for United States Federal income tax purposes as a result of such
dissolution of Time Warner Capital and distribution of the Subordinated
Debentures;
(b) redeem the Subordinated Debentures in whole (and not in part), upon
not less than 20 nor more than 45 Business Days' notice, within 90 days
following the occurrence of such Special Event, in which case Time Warner
Capital shall redeem in cash on a Pro Rata Basis Trust Securities having an
aggregate amount equal to the principal amount of, and accrued and unpaid
distributions equal to the accrued and unpaid interest on, the Subordinated
Debentures so redeemed, at a price per Trust Security of $25, plus an
amount equal to all accrued and unpaid distributions on such Trust Security
to but excluding the date of such redemption (the "Special Redemption
Date"); or
(c) in the case of a Tax Event, allow the Subordinated Debentures and the
Trust Securities to remain outstanding and indemnify Time Warner Capital
for all taxes payable by it as a result of such Tax Event;
provided, that, if at the time there is available to Time Warner Capital the
opportunity to eliminate, within such 90-day period, the Special Event by
taking some ministerial action, such as filing a form or making an election, or
pursuing some other similar reasonable measure, that has no adverse effect on
Time Warner Capital, Time Warner or the holders of Trust Securities and will
involve no material cost, Time Warner Capital will pursue such measure in lieu
of dissolution or redemption; provided further, that Time Warner shall have no
right to redeem the Subordinated Debentures or to direct the Regular Trustees
to dissolve Time Warner Capital while the Regular Trustees are pursuing any
such ministerial action or reasonable measure unless the Special Event shall
not have been so eliminated by the 85th day following the occurrence thereof,
in which case Time Warner shall be permitted to so direct the Regular Trustees
or to provide notice to the holders of the redemption of the Subordinated
Debentures; and provided further, that if dissolution of Time Warner Capital
and distribution of the Subordinated Debentures to the holders of Trust
Securities would eliminate the condition causing the Special Event and all
other conditions to such dissolution and distribution have been satisfied, Time
Warner will not be permitted to redeem the Subordinated Debentures.
If Subordinated Debentures are distributed to the holders of the Preferred
Securities, Time Warner will use its reasonable best efforts to have the
Subordinated Debentures listed on the New York Stock Exchange or on such
exchange as the Preferred Securities are then listed.
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On the date of any distribution of Subordinated Debentures, upon dissolution
of Time Warner Capital, (i) the Preferred Securities will no longer be deemed
to be outstanding, (ii) neither Time Warner Capital nor Time Warner shall have
any further obligation to the holders of the Preferred Securities with respect
to the Preferred Securities or under the Guarantee, (iii) the Depositary or its
nominee, as the record holder of the Preferred Securities, will receive a
registered global certificate or certificates representing the Subordinated
Debentures to be delivered upon such distribution and (iv) any certificates
representing Preferred Securities not held by the Depositary or its nominee
will be deemed to represent Subordinated Debentures having an aggregate
principal amount equal to the aggregate liquidation amount of, and accrued and
unpaid interest equal to accrued and unpaid distributions on, such Preferred
Securities, until such certificates are presented to Time Warner or its agent
for transfer or reissuance. Holders of Subordinated Debentures received as a
result of any such dissolution and distribution shall be entitled to receive on
the next regularly scheduled Interest Payment Date (as defined herein) interest
accrued on the Subordinated Debentures from and including the last date as of
which distributions were paid in respect of the Preferred Securities formerly
held by such holders to but excluding such Interest Payment Date. Any such
distribution shall constitute satisfaction of all the Trust's obligations with
respect to the Preferred Securities, including any obligation to pay accrued
and unpaid distributions thereon.
Under current United Stated Federal income tax law, a distribution of
Subordinated Debentures upon the dissolution of Time Warner Capital would not
be a taxable event to holders of the Preferred Securities. Upon occurrence of a
Special Event, however, a dissolution of Time Warner Capital in which holders
of the Preferred Securities receive cash would be a taxable event to such
holders. See "United States Federal Income Taxation".
There can be no assurance as to the market prices for the Preferred
Securities or the Subordinated Debentures that may be distributed in exchange
for Preferred Securities if a dissolution or liquidation of Time Warner Capital
were to occur. Accordingly, the Preferred Securities that an investor may
purchase, whether pursuant to the offer made hereby or in the secondary market,
or the Subordinated Debentures that a holder of Preferred Securities may
receive on dissolution and liquidation of Time Warner Capital, may trade at a
discount to the price that the investor paid to purchase the Preferred
Securities offered hereby. Because holders of Preferred Securities may receive
Subordinated Debentures upon the occurrence of a Special Event, prospective
purchasers of Preferred Securities are also making an investment decision with
regard to the Subordinated Debentures and should carefully review all the
information regarding the Subordinated Debentures contained herein and in the
Prospectus. See "Risk Factors--Special Event Redemption or Distribution",
"Description of the Subordinated Debentures" below and in the Prospectus.
REDEMPTION AND DISTRIBUTION PROCEDURES
Time Warner Capital will provide notice of any redemption (excluding the
mandatory redemption) of, or any distribution of the Subordinated Debentures in
exchange for, the Preferred Securities on a date not less than 20 Business Days
nor more than 45 Business Days prior to such redemption or distribution, as the
case may be, to all holders of Preferred Securities to be redeemed or exchanged
stating, among other things, the date of such redemption or of such
distribution, as the case may be. Such notice shall be provided by mail to the
holders of record of Preferred Securities to be redeemed or exchanged to the
address appearing for such holder in the books and records of Time Warner
Capital. Each holder of Preferred Securities to be redeemed or exchanged shall
surrender the certificates evidencing such Preferred Securities to Time Warner
Capital at the place designated in such notice and shall be entitled to receive
cash in respect of the applicable redemption payment amount or Subordinated
Debentures, as the case may be.
The Common Securities will be redeemed on a Pro Rata Basis with the Preferred
Securities in the case of any redemption. Subject to the foregoing, if fewer
than all outstanding Trust Securities are to be redeemed, Trust Securities will
be redeemed on a Pro Rata Basis. Preferred Securities registered in the name of
and held by DTC (as defined herein) or its nominee will be redeemed pro rata as
described under "--Book-Entry Only Issuance--The Depository Trust Company"
below.
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Payment of the Preferred Redemption Price of each Preferred Securities is
conditioned upon delivery or book-entry transfer of such Preferred Securities
(together with necessary endorsements) to the Property Trustee at any time
(whether prior to, on or after the relevant Redemption Date) after the required
notice is given (to the extent such notice is required). See "--Book-Entry Only
Issuance--The Depository Trust Company" below. Payment of the Preferred
Redemption Price for such Preferred Securities will be made by the delivery of
cash no later than the applicable Redemption Date with respect to such
Preferred Securities or, if later, the time of delivery or transfer of such
Preferred Securities. If the Property Trustee holds, in accordance with the
terms of the Declaration, money sufficient to pay the Preferred Redemption
Price of the Preferred Securities, on the applicable Redemption Date, then
immediately at the close of business on such Redemption Date, the Preferred
Securities will cease to be outstanding and distributions with respect to such
Preferred Securities will cease to accrue, whether or not such Preferred
Securities are delivered to the Property Trustee, and all rights of the holder
of such Preferred Securities shall terminate and lapse, other than the right to
receive the Preferred Redemption Price upon delivery of the Preferred
Securities.
Provided that Time Warner has paid to the Property Trustee the required
amount of cash due upon any redemption or at the maturity of the Subordinated
Debentures, Time Warner Capital will irrevocably deposit with the Depositary no
later than the close of business on the applicable Redemption Date funds
sufficient to pay the Preferred Redemption Price payable with respect to Trust
Securities on such date and will give the Depositary irrevocable instructions
and authority to pay such amount to the holders of Trust Securities entitled
thereto. See "--Book-Entry Only Issuance--The Depository Trust Company" below.
In the event that any date fixed for redemption of Trust Securities is not a
Business Day, then payment of the Preferred Redemption Price payable on such
date will be made on the next succeeding Business Day (and without any interest
or other payment in respect of any such delay), except that, if such Business
Day falls in the next calendar year such payment will be made on the
immediately preceding Business Day. In the event that payment of the Preferred
Redemption Price is improperly withheld or refused and not paid by the Property
Trustee or by Time Warner pursuant to the Guarantee, distributions on such
Preferred Securities will continue to accrue from the original Redemption Date
to the actual date of payment.
Upon the date of dissolution of Time Warner Capital and distribution of
Subordinated Debentures as a result of the occurrence of a Special Event,
certificates representing the Preferred Securities (or book-entry interests)
shall be deemed to represent beneficial interests in the Subordinated
Debentures so distributed, and the Preferred Securities will no longer be
deemed outstanding and may be canceled by the Regular Trustees. The
Subordinated Debentures so distributed shall have an aggregate principal amount
equal to the aggregate liquidation amount of the Preferred Securities in
respect of which the Subordinated Debentures shall have been so distributed.
Time Warner Capital may not redeem fewer than all of the outstanding
Preferred Securities on any Redemption Date unless all accrued and unpaid
distributions have been or are concurrently being paid on all Preferred
Securities for all quarterly distribution periods terminating on or prior to
the applicable Redemption Date. If a partial redemption would result in the
delisting of the Preferred Securities by any national securities exchange (or
automated inter-dealer quotation system, including The Nasdaq Stock Market
("Nasdaq")) on which the Preferred Securities are then listed, Time Warner
pursuant to the Indenture will only redeem Subordinated Debentures in whole
and, as a result, Time Warner Capital may only redeem the Preferred Securities
in whole.
Subject to the foregoing and to applicable law (including, without
limitation, United States Federal securities laws), Time Warner or its
affiliates may, at any time and from time to time, purchase outstanding
Preferred Securities by tender, in the open market or by private agreement.
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LIQUIDATION DISTRIBUTION UPON DISSOLUTION
In the event of any liquidation, dissolution, winding-up or termination of
Time Warner Capital (each a "Liquidation Event"), whether voluntary or
involuntary, the holders of Trust Securities on the date of such Liquidation
Event will be entitled to be paid on a Pro Rata Basis out of the assets of Time
Warner Capital the Liquidation Distribution unless, in connection with such
Liquidation Event, Subordinated Debentures in an aggregate principal amount
equal to the aggregate amount of, and bearing accrued and unpaid interest in an
amount equal to the accrued and unpaid distributions on, Trust Securities have
been distributed on a Pro Rata Basis (determined without regard to the proviso
in the definition of such term) to the holders of Trust Securities in exchange
therefor. The "Liquidation Distribution" will be equal to (a) $25 plus (b) the
amount of accrued and unpaid distributions on Trust Securities to but excluding
the date of payment. In addition, in the event that the assets of Time Warner
Capital exceed the amount necessary to pay to all holders of Trust Securities
the full amount of the Liquidation Distribution, such excess will be paid to
the holders of Trust Securities on a Pro Rata Basis.
Pursuant to the Declaration, Time Warner Capital shall terminate on the
earliest of (i) the Maturity Date, (ii) when all of the Trust Securities shall
have been called for redemption and the Preferred Redemption Price shall have
been paid to the holders of Trust Securities in accordance with the terms of
the Trust Securities or (iii) when all of the Subordinated Debentures shall
have been distributed to the holders of the Trust Securities.
DECLARATION EVENTS OF DEFAULT
An event of default under the Indenture for the Subordinated Debentures (an
"Indenture Event of Default") will constitute an event of default under the
Declaration with respect to Trust Securities (a "Declaration Event of
Default"); provided that pursuant to the Declaration, the holder of the Common
Securities will be deemed to have waived any Declaration Event of Default with
respect to the Common Securities until all Declaration Events of Default with
respect to the Preferred Securities have been cured, waived or otherwise
eliminated. Until all such Declaration Events of Default with respect to the
Preferred Securities have been so cured, waived or otherwise eliminated, the
Property Trustee will be deemed to be acting solely on behalf of the holders of
the Preferred Securities, and only the holders of the Preferred Securities will
have the right to direct the Property Trustee with respect to certain matters
under the Declaration and, consequently, the Indenture. In the event that any
Declaration Event of Default with respect to the Preferred Securities is waived
by the holders of the Preferred Securities as provided in the Declaration, the
holders of Common Securities pursuant to the Declaration have agreed that such
waiver also constitutes a waiver of such Declaration Event of Default with
respect to the Common Securities for all purposes under the Declaration without
any further act, vote or consent of the holders of the Common Securities. See
"--Voting Rights".
Upon the occurrence of a Declaration Event of Default, the Property Trustee,
as the sole holder of the Subordinated Debentures, will have the right under
the Indenture to declare the Subordinated Debentures to be immediately due and
payable. In addition, the Property Trustee will have the power to exercise all
rights, powers and privileges of a holder of Subordinated Debentures under the
Indenture. See "Description of the Subordinated Debentures".
VOTING RIGHTS
Except as described herein, under the Trust Act, the Trust Indenture Act and
under "--Modification of the Declaration", and as otherwise required by law and
the Declaration, the holders of the Preferred Securities will have no voting
rights.
If (i) Time Warner Capital fails to pay distributions in full on the
Preferred Securities for six (6) consecutive quarterly distribution periods or
(ii) a Declaration Event of Default occurs and is continuing
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(each an "Appointment Event"), then the holders of the Preferred Securities,
acting as a single class, will be entitled by the majority vote of such holders
to appoint a Special Regular Trustee. For purposes of determining whether Time
Warner Capital has failed to pay distributions in full for six (6) consecutive
quarterly distribution periods, distributions shall be deemed to remain in
arrears, notwithstanding any payments in respect thereof, until full cumulative
distributions have been or contemporaneously are paid with respect to all
quarterly distribution periods terminating on or prior to the date of payment
of such cumulative distributions. Any holder of Preferred Securities (other
than Time Warner or any of its affiliates) shall be entitled to nominate any
person to be appointed as Special Regular Trustee. Not later than 30 days after
such right to appoint a Special Regular Trustee arises, the Regular Trustees
shall convene a meeting of the holders of Preferred Securities for the purpose
of appointing a Special Regular Trustee. If the Regular Trustees fail to
convene such meeting within such 30-day period, the holders of not less than
10% of the aggregate liquidation amount of the outstanding Preferred Securities
will be entitled to convene such meeting. The provisions of the Declaration
relating to the convening and conduct of the meetings of the holders will apply
with respect to any such meeting. Any Special Regular Trustee so appointed
shall cease to be a Special Regular Trustee if the Appointment Event pursuant
to which the Special Regular Trustee was appointed and all other Appointment
Events cease to be continuing. Notwithstanding the appointment of any such
Special Regular Trustee, Time Warner shall retain all rights under the
Indenture, including the right to defer payments of interest by extending the
interest payment period as provided under "Description of the Subordinated
Debentures--Option to Extend Interest Payment Period". If such an extension
occurs, there will be no Indenture Event of Default and, consequently, no
Declaration Event of Default for failure to make any scheduled interest payment
on the Subordinated Debentures during the Extension Period on the date
originally scheduled.
Subject to the requirement of the Property Trustee obtaining a tax opinion in
certain circumstances set forth in the last sentence of this paragraph, the
holders of a majority in aggregate liquidation amount of the Trust Securities,
have the right to direct the time, method and place of conducting any
proceeding for any remedy available to the Property Trustee or direct the
exercise of any trust or power conferred upon the Property Trustee under the
Declaration, including the right to direct the Property Trustee, as holder of
the Subordinated Debentures, to (i) exercise the remedies available under the
Indenture with respect to the Subordinated Debentures, (ii) waive any past
Indenture Event of Default that is waivable under the Indenture, or (iii)
exercise any right to rescind or annul a declaration that the principal of all
the Subordinated Debentures shall be due and payable; provided, however, that,
where a consent or action under the Indenture would require the consent or act
of more than a majority of the holders (a "Super Majority") affected thereby,
only the holders of at least such Super Majority of the Trust Securities may
direct the Property Trustee to give such consent or take such action. If the
Property Trustee fails to enforce its rights under the Subordinated Debentures,
a record holder of Trust Securities may, after a period of 30 days has elapsed
from such holder's written request to the Property Trustee to enforce such
rights, institute a legal proceeding directly against Time Warner to enforce
the Property Trustee's rights under the Subordinated Debentures without first
instituting any legal proceeding against the Property Trustee or any other
person or entity. The Property Trustee shall notify all holders of the Trust
Securities of any notice of default received from the Indenture Trustee with
respect to the Subordinated Debentures. Such notice shall state that such
Indenture Event of Default also constitutes a Declaration Event of Default.
Except with respect to directing the time, method and place of conducting a
proceeding for a remedy, the Property Trustee shall not take any of the actions
described in clauses (i), (ii) or (iii) above unless the Property Trustee has
obtained an opinion of tax counsel to the effect that, as a result of such
action, Time Warner Capital will not fail to be classified as a grantor trust
for United States Federal income tax purposes.
In the event the consent of the Property Trustee, as the holder of the
Subordinated Debentures, is required under the Indenture with respect to any
amendment, modification or termination of the Indenture, the Property Trustee
shall request the direction of the holders of the Trust Securities with respect
to such amendment, modification or termination and shall vote with respect to
such amendment, modification or termination as directed by a majority in
liquidation amount of the Trust Securities voting together as a single
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class; provided, however, that, where a consent under the Indenture would
require the consent of a Super Majority, the Property Trustee may only give
such consent at the direction of the holders of at least the proportion in
liquidation amount of the Trust Securities which the relevant Super Majority
represents of the aggregate principal amount of the Subordinated Debentures
outstanding. The Property Trustee shall not take any such action in accordance
with the directions of the holders of the Trust Securities unless the Property
Trustee has obtained an opinion of tax counsel to the effect that, as a result
of such action, Time Warner Capital will not fail to be classified as a grantor
trust for United States Federal income tax purposes.
A waiver of an Indenture Event of Default will constitute a waiver of the
corresponding Declaration Event of Default.
Any required approval or direction of holders of Preferred Securities may be
given at a separate meeting of holders of Preferred Securities convened for
such purpose, at a meeting of all of the holders of Trust Securities or
pursuant to written consent. The Regular Trustees will cause a notice of any
meeting at which holders of Preferred Securities are entitled to vote, or of
any matter upon which action by written consent of such holders is to be taken,
to be mailed to each holder of record of Preferred Securities. Each such notice
will include a statement setting forth the following information: (i) the date
of such meeting or the date by which such action is to be taken; (ii) a
description of any resolution proposed for adoption at such meeting on which
such holders are entitled to vote or of such matter upon which written consent
is sought; and (iii) instructions for the delivery of proxies or consents. No
vote or consent of the holders of Preferred Securities will be required for
Time Warner Capital to redeem and cancel Preferred Securities or distribute
Subordinated Debentures in accordance with the Declaration.
Notwithstanding that holders of Preferred Securities are entitled to vote or
consent under any of the circumstances described above, any of the Preferred
Securities that are owned at such time by Time Warner or any entity directly or
indirectly controlling or controlled by, or under direct or indirect common
control with, Time Warner, shall not be entitled to vote or consent and shall,
for purposes of such vote or consent, be treated as if such Preferred
Securities were not outstanding.
The procedures by which holders of Preferred Securities may exercise their
voting rights are described below. See "--Book-Entry Only Issuance--The
Depository Trust Company" below.
Except in the limited circumstances described above, in connection with the
appointment of a Special Regular Trustee, holders of the Preferred Securities
will have no rights to appoint or remove the Time Warner Trustees, who may be
appointed, removed or replaced solely by Time Warner as the indirect or direct
holder of all of the Common Securities.
MODIFICATION OF THE DECLARATION
The Declaration may be amended or modified if approved by a written
instrument executed by a majority of the Regular Trustees (and in certain
circumstances the Property Trustee), provided that, if any proposed amendment
provides for, or the Regular Trustees otherwise propose to effect, (i) any
action that would adversely affect the powers, preferences or special rights of
the Trust Securities, whether by way of amendment to the Declaration or
otherwise, or (ii) the dissolution, winding-up or termination of Time Warner
Capital other than pursuant to the terms of the Declaration, then the holders
of the outstanding Trust Securities voting together as a single class will be
entitled to vote on such amendment or proposal and such amendment or proposal
shall not be effective except with the approval of holders of not less than a
majority in liquidation amount of the Trust Securities affected thereby;
provided further that, if any amendment or proposal referred to in clause (i)
above would adversely affect only the Preferred Securities or the Common
Securities, then only the affected class will be entitled to vote on such
amendment or proposal and such amendment or proposal shall not be effective
except with the approval of holders of not less than a majority in liquidation
amount of such class of Trust Securities.
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Notwithstanding the foregoing, (i) no amendment or modification may be made
to the Declaration unless the Regular Trustees shall have obtained (A) either a
ruling from the Internal Revenue Service or a written unqualified opinion of
nationally recognized independent tax counsel experienced in such matters to
the effect that such amendment will not result in Time Warner Capital failing
to be classified as a grantor trust for United States Federal income tax
purposes and that, following such action, each holder of Trust Securities will
be treated as owning, for United States Federal income tax purposes, an
undivided beneficial interest in the Subordinated Debentures and (B) a written
unqualified opinion of nationally recognized independent counsel experienced in
such matters to the effect that such amendment will not cause the Trust to be
an "investment company" that is required to be registered under the 1940 Act;
(ii) certain specified provisions of the Declaration may not be amended without
the consent of all of the holders of the Trust Securities, (iii) no amendment
which adversely affects the rights, powers and privileges of the Property
Trustee shall be made without the consent of the Property Trustee, (iv) Article
IV of the Declaration relating to the obligation of Time Warner to purchase the
Common Securities and to pay certain obligations and expenses of the Trust as
described under "Time Warner Capital" may not be amended without the consent of
Time Warner, (v) the rights of holders of Common Securities under Article V of
the Declaration to increase or decrease the number of, and to appoint, replace
or remove, Trustees (other than a Special Regular Trustee) shall not be amended
without the consent of each holder of Common Securities and (vi) the rights of
holders of the Preferred Securities under the Declaration to appoint or remove
a Special Regular Trustee shall not be amended without the consent of each
holder of Preferred Securities.
The Declaration further provides that it may be amended without the consent
of the holders of the Trust Securities to (i) cure any ambiguity, (ii) correct
or supplement any provision in this Declaration that may be defective or
inconsistent with any other provision of this Declaration, (iii) to add to the
covenants, restrictions or obligations of Time Warner and (iv) to conform to
changes in, or a change in interpretation or application of, certain
requirements of the 1940 Act by the Commission, which amendment does not
adversely affect the rights, preferences or privileges of the holders of the
Preferred Securities.
LISTING
Application will be made to list the Preferred Securities as equity
securities on the New York Stock Exchange under the symbol " ". Trading of
the Preferred Securities on the New York Stock Exchange is expected to commence
within a 30-day period after the date of this Prospectus Supplement.
ACCOUNTING TREATMENT
The financial statements of Time Warner Capital will be consolidated with
Time Warner's financial statements, with the Preferred Securities shown on the
face of the balance sheet as Company obligated mandatorily redeemable preferred
securities of a subsidiary. Such presentation will also include on the face of
the balance sheet the footnote relating to the PERCS and the Preferred
Securities set forth on the capitalization table included herein.
MERGERS, CONSOLIDATIONS OR AMALGAMATIONS
Time Warner Capital may not consolidate, amalgamate, merge with or into, or
be replaced by, or convey, transfer or lease its properties and assets
substantially as an entirety to any corporation or other entity. In addition,
so long as any Preferred Securities are outstanding and are not held entirely
by Time Warner, Time Warner Capital may not voluntarily liquidate, dissolve,
wind-up or terminate on or prior to the Maturity Date, except as described
above under "--Special Event Distribution or Redemption".
BOOK-ENTRY ONLY ISSUANCE--THE DEPOSITORY TRUST COMPANY
The Depository Trust Company ("DTC") will act as securities depositary for
the Preferred Securities. The Preferred Securities will be issued only as
fully-registered securities registered in the name of Cede & Co. (DTC's
nominee). One or more fully-registered global Preferred Securities
certificates, representing the total aggregate number of Preferred Securities,
will be issued and will be deposited with DTC.
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DTC is a limited-purpose trust company organized under the New York Banking
Law, a "banking organization" within the meaning of the New York Banking Law, a
member of the Federal Reserve System, a "clearing corporation" within the
meaning of the New York Uniform Commercial Code, and a "clearing agency"
registered pursuant to the provisions of Section 17A of the Securities Exchange
Act of 1934, as amended (the "Exchange Act"). DTC holds securities that its
participants ("Participants") deposit with DTC. DTC also facilitates the
settlement among Participants of securities transactions, such as transfers and
pledges, in deposited securities through electronic computerized book-entry
changes in Participants' accounts, thereby eliminating the need for physical
movement of securities certificates. Direct Participants include securities
brokers and dealers, banks, trust companies, clearing corporations and certain
other organizations ("Direct Participants"). DTC is owned by a number of its
Direct Participants and by the New York Stock Exchange, the American Stock
Exchange, Inc. and the National Association of Securities Dealers, Inc. Access
to the DTC system is also available to others, such as securities brokers and
dealers, banks and trust companies that clear transactions through or maintain
a direct or indirect custodial relationship with a Direct Participant either
directly or indirectly ("Indirect Participants"). The rules applicable to DTC
and its Participants are on file with the Securities and Exchange Commission.
Purchases of Preferred Securities within the DTC system must be made by or
through Direct Participants, which will receive a credit for the Preferred
Securities on DTC's records. The ownership interest of each actual purchaser of
each Preferred Security ("Beneficial Owner") is in turn to be recorded on the
Direct and Indirect Participants' records. Beneficial Owners will not receive
written confirmation from DTC of their purchases, but Beneficial Owners are
expected to receive written confirmations providing details of the
transactions, as well as periodic statements of their holdings, from the Direct
or Indirect Participants through which the Beneficial Owners purchased
Preferred Securities. Transfers of ownership interests in the Preferred
Securities are to be accomplished by entries made on the books of Participants
acting on behalf of Beneficial Owners. Beneficial Owners will not receive
certificates representing their ownership interests in the Preferred
Securities, except in the event that use of the book-entry system for the
Preferred Securities is discontinued.
To facilitate subsequent transfers, all the Preferred Securities deposited by
Participants with DTC are registered in the name of DTC's nominee, Cede & Co.
The deposit of Preferred Securities with DTC and their registration in the name
of Cede & Co. effect no change in beneficial ownership. DTC has no knowledge of
the actual Beneficial Owners of the Preferred Securities. DTC's records reflect
only the identity of the Direct Participants to whose accounts such Preferred
Securities are credited, which may or may not be the Beneficial Owners. The
Participants will remain responsible for keeping account of their holdings on
behalf of their customers.
Conveyance of notices and other communications by DTC to Direct Participants,
by Direct Participants to Indirect Participants and by Direct Participants and
Indirect Participants to Beneficial Owners will be governed by arrangements
among them, subject to any statutory or regulatory requirements that may be in
effect from time to time.
Redemption notices shall be sent to Cede & Co. If less than all of the
Preferred Securities are being redeemed, DTC will reduce the amount of the
interest of each Direct Participant in such Preferred Securities in accordance
with its procedures.
Although voting with respect to the Preferred Securities is limited, in those
cases where a vote is required, neither DTC nor Cede & Co. will itself consent
or vote with respect to Preferred Securities. Under its usual procedures, DTC
would mail an Omnibus Proxy to Time Warner Capital as soon as possible after
the record date. The Omnibus Proxy assigns Cede & Co. consenting or voting
rights to those Direct Participants to whose accounts the Preferred Securities
are credited on the record date (identified in a listing attached to the
Omnibus Proxy). Time Warner and Time Warner Capital believe that the
arrangements
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among DTC, Direct and Indirect Participants and Beneficial Owners will enable
the Beneficial Owners to exercise rights equivalent in substance to the rights
that can be directly exercised by a holder of a beneficial interest in Time
Warner Capital.
Distribution payments on the Preferred Securities will be made to DTC. DTC's
practice is to credit Direct Participants' accounts on the relevant payment
date in accordance with their respective holdings shown on DTC's records unless
DTC has reason to believe that it will not receive payments on such payment
date. Payments by participants to Beneficial Owners will be governed by
standing instructions and customary practices, as is the case with securities
held for the account of customers in bearer form or registered in "street
name", and such payments will be the responsibility of such Participant and not
of DTC, Time Warner Capital or Time Warner, subject to any statutory or
regulatory requirements to the contrary that may be in effect from time to
time. Payment of distributions to DTC is the responsibility of Time Warner
Capital, disbursement of such payments to Direct Participants is the
responsibility of DTC, and disbursement of such payments to the Beneficial
Owners is the responsibility of Direct and Indirect Participants.
DTC may discontinue providing its services as securities depositary with
respect to the Preferred Securities at any time by giving reasonable notice to
Time Warner Capital. Under such circumstances, in the event that a successor
securities depositary is not obtained, Preferred Securities certificates are
required to be printed and delivered. Additionally, the Regular Trustees (with
the consent of Time Warner) may decide to discontinue use of the system of
book-entry transfers through DTC (or any successor depositary) with respect to
the Preferred Securities. In that event, certificates for the Preferred
Securities will be printed and delivered.
The information in this section concerning DTC and DTC's book-entry system
has been obtained from sources that Time Warner and Time Warner Capital believe
to be reliable, but neither Time Warner nor Time Warner Capital takes
responsibility for the accuracy thereof.
INFORMATION CONCERNING THE PROPERTY TRUSTEE
The Property Trustee, prior to the occurrence of a default with respect to
the Trust Securities, will undertake to perform only such duties as are
specifically set forth in the Declaration and, after default, shall exercise
the same degree of care as a prudent individual would exercise in the conduct
of his or her own affairs. Subject to such provisions, the Property Trustee is
under no obligation to exercise any of the powers vested in it by the
Declaration at the request of any holder of Preferred Securities, unless
offered reasonable indemnity by such holder against the costs, expenses and
liabilities which might be incurred thereby. The holders of Preferred
Securities will not be required to offer such indemnity in the event such
holders, by exercising their voting rights, direct the Property Trustee to take
any action following a Declaration Event of Default.
GOVERNING LAW
The Declaration and the Preferred Securities will be governed by, and
construed in accordance with, the internal laws of the State of Delaware.
DESCRIPTION OF THE GUARANTEE
Set forth below is a summary of information concerning the Guarantee that
will be delivered by Time Warner for the benefit of the holders of Preferred
Securities. The Guarantee will be qualified as an indenture under the Trust
Indenture Act. The First National Bank of Chicago will act as the Guarantee
Trustee. The terms of the Guarantee will be those set forth in the Guarantee
and those made part of the Guarantee by the Trust Indenture Act. The summary
does not purport to be complete and is subject in all respects to the
provisions of, and is qualified in its entirety by reference to, the form of
Guarantee, which is filed as an exhibit to the Registration Statement of which
this Prospectus Supplement forms a part, and the Trust Indenture Act. The
Guarantee will be held by the Guarantee Trustee for the benefit of the holders
of the Preferred Securities.
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GENERAL
Pursuant to the Guarantee, Time Warner irrevocably and unconditionally agrees
to pay in full to the holders of the Preferred Securities, the Guarantee
Payments (as defined below) (except to the extent paid by Time Warner Capital),
as and when due, regardless of any defense, right of set-off or counterclaim
that Time Warner Capital may have or assert. The following payments with
respect to Preferred Securities issued by Time Warner Capital (the "Guarantee
Payments"), to the extent not paid by Time Warner Capital, will be subject to
the Guarantee (without duplication): (i)(A) any accrued and unpaid
distributions that are required to be paid on the Preferred Securities and (B)
the Preferred Redemption Price, but if and only if to the extent that, in each
case, Time Warner has made payment of interest or principal on the Subordinated
Debentures, as the case may be, and (ii) upon a Liquidation Event (other than
in connection with the distribution of Subordinated Debentures to the holders
of Preferred Securities or the redemption of all of the Preferred Securities
upon maturity or redemption of the Subordinated Debentures) the lesser of (A)
the aggregate of the liquidation amount and all accrued and unpaid
distributions on the Preferred Securities to the date of payment to the extent
Time Warner Capital has funds available therefor and (B) the amount of assets
of Time Warner Capital remaining available for distribution to holders of the
Preferred Securities upon such liquidation, dissolution, winding up or
termination of Time Warner Capital. Time Warner's obligation to make a
Guarantee Payment may be satisfied by direct payment of the required amounts by
Time Warner to the holders of Preferred Securities or by causing Time Warner
Capital to pay such amounts to such holders.
The Guarantee will be a full and unconditional guarantee with respect to the
Preferred Securities from the time of issuance of the Preferred Securities to
the extent Time Warner has made payments under the Subordinated Debentures. If
Time Warner does not make payments on the Subordinated Debentures, Time Warner
Capital will not pay distributions on the Preferred Securities issued and will
not have funds available therefor. See "Description of the Subordinated
Debentures".
CERTAIN COVENANTS OF TIME WARNER
In the Guarantee, Time Warner will covenant that, so long as any Preferred
Securities remain outstanding, if there shall have occurred any event that
would constitute an event of default under the Guarantee or the Declaration,
then (a) Time Warner shall not declare or pay any dividend on, or make any
distribution with respect to, or redeem, purchase, acquire or make a
liquidation payment with respect to, any of its capital stock and (b) Time
Warner shall not make any payment of interest, principal or premium, if any, on
or repay, repurchase or redeem any debt securities issued by Time Warner which
rank pari passu with or junior to the Subordinated Debentures. However, the
Guarantee will except from the foregoing any interest or dividend payments by
Time Warner, where the interest or dividend is paid by way of the issuance
of securities that rank pari passu with, or junior to, the securities on which
such interest or dividend is being paid .
MODIFICATION OF THE GUARANTEE; ASSIGNMENT
Except with respect to any changes that do not adversely affect the rights of
holders of Preferred Securities (in which case no vote will be required), the
Guarantee may be amended only with the prior approval of the holders of not
less than a majority in liquidation amount of the outstanding Preferred
Securities and only if the Guarantee Trustee shall have obtained either a
ruling from the Internal Revenue Service or a written unqualified opinion of
nationally recognized independent tax counsel experienced in such matters to
the effect that such action will not result in Time Warner Capital being
treated as an association taxable as a corporation or a partnership for United
States Federal income tax purposes and that, following such action, each holder
of Trust Securities will be treated as owning an undivided beneficial interest
in the Subordinated Debentures. All guarantees and agreements contained in a
Guarantee shall bind the successors, assignees, receivers, trustees and
representatives of Time Warner and shall inure to the benefit of the holders of
the Preferred Securities.
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EVENTS OF DEFAULT
An Event of Default under the Guarantee will occur upon the failure of Time
Warner to perform any of its payments or other obligations thereunder. The
holders of a majority in liquidation amount of the Preferred Securities to
which the Guarantee relates have the right to direct the time, method and place
of conducting any proceeding for any remedy available to the Guarantee Trustee
in respect of the Guarantee or to direct the exercise of any trust or power
conferred upon the Guarantee Trustee under the Guarantee.
If the Guarantee Trustee fails to enforce the Guarantee, any holder of
Preferred Securities relating to the Guarantee may, after a period of 30 days
has elapsed from such holder's written request to the Guarantee Trustee to
enforce the Guarantee, institute a legal proceeding directly against Time
Warner to enforce the Guarantee Trustee's rights under the Guarantee without
first instituting a legal proceeding against Time Warner Capital, the Guarantee
Trustee or any other person or entity. Subject to the award by a court of
competent jurisdiction of legal fees in connection with any such legal
proceeding, each holder will be required to bear its own costs in connection
with instituting a legal proceeding directly against Time Warner, which cost
may be significant.
Time Warner is required to file annually with the Guarantee Trustee an
officer's certificate as to Time Warner's compliance with all conditions and
covenants under the Guarantee.
INFORMATION CONCERNING THE GUARANTEE TRUSTEE
The Guarantee Trustee, prior to the occurrence of a default, undertakes to
perform only such duties as are specifically set forth in the Guarantee and,
after default with respect to the Guarantee, shall exercise the same degree of
care as a prudent individual would exercise in the conduct of his or her own
affairs. Subject to such provision, the Guarantee Trustee is under no
obligation to exercise any of the powers vested in it by the Guarantee at the
request of any holder of Preferred Securities unless it is offered reasonable
indemnity against the costs, expenses and liabilities that might be incurred
thereby.
TERMINATION OF THE GUARANTEE
The Guarantee will terminate upon full payment of the Redemption Price of the
Preferred Securities, upon distribution of the Subordinated Debentures to the
holders of the Preferred Securities or upon full payment of the amounts payable
in accordance with the Declaration upon liquidation of Time Warner Capital.
Each Guarantee will continue to be effective or will be reinstated, as the case
may be, if at any time any holder of Preferred Securities must restore payment
of any sums paid under such Preferred Securities or the Guarantee.
STATUS OF THE GUARANTEE
The Guarantee will constitute an unsecured obligation of Time Warner and will
rank (i) subordinate and junior in right of payment to all other liabilities of
Time Warner, (ii) pari passu with the guarantee to be delivered by Time Warner
in connection with the PERCS; (iii) pari passu with the most senior preferred
or preference stock now or hereafter issued by Time Warner and with any
guarantee now or hereafter entered into by Time Warner in respect of any
preferred or preference stock of any affiliate of Time Warner and (iv) senior
to Time Warner's common stock. The terms of the Preferred Securities provide
that each holder of Preferred Securities by acceptance thereof agrees to the
subordination provisions and other terms of the Guarantee.
The Guarantee will constitute a guarantee of payment and not of collection
(that is, the guaranteed party may institute a legal proceeding directly
against the guarantor to enforce its rights under the Guarantee without
instituting a legal proceeding against any other person or entity).
GOVERNING LAW
The Guarantee will be governed by and construed in accordance with the
internal laws of the State of New York.
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DESCRIPTION OF THE SUBORDINATED DEBENTURES
Set forth below is a summary of the terms of the Subordinated Debentures in
which Time Warner Capital will invest the proceeds from the issuance and sale
of the Trust Securities. The following description does not purport to be
complete and is subject to, and is qualified in its entirety by reference to,
the Subordinated Debentures Indenture, dated as of , 1995 (the
"Indenture"), between Time Warner and Chemical Bank, as Trustee (the "Indenture
Trustee"), the form of which is filed as an exhibit to the Registration
Statement of which this Prospectus Supplement is a part, and to the Trust
Indenture Act. The terms of the Subordinated Debentures include those set forth
in the Trust Indenture Act. Certain capitalized terms are used herein as
defined in the Indenture.
Under certain circumstances involving the dissolution of Time Warner Capital
following the occurrence of a Special Event, Subordinated Debentures may be
distributed to the holders of the Trust Securities in liquidation of Time
Warner Capital. See "Description of the Preferred Securities--Special Event
Redemption or Distribution". If the Subordinated Debentures are distributed to
the holders of the Preferred Securities, Time Warner will use its best efforts
to have the Subordinated Debentures listed on the New York Stock Exchange or on
such other national securities exchange or similar organization on which the
Preferred Securities are then listed or quoted.
GENERAL
The Subordinated Debentures will be issued as unsecured, subordinated
obligations of Time Warner, limited in aggregate principal amount to
approximately $ such amount being the sum of (i) the aggregate Price to
Public shown on the cover page hereof for the Preferred Securities and (ii) the
proceeds received by Time Warner Capital upon issuance of the Common Securities
to Time Warner.
The Subordinated Debentures are not subject to a sinking fund provision. The
entire principal amount of the Subordinated Debentures will mature and become
due and payable, together with any accrued and unpaid interest thereon, if any,
on the Maturity Date, subject to the election of Time Warner to redeem the
Subordinated Debentures in whole or in part, from time to time, on or after
, 2000, or at any time in certain circumstances upon the occurrence of a
Special Event. If Time Warner redeems Subordinated Debentures, Time Warner
Capital must redeem Trust Securities having an aggregate liquidation amount
equal to the aggregate principal amount of the Subordinated Debentures so
redeemed at the Preferred Redemption Price. See "Description of the Preferred
Securities--Optional Redemption" and "--Special Event Redemption or
Distribution".
If Subordinated Debentures are distributed to holders of Preferred Securities
in liquidation of such holders' interests in Time Warner Capital, such
Subordinated Debentures will initially be issued as one or more Global
Securities (as defined below). As described herein, under certain limited
circumstances, Subordinated Debentures may be issued in certificated form in
exchange for a Global Security. See "--Book-Entry and Settlement" below. In the
event that Subordinated Debentures are issued in certificated form, such
Subordinated Debentures will be in denominations of $25 and integral multiples
thereof and may be transferred or exchanged at the offices described below.
Payments on Subordinated Debentures issued as a Global Security will be made to
DTC, a successor depositary or, in the event that no depositary is used, to a
Paying Agent for the Subordinated Debentures. In the event Subordinated
Debentures are issued in certificated form, principal and interest will be
payable, the transfer of the Subordinated Debentures will be registrable and
Subordinated Debentures will be exchangeable for Subordinated Debentures of
other denominations of a like aggregate principal amount at the corporate trust
office of the Indenture Trustee in New York, New York; provided that, payment
of interest may be made at the option of Time Warner by check mailed to the
address of the persons entitled thereto.
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SUBORDINATION
The payment of the principal of and interest on the Subordinated Debentures
will be subordinated in right of payment to the extent set forth in the
Indenture to the prior payment in full in cash or cash equivalents of all of
Time Warner's present and future Senior Indebtedness (including Time Warner's
outstanding 8 3/4% Convertible Subordinated Debentures due 2015), which
aggregated approximately $10.1 billion at March 31, 1995. In addition to such
Senior Indebtedness, Time Warner's obligations under the Guarantee and the
Subordinated Debentures are effectively subordinated to all liabilities
(including indebtedness) of its consolidated and unconsolidated subsidiaries,
which aggregated approximately $13.9 billion at March 31, 1995. The
indebtedness of Time Warner's consolidated and unconsolidated subsidiaries is
expected to increase by approximately $2.5 billion as a result of the
Transactions referred to under "Recent Developments--Certain Transactions". The
Indenture does not limit the amount of Senior Indebtedness which Time Warner
may incur. Moreover, Time Warner's subsidiaries may incur indebtedness and
other liabilities and have obligations to third parties. Generally, the claims
of such third parties to the assets of Time Warner's subsidiaries will be
superior to those of Time Warner as a stockholder, and, therefore, the
Subordinated Debentures may be deemed to be effectively subordinated to the
claims of such third parties. The Subordinated Debentures will rank pari passu
with the Subordinated Notes to be issued by Time Warner in connection with the
offering of the PERCS (see "Recent Developments--PERCS Offering").
Upon any payment or distribution of all or substantially all of the assets of
Time Warner or in the event of any insolvency, bankruptcy, receivership,
liquidation, dissolution, reorganization or other similar proceeding whether
voluntary or involuntary relative to Time Warner or its creditors, the holders
of all Senior Indebtedness will first be entitled to receive payment in full in
cash or cash equivalents before the holders of the Subordinated Debentures will
be entitled to receive any distribution on account thereof. No payments on
account of the Subordinated Debentures, including by way of any Claim (as
defined below) may be made if, at any time, there is a default in the payment
of principal of or interest on or other monetary obligation with respect to any
Senior Indebtedness (including, without limitation, fees, expenses and
indemnities) or if there is an event of default with respect to any Senior
Indebtedness or any agreement pursuant to which the Senior Indebtedness is
issued which, or any event that, with the giving of notice or lapse of time,
would be an event of default and permit the holders to accelerate the maturity
thereof. Time Warner is obligated, upon the occurrence of any such default or
event of default, to provide written notice to the Indenture Trustee of such
default or event of default. By reason of such subordination, in the event of
insolvency, under certain circumstances the holders of Subordinated Debentures
may receive less, ratably, than Time Warner's general creditors. As used
herein, "Claim" means any claim against Time Warner or any of its subsidiaries
for rescission of the Subordinated Debentures or for monetary damages from the
purchase or receipt of the Subordinated Debentures.
As used in the Indenture, the term "Senior Indebtedness" means all
indebtedness or obligations, whether outstanding at the date of execution of
the Indenture or thereafter incurred, assumed, guaranteed or otherwise created,
unless the terms of the instrument or instruments by which Time Warner
incurred, assumed, guaranteed or otherwise created any such indebtedness or
obligation expressly provide that such indebtedness or obligation is
subordinate to all other indebtedness of Time Warner or that such indebtedness
or obligation is not superior in right of payment to the Subordinated
Debentures with respect to any of the following (including, without limitation,
interest accruing on or after a bankruptcy or other similar event, whether or
not an allowed claim therein): (i) any indebtedness incurred by Time Warner or
assumed or guaranteed, directly or indirectly, by Time Warner (a) for money
borrowed (including Time Warner's outstanding 8 3/4% Convertible Subordinated
Debentures due 2015), (b) in connection with the acquisition of any business,
property or other assets (other than trade payables incurred in the ordinary
course of business) or (c) for advances or progress payments in connection with
the construction or acquisition of any building, motion picture, television
production or other entertainment of any kind; (ii) any obligation of Time
Warner (or of a subsidiary which is guaranteed by Time Warner) as lessee under
a lease of real or personal property; (iii) any obligation of Time Warner to
purchase property at a future date in connection with a financing by Time
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Warner or a subsidiary of Time Warner; (iv) letters of credit; (v) currency
swaps and interest rate hedges; and (vi) any deferral, renewal, extension or
refunding of any of the foregoing. The Subordinated Debentures will be
subordinated to Time Warner's outstanding 8 3/4% Convertible Subordinated
Debentures due 2015 and will rank pari passu with the Subordinated Notes to be
issued in connection with the PERCS offering.
INTEREST
Each Subordinated Debenture shall bear interest at the rate of % per annum
from the original date of issuance, payable quarterly in arrears on ,
, and of each year (each, an "Interest Payment Date"), commencing
, 1995, (subject to the existence of any Extension Period, as discussed
below) to the person in whose name such Subordinated Debenture is registered,
subject to certain exceptions, at the close of business on the Business Day
next preceding the relevant Interest Payment Date. In the event the
Subordinated Debentures shall not continue to remain in book-entry only form,
Time Warner shall have the right to select record dates, which shall be more
than one Business Day prior to the Interest Payment Date.
The amount of interest payable for any period will be computed on the basis
of a 360-day year of twelve 30-day months. The amount of interest payable for
any period shorter than a full quarterly period for which interest is computed,
will be computed on the basis of the actual number of days elapsed per 30-day
month. In the event that any date on which interest is payable on the
Subordinated Debentures is not a Business Day, then payment of the interest
payable on such date will be made on the next succeeding day that is a Business
Day (without any interest or other payment in respect of any such delay),
except that, if such Business Day is in the next succeeding calendar year, then
such payment shall be made on the immediately preceding Business Day, in each
case with the same force and effect as if made on such date.
OPTION TO EXTEND INTEREST PAYMENT PERIOD
Time Warner shall have the right at any time, and from time to time, during
the term of the Subordinated Debentures to defer payments of interest by
extending the interest payment period for a period not exceeding 20 consecutive
quarters, at the end of which Extension Period, Time Warner shall pay all
interest then accrued and unpaid together with interest thereon compounded
quarterly at the rate specified for the Subordinated Debentures to the extent
permitted by applicable law ("Compound Interest"); provided that, during any
such Extension Period, (a) Time Warner shall not declare or pay dividends on,
make any distribution with respect to, or redeem, purchase, acquire or make a
liquidation payment with respect to any of its capital stock and (b) Time
Warner shall not make any payment of interest, principal or premium, if any, on
or repay, repurchase or redeem any debt securities issued by Time Warner that
rank pari passu with or junior to the Subordinated Debentures; provided,
however, that, the foregoing restrictions do not apply to any interest or
dividend payment by Time Warner, where the interest or dividend is paid by
way of the issuance of securities that rank pari passu with, or junior to, the
securities on which such interest or dividend is being paid . Prior to the
termination of any such Extension Period, Time Warner may further defer
payments of interest by extending the interest payment period; provided,
however, that such Extension Period, including all such previous and further
extensions, may not exceed 20 consecutive quarters. Upon the termination of any
Extension Period and the payment of all amounts then due, Time Warner may
commence a new Extension Period for up to 20 consecutive quarters, subject to
the terms set forth in this section. No interest shall be due and payable
during an Extension Period, except at the end thereof. Time Warner has no
present intention of exercising its right to defer payments of interest by
extending the interest payment period on the Subordinated Debentures. If the
Property Trustee shall be the sole holder of the Subordinated Debentures, Time
Warner shall give the Regular Trustees and the Property Trustee notice of its
selection of such Extension Period one Business Day prior to the earlier of (i)
the date distributions on the Preferred Securities are payable or (ii) the date
the Regular Trustees are required to give notice to the New York Stock Exchange
(or other applicable self-regulatory organization) or to holders of the
Preferred Securities of the record date or the date such distribution is
payable. The Regular Trustees shall give notice of Time Warner's
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selection of such Extension Period to the holders of the Preferred Securities.
If the Property Trustee shall not be the sole holder of the Subordinated
Debentures, Time Warner shall give the holders of the Subordinated Debentures
notice of its selection of such Extension Period ten Business Days prior to the
earlier of (i) the Interest Payment Date or (ii) the date upon which Time
Warner is required to give notice to the New York Stock Exchange (or other
applicable self-regulatory organization) or to holders of the Subordinated
Debentures of the record or payment date of such related interest payment.
OPTIONAL REDEMPTION
Time Warner shall have the right to redeem the Subordinated Debentures, in
whole or in part, from time to time, on or after , 2000 (the "Optional
Redemption Date"), or at any time in certain circumstances upon the occurrence
of a Special Event as described under "--Special Event Redemption or
Distribution", upon neither less than 20 nor more than 45 Business Days'
notice, at the Debenture Redemption Price. If a partial redemption of the
Preferred Securities resulting from a partial redemption of the Subordinated
Debentures would result in the delisting of the Preferred Securities, Time
Warner may only redeem the Subordinated Debentures in whole.
SPECIAL EVENT REDEMPTION OR DISTRIBUTION
Upon the occurrence of a Special Event, Time Warner will have the right to
elect to, under certain circumstances (a) dissolve Time Warner Capital (if it
has not previously been terminated) and cause the Subordinated Debentures to be
distributed on a Pro Rata Basis (determined without regard to the proviso in
the definition of such term) to the holders of the Trust Securities, (b) redeem
the Subordinated Debentures at the Redemption Price plus accrued and unpaid
interest thereon or (c) in the case of a Tax Event, allow the Subordinated
Debentures to remain outstanding and indemnify Time Warner Capital for any
taxes payable by it as a result of such Tax Event. See "Description of the
Preferred Securities--Special Event Distribution or Redemption".
DEFEASANCE
The Indenture provides that Time Warner, at its option, (i) will be
discharged from any and all obligations in respect of the Subordinated
Debentures and (ii) need not comply with certain covenants contained herein if
certain requirements are met. See "Description of the Subordinated Debentures--
Defeasance" in the Prospectus of which this Prospectus Supplement constitutes a
part.
INDENTURE EVENTS OF DEFAULT
The Indenture Events of Default are described in "Description of the
Subordinated Debentures--Indenture Events of Default" in the Prospectus of
which this Prospectus Supplement constitutes a part.
MODIFICATION OF THE INDENTURE
The Indenture contains provisions permitting Time Warner and the Indenture
Trustee, with the consent of the holders of the not less than a majority in
principal amount of the outstanding Subordinated Debentures, to modify the
Indenture, subject to certain exceptions. See "Description of the Subordinated
Debentures--Modification of the Indenture" in the Prospectus of which this
Prospectus Supplement constitutes a part.
CONSOLIDATION, MERGER AND SALE
The Indenture provides that Time Warner may, without the consent of the
holders of the Subordinated Debentures, consolidate with or merge into, or
transfer its properties as an entirety or substantially as an entirety to any
corporation, person or other entity; provided that in any such case (i) the
successor person (if other than Time Warner) (a) is an entity organized and
existing under the laws of the United States of America or any political
subdivision thereof and (b) assumes by a supplemental indenture Time Warner's
obligations under the Indenture, (ii) immediately after giving effect to such
transaction, no Indenture Event of Default shall have occurred and be
continuing and (iii) Time Warner shall have delivered to the Indenture
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Trustee an officer's certificate and opinion of counsel stating that such
consolidation, merger or transfer and such supplemental indenture comply with
the Indenture.
BOOK-ENTRY AND SETTLEMENT
If distributed to holders of Preferred Securities in connection with the
involuntary or voluntary dissolution, winding-up or liquidation of Time Warner
Capital as a result of the occurrence of a Special Event, the Subordinated
Debentures will be issued in the form of one or more global certificates (each,
a "Global Security") registered in the name of the depositary or its nominee.
Except under the limited circumstances described below, Subordinated Debentures
represented by the Global Security will not be exchangeable for, and will not
otherwise be issuable as, Subordinated Debentures in definitive form. The
Global Securities described above may not be transferred except by the
depositary to a nominee of the depositary or by a nominee of the depositary to
the depositary or another nominee of the depositary or to a successor
depositary or its nominee.
The laws of some jurisdictions require that certain purchasers of securities
take physical delivery of such securities in definitive form. Such laws may
impair the ability to transfer beneficial interests in such a Global Security.
Except as provided below under "--Discontinuance of the Depositary's
Services" owners of beneficial interests in such a Global Security will not be
entitled to receive physical delivery of Subordinated Debentures in definitive
form and will not be considered the holders (as defined in the Indenture)
thereof for any purpose under the Indenture, and no Global Security
representing Subordinated Debentures shall be exchangeable, except for another
Global Security of like denomination and tenor to be registered in the name of
the Depositary or its nominee or to a successor depositary or its nominee.
Accordingly, each beneficial owner must rely on the procedures of the
Depositary and, if such person is not a Participant, on the procedures of the
Participant through which such person owns its interest to exercise any rights
of a holder under the Indenture.
THE DEPOSITARY
If Subordinated Debentures are distributed to holders of Preferred Securities
in liquidation of such holders' interests in Time Warner Capital, DTC will act
as securities depositary for the Subordinated Debentures. For a description of
DTC and the specific terms of the depositary arrangements, see "Description of
the Preferred Securities--Book-Entry Only Issuance--The Depository Trust
Company". As of the date of this Prospectus Supplement, the description therein
of DTC's book-entry system and DTC's practices as they relate to purchases,
transfers, notices and payments with respect to the Preferred Securities apply
in all material respects to any debt obligations represented by one or more
Global Securities held by DTC. Time Warner may appoint a successor to DTC or
any successor depositary in the event DTC or such successor depositary is
unable or unwilling to continue as a depository for the Global Securities.
None of Time Warner, Time Warner Capital, the Indenture Trustee, any paying
agent and any other agent of Time Warner or the Indenture Trustee will have any
responsibility or liability for any aspect of the records relating to or
payments made on account of beneficial ownership interests in a Global Security
for such Subordinated Debentures or for maintaining, supervising or reviewing
any records relating to such beneficial ownership interests.
DISCONTINUANCE OF THE DEPOSITARY'S SERVICES
A Global Security shall be exchangeable for Subordinated Debentures
registered in the names of persons other than the Depositary or its nominee
only if (i) the Depositary notifies Time Warner that it is unwilling or unable
to continue as a depositary for such Global Security and no successor
depositary shall have been appointed, (ii) the Depositary, at any time, ceases
to be a clearing agency registered under the Exchange Act at which time the
Depositary is required to be so registered to act as such depositary and no
successor
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<PAGE>
depositary shall have been appointed, (iii) Time Warner, in its sole
discretion, determines that such Global Security shall be so exchangeable or
(iv) there shall have occurred an Event of Default with respect to such
Subordinated Debentures. Any Global Security that is exchangeable pursuant to
the preceding sentence shall be exchangeable for Subordinated Debentures
registered in such names as the Depositary shall direct. It is expected that
such instructions will be based upon directions received by the Depositary
from its Participants with respect to ownership of beneficial interests in
such Global Security.
GOVERNING LAW
The Indenture and the Subordinated Debentures will be governed by, and
construed in accordance with, the laws of the State of New York.
INFORMATION CONCERNING THE INDENTURE TRUSTEE
The Indenture Trustee, prior to default, undertakes to perform only such
duties as are specifically set forth in the Indenture and, after default,
shall exercise the same degree of care as a prudent individual would exercise
in the conduct of his or her own affairs. Subject to such provision, the
Indenture Trustee is under no obligation to exercise any of the powers vested
in it by the Indenture at the request of any holder of Subordinated
Debentures, unless offered reasonable indemnity by such holder against the
costs, expenses and liabilities that might be incurred thereby. The Indenture
Trustee is not required to expend or risk its own funds or otherwise incur
personal financial liability in the performance of its duties if the Trustee
reasonably believes that repayment or adequate indemnity is not reasonably
assured to it. The Indenture Trustee is one of a number of banks with which
Time Warner and its subsidiaries maintain ordinary banking and trust
relationships.
MISCELLANEOUS
Time Warner will have the right at all times to assign any of its rights or
obligations under the Indenture to a direct or indirect wholly-owned
subsidiary of Time Warner; provided that, in the event of any such assignment,
Time Warner will remain jointly and severally liable for all such obligations.
Subject to the foregoing, the Indenture will be binding upon and inure to the
benefit of the parties thereto and their respective successors and assigns.
EFFECT OF OBLIGATIONS UNDER THE
SUBORDINATED DEBENTURES AND THE GUARANTEE
As set forth in the Declaration, the sole purpose of Time Warner Capital is
to issue the Trust Securities evidencing undivided beneficial interests in the
assets of Time Warner Capital, and to invest the proceeds from such issuance
and sale in the Subordinated Debentures.
As long as payments of interest and other payments are made when due on the
Subordinated Debentures, such payments will be sufficient to cover
distributions and payments due on the Trust Securities because of the
following factors: (i) the aggregate principal amount of Subordinated
Debentures will be equal to the sum of the aggregate liquidation amount of the
Trust Securities; (ii) the interest rate and the interest and other payment
dates on the Subordinated Debentures will match the distribution rate and
distribution and other payment dates for the Preferred Securities; (iii) Time
Warner shall pay all, and Time Warner Capital shall not be obligated to pay,
directly or indirectly, any, costs and expenses of Time Warner Capital; and
(iv) the Declaration further provides that the Time Warner Trustees shall not
cause or permit Time Warner Capital to, among other things, engage in any
activity that is not consistent with the purposes of Time Warner Capital.
Payments of distributions (to the extent Time Warner had made payments of
interest on the Subordinated Debentures) and other payments due on the
Preferred Securities (to the extent Time Warner had made payment of principal
and other amounts on the Subordinated Debentures) are guaranteed by Time
Warner as and to the extent set forth under "Description of the Guarantee" and
in the accompanying Prospectus. If Time Warner does not make interest payments
on the Subordinated Debentures purchased by
S-40
<PAGE>
Time Warner Capital, it is expected that Time Warner Capital will not have
sufficient funds to pay distributions on the Preferred Securities. The
Guarantee is a full and unconditional guarantee from the time of its issuance
but does not apply to any payment of distributions unless and until Time Warner
has made payment of interest on the Subordinated Debentures.
If Time Warner fails to make interest or other payments on the Subordinated
Debentures when due (taking account of any Extension Period), the Declaration
provides a mechanism whereby the holders of the Preferred Securities, using the
procedures described in "Description of the Preferred Securities--Book-Entry
Only Issuance--The Depository Trust Company" and "--Voting Rights", may (i)
appoint a Special Regular Trustee and (ii) direct the Property Trustee to
enforce its rights under the Subordinated Debentures. If the Property Trustee
fails to enforce its rights under the Subordinated Debentures, a holder of
Preferred Securities may, after a period of 30 days has elapsed from such
holder's written request to the Property Trustee to enforce such rights,
institute a legal proceeding against Time Warner to enforce the Property
Trustee's rights under the Subordinated Debentures without first instituting
any legal proceeding against the Property Trustee or any other person or
entity. Time Warner, under the Guarantee, acknowledges that the Guarantee
Trustee shall enforce the Guarantee on behalf of the holders of the Preferred
Securities. If Time Warner fails to make payments under the Guarantee, the
Guarantee provides a mechanism whereby the holders of the Preferred Securities
may direct the Guarantee Trustee to enforce its rights thereunder. If the
Guarantee Trustee fails to enforce the Guarantee, any holder of Preferred
Securities may, after a period of 30 days has elapsed from such holder's
written request to the Guarantee Trustee to enforce the Guarantee, institute a
legal proceeding directly against Time Warner to enforce the Guarantee
Trustee's rights under the Guarantee without first instituting a legal
proceeding against Time Warner Capital, the Guarantee Trustee, or any other
person or entity.
Time Warner and Time Warner Capital believe that the above mechanisms and
obligations, taken together, are equivalent to a full and unconditional
guarantee by Time Warner of payments due on the Preferred Securities. See
"Description of the Guarantee--General" in the accompanying Prospectus.
If a Special Event shall occur and be continuing, Time Warner Capital shall
be dissolved unless the Subordinated Debentures are redeemed or left
outstanding in the limited circumstances described herein, with the result that
the Subordinated Debentures held by Time Warner Capital having an aggregate
principal amount equal to the aggregate liquidation amount of the Trust
Securities will be distributed on a Pro Rata Basis in exchange for the
outstanding Trust Securities, subject in the case of a Tax Event to Time
Warner's right to allow the Subordinated Debentures to remain outstanding and
indemnify Time Warner Capital for any taxes payable by it as a result of such
Tax Event. See "Description of the Preferred Securities--Special Event
Redemption or Distribution".
Upon any voluntary or involuntary liquidation, dissolution, winding-up or
termination of Time Warner Capital, the holders of Trust Securities will be
entitled to receive Subordinated Debentures or, on a Pro Rata Basis, the
Liquidation Distribution. Holders of Preferred Securities will be entitled to
the benefits of the Guarantee with respect to the Liquidation Distribution. See
"Description of the Preferred Securities--Liquidation Distribution Upon
Dissolution". Upon any voluntary or involuntary liquidation or bankruptcy of
Time Warner, the holder of Subordinated Debentures would be subordinated to
creditors of Time Warner, subordinated in right of payment to all Senior
Indebtedness, but entitled to receive payment in full of principal, premium, if
any, and interest, before any stockholders of Time Warner receive payments of
distributions.
A default or event of default under any Senior Indebtedness would not
constitute a default or event of default under the Subordinated Debentures.
However, in the event of payment defaults under, or acceleration of, Senior
Indebtedness, the subordination provisions of the Subordinated Debentures
provide that no payments may be made in respect of the Subordinated Debentures.
Failure to make required payments on the Subordinated Debentures would
constitute an Indenture Event of Default.
S-41
<PAGE>
UNITED STATES FEDERAL INCOME TAXATION
GENERAL
The following is a summary of certain of the material United States Federal
income tax consequences of the purchase, ownership and disposition of Preferred
Securities. Unless otherwise stated, this summary deals only with Preferred
Securities held as capital assets by holders who purchase the Preferred
Securities upon original issuance ("Initial Holders"). It is directed solely to
holders that are either (i) citizens or residents of the United States (or any
State thereof), (iii) trusts, the income of which is subject to United States
Federal income tax regardless of its source, or (iv) otherwise subject to
United States Federal income tax on a net income basis. It does not deal with
special classes of holders such as banks, thrifts, real estate investment
trusts, regulated investment companies, insurance companies, dealers in
securities or currencies, tax-exempt investors, or persons that will hold the
Preferred Securities as a position in a "straddle" (within the meaning of
Section 1092 of the Internal Revenue Code of 1986, as amended (the "Code")), or
as part of a "conversion transaction" (within the meaning of Section 1258 of
the Code) or "synthetic security" or other integrated investment comprised of
Preferred Securities and one or more other investments, or as other than a
capital asset. This summary also does not address the tax consequences to
persons that have a functional currency other than the U.S. Dollar or the tax
consequences to shareholders, partners or beneficiaries of a holder of
Preferred Securities. Further, it does not include any description of any
alternative minimum tax consequences or the tax laws of any state or local
government or of any foreign government that may be applicable to the Preferred
Securities. This summary is based on the Code, Treasury regulations thereunder
and administrative and judicial interpretations thereof, as of the date hereof,
all of which are subject to change, possibly on a retroactive basis.
CLASSIFICATION OF THE SUBORDINATED DEBENTURES
In connection with the issuance of the Subordinated Debentures, Cravath,
Swaine & Moore, counsel to Time Warner and Time Warner Capital, will render its
opinion to the effect that, although not entirely free from doubt, under then
current law and assuming full compliance with the terms of the Indenture (and
certain other documents), and based on certain facts and assumptions contained
in such opinion, the Subordinated Debentures held by Time Warner Capital would
be classified for United States Federal income tax purposes as indebtedness of
Time Warner.
CLASSIFICATION OF TIME WARNER CAPITAL
In connection with the issuance of the Preferred Securities, Cravath, Swaine
& Moore, counsel to Time Warner and Time Warner Capital, will render its
opinion to the effect that, under then current law and assuming full compliance
with the terms of the Declaration and the Indenture (and certain other
documents), and based on certain facts and assumptions contained in such
opinion, Time Warner Capital will be classified for United States Federal
income tax purposes as a grantor trust and not as an association taxable as a
corporation. Accordingly, for United States Federal income tax purposes, each
holder of Preferred Securities will be considered the owner of an undivided
interest in the Subordinated Debentures, and each holder will be required to
include in its gross income any original issue discount ("OID") accrued with
respect to its allocable share of those Subordinated Debentures.
ORIGINAL ISSUE DISCOUNT
Because Time Warner has the option, under the terms of the Subordinated
Debentures, to defer payments of interest by extending interest payment periods
for up to 20 quarters, all of the stated interest payments on the Subordinated
Debentures will be treated as "original issue discount". Holders of debt
instruments issued with OID must include that discount in income on an economic
accrual basis before the receipt of cash attributable to the interest,
regardless of their method of tax accounting. Generally, all of a holder's
taxable interest income with respect to the Subordinated Debentures will be
accounted for as OID. Actual payments and distributions of stated interest will
not, however, be separately reported as taxable income. The amount of OID that
accrues in any month will approximately equal the amount of the interest
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that accrues on the Subordinated Debentures in that month at the stated
interest rate. In the event that the interest payment period is extended,
holders will continue to accrue OID approximately equal to the amount of the
interest payment due at the end of the extended interest payment period on an
economic accrual basis over the length of the extended interest period.
Because income on the Preferred Securities will constitute OID, corporate
holders of Preferred Securities will not be entitled to a dividends-received
deduction with respect to any income recognized with respect to the Preferred
Securities.
MARKET DISCOUNT AND BOND PREMIUM
Holders of Preferred Securities other than Initial Holders may be considered
to have acquired their undivided interests in the Subordinated Debentures with
market discount or acquisition premium as such phrases are defined for United
States Federal income tax purposes. Such holders are advised to consult their
tax advisors as to the income tax consequences of the acquisition, ownership
and disposition of the Preferred Securities.
RECEIPT OF SUBORDINATED DEBENTURES OR CASH UPON LIQUIDATION OF TIME WARNER
CAPITAL
Under certain circumstances, as described under the caption "Description of
the Preferred Securities--Special Event Redemption or Distribution,"
Subordinated Debentures may be distributed to holders in exchange for the
Preferred Securities and in liquidation of Time Warner Capital. Under current
law, such a distribution, for United States Federal income tax purposes, would
be treated as a non-taxable event to each holder, and each holder would receive
an aggregate tax basis in the Subordinated Debentures equal to such holder's
aggregate tax basis in its Preferred Securities. A holder's holding period in
the Subordinated Debentures so received in liquidation of Time Warner Capital
would include the period during which the Preferred Securities were held by
such holder.
Under certain circumstances described herein (see "Description of the
Preferred Securities"), the Subordinated Debentures may be redeemed for cash
and the proceeds of such redemption distributed to holders in redemption of
their Preferred Securities. Under current law, such a redemption would, for
United States Federal income tax purposes, constitute a taxable disposition of
the redeemed Preferred Securities, and a holder could recognize gain or loss as
if it sold such redeemed Preferred Securities for cash. See "--Sales of
Preferred Securities."
SALES OF PREFERRED SECURITIES
A holder that sells Preferred Securities will recognize gain or loss equal to
the difference between its adjusted tax basis in the Preferred Securities and
the amount realized on the sale of such Preferred Securities. A holder's
adjusted tax basis in the Preferred Securities generally will be its initial
purchase price increased by OID previously includible in such holder's gross
income to the date of disposition and decreased by payments received on the
Preferred Securities. Such gain or loss generally will be a capital gain or
loss and generally will be a long-term capital gain or loss if the Preferred
Securities have been held for more than one year.
The Preferred Securities may trade at a price that does not accurately
reflect the value of accrued but unpaid interest with respect to the underlying
Subordinated Debentures. A holder who disposes of his Preferred Securities
between record dates for payments of distributions thereon will be required to
include accrued but unpaid interest on the Subordinated Debentures through the
date of disposition in income as ordinary income, and to add such amount to his
adjusted tax basis in his Preferred Securities. To the extent the selling price
is less than the holder's adjusted tax basis (which will include, in the form
of OID, all accrued but unpaid interest) a holder will recognize a capital
loss. Subject to certain limited exceptions, capital losses cannot be applied
to offset ordinary income for United States Federal income tax purposes.
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<PAGE>
INFORMATION REPORTING TO HOLDERS
Subject to the qualifications discussed below, income on the Preferred
Securities will be reported to holders on Forms 1099, which forms should be
mailed to holders of Preferred Securities by January 31 following each calendar
year.
Time Warner Capital will be obligated to report annually to Cede & Co., as
holder of record of the Preferred Securities, the OID related to the
Subordinated Debentures that accrued during the year. Time Warner Capital
currently intends to report such information on Form 1099 prior to January 31
following each calendar year even though Time Warner Capital is not legally
required to report to record holders until April 15 following each calendar
year. The Underwriters have indicated to Time Warner Capital that, to the
extent that they hold Preferred Securities as nominees for beneficial holders,
they currently expect to report to such beneficial holders on Forms 1099 by
January 31 following each calendar year. Under current law, holders of
Preferred Securities who hold as nominees for beneficial holders will not have
any obligation to report information regarding the beneficial holders to Time
Warner Capital. Time Warner Capital, moreover, will not have any obligation to
report to beneficial holders who are not also record holders. Thus, beneficial
holders of Preferred Securities who hold their Preferred Securities through the
Underwriters will receive Forms 1099 reflecting the income on their Preferred
Securities from such nominee holders rather than Time Warner Capital.
BACKUP WITHHOLDING
Payments made on, and proceeds from the sale of, the Preferred Securities may
be subject to a "backup" withholding tax of 31% unless the holder complies with
certain identification requirements. Any withheld amounts will be allowed as a
credit against the holder's United States Federal income tax, provided that the
required information is provided to the Service.
THE UNITED STATES FEDERAL INCOME TAX DISCUSSION SET FORTH ABOVE IS INCLUDED
FOR GENERAL INFORMATION ONLY AND MAY NOT BE APPLICABLE DEPENDING UPON A
HOLDER'S PARTICULAR SITUATION. HOLDERS SHOULD CONSULT THEIR TAX ADVISORS WITH
RESPECT TO THE TAX CONSEQUENCES TO THEM OF THE PURCHASE, OWNERSHIP AND
DISPOSITION OF THE PREFERRED SECURITIES, INCLUDING THE TAX CONSEQUENCES UNDER
STATE, LOCAL, FOREIGN AND OTHER TAX LAWS AND THE POSSIBLE EFFECTS OF CHANGES IN
UNITED STATES FEDERAL OR OTHER TAX LAWS.
ERISA CONSIDERATIONS
Generally, employee benefit plans that are subject to the Employee Retirement
Income Security Act of 1974 ("ERISA"), or Section 4975 of the Code ("Plans"),
may purchase Preferred Securities, subject to the investing fiduciary's
determination that the investment in Preferred Securities satisfies ERISA's
fiduciary standards and other requirements applicable to investments by the
Plan.
In any case, Time Warner and/or any of its affiliates may be considered a
"party in interest" (within the meaning of ERISA) or a "disqualified person"
(within the meaning of Section 4975 of the Code) with respect to certain plans
(generally, Plans maintained or sponsored by, or contributed to by, any such
persons). The acquisition and ownership of Preferred Securities by a Plan (or
by an individual retirement arrangement or other Plans described in Section
4975(e)(i) of the Code) with respect to which Time Warner or any of its
affiliates is considered a party in interest or a disqualified person, may
constitute or result in a prohibited transaction under ERISA or Section 4975 of
the Code, unless such Preferred Securities are acquired pursuant to and in
accordance with an applicable exemption.
As a result, Plans with respect to which Time Warner or any of its affiliates
is a party in interest or a disqualified person should not acquire Preferred
Securities. Any other Plans or other entities whose assets include Plan assets
subject to ERISA proposing to acquire Preferred Securities should consult with
their own ERISA counsel.
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<PAGE>
UNDERWRITING
Subject to the terms and conditions set forth in an underwriting agreement
(the "Underwriting Agreement"), Time Warner Capital has agreed to sell to each
of the Underwriters named below, and each of the Underwriters, for whom Merrill
Lynch, Pierce, Fenner & Smith Incorporated, Morgan Stanley & Co. Incorporated
and Bear, Stearns & Co. Inc. are acting as representatives (the
"Representatives"), has severally agreed to purchase the number of Preferred
Securities set forth opposite its name below. In the Underwriting Agreement,
the several Underwriters have agreed, subject to the terms and conditions set
forth therein, to purchase all the Preferred Securities offered hereby if any
of the Preferred Securities are purchased. In the event of default by an
Underwriter, the Underwriting Agreement provides that, in certain
circumstances, the purchase commitments of the nondefaulting Underwriters may
be increased or the Underwriting Agreement may be terminated.
<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITER PREFERRED SECURITIES
----------- --------------------
<S> <C>
Merrill Lynch, Pierce, Fenner & Smith
Incorporated.....................................
Morgan Stanley & Co. Incorporated.........................
Bear, Stearns & Co. Inc...................................
-----
Total................................................
=====
</TABLE>
The Underwriters propose to offer the Preferred Securities, in part, directly
to the public at the initial public offering price set forth on the cover page
of this Prospectus Supplement, and, in part, to certain securities dealers at
such price less a concession of $ per Preferred Security. The Underwriters
may allow, and such dealers may reallow, a concession not in excess of $ per
Preferred Security to certain brokers and dealers. After the Preferred
Securities are released for sale to the public, the offering price and other
selling terms may from time to time be varied by the Representatives.
In view of the fact that the proceeds of the sale of the Preferred Securities
will ultimately be used to purchase the Subordinated Debentures of Time Warner,
the Underwriting Agreement provides that Time Warner will pay as compensation
("Underwriters' Compensation") to the Underwriters an amount in New York
Clearing House (next day) funds of $ per Preferred Security (or $ in the
aggregate) for the accounts of the several Underwriters; provided that such
compensation for sales of Preferred Securities to certain institutions will be
$ per Preferred Security. Therefore, to the extent of such sales, the actual
amount of Underwriters Compensation will be less than the aggregate amount
specified in the preceding sentence.
The Company has agreed that, for a period of days from the date hereof it
will not, and will cause the Trust not to, offer to sell or sell additional
Preferred Securities or securities convertible into, exchangeable for or
similar to Preferred Securities, other than the PERCS, without the consent of
the Representatives.
Application will be made to list the Preferred Securities as equity
securities on the New York Stock Exchange. Trading of the Preferred Securities
on the New York Stock Exchange is expected to commence within a 30-day period
after the initial delivery of the Preferred Securities. The Representatives
have advised Time Warner Capital that they intend to make a market in the
Preferred Securities prior to the commencement of trading on the New York Stock
Exchange. The Representatives will have no obligation to make a market in the
Preferred Securities, however, and may cease market making activities, if
commenced, at any time.
Time Warner Capital and Time Warner have agreed to indemnify the Underwriters
against, or contribute to payments that the Underwriters may be required to
make in respect of, certain liabilities, including liabilities under the
Securities Act of 1933, as amended.
Certain of the Underwriters engage in transactions with, and, from time to
time, have performed services for, Time Warner and its subsidiaries in the
ordinary course of business for which they have received customary
compensation.
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<PAGE>
LEGAL MATTERS
The validity of the Preferred Securities under Delaware law will be passed
upon by Richards, Layton & Finger, Wilmington, Delaware, special Delaware
counsel to Time Warner and Time Warner Capital. The validity of the
Subordinated Debentures and the Guarantee and certain Federal income tax
matters will be passed upon for Time Warner and Time Warner Capital by Cravath,
Swaine & Moore, New York, New York, and for the Underwriters by Shearman &
Sterling, New York, New York. Time Warner and Time Warner Capital are also
being advised as to certain matters of Delaware law by Richards, Layton &
Finger, Wilmington, Delaware.
EXPERTS
The consolidated financial statements of Time Warner and TWE appearing in
Time Warner's Annual Report on Form 10-K for the year ended December 31, 1994,
as amended, and the combined financial statements of the Time Warner Service
Partnerships incorporated by reference therein, have been audited by Ernst &
Young LLP, independent auditors, as set forth in their reports thereon set
forth therein and incorporated herein by reference. Such financial statements
have been incorporated herein by reference in reliance upon such reports given
upon the authority of such firm as experts in accounting and auditing.
The financial statements of Summit Communications Group, Inc. as of December
31, 1993 and 1994, and for the three years ended December 31, 1994,
incorporated by reference in this Prospectus, have been audited by Deloitte &
Touche LLP, independent auditors, as set forth in their report thereon and
incorporated herein by reference. Such financial statements are incorporated
herein by reference in reliance upon such report and upon the authority of such
firm as experts in accounting and auditing.
The financial statements of Newhouse Broadcasting Cable Division of Newhouse
Broadcasting Corporation and subsidiaries as of July 31, 1993 and 1994, and for
the three years ended July 31, 1994, incorporated by reference in this
Prospectus, have been audited by Paul Scherer & Company LLP, independent
auditors, as set forth in their report thereon and incorporated herein by
reference. Such financial statements are incorporated herein by reference in
reliance upon such report and upon the authority of such firm as experts in
accounting and auditing.
The financial statements of Vision Cable Division of Vision Cable
Communications, Inc. and subsidiaries as of December 31, 1993 and 1994, and for
the three years ended December 31, 1994, incorporated by reference in this
Prospectus, have been audited by Paul Scherer & Company LLP, independent
auditors, as set forth in their report thereon and incorporated herein by
reference. Such financial statements are incorporated herein by reference in
reliance upon such report and upon the authority of such firm as experts in
accounting and auditing.
The financial statements of Cablevision Industries Corporation as of December
31, 1993 and 1994, and for the three years ended December 31, 1994,
incorporated by reference in this Prospectus, have been audited by Arthur
Andersen LLP, independent public accounts, as set forth in their report thereon
and incorporated herein by reference. Such financial statements are
incorporated herein by reference in reliance upon such report and upon the
authority of such firm as experts in accounting and auditing.
The financial statements of Cablevision Industries Limited Partnership as of
December 31, 1993 and 1994, and for the three years ended December 31, 1994,
incorporated by reference in this Prospectus, have been audited by Arthur
Andersen LLP, independent public accountants, as set forth in their report
thereon and incorporated herein by reference. Such financial statements are
incorporated herein by reference in reliance upon such report and upon the
authority of such firm as experts in accounting and auditing.
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<PAGE>
The financial statements of KBLCOM Incorporated as of December 31, 1993 and
1994, and for the three years ended December 31, 1994, incorporated by
reference in this Prospectus, have been audited by Deloitte & Touche LLP,
independent auditors, as set forth in their report thereon and incorporated
herein by reference. Such financial statements are incorporated herein by
reference in reliance upon such report and upon the authority of such firm as
experts in accounting and auditing.
The financial statements of Paragon Communications as of December 31, 1993
and 1994, and for the three years ended December 31, 1994, incorporated by
reference in this Prospectus, have been audited by Price Waterhouse LLP,
independent accountants, as set forth in their report thereon and incorporated
herein by reference. Such financial statements are incorporated herein by
reference in reliance upon such report and upon the authority of such firm as
experts in accounting and auditing.
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++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A +
+REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE +
+SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY +
+OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT +
+BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR +
+THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE +
+SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE +
+UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF +
+ANY SUCH STATE. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
PROSPECTUS (SUBJECT TO COMPLETION)
$500,000,000
TIME WARNER INC.
SUBORDINATED DEBENTURES
-----------
TIME WARNER CAPITAL I
TIME WARNER CAPITAL II
TIME WARNER CAPITAL III
PREFERRED TRUST SECURITIES
GUARANTEED TO THE EXTENT SET FORTH HEREIN BY
TIME WARNER INC.
-----------
Time Warner Inc. ("Time Warner"), a Delaware corporation, may offer, from
time to time, unsecured junior subordinated debentures (the "Subordinated
Debentures"), in one or more series and in amounts, at prices and on terms to
be determined at or prior to the time of any such offering. The Subordinated
Debentures when issued will be unsecured obligations of Time Warner. Time
Warner's obligations under the Subordinated Debentures will be subordinate and
junior in right of payment to certain other indebtedness of Time Warner as may
be described in an accompanying Prospectus Supplement (the "Prospectus
Supplement").
-----------
Each of Time Warner Capital I, Time Warner Capital II and Time Warner Capital
III (each a "Trust"), a statutory business trust formed under the laws of the
State of Delaware, may offer, from time to time, trust preferred capital
securities, representing undivided beneficial interests in the assets of the
respective Trust ("Preferred Securities"). The payment of periodic cash
distributions ("distributions") with respect to Preferred Securities of each of
the Trusts out of moneys held by each of the Trusts and payments on
liquidation, redemption or otherwise with respect to such Preferred Securities,
will be guaranteed by Time Warner to the extent described herein (each a
"Guarantee"). See "Description of the Guarantees". Time Warner's obligations
under the Guarantees are subordinate and junior in right of payment to all
other liabilities of Time Warner and rank pari passu with the most senior
preferred stock, if any, issued from time to time by Time Warner. Subordinated
Debentures may be issued and sold from time to time in one or more series by
Time Warner to a Trust, or a trustee of such trust, in connection with the
investment of the proceeds from the offering of Preferred Securities and Common
Securities (as defined herein) of such Trust. The Subordinated Debentures
purchased by a Trust may be subsequently distributed pro rata to holders of
Preferred Securities and Common Securities in connection with the dissolution
of such Trust, upon the occurrence of certain events as may be described in an
accompanying Prospectus Supplement.
-----------
Specific terms of the Subordinated Debentures of any series or the Preferred
Securities of any Trust in respect of which this Prospectus is being delivered
(the "Offered Securities") will be set forth in a Prospectus Supplement with
respect to such Offered Securities, which will describe, without limitation and
where applicable, the following: (i) in the case of Subordinated Debentures,
the specific designation, aggregate principal amount, denomination, maturity,
premium, if any, any exchange, conversion, redemption or sinking fund
provisions, if any, interest rate (which may be fixed or variable), if any, the
time and method of calculating interest payments, if any, dates on which
premium, if any, and interest, if any, will be payable, the right of Time
Warner, if any, to defer payment of interest on the Subordinated Debentures and
the maximum length of such deferral period, the initial public offering price,
subordination terms, and any listing on a securities exchange and other
specific terms of the offering; and (ii) in the case of Preferred Securities,
the designation, number of securities, liquidation preference per security,
initial public offering price, any listing on a securities exchange,
distribution rate (or method of calculation thereof), dates on which
distributions shall be payable and dates from which distributions shall accrue,
any voting rights, terms for any conversion or exchange into other securities,
any redemption, exchange or sinking fund provisions, any other rights,
preferences, privileges, limitations or restrictions relating to the Preferred
Securities and the terms upon which the proceeds of the sale of the Preferred
Securities shall be used to purchase a specific series of Subordinated
Debentures of Time Warner.
-----------
The Offered Securities may be offered in amounts, at prices and on terms to
be determined at the time of offering; provided, however, that, the aggregate
initial public offering price of all Offered Securities shall not exceed
$500,000,000. Any Prospectus Supplement relating to any series of Offered
Securities will contain information concerning certain United States federal
income tax considerations, if applicable, to the Offered Securities.
-----------
Time Warner or each Trust may sell the Offered Securities directly, through
agents designated from time to time or through underwriters or dealers. See
"Plan of Distribution" below. If any agents of Time Warner, any Trust or any
underwriters or dealers are involved in the sale of the Offered Securities, the
names of such agents, underwriters or dealers and any applicable commissions
and discounts will be set forth in any related Prospectus Supplement.
-----------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE. THIS PROSPECTUS MAY NOT BE USED TO CONSUMMATE
SALES OF SECURITIES UNLESS ACCOMPANIED BY A PROSPECTUS SUPPLEMENT.
The date of this Prospectus Supplement is , 1995.
<PAGE>
NO DEALER, SALESPERSON OR ANY OTHER INDIVIDUAL HAS BEEN AUTHORIZED BY TIME
WARNER OR ANY OF THE TRUSTS TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION OTHER THAN THOSE CONTAINED OR INCORPORATED BY REFERENCE IN THIS
PROSPECTUS OR ANY ACCOMPANYING PROSPECTUS SUPPLEMENT AND, IF GIVEN OR MADE,
SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A
SOLICITATION OF AN OFFER TO BUY ANY OF THE SECURITIES OFFERED HEREBY IN ANY
JURISDICTION TO ANY PERSON TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR
SOLICITATION IN SUCH JURISDICTION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR
ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION
THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF TIME WARNER OR ANY OF THE
TRUSTS SINCE THE DATE HEREOF.
----------------
AVAILABLE INFORMATION
This Prospectus constitutes a part of a Registration Statement on Form S-3
(together with all amendments and exhibits thereto, the "Registration
Statement") filed by Time Warner and the Trusts with the Securities and
Exchange Commission (the "SEC") under the Securities Act of 1933, as amended
(the "Securities Act"), with respect to the Offered Securities. This Prospectus
does not contain all of the information set forth in such Registration
Statement, certain parts of which are omitted in accordance with the rules and
regulations of the SEC. Reference is made to such Registration Statement and to
the exhibits relating thereto for further information with respect to Time
Warner, the Trusts and the Offered Securities. Any statements contained herein
concerning the provisions of any document filed as an exhibit to the
Registration Statement or otherwise filed with the SEC or incorporated by
reference herein are not necessarily complete, and, in each instance, reference
is made to the copy of such document so filed for a more complete description
of the matter involved. Each such statement is qualified in its entirety by
such reference.
Time Warner is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements and other information with the SEC.
Reports, proxy statements and other information concerning Time Warner can be
inspected and copied at prescribed rates at the SEC's Public Reference Room,
Judiciary Plaza, 450 Fifth Street, Northwest, Washington, D.C. 20549, as well
as the following Regional Offices of the SEC: 7 World Trade Center, New York,
New York 10048; and Northwestern Atrium Center, 500 West Madison Street,
Chicago, Illinois 60661-2511. Such reports, proxy statements and other
information may also be inspected at the offices of the New York Stock
Exchange, on which Time Warner common stock is traded, at 20 Broad Street, New
York, New York 10005.
No separate financial statements of any of the Trusts have been included
herein. Time Warner does not consider that such financial statements would be
material to holders of the Preferred Securities because (i) all of the voting
securities of each of the Trusts will be owned, directly or indirectly, by Time
Warner, a reporting company under the Exchange Act, (ii) the Trusts have no
independent operations and exist for the sole purpose of issuing securities
representing undivided beneficial interests in the assets of such Trusts and
investing the proceeds thereof in Subordinated Debentures issued by Time
Warner, and (iii) the obligations of the Trusts under the Trust Securities (as
defined herein) that may be issued from time to time are fully and
unconditionally guaranteed by Time Warner to the extent that such Trust has
funds available to meet such obligations. See "Description of the Subordinated
Debentures" and "Description of the Guarantees".
DOCUMENTS INCORPORATED BY REFERENCE
The following documents filed by Time Warner with the Commission pursuant to
Section 13 of the Exchange Act (File No. 1-8637) are incorporated herein by
reference: (i) Time Warner's Annual Report on Form 10-K for the fiscal year
ended December 31, 1994, as amended by Amendment No. 1 hereto dated June 28,
1995; (ii) Time Warner's Quarterly Report on Form 10-Q for the quarter ended
March 31, 1995; (iii) Time Warner's Current Report on Form 8-K dated January
26, 1995; (iv) Time Warner's Current Report
2
<PAGE>
on Form 8-K dated February 6, 1995; (v) Time Warner's Current Report on Form 8-
K dated April 1, 1995; (vi) Time Warner's Current Report on Form 8-K dated May
30, 1995; (vii) Time Warner's Current Report on Form 8-K dated June 15, 1995
and (viii) Time Warner's Current Report on Form 8-K dated July 6, 1995.
All documents and reports subsequently filed by Time Warner pursuant to
Sections 13(a), 13(c), 14 and 15(d) of the Exchange Act after the date of this
Prospectus and prior to the termination of the offering of the Preferred
Securities shall be deemed to be incorporated by reference and to be a part
hereof from the date of filing of such documents.
Any statement contained herein or in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Prospectus to the extent that a statement contained herein
or in any other subsequently filed document that also is deemed to be
incorporated by reference herein modifies or supersedes such statement. Any
such statement so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute a part of this Prospectus.
Time Warner will provide without charge to each person, including any
beneficial owner, to whom a copy of this Prospectus is delivered, upon the
written or oral request of such person, a copy of any or all documents
incorporated herein by reference, other than exhibits to such documents unless
such exhibits are specifically incorporated by reference in such documents, and
any other documents specifically identified herein as incorporated reference
into the Registration Statement to which this Prospectus relates or into such
other documents. Requests should be directed to Shareholder Relations, Time
Warner Inc., 75 Rockefeller Plaza, New York, New York 10019; telephone number
(212) 484-6971.
TIME WARNER INC.
Time Warner is the largest media and entertainment company in the world. Its
businesses are conducted in five principal areas: Publishing, Music, Filmed
Entertainment, Programming-HBO and Cable. Publishing consists principally of
the publication and distribution of magazines and books; Music consists
principally of the production and distribution of recorded music and the
ownership and administration of music copyrights; Filmed Entertainment consists
principally of the production and distribution of motion pictures and
television programming, the distribution of video cassettes and the ownership
and operation of retail stores and theme parks; Programming-HBO consists
principally of the production and distribution of pay television and cable
programming; and Cable consists principally of the operation of cable
television systems.
Time Warner was incorporated in the State of Delaware in August 1983 and is
the successor to a New York corporation that was originally organized in 1922.
Time Warner changed its name from Time Incorporated to Time Warner Inc.
following its acquisition of 59.3% of the common stock of Warner Communications
Inc. ("WCI") in July 1989. WCI became a wholly owned subsidiary of Time Warner
in January 1990 upon the completion of the merger of WCI and a subsidiary of
Time Warner.
Time Warner Entertainment Company, L.P. ("TWE") was formed as a Delaware
limited partnership in 1992 to own and operate substantially all of the Filmed
Entertainment, Programming-HBO and Cable businesses owned and operated by Time
Warner prior to such date. Certain wholly owned subsidiaries of Time Warner
(the "Time Warner General Partners") collectively own 63.27% of the pro rata
priority capital and residual equity interest in TWE and wholly owned
subsidiaries of ITOCHU Corporation, Toshiba Corporation and U S WEST Inc. ("U S
WEST") own pro rata priority capital and residual equity interests in TWE of
5.61%, 5.61% and 25.51%, respectively. In addition, the Time Warner General
Partners own priority capital interests senior and junior to the pro rata
priority capital interests.
TWE is the principal component of Time Warner's Entertainment Group, which is
not consolidated with Time Warner for financial reporting purposes. Certain
cable systems acquired or to be acquired as a result of the Transactions
referred to in "Recent Developments" will be owned by consolidated subsidiaries
3
<PAGE>
of Time Warner. The balance of Time Warner's cable systems are owned by TWE or
the TWE-A/N Partnership (as defined herein), in which TWE owns a two-thirds
interest. Accordingly, although TWE will manage substantially all the cable
systems owned by Time Warner, TWE and the TWE-A/N Partnership, the results of
operations of the cable systems owned by Time Warner's consolidated
subsidiaries will be included in Time Warner's consolidated results, while the
results of operations of the cable systems owned by TWE and the TWE-A/N
Partnership will be included in the consolidated results of the Entertainment
Group.
Time Warner is a holding company and its assets consist primarily of
investments in its consolidated and unconsolidated subsidiaries, including TWE.
Time Warner's ability to service its indebtedness, including the Subordinated
Debentures, is dependent primarily upon the earnings of its consolidated and
unconsolidated subsidiaries, including TWE, and the distribution or other
payment of such earnings to Time Warner.
As used in this Prospectus, unless the context otherwise requires, the terms
"Company" and "Time Warner" refer to Time Warner Inc. and its consolidated and
unconsolidated subsidiaries and includes TWE.
Time Warner's principal executive offices are located at 75 Rockefeller
Plaza, New York, NY 10019, and its telephone number is (212) 484-8000.
THE TRUSTS
Each of Time Warner Capital I, Time Warner Capital II and Time Warner Capital
III is a statutory business trust formed under Delaware law pursuant to (i) a
declaration of trust, dated as of August 2, 1995, executed by Time Warner, as
sponsor (the "Sponsor"), and the trustees of such Trust (the "Time Warner
Trustees") and (ii) the filing of a certificate of trust with the Secretary of
State of the State of Delaware on August 2, 1995. Each such declaration will be
amended and restated in its entirety (as so amended and restated, each a
"Declaration"), and is substantially in the form filed as an exhibit to the
Registration Statement of which this Prospectus Supplement and the accompanying
Prospectus form a part. Each Declaration will be qualified as an indenture
under the Trust Indenture Act of 1939 as amended (the "Trust Indenture Act").
Upon issuance of the Preferred Securities, the purchasers thereof will own all
of the Preferred Securities of the relevant Trust. See "Description of the
Preferred Securities". Time Warner will directly or indirectly acquire Common
Securities in an aggregate liquidation amount equal to 3% of the total capital
of each of the Trusts. The Trusts exist for the exclusive purposes of (i)
issuing the Trust Securities representing undivided beneficial interests in the
assets of each such Trust, (ii) investing the gross proceeds of the Trust
Securities in the Subordinated Debentures and (iii) engaging in only those
other activities necessary or incidental thereto.
Pursuant to each Declaration, the number of Time Warner Trustees of each of
the Trusts will initially be five. Three of the Time Warner Trustees of each of
the Trusts (the "Regular Trustees") will be persons who are employees or
officers of or who are affiliated with Time Warner. The fourth trustee of each
of the Trusts will be a financial institution that unaffiliated with Time
Warner, which trustee will serve as property trustee under the relevant
Declaration and as indenture trustee for the purposes of the Trust Indenture
Act (the "Property Trustee"). The fifth trustee of each of the Trusts will be a
financial institution or an affiliate thereof that maintains a principal place
of business or resident in the State of Delaware, meeting the requirements of
the Trust Act (the "Delaware Trustee"). Initially, The First National Bank of
Chicago, a Delaware banking corporation, will be the Property Trustee for each
of the Trusts until removed or replaced by the holder of the Common Securities
of each of the Trusts. The First National Bank of Chicago will also act as
indenture trustee under the Guarantees (the "Guarantee Trustee"). See
"Description of the Guarantees". In certain circumstances, the holders of a
majority of the Preferred Securities of each of the Trusts will be entitled to
appoint one Regular Trustee of such Trust (a "Special Regular Trustee"), who
need not be an officer or employee of or otherwise affiliated with Time Warner.
4
<PAGE>
The Property Trustee will hold title to the Subordinated Debentures for the
benefit of the holders of the Trust Securities and the Property Trustee will
have the power to exercise all rights, power, and privileges under the
Indenture (as defined herein) as the holder of the Subordinated Debentures. In
addition, the Property Trustee will maintain exclusive control of segregated
noninterest-bearing bank accounts (each a "Property Account") to hold all
payments made in respect of the Subordinated Debentures for the benefit of the
holders of the Trust Securities of the relevant Trust. The Property Trustee
will make payments of distributions and payments on liquidation, redemption and
otherwise to the holders of the Trust Securities out of funds from the Property
Account. The Guarantee Trustee will hold the Guarantee for the benefit of the
holders of the Preferred Securities of the relevant Trust. Subject to the right
of the holders of the Preferred Securities to appoint a Special Regular
Trustee, Time Warner, as the direct or indirect holder of all the Common
Securities of each of the Trusts, will have the right to appoint, remove or
replace any Time Warner Trustee of such Trust and to increase or decrease the
number of Time Warner Trustees of such Trust; provided that (i) the number of
Time Warner Trustees of each of the Trusts shall be at least three and (ii) a
majority of the Time Warner Trustees of each of the Trusts shall be Regular
Trustees. The Declarations provide that Time Warner will pay for all debts and
obligations (other than with respect to the Trust Securities) and all costs and
expenses of the Trusts, including any taxes and all costs and expenses with
respect thereto, to which the Trusts may become subject, except for United
States withholding taxes. Time Warner has agreed that any person to whom such
debts, obligations, costs and expenses are owed and the Property Trustee will
have the right to enforce Time Warner's obligations in respect of such debts,
obligations, costs and expenses directly against Time Warner without first
proceeding against the Trusts.
The rights of the holders of the Preferred Securities of the Trusts,
including economic rights, rights to information and voting rights, are set
forth in the applicable Prospectus Supplement, this Prospectus, the applicable
Declaration, the Delaware Business Trust Act (the "Trust Act") and the Trust
Indenture Act. See "Description of the Preferred Securities".
USE OF PROCEEDS
The proceeds to the Trusts from the sale of the Preferred Securities offered
from time to time hereby will be invested in one or more series of Subordinated
Debentures of Time Warner, the proceeds of which will be used by Time Warner to
repurchase, redeem or otherwise repay outstanding indebtedness.
RATIO OF EARNINGS TO FIXED CHARGES AND RATIO OF EARNINGS TO COMBINED FIXED
CHARGES AND PREFERRED STOCK DIVIDENDS
The ratio of earnings to fixed charges and ratio of earnings to combined
fixed charges and preferred stock dividends for Time Warner are set forth below
for the periods indicated. For periods in which earnings before fixed charges
were insufficient to cover fixed charges or combined fixed charges and
preferred stock dividends, the dollar amount of coverage deficiency, instead of
the ratio, is disclosed. The historical ratios of earnings to fixed charges and
ratios of earnings to combined fixed charges and preferred stock dividends for
all periods after 1992 reflect the deconsolidation of the Entertainment Group,
principally TWE, effective January 1, 1993. The historical ratios of earnings
to fixed charges and ratios of earnings to combined fixed charges and preferred
stock dividends for 1992 and periods prior to such date have not been changed;
however, a ratio of earnings to fixed charges and a ratio of earnings to
combined fixed charges and preferred stock dividends for 1992 retroactively
reflecting the deconsolidation is presented as supplementary information under
the column heading "restated" to facilitate comparative analysis.
The historical ratio of earnings to fixed charges and ratio of earnings to
combined fixed charges and preferred stock dividends for 1993 reflects the
issuance of $6.1 billion of long-term debt and the use of $500 million of cash
and equivalents in 1993 for the exchange or redemption of preferred stock
having an aggregate liquidation preference of $6.4 billion. The historical
ratio of earnings to fixed charges and ratio of earnings to combined fixed
charges and preferred stock dividends for 1992 reflects the capitalization of
TWE on June 30, 1992 and associated refinancings, and the acquisition of the
18.7% minority interest in American Television and Communications Corporation
as of June 30, 1992, using the purchase method of accounting for business
combinations.
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<PAGE>
The pro forma coverage deficiencies for the three months ended March 31, 1995
and the year ended December 31, 1994 give effect to the Acquisitions, TWE-A/N
Transaction, 1995 Debt Refinancing and Asset Sale Transactions as if such
transactions had occurred at the beginning of such periods. Such pro forma
information should be read in conjunction with the pro forma consolidated
condensed financial statements contained in Time Warner's Current Report on
Form 8-K dated May 30, 1995 and incorporated herein by reference. Such pro
forma amounts are presented for informational purposes only and are not
necessarily indicative of the actual ratio or coverage deficiency that would
have occurred if such transactions had been consummated as of the dates
indicated, nor are they necessarily indicative of future results.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31, YEARS ENDED DECEMBER 31,
-------------------- -------------------------------------------------------------------------
PRO FORMA HISTORICAL PRO FORMA HISTORICAL HISTORICAL RESTATED HISTORICAL HISTORICAL HISTORICAL
1995 1995 1994 1994 1993 1992 1992 1991 1990
--------- ---------- --------- ---------- ---------- -------- ---------- ---------- ----------
(MILLIONS, EXCEPT RATIOS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Ratio of earnings to
fixed charges
(deficiency in the
coverage of fixed
charges by earnings
before fixed charges). $(18) 1.0x $(73) 1.1x 1.1x 1.4x 1.4x 1.1x $ (101)
Ratio of earnings to
combined fixed charges
and preferred stock
dividends (deficiency
in the coverage of
combined fixed charges
and preferred stock
dividends by earnings
before fixed charges
and preferred stock
dividends)............ (55) (3) (209) 1.1x $(91) $(506) $(509) $(1,240) $(1,335)
</TABLE>
For purposes of the ratio of earnings to fixed charges and the ratio of
earnings to combined fixed charges and preferred stock dividends, earnings were
calculated by adding pretax income, interest expense, previously capitalized
interest amortized to expense, the portion of rents representative of an
interest factor, Time Warner's proportionate share of such items for its
partially-owned subsidiaries and 50%-owned companies, and undistributed losses
of less-than-50%-owned companies. Fixed charges consist of interest expense,
interest capitalized, the portion of rents representative of an interest factor
and Time Warner's proportionate share of such items for partially-owned
subsidiaries and 50%-owned companies. Combined fixed charges and preferred
stock dividends also include the amount of pretax income necessary to cover
preferred stock dividend requirements. For periods in which earnings before
fixed charges were insufficient to cover fixed charges or combined fixed
charges and preferred stock dividends, the dollar amount of coverage
deficiency, instead of ratio, is disclosed. Earnings as defined include
significant noncash charges for depreciation and amortization. Fixed charges
for the three months ended March 31, 1995 and 1994 and the year ended December
31, 1994 include noncash interest expense of $57 million, $52 million and $219
million, respectively, relating to Time Warner's Redeemable Reset Notes due
2002 and its Liquid Yield Option Notes due 2012 and 2013.
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<PAGE>
DESCRIPTION OF SUBORDINATED DEBENTURES
The Subordinated Debentures may be issued, from time to time, in one or more
series under an Indenture dated as of , 1995 (the "Indenture"),
between Time Warner and Chemical Bank, as trustee (the "Indenture Trustee"),
the form of which is filed as an exhibit to the Registration Statement of which
this Prospectus is a part. The following description sets forth certain general
terms and provisions of the Subordinated Debentures to which any Prospectus
Supplement may relate. The particular terms of the Subordinated Debentures
offered by any Prospectus Supplement and the extent, if any, to which such
general provisions may apply to the Subordinated Debentures so offered will be
described in the Prospectus Supplement relating to such Subordinated
Debentures. The following description does not purport to be complete and is
subject to, and is qualified in its entirety by reference to, any Prospectus
Supplement relating to the issuance of Subordinated Debentures, the Indenture,
the Trust Indenture Act and the other documents incorporated by reference
herein. The terms of the Subordinated Debentures include those set forth in the
Trust Indenture Act. Certain capitalized terms are used herein as defined in
the Indenture.
GENERAL
The Subordinated Debentures will be direct, unsecured obligations of Time
Warner. The Indenture does not limit the aggregate principal amount of
Subordinated Debentures that may be issued thereunder and provides that
Subordinated Debentures may be issued thereunder from time to time in one or
more series. The financial terms of the Subordinated Debentures, including,
among other things, the principal of, interest on and any premium on any series
of Subordinated Debentures shall be set forth in the Prospectus Supplement
related thereto. References made herein to the Subordinated Debentures refer to
each series of Subordinated Debentures that may be issued from time to time.
The Subordinated Debentures may be issued under the Indenture as Original
Issue Discount Securities to be offered and sold at a substantial discount
below their principal amount. Special United States federal income tax,
accounting and other considerations applicable to any such Original Issue
Discount Securities will be described in any Prospectus Supplement relating
thereto. "Original Issue Discount Security" means any security that provides
for an amount less than the principal amount thereof to be due and payable upon
a declaration of acceleration of the maturity thereof as a result of the
occurrence of an Event of Default and the continuation thereof. In addition,
the Subordinated Debentures may, for United States federal income tax purposes,
be deemed to have been issued with "original issue discount" ("OID") even if
such securities are offered and sold at an amount equal to their principal
amount. The United States federal income tax consequences of Subordinated
Debentures deemed to be issued with OID will be described in any Prospectus
Supplement relating thereto.
The Indenture does not contain any provisions that would limit the ability of
Time Warner to incur indebtedness. Reference is made to any Prospectus
Supplement relating to the Subordinated Debentures offered thereby for
information with respect to any deletions from, modifications of or additions
to the Events of Default or covenants of Time Warner applicable to the
Subordinated Debentures that are referred to herein.
Under the Indenture, Time Warner will have the ability to issue Subordinated
Debentures with terms different from those of Subordinated Debentures
previously issued, without the consent of the holders of previously issued
series of Subordinated Debentures, in an aggregate principal amount determined
by Time Warner.
SUBORDINATION
The Subordinated Debentures will be subordinated and junior in right of
payment of certain other indebtedness of Time Warner to the extent set forth in
the Prospectus Supplement that will accompany this Prospectus.
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<PAGE>
DEFEASANCE
The Indenture provides that Time Warner, at its option, (a) will be
Discharged (as defined in the Indenture) from any and all obligations in
respect any series of the Subordinated Debentures (except in each case for
certain obligations to register the transfer or exchange of the Subordinated
Debentures, replace stolen, lost or mutilated Subordinated Debentures, maintain
paying agencies and hold moneys for payment in trust) or (b) need not comply
with any restrictive covenant described in a Prospectus Supplement, and certain
Events of Default (other than those arising out of the failure to pay interest
or principal on the relevant series Subordinated Debentures of a particular
series and certain events of bankruptcy, insolvency and reorganization) will no
longer constitute Events of Default with respect to such series of Subordinated
Debentures, in each case if Time Warner deposits with the applicable Trustee,
in trust, money or the equivalent in securities of the government which issued
the currency in which the Subordinated Debentures are denominated or government
agencies backed by the full faith and credit of such government, or a
combination thereof, which through the payment of interest thereon and
principal thereof in accordance with their terms will provide money in an
amount sufficient to pay all the principal (including any mandatory sinking
fund payments) of, and interest on, such series on the dates such payments are
due in accordance with the terms of such series. To exercise any such option,
Time Warner is required, among other things, to deliver to the Indenture
Trustee an opinion of counsel to the effect that (i) the deposit and related
defeasance would not cause the holders of such series to recognize income, gain
or loss for United States Federal income tax purposes and, in the case of a
Discharge pursuant to clause (a), accompanied by a ruling to such effect
received from or published by the United States Internal Revenue Service and
(ii) the creation of the defeasance trust will not violate the Investment
Company Act of 1940. In addition, the Company is required to deliver to the
Indenture Trustee an Officers' Certificate stating that such deposit was not
made by Time Warner with the intent of preferring the holders over other
creditors of the Company or with the intent of defeating, hindering, delaying
or defrauding creditors of Time Warner or others.
INDENTURE EVENTS OF DEFAULT
If any Indenture Event of Default shall occur with respect to any series of
Subordinated Debentures and be continuing, the Property Trustee, as the holder
of the Subordinated Debentures, will have the right to declare the principal of
and the interest on such series of Subordinated Debentures and any other
amounts payable under the Indenture to be forthwith due and payable and to
enforce its other rights as a creditor with respect to the Subordinated
Debentures. An "Indenture Event of Default" is defined as: (i) default for 30
days in the payment of interest on the Subordinated Debentures of a particular
series (subject, however, to any right of Time Warner to defer interest
payments specified for a particular series); (ii) default in payment of the
principal amount at maturity or the amount payable upon redemption of the
Subordinated Debentures of such series; (iii) failure by Time Warner for 90
days after receipt of notice to it by the Indenture Trustee (or the holders of
at least 25% in principal amount of the Subordinated Debentures then
outstanding) to comply with any of its covenants or agreements contained in the
Indenture and applicable to a particular series; and (iv) certain events of
bankruptcy, insolvency, receivership or reorganization involving Time Warner.
If any Indenture Event of Default described in clause (i), (ii) or (iii) above
occurs and is continuing, the Indenture Trustee by notice to Time Warner, or
the holders of not less than 25% in aggregate principal amount of the
Subordinated Debentures of such series outstanding by notice to the Indenture
Trustee and Time Warner, may declare the Subordinated Debentures to be due and
payable and, upon any such declaration, the Subordinated Debentures shall
become immediately due and payable along with any accrued and unpaid interest.
If any Indenture Event of Default described in clause (iv) above occurs and is
continuing, the Subordinated Debentures of all series shall become immediately
due and payable along with any accrued and unpaid interest. Under certain
conditions the holders of a majority in principal amount of Subordinated
Debentures of each series then outstanding may waive certain past defaults and
their consequences with respect to such series, other than a default in the
payment of principal or interest, unless such default has been cured and a sum
sufficient to pay all matured installments of interest and principal otherwise
than by acceleration has been deposited with the Indenture Trustee. An
Indenture Event of Default also constitutes a Declaration Event of Default (as
defined in the applicable Declaration). The holders of Preferred Securities
8
<PAGE>
in certain circumstances have the right to direct the Property Trustee to
exercise its rights as the holder of the relevant series of Subordinated
Debentures.
GLOBAL SECURITIES
The Subordinated Debentures of a series may be issued in whole or in part in
the form of one or more Global Securities (as such term is defined below),
which will be deposited with, or on behalf of, a depositary ("Depositary") or
its nominee identified in the applicable Prospectus Supplement. In such case,
one or more Global Securities will be issued in a denomination or aggregate
denomination equal to the portion of the aggregate principal amount of
outstanding Subordinated Debentures of the series to be represented by such
Global Security or Global Securities. Unless and until it is exchanged in
whole or in part for Subordinated Debentures in registered form, a Global
Security may not be registered for transfer or exchange except as (i) a whole
by the Depositary for such Global Security to a nominee of such Depositary, by
a nominee of such Depositary to such Depositary or another nominee of such
Depositary, or by any nominee to a successor Depositary or a nominee of such
successor Depositary, and (ii) in the circumstances described in the
applicable Prospectus Supplement. The term "Global Security", when used with
respect to any series of Subordinated Debentures, means a Debt Security that
is executed by Time Warner and authenticated and delivered by the Indenture
Trustee to the Depositary or pursuant to the Depositary's instruction, which
shall be registered in the name of the Depositary or its nominee and which
shall represent, and shall be denominated in an amount equal to the aggregate
principal amount of, all of the outstanding Subordinated Debentures of such
series or any portion thereof, in either case having the same terms,
including, without limitation, the same original issue date, date or dates on
which principal is due, and interest rate or method of determining interest.
The specific terms of the depositary arrangement with respect to any portion
of a series of Subordinated Debentures to be represented by a Global Security
will be described in the applicable Prospectus Supplement. Time Warner expects
that the following provisions will apply to depositary arrangements.
Unless otherwise specified in the applicable Prospectus Supplement,
Subordinated Debentures that are to be represented by a Global Security to be
deposited with or on behalf of a Depositary will be represented by a Global
Security registered in the name of such Depositary or its nominee. Upon the
issuance of such Global Security, and the deposit of such Global Security with
or on behalf of the Depositary for such Global Security, the Depositary will
credit on its book-entry registration and transfer system the respective
principal amounts of the Subordinated Debentures represented by such Global
Security to the accounts of institutions that have accounts with such
Depositary or its nominee ("participants"). The accounts to be credited will
be designated by the underwriters or agents of such Subordinated Debentures
or, if such Subordinated Debentures are offered and sold directly by Time
Warner, by Time Warner. Ownership of beneficial interests in such Global
Security will be limited to participants or persons that may hold interests
through participants. Ownership of beneficial interests by participants in
such Global Security will be shown on, and the transfer of that ownership
interest will be effected only through, records maintained by the Depositary
or its nominee for such Global Security. Ownership of beneficial interests in
such Global Security by persons that hold through participants will be shown
on, and the transfer of that ownership interest within such participant will
be effected only through, records maintained by such participant. The laws of
some jurisdictions require that certain purchasers of securities take physical
delivery of such securities in certificated form. The foregoing limitations
and such laws may impair the ability to transfer beneficial interests in such
Global Securities.
So long as the Depositary for a Global Security, or its nominee, is the
registered owner of such Global Security, such Depositary or such nominee, as
the case may be, will be considered the sole owner or holder of the
Subordinated Debentures represented by such Global Security for all purposes
under the Indenture. Unless otherwise specified in the applicable Prospectus
Supplement, owners of beneficial interests in such Global Security will not be
entitled to have Subordinated Debentures of the series represented by such
Global Security registered in their names, will not receive or be entitled to
receive physical delivery of Subordinated Debentures of such series in
certificated form and will not be considered the holders thereof for any
purposes
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under the Indenture. Accordingly, each person owning a beneficial interest in
such Global Security must rely on the procedures of the Depositary and, if such
person is not a participant, on the procedures of the participant through which
such person owns its interest to exercise any rights of a holder under the
Indenture. Time Warner understands that under existing industry practices, if
Time Warner requests any action of holders or an owner of a beneficial interest
in such Global Security desires to give any notice or take any action a holder
is entitled to give or take under the Indenture, then the Depositary would
authorize the participants to give such notice or take such action, and
participants would authorize beneficial owners owning through such participants
to give such notice or take such action or would otherwise act upon the
instructions of beneficial owners owning through them.
Principal of and any premium and interest on a Global Security will be
payable in the manner described in the applicable Prospectus Supplement.
MODIFICATION OF THE INDENTURE
Time Warner and the Indenture Trustee may, without the consent of the holders
of the Subordinated Debentures, enter into indentures supplemental to the
Indenture for, among others, one or more of the following purposes: (i) to
evidence the succession of another person to Time Warner, and the assumption by
such successor of Time Warner's obligations under the Indenture and the
Subordinated Debentures of any series; (ii) to add covenants of Time Warner, or
surrender any rights of Time Warner, for the benefit of the holders of
Subordinated Debentures of any or all series; (iii) to cure any ambiguity, or
correct any inconsistency in the Indenture; (iv) to evidence and provide for
the acceptance of any successor Trustee with respect to one or more series of
Subordinated Debentures or to facilitate the administration of the trusts
thereunder by one or more trustees in accordance with the Indenture; (v) to
establish the form or terms of any series of Subordinated Debentures; and (vi)
to provide any additional Events of Default.
The Indenture contains provisions permitting Time Warner and the Indenture
Trustee, with the consent of the holders of the not less than a majority in
principal amount of the outstanding Subordinated Debentures of each series, to
modify the Indenture; provided that no such modification may, without the
consent of the holders of each outstanding Subordinated Debenture of such
series affected thereby, (i) reduce the amount of Subordinated Debentures of
such series the holders of which must consent to any amendment, supplement or
waiver of the Indenture; (ii) reduce the rate of or extend the time for the
payment of interest on any Subordinated Debenture; (iii) alter the method of
calculation of, or reduce, the amount paid at maturity or extend the fixed
maturity of any Subordinated Debenture; (iv) make any Subordinated Debenture
payable in money or property other than that stated in the Subordinated
Debenture; (v) make any change to the subordination terms that adversely
affects the rights of any holder of the Subordinated Debentures; or (vi) make
any change to the provisions relating to waivers of past defaults or the rights
of holders of the Subordinated Debentures to receive payments or reduce the
percentage of Subordinated Debentures the holders of which are required to
consent to any such modification. Each Declaration provides that in the event
that the consent of the Property Trustee, as holder of the Subordinated
Debentures of such series, is required in connection with any modification of
the Indenture or the Subordinated Debentures of such series, the Property
Trustee will request the written direction of the holders of a majority in
principal amount (or to the extent that the vote of a greater percentage or of
all the holders of the Subordinated Debentures shall be required, such greater
percentage in stated liquidation amount or all) of the Trust Securities of each
of the Trusts with respect to any such modification.
GOVERNING LAW
The Indenture and the Subordinated Debentures will be governed by, and
construed in accordance with, the laws of the State of New York.
INFORMATION CONCERNING THE INDENTURE TRUSTEE
The Indenture Trustee, prior to default, undertakes to perform only such
duties as are specifically set forth in the Indenture and, after default, shall
exercise the same degree of care as a prudent individual would
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exercise in the conduct of his or her own affairs. Subject to such provision,
the Indenture Trustee is under no obligation to exercise any of the powers
vested in it by the Indenture at the request of any holder of Subordinated
Debentures, unless offered reasonable indemnity by such holder against the
costs, expenses and liabilities that might be incurred thereby. The Indenture
Trustee is not required to expend or risk its own funds or otherwise incur
personal financial liability in the performance of its duties if the Trustee
reasonably believes that repayment or adequate indemnity is not reasonably
assured to it. The Indenture Trustee is one of a number of banks with which
Time Warner and its subsidiaries maintain ordinary banking and trust
relationships.
DESCRIPTION OF THE PREFERRED SECURITIES
Each Trust is authorized by the applicable Declaration to issue, from time to
time, one series of Preferred Securities having terms described in the
Prospectus Supplement relating thereto. Each Declaration will be qualified as
an indenture under the Trust Indenture Act. Each series of Preferred Securities
will have such terms, including distributions, redemption, voting, liquidation
rights and such other preferred, deferred or other special rights or such
restrictions as shall be set forth in the relevant Declaration or made part of
the relevant Declaration by the Trust Indenture Act. Reference is made to any
Prospectus Supplement relating to the Preferred Securities of a Trust for
specific terms, including (i) the distinctive designation of such Preferred
Securities, (ii) the number of Preferred Securities issued by such Trust, (iii)
the annual distribution rate (or method of determining such rate) for such
Preferred Securities and the date or dates upon which such distributions shall
be payable, (iv) whether distributions on such Preferred Securities shall be
cumulative, and, in the case of Preferred Securities having such cumulative
distribution rights, the date or dates or method of determining the date or
dates from which distributions on such Preferred Securities shall be
cumulative, (v) the amount or amounts which shall be paid out of the assets of
such Trust to the holders of such Preferred Securities upon voluntary or
involuntary dissolution, winding-up or termination of such Trust, (vi) the
obligation, if any, of such Trust to purchase or redeem Preferred Securities
issued by such Trust and the price or prices at which, the period or periods
within which and the terms and conditions upon which such Preferred Securities
shall be purchased or redeemed, in whole or in part, pursuant to such
obligation,(vii) the voting rights, if any, of such Preferred Securities in
addition to those required by law, including the number of votes per Preferred
Security and any requirement for the approval by the holders of Preferred
Securities, or of Preferred Securities issued by one or more Trust, or of both,
as a condition to specified action or amendments to the relevant Declaration,
and (viii) any other relevant rights, preferences, privileges, limitations or
restrictions of Preferred Securities issued by such Trust consistent with the
relevant Declaration or with applicable law.
All Preferred Securities offered hereby will be guaranteed by Time Warner to
the extent set forth below under "Description of the Guarantees".
Certain United States federal income tax considerations applicable to any
offering of Preferred Securities will be described in the Prospectus Supplement
relating thereto.
In connection with the issuance from time to time of Preferred Securities,
each Trust will issue Common Securities. Each Declaration authorizes the
relevant Trust to issue on behalf of such Trust only one series of Common
Securities having such terms including distributions, redemption, voting,
liquidation rights or such restrictions as shall be set forth therein. The
terms of the Common Securities issued by a Trust will be substantially
identical to the terms of the Preferred Securities issued by such Trust and the
Common Securities will rank pari passu, and payments will be made thereon pro
rata with the Preferred Securities except that, upon an event of default under
the relevant Declaration, the rights of the holders of the Common Securities to
payment in respect of distributions and payments upon liquidation, redemption
and otherwise will be subordinated to the rights of the holders of the
Preferred Securities. Except in certain limited circumstances, the Common
Securities will also carry the right to vote and to appoint, remove or replace
any of the Time Warner Trustees of the relevant Trust. All of the Common
Securities of the Trusts will be directly or indirectly owned by Time Warner.
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DESCRIPTION OF THE GUARANTEES
Set forth below is a summary of information concerning the Guarantees that
will be executed and delivered by Time Warner for the benefit of the holders,
from time to time, of Preferred Securities. Each Guarantee will be qualified as
an indenture under the Trust Indenture Act. The First National Bank of Chicago
will act as indenture trustee under each Guarantee (the "Guarantee Trustee").
The terms of each Guarantee will be those set forth in such Guarantee and those
made part of such Guarantee by the Trust Indenture Act. The summary set forth
herein does not purport to be complete and is subject in all respects to the
provisions of, and is qualified in its entirety by reference to, the form of
Guarantee, which is filed as an exhibit to the Registration Statement of which
this Prospectus forms a part, and the Trust Indenture Act. Each Guarantee will
be held by the Guarantee Trustee for the benefit of the holders of the
Preferred Securities of the applicable Trust.
GENERAL
Pursuant to each Guarantee, Time Warner will irrevocably and unconditionally
agree, to the extent set forth therein, to pay in full to the holders of the
Preferred Securities issued by each Trust, the Guarantee Payments (as defined
below), without duplication of amounts paid by the relevant Trust, as and when
due, regardless of any defense, right of set-off or counterclaim that such
Trust may have or assert. The following payments with respect to Preferred
Securities issued by a Trust (the "Guarantee Payments"), to the extent not paid
by such Trust, will be subject to the Guarantee (without duplication): (i)(A)
any accrued and unpaid distributions that are required to be paid on such
Preferred Securities and (B) any redemption price, including all accrued and
unpaid distributions, but if and only if to the extent that, in each case, Time
Warner has made payment to the Property Trustee of interest or principal on the
Subordinated Debentures, and (ii) upon a voluntary or involuntary dissolution,
winding-up or termination of such Trust (other than in connection with the
distribution of Subordinated Debentures to the holders of Preferred Securities
or the redemption of all of the Preferred Securities upon maturity or
redemption of the Subordinated Debentures) the lesser of(A) the aggregate of
the liquidation amount and all accrued and unpaid distributions on such
Preferred Securities to the date of payment to the extent such Trust has funds
available therefor and (B) the amount of assets of such Trust remaining
available for distribution to holders of such Preferred Securities upon such
liquidation, dissolution, winding-up or termination of such Trust. Time
Warner's obligation to make a Guarantee Payment may be satisfied by direct
payment of the required amounts by Time Warner to the holders of Preferred
Securities or by causing the applicable Trust to pay such amounts to such
holders.
Each Guarantee will be a full and unconditional guarantee with respect to the
Preferred Securities issued by the applicable Trust from the time of issuance
of such Preferred Securities but will not apply to any payment of distributions
except to the extent such Trust shall have funds available therefor. If Time
Warner does not make interest payments on the Subordinated Debentures purchased
by a Trust, such Trust will not pay distributions on the Preferred Securities
issued by such Trust and will not have funds available therefor. See
"Description of the Subordinated Debentures".
CERTAIN COVENANTS OF TIME WARNER
In each Guarantee, Time Warner will covenant that, so long as any Preferred
Securities issued by the applicable Trust remain outstanding, if there shall
have occurred any event that would constitute an event of default under such
Guarantee or the Declaration of such Trust, then (a) Time Warner shall not
declare or pay dividends on, or make distributions with respect to, or redeem,
purchase or acquire, or make a liquidation payment with respect to, any of its
capital stock and (b) Time Warner shall not make any payment of interest,
principal or premium, if any, on or repay, repurchase or redeem any debt
securities issued by Time Warner which rank pari passu with or junior to such
Subordinated Debentures. However, each Guarantee will except from the foregoing
any interest or dividend payments by Time Warner, where the interest or
dividend is paid by way of the issuance of securities that rank pari passu
with, or junior to, the securities on which such interest or dividend is being
paid.
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MODIFICATION OF THE GUARANTEES; ASSIGNMENT
Except with respect to any changes that do not adversely affect the rights of
holders of Preferred Securities (in which case no vote will be required), each
Guarantee may be amended only with the prior approval of the holders of not
less than a majority in liquidation amount of the outstanding Preferred
Securities issued by the applicable Trust and only if the Guarantee Trustee
shall have obtained either a ruling from the Internal Revenue Service or a
written unqualified opinion of nationally recognized independent tax counsel
experienced in such matters to the effect that such action will not result in
the relevant Trust being treated as an association taxable as a corporation or
a partnership for United States Federal income tax purposes and that, following
such action, each holder of Trust Securities will be treated as owning an
undivided beneficial interest in the Subordinated Debentures. The manner of
obtaining any such approval of holders of such Preferred Securities will be set
forth in an accompanying Prospectus Supplement. All guarantees and agreements
contained in a Guarantee shall bind the successors, assignees, receivers,
trustees and representatives of Time Warner and shall inure to the benefit of
the holders of the Preferred Securities of the applicable Trust then
outstanding.
EVENTS OF DEFAULT
An Event of Default under the Guarantees will occur upon the failure of Time
Warner to perform any of its payments or other obligations thereunder. The
holders of a majority in liquidation amount of the Preferred Securities to
which a Guarantee relates have the right to direct the time, method and place
of conducting any proceeding for any remedy available to the Guarantee Trustee
in respect of such Guarantee or to direct the exercise of any trust or power
conferred upon the Guarantee Trustee under such Guarantee.
If the Guarantee Trustee fails to enforce a Guarantee, any holder of
Preferred Securities relating to such Guarantee may, after a period of 30 days
has elapsed from such holder's written request to the Guarantee Trustee to
enforce such Guarantee, institute a legal proceeding directly against Time
Warner to enforce the Guarantee Trustee's rights under such Guarantee without
first instituting a legal proceeding against the relevant Trust, the Guarantee
Trustee or any other person or entity. Subject to the award by a court of
competent jurisdiction of legal fees in connection with any such legal
proceeding, each holder will be required to bear its own costs in connection
with instituting a legal proceeding directly against Time Warner, which cost
may be significant.
Time Warner is required to file annually with the Guarantee Trustee an
officer's certificate as to Time Warner's compliance with all conditions and
covenants under each of the Guarantees.
INFORMATION CONCERNING THE GUARANTEE TRUSTEE
The Guarantee Trustee, prior to the occurrence of a default, undertakes to
perform only such duties as are specifically set forth in the relevant
Guarantee and, after default with respect to such Guarantee, shall exercise the
same degree of care as a prudent individual would exercise in the conduct of
his or her own affairs. Subject to such provision, the Guarantee Trustee is
under no obligation to exercise any of the powers vested in it by a Guarantee
at the request of any holder of Preferred Securities unless it is offered
reasonable indemnity against the costs, expenses and liabilities that might be
incurred thereby.
TERMINATION OF THE GUARANTEES
Each Guarantee will terminate as to the Preferred Securities issued by the
applicable Trust upon full payment of the Redemption Price of all Preferred
Securities of such Trust, upon distribution of the Subordinated Debentures held
by such Trust to the holders of the Preferred Securities of such Trust or upon
full payment of the amounts payable in accordance with the relevant Declaration
upon liquidation of such Trust. Each Guarantee will continue to be effective or
will be reinstated, as the case may be, if at any time any holder of Preferred
Securities issued by the applicable Trust must restore payment of any sums paid
under such Preferred Securities or such Guarantee.
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STATUS OF THE GUARANTEES
Each Guarantee will constitute an unsecured obligation of Time Warner and
will rank (i) subordinate and junior in right of payment to all other
liabilities of Time Warner, (ii) pari passu with the most senior preferred or
preference stock now or hereafter issued by Time Warner and with any guarantee
now or hereafter entered into by Time Warner in respect of any preferred or
preference stock of any affiliate of Time Warner and (iii) senior to Time
Warner's common stock. The terms of the Preferred Securities provide that each
holder of Preferred Securities issued by a Trust by acceptance thereof agrees
to the subordination provisions and other terms of the applicable Guarantee.
Each Guarantee will constitute a guarantee of payment and not of collection
(that is, the guaranteed party may institute a legal proceeding directly
against the guarantor to enforce its rights under a Guarantee without
instituting a legal proceeding against any other person or entity).
GOVERNING LAW
The Guarantees will be governed by and construed in accordance with the
internal laws of the State of New York.
PLAN OF DISTRIBUTION
Time Warner may sell any series of the Subordinated Debentures and the Trusts
may sell the Preferred Securities in one or more of the following ways from
time to time (i) to or through underwriters or dealers, (ii) directly to
purchasers, or (iii) through agents. The Prospectus Supplement with respect to
any Offered Securities will set forth (i) the terms of the offering of the
Offered Securities, including the name or names of any underwriters, dealers or
agents, (ii) the purchase price of the Offered Securities and the proceeds to
Time Warner or the applicable Trust as the case may be from such sale, (iii)
any underwriting discounts and commissions or agency fees and other items
constituting underwriters' or agents' compensation, (iv) any initial public
offering prices, (v) any discounts or concessions allowed or reallowed or paid
to dealers, and (vi) any securities exchange on which such Offered Securities
may be listed. Any initial public offering price, discounts or concessions
allowed or reallowed or paid to dealers may be changed from time to time.
If underwriters are used in the sale, the Offered Securities will be acquired
by the underwriters for their own account and may be resold from time to time
in one or more transactions, including negotiated transactions, at a fixed
public offering price or at varying prices determined at the time of sale. The
Offered Securities may be offered to the public either through underwriting
syndicates represented by one or more managing underwriters or directly by one
or more firms acting as underwriters. The underwriter or underwriters with
respect to a particular underwritten offering of Offered Securities will be
named in the Prospectus Supplement relating to such offering and, if an
underwriting syndicate is used, the managing underwriter or underwriters will
be set forth on the cover of such Prospectus Supplement. Unless otherwise set
forth in the Prospectus Supplement relating thereto, the obligations of the
underwriters to purchase the Offered Securities will be subject to certain
conditions precedent, and the underwriters will be obligated to purchase all
the Offered Securities if any are purchased.
If dealers are utilized in the sale of Offered Securities, Time Warner or the
applicable Trust will sell such Offered Securities to the dealers as
principals. The dealers may then resell such Offered Securities to the public
at varying prices to be determined by such dealers at the time of resale. The
names of the dealers and the terms of the transaction will be set forth in the
Prospectus Supplement relating thereto.
Any series of Subordinated Debentures may be sold from time to time either
directly by Time Warner or through agents designated by Time Warner. Any series
of Preferred Securities may be sold from time to time either directly by the
applicable Trust or by agents of the applicable Trust designated by such Trust.
Any agent involved in the offer or sale of the Offered Securities in respect to
which this Prospectus is delivered
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will be named, and any commissions payable to Time Warner or the applicable
Trust to such agent will be set forth, in the Prospectus Supplement relating
thereto. Unless otherwise indicated in the Prospectus Supplement, any such
agent will be acting on a best efforts basis for the period of its appointment.
The Subordinated Debentures may be sold directly by Time Warner and the
Preferred Securities may be sold directly by the applicable Trust to
institutional investors or others who may be deemed to be underwriters within
the meaning of the Securities Act with respect to any resale thereof. The terms
of any such sales will be described in the Prospectus Supplement relating
thereto.
If so indicated in the Prospectus Supplement, Time Warner or the applicable
Trust will authorize agents, underwriters or dealers to solicit offers from
certain types of institutions to purchase Offered Securities from Time Warner
or such Trust at the public offering price set forth in the Prospectus
Supplement pursuant to delayed delivery contracts providing for payment and
delivery on a specified date in the future. Such contracts will be subject only
to those conditions set forth in the Prospectus Supplement, and the Prospectus
Supplement will set forth the commission payable for solicitation of such
contracts.
Agents, dealers and underwriters may be entitled under agreements with Time
Warner or the applicable Trust to indemnification by Time Warner or such Trust
against certain civil liabilities, including liabilities under the Securities
Act, or to contribution with respect to payments that such agents, dealers or
underwriters may be required to make in respect thereof. Agents, dealers and
underwriters may be customers of, engage in transactions with, or perform
services for Time Warner or the applicable Trust in the ordinary course of
business.
Each series of Offered Securities will be a new issue of securities and will
have no established trading market. Any underwriters to whom Offered Securities
are sold for public offering and sale may make a market in such Offered
Securities, but such underwriters will not be obligated to do so and may
discontinue any market making at any time without notice. The Offered
Securities may or may not be listed on a national securities exchange. No
assurance can be given that there will be a market for the Offered Securities.
LEGAL MATTERS
The validity of the Preferred Securities under Delaware law will be passed
upon for the Trusts by Richards, Layton & Finger, Wilmington, Delaware, special
Delaware counsel to Time Warner and the Trusts. The validity of the
Subordinated Debentures and the Guarantees and certain Federal income tax
matters will be passed upon for Time Warner and the Trusts by Cravath, Swaine &
Moore, New York, New York, and for the Underwriters by Shearman & Sterling, New
York, New York. Time Warner and the Trusts are also being advised as to certain
matters of Delaware law by Richards, Layton & Finger, Wilmington, Delaware.
EXPERTS
The consolidated financial statements of Time Warner and TWE appearing in
Time Warner's Annual Report on Form 10-K for the year ended December 31, 1994,
as amended, and the combined financial statements of the Time Warner Service
Partnerships incorporated by reference therein, have been audited by Ernst &
Young LLP, independent auditors, as set forth in their reports thereon set
forth therein and incorporated herein by reference. Such financial statements
have been incorporated herein by reference in reliance upon such reports given
upon the authority of such firm as experts in accounting and auditing.
The financial statements of Summit Communications Group, Inc. as of December
31, 1993 and 1994, and for the three years ended December 31, 1994,
incorporated by reference in this Prospectus, have been audited by Deloitte &
Touche LLP, independent auditors, as set forth in their report thereon and
incorporated herein by reference. Such financial statements are incorporated
herein by reference in reliance upon such report and upon the authority of such
firm as experts in accounting and auditing.
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The financial statements of Newhouse Broadcasting Cable Division of Newhouse
Broadcasting Corporation and subsidiaries as of July 31, 1993 and 1994, and for
the three years ended July 31, 1994, incorporated by reference in this
Prospectus, have been audited by Paul Scherer & Company LLP, independent
auditors, as set forth in their report thereon and incorporated herein by
reference. Such financial statements are incorporated herein by reference in
reliance upon such report and upon the authority of such firm as experts in
accounting and auditing.
The financial statements of Vision Cable Division of Vision Cable
Communications, Inc. and subsidiaries as of December 31, 1993 and 1994, and for
the three years ended December 31, 1994, incorporated by reference in this
Prospectus, have been audited by Paul Scherer & Company LLP, independent
auditors, as set forth in their report thereon and incorporated herein by
reference. Such financial statements are incorporated herein by reference in
reliance upon such report and upon the authority of such firm as experts in
accounting and auditing.
The financial statements of Cablevision Industries Corporation as of December
31, 1993 and 1994, and for the three years ended December 31, 1994,
incorporated by reference in this Prospectus, have been audited by Arthur
Andersen LLP, independent public accounts, as set forth in their report thereon
and incorporated herein by reference. Such financial statements are
incorporated herein by reference in reliance upon such report and upon the
authority of such firm as experts in accounting and auditing.
The financial statements of Cablevision Industries Limited Partnership as of
December 31, 1993 and 1994, and for the three years ended December 31, 1994,
incorporated by reference in this Prospectus, have been audited by Arthur
Andersen LLP, independent public accountants, as set forth in their report
thereon and incorporated herein by reference. Such financial statements are
incorporated herein by reference in reliance upon such report and upon the
authority of such firm as experts in accounting and auditing.
The financial statements of KBLCOM Incorporated as of December 31, 1993 and
1994, and for the three years ended December 31, 1994, incorporated by
reference in this Prospectus, have been audited by Deloitte & Touche LLP,
independent auditors, as set forth in their report thereon and incorporated
herein by reference. Such financial statements are incorporated herein by
reference in reliance upon such report and upon the authority of such firm as
experts in accounting and auditing.
The financial statements of Paragon Communications as of December 31, 1993
and 1994, and for the three years ended December 31, 1994, incorporated by
reference in this Prospectus, have been audited by Price Waterhouse LLP,
independent accountants, as set forth in their report thereon and incorporated
herein by reference. Such financial statements are incorporated herein by
reference in reliance upon such report and upon the authority of such firm as
experts in accounting and auditing.
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ANNEX I
GLOSSARY OF TERMS
The following is an abbreviated definition of certain capitalized terms used
in this Prospectus Supplement. The Declaration, the Guarantee and the Indenture
may contain a more complete definition of certain of the terms defined herein
and reference should be made to the Declaration, the Guarantee or the
Indenture, as applicable, for a more complete definition of all such terms.
APPOINTMENT EVENT.................. the occurrence and continuation of (i)
the failure by Time Warner Capital to pay
distributions in full on the Preferred
Securities for six (6) consecutive quar-
terly distribution periods or (ii) a Dec-
laration Event of Default.
BUSINESS DAY....................... any day other than a Saturday or Sunday
or any other day on which banking insti-
tutions in New York, New York, are autho-
rized or required by law to close.
CODE............................... the Internal Revenue Code of 1986, as
amended.
COMMISSION......................... the Securities and Exchange Commission.
COMMON SECURITIES.................. the common securities of the Trust repre-
senting undivided beneficial interests in
the assets of the Trust, directly or in-
directly owned initially by Time Warner.
DEBENTURE REDEMPTION PRICE......... on any date of redemption (including the
Maturity Date), an amount equal to (a)
100% of the principal amount of Subordi-
nated Debentures to be redeemed plus (b)
accrued and unpaid interest thereon to
but excluding the date of redemption.
DECLARATION........................ the Amended and Restated Declaration of
Trust dated as of , 1995 by the
trustees, Time Warner, as sponsor, and
the holders of undivided beneficial in-
terests in the assets of the Trust.
DECLARATION EVENT OF DEFAULT....... in respect of the Trust Securities, an
Indenture Event of Default that has oc-
curred and is continuing in respect of
the Subordinated Debentures, provided
that pursuant to the Declaration, the
holder of the Common Securities will be
deemed to have waived any Declaration
Event of Default with respect to the Com-
mon Securities until all Declaration
Events of Default with respect to the
Preferred Securities have been cured,
waived or otherwise eliminated.
DISTRIBUTIONS...................... cumulative cash distributions payable to
holders of Preferred Securities in an
amount per annum equal to % of the
stated liquidation amount of $25 per Pre-
ferred Security, accruing from and in-
cluding the Issue Date and payable quar-
terly in arrears on , , and
of each year, commencing ,
1995, except as described herein.
DTC................................ the Depository Trust Company.
ERISA..............................
the Employee Retirement Income Security
Act of 1974.
A-1
<PAGE>
EXCHANGE ACT....................... the Securities Exchange Act of 1934, as
amended.
EXTENSION PERIOD................... any period of up to 20 consecutive quar-
ters during which Time Warner has elected
to exercise its right to defer interest
payments on the Subordinated Debentures;
distributions on Preferred Securities
would also be deferred during any such
period but would continue to accrue with
interest thereon compounded quarterly.
GLOBAL SECURITY.................... issued in the form of one or more global
certificates distributed to holders of
Preferred Securities in connection with
the involuntary or voluntary dissolution,
winding-up or liquidation of Time Warner
Capital as a result of the occurrence of
a Special Event.
GUARANTEE.......................... the Guarantee Agreement dated as of ,
1995, executed by Time Warner on behalf
of the holders of Preferred Securities.
GUARANTEE PAYMENTS................. (i)(A) any accrued and unpaid distribu-
tions that are required to be paid on the
Preferred Securities and (B) the Pre-
ferred Redemption Price with respect to
the Preferred Securities subject to man-
datory redemption or called for redemp-
tion by Time Warner Capital, but if and
only to the extent that, in each of cases
(A) and (B), Time Warner has made a pay-
ment to the Property Trustee of interest
or principal on the Subordinated Deben-
tures, and (ii) upon a Liquidation Event
(other than in connection with the dis-
tribution of the Subordinated Debentures
to the holders of Preferred Securities or
the redemption of all the Preferred Secu-
rities upon the maturity or redemption of
the Subordinated Debentures), the lesser
of (x) the Liquidation Distribution, to
the extent the Trust has funds available
therefor, and (y) the amount of assets of
Time Warner Capital remaining available
for distribution to holders of the Pre-
ferred Securities in liquidation of the
Trust.
GUARANTEE TRUSTEE.................. The First National Bank of Chicago.
INDENTURE.......................... the Indenture dated as of , 1995, be-
tween Time Warner and the Indenture
Trustee.
INDENTURE EVENT OF DEFAULT......... (i) default for 30 days in the payment of
interest on the Subordinated Debentures;
(subject to Time Warner's right to defer
interest during any Extension Period);
(ii) default in payment at the Maturity
Date or any amount payable upon optional
or special redemption of the Subordinated
Debentures; (iii) failure by Time Warner
for 90 days after receipt of notice to it
to comply with any of its covenants or
agreements contained in the Indenture;
(iv) failure by the Property Trustee or
any Regular Trustee to comply with the
terms of the Declaration; and (v) certain
events of bankruptcy, insolvency, receiv-
ership or reorganization involving Time
Warner.
A-2
<PAGE>
INDENTURE TRUSTEE.................. Chemical Bank.
INTEREST PAYMENT DATE.............. with respect to the Subordinated Deben-
tures, , , and of each
year. The amount of interest payable for
any period will be computed on the basis
of a 360-day year of twelve 30-day months
and will include the first day but ex-
clude the last day of such period. The
amount of interest payable for any period
shorter than a full quarterly period for
which interest is computed, will be com-
puted on the basis of the actual number
of days elapsed per 30-day month. In the
event that any date on which interest is
payable on the Subordinated Debentures is
not a Business Day, then payment of the
interest payable on such date will be
made on the next succeeding day that is a
Business Day (without any interest or
other payment in respect of any such de-
lay), except that, if such Business Day
is in the next succeeding calendar year,
then such payment shall be made on the
immediately preceding Business Day, in
each case with the same force and effect
as if made on such date.
INVESTMENT COMPANY EVENT........... the receipt by the Regular Trustees of an
opinion of a nationally recognized inde-
pendent counsel experienced in such mat-
ters to the effect that, as a result of
the occurrence of a change in law or reg-
ulation or a written change in interpre-
tation or application of law or regula-
tion by any legislative body, court, gov-
ernmental agency or regulatory authority
(a "Change in 1940 Act Law"), there is
more than an insubstantial risk that Time
Warner Capital is or will be considered
an "investment company" that is required
to be registered under the 1940 Act,
which Change in 1940 Act Law becomes ef-
fective on or after the date of this Pro-
spectus.
IRS................................ Internal Revenue Service
ISSUE DATE......................... , 1995
LIQUIDATION DISTRIBUTION........... in respect of any Liquidation Event, the
sum of (a) $25 per Trust Security plus
(b) the amount of accrued and unpaid dis-
tributions on such Trust Security to but
excluding the date of payment.
LIQUIDATION EVENT.................. any liquidation, dissolution, winding-up
or termination of the Trust, whether vol-
untary or involuntary.
MANDATORY REDEMPTION DATE.......... , 2025
MATURITY DATE...................... , 2025
MINIMUM DENOMINATION............... with respect to the Subordinated Deben-
tures, $25 per Subordinate Debenture.
NASDAQ............................. The Nasdaq Stock Market.
1940 ACT........................... the Investment Company Act of 1940, as
amended.
NO RECOGNITION OPINION............. opinion of nationally recognized indepen-
dent tax counsel, to the effect that the
holders of the Preferred Securities will
not recognize any gain or loss for United
States
A-3
<PAGE>
Federal income tax purposes as a result
of the dissolution of Time Warner Capital
and distribution of the Subordinated De-
bentures.
OPTIONAL REDEMPTION DATE........... any date in respect of which, upon the
call for redemption prior to maturity by
Time Warner of the Subordinated Deben-
tures, Time Warner Capital shall have
called for redemption outstanding Trust
Securities having an aggregate stated
amount equal to the aggregate principal
amount of the Subordinated Debentures to
be so redeemed.
PREFERRED REDEMPTION PRICE......... On any date of redemption, an amount
equal to (i) $25 per Trust Security plus
(ii) accrued and unpaid distributions to
but excluding the date of redemption.
PREFERRED SECURITIES............... Time Warner Capital's % Preferred
Trust Securities.
PRINCIPAL AMOUNT................... with respect to each Subordinated
Debenture, the Minimum Denomination
thereof.
PRO RATA BASIS..................... with respect to any payment, pro rata to
each holder of Trust Securities according
to the aggregate stated amount of the
Trust Securities held by such holder in
relation to the aggregate stated amount
of all Trust Securities outstanding;
provided, however, that if the assets of
the Trust are insufficient to make such
payment in full as a result of a default
with respect to the Subordinated
Debentures, any funds available to make
such payment shall be paid (i) first to
each holder of Preferred Securities pro
rata according to the aggregate stated
amount of all the Preferred Securities
outstanding up to an aggregate amount
equal to the amount then owed to the
holders of the Preferred Securities and
(ii) only after satisfaction of all
amounts owed to the holders of the
Preferred Securities, to each holder of
Common Securities pro rata according to
the aggregate stated amount of the Common
Securities held by such holder in
relation to the aggregate stated amount
of all the Common Securities outstanding.
PROPERTY TRUSTEE................... The First National Bank of Chicago.
REDEMPTION/DISTRIBUTION NOTICE..... notice provided by Time Warner Capital of
any redemption (other than mandatory re-
demption) of, or any distribution of the
Subordinated Notes in exchange for, the
Preferred Securities to all holders of
Preferred Securities to be redeemed or
exchanged stating, among other things,
(i) the date of such redemption or of
such distribution, as the case may be,
and (ii) in the case of any early or spe-
cial redemption, the applicable Call
Price or Special Redemption Price, as the
case may be.
REDEMPTION DATE.................... any of a Mandatory Redemption Date, Op-
tional Redemption Date or Special Redemp-
tion Date.
REGULAR TRUSTEES................... the three Time Warner Trustees who are
employees or officers of, or affiliated
with, Time Warner.
SECURITIES ACT..................... the Securities Act of 1933.
A-4
<PAGE>
SENIOR INDEBTEDNESS................ with respect to Time Warner, all indebt-
edness or obligations, whether outstand-
ing at the date of execution of the In-
denture or thereafter incurred, assumed,
guaranteed or otherwise created, unless
the terms of the instrument or instru-
ments by which Time Warner incurred, as-
sumed, guaranteed or otherwise created
any such indebtedness or obligation ex-
pressly provide that such indebtedness or
obligation is subordinate to all other
indebtedness of Time Warner or that such
indebtedness or obligation is not supe-
rior in right of payment to the Subordi-
nated Debentures with respect to any of
the following (including, without limita-
tion, interest accruing on or after a
bankruptcy or other similar event,
whether or not an allowed claim therein):
(i) any indebtedness incurred by Time
Warner or assumed or guaranteed, directly
or indirectly, by Time Warner (a) for
money borrowed (including Time Warner's
outstanding 8 3/4% Convertible Subordi-
nated Debentures due 2015), (b) in con-
nection with the acquisition of any busi-
ness, property or other assets (other
than trade payables incurred in the ordi-
nary course of business) or (c) for ad-
vances or progress payments in connection
with the construction or acquisition of
any building, motion picture, television
production or other entertainment of any
kind; (ii) any obligation of Time Warner
(or of a subsidiary which is guaranteed
by Time Warner) as lessee under a lease
of real or personal property; (iii) any
obligation of Time Warner to purchase
property at a future date in connection
with a financing by Time Warner or a sub-
sidiary of Time Warner; (iv) letters of
credit; (v) currency swaps and interest
rate hedges; and (vi) any deferral, re-
newal, extension or refunding of any of
the foregoing.
7.75% NOTES........................ Time Warner's $500,000,000 7.75% Notes
due 2005.
SPECIAL EVENT...................... either a Tax Event or an Investment Com-
pany Event.
SPECIAL REDEMPTION DATE............ any date in respect of which upon the oc-
currence and continuation of a Tax Event
or an Investment Company Event, Time
Warner shall have called for redemption
in whole the Subordinated Debentures, and
Time Warner Capital shall have called for
redemption the Preferred Securities.
SPECIAL REGULAR TRUSTEE............ a special trustee appointed by the major-
ity vote of the holders of the Preferred
Securities if an Appointment Event shall
have occurred and shall be continuing.
SUBORDINATED DEBENTURES............
Time Warner's % Subordinated Debentures
due , 2025.
TAX EVENT.......................... the receipt by the Regular Trustees of an
opinion of nationally recognized indepen-
dent tax counsel experienced in such mat-
ters (a "Dissolution Tax Opinion") to the
effect that, as a result of (a) any
amendment to, or change (including any
announced prospective change) in, the
laws
A-5
<PAGE>
(or any regulations thereunder) of the
United States or any political subdivi-
sion or taxing authority thereof or
therein, (b) any amendment to, or change
in, an interpretation or application of
such laws or regulations, by any legisla-
tive body, court, governmental agency or
regulatory authority (including the en-
actment of any legislation and the publi-
cation of any judicial decision or regu-
latory determination), (c) any interpre-
tation or pronouncement that provides for
a position with respect to such laws or
regulations that differs from the there-
tofore generally accepted position or (d)
any action taken by any governmental
agency or regulatory authority, which
amendment or change is enacted, promul-
gated, issued or announced or which in-
terpretation or pronouncement is issued
or announced or which action is taken, in
each case on or after the date of this
Prospectus Supplement, that there is more
than an insubstantial risk that at such
time or within 90 days of the date
thereof (i) Time Warner Capital is or
would be subject to United States Federal
income tax with respect to income accrued
or received on the Subordinated Deben-
tures, (ii) the interest payable on the
Subordinated Debentures is not or would
not be deductible by Time Warner for
United States Federal income tax purposes
or (iii) Time Warner Capital is or would
be subject to more than a de minimis
amount of other taxes, duties or other
governmental charges.
TIME WARNER........................ Time Warner Inc., a Delaware corporation.
TIME WARNER CAPITAL................ Time Warner Capital I, a statutory busi-
ness trust formed under the laws of the
State of Delaware.
TIME WARNER TRUSTEES............... the Trustees that conduct Time Warner
Capital business and affairs as appointed
by Time Warner, the direct or indirect
holder of all the Common Securities.
TRUST ACT.......................... the Delaware Business Trust Act.
TRUST INDENTURE ACT................ the Trust Indenture Act of 1939, as
amended.
TRUST SECURITIES...................
the Common Securities and the Preferred
Securities.
TWE................................ Time Warner Entertainment Company, L.P.,
a Delaware limited partnership.
UNDERWRITING AGREEMENT............. the underwriting agreement dated ,
1995, among Time Warner, the Trust and
each of Merrill Lynch, Pierce, Fenner &
Smith Incorporated, Morgan Stanley & Co.
Incorporated and Bear, Stearns & Co. and
as representative of the several under-
writers named therein, with respect to,
among other things, the Preferred Securi-
ties.
A-6
<PAGE>
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NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED OR
INCORPORATED BY REFERENCE IN THIS PROSPECTUS SUPPLEMENT OR THE PROSPECTUS IN
CONNECTION WITH THE OFFER MADE BY THIS PROSPECTUS SUPPLEMENT AND THE
PROSPECTUS AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT
BE RELIED UPON AS HAVING BEEN AUTHORIZED BY TIME WARNER INC., TIME WARNER
CAPITAL OR THE UNDERWRITERS. NEITHER THE DELIVERY OF THIS PROSPECTUS
SUPPLEMENT AND THE PROSPECTUS NOR ANY SALE MADE HEREUNDER AND THEREUNDER SHALL
UNDER ANY CIRCUMSTANCE CREATE AN IMPLICATION THAT THERE HAS BEEN NO CHANGE IN
THE AFFAIRS OF TIME WARNER INC. OR TIME WARNER CAPITAL SINCE THE DATE HEREOF.
THIS PROSPECTUS SUPPLEMENT AND THE PROSPECTUS DO NOT CONSTITUTE AN OFFER OR
SOLICITATION BY ANYONE IN ANY STATE IN WHICH SUCH OFFER OR SOLICITATION IS NOT
AUTHORIZED OR IN WHICH THE PERSON MAKING SUCH OFFER OR SOLICITATION IS NOT
QUALIFIED TO DO SO OR TO ANYONE TO WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR
SOLICITATION.
---------------
TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Summary of the Offering................................................... S-3
Risk Factors.............................................................. S-7
Time Warner Inc........................................................... S-9
Time Warner Capital....................................................... S-11
Recent Developments....................................................... S-12
Selected Historical and Pro Forma Financial Information................... S-14
Consolidated Capitalization............................................... S-19
Use of Proceeds........................................................... S-21
Description of the Preferred Securities................................... S-21
Description of the Guarantee.............................................. S-32
Description of the Subordinated Debentures................................ S-35
Effect of Subordinated Obligations Under the Subordinated Debentures and
the Guarantee............................................................ S-40
United States Federal Income Taxation..................................... S-42
Erisa Considerations...................................................... S-44
Underwriting.............................................................. S-45
Legal Matters............................................................. S-46
Experts................................................................... S-46
PROSPECTUS
Available Information..................................................... 2
Documents Incorporated by Reference....................................... 2
Time Warner Inc........................................................... 3
The Trusts................................................................ 4
Use of Proceeds........................................................... 5
Ratio of Earnings to Fixed Charges and Ratio of Earnings to Combined Fixed
Charges and Preferred Stock Dividends.................................... 5
Description of the Subordinated Debentures................................ 7
Description of the Preferred Securities................................... 11
Description of the Guarantees............................................. 12
Plan of Distribution...................................................... 14
Legal Matters............................................................. 15
Experts................................................................... 15
ANNEX I
Glossary of Terms......................................................... A-1
</TABLE>
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PREFERRED TRUST SECURITIES
TIME WARNER CAPITAL I
% PREFERRED TRUST SECURITIES
GUARANTEED TO THE EXTENT
SET FORTH HEREIN BY
TIME WARNER INC.
----------------------
PROSPECTUS SUPPLEMENT
----------------------
MERRILL LYNCH & CO.
MORGAN STANLEY & CO.
INCORPORATED
BEAR, STEARNS & CO. INC.
, 1995
- -------------------------------------------------------------------------------
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<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.*
<TABLE>
<S> <C>
Securities and Exchange Commission Filing Fee...................... $172,414
Rating Agency Fees.................................................
Blue Sky Fees and Expenses.........................................
Trustee's Expenses.................................................
Printing Fees and Expenses.........................................
Accounting Fees and Expenses.......................................
NYSE Listing Fee...................................................
Legal Fees and Expenses............................................ 250,000
Miscellaneous......................................................
--------
Total............................................................
========
</TABLE>
- --------
* All fees and expenses other than SEC Registration Fee are estimated. To be
completed by amendment.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the Delaware General Corporation Law (the "DGCL") provides
that a corporation may indemnify directors and officers as well as other
employees and individuals against expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement in connection with specified
actions, suits or proceedings, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the corporation (a
"derivative action"), if they acted in good faith and in a manner they
reasonably believed to be in or not opposed to the best interests of the
corporation and, with respect to any criminal action or proceedings, had no
reasonable cause to believe their conduct was unlawful. A similar standard is
applicable in the case of derivative actions, except that indemnification only
extends to expenses (including attorneys' fees) actually and reasonably
incurred in connection with the defense or settlement of such action, and the
statute requires court approval before there can be any indemnification where
the person seeking indemnification has been found liable to the corporation.
The statute provides that it is not exclusive of other indemnification that may
be granted by a corporation's charter, by-laws, disinterested director vote,
stockholder vote, agreement or otherwise.
Article VI of Time Warner's By-Laws requires indemnification to the fullest
extent permitted under Delaware law of any person who is or was a director or
officer of Time Warner who is or was involved or threatened to be made so
involved in any action, suit or proceeding, whether criminal, civil,
administrative or investigative, by reason of the fact that such person is or
was serving as a director, officer or employee of the Registrant or any
predecessor of Time Warner or was serving at the request of Time Warner as a
director, officer or employee of any other enterprise.
Section 102(b)(7) of the DGCL permits a provision in the certificate of
incorporation of each corporation organized thereunder, such as Time Warner,
eliminating or limiting, with certain exceptions, the personal liability of a
director to the corporation or its stockholders for monetary damages for breach
of fiduciary duty as a director. Section 1, Article X of the Certificate of
Incorporation of Time Warner eliminates the liability of directors to the
extent permitted by Section 102(b)(7).
The foregoing statements are subject to the detailed provisions of Section
145 and 102(b)(7) of the DGCL, Article VI of such By-laws and Section 1,
Article X of such Certificate of Incorporation, as applicable.
Time Warner's Directors' and Officers' Liability and Reimbursement Insurance
Policy is designed to reimburse the Registrant for any payments made by it
pursuant to the foregoing indemnification. Such policy has coverage of
$50,000,000.
II-1
<PAGE>
The Declaration provides that no Trustee, affiliate of any Trustee or any
officers, directors, shareholders, members, partners, employees,
representatives or agents of any Trustee or any employee or agent of the Trust
or its Affiliates (each, an "Indemnified Person") shall be liable, responsible
or accountable in damages or otherwise to any employee or agent of the Trust or
its affiliates, or any officers, directors, shareholders, employees,
representatives or agents of Time Warner or its affiliates or to any holders of
Trust Securities of the Trust for any loss, damage or claim incurred by reason
of any act or omission performed or omitted by such Indemnified Person in good
faith on behalf of the Trust and in a manner such Indemnified Person reasonably
believed to be within the scope of the authority conferred on such Indemnified
Person by the Declaration or by law, except that an Indemnified Person shall be
liable for any such loss, damage or claim incurred by reason of such
Indemnified Person's gross negligence (or, in the case of the Property Trustee,
negligence) or willful misconduct with respect to such acts or omission. The
Declaration also provides that, to the fullest extent permitted by applicable
law, Time Warner shall indemnify and hold harmless each Indemnified Person from
and against any loss, damage or claim incurred by such Indemnified Person by
reason of any act or omission performed or omitted by such Indemnified Person
in good faith on behalf of the Trust and in a manner such Indemnified Person
reasonably believed to be within the scope of authority conferred on such
Indemnified Person by the Declaration, except that no Indemnified Person shall
be entitled to be indemnified in respect of any loss, damage or claim incurred
by such Indemnified Person by reason of gross negligence (or, in the case of
the Property Trustee, negligence) or willful misconduct with respect to such
acts or omissions. The Declaration further provides that to the fullest extent
permitted by applicable law, expenses (including legal fees) incurred by an
Indemnified Person in defending any claim, demand, action, suit or proceeding
shall, from time to time, be advanced by Time Warner prior to the final
disposition of such claim, demand, action, suit or proceeding upon receipt by
Time Warner of an undertaking by or on behalf of the Indemnified Person to
repay such amount if it shall be determined that the Indemnified Person is not
entitled to be indemnified pursuant to the Declaration.
ITEM 16. EXHIBITS.
Exhibits identified in parentheses below are on file with the SEC and are
incorporated herein by reference to such previous filings. All other exhibits
are provided as part of this electronic transmission.
<TABLE>
<C> <S>
1.1 --Form of Underwriting Agreement
4.1 --Certificate of Trust of Time Warner Capital I
4.2 --Certificate of Trust of Time Warner Capital II
4.3 --Certificate of Trust of Time Warner Capital III
4.4 --Declaration of Trust of Time Warner Capital I
4.5 --Declaration of Trust of Time Warner Capital II
4.6 --Declaration of Trust of Time Warner Capital III
4.7 --Form of Amended and Restated Declaration of Trust for each of Time
Warner Capital I, II and III
4.8 --Form of Subordinated Notes Indenture between Time Warner Inc. and
Chemical Bank, as Trustee
4.9 --Form of First Supplemental Indenture to Subordinated Notes Indenture
between Time Warner Inc. and Chemical Bank, as Trustee
4.10 --Form of Preferred Security (included in Exhibit 4.7)
4.11 --Form of Common Security (included in Exhibit 4.7)
4.12 --Form of Guarantee with respect to Preferred Securities
4.13 --Form of Subordinated Debentures (included in Exhibit 4.8)
5.1 --Opinion of Cravath, Swaine & Moore*
5.2 --Opinion of Richards, Layton & Finger*
12.1 --Computation of Ratio of Earnings to Fixed Charges of Time Warner
Inc.
12.2 --Computation of Ratio of Earnings to Combined Fixed Charges and
Preferred Stock Dividends of Time Warner Inc.
12.3 --Computation of Ratio of Earnings to Fixed Charges of Time Warner
Entertainment Company, L.P.
</TABLE>
II-2
<PAGE>
<TABLE>
<C> <S>
23.1 --Consent of Ernst & Young LLP, Independent Auditors
23.2 --Consent of Cravath, Swaine & Moore (to be included in Exhibit 5.1)*
23.3 --Consent of Deloitte & Touche LLP, Independent Auditors
23.4 --Consent of Paul Scherer & Company, LLP, Independent Auditors
23.5 --Consent of Arthur Andersen LLP, Independent Public Accountants
23.6 --Consent of Deloitte & Touche LLP Independent Auditors
23.7 --Consent of Price Waterhouse LLP, Independent Accountants
24.1 --Powers of Attorney for Time Warner Inc.
24.2 --Powers of Attorney for Time Warner Inc., as sponsor, to sign this
Registration Statement on behalf of each of Time Warner Capital I, II
and III (included in Exhibits 4.4 to 4.6)
25.1 --Statement of Eligibility under the Trust Indenture Act of 1939, as
amended, of Chemical Bank, as Trustee under the Subordinated
Debentures Indenture
25.2 --Statement of Eligibility under the Trust Indenture Act of 1939, as
amended, of The First National Bank of Chicago, as Property Trustee
under the Declaration of Trust of Time Warner Capital I
25.3 --Statement of Eligibility under the Trust Indenture Act of 1939, as
amended, of The First National Bank of Chicago, as Property Trustee
under the Declaration of Trust of Time Warner Capital II
25.4 --Statement of Eligibility under the Trust Indenture Act of 1939, as
amended, of The First National Bank of Chicago, as Property Trustee
under the Declaration of Trust of Time Warner Capital III
25.5 --Statement of Eligibility under the Trust Indenture Act of 1939, as
amended, of The First National Bank of Chicago, as Guarantee Trustee
under the Guarantee of Time Warner Inc. for the benefit of the
holders of Preferred Securities
</TABLE>
- --------
* To be filed by amendment.
ITEM 17. UNDERTAKING.
The Registrants hereby undertake that, for purposes of determining any
liability under the Securities Act, each filing of Southern Union's Annual
Report pursuant to Section 13(a) or Section 15(d) of the Securities Exchange
Act of 1934, as amended (the "Exchange Act") (and where applicable, each filing
of an employee benefit plan's annual report pursuant to Section 15(d) of the
Exchange Act) that is incorporated by reference in the Registration Statement
shall be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
Registrants pursuant to the provisions referred to in Item 15 (other than the
insurance policies referred to therein), or otherwise, the Registrants have
been advised that, in the opinion of the Securities and Exchange Commission,
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrants of expenses
incurred or paid by a director, officer or controlling person of the
Registrants in the successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person in connection with the
securities being registered, the Registrants will, unless in the opinion of
their counsel the matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question whether such indemnification by
it is against public policy as expressed in the Act and will be governed by the
final adjudication of such issue.
The Registrants hereby undertake:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement
(i) to include any prospectus required by Section 10(a)(3) of the
Securities Act;
(ii) to reflect in the prospectus any facts or events arising after
the effective date of the Registration Statement (or the most recent
post-effective amendment thereof) that, individually or
II-3
<PAGE>
in the aggregate, represent a fundamental change in the information set
forth in the Registration Statement;
(iii) to include any material information with respect to the Plan of
Distribution not previously disclosed in the Registration Statement or
any material change to such information in the Registration Statement;
provided, however, that the undertakings set forth in paragraphs (i) and (ii)
above do not apply if the information required to be included in a post-
effective amendment by those paragraphs is contained in periodic reports filed
by Southern Union pursuant to Section 13 or Section 15(d) of the Exchange Act
that are incorporated by reference in this Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a
new Registration Statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
The Registrants hereby undertake that:
(1) For purposes of determining any liability under the Securities Act,
the information omitted from the form of prospectus filed as part of a
registration statement in reliance upon Rule 430A and contained in the form
of prospectus filed by the registrant pursuant to Rule 424(b)-(1) or (4) or
497(h) under the Securities Act shall be deemed to be part of the
registration statement as of the time it was declared effective.
(2) For the purposes of determining any liability under the Securities
Act each post-effective amendment that contains a form of prospectus shall
be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
II-4
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT, TIME WARNER INC. HEREBY
CERTIFIES THAT IT HAS REASONABLE GROUNDS TO BELIEVE THAT IT MEETS THE
REQUIREMENTS FOR FILING ON FORM S-3 AND HAS DULY CAUSED THIS REGISTRATION
STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY
AUTHORIZED, IN THE CITY OF NEW YORK, STATE OF NEW YORK, ON THE 2ND DAY OF
AUGUST, 1995.
Time Warner Inc.
/s/ Richard J. Bressler
By __________________________________
RICHARD J. BRESSLER SENIOR VICE
PRESIDENT AND CHIEF FINANCIAL
OFFICER
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS REGISTRATION
STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE CAPACITIES AND ON THE
DATES INDICATED.
SIGNATURE TITLE DATE
* Director, Chairman August 2, 1995
- ------------------------------------- of the Board and
(GERALD M. LEVIN) Chief Executive
Officer (principal
executive officer)
* Director, President August 2, 1995
- -------------------------------------
(RICHARD D. PARSONS)
* Senior Vice August 2, 1995
- ------------------------------------- President and Chief
(RICHARD J. BRESSLER) Financial Officer
(principal
financial officer)
* Vice President and August 2, 1995
- ------------------------------------- Controller
(JOHN A. LABARCA) (principal
accounting officer)
* Director August 2, 1995
- -------------------------------------
(MERV ADELSON)
* Director August 2, 1995
- -------------------------------------
(LAWRENCE B. BUTTENWIESER)
II-5
<PAGE>
SIGNATURE TITLE DATE
* Director August 2, 1995
- -------------------------------------
(EDWARD S. FINKELSTEIN)
* Director August 2, 1995
- -------------------------------------
(BEVERLY SILLS GREENOUGH)
* Director August 2, 1995
- -------------------------------------
(CARLA A. HILLS)
* Director August 2, 1995
- -------------------------------------
(DAVID T. KEARNS)
* Director August 2, 1995
- -------------------------------------
(HENRY LUCE III)
* Director August 2, 1995
- -------------------------------------
(REUBEN MARK)
* Director August 2, 1995
- -------------------------------------
(MICHAEL A. MILES)
* Director August 2, 1995
- -------------------------------------
(J. RICHARD MUNRO)
* Director August 2, 1995
- -------------------------------------
(DONALD S. PERKINS)
* Director August 2, 1995
- -------------------------------------
(RAYMOND S. TROUBH)
* Director August 2, 1995
- -------------------------------------
(FRANCIS T. VINCENT)
/s/ Richard J. Bressler
*By: ________________________________
ATTORNEY-IN-FACT
II-6
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT, TIME WARNER CAPITAL I,
TIME WARNER CAPITAL II AND TIME WARNER CAPITAL III EACH HEREBY CERTIFIES THAT
IT HAS REASONABLE GROUNDS TO BELIEVE THAT IT MEETS ALL THE REQUIREMENTS FOR
FILING ON FORM S-3 AND HAS DULY CAUSED THIS REGISTRATION STATEMENT TO BE SIGNED
ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF NEW
YORK, STATE OF NEW YORK, ON THE 2ND DAY OF AUGUST, 1995.
Time Warner Capital I
By: Time Warner Inc., as Sponsor
/s/ Thomas W. McEnerney
By __________________________________
THOMAS W. MCENERNEY
VICE PRESIDENT
Time Warner Capital II
By: Time Warner Inc., as Sponsor
/s/ Thomas W. McEnerney
By __________________________________
THOMAS W. MCENERNEY
VICE PRESIDENT
Time Warner Capital III
By: Time Warner Inc., as Sponsor
/s/ Thomas W. McEnerney
By __________________________________
THOMAS W. MCENERNEY
VICE PRESIDENT
II-7
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
PAGE
NO.
EXHIBITS ----
<C> <S> <C>
1.1 --Form of Underwriting Agreement
4.1 --Certificate of Trust of Time Warner Capital I
4.2 --Certificate of Trust of Time Warner Capital II
4.3 --Certificate of Trust of Time Warner Capital III
4.4 --Declaration of Trust of Time Warner Capital I
4.5 --Declaration of Trust of Time Warner Capital II
4.6 --Declaration of Trust of Time Warner Capital III
4.7 --Form of Amended and Restated Declaration of Trust for each
of Time Warner Capital I, II and III
4.8 --Form of Subordinated Notes Indenture between Time Warner
Inc. and Chemical Bank, as Trustee
4.9 --Form of First Supplemental Indenture to Subordinated Notes
Indenture between Time Warner Inc. and Chemical Bank, as
Trustee
4.10 --Form of Preferred Security (included in Exhibit 4.7)
4.11 --Form of Common Security (included in Exhibit 4.7)
4.12 --Form of Guarantee with respect to Preferred Securities
4.13 --Form of Subordinated Debentures (included in Exhibit 4.8)
5.1 --Opinion of Cravath, Swaine & Moore*
5.2 --Opinion of Richards, Layton & Finger*
12.1 --Computation of Ratio of Earnings to Fixed Charges of Time
Warner Inc.
12.2 --Computation of Ratio of Earnings to Combined Fixed Charges
and Preferred Stock Dividends of Time Warner Inc.
12.3 --Computation of Ratio of Earnings to Fixed Charges of Time
Warner Entertainment Company, L.P.
23.1 --Consent of Ernst & Young LLP, Independent Auditors
23.2 --Consent of Cravath, Swaine & Moore (to be included in
Exhibit 5.1)*
23.3 --Consent of Deloitte & Touche LLP, Independent Auditors
23.4 --Consent of Paul Scherer & Company, LLP, Independent Auditors
23.5 --Consent of Arthur Andersen LLP, Independent Public
Accountants
23.6 --Consent of Deloitte & Touche LLP Independent Auditors
23.7 --Consent of Price Waterhouse LLP, Independent Accountants
24.1 --Powers of Attorney for Time Warner Inc.
24.2 --Powers of Attorney for Time Warner Inc., as sponsor, to sign
this Registration Statement on behalf of each of Time Warner
Capital I, II and III (included in Exhibits 4.4 to 4.6)
25.1 --Statement of Eligibility under the Trust Indenture Act of
1939, as amended, of Chemical Bank, as Trustee under the
Subordinated Debentures Indenture
25.2 --Statement of Eligibility under the Trust Indenture Act of
1939, as amended, of The First National Bank of Chicago, as
Property Trustee under the Declaration of Trust of Time
Warner Capital I
25.3 --Statement of Eligibility under the Trust Indenture Act of
1939, as amended, of The First National Bank of Chicago, as
Property Trustee under the Declaration of Trust of Time
Warner Capital II
25.4 --Statement of Eligibility under the Trust Indenture Act of
1939, as amended, of The First National Bank of Chicago, as
Property Trustee under the Declaration of Trust of Time
Warner Capital III
25.5 --Statement of Eligibility under the Trust Indenture Act of
1939, as amended, of The First National Bank of Chicago, as
Guarantee Trustee under the Guarantee of Time Warner Inc. for
the benefit of the holders of Preferred Securities
</TABLE>
- --------
* To be filed by amendment.
<PAGE>
EXHIBIT 1.1
TIME WARNER FINANCING TRUST and TIME WARNER INC.
Underwriting Agreement
New York, New York
August __, 1995
Merrill Lynch & Co.
Merrill Lynch, Pierce, Fenner & Smith Incorporated
Morgan Stanley & Co. Incorporated
Bear, Stearns & Co. Inc.
c/o Merrill Lynch & Co.
Merrill Lynch, Pierce, Fenner & Smith Incorporated
Merrill Lynch World Headquarters
North Tower
World Financial Center
New York, New York 10281-1201
Dear Sirs:
Time Warner Capital I (the "Trust"), a statutory business trust
organized under the Business Trust Act (the "Delaware Act") of the State of
Delaware (Chapter 38, Title 12, of the Delaware Code, 12 Del. C. SECTION 3801 et
--
seq.), proposes to sell to the underwriters named in Schedule I hereto (the
- ----
"Underwriters"), for whom you (the "Representative") are acting as
representative, [ ] [____]% Preferred Trust Securities (the "Preferred
Securities") to be specified in Schedule II hereto. The Preferred Securities
and the Common Securities (as defined herein) are to be issued pursuant to the
terms of a declaration of trust, dated as of __________, 1995, as amended and
restated (the "Declaration"), among Time Warner Inc., a Delaware corporation
(the "Company" and, together with the Trust, the "Offerors"), as sponsor, the
trustees named therein (the "Time Warner Trustees") and the holders from time to
time of undivided beneficial interests in the assets of the Trust. The
Declaration is qualified as an indenture under the Trust Indenture Act of 1939,
as amended (the "Trust Indenture Act"). Pursuant to the Declaration, the number
of Time Warner Trustees will initially be five. Three of the Time Warner
Trustees (the "Regular Trustees") will be persons who are employees or officers
of, or affiliated with, the Company. The fourth trustee will be a financial
institution unaffiliated with the Company that will serve as property trustee
under the Declaration and as indenture trustee with respect to the Preferred
Securities for purposes of the Trust Indenture Act (the "Property Trustee").
The fifth Time Warner Trustee will be a financial institution or an affiliate
thereof which maintains a principal place of business or residence in the State
of Delaware (the "Delaware Trustee"). The First National Bank of Chicago will
act as the Property Trustee and its affiliate will act as the Delaware Trustee
until removed or replaced by the holder of the Common Securities. The Preferred
Securities will be guaranteed by the Company on a
<PAGE>
2
subordinated basis with respect to distributions and payments upon liquidation,
redemption or otherwise (the "Guarantee") pursuant to the Guarantee Agreement
dated as of __________, 1995 (the "Guarantee Agreement") between the Company and
The First National Bank of Chicago, as Trustee (the "Guarantee Trustee"). The
assets of the Trust will consist of, among other things, ___% Subordinated
Debentures due 2025 (the "Subordinated Debentures") of the Company which will be
issued under an indenture, dated as of [ ], 1995 (the "Indenture"), between the
Company and Chemical Bank, as Trustee (the "Indenture Trustee"). Under certain
circumstances, the Subordinated Debentures will be distributable to the holders
of undivided beneficial interests in the assets of the Trust. The Preferred
Securities, the related Guarantee and the Subordinated Debentures are referred
to herein as the "Securities".
The Offerors understand that the Underwriters propose to make a public
offering of the Preferred Securities as soon as the Underwriters deem advisable
after this Agreement has been executed and delivered, and the Declaration, the
Preferred Securities Guarantee Agreement and the Indenture have been qualified
under the Trust Indenture Act. The entire proceeds from the sale of the
Securities will be combined with the entire proceeds from the sale by the Trust
to the Company of its common securities (the "Common Securities"), and will be
used by the Trust to purchase an equivalent amount of the Subordinated
Debentures.
1. Representations and Warranties. The Offerors jointly and
------------------------------
severally represent and warrant to, and agree with, each Underwriter as set
forth below in this Section 1. Certain terms used in this Section 1 are defined
in paragraph (bb) hereof.
(a) Each of the Offerors meets the requirements for the use of
Form S-3 under the Securities Act of 1933 (the "Act") and has filed with
the Securities and Exchange Commission (the "Commission") a registration
statement (File No. 33-_____) on such Form, including a prospectus, for
registration under the Act of the Preferred Securities, the Guarantee and
the Subordinated Debentures.
(b) On the Effective Date, the Registration Statement did and on
the Closing Date, the Prospectus will, comply in all material respects with
the applicable requirements of the Act, the Securities Exchange Act of
1934, as amended (the "Exchange Act"), the Trust Indenture Act and the
respective rules thereunder; on the Effective Date, the Registration
Statement did not contain any untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary in
order to make the statements therein not misleading; on the Effective Date
and on the Closing Date, each of the Declaration, the Indenture and the
Guarantee Agreement did and will comply in all material respects with the
requirements of the Trust Indenture Act and the rules thereunder; and, on
the date hereof, the Prospectus does not, and on the Closing Date, the
Prospectus will not, include any untrue statement of a material fact or
omit to state a material fact
<PAGE>
3
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading; provided,
--------
however, that the Company makes no representations or warranties as to (i)
-------
those parts of the Registration Statement which shall constitute the
Statements of Eligibility and Qualification (Form T-1) under the Trust
Indenture Act of the Property Trustee, the Guarantee Trustee and the
Indenture Trustee or (ii) the information contained in or omitted from the
Registration Statement or the Prospectus in reliance upon and in conformity
with information furnished in writing to the Offerors by or on behalf of
any Underwriter through the Representative specifically for inclusion in
the Registration Statement or the Prospectus.
(c) The Company is validly existing as a corporation in good
standing under the laws of the State of Delaware, with full corporate power
and authority under such laws to own its properties and conduct its
business as described in the Prospectus, to enter into and perform its
obligations under this Agreement, the Declaration, the Indenture and the
Guarantee Agreement and to purchase, own and hold the Common Securities
issued by the Trust; and the Company is duly qualified to transact business
as a foreign corporation and is in good standing in each other jurisdiction
in which it owns or leases property of a nature, or transacts business of a
type, that would make such qualification necessary, except to the extent
that the failure to so qualify or be in good standing would not have a
material adverse effect on the Company and its subsidiaries, considered as
one enterprise.
(d) Each of the Company's significant subsidiaries, as such term
is defined in Rule 1-02(v) of Regulation S-X under the Act, is validly
existing and in good standing under the laws of the jurisdiction of its
incorporation or organization, with full power and authority under such
laws to own its properties and conduct its business as described in the
Prospectus and is duly qualified to transact business as a foreign
corporation or partnership and is in good standing in each other
jurisdiction in which it owns or leases property of a nature, or transacts
business of a type, that would make such qualification necessary, except to
the extent that the failure to so qualify or be in good standing would not
have a material adverse effect on the Company and its subsidiaries,
considered as one enterprise.
(e) The Company's authorized equity capitalization and pro forma
equity capitalization is as set forth in the Prospectus.
(f) The Trust has been duly created and is validly existing and
in good standing as a business trust under the Delaware Act with the power
and authority to own property and to conduct its business as described in
the Registration Statement and Prospectus and to enter into and perform its
obligations under this Agreement, the Preferred Securities, the Common
Securities and the Declaration and is not required to
<PAGE>
4
be authorized to do business in any other jurisdiction; the Trust is not a
party to or otherwise bound by any agreement other than those described in
the Prospectus; the Trust is not and will not be classified as an
association taxable as a corporation for United States federal income tax
purposes; and the Trust is and will be treated as a consolidated subsidiary
of the Company pursuant to generally accepted accounting principles.
(g) This Agreement has been duly authorized, executed and
delivered by each of the Offerors.
(h) The Preferred Securities have been duly authorized by the
Declaration and, when issued and delivered pursuant to this Agreement
against payment of the consideration set forth in Schedule II hereto, will
be validly issued and (subject to the terms of the Declaration) fully paid
and non-assessable preferred undivided beneficial interests in the assets
of the Trust, will be entitled to the benefits of the Declaration and will
conform to all statements relating thereto contained in the Prospectus; the
issuance of the Preferred Securities is not subject to preemptive or other
similar rights; holders of Preferred Securities will be entitled to the
same limitation of personal liability extended to stockholders of private
corporations for profit; the Offerors have filed a preliminary listing
application and all required supporting documents with respect to the
Preferred Securities with the New York Stock Exchange and the Offerors have
no reason to believe that the Preferred Securities will not be authorized
for listing, subject to official notice of issuance and evidence of
satisfactory distribution.
(i) The Declaration has been duly authorized by the Company and,
at the Closing Date, will have been duly executed and delivered by the
Company and the Time Warner Trustees, and assuming due authorization,
execution and delivery of the Declaration by the Property Trustee, the
Declaration will, at the Closing Date, be a valid and binding obligation of
the Company and the Time Warner Trustees, enforceable against the Company
and the Time Warner Trustees in accordance with its terms (subject to
applicable bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium or other laws affecting creditors' rights generally from time to
time in effect and subject as to enforceability to general principles of
equity, regardless of whether considered in a proceeding in equity or at
law); and the Declaration will conform to all statements relating thereto
contained in the Prospectus.
(j) The Guarantee Agreement has been duly authorized by the
Company and, when validly executed and delivered by the Company, will
constitute a valid and binding obligation of the Company, enforceable
against the Company in accordance with its terms and the Guarantee and the
Guarantee Agreement will conform to all
<PAGE>
5
statements relating thereto contained in the Prospectus; and the Guarantee
Agreement, at the Closing Date, will have been duly qualified under the
Trust Indenture Act.
(k) The Indenture has been duly authorized, executed and
delivered by the Company, has been duly qualified under the Trust Indenture
Act and constitutes a valid and binding agreement of the Company,
enforceable against the Company in accordance with its terms (subject to
applicable bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium or other laws affecting creditors' rights generally from time to
time in effect and subject as to enforceability to general principles of
equity, regardless of whether considered in a proceeding in equity or at
law); and the Indenture will conform to all statements relating thereto
contained in the Prospectus.
(l) The Subordinated Debentures have been duly authorized by the
Company and, at the Closing Date, will have been duly executed by the
Company and, when authenticated in the manner provided for in the Indenture
and delivered against payment therefor as described in the Prospectus, will
constitute valid and binding obligations of the Company, enforceable
against the Company in accordance with their terms, will be in the form
contemplated by, and entitled to the benefits of, the Indenture and will
conform to all statements relating thereto in the Prospectus.
(m) The Company's obligations under the Guarantee are subordinate
and junior in right of payment to all other liabilities of the Company and
pari passu with the most senior preferred stock issued from time to time,
if any, by the Company.
(n) The Subordinated Debentures are subordinated and junior in
right of payment to all present and future senior indebtedness (as defined
in the Indenture) of the Company and rank pari passu with the Company's
[other general unsecured creditors].
(o) There is no pending or threatened action, suit or proceeding
before any court or governmental agency, authority or body or any
arbitrator involving the Trust, the Company or any of its subsidiaries of a
character required to be disclosed in the Registration Statement which is
not adequately disclosed in the Prospectus and there is no franchise,
contract or other document of a character required to be described in the
Registration Statement or Prospectus, or to be filed as an exhibit, which
is not described or filed as required.
(p) No authorization, approval, consent, order or license of any
government, governmental instrumentality, agency or body or court (other
than under the Act and the securities or blue sky laws of various
jurisdictions) is required for the authorization, issuance, sale and
delivery of the Preferred Securities, the Subordinated Debentures or the
Guarantee, the consummation by the Trust and the Company of the
<PAGE>
6
transactions contemplated by this Agreement or the delivery of shares of
Hasbro Common Stock upon the exchange of the Preferred Securities.
(q) Neither the Company nor any of its subsidiaries is in
violation of its certificate of incorporation or by-laws; the Trust is not
in violation of the Declaration or its Certificate of Trust filed with the
State of Delaware on July __, 1995 (the "Certificate of Trust"); and the
execution, delivery and performance of this Agreement, the Declaration, the
Preferred Securities, the Indenture, the Subordinated Debentures, the
Guarantee Agreement and the Guarantee and the consummation of the
transactions contemplated herein and therein and compliance by the Offerors
with their respective obligations hereunder and thereunder have been duly
authorized by all necessary action (corporate or otherwise) on the part of
the Offerors and do not and will not result in any violation of the
certificate of incorporation or by-laws of the Company or the Declaration
or Certificate of Trust of the Trust and do not and will not conflict with,
or result in a breach of any of the terms or provisions of, or constitute a
default under, or result in the creation or imposition of any lien, charge
or encumbrance upon any property or assets of the Trust or the Company
under (i) that certain Amended and Restated Credit Agreement (the "TWE
Credit Agreement"), dated as of June 23, 1992, among Time Warner
Entertainment Company, L.P., a Delaware limited partnership ("TWE"),
Bankers Trust Company and Chemical Bank, as Managing Agents, the Agents and
the Co-Agents named therein and the Banks named therein, that certain
revolving credit facility (the "New Credit Agreement"), dated as of June
__, 1995, among TWE, the Time Warner Entertainment-Advance/Newhouse
Partnership, a New York general partnership, TWI Cable, a wholly owned
subsidiary of the Company and __________, as Managing Agent, the Agents and
the Co-Agents named therein and the Banks named therein or any indenture,
mortgage or loan agreement, or any other agreement or instrument, to which
the Trust or the Company is a party or by which the Trust or the Company
may be bound or to which any of the Trust's or the Company's properties may
be subject (except for such conflicts, breaches or defaults or liens,
charges or encumbrances that would not have a material adverse effect on
the condition (financial or otherwise), earnings, business prospects of the
Trust or of the Company and its subsidiaries, considered as one
enterprise), (ii) any existing applicable law, rule or regulation (except
for such conflicts, breaches, liens, charges or encumbrances that would not
have a material adverse effect on the condition (financial or otherwise),
earnings, business affairs or business prospects of the Trust or of the
Company and its subsidiaries, considered as one enterprise, and other than
the securities or blue sky laws of various jurisdictions), or (iii) any
judgment, order or decree of any government, governmental instrumentality
or court having jurisdiction over the Trust, the Company or any of their
respective properties.
<PAGE>
7
(r) The documents incorporated by reference in the Prospectus, as
of the dates they were filed with the Commission, complied as to form in
all material respects with the requirements of the Exchange Act.
(s) John A. LaBarca, Philip R. Lochner, Jr. and Thomas W.
McEnerney (the "Regular Trustees") of the Trust are employees of the
Company and have been duly authorized by the Company to execute and deliver
the Declaration; the Declaration has been duly executed and delivered by
the Regular Trustees and is a valid and binding obligation of each Regular
Trustee, enforceable against such Regular Trustee in accordance with its
terms.
(t) The Trust is not an "investment company" or an entity
"controlled" by an "investment company" as such terms are defined in the
Investment Company Act of 1940, as amended (the "1940 Act").
(u) Each of Ernst & Young LLP, Deloitte & Touche LLP, Paul
Scherer & Company LLP and Arthur Andersen LLP, which is reporting upon the
audited financial statements and schedules included or incorporated by
reference in the Registration Statement, are independent accountants in
accordance with the provisions of the Exchange Act and the rules and
regulations thereunder.
(v) The consolidated financial statements and the related notes
of the Company, TWE and the Trust included or incorporated by reference in
the Registration Statement present fairly in accordance with generally
accepted accounting principles the consolidated financial position of the
Company, TWE and the Trust, as the case may be, as of the dates indicated
and the consolidated results of operations and cash flows of the Company,
TWE and the Trust, as the case may be, for the periods specified. Such
financial statements have been prepared in conformity with generally
accepted accounting principles applied on a consistent basis throughout the
periods involved, except as otherwise noted therein and subject, in the
case of interim statements, to normal year-end audit adjustments. The
financial statement schedules included or incorporated by reference in the
Registration Statement present fairly in accordance with generally accepted
accounting principles the information required to be stated therein. Any
pro forma financial statements of the Company and other pro forma financial
information included or incorporated by reference in the Registration
Statement present fairly the information shown therein. Such pro forma
financial statements and other pro forma financial information, to the
extent required, have been prepared in accordance with applicable rules and
guidelines of the Commission, if any, with respect thereto, have been
properly compiled on the pro forma basis described therein, and, in the
opinion of the Company, the assumptions used in the preparation thereof are
reasonable and the adjustments used therein are appropriate to give effect
to the transactions or circumstances referred to therein.
<PAGE>
8
(w) The terms which follow, when used in this Agreement, shall
have the meanings indicated. The term the "Effective Date" shall mean each
date that the Registration Statement and any post-effective amendment or
amendments thereto became or become effective and each date after the date
hereof on which a document incorporated by reference in the Registration
Statement is filed. "Execution Time" shall mean the date and time that
this Agreement is executed and delivered by the parties hereto. The
registration statement referred to in paragraph (a) above (as amended, if
applicable) and the prospectus constituting a part thereof (including, in
each case, all documents incorporated or deemed to be incorporated by
reference therein pursuant to Item 12 of Form S-3 under the Act and the
information, if any, deemed to be part thereof pursuant to Rule 430A(b) of
the rules and regulations of the Commission under the 1933 Act (the
"Regulations")), as from time to time amended or supplemented pursuant to
the Act, the Exchange Act or otherwise, are herein after referred to as the
"Registration Statement" and the "Prospectus", respectively, except that if
any revised prospectus shall be provided to the Underwriters by the
Offerors for use in connection with the offering of the Preferred
Securities, which differs from the Prospectus on file at the Commission at
the time the Registration Statement becomes effective (whether or nor such
revised prospectus is required to be filed by the Offerors pursuant to Rule
424(b) of the Regulations), the term "Prospectus" shall refer to such
revised prospectus from and after the time it is first provided to the
Underwriters for such use. All references in this Agreement to financial
statements and schedules and other information that is "contained",
"included" or "stated" in the Registration Statement or the Prospectus (and
all other references of like import) shall be deemed to mean and include
all such financial statements and schedules and other information that are
or are deemed to be incorporated by reference in the Registration Statement
or the Prospectus, as the case may be; and all references in this Agreement
to amendments or supplements to the Registration Statement or the
Prospectus shall be deemed to mean and include the filing of any document
under the Act that is or is deemed to be incorporated by reference in the
Registration Statement or the Prospectus, as the case may be.
2. Purchase and Sale. (a) Subject to the terms and conditions and
-----------------
in reliance upon the representations and warranties herein set forth, the Trust
agrees to sell to each Underwriter, and each Underwriter agrees, severally and
not jointly, to purchase from the Trust, at the purchase price set forth in
Schedule II hereto, the Preferred Securities set forth opposite such
Underwriter's name in Schedule I hereto.
(b) The initial public offering price of the Preferred Securities, the
purchase price to be paid by the Underwriters for the Preferred Securities and
the other information called for in Schedule II hereto have each been determined
and set forth in Schedule II hereto.
<PAGE>
9
3. Delivery and Payment. (a) The Company will deliver the Preferred
--------------------
Securities to you for the respective accounts of the several Underwriters at the
office of Shearman & Sterling, 599 Lexington Avenue, New York, New York 10022,
against payment of the purchase price by certified or official bank check or
checks in funds available the next succeeding business day drawn to the order of
the Trust on the third business day after the date hereof, or at such other time
not later than five full business days thereafter that you and the Company
determine (such time being herein referred to as the "Closing Date").
Certificates for the Preferred Securities shall be registered in such names and
in such denominations as the Representative may request not less than [two] full
business days in advance of the Closing Date.
The Company agrees to have the Preferred Securities available for
inspection, checking and packaging by the Representative in New York, New York,
not later than 1:00 P.M. on the business day prior to the Closing Date.
4. Agreements. The Offerors agree with the several Underwriters that:
----------
(a) The Company will use its best efforts to cause the
Registration Statement, if not effective at the Execution Time, and any
amendment thereto, to become effective. Prior to the termination of the
offering of the Securities, the Offerors will not file any amendment to the
Registration Statement or supplement to the Prospectus unless the Offerors
have furnished you a copy for your review prior to filing and will not file
any such proposed amendment or supplement to which you reasonably object on
a timely basis. Subject to the foregoing sentence, the Offerors will cause
the Prospectus, properly completed, to be filed with the Commission
pursuant to the applicable paragraph of Rule 424(b) within the time period
prescribed and will provide evidence satisfactory to the Representative of
such timely filing. The Offerors will promptly advise the Representative
(i) when the Registration Statement, if not effective at the Execution
Time, and any amendment thereto, shall have become effective, (ii) when the
Prospectus shall have been filed with the Commission pursuant to Rule
424(b), (iii) when, prior to termination of the offering of the Preferred
Securities, any amendment to the Registration Statement shall have been
filed or become effective, (iv) of any request by the Commission for any
amendment or supplement to the Registration Statement or the Prospectus or
for any additional information relating to the offering of the Preferred
Securities, (v) of the issuance by the Commission of any stop order
suspending the effectiveness of the Registration Statement or the
institution or threatening of any proceeding for that purpose and (vi) of
the receipt by the Offerors of any notification with respect to the
suspension of the qualification of the Preferred Securities for sale in any
jurisdiction or the initiation or threatening of any proceeding for such
purpose. The Offerors will use their efforts to prevent the issuance of
any such stop order and, if issued, to obtain as soon as possible the
withdrawal thereof.
<PAGE>
10
(b) If, at any time when a prospectus relating to the Preferred
Securities is required to be delivered under the Act, any event occurs as a
result of which the Prospectus would include any untrue statement of a
material fact or omit to state any material fact necessary to make the
statements therein in the light of the circumstances under which they were
made not misleading, or if it shall be necessary, in the opinion of counsel
for you or counsel for the Offerors, to amend or supplement the
Registration Statement or the Prospectus to comply with the Act or the
Exchange Act or the respective rules thereunder, the Offerors promptly will
prepare and file with the Commission, subject to the second sentence of
paragraph (a) of this Section 4, an amendment or supplement which will
correct such statement or omission or effect such compliance.
(c) As soon as practicable, the Trust will make generally
available to its security holders and to the Representative an earnings
statement or statements of the Company and its subsidiaries which will
satisfy the provisions of Section 11(a) of the Act and Rule 158 under the
Act.
(d) The Offerors will use their best efforts to cause the
Preferred Securities to be duly authorized for listing on the New York
Stock Exchange and to be registered under the Exchange Act.
(e) For a period of three years after the Closing Date, the
Company will furnish to you and, upon request, to each Underwriter, copies
of all annual reports, quarterly reports and current reports filed with the
Commission on Forms 10-K, 10-Q and 8-K, or such other similar forms as may
be designated by the Commission, and such other documents, reports and
information as shall be furnished by the Company to its stockholders
generally.
(f) The proceeds of the offering of the Preferred Securities will
be applied as set forth in the Prospectus.
(g) The Offerors will furnish to the Representative and counsel
for the Underwriters, without charge, copies of the Registration Statement
(including exhibits thereto) and, so long as delivery of a prospectus by an
Underwriter or dealer may be required by the Act, as many copies of any
preliminary prospectus and the Prospectus as the Representative may
reasonably request.
(h) The Company will pay and bear all costs and expenses incident
to the performance of each Offeror's obligations under this Agreement,
including (i) the preparation, printing and filing of the Registration
Statement (including financial statements and exhibits), as originally
filed and as amended, any preliminary prospectus and the Prospectus and any
amendments or supplements thereto, and the
<PAGE>
11
cost of furnishing copies thereof to the Underwriters, (ii) the
preparation, printing and distribution of this Agreement, the Declaration,
the Indenture, the Guarantee Agreement, the Preferred Securities, the Blue
Sky Survey and the Legal Investment Survey, (iii) the delivery of the
Preferred Securities to the Underwriters, (iv) the fees and disbursements
of the Trust's and the Company's counsel and accountants required hereby to
provide comfort letters, (v) the qualification of the Preferred Securities
and the Subordinated Debentures under the applicable securities laws in
accordance with Section 4(i) and any filing for review of the offering with
the National Association of Securities Dealers, Inc., including filing fees
and fees and disbursements of counsel for the Underwriters in connection
therewith and in connection with the Blue Sky Survey and the Legal
Investment Survey, (vi) any fees charged by rating agencies for rating the
Preferred Securities and the Subordinated Debentures, (vii) the fees and
expenses of the Indenture Trustee, including the fees and disbursements of
counsel for the Indenture Trustee, in connection with the Indenture and the
Subordinated Debentures, (viii) the fees and expenses of the Property
Trustee, including the fees and disbursements of counsel for the Property
Trustee and Delaware Trustee in connection with the Declaration and the
Certificate of Trust, (ix) any expenses and listing fees in connection with
the listing of the Preferred Securities and, if applicable, the
Subordinated Debentures on the New York Stock Exchange, (x) the cost and
charges of any transfer agent or registrar and (xi) the costs of qualifying
the Preferred Securities with The Depository Trust Company.
(i) The Offerors will arrange for the qualification of the
Preferred Securities and the Subordinated Debentures for distribution,
offering and sale under the laws of such jurisdictions as the
Representative may designate, will maintain such qualifications in effect
so long as required for the distribution of the Preferred Securities and
the Subordinated Debentures and will arrange for the determination of the
legality of the Preferred Securities and the Subordinated Debentures for
purchase by institutional investors; provided, however, that the Trust or
-------- -------
the Company, as the case may be, shall not be required to (i) qualify as a
foreign corporation or as a dealer in securities in any jurisdiction where
it would not otherwise be required to qualify but for this Section 4(i),
(ii) file any general consent to service of process or (iii) subject itself
to taxation in any such jurisdiction if it is not so subject.
(j) Until the business day following the Closing Date, neither of
the Offerors will, without the consent of Merrill Lynch & Co., offer, sell
or contract to sell, or announce the offering of, any debt securities
designed or intended to be traded or distributed in the public or private
securities markets; provided, however, that the foregoing shall not
-------- -------
prohibit (i) the Company or TWE from issuing long-term debt as all or part
of the consideration in any merger or acquisition or in connection with the
settlement of any litigation, (ii) the Company or TWE from filing with the
Commission a "shelf" registration statement for the offering of securities
under
<PAGE>
12
Rule 415 of the Act (or any similar rule that may be adopted by the
Commission) or amending any existing shelf registration statement provided
that (subject to clause (iii) below) such securities are not issued until
the business day following the Closing Date or such other date as may be
specified in Schedule I or (iii) the Company from issuing debt securities
as part of any redemption or repurchase of the Company's outstanding
Redeemable Reset Notes due August 15, 2005.
(k) Each of the Offerors confirms as of the date hereof that it
is in compliance with all provisions of Section 1 of Laws of Florida,
Chapter 92-198, An Act Relating to Disclosure of Doing Business with Cuba,
---------------------------------------------------------
and each of the Offerors further agrees that if the information reported in
the Prospectus concerning its business with Cuba or with any person or
affiliate located in Cuba changes in any material way, such Offeror will
provide the Florida Department of Banking and Finance (the "Department")
notice of such business or change, as appropriate, in a form acceptable to
the Department.
5. Conditions to the Obligations of the Underwriters. The
-------------------------------------------------
obligations of the Underwriters to purchase the Securities shall be subject to
the accuracy in all material respects of the representations and warranties on
the part of the Offerors contained herein as of the Execution Time and the
Closing Date, to the accuracy in all material respects of the statements of the
Trust and the Company made in any certificates pursuant to the provisions
hereof, to the performance by the Trust and the Company of their obligations
hereunder, to the due execution and delivery of the Declaration, the Indenture
and the Guarantee Agreements, to the absence of any event or condition which
would give you the right to terminate this Agreement and to the following
additional conditions:
(a) The Registration Statement shall have become effective not
later than 5:30 P.M. on the date hereof, or with your consent, at a later
time and date, not later, however, than 5:30 P.M. on the first business day
following the date hereof; and at the Closing Date no stop order suspending
the effectiveness of the Registration Statement shall have been issued
under the Act or proceedings therefor initiated or threatened by the
Commission. The Prospectus shall have been filed with the Commission
pursuant to Rule 424(b) within the applicable time period prescribed for
such filing by Rule 424(b).
(b) At the Closing Date, the Offerors shall have furnished to you
the opinion of Peter R. Haje, General Counsel to the Offerors, dated the
Closing Date, substantially in the form of Exhibit A hereto.
(c) At the Closing Date, the Offerors shall have furnished to you
the opinion of Cravath, Swaine & Moore, counsel to the Offerors, dated the
Closing Date, substantially in the form of Exhibit B hereto.
<PAGE>
13
(d) At the Closing Date, the Offerors shall have furnished to you
the opinion of Richards, Layton & Finger, special counsel to the Offerors,
dated the Closing Date, substantially in the form of Exhibit C hereto.
(e) At the Closing Date, you shall have received from The Law
Department, The First National Bank of Chicago, counsel of The First
National Bank of Chicago, as Property Trustee under the Declaration and
Guarantee Trustee under the Guarantee Agreements, dated the Closing Date,
substantially in the form of Exhibit D hereto.
(f) The Representative shall have received from Shearman &
Sterling, counsel for the Underwriters, such opinion or opinions, dated the
Closing Date, with respect to the legal existence of the Trust, the
Preferred Securities, the Indenture, the Preferred Securities Guarantee
Agreement, this Agreement, the Registration Statement, the Prospectus and
other related matters as you may reasonably require, and the Offerors shall
have furnished to such counsel such documents as they request for the
purpose of enabling them to pass upon such matters.
(g) The Representative shall have received from Davis, Polk &
Wardwell, counsel for the Underwriters, such opinion or opinions, dated the
Closing Date, with respect to the 1940 Act and other related matters as you
may reasonably require, and the Offerors shall have furnished to such
counsel such documents as they request for the purpose of enabling them to
pass upon such matters.
(h) Each of the Trust and the Company shall have furnished to you
a certificate of the Trust and the Company, respectively, signed by any two
of the Time Warner Trustees for the Trust and by any two officers who are
an Executive or Senior Vice President of the Company for the Company,
respectively, dated the Closing Date, to the effect that the signers of
such certificates have carefully examined the Registration Statement, the
Prospectus and this Agreement and that:
(i) the representations and warranties of the Trust and the Company,
as the case may be, in this Agreement are true and correct in all material
respects on and as of the Closing Date with the same effect as if made on the
Closing Date and the Trust and the Company, as the case may be, has complied
with all the agreements and satisfied all the conditions on its part to be
performed or satisfied at or prior to the Closing Date;
(ii) no stop order suspending the effectiveness of the Registration
Statement has been issued and no proceedings for that purpose have been
instituted or, to the Trust's or the Company's, as the case may be, knowledge,
threatened; and
<PAGE>
14
(iii) since the date of the most recent financial statements included
in the Prospectus, there has been no material adverse change in the condition
(financial or otherwise), earnings, or business prospects of the Company and its
subsidiaries, whether or not arising from transactions in the ordinary course of
business, except as set forth in or contemplated in the Prospectus.
(i) At the Closing Date and at the Execution Time, Ernst & Young
shall have furnished to you a letter or letters, dated as of the Closing
Date and the Execution Time, respectively, in form and substance
satisfactory to you, confirming that they are independent auditors with
respect to the Company and TWE within the meaning of the Act and the
Exchange Act and the respective applicable published rules and regulations
thereunder and stating in effect that:
(i) in their opinion the audited financial statements and financial
statement schedules of the Company and TWE included or incorporated in the
Registration Statement and the Prospectus comply in form in all material
respects with the applicable accounting requirements of the Act and the Exchange
Act and the related published rules and regulations;
(ii) on the basis of a reading of the latest unaudited financial
statements (including the notes thereto) made available by the Company and TWE
and their respective consolidated subsidiaries; carrying out certain specified
procedures (but not an examination in accordance with generally accepted
auditing standards) which would not necessarily reveal matters of significance
with respect to the comments set forth in such letter; a reading of the minutes
of the meetings of the stockholders, directors and executive, finance and audit
committees of the Company and TWE and their respective consolidated
subsidiaries; and inquiries of certain officials of the Company and TWE who have
responsibility for financial and accounting matters of the Company and TWE and
their respective consolidated subsidiaries as to transactions and events
subsequent to the date of the most recent audited financial statements in or
incorporated in the Prospectus, and such other inquiries and procedures as may
be specified in such letter, nothing came to their attention which caused them
to believe that:
(A) any of such unaudited financial statements included or
incorporated in the Registration Statement and the Prospectus do not comply in
form in all material respects with applicable accounting requirements of the Act
and the Exchange Act and with the published rules and regulations of the
Commission with respect to financial statements included or incorporated in
quarterly reports on Form 10-Q under the Exchange Act; or said unaudited
financial statements are not
<PAGE>
15
in conformity with generally accepted accounting principles applied on a basis
substantially consistent with that of the audited financial statements included
or incorporated in the Registration Statement and the Prospectus; or
(B) with respect to the period subsequent to the date of the most
recent unaudited financial statements in or incorporated in the Registration
Statement and the Prospectus, there were any increases, at a specified date not
more than five business days prior to the date of the letter, in the long-term
debt of the Company, TWE and the Entertainment Group and their respective
consolidated subsidiaries or any decreases in stockholders' equity or the
consolidated capital stock of the Company, TWE and the Entertainment Group as
compared with the amounts shown on the most recent consolidated balance sheet
included or incorporated in the Registration Statement and the Prospectus, or
for the period from the date of the most recent unaudited financial statements
included or incorporated in the Registration Statement and the Prospectus for
such entities to such specified date there were any decreases, as compared with
the corresponding period in the preceding year, in revenues, income before
income taxes (or any increase in the loss before income taxes) or net income (or
any increase in net loss), except in all instances for decreases or increases
disclosed in the Prospectus;
(iii) they are unable to and do not express any opinion on the pro
forma adjustments to the financial statements included or incorporated by
reference in the Registration Statement and the Prospectus or on the pro forma
adjustments applied to the historical amounts included or incorporated by
reference in the Registration Statement and the Prospectus; however, for
purposes of such letter they have:
(A) read the pro forma adjustments to such financial statements;
(B) made inquiries of certain officials of the Company who have
responsibility for financial and accounting matters about the basis for their
determination of the pro forma adjustments to such financial statements and
whether such pro forma adjustments comply as to form in all material respects
with the applicable accounting requirements of Rule 11-02 of Regulation S-X; and
<PAGE>
16
(C) proved the arithmetic accuracy of the application of the pro forma
adjustments to the historical amounts included or incorporated by reference in
the Registration Statement and the Prospectus; and
on the basis of such procedures, and such other inquiries and
procedures as may be specified in such letter, nothing came to their attention
that caused them to believe that the pro forma adjustments to the financial
statements included or incorporated by reference in the Registration Statement
and the Prospectus do not comply as to form in all material respects with the
applicable requirements of Rule 11-02 of Regulation S-X and that such pro forma
adjustments have not been properly applied to the historical amounts in the
compilation of such financial statements; and
(iv) they have performed certain other specified procedures as a
result of which they determined that certain information of an accounting,
financial or statistical nature (which is limited to accounting, financial or
statistical information derived from the general accounting records of the
Company and its subsidiaries) set forth in the Registration Statement and the
Prospectus and in Exhibit 12 to the Registration Statement agrees with the
accounting records of the Company and its subsidiaries, excluding any questions
of legal interpretation.
(j) At the Closing Date and at the Execution Time, each of (i)
Paul Scherer & Company LLP, (ii) Deloitte & Touche LLP and (iii) Arthur
Andersen LLP shall have furnished to you a letter or letters, dated
respectively as of the Closing Date and the Execution Time, in form and
substance satisfactory to you, confirming that they are independent
auditors with respect to (i) Vision Cable Division of Vision Cable
Communications, Inc. and Subsidiaries and Newhouse Broadcasting Cable
Division of Newhouse Broadcasting Corporation and Subsidiaries, (ii) KBLCOM
Incorporated, and (iii) Cablevision Industries Limited Partnership and
Combined Entities and Cablevision Industries Corporation and Subsidiaries,
respectively, within the meaning of the Act and the Exchange Act and the
respective applicable published rules and regulations thereunder and to the
same effect as the letter or letters of Ernst & Young LLP as described in
Section 5(j)(i) and 5(j)(ii)(l) hereto.
(k) Subsequent to the Execution Time or, if earlier, the dates as
of which information is given in the Registration Statement (exclusive of
any amendment thereof) and the Prospectus, there shall not have been (i)
any decrease or increase specified in the letter or letters referred to in
paragraph (h) of this Section 5 or (ii) any change, or any development
involving a prospective change, in or affecting the business (including the
results of operations or management) or properties of the Trust
<PAGE>
17
or the Company and its subsidiaries or of Hasbro and its subsidiaries the
effect of which, in any case referred to in clause (i) or (ii) above, is,
in the reasonable judgment of the Representative, so material and adverse
as to make it impractical or inadvisable to proceed with the offering or
delivery of the Securities as contemplated by the Registration Statement
(exclusive of any amendment thereof) and the Prospectus.
(l) Subsequent to the Execution Time, there shall not have been
any downgrade in the credit ratings of the Company's debt securities by
Moody's Investor Services, Inc. or Standard & Poor's Ratings Group, nor
shall the Company have been placed under special surveillance, with
negative implications, by Moody's Investor Service, Inc.
(m) At the Closing Date, the Preferred Securities shall have been
approved for listing on the New York Stock Exchange upon notice of
issuance.
(n) Prior to the Closing Date, the Offerors shall have furnished
to the Representative such further information, certificates and documents
as the Representative may reasonably request.
If any of the conditions specified in this Section 5 shall not have
been fulfilled in all material respects when and as provided in this Agreement,
or if any of the opinions and certificates mentioned above or elsewhere in this
Agreement shall not be in all material respects reasonably satisfactory in form
and substance to the Representative and counsel for the Underwriters, this
Agreement and all obligations of the Underwriters hereunder may be canceled at,
or at any time prior to, the Closing Date by you and such cancellation shall be
without liability of any party to any other party, except to the extent provided
in Sections 4 and 6. Notice of such cancellation shall be given to the Offerors
in writing or by telephone or telegraph confirmed in writing.
6. Reimbursement of Underwriter's Expenses. If the sale of the
---------------------------------------
Securities provided for herein is not consummated because any condition to
the obligations of the Underwriters set forth in Section 5 hereof is not
satisfied or because of any refusal, inability or failure on the part of
the Trust or the Company to perform any agreement herein or comply with any
provision hereof other than by reason of a default by any of the
Underwriters, the Company will reimburse the Underwriters upon demand for
all out-of-pocket expenses (including reasonable fees and disbursements of
counsel) that shall have been incurred by them in connection with the
proposed purchase and sale of the Securities.
7. Indemnification and Contribution. (a) The Offerors agree to
--------------------------------
jointly and severally indemnify and hold harmless each Underwriter, the
directors, officers, employees and agents of each Underwriter and each
person who controls any Underwriter
<PAGE>
18
within the meaning of either the Act or the Exchange Act against any and
all losses, claims, damages or liabilities, joint or several, to which they
or any of them may become subject under the Act, the Exchange Act or other
Federal or state statutory law or regulation, at common law or otherwise,
insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon (i) (A) any failure to
register the Hasbro Common Stock under the Act in connection with the
initial offering of the Preferred Securities or the exchange of Preferred
Securities for Hasbro Common Stock pursuant to the terms of the Preferred
Securities, (B) any untrue statement or alleged untrue statement of a
material fact contained in the reports and other documents filed by Hasbro
under the Exchange Act or the omission or alleged omission to state therein
a material fact required to be stated therein or necessary to make the
statements therein not misleading or (C) any untrue statement or omission
or alleged untrue statement or alleged omission made or alleged to have
been made by or on behalf of Hasbro regarding Hasbro or the market value of
the Hasbro Common Stock and which statements or omissions, in the case of
the foregoing clauses (B) or (C), adversely affect or allegedly adversely
affect a holder of Securities, (ii) any untrue statement or alleged untrue
statement of a material fact contained in the registration statement for
the registration of the Securities as originally filed or in any amendment
thereof, or in any preliminary prospectus or the Prospectus, or in any
amendment thereof or supplement thereto or (iii) the omission or alleged
omission to state in the documents referred to in clause (ii) above a
material fact required to be stated therein or necessary to make the
statements therein not misleading, and in each case agrees to reimburse
each such indemnified party, as incurred, for any legal or other expenses
reasonably incurred by them in connection with investigating or defending
any such loss, claim, damage, liability or action; provided, however, that
-------- -------
the Trust and the Company will not be liable in any such case to the extent
that any such loss, claim, damage or liability arises out of or is based
upon (i) any such untrue statement or alleged untrue statement or omission
or alleged omission made in the documents referred to in clause (ii) above
in reliance upon and in conformity with written information furnished to
the Trust and the Company by or on behalf of the Underwriters specifically
for inclusion therein or (ii) those parts of the Registration Statement
which shall constitute the Statement of Eligibility (Form T-1) under the
Trust Indenture Act of the Property Trustee, the Guarantee Trustee and the
Indenture Trustee. This indemnity agreement will be in addition to any
liability which the Trust or the Company may otherwise have.
(b) The Company agrees to indemnify the Trust against all loss,
liability, claim, damage and expense whatsoever, as due from the Trust
under 7(a) hereunder.
(c) Each Underwriter agrees to indemnify and hold harmless the
Offerors, their directors, trustees, each of their officers who signs the
Registration Statement, and each person who controls the Offerors within
the meaning of either the Act or the Exchange Act, to the same extent as
the foregoing indemnity from the Offerors to each Underwriter, but only
with reference to written information relating to such Underwriter
furnished to the Offerors by
<PAGE>
19
or on behalf of such Underwriter specifically for inclusion in the
documents referred to in clause (ii) in 7(a). This indemnity agreement will
be in addition to any liability which any Underwriter may otherwise have.
The Offerors acknowledge that the statements set forth in the last
paragraph of the cover page and the first, third and ninth paragraphs under
the heading "Underwriting" constitute the only information furnished in
writing by or on behalf of the several Underwriters for inclusion in the
documents referred to in the foregoing indemnity, and you, as the
Representative, confirm that such statements are correct.
(d) Promptly after receipt by an indemnified party under this
Section 7 of notice of the commencement of any action, such indemnified
party will, if a claim in respect thereof is to be made against the
indemnifying party under this Section 7, notify the indemnifying party in
writing of the commencement thereof; but the failure so to notify the
indemnifying party (i) will not relieve it from liability under paragraph
(a) or (b) above unless and to the extent it did not otherwise learn of
such action and such failure results in the forfeiture by the indemnifying
party of substantial rights and defenses and (ii) will not, in any event,
relieve the indemnifying party from any obligations to any indemnified
party other than the indemnification obligation provided in paragraph (a)
or (b) above. The indemnifying party shall be entitled to appoint counsel
of the indemnifying party's choice at the indemnifying party's expense to
represent the indemnified party in any action for which indemnification is
sought (in which case the indemnifying party shall not thereafter be
responsible for the fees and expenses of any separate counsel retained by
the indemnified party or parties except as set forth below); provided,
--------
however, that such counsel shall be reasonably satisfactory to the
-------
indemnified party. Notwithstanding the indemnifying party's election to
appoint counsel to represent the indemnified party in an action, the
indemnified party shall have the right to employ separate counsel
(including local counsel), and the indemnifying party shall bear the
reasonable fees, costs and expenses of such separate counsel if (i) the use
of counsel chosen by the indemnifying party to represent the indemnified
party would present such counsel with a conflict of interest, (ii) the
actual or potential defendants in, or targets of, any such action include
both the indemnified party and the indemnifying party and the indemnified
party shall have reasonably concluded that there may be legal defenses
available to it and/or other indemnified parties which are different from
or additional to those available to the indemnifying party (it being
understood, however, that in connection with such action, the indemnifying
party shall not be liable for the expenses of more than one separate
counsel (in addition to local counsel) in any one action or separate but
substantially similar actions in the same jurisdiction arising out of the
same general allegations or circumstances, representing the indemnified
parties who are parties to such action or actions), (iii) the indemnifying
party shall not have employed counsel reasonably satisfactory to the
indemnified party to represent the indemnified party within a reasonable
time after notice of the institution of such action or (iv) the
indemnifying party shall authorize the indemnified party to employ separate
counsel at the expense of the indemnifying party. An indemnifying party
will not, without the prior written consent of the indemnified parties,
settle or compromise or consent to the entry of any judgment with respect
to any pending or
<PAGE>
20
threatened claim, action, suit or proceeding in respect of which
indemnification or contribution may be sought hereunder (whether or not the
indemnified parties are actual or potential parties to such claim or
action) unless such settlement, compromise or consent includes an
unconditional release of each indemnified party from all liability arising
out of such claim, action, suit or proceeding.
(e) In the event that the indemnity provided in paragraph (a),
(b) or (c) of this Section 7 is unavailable to or insufficient to hold
harmless an indemnified party for any reason, the Offerors and the
Underwriters agree to contribute to the aggregate losses, claims, damages
and liabilities (including legal or other expenses reasonably incurred in
connection with investigating or defending same) (collectively "Losses") to
which the Offerors and one or more of the Underwriters may be subject in
such proportion as is appropriate to reflect the relative benefits received
by the Offerors and by the Underwriters from the offering of the
Securities; provided, however, that in no case shall any Underwriter
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(except as may be provided in any agreement among underwriters relating to
the offering of the Securities) be responsible for any amount in excess of
the underwriting discount or commission applicable to the Securities
purchased by such Underwriter hereunder. If the allocation provided by the
immediately preceding sentence is unavailable for any reason, the Offerors
and the Underwriters shall contribute in such proportion as is appropriate
to reflect not only such relative benefits but also the relative fault of
the Offerors, on the one hand, and of the Underwriters, on the other hand,
in connection with the statements or omissions which resulted in such
Losses as well as any other relevant equitable considerations. Benefits
received by the Offerors shall be deemed to be equal to the total net
proceeds from the offering (before deducting expenses), and benefits
received by the Underwriters shall be deemed to be equal to the total
underwriting discounts and commissions, in each case as set forth on the
cover page of the Prospectus. Relative fault shall be determined by
reference to whether any alleged untrue statement or omission relates to
information provided by or concerning the Trust, the Company or Hasbro on
the one hand or provided by the Underwriters on the other. The Offerors
and the Underwriters agree that it would not be just and equitable if
contribution were determined by pro rata allocation or any other method of
allocation which does not take account of the equitable considerations
referred to above. Notwithstanding the provisions of this paragraph (e),
no person guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation. For purposes of
this Section 7, each person who controls an Underwriter within the meaning
of either the Act or the Exchange Act and each director, officer, employee
and agent of an Underwriter shall have the same rights to contribution as
such Underwriter, and each person who controls the Trust or the Company
within the meaning of either the Act or the Exchange Act, each trustee of
the Trust or officer of the Company who shall have signed the Registration
Statement and each trustee of the Trust or director of the Company shall
have the same rights to contribution as the Offerors, subject in each case
to the applicable terms and conditions of this paragraph (e).
<PAGE>
21
8. Default by an Underwriter. If any one or more Underwriters
-------------------------
shall fail to purchase and pay for any one of the Securities agreed to be
purchased by such Underwriter or Underwriters hereunder and such failure to
purchase shall constitute a default in the performance of its or their
obligations under this Agreement, the remaining Underwriters shall be
obligated severally to take up and pay for (in the respective proportions
which the amount of Securities set forth opposite their names in Schedule I
hereto bears to the aggregate amount of Securities set forth opposite the
names of all the remaining Underwriters) the Securities which the
defaulting Underwriter or Underwriters agreed but failed to purchase;
provided, however, that in the event that the aggregate amount of
-------- -------
Securities which the defaulting Underwriter or Underwriters agreed but
failed to purchase shall exceed 10% of the aggregate amount of Securities
set forth in Schedule I hereto, the remaining Underwriters shall have the
right to purchase all, but shall not be under any obligation to purchase
any, of the Securities, and if such nondefaulting Underwriters do not
purchase all the Securities, this Agreement will terminate without
liability to any nondefaulting Underwriter or the Company. In the event of
a default by any Underwriter as set forth in this Section 8, the Closing
Date shall be postponed for such period, not exceeding seven days, as the
Representative shall determine in order that the required changes in the
Registration Statement and the Prospectus or in any other documents or
arrangements may be effected. Nothing contained in this Agreement shall
relieve any defaulting Underwriter of its liability, if any, to the Trust
and the Company and any nondefaulting Underwriter for damages occasioned by
its default hereunder.
9. Termination. This Agreement shall be subject to termination
-----------
in the absolute discretion of the Representative, by notice given to the
Offerors prior to delivery of and payment for the Securities, if prior to
such time (i) trading in the Company's Common Stock shall have been
suspended by the Commission or the New York Stock Exchange or the Pacific
Stock Exchange or trading in Hasbro Common Stock shall have been suspended
by the Commission or the American Stock Exchange or trading in securities
generally on either of such Exchanges shall have been suspended or limited
or minimum or maximum prices shall have been established on either of such
Exchanges, or maximum ranges for prices for securities have been required,
by such Exchanges or by order of the Commission or any other governmental
authority, (ii) a banking moratorium shall have been declared either by
Federal or New York State authorities or (iii) there shall have occurred
any new outbreak or escalation of hostilities, declaration by the United
States of a national emergency or war or other calamity or crisis the
effect of which on financial markets of the United States is such as to
make it, in the judgment of the Representative, impracticable or
inadvisable to proceed with the offering or delivery of the Securities as
contemplated by the Prospectus. If this Agreement is terminated pursuant
to this Section, such termination shall be without liability of any party
to any other party, except to the extent provided in Sections 4 and 6.
10. Representations and Indemnities to Survive. The respective
------------------------------------------
agreements, representations, warranties, indemnities and other statements
of the Trust or the Time Warner Trustees, the Company or its officers and
of the Underwriters set forth in or
<PAGE>
22
made pursuant to this Agreement will remain in full force and effect,
regardless of any investigation made by or on behalf of any Underwriter,
the Trust or the Time Warner Trustees or the Company or any of the
officers, directors, trustees or controlling persons referred to in Section
7 hereof, and will survive delivery of and payment for the Securities. The
provisions of Sections 6 and 7 hereof shall survive the termination or
cancellation of this Agreement.
11. Notices. All communications hereunder will be in writing and
-------
effective only on receipt, and, if sent to the Representative, will be
mailed, delivered or telegraphed and confirmed to it, at the address set
forth on page 1 hereof, or, if sent to the Offerors, will be mailed,
delivered or telegraphed and confirmed to the Company, or the Trust in care
of the Company, at 75 Rockefeller Plaza, New York, New York 10019,
attention of General Counsel.
12. Successors. This Agreement will inure to the benefit of and
----------
be binding upon the parties hereto and their respective successors and the
officers, directors, trustees and controlling persons referred to in
Section 7 hereof, and no other person will have any right or obligation
hereunder.
13. Applicable Law. This Agreement will be governed by and
--------------
construed in accordance with the laws of the State of New York.
14. Business Day. For purposes of this Agreement, "business day"
------------
means any day on which the New York Stock Exchange is open for trading.
15. Counterparts. This Agreement may be signed in any number of
------------
counterparts, each of which shall be an original, with the same effect as
if the signatures thereto and hereto were upon the same instrument.
<PAGE>
23
If the foregoing is in accordance with your understanding of our
agreement, please sign and return to us the enclosed duplicate hereof, whereupon
this letter and your acceptance shall represent a binding agreement among the
Trust, the Company and the several Underwriters.
Very truly yours,
TIME WARNER FINANCING TRUST
By: Time Warner Inc., as Sponsor
By:
---------------------------------
Name: Peter J. Haje
Title: Executive Vice President
TIME WARNER INC.
By:
---------------------------------
Name: Peter J. Haje
Title: Executive Vice President
The foregoing Agreement is
hereby confirmed and accepted.
MERRILL LYNCH & CO.
MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED
MORGAN STANLEY & CO. INCORPORATED
BEAR STEARNS & CO. INC.
By:
---------------------------------
Name:
Title:
For themselves and the other
several Underwriters, if any,
named in Schedule I to
the foregoing Agreement.
<PAGE>
SCHEDULE I
----------
Number of Preferred
Securities to Be
Underwriter Purchased
- ----------- -------------------
Merrill Lynch, Pierce, Fenner & Smith Incorporated
Morgan Stanley & Co. Incorporated
Bear Stearns & Co. Inc.
<PAGE>
SCHEDULE II
TIME WARNER CAPITAL I and TIME WARNER INC.
Underwriting Agreement: dated August __, 1995
Registration Statement: No. 33-
Representative: Merrill Lynch & Co.
Merrill Lynch, Pierce, Fenner & Smith Incorporated
Morgan Stanley & Co. Incorporated
Bear Stearns & Co. Inc.
Title, Purchase Price and Description of Securities:
[ ] [ ]% Preferred Trust Securities:
----------------------------------------------
Title: Preferred Trust Securities
Securities issued:
Distribution rate: ____% per annum
Distribution dates:
Mandatory redemption date: , 2025
Purchase price (include accrued
interest or amortization, if
any): _____%
Closing Date, Time and Location: August __, 1995 at 10 A.M.
at the offices of Cravath, Swaine & Moore, Worldwide Plaza,
825 Eighth Avenue, New York, New York 10019-7475.
Type of funds payable at Closing: Next day funds
Listing requirements: New York Stock Exchange
<PAGE>
EXHIBIT A
FORM OF OPINION OF PETER R. HAJE, ESQ.
(i) the Company is validly existing as a corporation in good
standing under the laws of the State of Delaware, with full corporate power
and authority under such laws to own its properties and conduct its
business as described in the Prospectus, and the Company is duly qualified
to transact business as a foreign corporation and is in good standing in
each other jurisdiction in which it owns or leases property of a nature, or
transacts business of a type, that would make such qualification necessary,
except to the extent that the failure to so qualify or be in good standing
would not have a material adverse effect on the Company and its
subsidiaries, considered as one enterprise;
(ii) each of the Company's significant subsidiaries, as such term
is defined in Rule 1-02(v) of Regulation S-X under the Act, is validly
existing and in good standing under the laws of the jurisdiction of its
incorporation or organization, with full power and authority under such
laws to own its properties and conduct its business as described in the
Prospectus and is duly qualified to transact business as a foreign
corporation or partnership and is in good standing in each other
jurisdiction in which it owns or leases property of a nature, or transacts
business of a type, that would make such qualification necessary, except to
the extent that the failure to so qualify or be in good standing would not
have a material adverse effect on the Company and its subsidiaries,
considered as one enterprise;
(iii) the Company's authorized equity capitalization and pro
forma equity capitalization is as set forth in the Prospectus;
(iv) the Trust has been duly created and is validly existing in
good standing as a business trust under the Delaware Act; and the Trust is
and will be treated as a consolidated subsidiary of the Company pursuant to
generally accepted accounting principles;
(v) to the best knowledge of such counsel, there is no pending or
threatened action, suit or proceeding before any court or governmental
agency, authority or body or any arbitrator involving the Trust, the
Company or any of its subsidiaries of a character required to be disclosed
in the Registration Statement which is not adequately disclosed in the
Prospectus, and there is no franchise, contract or other document of a
character required to be described in the Registration Statement or
Prospectus, or to be filed as an exhibit, which is not described or filed
as required;
<PAGE>
A-2
(vi) no authorization, approval, consent or license of any
government, governmental instrumentality, agency or body or court (other
than under the Act and the securities or blue sky laws of various
jurisdictions) is required for the authorization, issuance, sale and
delivery of the Preferred Securities or the offering of the Common
Securities, the Subordinated Debentures or the Guarantee or the
consummation by the Trust and the Company of the transactions contemplated
by the Underwriting Agreement;
(vii) the Declaration, the Underwriting Agreement, the Indenture
and the Guarantee Agreement have been duly authorized, executed and
delivered by the Company;
(viii) the execution, delivery and performance of this
Agreement, the Declaration, the Indenture, the Subordinated Debentures and
the Guarantee Agreement and the consummation of the transactions
contemplated herein and therein and compliance by the Company with its
obligations hereunder and thereunder have been duly authorized by all
necessary action (corporate or otherwise) on the part of the Company and do
not and will not result in any violation of the Restated Certificate of
Incorporation, as amended, or By-laws, as amended, of the Company and do
not and will not conflict with, or result in a breach of any of the terms
or provisions of, or constitute a default under, or result in the creation
or imposition of any lien, charge or encumbrance upon any property or
assets of the Company under (i) the TWE Credit Agreement, the New Credit
Agreement or any indenture, mortgage or loan agreement, or any other
agreement or instrument known to such counsel, to which the Company is a
party or by which the Company may be bound or to which any of the Company's
properties may be subject (except for such conflicts, breaches or defaults
or liens, charges or encumbrances that would not have a material adverse
effect on the condition (financial or otherwise), earnings or business
prospects of the Trust or the Company and its subsidiaries, considered as
one enterprise), (ii) any existing applicable law, rule or regulation
(except for such conflicts, breaches, liens, charges or encumbrances that
would not have a material adverse effect on the condition (financial or
otherwise), earnings or business prospects of the Trust or the Company and
its subsidiaries, considered as one enterprise, and other than the
securities or blue sky laws of various jurisdictions), or (iii) any
judgment, order or decree of any government, governmental instrumentality
or court having jurisdiction over the Company or any of its properties;
(ix) the documents incorporated by reference in the Prospectus
(except for the financial statements and other financial or statistical
data included therein or omitted therefrom, as to which such counsel need
express no opinion), as of the dates they were filed with the Commission,
complied as to form in all material respects with the requirements of the
Exchange Act; and
<PAGE>
A-3
(x) the Regular Trustees are employees of the Company and have
been duly authorized by the Company to execute and deliver the Declaration;
the Declaration has been duly executed and delivered by the Regular
Trustees and is a valid and binding obligation of each Regular Trustee,
enforceable against such Regular Trustee in accordance with its terms
(subject to applicable bankruptcy, insolvency, fraudulent transfer,
reorganization, moratorium or other laws affecting creditors' rights
generally from time to time in effect and subject as to enforceability to
general principles of equity regardless of whether considered in a
proceeding in equity or at law.
In addition, such counsel shall also state as follows: As General
Counsel, I have reviewed and participated in the preparation of the Registration
Statement and the Prospectus, including the documents incorporated by reference
therein. In examining the Registration Statement and Prospectus, I have
necessarily assumed the correctness and completeness of the statements made or
included therein by the Trust and the Company, as the case may be, and take no
responsibility therefor. However, in the course of the preparation by the Trust
and the Company of the Registration Statement and the Prospectus, I have
participated in conferences with the Time Warner Trustees and certain officers
of, and accountants for, the Company with respect thereto, and my examination of
the Registration Statement and Prospectus and my discussions in the above-
mentioned conferences did not disclose any information which gave me reason to
believe that the Registration Statement (except for the financial statements and
other financial or statistical data included therein or omitted therefrom, as to
which I express no opinion) at the time it became effective included an untrue
statement of a material fact or omitted to state a material fact necessary in
order to make the statements therein, in light of the circumstances under which
they were made, not misleading or that the Prospectus (except as aforesaid), at
its issue date or on the date of this opinion, included or includes any untrue
statement of a material fact or omitted or omits to state a material fact
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading.
Such counsel shall also state that he has reviewed the opinion of
Paul, Weiss, Rifkind, Wharton & Garrison delivered to you on the date hereof and
that he believes you are justified in relying thereon.
In rendering such opinion, such counsel may rely (A) as to matters
involving the application of laws of any jurisdiction other than the United
States, the State of New York, the Delaware Act and the General Corporation Law
of the State of Delaware, to the extent such counsel deems proper and specified
in such opinion, upon the opinion of other counsel of good standing whom such
counsel believes to be reliable and who are satisfactory to counsel for the
Underwriters and (B) as to matters of fact, to the extent such counsel deems
proper, on certificates of the Trustees and responsible officers of the Company
and public officials.
<PAGE>
EXHIBIT B
FORM OF OPINION OF CRAVATH, SWAINE & MOORE
(i) the Company is validly existing as a corporation in good
standing under the laws of the State of Delaware, with full corporate power
and authority under such laws to own its properties and conduct its
business as described in the Prospectus;
(ii) the Declaration has been duly authorized, executed and
delivered by the Company and each of the Time Warner Trustees, has been
duly qualified under the Trust Indenture Act, and constitutes a legal,
valid and binding instrument enforceable against the Company and each of
the Time Warner Trustees in accordance with its terms (subject to
applicable bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium or other laws affecting creditors' rights generally from time to
time in effect and subject as to enforceability to general principles of
equity, regardless of whether considered in a proceeding in equity or at
law);
(iii) the Trust is not and will not be classified as an
association taxable as a corporation for United States income tax purposes;
(iv) the Trust is not an "investment company" or an entity
"controlled" by an "investment company" and is exempt from the relevant
provisions of the 1940 Act;
(v) the Preferred Securities have been approved for listing on
the New York Stock Exchange upon notice of issuance;
(vi) the Guarantee Agreement has been duly authorized, executed
and delivered by the Company and, assuming it is duly authorized, executed
and delivered by the Guarantee Trustee, constitutes a valid and binding
obligation of the Company, enforceable against the Company in accordance
with its terms (subject to applicable bankruptcy, insolvency, fraudulent
transfer, reorganization, moratorium or other laws affecting creditors'
rights generally from time to time in effect and subject as to
enforceability to general principles of equity, regardless of whether
considered in a proceeding in equity or at law); and the Guarantee
Agreement has been duly qualified under the Trust Indenture Act;
(vii) the Indenture has been duly authorized, executed and
delivered by the Company, has been duly qualified under the Trust Indenture
Act and constitutes a legal, valid and binding agreement of the Company,
enforceable against the Company in accordance with its terms (subject to
applicable bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium or other laws affecting creditors' rights generally
<PAGE>
B-2
from time to time in effect and subject as to enforceability to general
principles of equity, regardless of whether considered in a proceeding in
equity or at law);
(viii) the Subordinated Debentures have been duly authorized,
executed and delivered by the Company and, when authenticated in the manner
provided for in the Indenture and delivered against payment therefor as
described in the Prospectus, will constitute valid and binding obligations
of the Company, enforceable against the Company in accordance with their
terms;
(ix) the Preferred Securities, the Subordinated Debentures, the
Declaration, the Indenture and the Guarantee Agreement conform to all
statements relating thereto contained in the Prospectus;
(x) the Registration Statement has become effective under the
Act; any required filing of the Prospectus pursuant to Rule 424(b) has been
made in the manner and within the time period required by Rule 424(b); to
the best knowledge of such counsel, no stop order suspending the
effectiveness of the Registration Statement has been issued, no proceedings
for that purpose have been instituted or threatened; the Registration
Statement and the Prospectus (other than the financial statements and other
financial and statistical information contained therein as to which such
counsel need express no opinion) comply as to form in all material respects
with the applicable requirements of the Act and the Exchange Act and the
respective rules thereunder;
(xi) the Underwriting Agreement has been duly authorized,
executed and delivered by the Trust and the Company; and
(xii) the statements made in the Prospectus under "Description
of the Preferred Securities", "Description of the Guarantees", "Description
of Subordinated Debentures", "Effect of Obligations Under the Subordinated
Debentures and the Guarantee" and "United States Federal Income Tax
Consequences", to the extent that they constitute matters of law or legal
conclusions, have been reviewed by us and fairly present the information
discussed therein in all material respects.
In addition, such counsel shall also state as follows: We have
necessarily assumed the correctness and completeness of the statements made or
included in the Registration Statement and the Prospectus by the Trust and the
Company, as the case may be, and take no responsibility therefor, except insofar
as such statements relate to the description of the Securities or relate to us.
However, in the course of the preparation by the Trust and the Company of the
Registration Statement and the Prospectus (the documents incorporated by
reference in the Prospectus having been prepared and filed by the Trust and the
Company, as the case may be, without our participation), we participated in
conferences with the Trustees of the Trust and certain officers of, and
accountants for, the Company with respect
<PAGE>
B-3
thereto, and our examination of the Registration Statement and the Prospectus
and our discussions in the above-mentioned conferences did not disclose any
information which gave us reason to believe that (i) the Registration Statement
(except for the financial statements and other financial or statistical data
included therein or omitted therefrom, as to which we express no opinion), at
the time the Registration Statement became effective, contained an untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary to make the statements therein not misleading or
(ii) the Prospectus (except as aforesaid), at its issue date or on the date of
this opinion, included or includes an untrue statement of a material fact or
omitted or omits to state a material fact necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading.
In rendering such opinion, such counsel may rely (A) as to matters
involving the application of laws of any jurisdiction other than the United
States, the State of New York and the General Corporation Law of the State of
Delaware, to the extent they deem proper and specified in such opinion, upon the
opinion of other counsel of good standing whom they believe to be reliable and
who are satisfactory to counsel for the Underwriter and (B) as to matters of
fact, to the extent they deem proper, on certificates of the Trustees and
responsible officers of the Company and public officials.
<PAGE>
EXHIBIT C
FORM OF OPINION OF RICHARDS, LAYTON AND FINGER
(i) the Trust has been duly created and is validly existing in
good standing as a business trust under the Delaware Act with the power and
authority to own property and to conduct its business as described in the
Registration Statement and Prospectus and to enter into and perform its
obligations under the Underwriting Agreement, the Preferred Securities, the
Common Securities and the Declaration and is not required to be authorized
to do business in any other jurisdiction; the Trust is not a party to or
otherwise bound by any agreement other than those described in the
Prospectus; and the Trust is and will be treated as a consolidated
subsidiary of the Company pursuant to generally accepted accounting
principles;
(ii) to the best knowledge of such counsel, there is no pending
or threatened action, suit or proceeding before any court or governmental
agency, authority or body or any arbitrator involving the Trust or any of
its subsidiaries of a character required to be disclosed in the
Registration Statement which is not adequately disclosed in the Prospectus,
and there is no franchise, contract or other document of a character
required to be described in the Registration Statement or Prospectus, or to
be filed as an exhibit, which is not described or filed as required;
(iii) no authorization, approval, consent or license of any
government, governmental instrumentality, agency or body or court (other
than under the Act and the securities or blue sky laws of various
jurisdictions) is required for the authorization, issuance, sale and
delivery of the Preferred Securities or the consummation by the Trust of
the transactions contemplated by the Underwriting Agreement;
(iv) the Underwriting Agreement has been duly authorized,
executed and delivered by the Trust;
(v) the execution, delivery and performance of this Agreement and
the consummation of the transactions contemplated herein and compliance by
the Trust with its obligations hereunder have been duly authorized by all
necessary action (corporate or otherwise) on the part of the Trust and do
not and will not result in any violation of the Declaration and do not and
will not conflict with, or result in a breach of any of the terms or
provisions of, or constitute a default under, or result in the creation or
imposition of any lien, charge or encumbrance upon any property or assets
of the Company under (i) any indenture, mortgage or loan agreement, or any
other agreement or instrument known to such counsel, to which the Trust is
a party or by
<PAGE>
C-2
which the Trust may be bound or to which any of the Trust's properties may
be subject (except for such conflicts, breaches or defaults or liens,
charges or encumbrances that would not have a material adverse effect on
the condition (financial or otherwise), earnings or business prospects of
the Trust and its subsidiaries, considered as one enterprise), (ii) any
existing applicable law, rule or regulation (except for such conflicts,
breaches, liens, charges or encumbrances that would not have a material
adverse effect on the condition (financial or otherwise), earnings or
business prospects of the Trust and other than the securities or blue sky
laws of various jurisdictions), or (iii) any judgment, order or decree of
any government, governmental instrumentality or court having jurisdiction
over the Trust or any of its properties; and
(vi) the Preferred Securities have been duly authorized by the
Trust and are validly issued and (subject to the terms of the Declaration)
when delivered to and paid for by the Underwriters pursuant to the
Underwriting Agreement will be fully paid and non-assessable preferred
undivided beneficial interests in the assets of the Trust and will be
entitled to the benefits of the Declaration; the issuance of the Preferred
Securities is not subject to preemptive or other similar rights; and the
holders of Preferred Securities will be entitled to the same limitation of
personal liability extended to stockholders of private corporations for
profit.
In addition, such counsel shall also state as follows: We have
reviewed and participated in the preparation of the Registration Statement and
the Prospectus, including the documents incorporated by reference therein. In
examining the Registration Statement and Prospectus, we have necessarily assumed
the correctness and completeness of the statements made or included therein by
the Trust and take no responsibility therefor. However, in the course of the
preparation by the Trust of the Registration Statement and the Prospectus, we
have participated in conferences with the Time Warner Trustees of the Trust and
certain officers of, and accountants for, the Company with respect thereto, and
our examination of the Registration Statement and Prospectus and our discussions
in the above-mentioned conferences did not disclose any information which gave
us reason to believe that the Registration Statement (except for the financial
statements and other financial or statistical data included therein or omitted
therefrom, as to which we express no opinion) at the time it became effective
included an untrue statement of a material fact or omitted to state a material
fact necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading or that the Prospectus
(except as aforesaid), at its issue date or on the date of this opinion,
included or includes any untrue statement of a material fact or omitted or omits
to state a material fact necessary to make the statements therein, in the light
of the circumstances under which they were made, not misleading.
<PAGE>
EXHIBIT D
FORM OF OPINION OF
THE LAW DEPARTMENT OF
THE FIRST NATIONAL BANK OF CHICAGO
___________, 1995
(i) The Property Trustee is a national banking association with trust
powers, duly organized, validly existing and in good standing under the laws of
the United States of America, with all necessary power and authority to execute
and deliver, and to carry out and perform its obligations under the Declaration.
(ii) The execution, delivery and performance by the Property Trustee
of the Declaration has been duly authorized by all necessary corporate action on
the part of the Property Trustee and the Declaration has been duly executed and
delivered by the Property Trustee. The Declaration and the Guarantee Agreement
have been duly executed and delivered by the Property Trustee, and constitute
the legal, valid and binding obligation of the Property Trustee, enforceable
against the Property Trustee in accordance with their terms, except as
enforcement thereof may be limited by applicable bankruptcy, insolvency,
fraudulent transfer, reorganization, moratorium or other laws affecting
creditors' rights generally from time to time in effect and subject as to
enforceability to general principles of equity, regardless of whether considered
in a proceeding in equity or at law.
(iii) To the best of our knowledge, there are no actions, proceedings
or investigations pending or threatened against or affecting the Property
Trustee before any court, arbitrator, administrative agency or other
governmental authority which, if adversely decided, would materially and
adversely affect the Property Trustee's ability to carry out the transactions
contemplated in the Declaration.
(iv) The execution, delivery and performance of the Declaration and
the Guarantee Agreement by the Property Trustee does not conflict with or
constitute a breach of the Articles of Association or By-Laws of the Property
Trustee.
(iv) No consent, approval or authorization of, or registration with or
notice to, any Illinois or federal banking authority, other than such as have
been obtained or accomplished, is required for the execution, delivery or
performance by the Property Trustee of the Declaration.
<PAGE>
D-2
(v) The Property Trustee is the record holder of the Subordinated
Debentures and the Guarantee and no security interest, mortgage, pledge, lien,
encumbrance, claim or equity is noted thereon or on the register.
<PAGE>
EXHIBIT 4.1
CERTIFICATE OF TRUST
OF
TIME WARNER CAPITAL I
This Certificate of Trust of Time Warner Capital I (the "Trust"),
dated August 2, 1995, is being duly executed and filed by the undersigned, as
trustees, to form a business trust under the Delaware Business Trust Act (12
Del. C. Section 3801 et seq.).
-- ----
1. Name. The name of the business trust formed hereby is Time Warner
-----
Capital I.
2. Delaware Trustee. The name and business address of the trustee of
-----------------
the Trust with a principal place of business in the State of Delaware is First
Chicago Delaware Inc., 1201 Market Street, Suite 1401, Wilmington, Delaware
19801.
3. Effective Date. This Certificate of Trust shall be effective as of
---------------
its filing.
IN WITNESS WHEREOF, the undersigned, being the sole trustees of the
Trust, have executed this Certificate of Trust as of the date first above
written.
THE FIRST NATIONAL BANK OF
CHICAGO, as trustee,
by
--------------------------
Name: Melissa G. Weisman
Title: Assistant Vice President
FIRST CHICAGO DELAWARE INC.,
as Delaware Trustee,
by
--------------------------
Name: Melissa G. Weisman
Title: Assistant Vice President
<PAGE>
2
by
-------------------------
John A. LaBarca,
as trustee
by
-------------------------
Philip R. Lochner, Jr.
as trustee
by
-------------------------
Thomas W. McEnerney,
as trustee
<PAGE>
EXHIBIT 4.2
CERTIFICATE OF TRUST
OF
TIME WARNER CAPITAL II
This Certificate of Trust of Time Warner Capital II (the "Trust"),
dated August 2, 1995, is being duly executed and filed by the undersigned, as
trustees, to form a business trust under the Delaware Business Trust Act (12
Del. C. Section 3801 et seq.).
-- ----
1. Name. The name of the business trust formed hereby is Time Warner
-----
Capital II.
2. Delaware Trustee. The name and business address of the trustee of
-----------------
the Trust with a principal place of business in the State of Delaware is First
Chicago Delaware Inc., 1201 Market Street, Suite 1401, Wilmington, Delaware
19801.
3. Effective Date. This Certificate of Trust shall be effective as of
---------------
its filing.
IN WITNESS WHEREOF, the undersigned, being the sole trustees of the
Trust, have executed this Certificate of Trust as of the date first above
written.
THE FIRST NATIONAL BANK OF
CHICAGO, as trustee,
by
--------------------------
Name: Melissa G. Weisman
Title: Assistant Vice President
FIRST CHICAGO DELAWARE INC.,
as Delaware Trustee,
by
--------------------------
Name: Melissa G. Weisman
Title: Assistant Vice President
<PAGE>
2
by
-------------------------
John A. LaBarca,
as trustee
by
-------------------------
Philip R. Lochner, Jr.,
as trustee
by
-------------------------
Thomas W. McEnerney,
as trustee
<PAGE>
EXHIBIT 4.3
CERTIFICATE OF TRUST
OF
TIME WARNER CAPITAL III
This Certificate of Trust of Time Warner Capital III (the "Trust"),
dated August 2, 1995, is being duly executed and filed by the undersigned, as
trustees, to form a business trust under the Delaware Business Trust Act (12
Del. C. Section 3801 et seq.).
-- ----
1. Name. The name of the business trust formed hereby is Time Warner
-----
Capital III.
2. Delaware Trustee. The name and business address of the trustee of
-----------------
the Trust with a principal place of business in the State of Delaware is First
Chicago Delaware Inc., 1201 Market Street, Suite 1401, Wilmington, Delaware
19801.
3. Effective Date. This Certificate of Trust shall be effective as of
---------------
its filing.
IN WITNESS WHEREOF, the undersigned, being the sole trustees of the
Trust, have executed this Certificate of Trust as of the date first above
written.
THE FIRST NATIONAL BANK OF
CHICAGO, as trustee,
by
--------------------------
Name: Melissa G. Weisman
Title: Assistant Vice President
FIRST CHICAGO DELAWARE INC.,
as Delaware Trustee,
by
--------------------------
Name: Melissa G. Weisman
Title: Assistant Vice President
<PAGE>
2
by
-------------------------
John A. LaBarca,
as trustee
by
-------------------------
Philip R. Lochner, Jr.,
as trustee
by
-------------------------
Thomas W. McEnerney,
as trustee
<PAGE>
EXHIBIT 4.4
DECLARATION OF TRUST, dated as of August 2, 1995, between
Time Warner Inc., a Delaware corporation, as sponsor (the
"Sponsor"), and The First National Bank of Chicago, a national
banking association, as property trustee (the "Property
Trustee"), First Chicago Delaware Inc., as Delaware trustee (the
"Delaware Trustee"), John A. LaBarca, Philip R. Lochner, Jr. and
Thomas W. McEnerney, not in their individual capacities but
solely as regular trustees (the "Regular Trustees") (the Property
Trustee, Delaware Trustee and Regular Trustees referred to herein
as the "Trustees"). The Sponsor and the Trustees hereby agree as
follows:
1. The trust created hereby (the "Trust") shall be known as "Time
Warner Capital I", in which name the Trustees, or the Sponsor to the extent
provided herein, may conduct the business of the Trust, make and execute
contracts, and sue and be sued.
2. The Sponsor hereby assigns, transfers, conveys and sets over to
the Trust the sum of $10. The Trustees hereby acknowledge receipt of such
amount from the Sponsor, which amount shall constitute the initial trust estate.
It is the intention of the parties hereto that the Trust created hereby
constitute a business trust under Chapter 38 of Title 12 of the Delaware Code,
12 Del. C. Section 3801 et seq. (the "Business Trust Act"), and that this
-- ---
document constitute the governing instrument of the Trust. The Trustees are
hereby authorized and directed to execute and file a certificate of trust with
the Delaware Secretary of State in the form attached as Exhibit A hereto.
3. The Sponsor and the Trustees will enter into an amended and
restated Declaration of Trust, satisfactory to each such party, to provide for
the contemplated operation of the Trust created hereby and the issuance of
preferred securities and common securities of the Trust. Prior to the execution
and delivery of such amended and restated Declaration of Trust, the Trustees
shall not have any duty or obligation hereunder or with respect to the trust
estate, except as otherwise required by applicable law or as may be necessary to
obtain prior to such execution and delivery any licenses, consents or approvals
required by applicable law or otherwise.
<PAGE>
2
4. The Sponsor and the Trustees hereby authorize and direct the
Sponsor, as the sponsor of the Trust, (a) to execute and file with the
Securities and Exchange Commission (the "Commission"), on behalf of the Trust,
(i) a Registration Statement on Form S-3 (the "1933 Act Registration
Statement"), including any pre-effective or post-effective amendments to such
Registration Statement or, relating to the registration under the Securities Act
of 1933 of the Preferred Securities of the Trust and (ii) a Registration
Statement on Form 8-A (the "1934 Act Registration Statement"), including any
pre-effective and post-effective amendments thereto, relating to the
registration of the Preferred Securities of the Trust under Section 12(b) of the
Securities Exchange Act of 1934, as amended; (b) to execute on behalf of the
Trust and file with the New York Stock Exchange or any other national stock
exchange a listing application and all other applications, statements,
certificates, agreements and other instruments as shall be necessary or
desirable to cause the Preferred Securities to be listed on the New York Stock
Exchange or such other national stock exchange; (c) to file and execute on
behalf of the Trust such applications, reports, surety bonds, irrevocable
consents, appointments of attorney for service of process and other papers and
documents as shall be necessary or desirable to register the Preferred
Securities under the securities or "Blue Sky" laws of such jurisdictions as the
Sponsor, on behalf of the Trust, may deem necessary or desirable and (d) to
execute on behalf of the Trust an Underwriting Agreement among the Trust, the
Sponsor and Merrill Lynch, Pierce, Feiner & Smith Incorporated, Morgan Stanley &
Co. Incorporated and Bear, Stearns & Co. Inc. as co-representatives of the
several underwriters, relating to the offer and sale of the Preferred
Securities, satisfactory to each such party. In the event that any filing
referred to in clauses (a) through (c) above is required by the rules and
regulations of the Commission, the New York Stock Exchange or any other national
stock exchange or state securities or blue sky laws, to be executed on behalf of
the Trust by the Trustees, John A. LaBarca, Philip R. Lochner, Jr. and Thomas W.
McEnerney, in their capacities as Trustees of the Trust, are hereby authorized
and directed to join in any such filing and to execute on behalf of the Trust
any and all of the foregoing, it being understood that The First National Bank
of Chicago and First Chicago Delaware Inc., in their capacities as Trustees of
the Trust, shall not be required to join in any such filing or execute on behalf
of the Trust any such document unless required by the rules and
<PAGE>
3
regulations of the Commission, the New York Stock Exchange or any other national
stock exchange or state securities or blue sky laws. In connection with all of
the foregoing, the Sponsor and each Trustee, solely in its capacity as Trustee
of the Trust, hereby constitutes and appoints Gerald M. Levin, Richard D.
Parsons, Richard J. Bressler, Peter R. Haje and Philip R. Lochner, and each of
them, as his, her or its, as the case may be, true and lawful attorneys-in-fact
and agents, with full power of substitution and resubstitution, for the Sponsor
or such Trustee or in the Sponsor's or such Trustee's name, place and stead, in
any and all capacities, to sign any and all amendments (including post-effective
amendments) to the 1933 Act Registration Statement and the 1934 Act Registration
Statement and to file the same, with all exhibits thereto, and other documents
in connection therewith, with the Commission, granting unto said attorneys-in-
fact and agents full power and authority to do and perform each and every act
and thing requisite and necessary to be, done in connection therewith, as fully
to all intents and purposes as the Sponsor or such Trustee might or could do in
person, hereby ratifying and confirming all that said attorneys-in-fact and
agents or any of them, or their or his or her substitute or substitutes, shall
do or cause to be done by virtue hereof.
5. This Declaration of Trust may be executed in one or more
counterparts.
6. The number of Trustees initially shall be five and thereafter the
number of Trustees shall be such number as shall be fixed from time to time by a
written instrument signed by the Sponsor which may increase or decrease the
number of Trustees; provided, however, that the number of Trustees shall in no
-------- -------
event be less than five; and provided further that to the extent required by the
----------------
Business Trust Act, one Trustee shall either be a natural person who is a
resident of the State of Delaware or, if not a natural person, an entity which
has its principal place of business in the State of Delaware. Subject to the
foregoing, the
<PAGE>
4
Sponsor is entitled to appoint or remove without cause any Trustee at any time.
The Trustees may resign upon thirty days' prior notice to the Sponsor.
IN WITNESS WHEREOF, the parties hereto have caused this Declaration of
Trust to be duly executed as of the day and year first above written.
TIME WARNER INC.,
as Sponsor,
by
----------------------------
Name: Thomas W. McEnerney
Title: V.P. and Associate
General Counsel
THE FIRST NATIONAL BANK OF CHICAGO, not in its
individual capacity but solely as Property
Trustee,
by
--------------------------
Name: Melissa G. Weisman
Title: Assistant Vice
President
FIRST CHICAGO DELAWARE
INC., not in its individual capacity but solely as
Delaware Trustee,
by
--------------------------
Name: Melissa G. Weisman
Title: Assistant Vice
President
<PAGE>
5
by
--------------------------
John A. LaBarca,
not in his individual capacity but solely as
Regular Trustee
by
--------------------------
Philip R. Lochner, Jr.,
not in his individual capacity but solely as
Regular Trustee
by
--------------------------
Thomas W. McEnerney,
not in his individual capacity but solely as
Regular Trustee
<PAGE>
EXHIBIT 4.5
DECLARATION OF TRUST, dated as of August 2, 1995, between
Time Warner Inc., a Delaware corporation, as sponsor (the
"Sponsor"), and The First National Bank of Chicago, a national
banking association, as property trustee (the "Property
Trustee"), First Chicago Delaware Inc., as Delaware trustee (the
"Delaware Trustee"), John A. LaBarca, Philip R. Lochner, Jr. and
Thomas W. McEnerney, not in their individual capacities but
solely as regular trustees (the "Regular Trustees") (the Property
Trustee, Delaware Trustee and Regular Trustees referred to herein
as the "Trustees"). The Sponsor and the Trustees hereby agree as
follows:
1. The trust created hereby (the "Trust") shall be known as "Time
Warner Capital II", in which name the Trustees, or the Sponsor to the extent
provided herein, may conduct the business of the Trust, make and execute
contracts, and sue and be sued.
2. The Sponsor hereby assigns, transfers, conveys and sets over to
the Trust the sum of $10. The Trustees hereby acknowledge receipt of such
amount from the Sponsor, which amount shall constitute the initial trust estate.
It is the intention of the parties hereto that the Trust created hereby
constitute a business trust under Chapter 38 of Title 12 of the Delaware Code,
12 Del. C. Section 3801 et seq. (the "Business Trust Act"), and that this
-- ---
document constitute the governing instrument of the Trust. The Trustees are
hereby authorized and directed to execute and file a certificate of trust with
the Delaware Secretary of State in the form attached as Exhibit A hereto.
3. The Sponsor and the Trustees will enter into an amended and
restated Declaration of Trust, satisfactory to each such party, to provide for
the contemplated operation of the Trust created hereby and the issuance of
preferred securities and common securities of the Trust. Prior to the execution
and delivery of such amended and restated Declaration of Trust, the Trustees
shall not have any duty or obligation hereunder or with respect to the trust
estate, except as otherwise required by applicable law or as may be necessary to
obtain prior to such execution and delivery any licenses, consents or approvals
required by applicable law or otherwise.
<PAGE>
2
4. The Sponsor and the Trustees hereby authorize and direct the
Sponsor, as the sponsor of the Trust, (a) to execute and file with the
Securities and Exchange Commission (the "Commission"), on behalf of the Trust,
(i) a Registration Statement on Form S-3 (the "1933 Act Registration
Statement"), including any pre-effective or post-effective amendments to such
Registration Statement or, relating to the registration under the Securities Act
of 1933 of the Preferred Securities of the Trust and (ii) a Registration
Statement on Form 8-A (the "1934 Act Registration Statement"), including any
pre-effective and post-effective amendments thereto, relating to the
registration of the Preferred Securities of the Trust under Section 12(b) of the
Securities Exchange Act of 1934, as amended; (b) to execute on behalf of the
Trust and file with the New York Stock Exchange or any other national stock
exchange a listing application and all other applications, statements,
certificates, agreements and other instruments as shall be necessary or
desirable to cause the Preferred Securities to be listed on the New York Stock
Exchange or such other national stock exchange; (c) to file and execute on
behalf of the Trust such applications, reports, surety bonds, irrevocable
consents, appointments of attorney for service of process and other papers and
documents as shall be necessary or desirable to register the Preferred
Securities under the securities or "Blue Sky" laws of such jurisdictions as the
Sponsor, on behalf of the Trust, may deem necessary or desirable and (d) to
execute on behalf of the Trust an Underwriting Agreement among the Trust, the
Sponsor and Merrill Lynch, Pierce, Feiner & Smith Incorporated, Morgan Stanley &
Co. Incorporated and Bear, Stearns & Co. Inc. as co-representatives of the
several underwriters, relating to the offer and sale of the Preferred
Securities, satisfactory to each such party. In the event that any filing
referred to in clauses (a) through (c) above is required by the rules and
regulations of the Commission, the New York Stock Exchange or any other national
stock exchange or state securities or blue sky laws, to be executed on behalf of
the Trust by the Trustees, John A. LaBarca, Philip R. Lochner, Jr. and Thomas W.
McEnerney, in their capacities as Trustees of the Trust, are hereby authorized
and directed to join in any such filing and to execute on behalf of the Trust
any and all of the foregoing, it being understood that The First National Bank
of Chicago and First Chicago Delaware Inc., in their capacities as Trustees of
the Trust, shall not be required to join in any such filing or execute on behalf
of the Trust any such document unless required by the rules and
<PAGE>
3
regulations of the Commission, the New York Stock Exchange or any other national
stock exchange or state securities or blue sky laws. In connection with all of
the foregoing, the Sponsor and each Trustee, solely in its capacity as Trustee
of the Trust, hereby constitutes and appoints Gerald M. Levin, Richard D.
Parsons, Richard J. Bressler, Peter R. Haje and Philip R. Lochner, and each of
them, as his, her or its, as the case may be, true and lawful attorneys-in-fact
and agents, with full power of substitution and resubstitution, for the Sponsor
or such Trustee or in the Sponsor's or such Trustee's name, place and stead, in
any and all capacities, to sign any and all amendments (including post-effective
amendments) to the 1933 Act Registration Statement and the 1934 Act Registration
Statement and to file the same, with all exhibits thereto, and other documents
in connection therewith, with the Commission, granting unto said attorneys-in-
fact and agents full power and authority to do and perform each and every act
and thing requisite and necessary to be, done in connection therewith, as fully
to all intents and purposes as the Sponsor or such Trustee might or could do in
person, hereby ratifying and confirming all that said attorneys-in-fact and
agents or any of them, or their or his or her substitute or substitutes, shall
do or cause to be done by virtue hereof.
5. This Declaration of Trust may be executed in one or more
counterparts.
6. The number of Trustees initially shall be five and thereafter the
number of Trustees shall be such number as shall be fixed from time to time by a
written instrument signed by the Sponsor which may increase or decrease the
number of Trustees; provided, however, that the number of Trustees shall in no
-------- -------
event be less than five; and provided further that to the extent required by the
----------------
Business Trust Act, one Trustee shall either be a natural person who is a
resident of the State of Delaware or, if not a natural person, an entity which
has its principal place of business in the State of Delaware. Subject to the
foregoing, the
<PAGE>
4
Sponsor is entitled to appoint or remove without cause any Trustee at any time.
The Trustees may resign upon thirty days' prior notice to the Sponsor.
IN WITNESS WHEREOF, the parties hereto have caused this Declaration of
Trust to be duly executed as of the day and year first above written.
TIME WARNER INC.,
as Sponsor,
by
--------------------------
Name: Thomas W. McEnerney
Title: V.P. and Associate
General Counsel
THE FIRST NATIONAL BANK OF CHICAGO, not in its
individual capacity but solely as Property
Trustee,
by
--------------------------
Name: Melissa G. Weisman
Title: Assistant Vice
President
FIRST CHICAGO DELAWARE
INC., not in its individual capacity but solely as
Delaware Trustee,
by
--------------------------
Name: Melissa G. Weisman
Title: Assistant Vice
President
<PAGE>
5
by
--------------------------
John A. LaBarca,
not in his individual capacity but solely as
Regular Trustee
by
--------------------------
Philip R. Lochner, Jr.,
not in his individual capacity but solely as
Regular Trustee
by
--------------------------
Thomas W. McEnerney,
not in his individual capacity but solely as
Regular Trustee
<PAGE>
EXHIBIT 4.6
DECLARATION OF TRUST, dated as of August 2, 1995, between
Time Warner Inc., a Delaware corporation, as sponsor (the
"Sponsor"), and The First National Bank of Chicago, a national
banking association, as property trustee (the "Property
Trustee"), First Chicago Delaware Inc., as Delaware trustee (the
"Delaware Trustee"), John A. LaBarca, Philip R. Lochner, Jr. and
Thomas W. McEnerney, not in their individual capacities but
solely as regular trustees (the "Regular Trustees") (the Property
Trustee, Delaware Trustee and Regular Trustees referred to herein
as the "Trustees"). The Sponsor and the Trustees hereby agree as
follows:
1. The trust created hereby (the "Trust") shall be known as "Time
Warner Capital III", in which name the Trustees, or the Sponsor to the extent
provided herein, may conduct the business of the Trust, make and execute
contracts, and sue and be sued.
2. The Sponsor hereby assigns, transfers, conveys and sets over to
the Trust the sum of $10. The Trustees hereby acknowledge receipt of such
amount from the Sponsor, which amount shall constitute the initial trust estate.
It is the intention of the parties hereto that the Trust created hereby
constitute a business trust under Chapter 38 of Title 12 of the Delaware Code,
12 Del. C. Section 3801 et seq. (the "Business Trust Act"), and that this
-- ---
document constitute the governing instrument of the Trust. The Trustees are
hereby authorized and directed to execute and file a certificate of trust with
the Delaware Secretary of State in the form attached as Exhibit A hereto.
3. The Sponsor and the Trustees will enter into an amended and
restated Declaration of Trust, satisfactory to each such party, to provide for
the contemplated operation of the Trust created hereby and the issuance of
preferred securities and common securities of the Trust. Prior to the execution
and delivery of such amended and restated Declaration of Trust, the Trustees
shall not have any duty or obligation hereunder or with respect to the trust
estate, except as otherwise required by applicable law or as may be necessary to
obtain prior to such execution and delivery any licenses, consents or approvals
required by applicable law or otherwise.
<PAGE>
2
4. The Sponsor and the Trustees hereby authorize and direct the
Sponsor, as the sponsor of the Trust, (a) to execute and file with the
Securities and Exchange Commission (the "Commission"), on behalf of the Trust,
(i) a Registration Statement on Form S-3 (the "1933 Act Registration
Statement"), including any pre-effective or post-effective amendments to such
Registration Statement or, relating to the registration under the Securities Act
of 1933 of the Preferred Securities of the Trust and (ii) a Registration
Statement on Form 8-A (the "1934 Act Registration Statement"), including any
pre-effective and post-effective amendments thereto, relating to the
registration of the Preferred Securities of the Trust under Section 12(b) of the
Securities Exchange Act of 1934, as amended; (b) to execute on behalf of the
Trust and file with the New York Stock Exchange or any other national stock
exchange a listing application and all other applications, statements,
certificates, agreements and other instruments as shall be necessary or
desirable to cause the Preferred Securities to be listed on the New York Stock
Exchange or such other national stock exchange; (c) to file and execute on
behalf of the Trust such applications, reports, surety bonds, irrevocable
consents, appointments of attorney for service of process and other papers and
documents as shall be necessary or desirable to register the Preferred
Securities under the securities or "Blue Sky" laws of such jurisdictions as the
Sponsor, on behalf of the Trust, may deem necessary or desirable and (d) to
execute on behalf of the Trust an Underwriting Agreement among the Trust, the
Sponsor and Merrill Lynch, Pierce, Feiner & Smith Incorporated, Morgan Stanley &
Co. Incorporated and Bear, Stearns & Co. Inc. as co-representatives of the
several underwriters, relating to the offer and sale of the Preferred
Securities, satisfactory to each such party. In the event that any filing
referred to in clauses (a) through (c) above is required by the rules and
regulations of the Commission, the New York Stock Exchange or any other national
stock exchange or state securities or blue sky laws, to be executed on behalf of
the Trust by the Trustees, John A. LaBarca, Philip R. Lochner, Jr. and Thomas W.
McEnerney, in their capacities as Trustees of the Trust, are hereby authorized
and directed to join in any such filing and to execute on behalf of the Trust
any and all of the foregoing, it being understood that The First National Bank
of Chicago and First Chicago Delaware Inc., in their capacities as Trustees of
the Trust, shall not be required to join in any such filing or execute on behalf
of the Trust any such document unless required by the rules and
<PAGE>
3
regulations of the Commission, the New York Stock Exchange or any other national
stock exchange or state securities or blue sky laws. In connection with all of
the foregoing, the Sponsor and each Trustee, solely in its capacity as Trustee
of the Trust, hereby constitutes and appoints Gerald M. Levin, Richard D.
Parsons, Richard J. Bressler, Peter R. Haje and Philip R. Lochner, and each of
them, as his, her or its, as the case may be, true and lawful attorneys-in-fact
and agents, with full power of substitution and resubstitution, for the Sponsor
or such Trustee or in the Sponsor's or such Trustee's name, place and stead, in
any and all capacities, to sign any and all amendments (including post-effective
amendments) to the 1933 Act Registration Statement and the 1934 Act Registration
Statement and to file the same, with all exhibits thereto, and other documents
in connection therewith, with the Commission, granting unto said attorneys-in-
fact and agents full power and authority to do and perform each and every act
and thing requisite and necessary to be, done in connection therewith, as fully
to all intents and purposes as the Sponsor or such Trustee might or could do in
person, hereby ratifying and confirming all that said attorneys-in-fact and
agents or any of them, or their or his or her substitute or substitutes, shall
do or cause to be done by virtue hereof.
5. This Declaration of Trust may be executed in one or more
counterparts.
6. The number of Trustees initially shall be five and thereafter the
number of Trustees shall be such number as shall be fixed from time to time by a
written instrument signed by the Sponsor which may increase or decrease the
number of Trustees; provided, however, that the number of Trustees shall in no
-------- -------
event be less than five; and provided further that to the extent required by the
----------------
Business Trust Act, one Trustee shall either be a natural person who is a
resident of the State of Delaware or, if not a natural person, an entity which
has its principal place of business in the State of Delaware. Subject to the
foregoing, the
<PAGE>
4
Sponsor is entitled to appoint or remove without cause any Trustee at any time.
The Trustees may resign upon thirty days' prior notice to the Sponsor.
IN WITNESS WHEREOF, the parties hereto have caused this Declaration of
Trust to be duly executed as of the day and year first above written.
TIME WARNER INC.,
as Sponsor,
by
--------------------------
Name: Thomas W. McEnerney
Title: V.P. and Associate
General Counsel
THE FIRST NATIONAL BANK OF CHICAGO, not in its
individual capacity but solely as Property
Trustee,
by
--------------------------
Name: Melissa G. Weisman
Title: Assistant Vice
President
FIRST CHICAGO DELAWARE
INC., not in its individual
capacity but solely as Delaware
Trustee,
by
--------------------------
Name: Melissa G. Weisman
Title: Assistant Vice
President
<PAGE>
5
by
--------------------------
John A. LaBarca,
not in his individual capacity
but solely as Regular Trustee
by
--------------------------
Philip R. Lochner, Jr.,
not in his individual capacity
but solely as Regular Trustee
by
--------------------------
Thomas W. McEnerney,
not in his individual capacity
but solely as Regular Trustee
<PAGE>
EXHIBIT 4.7
AMENDED AND RESTATED DECLARATION OF TRUST ("Declaration"),
dated as of [ ], 1995, by the undersigned trustees
(together with all other Persons from time to time duly appointed
and serving as trustees in accordance with the provisions of this
Declaration, the "Trustees"), Time Warner Inc., a Delaware
corporation, as trust sponsor ("Time Warner" or the "Sponsor"),
and by the holders, from time to time, of undivided beneficial
interests in the assets of the Trust to be issued pursuant to
this Declaration.
WHEREAS the Sponsor and the Trustees entered into a Declaration of
Trust dated as of August 2, 1995 (the "Original Declaration") in order to
establish a statutory business trust (the "Trust") under the Business Trust Act
(as hereinafter defined);
WHEREAS the Certificate of Trust (the "Certificate of Trust") of the
Trust was filed with the office of the Secretary of State of the State of
Delaware on August 2, 1995;
WHEREAS the Trustees and the Sponsor desire to continue the Trust
pursuant to the Business Trust Act for the sole purpose of, as described more
fully in Section 3.03 hereof, issuing and selling certain securities
representing undivided beneficial interests in the assets of the Trust and
investing the proceeds thereof in certain Subordinated Debentures (as defined
herein) of Time Warner issued under the Indenture (as defined herein) and to
engage pursuant to the terms hereof in only those other activities necessary or
incidental thereto; and
WHEREAS, as of the date hereof, no interests in the Trust have been
issued; and
WHEREAS all of the Trustees and the Sponsor, by this Declaration,
amend and restate each and every term and provision of the Original Declaration.
NOW, THEREFORE, it being the intention of the parties hereto to
continue the Trust as a business trust under the Business Trust Act, that the
Original Declaration
<PAGE>
2
be amended and restated in its entirety as provided herein and that this
Declaration constitute the governing instrument of such business trust, the
Trustees declare that all assets contributed to or purchased by the Trust will
be held in trust for the benefit of the holders, from time to time, of the
securities representing undivided beneficial interests in the assets of the
Trust issued hereunder, subject to the provisions of this Declaration.
ARTICLE I
Definitions
-----------
SECTION 1.01. Terms Generally. (a) The definitions in Section 1.02
----------------
shall apply equally to both the singular and plural forms of the terms defined.
Whenever the context may require any pronoun shall include the corresponding
masculine, feminine and neuter forms. The words "include", "includes" and
"including" shall be deemed to be followed by the phrase "without limitation".
All references herein to Articles, Sections, Exhibits and Annexes shall be
deemed references to Articles and Sections of, and Exhibits and Annexes to, this
Declaration unless the context shall otherwise require. Except as otherwise
expressly provided herein, any reference in this Declaration to any other
document shall mean such document as amended, restated, supplemented or
otherwise modified from time to time.
(b) Capitalized terms used in this Declaration but not defined in the
preamble above have the respective meanings assigned to them in Section 1.02.
(c) A term defined anywhere in this Declaration has the same meaning
throughout.
SECTION 1.02. Definitions. As used in this Declaration, the
------------
following terms have the meanings specified below:
"Affiliate" has the same meaning as given to that term in Rule 405 of
the Trust Indenture Act or any successor rule thereunder.
"Appointment Event" means an event defined in the terms of the
Preferred Securities set forth in Exhibit B which entitles the Holders of a
Majority in aggregate
<PAGE>
3
liquidation amount of the Preferred Securities to appoint a Special Regular
Trustee.
"Book Entry Interest" means a beneficial interest in a Certificate
registered in the name of a Clearing Agency or a nominee thereof, ownership and
transfers of which shall be maintained and made through book entries by such
Clearing Agency as described in Section 9.04.
"Business Day" means any day other than a Saturday or Sunday or any
other day on which banking institutions in New York, New York, are authorized or
required by law to close.
"Business Trust Act" means Chapter 38 of Title 12 of the Delaware
Code, 12 Del. C. (S)(S) 3801 et seq., as it may be amended from time to time.
-- ---- -- -- ----
"Certificate" means a Common Security Certificate or a Preferred
Security Certificate.
"Clearing Agency" means an organization registered as a "Clearing
Agency" pursuant to Section 17A of the Exchange Act that is acting as depositary
for the Preferred Securities and in whose name or in the name of a nominee of
that organization shall be registered a Global Certificate and which shall
undertake to effect book entry transfers and pledges of the Preferred
Securities.
"Clearing Agency Participant" means a broker, dealer, bank, other
financial institution or other Person for whom from time to time the Clearing
Agency effects book entry transfers and pledges of securities deposited with the
Clearing Agency.
"Closing Date" means [ ], 1995.
"Code" means the Internal Revenue Code of 1986, as amended from time
to time or any successor legislation. A reference to a specific section
((Sec.)) of the Code refers not only to such specific section but also to any
corresponding provision of any federal tax statute enacted after the date of
this Declaration, as such specific section or corresponding provision is in
effect on the date of application of the provisions of this Declaration
containing such reference.
<PAGE>
4
"Commission" means the Securities and Exchange Commission.
"Common Security" has the meaning specified in Section 7.01(b).
"Common Security Certificate" means a definitive certificate in fully
registered form representing a Common Security substantially in the form of
Annex I to Exhibit C.
"Covered Person" means (i) any officer, director, shareholder,
partner, member, representative, employee or agent of the Trust or its
Affiliates, (ii) any officer, director, shareholder, employee, representative or
agent of Time Warner or its Affiliates and (iii) the Holders from time to time
of the Trust Securities.
"Delaware Trustee" has the meaning set forth in Section 5.01(a)(C).
"Distribution" means a distribution payable to Holders of Trust
Securities in accordance with Section 6.01.
"DTC" means The Depository Trust Company, the initial Clearing Agency.
"Event of Default" in respect of the Trust Securities means an
Indenture Event of Default that has occurred and is continuing in respect of the
Subordinated Debentures.
"Exchange Act" means the Securities Exchange Act of 1934, as amended
from time to time or any successor legislation.
"Fiscal Year" has the meaning specified in Section 11.01.
"Global Certificate", when used with respect to any Preferred
Security, means a Preferred Security executed by the Trust and delivered to the
Depositary or pursuant to the Depositary's instruction, all in accordance with
this Declaration, which shall be registered in the name of the Depositary or its
nominee and which shall represent all of the outstanding Preferred Securities.
<PAGE>
5
"Guarantee" means the Guarantee Agreement to be dated as of [ ],
1995, of Time Warner in respect of the Preferred Securities.
"Holder" means a Person in whose name a Certificate representing a
Trust Security is registered, such Person being a beneficial owner within the
meaning of the Business Trust Act.
"Indemnified Person" means any Trustee, any Affiliate of any Trustee,
any officer, director, shareholder, member, partner, employee, representative or
agent of any Trustee, or any employee or agent of the Trust or its Affiliates.
"Indenture" means the Indenture dated as of [ ], 1995,
between Time Warner and the Indenture Trustee and any indenture supplemental
thereto pursuant to which the Subordinated Debentures are to be issued.
"Indenture Event of Default" means any event or condition defined as
an "Event of Default" with respect to the Subordinated Debentures under Section
5.01 of the Indenture that has occurred and is continuing.
"Indenture Trustee" means [Chemical Bank] as trustee under the
Indenture until a successor is appointed thereunder and thereafter means such
successor trustee.
"Investment Company" means an investment company as defined in the
Investment Company Act.
"Investment Company Act" means the Investment Company Act of 1940, as
amended from time to time or any successor legislation.
"Legal Action" has the meaning specified in Section 3.06(e).
"Liquidation Distribution" has the meaning set forth in Exhibits B and
C hereto establishing the terms of the Trust Securities.
"Majority in aggregate liquidation amount of the Trust Securities"
means, except as otherwise required by the Trust Indenture Act and except as
provided in the penultimate paragraph of Section 5 of Exhibit B hereto,
Holder(s) of outstanding Trust Securities voting together as
<PAGE>
6
a single class or, as the context may require, Holder(s) of outstanding
Preferred Securities or Common Securities voting separately as a class, who are
the record owners of a relevant class of Trust Securities whose aggregate
liquidation amount represents more than 50% of the aggregate liquidation amount
of all outstanding Trust Securities of such class.
"Ministerial Action" has the meaning set forth in the terms of the
Trust Securities as set forth in Exhibits B and C hereto.
"Paying Agent" has the meaning specified in Section 3.08(i).
"Person" means a legal person, including any individual, corporation,
estate, partnership, joint venture, association, joint stock company, limited
liability company, trust, unincorporated association, or government or any
agency or political subdivision thereof, or any other entity of whatever nature.
"Preferred Security" has the meaning specified in Section 7.01(b).
"Preferred Security Beneficial Owner" means, with respect to a Book
Entry Interest, a Person who is the beneficial owner of such Book Entry
Interest, as reflected on the books of the Clearing Agency, or on the books of a
Person maintaining an account with such Clearing Agency (directly as a Clearing
Agency Participant or as an indirect participant, in each case in accordance
with the rules of such Clearing Agency).
"Preferred Security Certificate" means a definitive certificate in
fully registered form representing a Preferred Security substantially in the
form of Annex I to Exhibit B.
"Property Trustee" means the Trustee meeting the eligibility
requirements set forth in Section 5.01(c) and having the duties set forth for
the Property Trustee herein.
"Property Account" has the meaning specified in Section 3.08(c)(i).
<PAGE>
7
"Quorum" means a majority of the Regular Trustees or, if there are
only two Regular Trustees, both such Regular Trustees.
"Regular Trustee" means any Trustee other than the Property Trustee
and the Delaware Trustee.
"Related Party" means any direct or indirect wholly owned subsidiary
of Time Warner or any other Person which owns, directly or indirectly, 100% of
the outstanding voting securities of Time Warner.
"Resignation Request" has the meaning specified in Section 5.02(d).
"Responsible Officer" means, with respect to the Property Trustee, the
chairman of the board of directors, any vice chairman, the president, any
executive vice president, any senior vice president, any vice-president, any
assistant vice president, the secretary, any assistant secretary, the treasurer,
any assistant treasurer, any trust officer or assistant trust officer or any
other officer of the Property Trustee customarily performing functions similar
to those performed by any of the above designated officers and also means, with
respect to a particular corporate trust matter, any other officer to whom such
matter is referred because of that officer's knowledge of and familiarity with
the particular subject.
"Rule 3a-5" means Rule 3a-5 under the Investment Company Act or any
successor rule thereunder.
"Securities Act" means the Securities Act of 1933, as amended from
time to time, or any successor legislation.
"Special Event" has the meaning set forth in the terms of the Trust
Securities as set forth in Exhibits B and C hereto.
"Special Redemption Date" has the meaning set forth in the terms of
the Trust Securities as set forth in Exhibits B and C hereto.
"Special Redemption Price" has the meaning set forth in the terms of
the Trust Securities as set forth in Exhibits B and C hereto.
<PAGE>
8
"Special Regular Trustee" means a Regular Trustee appointed by the
Holders of a Majority in aggregate liquidation amount of the Preferred
Securities in accordance with Section 5.02(a)(ii)(B).
"Sponsor" or "Time Warner" means Time Warner Inc., a Delaware
corporation, or any successor entity, in its capacity as sponsor of the Trust.
"Subordinated Debentures" means the series of Subordinated Debentures
issued by Time Warner under the Indenture to the Property Trustee and entitled
the [ ]% Subordinated Debentures due 2025.
"Successor Delaware Trustee" has the meaning specified in Section
5.02(b)(ii).
"Successor Property Trustee" means a successor Trustee possessing the
qualifications to act as Property Trustee set forth in Section 5.01(c).
"10% in aggregate liquidation amount of the Trust Securities" means,
except as otherwise required by the Trust Indenture Act and except as provided
in the penultimate paragraph of paragraph 5 of Exhibit B hereto, Holder(s) of
outstanding Trust Securities voting together as a single class or, as the
context may require, Holder(s) of outstanding Preferred Securities or Common
Securities, voting separately as a class, who are the record owners of a
relevant class of Trust Securities whose aggregate liquidation amount represents
10% or more of the aggregate liquidation amount of all outstanding Trust
Securities of such class.
"Treasury Regulations" means the income tax regulations, including
temporary and proposed regulations, promulgated under the Code by the United
States Treasury, as such regulations may be amended from time to time (including
corresponding provisions of succeeding regulations).
"Trustee" or "Trustees" means each Person who has signed this
Declaration as a trustee, so long as such Person shall continue in office in
accordance with the terms hereof, and all other Persons who may from time to
time be duly appointed, qualified and serving as Trustees in accordance with the
provisions hereof, and references herein to a Trustee or the Trustees shall
refer to such Person or Persons solely in their capacity as trustees hereunder.
<PAGE>
9
"Trust Indenture Act" means the Trust Indenture Act of 1939, as
amended.
"Trust Securities" means the Common Securities and the Preferred
Securities.
"Underwriting Agreement" means the underwriting agreement dated
[ ], 1995, among Time Warner, the Trust and Morgan Stanley & Co.
Incorporated and Merrill Lynch, Pierce, Fenner & Smith Incorporated, as co-
representatives of the several underwriters named therein, with respect to,
among other things, the Preferred Securities.
ARTICLE II
Trust Indenture Act
-------------------
SECTION 2.01. Trust Indenture Act; Application.
---------------------------------
(a) This Declaration is subject to the provisions of the Trust
Indenture Act that are required to be part of this Declaration and shall,
to the extent applicable, be governed by such provisions;
(b) if and to the extent that any provision of this Declaration
limits, qualifies or conflicts with the duties imposed by (S)(S) 310 to
317, inclusive, of the Trust Indenture Act, such imposed duties shall
control;
(c) the Property Trustee shall be the only Trustee which is a trustee
for the purposes of the Trust Indenture Act; and
(d) the application of the Trust Indenture Act to this Declaration
shall not affect the nature of the Trust Securities as equity securities
representing undivided beneficial interests in the assets of the Trust.
SECTION 2.02. Lists of Holders of Preferred Securities. (a) Each of
-----------------------------------------
the Sponsor and the Regular Trustees on behalf of the Trust shall provide the
Property Trustee with such information as is required under (S) 312(a) of the
Trust Indenture Act at the times and in the manner provided in (S) 312(a).
<PAGE>
10
(b) The Property Trustee shall comply with its obligations under
(S)(S) 310(b), 311 and 312(b) of the Trust Indenture Act.
SECTION 2.03. Reports by the Property Trustee. Within 60 days after
--------------------------------
May 15 of each year, the Property Trustee shall provide to the Holders of the
Trust Securities such reports as are required by (S) 313 of the Trust Indenture
Act, if any, in the form, in the manner and at the times provided by (S) 313 of
the Trust Indenture Act. The Property Trustee shall also comply with the
requirements of (S) 313(d) of the Trust Indenture Act.
SECTION 2.04. Periodic Reports to Property Trustee. Each of the
-------------------------------------
Sponsor and the Regular Trustees on behalf of the Trust shall provide to the
Property Trustee, the Commission and the Holders of the Trust Securities, as
applicable, such documents, reports and information as required by (S)
314(a)(l)-(3), if any, of the Trust Indenture Act and the compliance
certificates required by (S) 314(a)(4) and (c) of the Trust Indenture Act, any
such certificates to be provided in the form, in the manner and at the times
required by (S) 314(a)(4) and (c) of the Trust Indenture Act; provided that any
--------
certificate to be provided pursuant to (S) 314(a)(4) of the Trust Indenture Act
shall be provided within 120 days of the end of each Fiscal Year.
SECTION 2.05. Evidence of Compliance with Conditions Precedent. Each
-------------------------------------------------
of the Sponsor and the Regular Trustees on behalf of the Trust shall provide to
the Property Trustee such evidence of compliance with any conditions precedent,
if any, provided for in this Declaration which relate to any of the matters set
forth in (S) 314(c) of the Trust Indenture Act. Any certificate or opinion
required to be given pursuant to (S) 314(c) shall comply with (S) 314(e) of the
Trust Indenture Act.
SECTION 2.06. Events of Default; Waiver. (a) Subject to Section
--------------------------
2.06(c), Holders of Preferred Securities may by vote of at least a Majority in
aggregate liquidation amount of the Preferred Securities (i) in accordance with
the terms of the Preferred Securities direct the time, method, and place of
conducting any proceeding for any remedy available to the Property Trustee, or
exercising any trust or power conferred upon the Property Trustee hereunder or
(ii) on behalf of the Holders of all Preferred Securities waive any past Event
of Default in respect of the
<PAGE>
11
Preferred Securities and its consequences, provided that if the Event of Default
arises out of an Indenture Event of Default:
(A) which is not waivable under the Indenture, the Event of Default
under this Declaration shall also be not waivable; or
(B) which requires the consent or vote of (1) holders of Subordinated
Debentures representing a specified percentage greater than a majority in
principal amount of the Subordinated Debentures, or (2) each holder of
Subordinated Debentures, the Event of Default under this Declaration may
only be waived by, in the case of clause (1) above, the vote of Holders of
Preferred Securities representing such specified percentage of the
aggregate liquidation amount of the Preferred Securities, or, in the case
of clause (2) above, each Holder of Preferred Securities.
Upon such waiver, any such default shall cease to exist, and any Event of
Default with respect to the Preferred Securities arising therefrom shall be
deemed to have been cured, for every purpose of this Declaration, but no such
waiver shall extend to any subsequent or other default or Event of Default with
respect to the Preferred Securities or impair any right consequent thereon.
(b) Subject to Section 2.06(c), Holders of Common Securities may by
vote of at least a Majority in aggregate liquidation amount of the Common
Securities, (i) in accordance with the terms of the Common Securities, direct
the time, method, and place of conducting any proceeding for any remedy
available to the Property Trustee, or exercising any trust or power conferred
upon the Property Trustee or (ii) on behalf of the Holders of all of the Common
Securities, waive any past Event of Default with respect to the Common
Securities and its consequences, provided that, if the Event of Default arises
out of an Indenture Event of Default:
(A) which is not waivable under the Indenture, except where the
Holders of the Common Securities are deemed to have waived such Event of
Default under the Declaration as provided below, the Event of Default under
this Declaration shall also not be waivable; or
<PAGE>
12
(B) which requires the consent or vote of (1) holders of Subordinated
Debentures representing a specified percentage greater than a majority in
principal amount of the Subordinated Debentures or (2) each holder of
Subordinated Debentures, except where the holders of the Common Securities
are deemed to have waived such Event of Default under this Declaration as
provided below, the Event of Default under this Declaration may only be
waived by, in the case of clause (1) above, the vote of Holders of Common
Securities representing such specified percentage of the aggregate
liquidation amount of the Common Securities, or, in the case of clause (2)
above, each holder of Common Securities; and
provided further that, each Holder of Common Securities will be deemed to have
- ----------------
waived any Event of Default with respect to the Common Securities and its
consequences until all Events of Default with respect to the Preferred
Securities have been cured, waived by the Holders of Preferred Securities as
provided in this Declaration or otherwise eliminated and until all Events of
Default with respect to the Preferred Securities have been so cured, waived or
otherwise eliminated, the Property Trustee will be deemed to be acting solely on
behalf of the Holders of the Preferred Securities and only the Holders of the
Preferred Securities will have the right to direct the Property Trustee in
accordance with the terms of this Declaration or the Trust Securities. In the
event that any Event of Default with respect to the Preferred Securities is
waived by the Holders of Preferred Securities as provided in this Declaration,
the Holders of Common Securities agree that such waiver shall also constitute
the waiver of such Event of Default with respect to the Common Securities for
all purposes under this Declaration without any further act, vote or consent of
the Holders of the Common Securities. Subject to the foregoing provisions of
this Section 2.06(b), upon such waiver, any such default shall cease to exist
and any Event of Default with respect to the Common Securities arising therefrom
shall be deemed to have been cured, for every purpose of this Declaration, but
no such waiver shall extend to any subsequent or other default or Event of
Default with respect to the Common Securities or impair any right consequent
thereon.
(c) The right of any Holder of Trust Securities to receive payment of
Distributions on the Trust Securities in accordance with this Declaration and
the terms of the
<PAGE>
13
Trust Securities set forth in Exhibits B and C on or after the respective
payment dates therefor, or to institute suit for the enforcement of any such
payment on or after such payment dates, shall not be impaired without the
consent of each such Holder.
(d) As provided in the terms of the Trust Securities set forth in
Exhibits B and C hereto, a waiver of an Indenture Event of Default by the
Property Trustee at the written direction of the Holders of the Preferred
Securities constitutes a waiver of the corresponding Event of Default under this
Declaration in respect of the Trust Securities.
SECTION 2.07. Disclosure of Information. The disclosure of
--------------------------
information as to the names and addresses of the Holders of the Trust Securities
in accordance with (S) 312 of the Trust Indenture Act, regardless of the source
from which such information was derived, shall not be deemed to be a violation
of any existing law, or any law hereafter enacted which does not specifically
refer to (S) 312 of the Trust Indenture Act, nor shall the Property Trustee be
held accountable by reason of mailing any material pursuant to a request made
under (S) 312(b) of the Trust Indenture Act.
ARTICLE III
Organization
------------
SECTION 3.01. Name. The Trust is named "Time Warner Capital I" as
-----
such name may be modified from time to time by the Regular Trustees following
written notice to the Holders of Trust Securities. The Trust's activities may
be conducted under the name of the Trust or any other name deemed advisable by
the Regular Trustees.
SECTION 3.02. Office. The address of the principal office of the
-------
Trust is c/o Time Warner Inc., 75 Rockefeller Plaza, New York, New York 10019.
Upon ten days written notice to the Holders, the Regular Trustees may change the
location of the Trust's principal office.
SECTION 3.03. Purpose. The exclusive purposes and functions of the
--------
Trust are: (a) to issue and sell Trust Securities and use the proceeds from
such sale to acquire the Subordinated Debentures and (b) except as otherwise
limited herein, to engage in only those other activities necessary or incidental
thereto. The Trust shall not borrow
<PAGE>
14
money, issue debt or reinvest proceeds derived from investments, pledge any of
its assets or at any time otherwise undertake (or permit to be undertaken) any
activity that would result in or cause the Trust to be treated as an association
taxable as a corporation or partnership for United States Federal income tax
purposes or as anything other than a grantor trust for United States Federal
income tax purposes.
SECTION 3.04. Authority. Subject to the limitations provided in this
----------
Declaration and to the specific duties of the Property Trustee, the Regular
Trustees shall have exclusive and complete authority to carry out the purposes
of the Trust. An action taken by the Regular Trustees in accordance with their
powers shall constitute the act of and serve to bind the Trust and an action
taken by the Property Trustee in accordance with its powers shall constitute the
act of and serve to bind the Trust. In dealing with the Trustees acting on
behalf of the Trust, no Person shall be required to inquire into the authority
of the Trustees to bind the Trust. Persons dealing with the Trust are entitled
to rely conclusively on the power and authority of the Trustees as set forth in
this Declaration.
SECTION 3.05. Title to Property of the Trust. Except as provided in
-------------------------------
Section 3.08 with respect to the Subordinated Debentures and the Property
Account or unless otherwise provided in this Declaration, legal title to all
assets of the Trust shall be vested in the Trust. The Holders of Trust
Securities shall not have legal title to any part of the assets of the Trust,
but shall have an undivided beneficial interest in the assets of the Trust.
SECTION 3.06. Powers and Duties of the Regular Trustees. The Regular
------------------------------------------
Trustees shall have the exclusive power, authority and duty to cause the Trust,
and shall cause the Trust, to engage in the following activities:
(a) to issue and sell the Preferred Securities and the Common
Securities, in each case in accordance with this Declaration; provided,
--------
however, that the Trust may issue no more than one series of Preferred
-------
Securities and no more than one series of Common Securities; and, provided
--------
further, there shall be no interests in the Trust other than the Trust
-------
Securities and the issuance of Trust Securities shall be limited to a one-
time, simultaneous issuance of both Preferred Securities and Common
Securities;
<PAGE>
15
(b) to acquire the Subordinated Debentures with the proceeds of the
sale of the Preferred Securities and the Common Securities; provided,
--------
however, the Regular Trustees shall cause legal title to all of the
-------
Subordinated Debentures to be vested in, and the Subordinated Debentures to
be held of record in the name of, the Property Trustee for the benefit of
the Holders of the Preferred Securities and the Common Securities;
(c) to give the Sponsor and the Property Trustee prompt written notice
of the occurrence of any Special Event and to take any Ministerial Actions
in connection therewith; provided, that the Regular Trustees shall consult
--------
with the Sponsor and the Property Trustee before taking or refraining to
take any Ministerial Action in relation to a Special Event;
(d) to establish a record date with respect to all actions to be taken
hereunder that require a record date be established, including for the
purposes of (S) 316(c) of the Trust Indenture Act and with respect to
Distributions, voting rights, redemptions, and exchanges, and to issue
relevant notices to Holders of the Preferred Securities and Common
Securities as to such actions and applicable record dates;
(e) to bring or defend, pay, collect, compromise, arbitrate, resort to
legal action, or otherwise adjust claims or demands of or against the Trust
("Legal Action"), unless pursuant to Section 3.08(e), the Property Trustee
has the exclusive power to bring such Legal Action;
(f) to employ or otherwise engage employees and agents (who may be
designated as officers with titles) and managers, contractors, advisors,
and consultants and pay reasonable compensation for such services;
(g) to cause the Trust to comply with the Trust's obligations under
the Trust Indenture Act;
(h) to give the certificate to the Property Trustee required by (S)
314(a)(4) of the Trust Indenture Act, which certificate may be executed by
any Regular Trustee;
<PAGE>
16
(i) to incur expenses which are necessary or incidental to carrying
out any of the purposes of the Trust;
(j) to act as, or appoint another Person to act as, registrar and
transfer agent for the Trust Securities, the Regular Trustees hereby
initially appointing the Property Trustee for such purposes;
(k) to take all actions and perform such duties as may be required of
the Regular Trustees pursuant to the terms of the Trust Securities set
forth in Exhibits B and C hereto;
(l) to execute all documents or instruments, perform all duties and
powers, and do all things for and on behalf of the Trust in all matters
necessary or incidental to the foregoing;
(m) to take all action that may be necessary or appropriate for the
preservation and the continuation of the Trust's valid existence, rights,
franchises and privileges as a statutory business trust under the laws of
the State of Delaware and of each other jurisdiction in which such
existence is necessary to protect the limited liability of the Holders of
the Trust Securities or to enable the Trust to effect the purposes for
which the Trust has been created;
(n) to take any action, not inconsistent with this Declaration or with
applicable law, which the Regular Trustees determine in their discretion to
be reasonable and necessary or desirable in carrying out the activities of
the Trust as set out in this Section 3.06, in order that:
(i) the Trust will not be deemed to be an Investment Company
required to be registered under the Investment Company Act;
(ii) the Trust will not be classified for United States Federal
income tax purposes as an association taxable as a corporation or a
partnership and will be treated as a grantor trust for United States
Federal income tax purposes; and
(iii) the Trust comply with any requirements imposed by any
taxing authority on holders of
<PAGE>
17
instruments treated as indebtedness for United States Federal income
tax purposes;
provided that such action does not adversely affect the interests of
--------
Holders;
(o) to take all action necessary to cause all applicable tax returns
and tax information reports that are required to be filed with respect to
the Trust to be duly prepared and filed by the Regular Trustees, on behalf
of the Trust; and
(p) subject to the requirements of (S)317(b) of the Trust Indenture
Act, to appoint one or more Paying Agents in addition to the Property
Trustee.
The Regular Trustees must exercise the powers set forth in this
Section 3.06 in a manner which is consistent with the purposes and functions of
the Trust set out in Section 3.03 and the Regular Trustees shall not take any
action which is inconsistent with the purposes and functions of the Trust set
forth in Section 3.03; and
Subject to this Section 3.06, the Regular Trustees shall have none of
the powers nor any of the authority of the Property Trustee set forth in Section
3.08.
SECTION 3.07. Prohibition of Actions by Trust and Trustees. The
---------------------------------------------
Trust shall not, and the Trustees (including the Property Trustee) shall cause
the Trust not to, engage in any activity other than as required or authorized by
this Declaration. In particular, the Trust shall not and the Trustees
(including the Property Trustee) shall cause the Trust not to:
(a) invest any proceeds received by the Trust from holding the
Subordinated Debentures but shall promptly distribute all such proceeds to
Holders of Trust Securities pursuant to the terms of this Declaration and
of the Trust Securities;
(b) acquire any assets other than as expressly provided herein;
(c) possess Trust property for other than a Trust purpose;
<PAGE>
18
(d) make any loans, other than loans represented by the Subordinated
Debentures;
(e) possess any power or otherwise act in such a way as to vary the
Trust assets or the terms of the Trust Securities in any way whatsoever;
(f) issue any securities or other evidences of beneficial ownership
of, or beneficial interests in, the Trust other than the Trust Securities;
(g) incur any indebtedness for borrowed money;
(h) except as contemplated by Section 2.06, (i) direct the time,
method and place of exercising any trust or power conferred upon the
Indenture Trustee with respect to the Subordinated Debentures, (ii) waive
any past default that is waivable under Section 5.13 of the Indenture,
(iii) exercise any right to rescind or annul any declaration that the
Subordinated Debentures shall be due and payable or (iv) consent to any
amendment, modification or termination of the Indenture or the Subordinated
Debentures, where such consent shall be required, unless the Property
Trustee shall have received an unqualified opinion of nationally recognized
independent tax counsel experienced in such matters to the effect that such
action will not result in the Trust being treated as an association taxable
as a corporation or partnership for United States Federal income tax
purposes and that, following such action, each holder of Trust Securities
will be treated for United States Federal income tax purposes as owning an
undivided beneficial interest in the Subordinated Debentures; or
(i) consolidate, amalgamate, merge with or into, or be replaced by, or
convey, transfer or lease its properties and assets to, any corporation or
other body.
SECTION 3.08. Powers and Duties of the Property Trustee. (a) The
------------------------------------------
legal title to the Subordinated Debentures shall be owned by and held of record
in the name of the Property Trustee in trust for the benefit of the Trust and
the Holders of the Trust Securities. The right, title and interest of the
Property Trustee to the Subordinated Debentures shall vest automatically in each
Person who may hereafter be appointed as Property Trustee in
<PAGE>
19
accordance with Article V. Such vesting and cessation of title shall be
effective whether or not conveyancing documents have been executed and
delivered.
(b) The Property Trustee shall not transfer its right, title and
interest in the Subordinated Debentures to the Regular Trustees or, if the
Property Trustee does not also act as the Delaware Trustee, the Delaware
Trustee.
(c) The Property Trustee shall:
(i) establish and maintain a segregated non-interest bearing bank
account (the "Property Account") in the name of and under the exclusive
control of the Property Trustee on behalf of the Trust and the Holders of
the Trust Securities and on the receipt of payments of funds made in
respect of the Subordinated Debentures held by the Property Trustee,
deposit such funds into the Property Account and, without any further acts
of the Property Trustee or the Regular Trustees, promptly make payments to
the Holders of the Preferred Securities and Common Securities from the
Property Account in accordance with Section 6.01. Funds in the Property
Account shall be held uninvested, and without liability for interest
thereon, until disbursed in accordance with this Declaration. The Property
Account shall be an account which is maintained with a banking institution
whose long term unsecured indebtedness is rated by a "nationally recognized
statistical rating organization", as such term is defined for purposes of
Rule 436(g)(2) under the Securities Act, at least equal to (but in no event
less than "A" or the equivalent) the rating assigned to the Preferred
Securities by a nationally recognized statistical rating organization;
(ii) engage in such ministerial activities as shall be necessary or
appropriate to effect promptly the redemption of the Preferred Securities
and the Common Securities to the extent the Subordinated Debentures are
redeemed or mature;
(iii) upon notice of distribution issued by the Regular Trustees in
accordance with the terms of the Preferred Securities and the Common
Securities, engage in such ministerial activities as shall be necessary or
appropriate to effect promptly the distribution pursuant to terms of the
Trust Securities of
<PAGE>
20
Subordinated Debentures to Holders of Trust Securities upon the occurrence
of a Special Event; and
(iv) have the legal power to exercise all of the rights, powers and
privileges of a holder of the Subordinated Debentures under the Indenture
and, if an Event of Default occurs and is continuing, the Property Trustee,
subject to Section 2.06, shall for the benefit of the Holders of the Trust
Securities, enforce its rights as holder of the Subordinated Debentures
under the Indenture, subject to the rights of the Holders of the Trust
Securities pursuant to the terms of the Trust Securities, this Declaration,
the Business Trust Act and the Trust Indenture Act.
(d) The Property Trustee shall take all actions and perform such
duties as may be specifically required of the Property Trustee pursuant to the
terms of the Trust Securities set forth in Exhibits B and C hereto.
(e) Subject to Section 2.06, the Property Trustee shall take any Legal
Action which arises out of or in connection with an Event of Default or the
Property Trustee's duties and obligations under this Declaration, the Business
Trust Act or the Trust Indenture Act.
(f) All moneys deposited in the Property Account, and all Subordinated
Debentures held by the Property Trustee for the benefit of the Trust and the
Holders of the Trust Securities, will not be subject to any right, charge,
security interest, lien or claim of any kind in favor of, or for the benefit of,
the Property Trustee or its agents or their creditors.
(g) The Property Trustee shall, within 90 days after the occurrence of
a default with respect to the Trust Securities, transmit by mail, first class
postage prepaid, to the holders of the Trust Securities, as their names and
addresses appear upon the register, notice of all defaults with respect to the
Trust Securities known to the Property Trustee, unless such defaults shall have
been cured before the giving of such notice (the term "defaults" for the
purposes of this Section 3.08(g) being hereby defined to be an Indenture Event
of Default, not including any periods of grace provided for in the Indenture and
irrespective of the giving of any notice provided therein); provided, that,
--------
except in the case of default in the payment of the principal amount or any
redemption price or interest on any
<PAGE>
21
of the Subordinated Debentures, the Property Trustee shall be protected in
withholding such notice if and so long as the board of directors, the executive
committee, or a trust committee of directors and/or Responsible Officers, of the
Property Trustee in good faith determine that the withholding of such notice is
in the interests of the Holders of the Trust Securities. The Property Trustee
shall not be deemed to have knowledge of any default, except (i) a default in
the payment of principal or any redemption price or interest on the Subordinated
Debentures or (ii) any default as to which the Property Trustee shall have
received written notice or a Responsible Officer charged with the administration
of this Declaration shall have obtained written notice.
(h) The Property Trustee shall continue to serve as Property Trustee
unless either:
(i) the Trust has been completely liquidated and the proceeds thereof
distributed to the Holders of Trust Securities pursuant to the terms of the
Trust Securities; or
(ii) a Successor Property Trustee has been appointed and accepted that
appointment in accordance with Article V.
(i) The Property Trustee shall act as paying agent in respect of the
Trust Securities and may authorize one or more Persons (each, a "Paying Agent")
to pay Distributions, redemption payments or liquidation payments on behalf of
the Trust with respect to the Trust Securities. Any such Paying Agent shall
comply with (S) 317(b) of the Trust Indenture Act. Any Paying Agent may be
removed by the Property Trustee, after consultation with the Regular Trustees,
at any time and a successor Paying Agent or additional Paying Agents may be
appointed at any time by the Property Trustee.
(j) Subject to this Section 3.08, the Property Trustee shall have
none of the powers or the authority of the Regular Trustees set forth in Section
3.06.
The Property Trustee shall exercise the powers, duties and rights set forth in
this Section 3.08 and Section 3.10 in a manner that is consistent with the
purposes and functions of the Trust set out in Section 3.03 and the Property
Trustee shall not take any action which is inconsistent with the
<PAGE>
22
purposes and functions of the Trust set forth in Section 3.03.
SECTION 3.09. Delaware Trustee. Notwithstanding any other provision
-----------------
of this Declaration other than Section 5.01(a)(C), the Delaware Trustee shall
not be entitled to exercise any powers, nor shall the Delaware Trustee have any
of the duties and responsibilities of the Regular Trustees and the Property
Trustee described in this Declaration. Except as set forth in Section
5.01(a)(C), the Delaware Trustee shall be a Trustee for the sole and limited
purpose of fulfilling the requirements of (S) 3807 of the Business Trust Act.
SECTION 3.10. Certain Rights and Duties of the Property Trustee. (a)
--------------------------------------------------
The Property Trustee, before the occurrence of an Event of Default and after the
curing or waiver of all Events of Default that may have occurred, shall
undertake to perform only such duties as are specifically set forth in this
Declaration, and no implied covenants shall be read into this Declaration
against the Property Trustee. In case an Event of Default has occurred (that
has not been cured or waived pursuant to Section 2.06), the Property Trustee
shall exercise such of the rights and powers vested in it by this Declaration,
and use the same degree of care and skill in their exercise, as a prudent person
would exercise or use under the circumstances in the conduct of his or her own
affairs.
(b) No provision of this Declaration shall be construed to relieve the
Property Trustee from liability for its own negligent action, its own negligent
failure to act or its own wilful misconduct, except that:
(i) prior to the occurrence of an Event of Default and after the
curing or waiving of all such Events of Default that may have occurred:
(A) the duties and obligations of the Property Trustee shall be
determined solely by the express provisions of this Declaration, and
the Property Trustee shall not be liable except for the performance of
such duties and obligations as are specifically set forth in this
Declaration, and no implied covenants or obligations shall be read
into this Declaration against the Property Trustee; and
<PAGE>
23
(B) in the absence of bad faith on the part of the Property
Trustee, the Property Trustee may conclusively rely, as to the truth
of the statements and the correctness of the opinions expressed
therein, upon any certificates or opinions furnished to the Property
Trustee and conforming to the requirements of this Declaration; but in
the case of any such certificates or opinions that by any provision
hereof are specifically required to be furnished to the Property
Trustee, the Property Trustee shall be under a duty to examine the
same to determine whether or not they conform to the requirements of
this Declaration;
(ii) the Property Trustee shall not be liable for any error of
judgment made in good faith by a Responsible Officer of the Property
Trustee, unless it shall be proved that the Property Trustee was negligent
in ascertaining the pertinent facts;
(iii) the Property Trustee shall not be liable with respect to any
action taken or omitted to be taken by it in good faith in accordance with
the direction of the Holders as provided herein relating to the time,
method and place of conducting any proceeding for any remedy available to
the Property Trustee hereunder or under the Indenture, or exercising any
trust or power conferred upon the Property Trustee under this Declaration;
and
(iv) no provision of this Declaration shall require the Property
Trustee to expend or risk its own funds or otherwise incur personal
financial liability in the performance of any of its duties or in the
exercise of any of its rights or powers, if it shall have reasonable
grounds for believing that the repayment of such funds or liability is not
reasonably assured to it under the terms of this Declaration or adequate
indemnity against such risk or liability is not reasonably assured to it.
(c) Subject to the provisions of Section 3.10(a)
and (b):
(i) whenever in the administration of this Declaration, the Property
Trustee shall deem it desirable that a matter be proved or established
prior
<PAGE>
24
to taking, suffering or omitting any action hereunder, the Property Trustee
(unless other evidence is herein specifically prescribed) may, in the
absence of bad faith on its part request and rely upon a certificate, which
shall comply with the provisions of (S) 314(e) of the Trust Indenture Act,
signed by any two of the Regular Trustees or by an authorized officer of
the Sponsor, as the case may be;
(ii) the Property Trustee (A) may consult with counsel (which may be
counsel to the Sponsor or any of its Affiliates and may include any of its
employees) selected by it in good faith and with due care and the written
advice or opinion of such counsel with respect to legal matters shall be
full and complete authorization and protection in respect of any action
taken, suffered or omitted by it hereunder in good faith and in reliance
thereon and in accordance with such advice and opinion and (B) shall have
the right at any time to seek instructions concerning the administration of
this Declaration from any court of competent jurisdiction;
(iii) the Property Trustee may execute any of the trusts or powers
hereunder or perform any duties hereunder either directly or by or through
agents or attorneys and the Property Trustee shall not be responsible for
any misconduct or negligence on the part of any agent or attorney appointed
by it in good faith and with due care;
(iv) the Property Trustee shall be under no obligation to exercise any
of the rights or powers vested in it by this Declaration at the request or
direction of any Holders, unless such Holders shall have offered to the
Property Trustee reasonable security and indemnity against the costs,
expenses (including attorneys' fees and expenses) and liabilities that
might be incurred by it in complying with such request or direction;
provided that nothing contained in this clause (iv) shall relieve the
--------
Property Trustee of the obligation, upon the occurrence of an Event of
Default (which has not been cured or waived) to exercise such of the rights
and powers vested in it by this Declaration, and to use the same degree of
care and skill in this exercise, as a prudent person would exercise or use
under the circumstances in the conduct of his or her own affairs; and
<PAGE>
25
(v) any action taken by the Property Trustee or its agents hereunder shall
bind the Trust and the Holders of the Trust Securities and the signature of
the Property Trustee or its agents alone shall be sufficient and effective
to perform any such action; and no third party shall be required to inquire
as to the authority of the Property Trustee to so act, or as to its
compliance with any of the terms and provisions of this Declaration, both
of which shall be conclusively evidenced by the Property Trustee's or its
agent's taking such action.
SECTION 3.11. Registration Statement and Related Matters. In
-------------------------------------------
accordance with the Original Declaration, Time Warner and the Trustees have
authorized and directed, and hereby confirm the authorization of, Time Warner,
as the sponsor of the Trust, (a) to file with the Commission and execute, in
each case on behalf of the Trust, (i) the Registration Statement on Form S-3
(File Nos. 33-[ ] and 33-[ ] )(the "1933 Act Registration Statement")
including any pre-effective or post-effective amendments to such Registration
Statement, relating to the registration under the Securities Act of the
Preferred Securities of the Trust and (ii) a Registration Statement on Form 8-A
or other appropriate form (the "1934 Act Registration Statement") (including all
pre-effective and post-effective amendments thereto) relating to the
registration of the Preferred Securities of the Trust under Section 12(b) of the
Exchange Act; (b) to file with the New York Stock Exchange or any other national
securities exchange and execute on behalf of the Trust a listing application and
all other applications, statements, certificates, agreements and other
instruments as shall be necessary or desirable to cause the Preferred Securities
to be listed on the New York Stock Exchange or such other national securities
exchange; (c) to file and execute on behalf of the Trust such applications,
reports, surety bonds, irrevocable consents, appointments of attorney for
service of process and other papers and documents as shall be necessary or
desirable to register the Preferred Securities under the securities or "Blue
Sky" laws of such jurisdictions as Time Warner on behalf of the Trust may deem
necessary or desirable and (d) to execute on behalf of the Trust the
Underwriting Agreement relating to the issuance and sale of the Preferred
Securities, substantially in the form included as Exhibit 1 to the 1933 Act
Registration Statement with such changes thereto as may be approved by the
authorized officer of the Sponsor executing the same, such approval to be
evidenced by such officer's execution
<PAGE>
26
thereof. In the event that any filing referred to in clauses (a)-(c) above is
required by the rules and regulations of the Commission, the New York Stock
Exchange or state securities or blue sky laws, to be executed on behalf of the
Trust by the Trustees, the Regular Trustees, in their capacities as Trustees of
the Trust, are hereby authorized and directed to join in any such filing and to
execute on behalf of the Trust any and all of the foregoing, it being understood
that the Property Trustee and the Delaware Trustee, in their capacities as
Trustees of the Trust, shall not be required to join in any such filing or
execute on behalf of the Trust any such document unless required by the rules
and regulations of the Commission, the New York Stock Exchange or state
securities or blue sky laws. In connection with all of the foregoing, Time
Warner and each Trustee, solely in its capacity as Trustee of the Trust, have
constituted and appointed, and hereby confirm the appointment of, Gerald M.
Levin, Richard D. Parsons, Richard J. Bressler, Peter R. Haje and Philip R.
Lochner, and each of them, as his, her or its, as the case may be, true and
lawful attorneys-in-fact, and agents, with full power of substitution and
resubstitution, for Time Warner or such Trustee or in Time Warner's or such
Trustee's name, place and stead, in any and all capacities, to sign any and all
amendments (including post-effective amendments) to the 1933 Act Registration
Statement and the 1934 Act Registration Statement and to file the same, with all
exhibits thereto, and other documents in connection therewith, with the
Commission, and to execute and file with the New York Stock Exchange or any
other national securities exchange a listing application and all other
applications and documents as shall be necessary or desirable in connection
therewith, granting unto said attorneys-in-fact and agents full power and
authority to do and perform each and every act and thing requisite and necessary
to be done in connection therewith, as fully to all intents and purposes as Time
Warner or such Trustee might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents or any of them, or their
or his or her substitute or substitutes, shall do or cause to be done by virtue
hereof.
SECTION 3.12. Filing of Amendments to Certificate of Trust. The
---------------------------------------------
Certificate of Trust as filed with the Secretary of State of the State of
Delaware on August 2, 1995 is attached hereto as Exhibit A. On or after the date
of execution of this Declaration, the Trustees shall cause the filing with the
Secretary of State of the State of Delaware
<PAGE>
27
of such amendments to the Certificate of Trust as the Trustees shall deem
necessary or desirable.
SECTION 3.13. Execution of Documents by Regular Trustees. Unless
-------------------------------------------
otherwise determined by the Regular Trustees and except as otherwise required by
the Business Trust Act with respect to the Certificate of Trust or otherwise, a
majority of, or if there are only two, both of, the Regular Trustees are
authorized to execute and deliver on behalf of the Trust any documents which the
Regular Trustees have the power and authority to execute or deliver pursuant to
this Declaration; provided that any listing application prepared by the Sponsor
--------
referred to in Section 3.11(b) may be executed by any Regular Trustee.
SECTION 3.14. Trustees Not Responsible for Recitals or Issuance of
----------------------------------------------------
Trust Securities. The recitals contained in this Declaration and the Trust
- -----------------
Securities shall be taken as the statements of the Sponsor and the Trustees do
not assume any responsibility for their correctness. The Trustees make no
representations as to the value or condition of the property of the Trust or any
part thereof. The Trustees make no representations as to the validity or
sufficiency of this Declaration or the Trust Securities.
SECTION 3.15. Duration of Trust. The Trust, absent termination
------------------
pursuant to the provisions of Article VIII hereof, shall have existence for 55
years from the Closing Date.
ARTICLE IV
Sponsor
-------
SECTION 4.01. Purchase of Common Securities by Sponsor. The Sponsor
-----------------------------------------
will purchase all the Common Securities issued by the Trust at the same time as
the Preferred Securities are sold, in an amount equal to 3% of the capital of
the Trust after giving effect to such purchase.
SECTION 4.02. Expenses. (a) The Sponsor, in its capacity as Sponsor
---------
and not as a Holder, shall be responsible for and shall pay for all debts and
obligations (other than with respect to the Trust Securities) and all costs and
expenses of the Trust (including costs and expenses relating to the organization
of the Trust, the
<PAGE>
28
issuance of the Preferred Securities, the fees and expenses (including
reasonable counsel fees and expenses) of the Trustees (including any amounts
payable under Article X) and the costs and expenses relating to the operation of
the Trust, including costs and expenses of accountants, attorneys, statistical
or bookkeeping services, expenses for printing and engraving and computing or
accounting equipment, paying agent(s), registrar(s), transfer agent(s),
duplicating, travel and telephone and other telecommunications expenses and
costs and expenses incurred in connection with the disposition of Trust assets).
(b) The Sponsor, in its capacity as Sponsor and not as a Holder, will
pay any and all taxes (other than United States withholding taxes attributable
to the Trust or its assets) and all liabilities, costs and expenses with respect
to such taxes of the Trust.
(c) The Sponsor's obligations under this Section 4.02 shall be for the
benefit of, and shall be enforceable by, any Person to whom any such debts,
obligations, costs, expenses and taxes are owed (a "Creditor") whether or not
such Creditor has received notice hereof. Any such Creditor may enforce the
Sponsor's obligations under this Section 4.02 directly against the Sponsor and
the Sponsor irrevocably waives any right or remedy to require that any such
Creditor take any action against the Trust or any other Person before proceeding
against the Sponsor. The Sponsor agrees to execute such additional agreements
as may be necessary or desirable in order to give full effect to the provisions
of this Section 4.02.
ARTICLE V
Trustees
--------
SECTION 5.01. Number of Trustees; Qualifications. (a) The number of
-----------------------------------
Trustees initially shall be [five]. At any time (i) before the issuance of the
Trust Securities, the Sponsor may, by written instrument, increase or decrease
the number of, and appoint, remove and replace the, Trustees, and (ii) after the
issuance of the Trust Securities and except as provided in subsection (E) below
and Section 5.02(a)(ii)(B) with respect to the Special Regular Trustee, the
number of Trustees may be increased or decreased solely by, and Trustees may be
appointed, removed
<PAGE>
29
or replaced solely by, vote of Holders of Common Securities representing a
Majority in aggregate liquidation amount of the Common Securities voting as a
class; provided that in any case:
--------
(A) the number of Trustees shall be at least [five] unless the Trustee
that acts as the Property Trustee also acts as the Delaware Trustee, in
which case the number of Trustees shall be at least [four];
(B) unless a Special Regular Trustee has been appointed (which
appointment shall not impair the right of the Holders of Common Securities
to increase or decrease the number of, or to appoint, remove or replace,
Trustees (other than the Special Regular Trustee) as provided above), at
least a majority of the Trustees shall at all times be officers, directors
or employees of Time Warner;
(C) if required by the Business Trust Act, one Trustee (the "Delaware
Trustee") shall be either a natural person who is a resident of the State
of Delaware or, if not a natural person, an entity that has its principal
place of business in the State of Delaware and otherwise is permitted to
act as a Delaware Trustee hereunder under the laws of the State of
Delaware, except that if the Property Trustee has its principal place of
business in the State of Delaware and otherwise is permitted to act as a
Trustee hereunder under the laws of the State of Delaware, then the
Property Trustee shall also be the Delaware Trustee and Section 3.09 shall
have no application;
(D) there shall at all times be a Property Trustee hereunder that
shall satisfy the requirements of Section 5.01(c); and
(E) the number of Trustees shall be increased automatically by one if
an Appointment Event has occurred and is continuing and the Holders of a
Majority in aggregate liquidation amount of the Preferred Securities
appoint a Special Regular Trustee in accordance with Section 5.02(a)(ii)(B)
and the terms of the Preferred Securities.
Each Trustee shall be either a natural person at least 21 years of age or a
legal entity which shall act through one or more duly appointed representatives.
<PAGE>
30
(b) The initial Regular Trustees shall be:
John A. LaBarca
Philip R. Lochner, Jr.
Thomas W. McEnerney
c/o Time Warner Inc.
75 Rockefeller Plaza
New York, NY 10019
(c) There shall at all times be one Trustee that shall act as Property
Trustee. In order to act as Property Trustee hereunder, such Trustee shall:
(i) not be an Affiliate of the Sponsor; and
(ii) be a corporation organized and doing business under the laws of
the United States of America or any State or Territory thereof or of the
District of Columbia, or a corporation or Person permitted by the
Commission to act as an institutional trustee under the Trust Indenture
Act, authorized under such laws to exercise corporate trust powers, having
a combined capital and surplus of at least $50,000,000, and subject to
supervision or examination by Federal, State, Territorial or District of
Columbia authority. If such corporation publishes reports of condition at
least annually, pursuant to law or to the requirements of the supervising
or examining authority referred to above, then for the purposes of this
Section 5.01(c)(ii), the combined capital and surplus of such corporation
shall be deemed to be its combined capital and surplus as set forth in its
most recent report of condition so published.
If at any time the Property Trustee shall cease to satisfy any of the
requirements of clauses (i) and (ii) above, the Property Trustee shall
immediately resign in the manner and with the effect set out in Section 5.02(d).
If the Property Trustee has or shall acquire any "conflicting interest" within
the meaning of (S) 310(b) of the Trust Indenture Act, the Property Trustee and
the Holders of the Common Securities (as if such Holders were the obligor
referred to in (S) 310(b) of the Trust Indenture Act) shall in all respects
comply with the provisions of (S) 310(b) of the Trust Indenture Act. The
Guarantee shall be deemed to be specifically described in this Declaration for
the purposes of clause (i) of the first proviso contained in (S) 310(b) of the
Trust Indenture Act.
<PAGE>
31
The initial Trustee that shall serve as the Property Trustee is The
First National Bank of Chicago whose address is as set forth in Section
14.01(b).
(d) The initial Trustee that shall serve as the Delaware Trustee is
First Chicago Delaware Inc., whose address is as set forth in Section 14.01(c).
(e) Any action taken by (i) Holders of Common Securities pursuant to
this Article V or (ii) Holders of Preferred Securities pursuant to this Article
V to appoint or remove a Special Regular Trustee upon the occurrence of an
Appointment Event, shall be taken at a meeting of Holders of Common Securities
or Preferred Securities, as the case may be, convened for such purpose or by
written consent as provided in Section 12.02.
(f) No amendment may be made to this Section 5.01 which would change
any rights with respect to the number, existence or appointment and removal of
Trustees (other than any Special Regular Trustee), except with the consent of
each Holder of Common Securities.
(g) No amendment may be made to this Section 5.01 or Section
5.02(a)(ii)(B), which would change the rights of Holders of Preferred Securities
to appoint, remove or replace a Special Regular Trustee except with the consent
of each Holder of Preferred Securities.
SECTION 5.02. Appointment, Removal and Resignation of Trustees. (a)
-------------------------------------------------
Subject to Section 5.02(b), Trustees may be appointed or removed without cause
at any time:
(i) until the issuance of the Trust Securities, by written instrument
executed by the Sponsor; and
(ii) after the issuance of the Trust Securities,
(A) other than with respect to the Special Regular Trustee, by
vote of the Holders of a Majority in aggregate liquidation amount of
the Common Securities voting as a class; and
(B) if an Appointment Event has occurred and is continuing, one
additional Regular Trustee (the "Special Regular Trustee") may be
appointed, who shall not be an Affiliate of the Sponsor, by vote
<PAGE>
32
of the Holders of a Majority in aggregate liquidation amount of the
Preferred Securities, voting as a class and such Special Regular
Trustee may only be removed (otherwise than by the operation of
Section 5.02(c)), by vote of the Holders of a Majority in aggregate
liquidation amount of the Preferred Securities voting as a class.
(b) (i) The Trustee that acts as Property Trustee shall not be
removed in accordance with Section 5.02(a) until a Successor Property
Trustee possessing the qualifications to act as Property Trustee under
Section 5.01(c) has been appointed and has accepted such appointment by
written instrument executed by such Successor Property Trustee and
delivered to the Regular Trustees, the Sponsor and the Property Trustee
being removed; and
(ii) the Trustee that acts as Delaware Trustee shall not be removed in
accordance with Section 5.02(a) until a successor Trustee possessing the
qualifications to act as Delaware Trustee under Section 5.01(a)(C) (a
"Successor Delaware Trustee") has been appointed and has accepted such
appointment by written instrument executed by such Successor Delaware
Trustee and delivered to the Regular Trustees, the Sponsor and the Delaware
Trustee being removed.
(c) A Trustee appointed to office shall hold office until such
Trustee's successor shall have been appointed or until such Trustee's death,
removal or resignation, provided that a Special Regular Trustee shall only hold
--------
office while an Appointment Event is continuing and shall cease to hold office
immediately after the Appointment Event pursuant to which the Special Regular
Trustee was appointed and all other Appointment Events cease to be continuing.
(d) Any Trustee may resign from office (without need for prior or
subsequent accounting) by an instrument (a "Resignation Request") in writing
signed by the Trustee and delivered to the Sponsor and the Trust, which
resignation
<PAGE>
33
shall take effect upon such delivery or upon such later date as is specified
therein; provided, however, that:
-------- -------
(i) no such resignation of the Trustee that acts as the Property
Trustee shall be effective until a Successor Property Trustee possessing
the qualifications to act as Property Trustee under Section 5.01(c) has
been appointed and has accepted such appointment by instrument executed by
such Successor Property Trustee and delivered to the Trust, the Sponsor and
the resigning Property Trustee;
(ii) no such resignation of the Trustee that acts as the Delaware
Trustee shall be effective until a Successor Delaware Trustee has been
appointed and has accepted such appointment by instrument executed by such
Successor Delaware Trustee and delivered to the Trust, the Sponsor and the
resigning Delaware Trustee; and
(iii) no such resignation of a Special Regular Trustee shall be
effective until the 60th day following delivery of the Resignation Request
to the Sponsor and the Trust or such later date specified in the
Resignation Request during which period the Holders of the Preferred
Securities shall have the right to appoint a successor Special Regular
Trustee as provided in this Article V.
(e) If no Successor Property Trustee or Successor Delaware Trustee
shall have been appointed and accepted appointment as provided in this Section
5.02 within 60 days after delivery to the Sponsor and the Trust of a Resignation
Request, the resigning Property Trustee or Delaware Trustee may petition any
court of competent jurisdiction for appointment of a Successor Property Trustee
or Successor Delaware Trustee. Such court may thereupon after such notice, if
any, as it may deem proper and prescribe, appoint a Successor Property Trustee
or Successor Delaware Trustee, as the case may be.
SECTION 5.03. Vacancies Among Trustees. If a Trustee ceases to hold
-------------------------
office for any reason and the number of Trustees is not reduced pursuant to
Section 5.01 or if the number of Trustees is increased pursuant to Section 5.01,
a vacancy shall occur. A resolution certifying the existence of such vacancy by
a majority of the Regular Trustees shall be conclusive evidence of the existence
of
<PAGE>
34
such vacancy. The vacancy shall be filled with a Trustee appointed in
accordance with the requirements of this Article V.
SECTION 5.04. Effect of Vacancies. The death, resignation,
--------------------
retirement, removal, bankruptcy, dissolution, liquidation, incompetence or
incapacity to perform the duties of a Trustee, or any one of them, shall not
operate to annul the Trust. Whenever a vacancy in the number of Regular
Trustees shall occur until such vacancy is filled as provided in this Article V,
the Regular Trustees in office, regardless of their number, shall have all the
powers granted to the Regular Trustees and shall discharge all the duties
imposed upon the Regular Trustees by this Declaration.
SECTION 5.05. Meetings. Meetings of the Regular Trustees shall be
---------
held from time to time upon the call of any Trustee. Regular meetings of the
Regular Trustees may be held at a time and place fixed by resolution of the
Regular Trustees. Notice of any in-person meeting of the Regular Trustees shall
be hand-delivered or otherwise delivered in writing (including by facsimile) not
less than 24 hours before such meeting. Notice of any telephonic meeting of the
Regular Trustees or any committee thereof shall be hand-delivered or otherwise
delivered in writing (including by facsimile) not less than 24 hours before such
meeting. Notices shall contain a brief statement of the time, place and
anticipated purposes of the meeting. The presence (whether in person or by
telephone) of a Regular Trustee at a meeting shall constitute a waiver of notice
of such meeting except where a Regular Trustee attends a meeting for the express
purpose of objecting to the transaction of any activity on the ground that the
meeting has not been lawfully called or convened. Unless provided otherwise in
this Declaration, any action of the Regular Trustees may be taken at a meeting
by vote of a majority of the Regular Trustees present (whether in person or by
telephone) and eligible to vote with respect to such matter, provided that a
Quorum is present, or without a meeting by the unanimous written consent of the
Regular Trustees.
SECTION 5.06. Delegation of Power. (a) Any Regular Trustee may, by
--------------------
power of attorney consistent with applicable law, delegate to any other natural
person over the age of 21 his or her power for the purpose of executing any
documents contemplated in Section 3.11, including any registration statement or
amendment thereto or other
<PAGE>
35
document or schedule filed with the Commission, or making any other governmental
filing.
(b) The Regular Trustees shall have power to delegate from time to
time to such of their number or to officers of the Trust the doing of such
things and the execution of such instruments either in the name of the Trust or
the names of the Regular Trustees or otherwise as the Regular Trustees may deem
expedient, to the extent such delegation is not prohibited by applicable law or
contrary to the provisions of the Trust, as set forth herein.
ARTICLE VI
Distributions
-------------
SECTION 6.01. Distributions. Holders shall receive periodic
--------------
distributions, redemption payments and liquidation distributions in accordance
with the applicable terms of the relevant Holder's Trust Securities
("Distributions"). Distributions shall be made to the Holders of Preferred
Securities and Common Securities in accordance with the terms of the Trust
Securities as set forth in Exhibits B and C hereto. If and to the extent that
Time Warner makes a payment of interest or principal on the Subordinated
Debentures held by the Property Trustee (the amount of any such payment being a
"Payment Amount"), the Property Trustee shall and is directed to promptly make a
Distribution of the Payment Amount to Holders in accordance with the terms of
the Trust Securities as set forth in Exhibits B and C hereto.
ARTICLE VII
Issuance of Trust Securities
----------------------------
SECTION 7.01. General Provisions Regarding Trust Securities. (a)
----------------------------------------------
The Regular Trustees shall issue on behalf of the Trust securities in fully
registered form representing undivided beneficial interests in the assets of the
Trust in accordance with Section 7.01(b).
(b) The Regular Trustees shall issue on behalf of the Trust one class
of preferred securities representing undivided beneficial interests in the
assets of the Trust having such terms as are set forth in Exhibit B (the
<PAGE>
36
"Preferred Securities"), which terms are incorporated by reference in, and made
a part of, this Declaration as if specifically set forth herein, and one class
of common securities representing undivided beneficial interests in the assets
of the Trust having such terms as are set forth in Exhibit C (the "Common
Securities"), which terms are incorporated by reference in, and made a part of,
this Declaration as if specifically set forth herein. The Trust shall have no
securities or other interests in the assets of the Trust other than the
Preferred Securities and the Common Securities.
(c) The Certificates shall be signed on behalf of the Trust by the
Regular Trustees (or, if there are more than two Regular Trustees, by any two of
the Regular Trustees). Such signatures may be the manual or facsimile
signatures of the present or any future Regular Trustee. Typographical and
other minor errors or defects in any such reproduction of any such signature
shall not affect the validity of any Certificate. In case any Regular Trustee
of the Trust who shall have signed any of the Certificates shall cease to be
such Regular Trustee before the Certificate so signed shall be delivered by the
Trust, such Certificate nevertheless may be delivered as though the person who
signed such Certificate had not ceased to be such Regular Trustee; and any
Certificate may be signed on behalf of the Trust by such persons as, at the
actual date of the execution of such Certificate, shall be the Regular Trustees
of the Trust, although at the date of the execution and delivery of the
Declaration any such person was not such a Regular Trustee. Certificates shall
be printed, lithographed or engraved or may be produced in any other manner as
is reasonably acceptable to the Regular Trustees, as evidenced by their
execution thereof, and may have such letters, numbers or other marks of
identification or designation and such legends or endorsements as the Regular
Trustees may deem appropriate, or as may be required to comply with any law or
with any rule or regulation made pursuant thereto or with any rule or regulation
of any stock exchange on which the Trust Securities may be listed or of any
Clearing Agency in which the Trust Securities have been accepted for trading, or
to conform to usage.
(d) The consideration received by the Trust for the issuance of the
Trust Securities shall constitute a contribution to the capital of the Trust and
shall not constitute a loan to the Trust.
<PAGE>
37
(e) Upon issuance of the Trust Securities as provided in this
Declaration, the Trust Securities so issued shall be deemed to be validly
issued, fully paid and nonassessable.
(f) Every Person, by virtue of having become a Holder or a Preferred
Security Beneficial Owner in accordance with the terms of this Declaration,
shall be deemed to have expressly assented and agreed to the terms of and shall
be bound by this Declaration.
(g) Upon issuance of the Trust Securities as provided in this
Declaration, the Regular Trustees on behalf of the Trust shall return to Time
Warner the $10 constituting initial trust assets as set forth in the Original
Declaration.
ARTICLE VIII
Termination of Trust
--------------------
SECTION 8.01. Termination of Trust. This Declaration and the Trust
---------------------
shall terminate and be of no further force or effect upon the earliest of:
(a) when all the Trust Securities shall have been called for
redemption and the amounts necessary for redemption thereof, including any
accrued and unpaid Distributions thereon to the applicable date of
redemption, shall have been paid to the Holders of the Trust Securities in
accordance with the terms of the Trust Securities;
(b) when all the Subordinated Debentures shall have been distributed
to the Holders of Trust Securities in exchange for all the Trust Securities
in accordance with the terms of the Trust Securities;
(c) upon the expiration of the term of the Trust as set forth in
Section 3.15; or
(d) if Time Warner shall direct the Trustees to terminate the Trust,
provided that Time Warner shall be the holder at such time of all the
--------
outstanding Preferred Securities;
<PAGE>
38
and a certificate of cancellation is filed by the Trustees with the Secretary of
State of the State of Delaware. The Trustees shall so file such a certificate
as soon as practicable after the occurrence of an event referred to in this
Article VIII.
The provisions of Sections 3.10 and Article X shall survive the
termination of the Trust.
ARTICLE IX
Transfer of Interests
---------------------
SECTION 9.01. Transfer of Trust Securities. (a) Trust Securities
----------------------------
may only be transferred, in whole or in part, in accordance with the terms and
conditions set forth in this Declaration. Any transfer or purported transfer of
any Trust Security not made in accordance with this Declaration shall be null
and void.
(b) Subject to this Article IX, Preferred Securities shall be freely
transferable.
(c) Subject to this Article IX, Time Warner and any Related Party may
only transfer Common Securities to Time Warner or a Related Party; provided that
--------
any such transfer shall be subject to the condition that the transferor shall
have obtained (i) either a ruling from the Internal Revenue Service or an
unqualified written opinion addressed to the Trust and delivered to the Trustees
of nationally recognized independent tax counsel experienced in such matters to
the effect that such transfer will not (A) cause the Trust to be treated as
issuing a class of interests in the Trust differing from the class of interests
represented by the Common Securities originally issued to Time Warner, (B)
result in the Trust acquiring or disposing of, or being deemed to have acquired
or disposed of, an asset or (C) result in or cause the Trust to be treated as an
association taxable as a corporation or partnership for United States Federal
income tax purposes or as anything other than a grantor trust for United States
Federal income tax purposes and (ii) an unqualified written opinion addressed to
the Trust and delivered to the Trustees of a nationally recognized independent
counsel experienced in such matters that such transfer will not cause the Trust
to be an Investment Company or controlled by an Investment Company.
<PAGE>
39
SECTION 9.02. Transfer of Certificates. The Regular Trustees shall
-------------------------
provide for the registration of Certificates and of transfers of Certificates,
which will be effected without charge but only upon payment (with such indemnity
as the Regular Trustees may require) in respect of any tax or other government
charges which may be imposed in relation to such transfers. Upon surrender for
registration of transfer of any Certificate, the Regular Trustees shall cause
one or more new Certificates to be issued in the name of the designated
transferee or transferees. Every Certificate surrendered for registration of
transfer shall be accompanied by a written instrument of transfer in form
satisfactory to the Regular Trustees duly executed by the Holder or such
Holder's attorney duly authorized in writing. Each Certificate surrendered for
registration of transfer shall be canceled by the Regular Trustees. A
transferee of a Certificate shall be entitled to the rights and subject to the
obligations of a Holder hereunder upon the receipt by such transferee of a
Certificate. By acceptance of a Certificate, each transferee shall be deemed to
have agreed to be bound by this Declaration.
SECTION 9.03. Deemed Security Holders. The Trustees may treat the
------------------------
Person in whose name any Certificate shall be registered on the books and
records of the Trust as the sole holder of such Certificate and of the Trust
Securities represented by such Certificate for purposes of receiving
Distributions and for all other purposes whatsoever and, accordingly, shall not
be bound to recognize any equitable or other claim to or interest in such
Certificate or in the Trust Securities represented by such Certificate on the
part of any Person, whether or not the Trustees shall have actual or other
notice thereof.
SECTION 9.04. Book-Entry Interests. The Preferred Securities
---------------------
Certificates, on original issuance, will be issued in fully registered form.
With respect to any Certificates registered on the books and records of the
Trust in the name of a Clearing Agency or the nominee of a Clearing Agency:
(a) the Trust and the Trustees shall be entitled to deal with the
Clearing Agency for all purposes of this Declaration (including the payment
of Distributions on such Certificates and receiving approvals, votes or
consents hereunder) as the Preferred Security Holder and the sole holder of
such Certificates and, except as set forth herein, shall
<PAGE>
40
have no obligation to the Preferred Security Beneficial Owners;
(b) to the extent that the provisions of this Section 9.04 conflict
with any other provisions of this Declaration, the provisions of this
Section 9.04 shall control; and
(c) the rights of the Preferred Security Beneficial Owners shall be
exercised only through the Clearing Agency and shall be limited to those
established by law and agreements between such Preferred Security
Beneficial Owners and the Clearing Agency and/or the Clearing Agency
Participants. The Clearing Agency will make book-entry transfers among
Clearing Agency Participants and receive and transmit payments of
Distributions on such Certificates to such Clearing Agency Participants.
SECTION 9.05. Notices to Holders of Certificates. Whenever a notice
-----------------------------------
or other communication to the Holders is required to be given under this
Declaration, the relevant Trustees shall give such notices and communications to
the Holders and, with respect to any Preferred Security Certificate registered
in the name of a Clearing Agency or the nominee of a Clearing Agency, the
Trustees shall, except as set forth herein with respect to the Property Trustee,
have no obligations to the Preferred Security Beneficial Owners.
SECTION 9.06. Appointment of Successor Clearing Agency. If any
-----------------------------------------
Clearing Agency elects to discontinue its services as securities depositary with
respect to the Preferred Securities, the Regular Trustees may, in their sole
discretion, appoint a successor Clearing Agency with respect to the Preferred
Securities.
SECTION 9.07. Definitive Preferred Securities Certificates. If (a) a
---------------------------------------------
Clearing Agency elects to discontinue its services as securities depositary with
respect to the Preferred Securities and a successor Clearing Agency is not
appointed within 90 days after such discontinuance pursuant to Section 9.06 or
(b) the Regular Trustees elect after consultation with the Sponsor to terminate
the book-entry system through the Clearing Agency with respect to the Preferred
Securities, then upon surrender of the Certificates representing the Book Entry
Interests with respect to the Preferred Securities by the
<PAGE>
41
Clearing Agency, accompanied by registration instructions, the Regular Trustees
shall cause definitive Preferred Security Certificates to be delivered to
Preferred Security Beneficial Owners in accordance with the instructions of the
Clearing Agency. Neither the Trustees nor the Trust shall be liable for any
delay in delivery of such instructions and each of them may conclusively rely
on, and shall be protected in relying on, such instructions.
SECTION 9.08. Mutilated, Destroyed, Lost or Stolen Certificates. If
--------------------------------------------------
(a) any mutilated Certificates should be surrendered to the Regular Trustees or
if the Regular Trustees shall receive evidence to their satisfaction of the
destruction, loss or theft of any Certificate and (b) there shall be delivered
to the Regular Trustees such security or indemnity as may be required by them to
keep each of them harmless, then in the absence of notice that such Certificate
shall have been acquired by a bona fide purchaser, any two Regular Trustees on
behalf of the Trust shall execute and deliver, in exchange for or in lieu of any
such mutilated, destroyed, lost or stolen Certificate, a new Certificate of like
denomination. In connection with the issuance of any new Certificate under this
Section 9.08, the Regular Trustees may require the payment of a sum sufficient
to cover any tax or other governmental charge that may be imposed in connection
therewith. Any duplicate Certificate issued pursuant to this Section shall
constitute conclusive evidence of an ownership interest in the relevant
securities, as if originally issued, whether or not the lost, stolen or
destroyed Certificate shall be found at any time.
ARTICLE X
Limitation of Liability; Indemnification
----------------------------------------
SECTION 10.01. Liability. (a) Except as expressly set forth in this
----------
Declaration, the Guarantee and the terms of the Trust Securities the Sponsor:
(i) shall not be personally liable for the return of any portion of
the capital contributions of the Holders of the Trust Securities, which
shall be made solely from assets of the Trust; and
<PAGE>
42
(ii) shall not be required to pay to the Trust or to any Holder of
Trust Securities any deficit upon dissolution of the Trust or otherwise.
(b) Pursuant to Section 3803(a) of the Business Trust Act, the
Holders of the Trust Securities shall be entitled to the same limitation of
personal liability extended to stockholders of private corporations for profit
organized under the General Corporation Law of the State of Delaware.
SECTION 10.02. Exculpation. (a) No Indemnified Person shall be
------------
liable, responsible or accountable in damages or otherwise to the Trust or any
Covered Person for any loss, damage or claim incurred by reason of any act or
omission performed or omitted by such Indemnified Person in good faith on behalf
of the Trust and in a manner such Indemnified Person reasonably believed to be
within the scope of the authority conferred on such Indemnified Person by this
Declaration or by law, except that an Indemnified Person shall be liable for any
such loss, damage or claim incurred by reason of such Indemnified Person's gross
negligence (or, in the case of the Property Trustee, except as otherwise set
forth in Section 3.10 hereof) or wilful misconduct with respect to such acts or
omissions.
(b) An Indemnified Person shall be fully protected in relying in good
faith upon the records of the Trust and upon such information, opinions, reports
or statements presented to the Trust by any Person as to matters the Indemnified
Person reasonably believes are within such other Person's professional or expert
competence and who has been selected with reasonable care by or on behalf of the
Trust, including information, opinions, reports or statements as to the value
and amount of the assets, liabilities, profits, losses or any other facts
pertinent to the existence and amount of assets from which Distributions to
Holders of Trust Securities might properly be paid.
SECTION 10.03. Indemnification. (a) To the fullest extent permitted
----------------
by applicable law, the Sponsor shall indemnify and hold harmless each
Indemnified Person from and against any loss, damage or claim incurred by such
Indemnified Person by reason of any act or omission performed or omitted by such
Indemnified Person in good faith on behalf of the Trust and in a manner such
Indemnified Person reasonably believed to be within the
<PAGE>
43
scope of authority conferred on such Indemnified Person by this Declaration,
except that no Indemnified Person shall be entitled to be indemnified in respect
of any loss, damage or claim incurred by such Indemnified Person by reason of
gross negligence (or, in the case of the Property Trustee, except as otherwise
set forth in Section 3.10 hereof) or wilful misconduct with respect to such acts
or omissions.
(b) To the fullest extent permitted by applicable law, expenses
(including reasonable legal fees) incurred by an Indemnified Person in defending
any claim, demand, action, suit or proceeding shall, from time to time, be
advanced by the Sponsor prior to the final disposition of such claim, demand,
action, suit or proceeding upon receipt by the Sponsor of an undertaking by or
on behalf of the Indemnified Person to repay such amount if it shall be
determined that the Indemnified Person is not entitled to be indemnified as
authorized in Section 10.03(a).
SECTION 10.04. Outside Businesses. Any Covered Person, the Sponsor,
-------------------
the Delaware Trustee and the Property Trustee may engage in or possess an
interest in other business ventures of any nature or description, independently
or with others, similar or dissimilar to the business of the Trust, and the
Trust and the Holders of Trust Securities shall have no rights by virtue of this
Declaration in and to such independent ventures or the income or profits derived
therefrom and the pursuit of any such venture, even if competitive with the
business of the Trust, shall not be deemed wrongful or improper. No Covered
Person, the Sponsor, the Delaware Trustee or the Property Trustee shall be
obligated to present any particular investment or other opportunity to the Trust
even if such opportunity is of a character that, if presented to the Trust,
could be taken by the Trust, and any Covered Person, the Sponsor, the Delaware
Trustee and the Property Trustee shall have the right to take for its own
account (individually or as a partner or fiduciary) or to recommend to others
any such particular investment or other opportunity. Any Covered Person, the
Delaware Trustee and the Property Trustee may engage or be interested in any
financial or other transaction with the Sponsor or any Affiliate of the Sponsor,
or may act as depositary for, trustee or agent for, or act on any committee or
body of holders of securities or other obligations of the Sponsor or its
Affiliates.
<PAGE>
44
ARTICLE XI
Accounting
----------
SECTION 11.01. Fiscal Year. The fiscal year ("Fiscal Year") of the
-----------
Trust shall be the calendar year or such other year as is required by the Code.
SECTION 11.02. Certain Accounting Matters. (a) At all times during
--------------------------
the existence of the Trust, the Regular Trustees shall keep, or cause to be
kept, full books of account, records and supporting documents, which shall
reflect in reasonable detail each transaction of the Trust. The books of
account shall be maintained on the accrual method of accounting, in accordance
with generally accepted accounting principles, consistently applied. The Trust
shall use the accrual method of accounting for United States Federal income tax
purposes. The books and records of the Trust, together with a copy of this
Declaration and a certified copy of the Certificate of Trust, or any amendment
thereto, shall at all times be maintained at the principal office of the Trust
and shall be open for inspection for any examination by any Holder or its duly
authorized representative for any purpose reasonably related to its interest in
the Trust during normal business hours.
(b) The Regular Trustees shall, as soon as available after the end of
each Fiscal Year of the Trust, cause to be prepared and mailed to each Holder of
Trust Securities unaudited financial statements of the Trust for such Fiscal
Year, prepared in accordance with generally accepted accounting principles;
provided that, if the Trust is required to comply with the periodic reporting
- --------
requirements of Section 13(a) or 15(d) of the Exchange Act, such financial
statements for such Fiscal Year shall be examined and reported on by a firm of
independent certified public accountants selected by the Regular Trustees (which
firm may be the firm used by the Sponsor).
(c) The Regular Trustees shall cause to be prepared and mailed to each
Holder of Trust Securities an annual United States federal income tax
information statement, on such form as is required by the Code, containing such
information with regard to the Trust Securities held by each Holder as is
required by the Code and the Treasury Regulations. Notwithstanding any right
under the Code to deliver any such statement at a later date, the Regular
Trustees shall endeavor to deliver all
<PAGE>
45
such statements within 30 days after the end of each Fiscal Year of the Trust.
(d) The Regular Trustees shall cause to be prepared and filed with the
appropriate taxing authority an annual United States federal income tax return,
on such form as is required by the Code, and any other annual income tax returns
required to be filed by the Regular Trustees on behalf of the Trust with any
state or local taxing authority, such returns to be filed as soon as practicable
after the end of each Fiscal Year of the Trust.
SECTION 11.03. Banking. The Trust may maintain one or more bank
--------
accounts in the name and for the sole benefit of the Trust; provided, however,
-------- -------
that all payments of funds in respect of the Subordinated Debentures held by the
Property Trustee shall be made directly to the Property Account and no other
funds from the Trust shall be deposited in the Property Account. The sole
signatories for such accounts shall be designated by the Regular Trustees;
provided, however, that the Property Trustee shall designate the sole
- -------- -------
signatories for the Property Account.
SECTION 11.04. Withholding. The Trust and the Trustees shall comply
------------
with all withholding requirements under United States Federal, state and local
law. The Trust shall request, and the Holders shall provide to the Trust, such
forms or certificates as are necessary to establish an exemption from
withholding with respect to each Holder and any representations and forms as
shall reasonably be requested by the Trust to assist it in determining the
extent of, and in fulfilling, its withholding obligations. The Trust shall file
required forms with applicable jurisdictions and, unless an exemption from
withholding is properly established by a Holder, shall remit amounts withheld
with respect to the Holder to the applicable jurisdiction. To the extent that
the Trust is required to withhold and pay over any amounts to any authority with
respect to distributions or allocations to any Holder, the amount withheld shall
be deemed to be a distribution in the amount of the withholding to the Holder.
In the event of any claimed overwithholding, Holders shall be limited to an
action against the applicable jurisdiction. If the amount to be withheld was
not withheld from a Distribution, the Trust may reduce subsequent Distributions
by the amount of such withholding.
<PAGE>
46
ARTICLE XII
Amendments and Meetings
-----------------------
SECTION 12.01. Amendments. (a) Except as otherwise provided in this
-----------
Declaration or by any applicable terms of the Trust Securities, this Declaration
may be amended by, and only by, a written instrument executed by a majority of
the Regular Trustees; provided, however, that (i) no amendment to this
-------- -------
Declaration shall be made unless the Regular Trustees shall have obtained (A)
either a ruling from the Internal Revenue Service or a written unqualified
opinion of nationally recognized independent tax counsel experienced in such
matters to the effect that such amendment will not result in the Trust being
treated as an association taxable as a corporation or a partnership for United
States Federal income tax purposes and that, following such action, each holder
of Trust Securities will be treated as owning an undivided beneficial interest
in the Subordinated Debentures and (B) a written unqualified opinion of
nationally recognized independent counsel experienced in such matters to the
effect that such amendment will not cause the Trust to be an Investment Company
that is required to be registered under the Investment Company Act, (ii) at such
time after the Trust has issued any Trust Securities which remain outstanding,
any amendment which would adversely affect the rights, privileges or preferences
of any Holder of Trust Securities may be effected only with such additional
requirements as may be set forth in the terms of such Trust Securities, (iii)
Section 4.02, Section 9.01(c) and this Section 12.01 shall not be amended
without the consent of all the Holders of the Trust Securities, (iv) no
amendment which adversely affects the rights, powers and privileges of the
Property Trustee shall be made without the consent of the Property Trustee, (v)
Article IV shall not be amended without the consent of the Sponsor, (vi) the
rights of Holders of Common Securities under Article V to increase or decrease
the number of, and to appoint, replace or remove, Trustees (other than a Special
Regular Trustee) shall not be amended without the consent of each Holder of
Common Securities and (vii) the rights of Holders of Preferred Securities to
appoint or remove a Special Regular Trustee shall not be amended without the
consent of each Holder of Preferred Securities.
<PAGE>
47
(b) Subject to Section 12.01(a)(i) and notwithstanding Section
12.01(a)(ii), this Declaration may be amended without the consent of the Holders
of the Trust Securities to (i) cure any ambiguity, (ii) correct or supplement
any provision in this Declaration that may be defective or inconsistent with any
other provision of this Declaration, (iii) add to the covenants, restrictions or
obligations of the Sponsor and (iv) conform to any changes in Rule 3a-5 or any
change in interpretation or application of Rule 3a-5 by the Commission, which
amendment does not adversely affect the rights, preferences or privileges of the
Holders.
SECTION 12.02. Meetings of the Holders of Trust Securities; Action by
------------------------------------------------------
Written Consent. (a) Meetings of the Holders of Preferred Securities and/or
- ----------------
Common Securities may be called at any time by the Regular Trustees (or as
provided in the terms of the Trust Securities) to consider and act on any matter
on which Holders of such class of Trust Securities are entitled to act under the
terms of this Declaration, the terms of the Trust Securities or the rules of any
stock exchange or other self-regulatory organization (including the NASDAQ
National Market System) on which the Preferred Securities are listed or admitted
for trading. The Regular Trustees shall call a meeting of Holders of Preferred
Securities or Common Securities, if directed to do so by Holders of at least 10%
in aggregate liquidation amount of such class of Trust Securities. Such
direction shall be given by delivering to the Regular Trustees one or more
written notifications stating that the signing Holders of Trust Securities wish
to call a meeting and indicating the general or specific purpose for which the
meeting is to be called. Any Holders of Trust Securities calling a meeting
shall specify in writing the Certificates held by the Holders of Trust
Securities exercising the right to call a meeting and only those specified
Certificates shall be counted for purposes of determining whether the required
percentage set forth in the second sentence of this paragraph has been met.
(b) Except to the extent otherwise provided in the terms of the Trust
Securities, the following provision shall apply to meetings of Holders of Trust
Securities:
(i) notice of any such meeting shall be given by mail to all the
Holders of Trust Securities having a right to vote thereat not less than
seven days nor more than 60 days prior to the date of such meeting.
<PAGE>
48
Whenever a vote, consent or approval of the Holders of securities is
permitted or required under this Declaration or the rules of any stock
exchange or other self-regulatory organization (including the NASDAQ
National Market System) on which the Preferred Securities are listed or
admitted for trading, such vote, consent or approval may be given at a
meeting of the Holders of Trust Securities. Any action that may be taken
at a meeting of the Holders of Trust Securities may be taken without a
meeting if a consent in writing setting forth the action so taken is signed
by Holders of Trust Securities owning not less than the minimum aggregeate
liquidation amount of Trust Securities that would be necessary to authorize
or take such action at a meeting at which all Holders of Trust Securities
having a right to vote thereon were present and voting. Prompt notice of
the taking of action without a meeting shall be given to the Holders of
Trust Securities entitled to vote who have not consented in writing. The
Regular Trustees may specify that any written ballot submitted to the
Holders of Trust Securities for the purpose of taking any action without a
meeting shall be returned to the Trust within the time specified by the
Regular Trustees;
(ii) each Holder of a Trust Security may authorize any Person to act
for it by proxy on all matters in which a Holder of a Trust Security is
entitled to participate, including waiving notice of any meeting or voting
or participating at a meeting. No proxy shall be valid after the
expiration of 11 months from the date thereof unless otherwise provided in
the proxy. Every proxy shall be revocable at the pleasure of the Holder of
the Trust Security executing it. Except as otherwise provided herein or in
the terms of the Trust Securities, all matters relating to the giving,
voting or validity of proxies shall be governed by the General Corporation
Law of the State of Delaware relating to proxies, and judicial
interpretations thereunder, as if the Trust were a Delaware corporation and
the Holders of the Trust Securities were stockholders of a Delaware
corporation;
(iii) each meeting of the Holders of the Trust Securities shall be
conducted by the Regular Trustees or by such other Person that the Regular
Trustees may designate; and
<PAGE>
49
(iv) unless otherwise provided in the Business Trust Act, this
Declaration or the rules of any stock exchange or other self-regulatory
organization (including the NASDAQ National Market System) on which the
Preferred Securities are then listed or admitted for trading, the Regular
Trustees, in their sole discretion, shall establish all other provisions
relating to meetings of Holders of Trust Securities, including notice of
the time, place or purpose of any meeting at which any matter is to be
voted on by any Holders of Trust Securities, waiver of any such notice,
action by consent without a meeting, the establishment of a record date,
quorum requirements, voting in person or by proxy or any other matter with
respect to the exercise of any such right to vote.
ARTICLE XIII
Representations and Warranties of Property Trustee
--------------------------------------------------
and Delaware Trustee
--------------------
SECTION 13.01. Representations and Warranties of Property Trustee and
------------------------------------------------------
Delaware Trustee. (a) The Trustee that acts as initial Property Trustee
- -----------------
represents and warrants to the Trust and to the Sponsor at the date of this
Declaration, and each Successor Property Trustee represents and warrants to the
Trust and the Sponsor at the time of the Successor Property Trustee's acceptance
of its appointment as Property Trustee that:
(i) The Property Trustee is a banking association with trust powers,
duly organized, validly existing and in good standing under the laws of the
United States, or any State therein, with trust power and authority to
execute and deliver, and to carry out and perform its obligations under the
terms of, this Declaration.
(ii) The execution, delivery and performance by the Property Trustee
of this Declaration has been duly authorized by all necessary corporate
action on the part of the Property Trustee. The Declaration has been duly
executed and delivered by the Property Trustee and constitutes a legal,
valid and binding obligation of the Property Trustee, enforceable against
it in accordance with its terms, subject to applicable bankruptcy,
reorganization, moratorium, insolvency and other similar laws affecting
creditors' rights
<PAGE>
50
generally and to general principles of equity and the discretion of the
court (regardless of whether the enforcement of such remedies is considered
in a proceeding in equity or at law).
(iii) The execution, delivery and performance of this Declaration by
the Property Trustee does not conflict with or constitute a breach of any
of the terms or provisions of or constitute a default under (i) the
Articles of Association or By-laws of the Property Trustee or any other
agreement or instrument to which the Property Trustee is a party or by
which it may be bound, (ii) any existing applicable law, rule or regulation
or (iii) any judgment, order or decree of any government, governmental
instrumentality or court having jurisdiction over the Property Trustee.
(iv) No consent, approval or authorization of, or registration with
or notice to, any banking authority which supervises or regulates the
Property Trustee is required for the execution, delivery or performance by
the Property Trustee of this Declaration.
(v) The Property Trustee satisfies the qualifications set forth in
Section 5.01(c).
(b) The Trustee which acts as initial Delaware Trustee represents and
warrants to the Trust and the Sponsor at the date of this Declaration, and each
Successor Delaware Trustee represents and warrants to the Trust and the Sponsor
at the time of the Successor Delaware Trustee's acceptance of its appointment as
Delaware Trustee, that:
(i) it satisfies the qualifications set forth in Section 5.01(a)(C);
(ii) it has been authorized to perform its obligations under the
Certificate of Trust and the Declaration; and
(iii) the Declaration under Delaware law constitutes a legal, valid
and binding obligation of the Delaware Trustee, enforceable against it in
accordance with its terms, subject to applicable bankruptcy,
reorganization, moratorium, insolvency, and other similar laws affecting
creditors' rights generally and to general principles of equity and the
discretion of the court (regardless of whether the
<PAGE>
51
enforcement of such remedies is considered in a proceeding in equity or at
law).
ARTICLE XIV
Miscellaneous
-------------
SECTION 14.01. Notices. All notices provided for in this Declaration
--------
shall be in writing, duly signed by the party giving such notice, and shall be
delivered, telecopied or mailed by first class mail, as follows:
(a) if given to the Trust, in care of the Regular Trustees at the
Trust's mailing address set forth below (or such other address as the
Regular Trustees on behalf of the Trust may give notice of to the Holders
of the Trust Securities):
Time Warner Capital [I]
In care of Time Warner Inc.
75 Rockefeller Plaza
New York, NY 10019
Attention of John A. LaBarca
Philip R. Lochner, Jr. and
Thomas W. McEnerney,
Trustees
Facsimile No.: (212) 333-3987
(b) if given to the Property Trustee, at the mailing address of the
Property Trustee set forth below (or such other address as the Property
Trustee may give notice of to the Holders of the Trust Securities):
The First National Bank of Chicago
Corporate Trust Services Division
One First National Plaza, Suite 0126
Chicago, Illinois 60670-0126
Attention of: Melissa G. Weisman
Facsimile No.: [(212) 373-1383]
(c) if given to the Delaware Trustee, at the mailing address of the
Delaware Trustee set forth below
<PAGE>
52
(or such other address as the Delaware Trustee may give notice of to the
Holders of the Trust Securities):
[First Chicago Delaware Inc.,
1201 Market Street
Wilmington, Delaware 19801]
Facsimile No.: [(302) 594-8622]
(d) if given to the Holder of the Common Securities, at the mailing
address of the Sponsor set forth below (or such other address as the Holder
of the Common Securities may give notice of to the Trust):
Time Warner Inc.
75 Rockefeller Center
New York, NY 10019
Attention of General Counsel
Facsimile No.: (212) 956-7281
(e) if given to any other Holder, at the address set forth on the
books and records of the Trust.
A copy of any notice to the Property Trustee or the Delaware Trustee
shall also be sent to the Trust. Except as otherwise provided in the terms of
the Trust Securities, all notices shall be deemed to have been given when
received in person, telecopied with receipt confirmed or three Business Days
after mailed by first class mail, postage prepaid, except that, if a notice or
other document is refused delivery or cannot be delivered because of a changed
address of which no notice was given, such notice or other document shall be
deemed to have been delivered on the date of such refusal or inability to
deliver.
SECTION 14.02. Undertaking for Costs. All parties to this
----------------------
Declaration agree, and each Holder of any Trust Securities by his or her
acceptance thereof shall be deemed to have agreed, that any court may in its
discretion require, in any suit for the enforcement of any right or remedy under
this Declaration or in any suit against the Property Trustee for any action
taken or omitted by it as Property Trustee, the filing by any party litigant in
such suit of an undertaking to pay the costs of such suit and that such court
may in its discretion assess reasonable costs, including reasonable attorneys'
fees, against any
<PAGE>
53
party litigant in such suit, having due regard to the merits and good faith of
the claims or defenses made by such party litigant; but the provisions of this
Section 14.02 shall not apply to any suit instituted by the Property Trustee, to
any suit instituted by any Holder or group of Holders of Preferred Securities
holding more than 10% in aggregate liquidation amount of the outstanding
Preferred Securities, or to any suit instituted by any Holder of Preferred
Securities for the enforcement of the payment of principal or any redemption
price or interest on the Subordinated Debentures, on or after the respective due
dates expressed in such Subordinated Debentures.
SECTION 14.03. Governing Law. This Declaration and the rights of the
--------------
parties hereunder shall be governed by and interpreted in accordance with the
laws of the State of Delaware and all rights and remedies shall be governed by
such laws without regard to principles of conflict of laws.
SECTION 14.04. Headings. Headings contained in this Declaration are
---------
inserted for convenience of reference only and do not affect the interpretation
of this Declaration or any provision hereof.
SECTION 14.05. Partial Enforceability. If any provision of this
-----------------------
Declaration, or the application of such provision to any Person or circumstance,
shall be held invalid, the remainder of this Declaration, or the application of
such provision to persons or circumstances other than those to which it is held
invalid, shall not be affected thereby.
SECTION 14.06. Counterparts. This Declaration may contain more than
-------------
one counterpart of the signature pages and this Declaration may be executed by
the affixing of the signature of the Sponsor and each of the Trustees to one of
such counterpart signature pages. All such counterpart signature pages shall be
read as though one, and they shall have the same force and effect as though all
the signers had signed a single signature page.
SECTION 14.07. Intention of the Parties. (a) It is the intention of
------------------------
the parties hereto that the Trust not be classified for United States Federal
income tax purposes as an association taxable as a corporation or partnership
but that the Trust be treated as a grantor trust for United States Federal
income tax purposes. The provisions of this
<PAGE>
54
Declaration shall be interpreted to further this intention of the parties.
(b) The Trust, the Trustees, Time Warner and each Holder of a Trust
Security, by his or her acceptance thereof, agree to treat the Subordinated
Debentures as debt instruments for United States Federal, state and local income
and franchise tax purposes and shall not take any contrary position before any
taxing authority or on any tax return.
SECTION 14.08. Successors and Assigns. Whenever in this Declaration
-----------------------
any of the parties hereto is named or referred to, the successors and assigns of
such party shall be deemed to be included, and all covenants and agreements
<PAGE>
55
in this Declaration by the Sponsor and the Trustees shall bind and inure to the
benefit of their respective successors and assigns, whether so expressed.
IN WITNESS WHEREOF, the undersigned has caused these presents to be
executed as of the day and year first above written.
TIME WARNER INC.,
as Sponsor,
by
__________________________
Name:
Title:
by
__________________________
John A. LaBarca
as Trustee
by
__________________________
Philip R. Lochner, Jr.
as Trustee
by
__________________________
Thomas W. McEnerney,
as Trustee
<PAGE>
56
THE FIRST NATIONAL BANK OF CHICAGO, as Trustee
by
__________________________
Name: Melissa G. Weisman
Title: Assistant Vice President
FIRST CHICAGO DELAWARE INC., as Delaware Trustee
by
__________________________
Name: Melisssa G. Weisman,
Title: Assistant Vice President
<PAGE>
EXHIBIT A
CERTIFICATE OF TRUST
OF
TIME WARNER CAPITAL I
This Certificate of Trust of Time Warner Capital I (the "Trust"),
dated August 2, 1995, is being duly executed and filed by the undersigned, as
trustees, to form a business trust under the Delaware Business Trust Act (12
Del. C. Section 3801 et seq.).
-- ----
1. Name. The name of the business trust formed hereby is Time Warner
-----
Capital I.
2. Delaware Trustee. The name and business address of the trustee of
-----------------
the Trust with a principal place of business in the State of Delaware is First
Chicago Delaware Inc., 1201 Market Street, Suite 1401, Wilmington, Delaware
19801.
3. Effective Date. This Certificate of Trust shall be effective as of
---------------
its filing.
IN WITNESS WHEREOF, the undersigned, being the sole trustees of the
Trust, have executed this Certificate of Trust as of the date first above
written.
THE FIRST NATIONAL BANK OF
CHICAGO, as trustee,
by
--------------------------
Name: Melissa G. Weisman
Title: Assistant Vice President
FIRST CHICAGO DELAWARE INC.,
as Delaware Trustee,
by
--------------------------
Name: Melissa G. Weisman
Title: Assistant Vice President
<PAGE>
2
by
-------------------------
John A. LaBarca,
as trustee
by
-------------------------
Philip R. Lochner, Jr.
as trustee
by
-------------------------
Thomas W. McEnerney,
as trustee
<PAGE>
EXHIBIT B
TERMS OF
PREFERRED SECURITIES
Pursuant to Section 7.01 of the Amended and Restated Declaration of
Trust of Time Warner Capital I (the "Trust") dated as of [ ], 1995 (as
amended from time to time, the "Declaration"), the designations, rights,
privileges, restrictions, preferences and other terms and provisions of the
Preferred Securities are set forth below (each capitalized term used but not
defined herein having the meaning set forth in the Declaration or, to the extent
not defined therein, the Guarantee Agreement dated as of [ ], 1995 (as
amended from time to time, the "Guarantee") executed by Time Warner on behalf of
the holders of the Preferred Securities):
1. Designation and Number. Preferred Securities of the Trust with an
-----------------------
aggregate liquidation amount in the assets of the Trust of
($ ) and a liquidation amount in the assets of the Trust of $[25] per
Preferred Security, are hereby designated as "[ ]% Preferred Trust Securities".
The Preferred Security Certificates evidencing the Preferred Securities shall be
substantially in the form attached hereto as Annex I, with such changes and
additions thereto or deletions therefrom as may be required by ordinary usage,
custom or practice or to conform to the rules of any stock exchange on which the
Preferred Securities are listed or to the rules of any Clearing Agency in which
the Trust Securities have been accepted for trading. The Trust will invest the
gross proceeds from the issuance of the Preferred Securities together with the
gross proceeds from the sale to Time Warner Inc. ("Time Warner") of the Common
Securities in Subordinated Debentures of Time Warner having an aggregate
principal amount equal to $ , and bearing interest at an annual
percentage rate of [ ]%, which will result in the payment of interest equal to
the annual Distribution rate on the Preferred Securities and Common Securities
and having payment and redemption provisions that correspond to the payment and
redemption provisions of the Preferred Securities and Common Securities.
2. Distributions. (a) Periodic distributions payable on each
--------------
Preferred Security will be fixed at an a rate per annum of %[ ] (the "Coupon
Rate") of the aggregate liquidation amount of $[25] per Preferred Security, such
rate being the rate of interest payable on
<PAGE>
2
the Subordinated Debentures to be held by the Property Trustee. Distributions
in arrears for more than one quarter will bear interest thereon at the Coupon
Rate (to the extent permitted by law), compounded quarterly. The term
"Distributions" as used in these terms means such periodic cash distributions
and any such interest payable unless otherwise stated. A Distribution will be
made by the Property Trustee only to the extent that interest payments are made
in respect of the Subordinated Debentures held by the Property Trustee. The
amount of Distributions (or amounts equal to accrued and unpaid Distributions)
payable for any period will be computed (i) for any full quarterly Distribution
period, on the basis of a 360-day year of twelve 30-day months, and (ii) for any
period shorter than a full quarterly Distribution period, on the basis of a 360-
day year of twelve 30-day months and on the basis of the actual number of days
elapsed in any such 30-day month.
(b) Distributions on the Preferred Securities will be cumulative,
will accrue from and including [date of issue], 1995 and will be payable
quarterly in arrears, on March 30, June 30, September 30 and December 30 of each
year, commencing on, but excluding [ ], 1995, except as otherwise
described below, but only if and to the extent that interest payments are made
in respect of the Subordinated Debentures held by the Property Trustee. Time
Warner, as issuer of the Subordinated Debentures, has the right under the
Indenture to defer payments of interest by extending the interest payment period
from time to time on the Subordinated Debentures for a period not exceeding 20
consecutive quarters (each an "Extension Period") and, during such Extension
Period, Distributions will also be deferred. Despite such deferral, quarterly
Distributions will continue to accrue with interest thereon (to the extent
permitted by applicable law) at the Coupon Rate compounded quarterly during any
such Extension Period. Prior to the termination of any such Extension Period,
Time Warner may further extend such Extension Period; provided that such
--------
Extension Period. Upon the termination of any Extension Period together with
all such previous and further extensions thereof may not exceed 20 consecutive
quarters. Payments of accrued Distributions will be payable to Holders as they
appear on the books and records of the Trust on the first record date after the
end of the Extension Period. Upon the termination of any Extension Period and
the payment of all amounts then due, Time Warner may commence a new Extension
Period, subject to the above requirements.
<PAGE>
3
(c) Distributions on the Preferred Securities will be payable
promptly by the Property Trustee (or other Paying Agent) upon receipt of
immediately available funds to the Holders thereof as they appear on the books
and records of the Trust on the relevant record dates. While the Preferred
Securities remain in book-entry only form, the relevant record dates shall be
one Business Day prior to the relevant payment dates which payment dates
correspond to the interest payment dates on the Subordinated Debentures.
Subject to any applicable laws and regulations and the provisions of the
Declaration, each such payment in respect of the Preferred Securities will be
made as described under the heading "Description of the Preferred Securities--
Book-Entry Only Issuance--The Depository Trust Company" in the Prospectus
Supplement dated ________, 1995, to the Prospectus dated ______, 1995 (together
the "Prospectus"), of the Trust included in the Registration Statement on Form
S-3 of the Sponsor, the Trust and certain other business trusts.
If the Preferred Securities shall not continue to remain in book-entry
only form, the relevant record dates for the Preferred Securities shall conform
to the rules of any securities exchange on which the securities are listed and,
if none, shall be selected by the Regular Trustees, which dates shall be at
least one Business Day but less than 60 Business Days before the relevant
payment dates, which payment dates correspond to the interest payment dates on
the Debentures. Distributions payable on any Preferred Securities that are not
punctually paid on any Distribution payment date as a result of Time Warner
having failed to make the corresponding interest payment on the Subordinated
Debentures will forthwith cease to be payable to the person in whose name such
Preferred Security is registered on the relevant record date, and such defaulted
Distribution will instead be payable to the person in whose name such Preferred
Security is registered on the special record date established by the Regular
Trustees, which record date shall correspond to the special record date or other
specified date determined in accordance with the Indenture. Subject to any
applicable laws and regulations and the provisions of the Declaration, each
payment in respect of the Preferred Securities will be made as described in
paragraph 9 hereof. If any date on which Distributions are payable on the
Preferred Securities is not a Business Day, then payment of the Distribution
payable on such date will be made on the next succeeding day that is a Business
Day (and without any interest or other payment in respect of any such delay),
<PAGE>
4
except that if such Business Day is in the next succeeding calendar year, such
payment shall be made on the immediately preceding Business Day, in each case
with the same force and effect as if made on such date.
(d) All Distributions paid with respect to the Preferred Securities
and the Common Securities will be paid on a Pro Rata Basis (as defined herein)
to the Holders thereof entitled thereto.
(e) In the event that there is any money or other property held by or
for the Trust that is not accounted for under the Declaration or these terms of
the Preferred Securities or the terms of the Common Securities, such money or
property shall be distributed on a Pro Rata Basis among the Holders of the
Preferred Securities and Common Securities.
3. Liquidation Distribution Upon Dissolution. In the event of any
------------------------------------------
voluntary or involuntary liquidation, dissolution, winding-up or termination of
the Trust (each a "Liquidation Event"), the Holders of the Trust Securities on
the date of such Liquidation Event will be entitled to be paid on a Pro Rata
Basis out of the assets of the Trust an amount equal to the liquidation amount
per Trust Security plus accrued and unpaid Distributions thereon to, but
excluding, the date of payment (such amount being the "Liquidation
Distribution") in connection with such Liquidation Event, unless Subordinated
Debentures in an aggregate principal amount equal to the aggregate liquidation
amount of, and bearing accrued and unpaid interest in an amount equal to the
accrued and unpaid Distributions on, the Trust Securities have been distributed
on a Pro Rata Basis (determined without regard to the proviso in the definition
of such term) to the Holders of the Trust Securities in exchange for such Trust
Securities. In the event that the assets of the Trust exceed the amount
necessary to pay to all Holders of the Trust Securities the full amount of the
Liquidation Distribution, such excess will be paid to the Holders of the Trust
Securities on a Pro Rata Basis (determined without regard to the proviso in the
definition of such term).
4. Redemption and Distribution of Subordinated Debentures. The Trust
-------------------------------------------------------
Securities may be redeemed only if Subordinated Debentures having an aggregate
principal amount equal to the aggregate liquidation amount and accrued and
unpaid interest equal to accrued and unpaid Distributions on
<PAGE>
5
the Trust Securities are repaid, redeemed or distributed as set forth below:
(a) Upon the repayment of the Subordinated Debentures in whole or in
part, whether at maturity or upon redemption, the proceeds from such repayment
or payment shall be simultaneously applied to redeem Trust Securities having an
aggregate liquidation amount equal to the aggregate principal amount of the
Subordinated Debentures so repaid or redeemed at a redemption price equal to the
liquidation amount per Trust Security (the "Redemption Price") plus an amount
equal to all accrued and unpaid Distributions thereon at the date of the
redemption, payable in cash. Holders will be given not less than 20 nor more
than 45 days notice of such redemption.
(b) If fewer than all the outstanding Trust Securities are to be so
redeemed, the Trust Securities will be redeemed on a Pro Rata Basis and the
Preferred Securities to be redeemed will be redeemed as described in para-graph
4(f)(ii) below. If a partial redemption would result in the delisting of the
Preferred Securities by any national securities exchange or other self-
regulatory organization (including the NASDAQ National Market System) on which
the Preferred Securities are then listed, Time Warner pursuant to the Indenture
will only redeem the Subordinated Debentures in whole and, as a result, the
Trust may only redeem the Preferred Securities in whole.
(c) (i) If, at any time, a Tax Event or an Investment Company
Event (each as hereinafter defined, and each a "Special Event") shall occur
and be continuing, the Regular Trustees shall notify Time Warner thereof
and Time Warner shall elect to either (A) direct the Regular Trustees to
dissolve the Trust and cause Subordinated Debentures having an aggregate
principal amount equal to the aggregate liquidation amount of, and accrued
and unpaid interest equal to accrued and unpaid Distributions on, and
having the same record dates for payment as, the Trust Securities
outstanding at such time, to be distributed to the Holders of the Trust
Securities on a Pro Rata Basis in liquidation of such Holders' interests in
the Trust, within 90 days following the occurrence of such Special Event,
provided, however, that in the case of the occurrence of a Tax Event, as a
-------- -------
condition of any such dissolution and distribution, the Regular Trustees
shall have received an opinion of nationally recognized
<PAGE>
6
independent tax counsel experienced in such matters (a "No Recognition
Opinion"), which opinion may rely on any then applicable published revenue
ruling of the Internal Revenue Service, to the effect that the Holders of
the Preferred Securities will not recognize any gain or loss for United
States Federal income tax purposes as a result of the dissolution of the
Trust and distribution of Subordinated Debentures; (B) to redeem the
Subordinated Debentures in accordance with the Indenture and the Trust
Securities as described under paragraph (ii) below or (C) in the case of a
Tax Event, allow the Subordinated Debentures and the Trust Securities to
remain outstanding and indemnify the Trust for all taxes payable by it as a
result of such change in law or interpretation; provided that, if and as
--------
long as at the time there is available to the Trust the opportunity to
eliminate, within 90 days following the occurrence of such Special Event
(the "90-Day Period"), the Special Event by taking some ministerial action,
such as filing a form or making an election, or pursuing some other similar
reasonable measure that has no adverse effect on the Trust, Time Warner or
the Holders of the Trust Securities (a "Ministerial Action"), the Trust
will pursue such measure in lieu of dissolution or redemption; provided
--------
further, that Time Warner shall have no right to redeem the Subordinated
-------
Debentures or to direct the Regular Trustees to dissolve the Trust while
the Regular Trustees are pursuing such Ministerial Action unless the
Special Event shall not have been so eliminated by the 85th day following
the occurrence thereof, in which case Time Warner shall be permitted to so
direct the Regular Trustees or to provide notice to the holders of the
redemption of the Subordinated Debentures; provided further, that if
----------------
dissolution of the Trust and distribution of the Subordinated Debentures to
the holders of the Trust Securities would eliminate the condition causing
the Tax Event or the Investment Company Event and all other conditions to
such dissolution and distribution have been satisfied, Time Warner will not
be permitted to redeem the Subordinated Debentures; and provided further,
----------------
that Time Warner shall not be permitted to direct the Regular Trustees to
dissolve the Trust and distribute the Subordinated Debentures to the
holders of the Trust Securities upon the occurrence of the condition
described in clause (2) in the definition of "Tax Event" if, after giving
effect to such dissolution and distribution, Time
<PAGE>
7
Warner would not be permitted to deduct a greater percentage of the
interest payable on the Subordinated Debentures than it had been permitted
to deduct for United States Federal income tax purposes prior to the
occurrence of such Tax Event.
(ii) Upon the occurrence and continuation of a Tax Event or an
Investment Company Event, Time Warner shall have the right to redeem the
Subordinated Debentures in whole (but not in part), upon not less than 20
nor more than 45 Business Days' notice, within the 90-Day Period (such date
of redemption a "Special Redemption Date"), in which case the Trust shall
(unless the Trust shall have been dissolved) redeem in cash Trust
Securities having an aggregate liquidation amount equal to the aggregate
principal amount of the Subordinated Debentures so redeemed, at a
redemption price per Trust Security equal to the liquidation amount per
Trust Security, plus an amount equal to all accrued and unpaid
distributions on such Trust Security to but excluding the Special
Redemption Date. The Common Securities and the Preferred Securities will
be redeemed on a Pro Rata Basis.
(iii) "Tax Event" means that the Regular Trustees shall have obtained
an opinion of nationally recognized independent tax counsel experienced in
such matters (a "Dissolution Tax Opinion") to the effect that on or after
[ ], 1995, 1/ as a result of (A) any amendment to, or change (including any
-
announced prospective change) in, the laws (or any regulations thereunder)
of the United States or any political subdivision or taxing authority
thereof or therein, (B) any amendment to, or change in, an interpretation
or application of any such laws or regulations by any legislative body,
court, governmental agency or regulatory authority (including the enactment
of any legislation and the publication of any judicial decision or
regulatory determination), (C) any interpretation or pronouncement that
provides for a position with respect to such laws or regulations that
differs from the theretofore generally accepted position or (D) any action
taken by any governmental agency or regulatory authority, which amendment
or change is enacted, promulgated, issued or announced or
- ---------------------
1/ Insert date of prospectus.
-
<PAGE>
8
which interpretation or pronouncement is issued or announced or which
action is taken, in each case on or after [ ], 1995, 2/ there is more
-
than an insubstantial risk that at such time or within 90 days of the date
thereof (1) the Trust is, or would be, subject to United States Federal
income tax with respect to income accrued or received on the Subordinated
Debentures, (2) less than 25% of the interest payable by Time Warner to the
Trust on the Subordinated Debentures is, or would be, deductible by Time
Warner for United States Federal income tax purposes or (3) the Trust is,
or would be, subject to more than a de minimis amount of other taxes,
-- -------
duties or other governmental charges.
(iv) "Investment Company Event" means that the Regular Trustees shall
have received an opinion of nationally recognized independent counsel
experienced in such matters that, as a result of the occurrence of a change
in law or regulation or a written change in interpretation or application
of law or regulation by any legislative body, court, governmental agency or
regulatory authority (a "Change in 1940 Act Law"), there is more than an
insubstantial risk that the Trust is or will be considered an Investment
Company that is required to be registered under the Investment Company Act,
which Change in 1940 Act Law becomes effective on or after [ ],
1995. 3/
-
(v) On the date fixed for any distribution of Subordinated
Debentures, upon dissolution of the Trust, (i) the Preferred Securities
will no longer be deemed to be outstanding, (ii) neither the Trust nor Time
Warner shall have any further obligation to the Holders of the Preferred
Securities with respect to the Preferred Securities or under the Guarantee,
(iii) the Depositary or its nominee, as the record holder of the Preferred
Securities, will receive a registered global certificate or certificates
representing the Subordinated Debentures to be delivered upon such
distribution and (iv) any certificates representing Preferred Securities
not held by the Depositary or its nominee will be deemed to represent
beneficial
- ----------------------
2/Insert date of prospectus.
-
3/Insert date of prospectus.
-
<PAGE>
9
interests in the Subordinated Debentures having an aggregate principal
amount equal to the aggregate liquidation amount of, and bearing accrued
and unpaid interest equal to accrued and unpaid Distributions on, such
Preferred Securities until such certificates are presented to Time Warner
or its agent for transfer or reissuance.
(d) The Trust may not redeem fewer than all the outstanding Preferred
Securities unless all accrued and unpaid Distributions have been or are
concurrently being paid on all Preferred Securities for all quarterly
Distribution periods terminating on or prior to the date of redemption.
(e) If Subordinated Debentures are distributed to Holders of the
Preferred Securities, Time Warner, pursuant to the terms of the Indenture, will
use its best efforts to have the Subordinated Debentures listed on the New York
Stock Exchange or on such other exchange or self-regulatory organization
(including the NASDAQ National Market System) as the Preferred Securities were
listed immediately prior to the distribution of the Subordinated Debentures.
(f) (i) Notice of any redemption (other than mandatory redemption)
of, or notice of distribution of Subordinated Debentures in exchange for,
the Preferred Securities and Common Securities (a "Redemption/ Distribution
Notice") will be given by the Regular Trustees on behalf of the Trust by
mail to each Holder of Preferred Securities and Common Securities to be
redeemed or exchanged not less than 20 nor more than 45 Business Days prior
to the date fixed for redemption or distribution thereof. For purposes of
the calculation of the date of redemption or exchange and the dates on
which notices are given pursuant to this paragraph (f)(i), a
Redemption/Distribution Notice shall be deemed to be given on the day such
notice is first mailed by first-class mail, postage prepaid, to Holders of
Preferred Securities and Common Securities. Each Redemption/Distribution
Notice shall be addressed to the Holders of Preferred Securities and Common
Securities at the address of each such Holder appearing in the books and
records of the Trust. Such Redemption/Distribution Notice shall set forth
the aggregate liquidation amount of Trust Securities to be redeemed, the
date of such redemption or such distribution and in the case of a Special
Event, a
<PAGE>
10
brief description thereof. No defect in the Redemption/Distribution Notice
or in the mailing of either thereof with respect to any Holder shall affect
the validity of the redemption or exchange proceedings with respect to any
other Holder.
(ii) In the event that fewer than all the outstanding Preferred
Securities are to be redeemed, the Preferred Securities to be redeemed will
be redeemed on a Pro Rata Basis from each Holder of Preferred Securities,
and, in the event Preferred Securities are held in book-entry only form by
the Depositary or its nominee (or any successor Clearing Agency or its
nominee), the Depositary will reduce on a Pro Rata Basis the amount of the
interest of each Clearing Agency Participant in the Preferred Securities to
be redeemed; provided that if, as a result of such redemption, Clearing
--------
Agency Participants would hold fractional interests in the Preferred
Securities, the Depositary will adjust the amount of the interest of each
clearing Agency Participant to be redeemed to avoid such fractional
interests.
(iii) Payment of the Redemption Price in respect of each Preferred
Security, together with any accrued and unpaid Distributions thereon, is
conditioned upon delivery or book-entry transfer of such Preferred Security
(together with necessary endorsements) to the Property Trustee at any time
(whether prior to, on or after the relevant date of redemption) after the
Redemption/Distribution Notice is given (to the extent such notice is
required). Payment of the Redemption Price, together with any accrued and
unpaid distributions on each Preferred Security, will be made by the
delivery of cash no later than the applicable date of redemption with
respect to such Preferred Security or, if later, the time of delivery or
transfer of such Preferred Security.
(iv) If the Trust gives a Redemption/Distribution Notice in respect
of a redemption of Preferred Securities as provided in this paragraph 4
(which notice will be irrevocable), then immediately prior to the close of
business on the redemption date, so long as Time Warner has paid to the
Property Trustee in immediately available funds a sufficient amount of cash
in connection with the related redemption or maturity of the Subordinated
Debentures, Distributions
<PAGE>
11
will cease to accrue on the Preferred Securities called for redemption,
such Preferred Securities will no longer be deemed to be outstanding and
all rights of Holders of such Preferred Securities so called for redemption
will cease, except the right of the Holders of such Preferred Securities to
receive the Redemption Price, together with any accrued and unpaid
Distributions on the Preferred Securities being redeemed, but without
interest on such amount. Neither the Trustees nor the Trust shall be
required to register or cause to be registered the transfer of any
Preferred Securities which have been so called for redemption. If any date
fixed for redemption of Preferred Securities is not a Business Day, then
payment of the Redemption Price payable on such date, together with any
accrued and unpaid Distributions to such date, will be made on the next
succeeding day that is a Business Day (and without any interest or other
payment in respect of any such delay) except that, if such Business Day
falls in the next calendar year, such payment will be made on the
immediately preceding Business Day, in each case with the same force and
effect as if made on such date fixed for redemption. If payment of the
Redemption Price in respect of Preferred Securities, together with any
accrued and unpaid Distributions on such Preferred Securities, is
improperly withheld or refused and not paid either by the Property Trustee
or by Time Warner pursuant to the Guarantee, Distributions on such
Preferred Securities will continue to accrue, from the original redemption
date to the date of payment, in which case the actual payment date will be
considered the date fixed for redemption for purposes of calculating the
Redemption Price and the amount of any such accrued and unpaid
distributions.
(v) Redemption/Distribution Notices shall be sent by the Regular
Trustees on behalf of the Trust to the Holders of the Preferred Securities.
(vi) Upon the date of dissolution of the Trust and distribution of
Subordinated Debentures as a result of the occurrence of a Special Event,
Preferred Security Certificates shall be deemed to represent beneficial
interests in the Subordinated Debentures so distributed, and the Preferred
Securities will no longer be deemed outstanding and may be canceled by the
Regular Trustees. The Subordinated Debentures so
<PAGE>
12
distributed shall have an aggregate principal amount equal to the aggregate
liquidation amount of the Preferred Securities so distributed.
(vii) Subject to the foregoing and applicable law (including, without
limitation, United States Federal securities laws), Time Warner or any of
its affiliates may at any time and from time to time purchase outstanding
Preferred Securities by tender, in the open market or by private agreement.
Any such Preferred Securities purchased by Time Warner shall be surrendered
to the Trust for cancellation.
5. Voting Rights. (a) Except as provided under paragraph 5(b) below
--------------
and as otherwise required by law and the Declaration, the Holders of the
Preferred Securities will have no voting rights.
(b) (i) If (A) the Trust (1) fails to pay Distributions in full on
the Preferred Securities and such failure continues unremedied for 6
quarterly Distribution periods or (2) fails to pay the Redemption Price of
any Preferred Securities to be redeemed on the applicable redemption date;
or (B) an Event of Default occurs and is continuing (each an "Appointment
Event"), then the Holders of the Preferred Securities, acting as a single
class, will be entitled by the vote of Holders of Preferred Securities
representing a Majority in aggregate liquidation amount of the Preferred
Securities to appoint a Special Regular Trustee in accordance with Section
5.02(a)(ii)(B) of the Declaration. Any Holder of Preferred Securities
(other than the Sponsor or any Affiliate of the Sponsor) will have the
right to nominate any Person to be appointed as Special Regular Trustee.
For purposes of determining whether the Trust has failed to make
Distributions in full for 6 consecutive quarterly Distribution periods,
Distributions shall be deemed to remain in arrears, notwithstanding any
payments in respect thereof, until full cumulative Distributions have been
or contemporaneously are paid with respect to all quarterly Distribution
periods terminating on or prior to the date of payment of such cumulative
Distributions. Not later than 30 days after such right to appoint a
Special Regular Trustee arises, the Regular Trustees will convene a meeting
of the Holders of the Preferred Securities for the purpose of appointing a
Special Regular Trustee. If the Regular
<PAGE>
13
Trustees fail to convene such meeting within such 30-day period, the
Holders of Preferred Securities representing not less than 10% in aggregate
liquidation amount of the outstanding Preferred Securities will be entitled
to convene such meeting in accordance with Section 12.02 of the
Declaration. The record date for such meeting will be the close of
business on the Business Day next preceding the day on which notice of the
meeting is sent to Holders of Preferred Securities. The provisions of the
Declaration relating to the convening and conduct of the meetings of the
Holders will apply with respect to any such meeting. If, at any such
meeting, Holders of less than a Majority in aggregate liquidation amount of
Preferred Securities entitled to vote for the appointment of a Special
Regular Trustee vote for such appointment, no Special Regular Trustee shall
be appointed.
Any Special Regular Trustee may be removed without cause at any time
by the Holders of Preferred Securities representing a Majority in aggregate
liquidation amount of the Preferred Securities in accordance with Section
5.02(a)(ii)(B) of the Declaration. The Holders of 10% in aggregate
liquidation amount of the Preferred Securities will be entitled to convene
such a meeting to remove the Special Regular Trustee in accordance with
Section 12.02 of the Declaration. The record date for such meeting will be
the close of business on the Business Day next preceding the day on which
notice of the meeting is sent to Holders of Preferred Securities. Any
Special Regular Trustee appointed shall cease to be a Special Regular
Trustee as provided in Section 5.02(c) of the Declaration. Notwithstanding
the appointment of any such Special Regular Trustee, Time Warner shall
retain all its rights under the Indenture, including the right to extend
the interest payment period on the Subordinated Debentures.
(ii) If any proposed amendment to the Declaration provides for, or
the Regular Trustees otherwise propose to effect (A) any action that would
adversely affect the powers, preferences or special rights of the Trust
Securities, whether by way of amendment to the Declaration or otherwise, or
(B) the liquidation, dissolution, winding-up or termination of the Trust,
other than in connection with the distribution of Subordinated Debentures
held by the Property Trustee,
<PAGE>
14
upon the occurrence of a Special Event or in connection with the redemption
of Preferred Securities as a consequence of a redemption of Subordinated
Debentures, then the Holders of outstanding Trust Securities will be
entitled to vote on such amendment or proposal as a class and such
amendment or proposal shall not be effective except with the approval of
the Holders of Trust Securities representing a Majority in aggregate
liquidation amount of Trust Securities affected thereby; provided, however,
-------- -------
(1) if any amendment or proposal referred to in clause (A) above would
adversely affect only the Preferred Securities or the Common Securities,
then only the affected class will be entitled to vote on such amendment or
proposal and such amendment or proposal shall not be effective except with
the approval of a Majority in aggregate liquidation amount of such class of
Trust Securities, (2) the rights of Holders of Preferred Securities under
Article V of the Declaration to appoint and remove a Special Regular
Trustee shall not be amended without the consent of each Holder of
Preferred Securities, and (3) amendments to the Declaration shall be
subject to such further requirements as are set forth in Sections 12.01 and
12.02 of the Declaration.
(iii) In the event the consent of the Property Trustee, as the holder
of the Subordinated Debentures, is required under the Indenture with
respect to any amendment, modification or termination of the Indenture or
the Subordinated Debentures, the Property Trustee shall request the written
direction of the Holders of the Trust Securities with respect to such
amendment, modification or termination. The Property Trustee shall vote
with respect to such amendment, modification or termination as directed by
a Majority in aggregate liquidation amount of the Trust Securities voting
together as a single class; provided that where such amendment,
--------
modification or termination of the Indenture or the Subordinated Debentures
requires the consent or vote of (A) holders of Subordinated Debentures
representing a specified percentage greater than a majority in principal
amount of the Subordinated Debentures or (B) each holder of Subordinated
Debentures, the Property Trustee may only vote with respect to that
amendment, modification or termination as directed by, in the case of
clause (A) above, the vote of Holders of Trust Securities representing such
specified percentage of the aggregate liquidation
<PAGE>
15
amount of the Trust Securities, or, in the case of clause (B) above, each
Holder of Trust Securities; and provided further that the Property Trustee
----------------
shall not take any action in accordance with the directions of the Holders
of Trust Securities unless the Property Trustee shall have received, at the
expense of the Sponsor, an opinion of nationally recognized independent tax
counsel experienced in such matters to the effect that such action will not
result in the Trust being treated as an association taxable as a
corporation or a partnership for United States Federal income tax purposes
and that, following such action, each Holder of Trust Securities will be
treated for United States Federal income tax purposes as owning an
undivided beneficial interest in the Subordinated Debentures.
(iv) Subject to Section 2.06 of the Declaration, and the provisions
of this and the next succeeding paragraph, the Holders of a Majority in
aggregate liquidation amount of the Preferred Securities, voting separately
as a class, shall have the right to (A) on behalf of all Holders of
Preferred Securities, waive any past default that is waivable under the
Declaration (subject to, and in accordance with the Declaration) and (B)
direct the time, method, and place of conducting any proceeding for any
remedy available to the Property Trustee, or to direct the exercise of any
trust or power conferred upon the Property Trustee under the Declaration,
including the right to direct the Property Trustee, as the holder of the
Subordinated Debentures, to (1) direct the time, method and place of
conducting any proceeding for any remedy available to the Indenture
Trustee, or exercising any trust or power conferred on the Indenture
Trustee with respect to the Subordinated Debentures, (2) waive any past
default that is waivable under Section 5.13 of the Indenture or (3)
exercise any right to rescind or annul a declaration that the principal of
all the Subordinated Debentures shall be due and payable; provided that
--------
where the taking of any action under the Indenture requires the consent or
vote of (x) holders of Subordinated Debentures representing a specified
percentage greater than a majority in principal amount of the Subordinated
Debentures or (y) each holder of Subordinated Debentures, the Property
Trustee may only take such action if directed by, in the case of clause (x)
above, the vote of Holders of Preferred
<PAGE>
16
Securities representing such specified percentage of the aggregate
liquidation amount of the Preferred Securities, or, in the case of clause
(y) above, each Holder of Preferred Securities. The Property Trustee shall
not revoke any action previously authorized or approved by a vote of the
Holders of the Preferred Securities. The Property Trustee shall not take
any of the foregoing actions at the direction of the Holders of Preferred
Securities unless the Property Trustee shall have received, at the expense
of the Sponsor, an opinion of nationally recognized independent tax counsel
experienced in such matters to the effect that such action will not result
in the Trust being treated for United States Federal income tax purposes as
an association taxable as a corporation or a partnership and that,
following such action, each Holder of Trust Securities will be treated for
United States Federal income tax purposes as owning an undivided beneficial
interest in the Subordinated Debentures. If the Property Trustee fails to
enforce its rights under the Declaration (including its rights, powers and
privileges as a holder of the Subordinated Debentures under the Indenture),
any Holder of Preferred Securities may, after a period of 30 days has
elapsed from such Holder's written request to the Property Trustee to
enforce such rights, institute a legal proceeding directly against Time
Warner to enforce the Property Trustee's rights under the Declaration,
without first instituting a legal proceeding against the Property Trustee
or any other Person.
(v) A waiver of an Indenture Event of Default by the Property Trustee
at the direction of the Holders of the Preferred Securities will constitute a
waiver of the corresponding Event of Default under the Declaration in respect of
the Trust Securities.
(vi) Any required approval or direction of Holders of Preferred
Securities may be given at a separate meeting of Holders of Preferred Securities
convened for such purpose, at a meeting of all of the Holders of Trust
Securities or pursuant to written consent. The Regular Trustees will cause a
notice of any meeting at which Holders of Preferred Securities are entitled to
vote, or of any matter upon which action by written consent of such Holders is
to be taken, to be mailed to each Holder of record of Preferred Securities.
Each such notice will include a statement setting forth (A) the date of such
meeting or the
<PAGE>
17
date by which such action is to be taken, (B) a description of any resolution
proposed for adoption at such meeting on which such Holders are entitled to vote
or of such matter upon which written consent is sought and (C) instructions for
the delivery of proxies or consents.
(vii) No vote or consent of the Holders of Preferred Securities will
be required for the Trust to redeem and cancel Preferred Securities in
accordance with the Declaration.
(viii) Notwithstanding that Holders of Preferred Securities are
entitled to vote or consent under any of the circumstances described above, any
of the Preferred Securities at such time that are owned by Time Warner or by any
entity directly or indirectly controlling or controlled by or under direct or
indirect common control with Time Warner shall not be entitled to vote or
consent and shall, for purposes of such vote or consent, be treated as if they
were not outstanding.
(ix) Except as provided in this paragraph 5, Holders of the Preferred
Securities will have no rights to increase or decrease the number of Trustees or
to appoint, remove or replace a Trustee, which voting rights are vested solely
in the Holders of the Common Securities.
6. Pro Rata Treatment. A reference in these terms of the Preferred
-------------------
Securities to any payment, distribution or treatment as being made on a "Pro
Rata Basis" shall mean, with respect to such payment, distribution or treatment,
pro rata to each Holder of Trust Securities according to the aggregate
liquidation amount of the Trust Securities held by such Holder in relation to
the aggregate liquidation amount of all Trust Securities outstanding; provided,
--------
however, that if the assets of the Trust are insufficient to make such payment
- -------
in full as a result of a default with respect to the Subordinated Debentures,
any funds available to make such payment shall be paid (i) first to each Holder
of the Preferred Securities pro rata according to the aggregate liquidation
amount of Preferred Securities held by such Holder in relation to the aggregate
liquidation amount of all Preferred Securities outstanding up to an aggregate
amount equal to the amount then owed to the Holders of the Preferred Securities,
and (ii) only after satisfaction of all amounts owed to the Holders of the
Preferred Securities, to each Holder of Common Securities pro rata according to
the aggregate
<PAGE>
18
liquidation amount of Common Securities held by such Holder in relation to the
aggregate liquidation amount of all Common Securities outstanding.
7. Ranking. The Preferred Securities rank pari passu, and payments
-------- ---- -----
will be made thereon on a Pro Rata Basis, with the Common Securities, except
that if, as a result of an Event of Default with respect to the Subordinated
Debentures, the assets of the Trust are insufficient to make payments of
Distributions or payments upon liquidation, redemption of the Trust Securities
or otherwise, the rights of Holders of the Common Securities to receive such
payments will be subordinated to the rights of the Holders of the Preferred
Securities.
8. Mergers, Consolidations or Amalgamations. The Trust may not
-----------------------------------------
consolidate, amalgamate, merge with or into, or be replaced by, or convey,
transfer or lease its properties and assets to, any corporation or other body.
9. Transfer, Exchange, Method of Payments. Payment of Distributions
---------------------------------------
and payments on redemption of the Preferred Securities or on dissolution of the
Trust will be payable, the transfer of the Preferred Securities will be
registrable, and Preferred Securities will be exchangeable for Preferred
Securities of other denominations of a like aggregate liquidation amount, at the
principal corporate trust office of the Property Trustee in The City of New
York; provided that payment of Distributions may be made at the option of the
--------
Regular Trustees on behalf of the Trust by check mailed to the address of the
persons entitled thereto and that the payment on redemption of any Preferred
Security or on dissolution of the Trust will be made only upon surrender of such
Preferred Security to the Property Trustee.
10. Acceptance of Indenture and Guarantee and Certain Other Matters.
----------------------------------------------------------------
Each Holder of Preferred Securities, by the acceptance thereof, agrees (a) to
the provisions of (i) the Guarantee, including the subordination provisions
therein and (ii) the Indenture and the Subordinated Debentures, including the
subordination provisions of the Indenture and (b) to treat the Subordinated
Debentures as debt instruments for United States Federal, state and local income
and franchise tax purposes and not to take any contrary position before any
taxing authority or on any tax return.
<PAGE>
19
11. No Preemptive Rights. The Holders of Preferred Securities shall
---------------------
have no preemptive rights to subscribe to any additional Preferred Securities or
Common Securities.
12. Miscellaneous. These terms shall constitute a part of the
--------------
Declaration. The Regular Trustees will provide a copy of the Declaration, the
Guarantee and the Indenture to a Holder without charge on written request to the
Trust at its principal place of business.
<PAGE>
[Draft--7/29/95]
Annex I
Certificate Number Number of Preferred Securities
B-1
CUSIP NO. [ ]
Certificate Evidencing Preferred Securities
of
Time Warner Capital I
[ ]% Preferred Trust Securities
Time Warner Financing Trust, a statutory business trust formed under
the laws of the State of Delaware (the "Trust"), hereby certifies that
(the "Holder") is the registered owner of ( ) preferred securities
of the Trust representing undivided beneficial interests in the assets of the
Trust designated the [ ]% Preferred Trust Securities (the "Preferred
Securities"). The Preferred Securities are transferable on the books and
records of the Trust, in person or by a duly authorized attorney, upon surrender
of this certificate duly endorsed and in proper form for transfer. The
designations, rights, privileges, restrictions, preferences and other terms and
provisions of the Preferred Securities are set forth in, and this certificate
and the Preferred Securities represented hereby are issued and shall in all
respects be subject to the terms and provisions of, the Amended and Restated
Declaration of Trust of the Trust dated as of , 1995, as the same may
be amended from time to time (the "Declaration") including the designation of
the terms of Preferred Securities as set forth in Exhibit B thereto. The
Preferred Securities and the Common Securities issued by the Trust pursuant to
the Declaration represent undivided beneficial interests in the assets of the
Trust, including the Subordinated Debentures (as defined in the Declaration)
issued by Time Warner Inc., a Delaware corporation ("Time Warner"), to the Trust
pursuant to the Indenture referred to in the Declaration. The Holder is
entitled to the benefits of the Guarantee Agreement of Time Warner dated as of
, 1995 (the "Guarantee") to the extent provided therein. The Regular Trustees
will furnish a copy of the Declaration, the Guarantee and the Indenture to the
Holder without charge upon written request to the Trust at its principal place
of business or registered office.
<PAGE>
2
The Holder of this Certificate, by accepting this Certificate, is
deemed to have (i) agreed to the terms of the Indenture and the Subordinated
Debentures, including that the Subordinated Debentures are (a) subordinate and
junior in right of payment to all Senior Indebtedness (as defined in the
Indenture, which term includes Time Warner's outstanding 8-3/4% Convertible
Subordinated Debentures due 2015) as and to the extent provided in the Indenture
and (ii) agreed to the terms of the Guarantee, including that the Guarantee is
(a) subordinate and junior in right of payment to all other liabilities of Time
Warner, including the Subordinated Debentures, except those made pari passu or
---- -----
subordinate by their terms, (b) pari passu with the most senior preferred stock
---- -----
issued from time to time, by Time Warner and any guarantee now or hereafter
entered into by Time Warner in respect of any such preferred stock and (c)
senior to all common stock now or hereafter issued by Time Warner and to any
guarantee now or hereafter entered into by Time Warner in respect of any of its
common stock.
Upon receipt of this certificate, the Holder is bound by the
Declaration and is entitled to the benefits thereunder.
IN WITNESS WHEREOF, Trustees of the Trust have executed this
certificate this day of , 1995.
TIME WARNER CAPITAL I,
by
________________________, as trustee
Name:
Title: Trustee
by
________________________, as trustee
Name:
Title: Trustee
<PAGE>
3
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned assigns and transfers this Preferred
Security to:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Insert assignee's social security or tax identification number)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Insert address and zip code of assignee)
and irrevocably appoints
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
agent to transfer this Preferred Security Certificate on the books of the Trust.
The agent may substitute another to act for him or her.
Date:
-------------------------------
Signature:
--------------------------
(Sign exactly as your name appears on the other side of this Preferred Security
Certificate)
<PAGE>
EXHIBIT C
TERMS OF
COMMON SECURITIES
Pursuant to Section 7.01 of the Amended and Restated Declaration of
Trust of Time Warner Capital I (the "Trust") dated as of [ ], 1995 (as
amended from time to time, the "Declaration"), the designations, rights,
privileges, restrictions, preferences and other terms and provisions of the
Common Securities are set forth below (each capitalized term used but not
defined herein having the meaning set forth in the Declaration):
SECTION 1. Designation and Number. Common Securities of the Trust
-----------------------
with an aggregate liquidation amount in the assets of the Trust of
($ ) and a aggregate liquidation amount in the assets of the Trust of
$[ ] per Common Security, are hereby designated as "[ ]% Common Securities".
The Common Security Certificates evidencing the Common Securities shall be
substantially in the form attached hereto as Annex I, with such changes and
additions thereto or deletions therefrom as may be required by ordinary usage,
custom or practice. The Common Securities are to be issued and sold to Time
Warner Inc. ("Time Warner") in consideration of $[ ] in cash. The Trust will
invest the gross proceeds from the issuance of the Common Securities together
with the gross proceeds from the issuance of the Preferred Securities in
Subordinated Debentures of Time Warner having an aggregate principal amount
equal to $[ ], and bearing interest at an annual percentage rate equal to
the annual distribution rate on the Preferred Securities and Common Securities
and having payment and redemption provisions that correspond to the payment and
redemption provisions of the Preferred Securities and Common Securities.
SECTION 2. Distributions. (a) Periodic distributions payable on
--------------
each Common Security will be fixed at a rate per annum of [ ]% (the "Coupon
Rate") of the aggregate liquidation amount of $[25] per Common Security, such
rate being the rate of interest payable on the Subordinated Debentures to be
held by the Property Trustee. Distributions in arrears for more than one
quarter will bear interest thereon at the Coupon Rate (to the extent permitted
by applicable law), compounded quarterly. The term "Distributions" as used in
these terms means such periodic cash distributions and any such interest payable
unless otherwise stated. A Distribution will be made by the Property Trustee
only to the extent that interest payments
<PAGE>
2
are made in respect of the Subordinated Debentures held by the Property Trustee.
The amount of Distributions (or amounts equal to accrued and unpaid
Distributions) payable for any period will be computed (i) for any full
quarterly Distribution period, on the basis of a 360-day year of twelve 30-day
months, and for any period shorter than a full quarterly Distribution period, on
the basis of a 360-day year of twelve 30-day months and on the basis of the
actual number of days elapsed in any such 30-day month.
(b) Distributions on the Common Securities will be cumulative, will
accrue from and including [date of issue], 1995, and will be payable quarterly
in arrears, on March 30, June 30, September 30 and December 30 of each year,
commencing on, but excluding [ ], 1995, except as otherwise described
below, but only if and to the extent that interest payments are made in respect
of the Subordinated Debentures held by the Property Trustee. Time Warner, as
issuer of the Subordinated Debentures, has the right under the Indenture to
defer payments of interest by extending the interest payment period from time to
time on the Subordinated Debentures for a period not exceeding 20 consecutive
quarters (each an "Extension Period") and, during such Extension Period,
Distributions will also be deferred. Despite such deferral, quarterly
Distributions will continue to accrue with interest thereon (to the extent
permitted by applicable law) at the Coupon Rate compounded quarterly during any
such Extension Period. Prior to the termination of any such Extension Period,
Time Warner may further extend such Extension Period; provided that such
--------
Extension Period. Upon the termination of any Extension Period together with
all such previous and further extensions thereof may not exceed 20 consecutive
quarters. Payments of accrued Distributions will be payable to Holders as they
appear on the books and records of the Trust on the first record date after the
end of the Extension Period. Upon the termination of any Extension Period and
the payment of all amounts then due, Time Warner may commence a new Extension
Period, subject to the above requirements.
(c) Distributions on the Common Securities will be payable promptly
by the Property Trustee (or other Paying Agent) upon receipt of immediately
available funds to the Holders thereof as they appear on the books and records
of the Trust on the relevant record dates. While the Preferred Securities
remain in book-entry only form, the relevant record dates shall be one Business
Day prior to the relevant payment dates which payment dates correspond to the
interest
<PAGE>
3
payment dates on the Subordinated Debentures. Subject to any applicable laws
and regulations and the provisions of the Declaration, each such payment in
respect of the Preferred Securities will be made as described under the heading
"Description of the Preferred Securities--Book-Entry Only Issuance--The
Depository Trust Company" in the Prospectus Supplement dated ________, 1995, to
the Prospectus dated ______, 1995 (together the "Prospectus"), of the Trust
included in the Registration Statement on Form S-3 of the Sponsor, the Trust and
certain other business trusts.
If the Preferred Securities shall not continue to remain in book-entry
only form, the relevant record dates for the Preferred Securities shall conform
to the rules of any securities exchange on which the securities are listed and,
if none, shall be selected by the Regular Trustees, which dates shall be at
least one Business Day but less than 60 Business Days before the relevant
payment dates, which payment dates correspond to the interest payment dates on
the Debentures. Distributions payable on any Common Securities that are not
punctually paid on any Distribution date as a result of Time Warner having
failed to make the corresponding interest payment on the Subordinated Debentures
will forthwith cease to be payable to the person in whose name such Common
Security is registered on the relevant record date, and such defaulted
Distribution will instead be payable to the person in whose name such Common
Security is registered on the special record date established by the Regular
Trustees, which record date shall correspond to the special record date or other
specified date determined in accordance with the Indenture. Subject to any
applicable laws and regulations and the provisions of the Declaration, each
payment in respect of the Common Securities will be made as described in
paragraph 9 hereof. If any date on which Distributions are payable on the
Common Securities is not a Business Day, then payment of the Distribution
payable on such date will be made on the next succeeding day that is a Business
Day (and without any interest or other payment in respect of any such delay),
except that if such Business Day is in the next succeeding calendar year, such
payment shall be made on the immediately preceding Business Day, in each case
with the same force and effect as if made on such date.
(d) All Distributions paid with respect to the Common Securities and
the Preferred Securities will be paid
<PAGE>
4
on a Pro Rata Basis to the Holders thereof entitled thereto.
(e) In the event that there is any money or other property held by or
for the Trust that is not accounted for under the Declaration or the terms of
the Preferred Securities or these terms of the Common Securities, such money or
property shall be distributed on a Pro Rata Basis among the Holders of the
Preferred Securities and Common Securities.
3. Liquidation Distribution Upon Dissolution. In the event of any
------------------------------------------
voluntary or involuntary liquidation, dissolution, winding-up or termination of
the Trust (each a "Liquidation Event"), the Holders of the Trust Securities on
the date of such Liquidation Event will be entitled to be paid on a Pro Rata
Basis out of the assets of the Trust an amount equal to the liquidation amount
per Trust Security plus accrued and unpaid Distributions thereon to, but
excluding, the date of payment (such amount being the "Liquidation
Distribution") in connection with such Liquidation Event unless Subordinated
Debentures in an aggregate principal amount equal to the aggregate liquidation
amount of, and bearing accrued and unpaid interest in an amount equal to the
accrued and unpaid Distributions on, the Trust Securities have been distributed
on a Pro Rata Basis (determined without regard to the proviso in the definition
of such term) to the Holders of the Trust Securities in exchange for such Trust
Securities. In addition, in the event that the assets of the Trust exceed the
amount necessary to pay to all holders of the Trust Securities the full amount
of the Liquidation Distribution, such excess will be paid to the holders of the
Trust Securities on a Pro Rata Basis (determined without regard to the proviso
in the definition of such term).
SECTION 4. Redemption and Distribution of Subordinated Debentures.
-------------------------------------------------------
The Trust Securities may only be redeemed if Subordinated Debentures having an
aggregate principal amount equal to the aggregate liquidation amount of the
Trust Securities are repaid, redeemed or distributed as set forth below:
(a) Upon the repayment of the Subordinated Debentures in whole or in
part, whether at maturity or upon redemption, the proceeds from such repayment
or payment shall be simultaneously applied to redeem Trust Securities having an
aggregate liquidation amount equal to the
<PAGE>
5
aggregate principal amount of the Subordinated Debentures so repaid or redeemed
at a redemption price equal to the liquidation amount per Security (the
"Redemption Price") plus an amount equal to all accrued and unpaid Distributions
thereon at the date of the redemption, payable in cash. Holders will be given
not less than 20 nor more than 45 days notice of such redemption.
(b) If fewer than all the outstanding Trust Securities are to be so
redeemed, the Trust Securities will be redeemed on a Pro Rata Basis and the
Common Securities to be redeemed will be redeemed as described in paragraph
4(e)(ii) below. If a partial redemption would result in the delisting of the
Preferred Securities by any national securities exchange or other self-
regulatory organization (including the NASDAQ National Market System) on which
the Preferred Securities are then listed, Time Warner pursuant to the Indenture
will only redeem the Subordinated Debentures in whole and, as a result, the
Trust may only redeem the Common Securities in whole.
(c)(i) If, at any time, a Tax Event or an Investment Company Event
(each as hereinafter defined, and each a "Special Event") shall occur and be
continuing, the Regular Trustees shall notify Time Warner thereof and Time
Warner shall elect to either (A) direct the Regular Trustees to dissolve the
Trust and cause Subordinated Debentures having an aggregate principal amount
equal to the aggregate liquidation amount of, and accrued and unpaid interest
equal to accrued and unpaid Distributions on, and having the same record dates
for payment as, the Trust Securities outstanding at such time, to be distributed
to the Holders of the Trust Securities on a Pro Rata Basis in liquidation of
such Holders' interests in the Trust, within 90 days following the occurrence of
such Special Event, provided, however, that in the case of the occurrence of a
-------- -------
Tax Event, as a condition of any such dissolution and distribution, the Regular
Trustees shall have received an opinion of nationally recognized independent tax
counsel experienced in such matters (a "No Recognition Opinion"), which opinion
may rely on any then applicable published revenue ruling of the Internal Revenue
Service, to the effect that the Holders of the Preferred Securities will not
recognize any gain or loss for United States Federal income tax purposes as a
result of the dissolution of the Trust and distribution of Subordinated
Debentures; (B) to redeem the Subordinated Debentures in accordance with the
Indenture and the Trust Securities as described under paragraph (ii) below or
(C) in
<PAGE>
6
the case of a Tax Event, allow the Subordinated Debentures and the Trust
Securities to remain outstanding and indemnify the Trust for all taxes payable
by it as a result of such change in law or interpretation; provided that, if and
--------
as long as at the time there is available to the Trust the opportunity to
eliminate, within 90 days following the occurrence of such Special Event (the
"90-Day Period"), the Special Event by taking some ministerial action, such as
filing a form or making an election, or pursuing some other similar reasonable
measure that has no adverse effect on the Trust, Time Warner or the Holders of
the Trust Securities (a "Ministerial Action"), the Trust will pursue such
measure in lieu of dissolution or redemption; provided further, that Time Warner
----------------
shall have no right to redeem the Subordinated Debentures or to direct the
Regular Trustees to dissolve the Trust while the Regular Trustees are pursuing
such Ministerial Action unless the Special Event shall not have been so
eliminated by the 85th day following the occurrence thereof, in which case Time
Warner shall be permitted to so direct the Regular Trustees or to provide notice
to the holders of the redemption of the Subordinated Debentures; provided
--------
further, that if dissolution of the Trust and distribution of the Subordinated
- -------
Debentures to the holders of the Trust Securities would eliminate the condition
causing the Tax Event or the Investment Company Event and all other conditions
to such dissolution and distribution have been satisfied, Time Warner will not
be permitted to redeem the Subordinated Debentures; and provided further, that
----------------
Time Warner shall not be permitted to direct the Regular Trustees to dissolve
the Trust and distribute the Subordinated Debentures to the holders of the Trust
Securities upon the occurrence of the condition described in clause (2) in the
definition of "Tax Event" if, after giving effect to such dissolution and
distribution, Time Warner would not be permitted to deduct a greater percentage
of the interest payable on the Subordinated Debentures than it had been
permitted to deduct for United States Federal income tax purposes prior to the
occurrence of such Tax Event.
(ii) Upon the occurrence and continuation of a Tax Event or an
Investment Company Event, Time Warner shall have the right to redeem the
Subordinated Debentures in whole (but not in part), upon not less than 20
nor more than 45 Business Days' notice, within the 90-Day Period (such date
of redemption a "Special Redemption Date"), in which case the Trust shall
(unless the Trust shall have been dissolved) redeem in cash Trust
Securities having an aggregate liquidation
<PAGE>
7
amount equal to the aggregate principal amount of the Subordinated
Debentures so redeemed, at a redemption price per Trust Security equal to
the liquidation amount per Trust Security, plus an amount equal to all
accrued and unpaid distributions on such Trust Security to but excluding
the Special Redemption Date. The Common Securities and the Preferred
Securities will be redeemed on a Pro Rata Basis.
(iii) "Tax Event" means that the Regular Trustees shall have obtained
an opinion of nationally recognized independent tax counsel experienced in
such matters (a "Dissolution Tax Opinion") to the effect that on or after
July [ ], 1995, /1/as a result of (A) any amendment to, or change
-
(including any announced prospective change) in, the laws (or any
regulations thereunder) of the United States or any political subdivision
or taxing authority thereof or therein, (B) any amendment to, or change in,
an interpretation or application of any such laws or regulations by any
legislative body, court, governmental agency or regulatory authority
(including the enactment of any legislation and the publication of any
judicial decision or regulatory determination), (C) any interpretation or
pronouncement that provides for a position with respect to such laws or
regulations that differs from the theretofore generally accepted position
or (D) any action taken by any governmental agency or regulatory authority,
which amendment or change is enacted, promulgated, issued or announced or
which interpretation or pronouncement is issued or announced or which
action is taken, in each case on or after [ ], 1995, /2/ there is
-
more than an insubstantial risk that at such time or within 90 days of the
date thereof (1) the Trust is, or would be, subject to United States
Federal income tax with respect to income accrued or received on the
Subordinated Debentures, (2) less than 25% of the interest payable by Time
Warner to the Trust on the Subordinated Debentures is, or would be,
deductible by Time Warner for United States Federal income tax purposes or
(3) the Trust is, or would be, subject to
- ------------------------
/1/ Insert date of prospectus.
-
/2/ Insert date of prospectus.
-
<PAGE>
8
more than a de minimis amount of other taxes, duties or other governmental
-- -------
charges.
(iv) "Investment Company Event" means that the Regular Trustees shall
have received an opinion of nationally recognized independent counsel
experienced in such matters that, as a result of the occurrence of a change
in law or regulation or a written change in interpretation or application
of law or regulation by any legislative body, court, governmental agency or
regulatory authority (a "Change in 1940 Act Law"), there is more than an
insubstantial risk that the Trust is or will be considered an Investment
Company that is required to be registered under the Investment Company Act,
which Change in 1940 Act Law becomes effective on or after July [ ],
1995./3/
(v) On the date fixed for any distribution of Subordinated
Debentures, upon dissolution of the Trust, (i) the Common Securities will
no longer be deemed to be outstanding, (ii) the Trust shall not have any
further obligation to the holders of the Common Securities with respect to
the Common Securities and (iii) certificates representing Common Securities
will be deemed to represent beneficial interests in the Subordinated
Debentures having an aggregate principal amount equal to the aggregate
liquidation amount of, and bearing accrued and unpaid interest equal to
accrued and unpaid Distributions on, such Common Securities until such
certificates are presented to Time Warner or its agent for transfer or
reissuance.
(d) The Trust may not redeem fewer than all the outstanding Common
Securities unless all accrued and unpaid Distributions have been or are
concurrently being paid on all Common Securities for all quarterly Distribution
periods terminating on or prior to the date of redemption.
(e) (i) Notice of any redemption (other than a mandatory redemption)
of, or notice of distribution of Subordinated Debentures in exchange for,
the Preferred Securities and Common Securities (a "Redemption/Distribution
Notice") will be given by the Regular Trustees on behalf of the Trust by
mail to each Holder of Preferred Securities and Common Securities to
- -------------------------
/3/ Insert date of prospectus.
<PAGE>
9
be redeemed or exchanged not less than 20 nor more than 45 Business Days
prior to the date fixed for redemption or distribution thereof. For
purposes of the calculation of the date of redemption or exchange and the
dates on which notices are given pursuant to this paragraph (e)(i), a
Redemption/Distribution Notice shall be deemed to be given on the day such
notice is first mailed by first-class mail, postage prepaid, to Holders of
Preferred Securities and Common Securities. Each Redemption/Distribution
Notice shall be addressed to the Holders of Preferred Securities and Common
Securities at the address of each such Holder appearing in the books and
records of the Trust. Such Redemption/Distribution Notice shall set forth
the aggregate liquidation amount of Trust Securities to be redeemed, the
date of such redemption or such distribution and, in the case of a Special
Event, a brief description thereof. No defect in the Redemption/
Distribution Notice or in the mailing of either thereof with respect to any
Holder shall affect the validity of the redemption or exchange proceedings
with respect to any other Holder.
(ii) In the event that fewer than all the outstanding Common
Securities are to be redeemed, the Common Securities to be redeemed will be
redeemed on a Pro Rata Basis from each Holder of Common Securities, and, in
the event Common Securities are held in book-entry only form by the
Depositary or its nominee (or any successor Clearing Agency or its
nominee), the Depositary will reduce on a Pro Rata Basis the amount of the
interest of each Clearing Agency Participant in the Common Securities to be
redeemed; provided that if, as a result of such redemption, Clearing Agency
--------
Participants would hold fractional interests in the Preferred Securities,
the Depositary will adjust the amount of the interest of each clearing
Agency Participant to be redeemed to avoid such fractional interests.
(iii) Payment of the Redemption Price in respect of each Common
Security, together with any accrued and unpaid Distributions thereon, is
conditioned upon delivery or book-entry transfer of such Common Security
(together with necessary endorsements) to the Property Trustee at any time
(whether prior to, on or after the relevant date of redemption) after the
Redemption/Distribution Notice is given (to the extent
<PAGE>
10
such notice is required). Payment of the Redemption Price, together with
any accrued and unpaid Distributions on each Common Security, will be made
by the delivery of cash no later than the applicable date of redemption
with respect to such Common Security or, if later, the time of delivery or
transfer of such Common Security.
(iv) If the Trust gives a Redemption/Distribution Notice in
respect of a redemption of Common Securities as provided in this paragraph
4 (which notice will be irrevocable) then immediately prior to the close of
business on the redemption date, provided that Time Warner has paid to the
--------
Property Trustee in immediately available funds a sufficient amount of cash
in connection with the related redemption or maturity of the Subordinated
Debentures, Distributions will cease to accrue on the Common Securities
called for redemption, such Common Securities will no longer be deemed to
be outstanding and all rights of Holders of such Common Securities so
called for redemption will cease, except the right of the Holders of such
Common Securities to receive the Redemption Price, together with any
accrued and unpaid Distributions on the Common Securities being redeemed,
but without interest on such amount. Neither the Trustees nor the Trust
shall be required to register or cause to be registered the transfer of any
Common Securities which have been so called for redemption. If any date
fixed for redemption of Common Securities is not a Business Day, then
payment of the Redemption Price payable on such date, together with any
accrued and unpaid Distributions to such date, will be made on the next
succeeding day that is a Business Day (and without any interest or other
payment in respect of any such delay) except that, if such Business Day
falls in the next calendar year, such payment will be made on the
immediately preceding Business Day, in each case with the same force and
effect as if made on such date fixed for redemption. If payment of the
Redemption Price in respect of Common Securities, together with any accrued
and unpaid Distributions on such Common Securities, is improperly withheld
or refused and not paid by the Property Trustee, Distributions on such
Common Securities will continue to accrue, from the original redemption
date to the date of payment, in which case the actual payment date will be
considered the date fixed for redemption for purposes of
<PAGE>
11
calculating the Redemption Price and the amount of any such accrued and
unpaid Distributions.
(v) Redemption/Distribution Notices shall be sent by the Regular
Trustees on behalf of the Trust to the Holders of the Common Securities.
(vi) Upon the date of dissolution of the Trust and distribution
of Subordinated Debentures as a result of the occurrence of a Special
Event, Common Security Certificates shall be deemed to represent beneficial
interests in the Subordinated Debentures so distributed, and the Common
Securities will no longer be deemed outstanding and may be canceled by the
Regular Trustees. The Subordinated Debentures so distributed shall have an
aggregate principal amount equal to the aggregate liquidation amount of the
Common Securities so distributed.
SECTION 5. Voting Rights. (a) Except as provided under paragraph
--------------
5(b) below and as otherwise required by law and the Declaration, the Holders of
the Common Securities will have no voting rights.
(b) (i) Except as provided in the Declaration with respect to a
Special Regular Trustee, Holders of Common Securities have the sole right under
the Declaration to increase or decrease the number of Trustees, and to appoint,
remove or replace a Trustee, any such increase, decrease, appointment, removal
or replacement to be approved by Holders of Common Securities representing a
Majority in aggregate liquidation amount of the Common Securities.
(ii) If any proposed amendment to the Declaration provides for, or
the Regular Trustees otherwise propose to effect (A) any action that would
adversely affect the powers, preferences or special rights of the Trust
Securities, whether by way of amendment to the Declaration or otherwise, or (B)
the liquidation, dissolution, winding-up or termination of the Trust, other than
in connection with the distribution of Subordinated Debentures held by the
Property Trustee, upon the occurrence of a Special Event or in connection with
the redemption of Common Securities as a consequence of a redemption of
Subordinated Debentures, then the Holders of outstanding Trust Securities will
be entitled to vote on such amendment or proposal as a class and such amendment
or proposal shall not be effective except with the approval of the Holders of
Trust Securities representing a
<PAGE>
12
Majority in aggregate liquidation amount of such securities affected thereby;
provided, however, (1) if any amendment or proposal referred to in clause (A)
- -------- -------
above would adversely affect only the Preferred Securities or the Common
Securities, then only the affected class will be entitled to vote on such
amendment or proposal and such amendment or proposal shall not be effective
except with the approval of a Majority in aggregate liquidation amount of such
class of Trust Securities, (2) the rights of Holders of Common Securities under
Article V of the Declaration to increase or decrease the number of, and to
appoint, replace or remove, Trustees (other than a Special Regular Trustee)
shall not be amended without the consent of each Holder of Common Securities and
(3) amendments to the Declaration shall be subject to such further requirements
as are set forth in Sections 12.01 and 12.02 of the Declaration.
(iii) In the event the consent of the Property Trustee as the holder
of the Subordinated Debentures, is required under the Indenture with respect to
any amendment, modification or termination of the Indenture or the Subordinated
Debentures, the Property Trustee shall request the written direction of the
Holders of the Trust Securities with respect to such amendment, modification or
termination. The Property Trustee shall vote with respect to such amendment,
modification or termination as directed by a Majority in aggregate liquidation
amount of the Trust Securities voting together as a single class; provided that
--------
where such amendment, modification or termination of the Indenture or the
Subordinated Debentures requires the consent or vote of (1) holders of
Subordinated Debentures representing a specified percentage greater than a
majority in principal amount of the Subordinated Debentures or (2) each holder
of Subordinated Debentures, the Property Trustee may only vote with respect to
that amendment, modification or termination as directed by, in the case of
clause (1) above, the vote of Holders of Trust Securities representing such
specified percentage of the aggregate liquidation amount of the Trust
Securities, or, in the case of clause (2) above, each Holder of Trust
Securities; and provided further, that the Property Trustee shall not take any
----------------
action in accordance with the directions of the Holders of the Trust Securities
unless the Property Trustee shall have received, at the expense of the Sponsor,
an opinion of nationally recognized independent tax counsel experienced in such
matters to the effect that such action will not result in the Trust being
treated as an association taxable as a corporation or a partnership for United
States Federal
<PAGE>
13
income tax purposes and that, following such action, each holder of Trust
Securities will be treated for United States Federal income tax purposes as
owning an undivided beneficial interest in the Subordinated Debentures.
(iv) Subject to Section 2.06 of the Declaration, and the provisions
of this and the next succeeding paragraph, the Holders of a Majority in
aggregate liquidation amount of the Common Securities, voting separately as a
class, shall have the right to (A) on behalf of all Holders of Common
Securities, waive any past default that is waivable under the Declaration
(subject to, and in accordance with the Declaration) and (B) direct the time,
method, and place of conducting any proceeding for any remedy available to the
Property Trustee, or to direct the exercise of any trust or power conferred upon
the Property Trustee under the Declaration, including the right to direct the
Property Trustee, as holder of the Subordinated Debentures, to (1) direct the
time, method and place of conducting any proceeding for any remedy available to
the Indenture Trustee, or exercising any trust or power conferred on the
Indenture Trustee with respect to the Subordinated Debentures, (2) waive any
past default and its consequences that is waivable under Section 5.13 of the
Indenture, or (3) exercise any right to rescind or annul a declaration that the
principal of all the Subordinated Debentures shall be due and payable; provided
--------
that where the taking of any action under the Indenture requires the consent or
vote of (x) holders of Subordinated Debentures representing a specified
percentage greater than a majority in principal amount of the Subordinated
Debentures or (y) each holder of Subordinated Debentures, the Property Trustee
may only take such action if directed by, in the case of clause (x) above, the
vote of Holders of Common Securities representing such specified percentage of
the aggregate liquidation amount of the Common Securities, or, in the case of
clause (y) above, each Holder of Common Securities. Pursuant to this paragraph,
the Property Trustee shall not revoke, or take any action inconsistent with, any
action previously authorized or approved by a vote of the Holders of the
Preferred Securities, and shall not take any action in accordance with the
direction of the Holders of the Common Securities under this paragraph if the
action is prejudicial to the Holders of Preferred Securities. The Property
Trustee shall not take any of the foregoing actions at the direction of the
Holders of Common Securities unless the Property Trustee shall have received, at
the expense of the Sponsor, an opinion of nationally
<PAGE>
14
recognized independent tax counsel experienced in such matters to the effect
that such action will not result in the Trust being treated as an association
taxable as a corporation or a partnership for United States Federal income tax
purposes and that, following such action, each Holder of Trust Securities will
be treated for United States Federal income tax purposes as owning an undivided
beneficial interest in the Subordinated Debentures.
(c) (i) Notwithstanding any other provision of these terms, each
Holder of Common Securities will be deemed to have waived any Event of Default
with respect to the Common Securities and its consequences until Events of
Default with respect to the Preferred Securities have been cured, waived by the
Holders of Preferred Securities as provided in the Declaration or otherwise
eliminated, and until all Events of Default with respect to the Preferred
Securities have been so cured, waived by the Holders of Preferred Securities or
otherwise eliminated, the Property Trustee will be deemed to be acting solely on
behalf of the Holders of Preferred Securities and only the Holders of the
Preferred Securities will have the right to direct the Property Trustee in
accordance with the terms of the Declaration or of the Trust Securities. In the
event that any Event of Default with respect to the Preferred Securities is
waived by the Holders of Preferred Securities as provided in the Declaration,
the Holders of Common Securities agree that such waiver shall also constitute
the waiver of such Event of Default with respect to the Common Securities for
all purposes under the Declaration without any further act, vote or consent of
the Holders of the Common Securities.
(ii) A waiver of an Indenture Event of Default by the Property
Trustee at the direction of the Holders of the Preferred Securities will
constitute a waiver of the corresponding Event of Default under the Declaration
in respect of the Trust Securities.
(d) Any required approval of Holders of Common Securities may be
given at a separate meeting of Holders of Common Securities convened for such
purpose, at a meeting of all of the Holders of Trust Securities or pursuant to
written consent. The Regular Trustees will cause a notice of any meeting at
which Holders of Common Securities are entitled to vote, or of any matter upon
which action by written consent of such Holders is to be taken, to be mailed to
each Holder of record of Common Securities. Each such
<PAGE>
15
notice will include a statement setting forth (i) the date of such meeting or
the date by which such action is to be taken, (ii) a description of any
resolution proposed for adoption at such meeting on which such Holders are
entitled to vote or of such matter upon which written consent is sought and
(iii) instructions for the delivery of proxies or consents.
(e) No vote or consent of the Holders of Common Securities will be
required for the Trust to redeem and cancel Common Securities in accordance with
the Declaration.
6. Pro Rata Treatment. A reference in these terms of the Common
-------------------
Securities to any payment, distribution or treatment as being made on a "Pro
Rata Basis" shall mean, with respect to such payment, distribution or treatment,
pro rata to each Holder of Trust Securities according to the aggregate
liquidation amount of the Trust Securities held by such Holder in relation to
the aggregate liquidation amount of all Trust Securities outstanding; provided,
--------
however, that if the assets of the Trust are insufficient to make such payment
- -------
in full as a result of a default with respect to the Subordinated Debentures,
any funds available to make such payment shall be paid (a) first to each Holder
of the Preferred Securities pro rata according to the aggregate liquidation
amount of Preferred Securities held by such Holder in relation to the aggregate
liquidation amount of all Preferred Securities outstanding up to an aggregate
amount equal to the amount then owed to the Holders of the Preferred Securities,
and (b) only after satisfaction of all amounts owed to the Holders of the
Preferred Securities, to each Holder of Common Securities pro rata according to
the aggregate liquidation amount of Common Securities held by such Holder in
relation to the aggregate liquidation amount of all Common Securities
outstanding.
7. Ranking. The Common Securities rank pari passu, and payments will
-------- ---- -----
be made thereon on a Pro Rata Basis with, the Preferred Securities, except that
if, as a result of an Event of Default with respect to the Subordinated
Debentures, the assets of the Trust are insufficient to make payments of
Distributions or payments upon liquidation, redemption of the Trust Securities
or otherwise, the rights of Holders of the Common Securities to receive such
payments will be subordinated to the rights of the Holders of the Preferred
Securities.
<PAGE>
16
8. Mergers, Consolidations or Amalgamations. The Trust may not
-----------------------------------------
consolidate, amalgamate, merge with or into, or be replaced by, or convey,
transfer or lease its properties and assets to, any corporation or other body.
9. Transfers, Exchanges, Method of Payments. Payment of
-----------------------------------------
Distributions and payments on redemption of the Common Securities or on
dissolution of the Trust will be payable, the transfer of the Common Securities
will be registrable, and Common Securities will be exchangeable for Common
Securities of other denominations of a like aggregate liquidation amount, at the
principal corporate trust office of the Property Trustee in The City of New
York; provided that payment of Distributions may be made at the option of the
Regular Trustees on behalf of the Trust by check mailed to the address of the
persons entitled thereto and that the payment on redemption of any Common
Security or on dissolution of the Trust will be made only upon surrender of such
Common Security to the Property Trustee. Notwithstanding the foregoing,
transfers of Common Securities are subject to conditions set forth in Section
9.01(c) of the Declaration.
10. Acceptance of Indenture and Certain Other Matters. Each Holder
--------------------------------------------------
of Common Securities, by the acceptance thereof, agrees (a) to the provisions of
the Indenture and the Subordinated Debentures, including the subordination
provisions thereof and (b) to treat the Subordinated Debentures as debt
instruments for United States Federal, state and local income and franchise tax
purposes and not to take any contrary position before any taxing authority or on
any tax return.
11. No Preemptive Rights. The Holders of Common Securities shall
---------------------
have no preemptive rights to subscribe to any additional Common Securities or
Preferred Securities.
12. Miscellaneous. These terms shall constitute a part of the
--------------
Declaration. The Regular Trustees will provide a copy of the Declaration and
the Indenture to a Holder without charge on written request to the Trust at its
principal place of business.
<PAGE>
Annex I
TRANSFER OF THIS CERTIFICATE
IS SUBJECT TO THE CONDITIONS
SET FORTH IN THE DECLARATION
REFERRED TO BELOW
Certificate Number Number of Common Securities
C-1
Certificate Evidencing Common Securities
of
Time Warner Capital [I]
[ ]% Common Securities
Time Warner Capital [I], a statutory business trust formed under the
laws of the State of Delaware (the "Trust"), hereby certifies that [
] (the "Holder") is the registered owner of ( ) common securities of
the Trust representing undivided beneficial interests in the assets of the Trust
designated the [ ]% Common Securities (the "Common Securities"). The Common
Securities are transferable on the books and records of the Trust, in person or
by a duly authorized attorney, upon surrender of this certificate duly endorsed
and in proper form for transfer and satisfaction of the other conditions set
forth in the Declaration (as defined below) including, without limitation
Section 9.01(c) thereof. The designations, rights, privileges, restrictions,
preferences and other terms and provisions of the Common Securities are set
forth in, and this certificate and the Common Securities represented hereby are
issued and shall in all respects be subject to the terms and provisions of, the
Amended and Restated Declaration of Trust of the Trust dated as of [
], 1995, as the same may be amended from time to time (the "Declaration")
including the designation of the terms of Common Securities as set forth in
Exhibit C thereto. The Common Securities and the Preferred Securities issued by
the Trust pursuant to the Declaration represent undivided beneficial interests
in the assets of the Trust, including the Subordinated Debentures (as defined in
the Declaration) issued by Time Warner Inc., a Delaware corporation, to the
Trust pursuant to the Indenture referred
<PAGE>
2
to in the Declaration. The Regular Trustees will furnish a copy of the
Declaration and the Indenture to the Holder without charge upon written request
to the Trust at its principal place of business or registered office.
The Holder of this Certificate, by accepting this Certificate, is
deemed to have agreed to the terms of the Indenture and the Subordinated
Debentures, including that the Subordinated Debentures are subordinate and
junior in right of payment to all Senior Indebtedness (as defined in the
Indenture, which term includes Time Warner's outstanding 8-3/4% Convertible
Subordinated Debentures due 2015) as and to the extent provided in the
Indenture.
Upon receipt of this certificate, the Holder is bound by the
Declaration and is entitled to the benefits thereunder.
IN WITNESS WHEREOF, Trustees of the Trust have executed this
certificate this day of , 1995.
TIME WARNER CAPITAL I,
By ___________________, as trustee
Name:
Title: Trustee
By ____________________, as trustee
Name:
Title: Trustee
<PAGE>
3
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned assigns and transfer this Common Security
Certificate to:
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
(Insert assignee's social security or tax identification number)
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
(Insert address and zip code of assignee)
and irrevocably appoints
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
agent to transfer this Common Security
- ---------------------------------------
Certificate on the books of the Trust. The agent may substitute another to act
for him or her.
Date:
----------------------
Signature:
----------------------------
(Sign exactly as your name appears on the other side of this Common Security
Certificate)
<PAGE>
EXHIBIT 4.8
===============================================================================
INDENTURE
between
TIME WARNER INC.
and
CHEMICAL BANK
Trustee
Dated as of [ ], 1995
Providing for Issuance of
Subordinated Securities in Series
===============================================================================
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
ARTICLE I
Definitions and Other Provisions of General Application
-------------------------------------------------------
<S> <C> <C>
SECTION 1.01. Definitions......................................... 1
SECTION 1.02. Compliance Certificates and
Opinions.......................................... 14
SECTION 1.03. Form of Documents Delivered to
Trustee............................................ 15
SECTION 1.04. Acts of Securityholders.............................. 16
SECTION 1.05. Notices, etc., to Trustee and
Company............................................ 18
SECTION 1.06. Notices to Securityholders;
Waiver............................................. 18
SECTION 1.07. Conflict with Trust Indenture Act.................... 19
SECTION 1.08. Effect of Headings and Table of
Contents........................................... 19
SECTION 1.09. Successors and Assigns............................... 19
SECTION 1.10. Separability Clause.................................. 19
SECTION 1.11. Benefits of Indenture................................ 20
SECTION 1.12. Governing Law........................................ 20
SECITON 1.13. Counterparts......................................... 20
SECTION 1.14. Judgment Currency.................................... 20
<CAPTION>
ARTICLE II
Security Forms
--------------
<S> <C> <C>
SECTION 2.01. Forms Generally...................................... 20
SECTION 2.02. Forms of Securities.................................. 21
SECTION 2.03. Form of Trustee's Certificate of
Authentication..................................... 21
SECTION 2.04. Securities Issuable in the Form of a
Global Security.................................... 22
<CAPTION>
ARTICLE III
The Securities
--------------
<S> <C> <C>
SECTION 3.01. General Title; General Limitations;
Issuable in Series; Terms of
Paricular Series.................................. 25
</TABLE>
<PAGE>
Contents, p. 2
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
SECTION 3.02. Denominations........................................ 28
SECTION 3.03. Execution, Authentication and
Delivery and Dating................................ 29
SECTION 3.04. Temporary Securities................................. 31
SECTION 3.05. Registration, Transfer and Exchange.................. 31
SECTION 3.06. Mutilated, Destroyed, Lost and
Stolen Securities.................................. 33
SECTION 3.07. Payment of Interest; Interest Rights
Preserved.......................................... 34
SECTION 3.08. Persons Deemed Owners................................ 36
SECTION 3.09. Cancellation......................................... 36
SECITON 3.10. Computation of Interest.............................. 36
SECTION 3.11. Delayed Issuance of Securities....................... 37
<CAPTION>
ARTICLE IV
Satisfaction and Discharge
--------------------------
<S> <C> <C>
SECTION 4.01. Satisfaction and Discharge of
Indenture.......................................... 37
SECTION 4.02. Application of Trust Money........................... 39
SECTION 4.03. Defeasance upon Deposit of Funds or
Government Obligations............................. 40
SECTION 4.04. Reinstatement........................................ 42
SECTION 4.05. Subordination Provisions
Inapplicable....................................... 42
<CAPTION>
ARTICLE V
Remedies
--------
<S> <C> <C>
SECTION 5.01. Events of Default.................................... 43
SECTION 5.02. Acceleration of Maturity; Rescission
and Annulment...................................... 45
SECTION 5.03. Collection of Indebtedness and Suits 47
for Enforcement by Trustee.........................
SECTION 5.04. Trustee May File Proofs of Claim..................... 48
SECTION 5.05. Trustee May Enforce Claims Without
Possession of Securities........................... 49
SECTION 5.06. Application of Money Collected....................... 49
SECTION 5.07. Limitation on Suits.................................. 50
SECTION 5.08. Unconditional Right of Securityholders To Receive
Principal, Premium and Interest.................... 51
SECTION 5.09. Restoration of Rights and Remedies................... 51
SECTION 5.10. Rights and Remedies Cumulative....................... 51
</TABLE>
<PAGE>
Contents, p. 3
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
SECTION 5.11. Delay or Omission Not Waiver......................... 51
SECTION 5.12. Control by Securityholders........................... 52
SECTION 5.13. Waiver of Past Defaults.............................. 52
SECTION 5.14. Undertaking for Costs................................ 53
SECTION 5.15. Waiver of Stay or Extension Laws..................... 53
<CAPTION>
ARTICLE VI
The Trustee
-----------
<S> <C> <C>
SECTION 6.01. Certain Duties and Responsibilities.................. 54
SECTION 6.02. Notice of Defaults................................... 55
SECTION 6.03. Certain Rights of Trustee............................ 56
SECTION 6.04. Not Responsible for Recitals or
Issuance of Securities............................. 57
SECTION 6.05. May Hold Securities.................................. 57
SECTION 6.06. Money Held in Trust.................................. 58
SECTION 6.07. Compensation and Reimbursement....................... 58
SECTION 6.08. Disqualification; Conflicting
Interests.......................................... 59
SECTION 6.09. Corporate Trustee Required;
Eligibility........................................ 59
SECTION 6.10. Resignation and Removal; Appointment
of Successor....................................... 60
SECTION 6.11. Acceptance of Appointment by
Successor.......................................... 62
SECTION 6.12. Merger, Conversion, Consolidation or
Succession to Business............................. 63
SECTION 6.13. Preferential Collection of Claims
Against Company.................................... 64
SECTION 6.14. Appointment of Authenticating Agent.................. 69
<CAPTION>
ARTICLE VII
Securityholders' Lists and Reports by Trustee and Company
---------------------------------------------------------
<S> <C> <C>
SECTION 7.01. Company To Furnish Trustee Names and
Addresses of Securityholders....................... 72
SECTION 7.02. Preservation of Information;
Communications to Securityholders.................. 72
SECTION 7.03. Reports by Trustee................................... 74
SECTION 7.04. Reports by Company................................... 76
</TABLE>
<PAGE>
Contents, p. 4
<TABLE>
<CAPTION>
Page
----
ARTICLE VIII
Consolidation, Merger, Conveyance or Transfer
---------------------------------------------
<S> <C> <C>
SECTION 8.01. Company May Consolidate, etc., only
on Certain Terms................................... 76
SECTION 8.02. Successor Person Substituted......................... 77
<CAPTION>
ARTICLE IX
Supplemental Indentures
-----------------------
<S> <C> <C>
SECTION 9.01. Supplemental Indentures without
Consent of Securityholders......................... 77
SECTION 9.02. Supplemental Indentures with Consent
of Securityholders................................. 79
SECTION 9.03. Execution of Supplemental
Indentures......................................... 80
SECTION 9.04. Effect of Supplemental Indentures.................... 81
SECTION 9.05. Conformity with Trust Indenture Act.................. 81
SECTION 9.06. Reference in Securities to
Supplemental Indentures............................ 81
SECTION 9.07. Subordination Unimpaired............................. 81
<CAPTION>
ARTICLE X
Covenants
---------
<S> <C> <C>
SECTION 10.01. Payment of Principal, Premium and
Interest........................................... 82
SECTION 10.02. Maintenance of Office or Agency...................... 82
SECTION 10.03. Money for Security Payments To Be
Held in Trust...................................... 82
SECTION 10.04. Statement as to Compliance........................... 84
SECTION 10.05. Legal Existence...................................... 84
SECTION 10.06. Waiver of Certain Covenants.......................... 85
<CAPTION>
ARTICLE XI
Redemption of Securities
------------------------
<S> <C> <C>
SECTION 11.01. Applicability of Article............................. 85
SECTION 11.02. Election To Redeem; Notice to
Trustee............................................ 86
</TABLE>
<PAGE>
Contents, p. 5
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
SECTION 11.03. Selection by Trustee of Securities
To Be Redeemed..................................... 86
SECTION 11.04. Notice of Redemption................................. 87
SECTION 11.05. Deposit of Redemption Price.......................... 88
SECTION 11.06. Securities Payable on Redemption
Date............................................... 89
SECTION 11.07. Securities Redeemed in Part.......................... 89
SECTION 11.08. Provisions with Respect to Any
Sinking Funds...................................... 90
SECTION 11.09. Rescission of Redemption............................. 91
<CAPTION>
ARTICLE XII
Conversion
----------
<S> <C> <C>
SECTION 12.01. Conversion Privilege................................. 93
SECTION 12.02. Conversion Procedure; Rescission of
Conversion; Conversion Price;
Fractional Shares.................................. 93
SECTION 12.03. Adjustment of Conversion Price for 96
Common Stock or Other Marketable
Securities.........................................
SECTION 12.04. Consolidation or Merger of the 101
Company............................................
SECTION 12.05. Notice of Adjustment................................. 102
SECTION 12.06. Notice in Certain Events............................. 102
SECTION 12.07. Company To Reserve Stock or Other
Marketable Securities;
Registration; Listing.............................. 103
SECTION 12.08. Taxes on Conversion.................................. 104
SECTION 12.09. Conversion After Record Date......................... 105
SECTION 12.10. Corporate Action Regarding Par Value
of Common Stock.................................... 105
SECTION 12.11. Company Determination Final.......................... 105
SECTION 12.12. Trustee's Disclaimer................................. 105
<CAPTION>
ARTICLE XIII
Subordination
-------------
<S> <C> <C>
SECTION 13.01. Agreement To Subordinate............................. 106
SECTION 13.02. Liquidation, Dissolution, Bankruptcy................. 106
SECTION 13.03. Default on Senior Indebtedness....................... 108
SECTION 13.04. Dispute with Holders of Certain
Senior Indebtedness................................ 109
SECTION 13.05. Acceleration of Notes................................ 110
</TABLE>
<PAGE>
Contents, p. 6
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
SECTION 13.06. When Distribution Must be Paid Over.................. 110
SECTION 13.07. Relative Rights...................................... 110
SECTION 13.08. Subordination May Not Be Impaired
by Company......................................... 111
SECTION 13.09. Distribution or Notice to
Representative..................................... 111
SECTION 13.10. Rights of Trustee and Paying Agent................... 111
SECTION 13.11. Notice to Trustee.................................... 111
SECTION 13.12. Trustee Not a Fiduciary.............................. 112
SECTION 13.13. Effectuation of Subordination by
Trustee............................................ 112
SECTION 13.14. Article Applicable to Paying Agents.................. 112
SECTION 13.15. Trustee; Compensation Not Prejudiced................. 112
</TABLE>
<PAGE>
[Draft--7/29/95]
INDENTURE between TIME WARNER INC., a Delaware corporation
(hereinafter called the "Company") having its principal office at
75 Rockefeller Plaza, New York, New York 10019, and CHEMICAL
BANK, a New York banking corporation, trustee (hereinafter
called the "Trustee"), made and entered into as of the [ ]th day
of [ ] 1995.
The Company has duly authorized the execution and delivery of this
Indenture to provide for the issuance of its subordinated debentures, notes,
bonds or other evidences of indebtedness, to be issued in one or more fully
registered series.
All things necessary to make this Indenture a valid agreement of the
Company, in accordance with its terms, have been done.
To set forth or to provide for the establishment, of the terms and
conditions upon which the Securities are and are to be authenticated, issued and
delivered, and in consideration of the premises and the purchase of Securities
by the Holders thereof, it is mutually covenanted and agreed as follows, for the
equal and proportionate benefit of all Holders of the Securities or of a series
thereof, as the case may be:
ARTICLE I
Definitions and Other Provisions
--------------------------------
of General Application
----------------------
SECTION 1.01. Definitions. For all purposes of this Indenture and of
------------
any indenture supplemental hereto, except as otherwise expressly provided or
unless the context otherwise requires:
(a) the terms defined in this Article have the meanings assigned to
them in this Article and include the plural as well as the singular;
(b) all other terms used herein which are defined in the Trust
Indenture Act or by Commission rule under the Trust Indenture Act, either
directly or by
<PAGE>
2
reference therein, have the meanings assigned to them therein;
(c) all accounting terms not otherwise defined herein have the
meanings assigned to them in accordance with generally accepted accounting
principles and, except as otherwise herein expressly provided, the term
"generally accepted accounting principles" with respect to any computation
required or permitted hereunder shall mean such accounting principles and
any accounting rules or interpretations promulgated by the commission as
are generally in effect in the United States of America as of the date of
this Indenture; and
(d) all references in this instrument to designated "Articles",
"Sections" and other subdivisions are to the designated Articles, Sections
and other subdivisions of this instrument as originally executed. The
words "herein", "hereof" and "hereunder" and other words of similar import
refer to this Indenture as a whole and not to any particular Article,
Section or other subdivision.
Certain terms, used principally in Article VI, are defined in that
Article.
"Act", when used with respect to any Securityholder, has the meaning
specified in Section 1.04.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For the purposes of this definition,
"control" when used with respect to any specified Person means the power to
direct the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise;
and the terms "controlling" and "controlled" have meanings correlative to the
foregoing.
"Authenticating Agent" means any Person authorized by the Trustee to
authenticate Securities under Section 614.
"Board of Directors" means (a) the board of directors of the Company,
(b) any duly authorized committee of such board, (c) any committee of officers
of the Company or (d) any officer of the Company acting, in the case of (c)
<PAGE>
3
or (d), pursuant to authority granted by the board of directors of the Company
or any committee of such board.
"Board Resolution" means a copy of a resolution certified by the
Secretary or an Assistant Secretary of the Company to have been duly adopted by
the Board of Directors and to be in full force and effect on the date of such
certification, and delivered to the Trustee.
"Business Day" means, with respect to any series of Securities, unless
otherwise specified in a Board Resolution or an Officer's Certificate with
respect to a particular series of Securities, any day other than a Saturday or
Sunday or any other day on which banking institutions in the pertinent Place or
Places of Payment or the city in which the Corporate Trust Office is located are
authorized or required by law or executive order to be closed.
"Closing Price" of the Common Stock or other Marketable Security, as
the case may be, shall mean the last reported sale price of such stock or other
Marketable Security (regular way) as shown on the Composite Tape of the NYSE
(or, if such stock or other Marketable Security is not listed or admitted to
trading on the NYSE, on the principal national securities exchange on which such
stock or other Marketable Security is listed or admitted to trading), or, in
case no such sale takes place on such day, the average of the closing bid and
asked prices on the NYSE (or, if such stock or other Marketable Security is not
listed or admitted to trading on the NYSE, on the principal national securities
exchange on which such stock or other Marketable Security is listed or admitted
to trading), or, if it is not listed or admitted to trading on any national
securities exchange, the average of the closing bid and asked prices as reported
by the National Association of Securities Dealers Automated Quotation System
(NASDAQ), or if such stock or other Marketable Security is not so reported, the
average of the closing bid and asked prices as furnished by any member of the
National Association of Securities Dealers, Inc., selected from time to time by
the Company for that purpose.
"Commission" means the Securities and Exchange Commission, as from
time to time constituted, created under the Securities Exchange Act of 1934, or,
if at any time after the execution of this instrument such Commission is not
existing and performing the duties now assigned to it
<PAGE>
4
under the Trust Indenture Act, then the body performing such duties at such
time.
"Common Stock" shall mean the class of Common Stock, par value $1.00
per share, of the Company authorized at the date of this Indenture as originally
signed, or any other class of stock resulting from successive changes or
reclassifications of such Common Stock, and in any such case including any
shares thereof authorized after the date of this Indenture, and any other shares
of stock of the Company which do not have any priority in the payment of
dividends or upon liquidation over any other class of stock.
"Company" means the Person named as the "Company" in the first
paragraph of this instrument until a successor shall have become such pursuant
to the applicable provisions of this Indenture, and thereafter "Company" shall
mean such successor.
"Company Request", "Company Order" and "Company Consent" mean a
written request, order or consent, respectively, signed in the name of the
Company by its Chairman of the Board, President or a Vice President, and by its
Treasurer, an Assistant Treasurer, Controller, an Assistant Controller,
Secretary or an Assistant Secretary, and delivered to the Trustee.
"Conversion Agent" means any Person authorized by the Company to
receive Securities to be converted into Common Stock or other Marketable
Securities on behalf of the Company. The Company initially authorizes the
Trustee to act as Conversion Agent for the Securities on its behalf. The
Company may at any time and from time to time authorize one or more Persons to
act as Conversion Agent in addition to or in place of the Trustee with respect
to any series of Securities issued under this Indenture.
"Conversion Price" means, with respect to any series of Securities
which are convertible into Common Stock or other Marketable Securities, the
price per share of Common Stock or the price per designated unit of other
Marketable Security at which the Securities of such series are so convertible as
set forth in the Board Resolution with respect to such series (or in any
supplemental indenture entered into pursuant to Section 9.01(ix) with respect to
such series), as the same may be adjusted from time to time in accordance with
Section 12.03 (or such supplemental indenture).
<PAGE>
5
"Converting Holder" shall have the meaning specified in Section
12.02(c) of this Indenture.
"Corporate Trust Office" means the office of the Trustee at which at
any particular time its corporate trust business shall be principally
administered, which office at the date hereof is located at 450 West 33rd
Street, 15th Floor, New York, New York 10001.
"Current Market Price" on any date shall mean the average of the daily
Closing Prices per share of Common Stock or of such other Marketable Securities
for any 30 consecutive Trading Days selected by the Company prior to the day in
question, which 30 consecutive Trading Day period shall not commence more than
45 Trading Days prior to the day in question; provided that, with respect to
Section 12.03(c), the "Current Market Price" of the Common Stock or of such
other Marketable Securities shall mean the average of the daily Closing Prices
per share of Common Stock or of such other Marketable Securities for the five
consecutive Trading Days ending on the date of the distribution referred to in
Section 12.03(c) (or if such date shall not be a Trading Day, on the Trading Day
immediately preceding such date).
"Defaulted Interest" has the meaning specified in Section 3.07.
"Depository" means, unless otherwise specified by the Company pursuant
to either Section 2.04 or 3.01, with respect to Securities of any series
issuable or issued as a Global Security, The Depository Trust Company, New York,
New York, or any successor thereto registered as a clearing agency under the
Securities Exchange Act of 1934, as amended, or other applicable statute or
regulation.
"Event of Default" has the meaning specified in Article Five.
"GAAP" means generally accepted accounting principles as such
principles are in effect as of the date of this Indenture.
"Global Security", when used with respect to any series of Securities
issued hereunder, means a Security which is executed by the Company and
authenticated and delivered by the Trustee to the Depository or pursuant to the
Depository's instruction, all in accordance with this
<PAGE>
6
Indenture and an indenture supplemental hereto, if any, or Board Resolution and
pursuant to a Company Request, which shall be registered in the name of the
Depository or its nominee and which shall represent, and shall be denominated in
an amount equal to the aggregate principal amount of, all of the Outstanding
Securities of such series or any portion thereof, in either case having the same
terms, including, without limitation, the same original issue date, date or
dates on which principal is due, and interest rate or method of determining
interest.
"Holder", when used with respect to any Security, means a
Securityholder.
"Indenture" or "this Indenture" means this instrument as originally
executed or as it may from time to time be supplemented or amended by one or
more indentures supplemental hereto entered into pursuant to the applicable
provisions hereof and shall include the terms of particular series of Securities
established as contemplated by Section 3.01.
"Interest", when used with respect to an Original Issue Discount
Security which by its terms bears interest only after Maturity, means interest
payable after Maturity.
"Interest Payment Date", when used with respect to any series of
Securities, means the Stated Maturity of any installment of interest on those
Securities.
"Marketable Security" means any common stock, debt security or other
security of a Person which is (or will, upon distribution thereof, be) listed on
the NYSE, the American Stock Exchange or any national securities exchange
registered under Section 6 of the Securities Exchange Act of 1934, as amended,
or approved for quotation in the National Market System of the National
Association of Securities Dealers, Inc. Automated Quotations System or any
similar system of automated dissemination of quotations of securities prices in
the United States or for which there is a recognized market maker or trading
market.
"Material U.S. Subsidiary" means any Person that is a Subsidiary if
(a) if such Person is organized under the laws of the United States of America
or any political subdivision thereof (including any state thereof or the
District of Columbia) and (b) at the end of the most recent fiscal quarter of
the Company, the aggregate amount,
<PAGE>
7
determined in accordance with GAAP consistently applied, of securities of, loans
and advances to, and other investments in, such Person held by the Company and
its other Subsidiaries exceeded 10% of the Company's Consolidated Net Worth.
For purposes of the foregoing, "Consolidated Net Worth" means the consolidated
stockholders' or owners' equity of the holders of capital stock or partnership
interests of such Person and its Subsidiaries, determined on a consolidated
basis in accordance with GAAP consistently applied; provided that to the extent
--------
the Company's 8-3/4% Convertible Subordinated Debentures due 2015 or 11%
Convertible Subordinated Debentures due 2015 have been issued in exchange for
the Company's outstanding Series C 8-3/4% Convertible Exchangeable Preferred
Stock or Series D 11% Convertible Exchangeable Preferred Stock, respectively,
such Debentures that are then outstanding shall be considered equity for the
purposes of the computation of the Company's Consolidated Net Worth.
"Maturity", when used with respect to any Securities, means the date
on which the principal of any such Security becomes due and payable as therein
or herein provided, whether on a Repayment Date, at the Stated Maturity or by
declaration of acceleration, call for redemption or otherwise.
"NYSE" shall mean the New York Stock Exchange, Inc.
"Officers' Certificate" means a certificate signed by the Chairman of
the Board, the President or a Vice President, and by the Treasurer, an Assistant
Treasurer, the Controller, an Assistant Controller, the Secretary or an
Assistant Secretary of the Company and delivered to the Trustee. Wherever this
Indenture requires that an Officers' Certificate be signed also by an engineer
or an accountant or other expert, such engineer, accountant or other expert
(except as otherwise expressly provided in this Indenture) may be in the employ
of the Company, and shall be acceptable to the Trustee.
"Opinion of Counsel" means a written opinion of counsel, who may
(except as otherwise expressly provided in this Indenture) be an employee of or
of counsel to the Company, which is delivered to the Trustee. Such counsel
shall be acceptable to the Trustee, whose acceptance shall not be unreasonably
withheld.
<PAGE>
8
"Original Issue Discount Security" means (a) any Security which
provides for an amount less than the principal amount thereof to be due and
payable upon a declaration of acceleration of the Maturity thereof, and (b) any
other Security which is issued with "original issue discount" within the meaning
of Section 1273(a) of the Internal Revenue Code of 1986, as amended, and the
regulations thereunder.
"Outstanding", when used with respect to Securities or Securities of
any series, means, as of the date of determination, all such Securities
theretofore authenticated and delivered under this Indenture, except:
(a) such Securities theretofore canceled by the Trustee or delivered
to the Trustee for cancellation;
(b) such Securities for whose payment or redemption money in the
necessary amount has been theretofore deposited with the Trustee or any
Paying Agent in trust for the Holders of such Securities; provided that, if
such Securities are to be redeemed, notice of such redemption has been duly
given pursuant to this Indenture or provision therefor satisfactory to the
Trustee has been made; and
(c) such Securities in exchange for or in lieu of which other
Securities have been authenticated and delivered pursuant to this
Indenture, or which shall have been paid pursuant to the terms of Section
306 (except with respect to any such Security as to which proof
satisfactory to the Trustee is presented that such Security is held by a
Person in whose hands such Security is a legal, valid and binding
obligation of the Company).
In determining whether the Holders of the requisite principal amount of such
Securities Outstanding have given any request, demand, authorization, direction,
notice, consent or waiver hereunder, (i) the principal amount of any Original
Issue Discount Security that shall be deemed to be Outstanding shall be the
amount of the principal thereof that would be due and payable as of the date of
the taking of such action upon a declaration of acceleration of the Maturity
thereof and (ii) Securities owned by the Company or any other obligor upon the
Securities or any Affiliate of the Company or of such other obligor shall be
disregarded and deemed not to be Outstanding. In determining whether
<PAGE>
9
the Trustee shall be protected in relying upon any such request, demand,
authorization, direction, notice, consent or waiver, only Securities which a
Responsible Officer assigned to the Corporate Trust Department of the Trustee
knows to be owned by the Company or any other obligor upon the Securities or any
Affiliate of the Company or such other obligor shall be so disregarded.
Securities so owned which have been pledged in good faith may be regarded as
Outstanding if the pledgee establishes to the satisfaction of the Trustee the
pledgee's right to act as owner with respect to such Securities and that the
pledgee is not the Company or any other obligor upon the Securities or any
Affiliate of the Company or such other obligor.
"pari passu", as applied to the ranking of any indebtedness or other
---- -----
obligation of a Person in relation to other indebtedness or other obligation of
such Person, means that each such indebtedness or other obligation either (a) is
not subordinated in right of payment to any indebtedness or other obligation or
(b) is subordinate in right of payment to the same indebtedness or other
obligation as is the other, and is so subordinate to the same extent, and is not
subordinate in right of payment to each other or to any indebtedness or other
obligation as to which the other is not so subordinate.
"Paying Agent" means any Person authorized by the Company to pay the
principal of (and premium, if any) or interest on any Securities on behalf of
the Company. The Company initially authorizes the Trustee to act as Paying
Agent for the Securities on its behalf. The Company may at any time and from
time to time authorize one or more Persons to act as Paying Agent in addition to
or in place of the Trustee with respect to any series of Securities issued under
this Indenture.
"Person" means any individual, corporation, partnership, joint
venture, association, joint-stock company, trust, unincorporated organization or
government or any agency or political subdivision thereof.
"Place of Payment" means with respect to any series of Securities
issued hereunder the city or political subdivision so designated with respect to
the series of Securities in question in accordance with the provisions of
Section 3.01.
<PAGE>
10
"Predecessor Securities" of any particular Security means every
previous Security evidencing all or a portion of the same debt as that evidenced
by such particular Security; and, for the purposes of this definition, any
Security authenticated and delivered under Section 306 in lieu of a lost,
destroyed or stolen Security shall be deemed to evidence the same debt as the
lost, destroyed or stolen Security.
"Redemption Date", when used with respect to any Security to be
redeemed, means the date fixed for such redemption by or pursuant to this
Indenture.
"Redemption Price", when used with respect to any Security to be
redeemed, means the price specified in the Security at which it is to be
redeemed pursuant to this Indenture.
"Redemption Rescission Event" shall mean the occurrence of (a) any
general suspension of trading in, or limitation on prices for, securities on the
principal national securities exchange on which shares of Common Stock or
Marketable Securities are registered and listed for trading (or, if shares of
Common Stock or Marketable Securities are not registered and listed for trading
on any such exchange, in the over-the-counter market) for more than 6-1/2
consecutive trading hours, (b) any decline in either the Dow Jones Industrial
Average or the Standard & Poor's Index of 400 Industrial Companies (or any
successor index published by Dow Jones & Company, Inc., or Standard & Poor's
Corporation) by either (i) an amount in excess of 10%, measured from the close
of business on any Trading Day to the close of business on the next succeeding
Trading Day during the period commencing on the Trading Day preceding the day
notice of any redemption of Securities is given (or, if such notice is given
after the close of business on a Trading Day, commencing on such Trading Day)
and ending at the time and date fixed for redemption in such notice or (ii) an
amount in excess of 15% (or if the time and date fixed for redemption is more
than 15 days following the date on which such notice of redemption is given,
20%), measured from the close of business on the Trading Day preceding the day
notice of such redemption is given (or, if such notice is given after the close
of business on a Trading Day, from such Trading Day) to the close of business on
any Trading Day at or prior to the time and date fixed for redemption, (c) a
declaration of a banking moratorium or any suspension of payments in respect of
banks by Federal or state
<PAGE>
11
authorities in the United States or (d) the commencement of a war or armed
hostilities or other national or international calamity directly or indirectly
involving the United States which in the reasonable judgment of the Company
could have a material adverse effect on the market for the Common Stock or
Marketable Securities.
"Regular Record Date" for the interest payable on any Security on any
Interest Payment Date means the date specified in such Security as the Regular
Record Date.
"Repayment Date", when used with respect to any Security to be
repaid, means the date fixed for such repayment pursuant to such Security.
"Repayment Price", when used with respect to any Security to be
repaid, means the price at which it is to be repaid pursuant to such Security.
"Representative" means any Person whom the Company has, by written
notice to the Trustee, identified as the indenture trustee or other trustee,
agent or representative for an issue of Senior Indebtedness.
"Required Currency", when used with respect to any Security, has the
meaning set forth in Section 1.14.
"Responsible Officer", when used with respect to the Trustee, means
any other officer of the Trustee with direct responsibility for the
administration of this Indenture and also means, with respect to a particular
corporate trust matter, any other officer to whom such matter is referred
because of his knowledge of and familiarity with the particular subject.
"Security" or "Securities" means any note or notes, bond or bonds,
debenture or debentures, or any other evidences of indebtedness, as the case may
be, of any series authenticated and delivered from time to time under this
Indenture.
"Securityholder" means a Person in whose name a Security is registered
in the Security Register.
"Security Register" shall have the meaning specified in Section 3.05.
<PAGE>
12
"Security Registrar" means the Person who keeps the Security Register
specified in Section 3.05. The Company initially appoints the Trustee to act as
Security Registrar for the Securities on its behalf. The Company may at any
time and from time to time authorize any Person to act as Security Registrar in
place of the Trustee with respect to any series of Securities issued under this
Indenture.
"Senior Indebtedness" means all indebtedness or obligations of the
Company, whether outstanding at the date of execution of this Indenture or
thereafter incurred, assumed, guaranteed or otherwise created, unless the terms
of the instrument or instruments by which the Company incurred, assumed,
guaranteed or otherwise created any such indebtedness or obligation expressly
provide that such obligation or obligations is subordinated to all other
indebtedness of the Company or that such indebtedness is not superior or is
subordinated in right of payment to the Securities, with respect to any of the
following (including, without limitation, interest accruing on or after a
bankruptcy or other similar event, whether or not an allowed claim therein):
(a) any indebtedness incurred by the Company or assumed or guaranteed, directly
or indirectly, by the Company (i) for money borrowed, including the Company's
outstanding 8-3/4% Convertible Subordinated Debentures due 2015, (ii) in
connection with the acquisition of any business, property or other assets (other
than trade payables incurred in the ordinary course of business) or (iii) for
advances or progress payments in connection with the construction or acquisition
of any building, motion picture, television production or other entertainment of
any kind; (b) any obligation of the Company (or of a Subsidiary which is
guaranteed by the Company) as lessee under a lease of real or personal property;
(c) any obligation of the Company to purchase property at a future date in
connection with a financing by the Company or a Subsidiary; (d) letters of
credit; (e) currency swaps and interest rate hedges; and (f) a deferral,
renewal, extension or refunding of any of the foregoing.
"Senior Subordinated Indenture" means the Indenture dated as of
October 15, 1992, between the Company and Chemical Bank, as trustee.
"Special Record Date" for the payment of any Defaulted Interest (as
defined in Section 3.07) means a date fixed by the Trustee pursuant to Section
3.07.
<PAGE>
13
"Stated Maturity" when used with respect to any Security or any
installment of principal thereof or interest thereon means the date specified in
such Security as the fixed date on which the principal of such Security or such
installment of principal or interest is due and payable.
"Subsidiary" means, with respect to any Person, any corporation more
than 50% of the voting stock of which is owned directly or indirectly by such
Person, and any partnership, association, joint venture or other entity in which
such Person owns more than 50% of the equity interests or has the power to elect
a majority of the board of directors or other governing body.
"Trading Day" shall mean with respect to the Common Stock or a
Marketable Security, so long as the Common Stock or such Marketable Security, as
the case may be, is listed or admitted to trading on the NYSE, a day on which
the NYSE is open for the transaction of business, or, if the Common Stock or
such Marketable Security, as the case may be, is not listed or admitted to
trading on the NYSE, a day on which the principal national securities exchange
on which the Common Stock or such Marketable Security, as the case may be, is
listed is open for the transaction of business, or, if the Common Stock or such
Marketable Security, as the case may be, is not so listed or admitted for
trading on any national securities exchange, a day on which NASDAQ is open for
the transaction of business.
"Trust Indenture Act" or "TIA" means the Trust Indenture Act of 1939
as in force at the date as of which this instrument was executed; provided,
--------
however, that, in the event the Trust Indenture Act of 1939 is amended after
- -------
such date, "Trust Indenture Act" or "TIA" means, to the extent required by any
such amendment, the Trust Indenture Act of 1939 as so amended.
"Trustee" means the Person named as the Trustee in the first paragraph
of this instrument until a successor Trustee shall have become such pursuant to
the applicable provisions of this Indenture, and thereafter "Trustee", shall
mean and include each Person who is then a Trustee hereunder. If at any time
there is more than one such Person, "Trustee" as used with respect to the
Securities of any series shall mean the Trustee with respect to Securities of
that series.
<PAGE>
14
"Vice President" when used with respect to the Company or the Trustee
means any vice president, whether or not designated by a number or a word or
words added before or after the title "vice president", including, without
limitation, an assistant vice president.
"Voting Stock", as applied to the stock of any corporation, means
stock of any class or classes (however designated) having by the terms thereof
ordinary voting power to elect a majority of the members of the board of
directors (or other governing body) of such corporation other than stock having
such power only by reason of the happening of a contingency.
"WCI" means Warner Communications Inc., a Delaware corporation.
"Yield to Maturity" means t he yield to maturity on a series of
Securities, calculated by the Company at the time of issuance of such series of
Securities, or, if applicable, at the most recent redetermination of interest on
such series, in accordance with accepted financial practice.
SECTION 1.02. Compliance Certificates and Opinions. Upon any
-------------------------------------
application or request by the Company to the Trustee to take any action under
any provision of this Indenture, the Company shall furnish to the Trustee an
Officers' Certificate stating that all conditions precedent, if any (including
any covenants compliance with which constitutes a condition precedent), provided
for in this Indenture relating to the proposed action have been complied with
and an Opinion of Counsel stating that in the opinion of such Counsel all such
conditions precedent, if any (including any covenants compliance with which
constitutes a condition precedent), have been complied with, except that in the
case of any such application or request as to which the furnishing of such
documents is specifically required by any provision of this Indenture relating
to such particular application or request, no additional certificate or opinion
need be furnished.
Every certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture (other than annual
statements of compliance provided pursuant to Section 10.04) shall include
<PAGE>
15
(a) a statement that each individual signing such certificate or
opinion has read such covenant or condition and the definitions herein
relating thereto;
(b) a brief statement as to the nature and scope of the examination
or investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(c) a statement that, in the opinion of each such individual, he has
made such examination or investigation as is necessary to enable him to
express an informed opinion as to whether or not such covenant or condition
has been compiled with; and
(d) a statement as to whether, in the opinion of each such individual,
such condition or covenant has been complied with.
SECTION 1.03. Form of Documents Delivered to Trustee. In any case
---------------------------------------
where several matters are required to be certified by, or covered by an opinion
of, any specified Person, it is not necessary that all such matters be certified
by, or covered by the opinion of, only one such Person, or that they be so
certified or covered by only one document, but one such Person may certify or
give an opinion with respect to some matters and one or more other such Persons
may certify or give an opinion as to the other matters, and any such Person may
certify or give an opinion and to such matters in one or several documents.
Any certificate or opinion of an officer of the Company may be based,
insofar as it relates to legal matters, upon a certificate or opinion of, or
representations by, counsel, unless such officer knows, or in the exercise of
reasonable care should know, that the certificate or opinion or representations
with respect to the matters upon which his certificate or opinion is based are
erroneous. Any such certificate or Opinion of Counsel may be based, insofar as
it relates to factual matters, upon a certificate or opinion of, or
representations by, an officer or officers of the Company stating that the
information with respect to such factual matters is in the possession of the
Company, unless such Counsel knows, or in the exercise of reasonable care should
know, that the certificate or opinion or representations with respect to such
matters are erroneous.
<PAGE>
16
Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions or other
instruments under this Indenture, they may, but need not, be consolidated and
form one instrument.
SECTION 1.04. Acts of Securityholders. (a) Any request, demand,
------------------------
authorization, direction, notice, consent, waiver or other action provided by
this Indenture to be given or taken by Securityholders or Securityholders of
any series may be embodied in and evidenced by one or more instruments of
substantially similar tenor signed by such Securityholders in person or by an
agent duly appointed in writing; and, except as herein otherwise expressly
provided, such action shall become effective when such instrument or instruments
are delivered to the Trustee, and, where it is hereby expressly required, to the
Company. If any Securities are denominated in coin or currency other than that
of the United States, then for the purposes of determining whether the Holders
of the requisite principal amount of Securities have taken any action as herein
described, the principal amount of such Securities shall be deemed to be that
amount of United States dollars that could be obtained for such principal amount
on the basis of the spot rate of exchange into United States dollars for the
currency in which such Securities are denominated (as evidenced to the Trustee
by an Officers' Certificate) as of the date the taking of such action by the
Holders of such requisite principal amount is evidenced to the Trustee as
provided in the immediately preceding sentence. Such instrument or instruments
(and the action embodied therein and evidenced thereby) are herein sometimes
referred to as the "Act" of the Securityholders signing such instrument or
instruments. Proof of execution of any such instrument or of a writing
appointing any such agent shall be sufficient for any purpose of this Indenture
and (subject to Section 6.01) conclusive in favor of the Trustee and the
Company, if made in the manner provided in this Section.
(b) The fact and date of the execution by any Person of any such
instrument or writing may be proved by the affidavit of a witness to such
execution or by the certificate of any notary public or other officer authorized
by law to take acknowledgments of deeds, certifying that the individual signing
such instrument or writing acknowledged to him the execution thereof. Where
such execution is by an officer of a corporation or a member of a partnership,
on behalf of such corporation or partnership, such certificate
<PAGE>
17
or affidavit shall also constitute sufficient proof of his authority. The fact
and date of the execution of any such instrument or writing, or the authority of
the person executing the same, may also be proved in any other manner which the
Trustee deems sufficient.
(c) The ownership of Securities shall be proved by the Security
Register.
(d) If the Company shall solicit from the Holders any request,
demand, authorization, direction, notice, consent, waiver or other action, the
Company may, at its option, by Board Resolution, fix in advance a record date
for the determination of Holders entitled to give such request, demand,
authorization, direction, notice, consent, waiver or other action, but the
Company shall have no obligation to do so. Such record date shall be the later
of 10 days prior to the first solicitation of such action or the date of the
most recent list of Holders furnished to the Trustee pursuant to Section 7.01.
If such a record date is fixed, such request, demand, authorization, direction,
notice, consent, waiver or other action may be given before or after the record
date, but only the Holders of record at the close of business on the record date
shall be deemed to be Holders for the purposes of determining whether Holders of
the requisite proportion of Securities Outstanding have authorized or agreed or
consented to such request, demand, authorization, direction, notice, consent,
waiver or other action, and for that purpose the Securities Outstanding shall be
computed as of the record date; provided that no such authorization, agreement
or consent by the Holders on the record date shall be deemed effective unless it
shall become effective pursuant to the provisions of this Indenture not later
than six months after the record date, and that no such authorization, agreement
or consent may be amended, withdrawn or revoked once given by a Holder, unless
the Company shall provide for such amendment, withdrawal or revocation in
conjunction with such solicitation of authorizations, agreements or consents or
unless and to the extent required by applicable law.
(e) Any request, demand, authorization, direction, notice, consent,
waiver or other action by the Holder of any Security shall bind the Holder of
every Security issued upon the registration of transfer thereof or in exchange
therefor or in lieu thereof, in respect of anything done or suffered to be done
by the Trustee or the
<PAGE>
18
Company in reliance thereon whether or not notation of such action is made upon
such Security.
SECTION 1.05. Notices, etc., to Trustee and Company. Any request,
--------------------------------------
demand, authorization, direction, notice, consent, waiver or Act of
Securityholders or other document provided or permitted by this Indenture to be
made upon, given or furnished to, or filed with:
(a) the Trustee by any Securityholder or by the Company shall be
sufficient for every purpose hereunder if made, given, furnished or filed
in writing to or with the Trustee at its Corporate Trust Office, Attention
of Corporate Trust Department; or
(b) the Company by the Trustee or by any securityholder shall be
sufficient for every purpose hereunder (except as provided in Section
5.01(d) or, in the case of a request for repayment, as specified in the
Security carrying the right to repayment) if in writing and mailed, first-
class postage prepaid, to the Company addressed to it at the address of its
principal office specified in the first paragraph of this instrument,
Attention of Treasurer, or at any other address previously furnished in
writing to the Trustee by the Company.
SECTION 1.06. Notices to Securityholders; Waiver. Where this
-----------------------------------
Indenture or any Security provides for notice to Securityholders of any event,
such notice shall be sufficiently given (unless otherwise herein or in such
Security expressly provided) if in writing and mailed, first-class postage
prepaid, to each Securityholder affected by such event, at his address as it
appears in the Security Register, not later than the latest date, and not
earlier than the earliest date, prescribed for the giving of such notice. In
any case where notice to Securityholders is given by mail, neither the failure
to mail such notice, nor any defect in any notice so mailed, to any particular
Securityholder shall affect the sufficiency of such notice with respect to other
Securityholders. Where this Indenture or any Security provides for notice in
any manner, such notice may be waived in writing by the Person entitled to
receive such notice, either before or after the event, and such waiver shall be
the equivalent of such notice. Waivers of notice by Securityholders shall be
filed with the Trustee, but such filing shall not be a condition precedent
<PAGE>
19
to the validity of any action taken in reliance upon such waiver.
In case, by reason of the suspension of regular mail service as a
result of a strike, work stoppage or otherwise, it shall be impractical to mail
notice of any event to any Securityholder when such notice is required to be
given pursuant to any provision of this Indenture, then any method of
notification as shall be satisfactory to the Trustee and the Company shall be
deemed to be a sufficient giving of such notice.
SECTION 1.07. Conflict with Trust Indenture Act. If and to the
----------------------------------
extent that any provision hereof limits, qualifies or conflicts with the duties
imposed by, or with another provision (an "incorporated provision") included in
this Indenture by operation of, any of Sections 3.10 to 3.18, inclusive, of the
Trust Indenture Act, such imposed duties or incorporated provision shall
control.
SECTION 1.08. Effect of Headings and Table of Contents. The Article
-----------------------------------------
and Section headings herein and the Table of Contents are for convenience only
and shall not affect the construction hereof.
SECTION 1.09. Successors and Assigns. All covenants and agreements in
-----------------------
this Indenture by the Company shall bind its successors and assigns, whether so
expressed or not.
SECTION 1.10. Separability Clause. In case any provision in this
--------------------
Indenture or in the Securities shall be invalid, illegal or unenforceable, the
validity, legality and enforceability of the remaining provisions shall not in
any way be affected or impaired thereby.
SECTION 1.11. Benefits of Indenture. Nothing in this Indenture or
----------------------
in any Securities, express or implied, shall give to any Person, other than the
parties hereto and their successors hereunder, any Authenticating Agent or
Paying Agent, the Security Registrar, the holders of Senior Indebtedness and the
Holders of Securities (or such of them as may be affected thereby), any benefit
or any legal or equitable right, remedy or claim under this Indenture.
SECTION 1.12. Governing Law. This Indenture shall be construed in
--------------
accordance with and governed by the laws of the State of New York.
<PAGE>
20
SECTION 1.13. Counterparts. This instrument may be executed in any
-------------
number of counterparts, each of which so executed shall be deemed to be an
original, but all such counterparts shall together constitute but one and the
same instrument.
SECTION 1.14. Judgment Currency. The Company agrees, to the fullest
------------------
extent that it may effectively do so under applicable law, that (a) if for the
purpose of obtaining judgment in any court it is necessary to convert the sum
due in respect of the principal of, or premium or interest, if any, on the
Securities of any series (the "Required Currency") into a currency in which a
judgment will be rendered (the "Judgment Currency"), the rate of exchange used
shall be the rate at which in accordance with normal banking procedures the
Trustee could purchase in the City of New York the Required Currency with the
Judgment Currency on the New York Banking Day preceding that on which a final
unappealable judgment is given and (b) its obligations under this Indenture to
make payments in the Required Currency (i) shall not be discharged or satisfied
by any tender, or any recovery pursuant to any judgment (whether or not entered
in accordance with subsection (a)), in any currency other than the Required
Currency, except to the extent that such tender or recovery shall result in the
actual receipt, by the payee, of the full amount of the Required Currency,
expressed to be payable in respect of such payments, (ii) shall be enforceable
as an alternative or additional cause of action for the purpose of recovering in
the Required Currency the amount, if any, by which such actual receipt shall
fall short of the full amount of the Required Currency so expressed to be
payable and (iii) shall not be affected by judgment being obtained for any other
sum due under this Indenture. For purposes of the foregoing, "New York Banking
Day" means any day except a Saturday, Sunday or a legal holiday in the City of
New York or a day on which banking institutions in the City of New York are
authorized or required by law or executive order to close.
ARTICLE II
Security Forms
--------------
SECTION 2.01. Forms Generally. The Securities shall have such
----------------
appropriate insertions, omissions, substitutions and other variations as are
required or permitted by this Indenture and may have such letters,
<PAGE>
21
numbers or other marks of identification and such legends or endorsements placed
thereon, as may be required to comply with the rules of any securities exchange,
or as may, consistently herewith, be determined by the officers executing such
Securities, as evidenced by their execution of the Securities. Any portion of
the text of any Security may be set forth on the reverse thereof, with an
appropriate reference thereto on the face of the Security.
The definitive Securities shall be printed, lithographed or engraved
or produced by any combination of these methods on steel engraved borders or may
be produced in any other manner, all as determined by the officers executing
such Securities, as evidenced by their execution of such Securities, subject,
with respect to the Securities of any series, to the rules of any securities
exchange on which such Securities are listed.
SECTION 2.02. Forms of Securities. Each Security shall be in one of
--------------------
the forms approved from time to time by or pursuant to a Board Resolution, or
established in one or more indentures supplemental hereto. Prior to the
delivery of a Security to the Trustee for authentication in any form approved by
or pursuant to a Board Resolution, the Company shall deliver to the Trustee the
Board Resolution by or pursuant to which such form of Security has been
approved, which Board Resolution shall have attached thereto a true and correct
copy of the form of Security which has been approved thereby or, if a Board
Resolution authorizes a specific officer or officers to approve a form of
Security, a certificate of such officer or officers approving the form of
Security attached thereto. Any form of Security approved by or pursuant to a
Board Resolution must be acceptable as to form to the Trustee, such acceptance
to be evidenced by the Trustee's authentication of Securities in that form or a
certificate signed by a Responsible Officer of the Trustee and delivered to the
Company.
SECTION 2.03. Form of Trustee's Certificate of Authentication. The
-------------------------------- ---------------
form of Trustee's Certificate of
<PAGE>
22
Authentication for any Security issued pursuant to this Indenture shall be
substantially as follows:
"TRUSTEE'S CERTIFICATE OF AUTHENTICATION
"This is one of the Securities of the series designated therein
referred to in the within mentioned Indenture.
CHEMICAL BANK,
as Trustee,
by
------------------------
Authorized Officer"
SECTION 2.04. Securities Issuable in the Form of a Global Security.
-----------------------------------------------------
(a) If the Company shall establish pursuant to Sections 2.02 and 3.01 that the
Securities of a particular series are to be issued in whole or in part in the
form of one or more Global Securities, then the Company shall execute and the
Trustee or its agent shall in accordance with Section 3.03 and the Company Order
delivered to the Trustee or its agent thereunder, authenticate and deliver, such
Global Security or Securities, which (i) shall represent, and shall be
denominated in an amount equal to the aggregate principal amount of, the
Outstanding Securities of such series to be represented by such Global Security
or Securities, or such portion thereof as the Company shall specify in a Company
Order, (ii) shall be registered in the name of the Depository for such Global
Security or Securities or its nominee, (iii) shall be delivered by the Trustee
or its agent to the Depository or pursuant to the Depository's instruction and
(iv) shall bear a legend substantially to the following effect:
"Unless this certificate is presented by an authorized representative of
the Depository to Issuer or its agent for registration of transfer,
exchange, or payment, and any certificate issued is registered in the name
of the nominee of the Depository or in such other name as is requested by
an authorized representative of the Depository (and any payment is made to
the nominee of the Depository or to such other entity as is requested
<PAGE>
23
by an authorized representative of the Depository), ANY TRANSFER, PLEDGE,
OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL
inasmuch as the registered owner hereof, the nominee of the Depository, has
an interest herein."
(b) Notwithstanding any other provision of this Section 2.04 or of
Section 3.05, and subject to the provisions of paragraph (c) below, unless the
terms of a Global Security expressly permit such Global Security to be exchanged
in whole or in part for individual Securities, a Global Security may be
transferred, in whole but not in part and in the manner provided in Section 305,
only to a nominee of the Depository for such Global Security, or to the
Depository, or a successor Depository for such Global Security selected or
approved by the Company, or to a nominee of such successor Depository.
(c) (i) If at any time the Depository for a Global Security notifies
the Company that it is unwilling or unable to continue as Depository for such
Global Security or if at any time the Depository for the Securities for such
series shall no longer be eligible or in good standing under the Securities
Exchange Act of 1934, as amended, or other applicable statute or regulation, the
Company shall appoint a successor Depository with respect to such Global
Security. If a successor Depository for such Global Security is not appointed by
the Company within 90 days after the Company receives such notice or becomes
aware of such ineligibility, the Company will execute, and the Trustee or its
agent, upon receipt of a Company Request for the authentication and delivery of
individual Securities of such series in exchange for such Global Security, will
authenticate and deliver, individual Securities of such series of like tenor and
terms in an aggregate principal amount equal to the principal amount of the
Global Security in exchange for such Global Security.
(ii) The Company may at any time and in its sole discretion determine
that the Securities of any series or portion thereof issued or issuable in the
form of one or more Global Securities shall no longer be represented by such
Global Security or Securities. In such event the Company will execute, and the
Trustee, upon receipt of a Company Request for the authentication and delivery
of individual Securities of such series in exchange in whole or in part for such
Global Security, will authenticate and deliver individual Securities of such
series of like tenor
<PAGE>
24
and terms in definitive form in an aggregate principal amount equal to the
principal amount of such Global Security or Securities representing such series
or portion thereof in exchange for such Global Security or Securities.
(iii) If specified by the Company pursuant to Sections 2.02 and 3.01
with respect to Securities issued or issuable in the form of a Global Security,
the Depository for such Global Security may surrender such Global Security in
exchange in whole or in part for individual Securities of such series of like
tenor and terms in definitive form on such terms as are acceptable to the
Company and such Depository. Thereupon the Company shall execute, and the
Trustee or its agent shall authenticate and deliver, without service charge, (A)
to each Person specified by such Depository a new Security or Securities of the
same series of like tenor and terms and of any authorized denomination as
requested by such Person in aggregate principal amount equal to and in exchange
for such Person's beneficial interest as specified by such Depository in the
Global Security; and (B) to such Depository a new Global Security of like tenor
and terms and in an authorized denomination equal to the difference, if any,
between the principal amount of the surrendered Global Security and the
aggregate principal amount of Securities delivered to Holders thereof.
(iv) In any exchange provided for in any of the preceding three
paragraphs, the Company will execute and the Trustee or its agent will
authenticate and deliver individual Securities in definitive registered form in
authorized denominations. Upon the exchange of the entire principal amount of a
Global Security for individual Securities, such Global Security shall be
canceled by the Trustee or its agent. Except as provided in the preceding
paragraph, Securities issued in exchange for a Global Security pursuant to this
Section shall be registered in such names and in such authorized denominations
as the Depository for such Global Security, pursuant to instructions from its
direct or indirect participants or otherwise, shall instruct the Trustee or the
Security Registrar. The Trustee or the Security Registrar shall deliver at its
Corporate Trust Office such Securities to the Persons in whose names such
Securities are so registered.
<PAGE>
25
ARTICLE III
The Securities
--------------
SECTION 3.01. General Title; General Limitations; Issuable in Series;
-------------------------------------------------------
Terms of Particular Series. The aggregate principal amount of Securities which
- ---------------------------
may be authenticated and delivered and outstanding under this Indenture is not
limited.
The Securities may be issued in one or more series as from time to
time may be authorized by the Board of Directors. There shall be established in
or pursuant to a Board Resolution or in a supplemental indenture, subject to
Section 3.11, prior to the issuance of Securities of any such series:
(a) the title of the Securities of such series (which shall
distinguish the Securities of such series from Securities of any other
series);
(b) the Person to whom any interest on a Security of such series shall
be payable, if other than the Person in whose name that Security (or one or
more Predecessor Securities) is registered at the close of business on the
Regular Record Date for such interest;
(c) the date or dates on which the principal of the Securities of such
series is payable;
(d) the rate or rates at which the Securities of such series shall
bear interest, if any, the date or dates from which such interest shall
accrue, the Interest Payment Dates on which any such interest shall be
payable and the Regular Record Date for any interest payable on any
Interest Payment Date;
(e) the place or places where the principal of and any premium and
interest on Securities of such series shall be payable;
(f) the period or periods within which, the Redemption Price or Prices
or the Repayment Price or Prices, as the case may be, at which and the
terms and conditions upon which Securities of such series may be redeemed
or repaid (including the applicability of Section 11.09), as the case may
be, in whole or in part, at the option of the Company or the Holder;
<PAGE>
26
(g) the obligation, if any, of the Company to purchase Securities of
such series pursuant to any sinking fund or analogous provisions or at the
option of a Holder thereof and the period or periods within which, the
price or prices at which and the terms and conditions upon which Securities
of such series shall be purchased, in whole or in part, pursuant to such
obligation;
(h) if other than denominations of $1,000 and any integral multiple
thereof, the denominations in which Securities of such series shall be
issuable;
(i) provisions, if any, with regard to the conversion or exchange of
the Securities of such series, at the option of the Holders thereof or the
Company, as the case may be, for or into new Securities of a different
series, Common Stock or other securities and, if the Securities of such
series are convertible into Common Stock or other Marketable Securities,
the Conversion Price therefor;
(j) if other than U.S. dollars, the currency or currencies or units
based on or related to currencies in which the Securities of such series
shall be denominated and in which payments of principal of, and any premium
and interest on, such Securities shall or may be payable;
(k) if the principal of (and premium, if any) or interest, if any, on
the Securities of such series are to be payable, at the election of the
Company or a Holder thereof, in a coin or currency (including a composite
currency) other than that in which the Securities are stated to be payable,
the period or periods within which, and the terms and conditions upon
which, such election may be made;
(l) if the amount of payments of principal of (and premium, if any)
or interest, if any, on the Securities of such series may be determined
with reference to an index based on a coin or currency (including a
composite currency) other than that in which the Securities are stated to
be payable, the manner in which such amounts shall be determined;
(m) any limit upon the aggregate principal amount of the Securities of
such series which may be
<PAGE>
27
authenticated and delivered under this Indenture (except for Securities
authenticated and delivered upon registration of transfer of, or in
exchange for, or in lieu of, other Securities of the series pursuant to
Section 3.04, 3.05, 3.06, 9.06, 11.07, 12.02 and except for any Securities
which, pursuant to Section 3.03, are deemed never to have been
authenticated and delivered hereunder);
(n) provisions, if any, with regard to the exchange of Securities of
such series, at the option of the Holders thereof, for other Securities of
the same series of the same aggregate principal amount of a different
authorized kind or different authorized denomination or denominations, or
both;
(o) provisions, if any, with regard to the appointment by the Trustee
of an Authenticating Agent in one or more places other than the location of
the office of the Trustee with power to act on behalf of the Trustee and
subject to its direction in the authentication and delivery of the
Securities of any one or more series in connection with such transactions
as shall be specified in the provisions of this Indenture or in or pursuant
to such Board Resolution or supplemental indenture;
(p) the portion of the principal amount of Securities of the series,
if other than the principal amount thereof, which shall be payable upon
declaration of acceleration of the Maturity thereof pursuant to Section
5.02 or provable in bankruptcy pursuant to Section 5.04;
(q) any Event of Default with respect to the Securities of such
series, if not set forth herein, and any additions, deletions or other
changes to the Events of Default set forth herein that shall be applicable
to the Securities of such series;
(r) any covenant solely for the benefit of the Securities of such
series and any additions, deletions or other changes to Article X or
Section 1.01 or any definitions otherwise applicable to the Securities of
that series;
(s) if Section 4.03 of this Indenture shall not be applicable to the
Securities of such series and if
<PAGE>
28
Section 4.03 shall be applicable to any covenant or Event of Default
established in or pursuant to a Board Resolution or in a supplemental
indenture as described above that has not already been established herein;
(t) if the Securities of such series shall be issued in whole or in
part in the form of a Global Security or Securities, the terms and
conditions, if any, upon which such Global Security or Securities may be
exchanged in whole or in part for other individual Securities; and the
Depository for such Global Security or Securities; and
(u) any other terms of such series, all upon such terms as may be
determined in or pursuant to such Board Resolution or supplemental
indenture with respect to such series.
The form of the Securities of each series shall be established
pursuant to the provisions of this Indenture in or pursuant to the Board
Resolution or in the supplemental indenture creating such series. The
Securities of each series shall be distinguished from the Securities of each
other series in such manner, reasonably satisfactory to the Trustee, as the
Board of Directors may determine.
Unless otherwise provided with respect to Securities of a particular
series, the Securities of any series may only be issuable in registered form,
without coupons.
Any terms or provisions in respect of the Securities of any series
issued under this Indenture may be determined pursuant to this Section by
providing for the method by which such terms or provisions shall be determined.
SECTION 3.02. Denominations. The Securities of each series shall be
--------------
issuable in such denominations and currency as shall be provided the provisions
of this Indenture or in or pursuant to the Board Resolution or the supplemental
indenture creating such series. In the absence of any such provisions with
respect to the Securities of any series, the Securities of that series shall be
issuable only in fully registered form in denominations of $1,000 and any
integral multiple thereof.
<PAGE>
29
SECTION 3.03. Execution, Authentication and Delivery and Dating. The
--------------------------------------------------
Securities shall be executed on behalf of the Company by its Chairman of the
Board, its President, one of its Vice Presidents or its Treasurer under its
corporate seal reproduced thereon and attested by its Secretary or one of its
Assistant Secretaries. The signature of any of these officers on the Securities
may be manual or facsimile.
Securities bearing the manual or facsimile signatures of individuals
who were at any time the proper officers of the Company shall bind the Company,
notwithstanding that such individuals or any of them have ceased to hold such
offices prior to the authentication and delivery of such Securities or did not
hold such offices at the date of such Securities.
At any time and from time to time after the execution and delivery of
this Indenture, the Company may deliver Securities executed by the Company to
the Trustee for authentication; and the Trustee shall, upon Company Order,
authenticate and deliver such Securities as in this Indenture provided and not
otherwise.
Prior to any such authentication and delivery, the Trustee shall be
entitled to receive, in addition to any Officers' Certificate and Opinion of
Counsel required to be furnished to the Trustee pursuant to Section 1.02, and
the Board Resolution and any certificate relating to the issuance of the series
of Securities required to be furnished pursuant to Section 2.02, an Opinion of
Counsel stating that:
(a) all instruments furnished to the Trustee conform to the
requirements of the Indenture and constitute sufficient authority hereunder
for the Trustee to authenticate and deliver such Securities;
(b) the form and terms of such Securities have been established in
conformity with the provisions of this Indenture;
(c) all laws and requirements with respect to the execution and
delivery by the Company of such Securities have been complied with, the
Company has the corporate power to issue such Securities and such
Securities have been duly authorized and delivered by the Company and,
assuming due authentication and
<PAGE>
30
delivery by the Trustee, constitute legal, valid and binding obligations of
the Company enforceable in accordance with their terms (subject, as to
enforcement of remedies, to applicable bankruptcy, reorganization,
insolvency, moratorium or other laws and legal principles affecting
creditors' rights generally from time to time in effect and to general
equitable principles, whether applied in an action at law or in equity) and
entitled to the benefits of this Indenture, equally and ratably with all
other Securities, if any, of such series Outstanding;
(d) the Indenture is qualified under the Trust Indenture Act; and
(e) such other matters as the Trustee may reasonably request;
and, if the authentication and delivery relates to a new series of Securities
created by an indenture supplemental hereto, also stating that all laws and
requirements with respect to the form and execution by the Company of the
supplemental indenture with respect to that series of Securities have been
complied with, the Company has corporate power to execute and deliver any such
supplemental indenture and has taken all necessary corporate action for those
purposes and any such supplemental indenture has been executed and delivered and
constitutes the legal, valid and binding obligation of the Company enforceable
in accordance with its terms (subject, as to enforcement of remedies, to
applicable bankruptcy, reorganization, insolvency, moratorium or other laws and
legal principles affecting creditors' rights generally from time to time in
effect and to general equitable principles, whether applied in an action at law
or in equity).
The Trustee shall not be required to authenticate such Securities if
the issue thereof will adversely affect the Trustee's own rights, duties or
immunities under the Securities and this Indenture.
Unless otherwise provided in the form of Security for any series, all
Securities shall be dated the date of their authentication.
No Security shall be entitled to any benefit under this Indenture or
be valid or obligatory for any purpose unless there appears on such Security a
certificate of
<PAGE>
31
authentication substantially in the form provided for herein executed by the
Trustee by manual signature, and such certificate upon any Security shall be
conclusive evidence, and the only evidence, that such Security has been duly
authenticated and delivered hereunder. Notwithstanding the foregoing, if any
Security shall have been authenticated and delivered hereunder but never issued
and sold by the Company, and the Company shall deliver such Security to the
Trustee for cancellation as provided in Section 3.09, for all purposes of this
Indenture such Security shall be deemed never to have been authenticated and
delivered hereunder and shall never be entitled to the benefits of this
Indenture.
SECTION 3.04. Temporary Securities. Pending the preparation of
---------------------
definitive Securities of any series, the Company may execute, and, upon receipt
of the documents required by Section 3.03, together with a Company Order, the
Trustee shall authenticate and deliver, temporary Securities which are printed,
lithographed, typewritten, mimeographed or otherwise produced, in any authorized
denomination, substantially of the tenor of the definitive Securities in lieu of
which they are issued and with such appropriate insertions, omissions,
substitutions and other variations as the officers executing such Securities may
determine, as evidenced by their execution of such Securities.
If temporary Securities of any series are issued, the Company will
cause definitive Securities of such series to be prepared without unreasonable
delay. After the preparation of definitive Securities, the temporary
Securities of such series shall be exchangeable for definitive Securities of
such series upon surrender of the temporary Securities of such series at the
office or agency of the Company in a Place of Payment, without charge to the
Holder; and upon surrender for cancellation of any one or more temporary
Securities the Company shall execute and the Trustee shall authenticate and
deliver in exchange therefor a like principal amount of definitive Securities of
such series of authorized denominations and of like tenor and terms. Until so
exchanged the temporary Securities of such series shall in all respects be
entitled to the same benefits under this Indenture as definitive Securities of
such series.
SECTION 3.05. Registration, Transfer and Exchange. The Company shall
------------------------------------
keep or cause to be kept a register or registers (herein sometimes referred to
as the "Security Register") in which, subject to such reasonable
<PAGE>
32
regulations as it may prescribe, the Company shall provide for the registration
of Securities, or of Securities of a particular series, and of transfers of
Securities or of Securities of such series. Any such register shall be in
written form or in any other form capable of being converted into written form
within a reasonable time. At all reasonable times the information contained in
such register or registers shall be available for inspection by the Trustee at
the office or agency to be maintained by the Company as provided in Section
10.02. There shall be only one Security Register per series of Securities.
Subject to Section 2.04, upon surrender for registration of transfer
of any Security of any series at the office or agency of the Company maintained
for such purpose in a Place of Payment, the Company shall execute, and the
Trustee shall authenticate and deliver, in the name of the designated transferee
or transferees, one or more new Securities of such series of any authorized
denominations, of a like aggregate principal amount and Stated Maturity and of
like tenor and terms.
Subject to Section 2.04, at the option of the Holder, Securities of
any series may be exchanged for other Securities of such series of any
authorized denominations, of a like aggregate principal amount and Stated
Maturity and like tenor and terms, upon surrender of the Securities to be
exchanged at such office or agency. Whenever any Securities are so surrendered
for exchange, the Company shall execute, and the Trustee shall authenticate and
deliver, the Securities which the Securityholder making the exchange is entitled
to receive.
All Securities issued upon any registration of transfer or exchange
of Securities shall be the valid obligations of the Company, evidencing the same
debt, and entitled to the same benefits under this Indenture, as the Securities
surrendered upon such registration of transfer or exchange.
Every Security presented or surrendered for registration of transfer
or exchange shall (if so required by the Company or the Trustee) be duly
endorsed, or be accompanied by a written instrument of transfer in form
satisfactory to the Company and the Trustee duly executed, by the Holder thereof
or his attorney duly authorized in writing.
<PAGE>
33
Unless otherwise provided in the Security to be registered for
transfer or exchanged, no service charge shall be made on any Securityholder for
any registration of transfer or exchange of Securities, but the Company may
(unless otherwise provided in such Security) require payment of a sum sufficient
to cover any tax or other governmental charge that may be imposed in connection
with any registration of transfer or exchange of Securities, other than
exchanges pursuant to Section 3.04, 9.06 or 11.07 not involving any transfer.
The Company shall not be required (a) to issue, register the transfer
of or exchange any Security of any series during a period beginning at the
opening of business 15 days before the day of the mailing of a notice of
redemption of Securities of such series selected for redemption under Section
11.03 and ending at the close of business on the date of such mailing or (b) to
register the transfer of or exchange any Security so selected for redemption in
whole or in part.
None of the Company, the Trustee, any agent of the Trustee, any Paying
Agent or the Security Registrar will have any responsibility or liability for
any aspect of the records relating to or payments made on account of beneficial
ownership interests of a Global Security or for maintaining, supervising or
reviewing any records relating to such beneficial ownership interests.
SECTION 3.06. Mutilated, Destroyed, Lost and Stolen Securities. If
-------------------------------------------------
(a) any mutilated Security is surrendered to the Trustee, or the Company and the
Trustee receive evidence to their satisfaction of the destruction, loss or theft
of any Security and(b) there is delivered to the Company and the Trustee such
security or indemnity as may be required by them to save each of them harmless,
then, in the absence of notice to the Company or the Trustee that such Security
has been acquired by a bona fide purchaser, the Company shall execute and upon
its written request the Trustee shall authenticate and deliver, in exchange for
or in lieu of any such mutilated, destroyed, lost or stolen Security, a new
Security of like tenor, series, Stated Maturity and principal amount, bearing a
number not contemporaneously outstanding.
In case any such mutilated, destroyed, lost or stolen Security has
become or is about to become due and
<PAGE>
34
payable, the Company in its discretion may, instead of issuing a new Security,
pay such Security.
Upon the issuance of any new Security under this Section, the Company
may require the payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in relation thereto and any other
expenses (including the fees and expenses of the Trustee) connected therewith.
Every new Security issued pursuant to this Section in lieu of any
destroyed, lost or stolen Security shall constitute an original additional
contractual obligation of the Company, whether or not the destroyed, lost or
stolen Security shall be at any time enforceable by anyone, and shall be
entitled to all the benefits of this Indenture equally and proportionately with
any and all other Securities of the same series duly issued hereunder.
The provisions of this Section are exclusive and shall preclude (to
the extent lawful) all other rights and remedies with respect to the replacement
or payment of mutilated, destroyed, lost or stolen Securities.
SECTION 3.07. Payment of Interest; Interest Rights Preserved. Unless
-----------------------------------------------
otherwise provided with respect to such security pursuant to Section 3.01,
interest on any Security which is payable, and is punctually paid or duly
provided for, on any Interest Payment Date shall be paid to the Person in whose
name that Security (or one or more Predecessor Securities) is registered at the
close of business on the Regular Record Date for such interest.
Any interest on any Security which is payable, but is not punctually
paid or duly provided for, on any Interest Payment Date (herein called
"Defaulted Interest") shall forthwith cease to be payable to the registered
Holder on the relevant Regular Record Date by virtue of his having been such
Holder; and, except as hereinafter provided, such Defaulted Interest may be paid
by the Company, at its election in each case, as provided in clause (a) or
clause (b) below:
(a) The Company may elect to make payment of any Defaulted Interest to
the Persons in whose names any such Securities (or their respective Predecessor
Securities) are registered at the close of business on a Special Record Date for
the payment of such Defaulted Interest, which shall be
<PAGE>
35
fixed in the following manner. The Company shall notify the Trustee in writing
of the amount of Defaulted Interest proposed to be paid on each such Security
and the date of the proposed payment, and at the same time the Company shall
deposit with the Trustee an amount of money equal to the aggregate amount
proposed to be paid in respect of such Defaulted Interest or shall make
arrangements satisfactory to the Trustee for such deposit prior to the date of
the proposed payment, such money when deposited to be held in trust for the
benefit of the Persons entitled to such Defaulted Interest as in this Clause
provided. Thereupon the Trustee shall fix a Special Record Date for the payment
of such Defaulted Interest which shall be not more than 15 nor less than 10 days
prior to the date of the proposed payment and not less than 10 days after the
receipt by the Trustee of the notice of the proposed payment. The Trustee shall
promptly notify the Company of such Special Record Date and, in the name and at
the expense of the Company, shall cause notice of the proposed payment of such
Defaulted Interest and the Special Record Date therefor to be mailed, first
class postage prepaid, to the Holder of each such Security at his address as it
appears in the Security Register, not less than 10 days prior to such Special
Record Date. Notice of the proposed payment of such Defaulted Interest and the
Special Record Date therefor having been mailed as aforesaid, such Defaulted
Interest shall be paid to the Persons in whose names such Securities (or their
respective Predecessor Securities) are registered on such Special Record Date
and shall no longer be payable pursuant to the following clause (b).
(2) The Company may make payment of any Defaulted Interest in any
other lawful manner not inconsistent with the requirements of any securities
exchange on which such Securities may be listed, and upon such notice as may be
required by such exchange, if, after notice given by the Company to the Trustee
of the proposed payment pursuant to this clause, such manner of payment shall be
deemed practicable by the Trustee.
If any installment of interest the Stated Maturity of which is on or
prior to the Redemption Date for any Security called for redemption pursuant to
Article Eleven is not paid or duly provided for on or prior to the Redemption
Date in accordance with the foregoing provisions of this Section, such interest
shall be payable as part of the Redemption Price of such Securities.
<PAGE>
36
Subject to the foregoing provisions of this Section, each Security
delivered under this Indenture upon registration of transfer of or in exchange
for or in lieu of any other Security shall carry the rights to interest accrued
and unpaid, and to accrue, which were carried by such other Security.
SECTION 3.08. Persons Deemed Owners. The Company, the Trustee and
----------------------
any agent of the Company or the Trustee may treat the Person in whose name any
Security is registered as the owner of such Security for the purpose of
receiving payment of principal of (and premium, if any), and (subject to Section
3.07) interest on, such Security and for all other purposes whatsoever, whether
or not such Security be overdue, and neither the Company, the Trustee nor any
agent of the Company or the Trustee shall be affected by notice to the contrary.
None of the Company, the Trustee, any Paying Agent or the Security
Registrar will have any responsibility or liability for any aspect of the
records relating to or payments made on account of beneficial ownership
interests in a Global Security or for maintaining, supervising or reviewing any
records relating to such beneficial ownership interests.
SECTION 3.09. Cancellation. All Securities surrendered for payment,
-------------
redemption, conversion, registration of transfer, or exchange or credit against
a sinking fund shall, if surrendered to any Person other than the Trustee, be
delivered to the Trustee and, if not already cancelled, shall be promptly
cancelled by it. The Company may at any time deliver to the Trustee for
cancellation any Securities previously authenticated and delivered hereunder
which the Company may have acquired in any manner whatsoever, and all Securities
so delivered shall be promptly cancelled by the Trustee. No Security shall be
authenticated in lieu of or in exchange for any Securities cancelled as provided
in this Section, except as expressly permitted by this Indenture. The Trustee
shall dispose of all cancelled Securities in accordance with its standard
procedures and deliver a certificate of such disposition to the Company.
SECTION 3.10. Computation of Interest. Unless otherwise provided as
------------------------
contemplated in Section 3.01, interest on the Securities shall be calculated on
the basis of a 360-day year of twelve 30-day months.
<PAGE>
37
SECTION 3.11. Delayed Issuance of Securities. Notwithstanding any
-------------------------------
contrary provision herein, if all Securities of a series are not to be
originally issued at one time, it shall not be necessary for the Company to
deliver to the Trustee an Officers' Certificate, Board Resolution, supplemental
indenture, Opinion of Counsel or Company Order otherwise required pursuant to
Sections 1.02, 2.02, 3.01 and 3.03 at or prior to the time of authentication of
each Security of such series if such documents are delivered to the Trustee or
its agent at or prior to the authentication upon original issuance of the first
Security of such series to be issued; provided that any subsequent request by
the Company to the Trustee to authenticate Securities of such series upon
original issuance shall constitute a representation and warranty by the Company
that as of the date of such request, the statements made in the Officers'
Certificate or other certificates delivered pursuant to Sections 1.02 and 2.02
shall be true and correct as if made on such date.
A Company Order, Officers', Certificate or Board Resolution or
supplemental indenture delivered by the Company to the Trustee in the
circumstances set forth in the preceding paragraph may provide that Securities
which are the subject thereof will be authenticated and delivered by the Trustee
or its agent on original issue from time to time in the aggregate principal
amount, if any, established for such series pursuant to such procedures
acceptable to the Trustee as may be specified from time to time by Company Order
upon the telephonic, electronic or written order of Persons designated in such
Company Order, Officers' Certificate, supplemental indenture or Board Resolution
(any such telephonic or electronic instructions to be promptly confirmed in
writing by such Persons) and that such Persons are authorized to determine,
consistent with such Company Order, Officers' Certificate, supplemental
indenture or Board Resolution, such terms and conditions of said Securities as
are specified in such Company Order, Officers' Certificate, supplemental
indenture or Board Resolution.
ARTICLE IV
Satisfaction and Discharge
--------------------------
SECTION 4.01. Satisfaction and Discharge of Indenture. This
----------------------------- ----------
Indenture shall cease to be of further effect with respect to any series of
Securities (except as
<PAGE>
38
to any surviving rights of conversion or transfer or exchange of Securities of
such series expressly provided for herein or in the form of Security for such
series), and the Trustee, on receipt of a Company Request and at the expense of
the Company, shall execute proper instruments acknowledging satisfaction and
discharge of this Indenture as to such series, when:
(a) either:
(i) all Securities of that series theretofore authenticated and
delivered (other than (A) Securities of such series which have been
destroyed, lost or stolen and which have been replaced or paid as
provided in Section 3.06 and (B) Securities of such series for whose
payment money in the Required Currency has theretofore been deposited
in trust or segregated and held in trust by the Company and thereafter
repaid to the Company or discharged from such trust, as provided in
Section 10.03) have been delivered to the Trustee canceled or for
cancellation; or
(ii) all such Securities of that series not theretofore delivered
to the Trustee canceled or for cancellation:
(A) have become due and payable,
(B) will become due and payable at their Stated Maturity within
one year, or
(C) are to be called for redemption within one year under
arrangements satisfactory to the Trustee for the giving of notice of
redemption by the Trustee in the name, and at the expense, of the
Company,
and the Company, in the case of (a), (B) or (C) above, has irrevocably
deposited or caused to be deposited (which deposit is not prohibited
by Article XIII) with the Trustee as trust funds in trust for the
purpose an amount in the Required Currency sufficient to pay and
discharge the entire indebtedness on such Securities not theretofore
delivered to the Trustee canceled or for cancellation, for principal
(and premium, if any) and interest to the date of such deposit (in
<PAGE>
39
the case of Securities which have become due and payable), or to the
Stated Maturity or Redemption Date, as the case may be;
(b) the Company has paid or caused to be paid all other sums payable
hereunder by the Company with respect to the Securities of such series; and
(c) the Company has delivered to the Trustee an Officers' Certificate
and an Opinion of Counsel each stating that all conditions precedent herein
provided for relating to the satisfaction and discharge of this Indenture
with respect to the Securities of such series have been complied with.
Notwithstanding the satisfaction and discharge of this Indenture with respect to
any series of Securities, the obligations of the Company to the Trustee with
respect to that series under Section 6.07 shall survive and the obligations of
the Company and the Trustee under Sections 3.05, 3.06, 4.02, 10.02 and 10.03
shall survive.
SECTION 4.02. Application of Trust Money. Subject to the provisions
---------------------------
of the last paragraph of Section 10.03, all money deposited with the Trustee
pursuant to Section 4.01 or Section 4.03 shall be held in trust and applied by
it, in accordance with the provisions of the series of Securities in respect of
which it was deposited and this Indenture, to the payment, either directly or
through any Paying Agent (including the Company acting as its own Paying Agent)
as the Trustee may determine, to the Persons entitled thereto, of the principal
(and premium, if any) and interest for whose payment such money has been
deposited with the Trustee; but such money need not be segregated from other
funds except to the extent required by law.
Anything herein to the contrary notwithstanding, the Trustee shall
deliver or pay to the Company from time to time upon Company Request any money
or securities deposited with and held by it as provided in Section 4.03 and this
Section 4.02 which, in the opinion of a nationally recognized firm of
independent public accountants expressed in a written certification thereof
delivered to the Trustee, are in excess of the amount thereof which would then
be required to be deposited to effect an equivalent satisfaction and discharge,
Discharge or covenant defeasance; provided that the Trustee shall not be
required
<PAGE>
40
to liquidate any securities in order to comply with the provisions of this
paragraph.
SECTION 4.03. Defeasance upon Deposit of Funds or Government
----------------------------------------------
Obligations. Unless pursuant to Section 3.01 provision is made that this
- ------------
Section shall not be applicable to the Securities of any series, at the
Company's option, either (a) the Company shall be deemed to have been Discharged
(as defined below) from its obligations with respect to any series of Securities
after the applicable conditions set forth below have been satisfied or (b) the
Company shall cease to be under any obligation to comply with any term,
provision or condition set forth in Sections 10.05 and 10.07 and Article Eight
(and any other Sections or covenants applicable to such Securities that are
determined pursuant to Section 3.01 to be subject to this provision), and clause
(d) of Section 5.01 of this Indenture (and any other Events of Default
applicable to such Securities that are determined pursuant to Section 3.01 to be
subject to this provision) shall be deemed not to be an Event of Default, with
respect to any series of Securities at any time after the applicable conditions
set forth below have been satisfied:
(i) the Company shall have deposited or caused to be deposited (which
deposit is not prohibited by Article Thirteen) irrevocably with the Trustee
as trust funds in trust, specifically pledged as security for, and
dedicated solely to, the benefit of the Holders of the Securities of such
series (A) money in an amount, (B) the equivalent in securities of the
government which issued the currency in which the Securities are
denominated or government agencies backed by the full faith and credit of
such government which through the payment of interest and principal in
respect thereof in accordance with their terms will provide, not later than
one day before the due date of any payment, money in an amount or (C) a
combination of (A) and (B), sufficient, in the opinion (with respect to (B)
and (C)) of a nationally recognized firm of independent public accountants
expressed in a written certification thereof delivered to the Trustee, to
pay and discharge each installment of principal (including mandatory
sinking fund payments) and any premium of, interest on and any repurchase
or redemption obligations with respect to the outstanding Securities of
such series on the dates such installments of interest or principal or
repurchase or redemption obligations are due (before
<PAGE>
41
such a deposit, if the Securities of such series are then redeemable or may
be redeemed in the future pursuant to the terms thereof, in either case at
the option of the Company, the Company may give to the Trustee, in
accordance with Section 11.02, a notice of its election to redeem all of
the Securities of such series at a future date in accordance with Article
Eleven);
(ii) no Event of Default or event (including such deposit) which with
notice or lapse of time would become an Event of Default with respect to
the Securities of such series shall have occurred and be continuing on the
date of such deposit;
(iii) the Company shall have delivered to the Trustee (A) an Opinion
of Counsel to the effect that Holders of the Securities of such series will
not recognize income, gain or loss for Federal income tax purposes as a
result of the Company's exercise of its option under this Section 4.03 and
will be subject to Federal income tax on the same amount and in the same
manner and at the same times as would have been the case if such option had
not been exercised, and, in the case of Securities being Discharged,
accompanied by a ruling to that effect from the Internal Revenue Service,
unless, as set forth in such Opinion of Counsel, there has been a change in
the applicable federal income tax law since the date of this Indenture such
that a ruling from the Internal Revenue Service is no longer required and
(B) an Opinion of Counsel, subject to such qualifications, exceptions,
assumptions and limitations as are reasonably deemed necessary by such
counsel and are reasonably satisfactory to counsel for the Trustee, to the
effect that the trust resulting from the deposit referred to in paragraph
(i) above does not violate the Investment Company Act of 1940; and
(iv) the Company shall have delivered to the Trustee an Officers'
Certificate stating that the deposit referred to in paragraph (i) above was
not made by the Company with the intent of preferring the Holders over
other creditors of the Company or with the intent of defeating, hindering,
delaying or defrauding creditors of the Company or others.
<PAGE>
42
"Discharged" means that the Company shall be deemed to have paid and
discharged the entire indebtedness represented by, and obligations under, the
Securities of such series and to have satisfied all the obligations under this
Indenture relating to the Securities of such series (and the Trustee, upon
receipt of a Company Request and at the expense of the Company, shall execute
proper instruments acknowledging the same), except (a) the rights of Holders of
Securities to receive, from the trust fund described in paragraph (i) above,
payment of the principal and any premium of and any interest on such Securities
when such payments are due; (B) the Company's obligations with respect to such
Securities under Sections 3.05, 3.06, 4.02, 6.07, 10.02 and 10.03; (c) the
Company's right of redemption, if any, with respect to any Securities of such
series pursuant to Article XI, in which case the Company may redeem the
Securities of such series in accordance with Article XI by complying with such
Article and depositing with the Trustee, in accordance with Section 11.05, an
amount of money sufficient, together with all amounts held in trust pursuant to
Section 4.02 with respect to Securities of such series, to pay the Redemption
Price of all the Securities of such series to be so redeemed; and (d) the
rights, powers, trusts, duties and immunities of the Trustee hereunder.
SECTION 4.04. Reinstatement. If the Trustee or paying Agent is
--------------
unable to apply any money or securities in accordance with Section 4.02 of this
Indenture by reason of any legal proceeding or by reason of any order or
judgment of any court or governmental authority enjoining, restraining or
otherwise prohibiting such application, the Company's obligations under this
Indenture and the Securities shall be revived and reinstated as though no
deposit had occurred pursuant to Section 4.01 or 4.03 of this Indenture, as the
case may be, until such time as the Trustee or Paying Agent is permitted to
apply all such money or securities in accordance with Section 4.02 of this
Indenture; provided that, if the Company has made any payment of principal of or
--------
interest on any Securities because of the reinstatement of its obligations, the
Company shall be subrogated to the rights of the Holders of such Securities to
receive such payment from the money or securities held by the Trustee or paying
Agent.
SECTION 4.05. Subordination Provisions Inapplicable. Notwithstanding
--------------------------------------
anything contained herein to the contrary, any money that shall have been
deposited by the Company with the Trustee pursuant to Section 4.01 or
<PAGE>
43
Section 4.03 shall not be subject to the provisions of Article Thirteen of this
Indenture respecting subordination of the Securities; provided, however, that
-------- -------
said provisions respecting subordination shall continue to apply to such money,
if any, that has been returned to the Company or its legal representative
pursuant to any legal proceeding or an order or judgment of a court or
governmental authority.
ARTICLE V
Remedies
--------
SECTION 5.01. Events of Default. "Event of Default", wherever used
------------------
herein, means with respect to any series of Securities any one of the following
events (whatever the reason for such Event of Default and whether it shall be
voluntary or involuntary or be effected by operation of law or pursuant to any
judgment, decree or order of any court or any order, rule or regulation of any
administrative or governmental body), unless such event is either inapplicable
to a particular series or it is specifically deleted or modified in or pursuant
to the supplemental indenture or Board Resolution creating such series of
Securities or in the form of Security for such series:
(a) default in the payment of any interest upon any Security of that
series when it becomes due and payable, and continuance of such default for
a period of 30 days; or
(b) default in the payment of the principal of (or premium, if any,
on) any Security of that series at its Maturity; or
(c) default in the payment of any sinking or purchase fund or
analogous obligation when the same becomes due by the terms of the
Securities of such series; or
(d) default in the performance, or breach, of any covenant or warranty
of the Company in this Indenture in respect of the Securities of such
series (other than a covenant or warranty in respect of the Securities of
such series a default in the performance of which or the breach of which is
elsewhere in this Section specifically dealt with), all of such covenants
<PAGE>
44
and warranties in the Indenture which are not expressly stated to be for
the benefit of a particular series of Securities being deemed in respect of
the Securities of all series for this purpose, and continuance of such
default or breach for a period of 90 days after there has been given, by
registered or certified mail, to the Company by the Trustee or to the
Company and the Trustee by the Holders of at least 25% in principal amount
of the Outstanding Securities of such series, a written notice specifying
such default or breach and requiring it to be remedied and stating that
such notice is a "Notice of Default" hereunder; or
(e) the entry of an order for relief against the Company under Title
11, United States Code (the "Federal Bankruptcy Act") by a court having
jurisdiction in the premises or a decree or order by a court having
jurisdiction in the premises adjudging the Company or any Material U.S.
Subsidiary a bankrupt or insolvent under any other applicable Federal or
State law, or the entry of a decree or order approving as properly filed a
petition seeking reorganization, arrangement, adjustment or composition of
or in respect of the Company or such Material U.S. Subsidiary under the
Federal Bankruptcy Act or any other applicable Federal or State law, or
appointing a receiver, liquidator, assignee, trustee, sequestrator (or
other similar official) of the Company or such Material U.S. Subsidiary or
of any substantial part of its property, or ordering the winding up or
liquidation of its affairs, and the continuance of any such decree or order
unstayed and in effect for a period of 90 consecutive days; or
(f) the consent by the Company or any Material U.S. Subsidiary to the
institution of bankruptcy or insolvency proceedings against it, or-the
filing by it of a petition or answer or consent seeking reorganization or
relief under the Federal Bankruptcy Act or any other applicable Federal or
State law, or the consent by it to the filing of any such petition or to
the appointment of a receiver, liquidator, assignee, trustee, sequestrator
(or other similar official) of the Company or such Material U.S. Subsidiary
or of any substantial part of its property, or the making by it of an
assignment for the benefit of creditors, or the admission by it in writing
of its inability to pay its debts generally as they become due, or the
taking of
<PAGE>
45
corporate action by the Company or such Material U.S. Subsidiary in
furtherance of any such action; or
(g) any other Event of Default provided in the supplemental indenture
or Board Resolution under which such series of Securities is issued or in
the form of Security for such series.
SECTION 5.02. Acceleration of Maturity; Rescission and Annulment. If
---------------------------------------------------
an Event of Default described in paragraph (a), (b), (c), (d) or (g) (if the
Event of Default under paragraph (d) or (g) is with respect to less than all
series of Securities then Outstanding) of Section 5.01 occurs and is continuing
with respect to any series, then and in each and every such case, unless the
principal of all the Securities of such series shall have already become due and
payable, either the Trustee or the Holders of not less than 25% in aggregate
principal amount of the Securities of such series then Outstanding hereunder
(each such series acting as a separate class), by notice in writing to the
Company (and to the Trustee if given by Holders), may declare the principal
amount (or, if the Securities of such series are Original Issue Discount
Securities, such portion of the principal amount as may be specified in the
terms of that series) of all the Securities of such series and all accrued
interest thereon to be due and payable immediately, and upon any such
declaration the same shall become and shall be immediately due and payable,
anything in this Indenture or in the Securities of such series contained to the
contrary notwithstanding. If an Event of Default described in paragraph (d) or
(g) (if the Event of Default under paragraph (d) or (g) is with respect to all
series of Securities then Outstanding), of Section 5.01 occurs and is
continuing, then and in each and every such case; unless the principal of all
the Securities shall have already become due and payable, either the Trustee or
the Holders of not less than 25% in aggregate principal amount of all the
Securities then outstanding hereunder (treated as one class), by notice in
writing to the Company (and to the Trustee if given by Holders), may declare the
principal amount (or, if any Securities are Original Issue Discount Securities,
such portion of the principal amount as may be specified in the terms thereof)
of all the Securities then Outstanding and all accrued interest thereon to be
due and payable immediately, and upon any such declaration the same shall become
and shall be immediately due and payable, anything in this Indenture or in the
Securities contained to the contrary notwithstanding.
<PAGE>
46
If an Event of Default of the type set forth in clause (e) or clause (f) of
Section 5.01 occurs and is continuing, the principal of and any interest on the
Securities then Outstanding shall become immediately due and payable.
At any time after such a declaration of acceleration has been made
with respect to the Securities of any or all series, as the case may be, and
before a judgment or decree for payment of the money due has been obtained by
the Trustee as hereinafter in this Article provided, the Holders of a majority
in principal amount of the Outstanding Securities of such series, by written
notice to the Company and the Trustee, may rescind and annul such declaration
and its consequences if
(a) the Company has paid or deposited with the Trustee a sum
sufficient to pay
(i) all overdue installments of interest on the Securities of
such series;
(ii) the principal of (and premium, if any, on) any Securities of
such series which have become due otherwise than by such declaration
of acceleration, and interest thereon at the rate or rates prescribed
therefor by the terms of the Securities of such series, to the extent
that payment of such interest is lawful;
(iii) interest upon overdue installments of interest at the rate
or rates prescribed therefor by the terms of the Securities of such
series to the extent that payment of such interest is lawful, and
(iv) all sums paid or advanced by the Trustee hereunder and the
reasonable compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel and all other amounts due the Trustee
under Section 6.07; and
(b) all Events of Default with respect to such series of Securities,
other than the nonpayment of the principal of the Securities of such series
which have become due solely by such acceleration, have been cured or
waived as provided in Section 5.13.
<PAGE>
47
No such rescission shall affect any subsequent default or impair any right
consequent thereon.
SECTION 5.03. Collection of Indebtedness and Suits for Enforcement by
-------------------------------------------------------
Trustee. The Company covenants that if
- --------
(a) default is made in the payment of any installment of interest on
any Security of any series when such interest becomes due and payable;
(b) default is made in the payment of the principal of (or premium, if
any, on) any Security at the Maturity thereof; or
(c) default is made in the payment of any sinking or purchase fund or
analogous obligation when the same becomes due by the terms of the
Securities of any series;
and any such default continues for any period of grace provided with respect to
the Securities of such series, the Company will, upon demand of the Trustee, pay
to it, for the benefit of the Holder of any such Security (or the Holders of any
such series in the case of Clause (c) above), the whole amount then due and
payable on any such Security (or on the Securities of any such series in the
case of Clause (c) above) for principal (and premium, if any) and interest, with
interest, to the extent that payment of such interest shall be legally
enforceable, upon the overdue principal (and premium, if any) and upon overdue
installments of interest, at such rate or rates as may be prescribed therefor by
the terms of any such Security (or of securities of any such series in the case
of Clause (c) above); and, in addition thereto, such further amount as shall be
sufficient to cover the costs and expenses of collection, including the
reasonable compensation, expenses, disbursements and advances of the Trustee,
its agents and counsel and all other amounts due the Trustee under Section 6.07.
If the Company fails to pay such amounts forthwith upon such demand,
the Trustee, in its own name and as trustee of an express trust, may institute a
judicial proceeding for the collection of the sums so due and unpaid, and may
prosecute such proceeding to judgment or final decree, and may enforce the same
against the Company or any other obligor upon the Securities of such series and
collect
<PAGE>
48
the money adjudged or decreed to be payable in the manner provided by law out of
the property of the Company or any other obligor upon such Securities, wherever
situated.
If an Event of Default with respect to any series of securities occurs
and is continuing, the Trustee may in its discretion proceed to protect and
enforce its rights and the rights of the Holders of Securities of such series by
such appropriate judicial proceedings as the Trustee shall deem most effectual
to protect and enforce any such rights, whether for the specific enforcement of
any covenant or agreement in this Indenture or in aid of the exercise of any
power granted herein, or to enforce any other proper remedy.
SECTION 5.04. Trustee May File Proofs of Claim. In case of the
---------------------------------
pendency of any receivership, insolvency, liquidation, bankruptcy,
reorganization, arrangement, adjustment, composition or other judicial
proceeding relative to the Company or any other obligor upon the Securities or
the property of the Company or of such other obligor or their creditors, the
Trustee (irrespective of whether the principal of the Securities shall then be
due and payable as therein expressed or by declaration or otherwise and
irrespective of whether the Trustee shall have made any demand on the Company
for the payment of overdue principal or interest) shall be entitled and
empowered, by intervention in such proceedings or otherwise,
(a) to file and prove a claim for the whole amount of principal (or
portion thereof determined pursuant to Section 3.01(16) to be provable in
bankruptcy) (and premium, if any) and interest owing and unpaid in respect
of the Securities and to file such other papers or documents as may be
necessary and advisable in order to have the claims of the Trustee
(including any claim for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel and all
other amounts due the Trustee under Section 6.07) and of the
Securityholders allowed in such judicial proceeding; and
(b) to collect and receive any moneys or other property payable or
deliverable on any such claims and to distribute the same;
and any receiver, assignee, trustee, liquidator, sequestrator (or other similar
official) in any such judicial proceeding is hereby authorized by each
<PAGE>
49
Securityholder to make such payment to the Trustee and in the event that the
Trustee shall consent to the making of such payments directly to the
Securityholders, to pay to the Trustee any amount due to it for the reasonable
compensation, expenses, disbursements and advances of the Trustee, its agents
and counsel, and any other amounts due the Trustee under Section 6.07.
Nothing herein contained shall be deemed to authorize the Trustee to
authorize or consent to or accept or adopt on behalf of any Securityholder any
plan of reorganization, arrangement, adjustment or composition affecting the
Securities or the rights of any Holder thereof, or to authorize the Trustee to
vote in respect of the claim of any Securityholder in any such proceeding.
SECTION 5.05. Trustee May Enforce Claims Without Possession of
------------------------------------------------
Securities. All rights of action and claims under this Indenture or the
- -----------
Securities of any series may be prosecuted and enforced by the Trustee without
the possession of any of the Securities of such series or the production thereof
in any proceeding relating thereto, and any such proceeding instituted by the
Trustee shall be brought in its own name as trustee of an express trust, and any
recovery of judgment shall, after provision for the payment of the reasonable
compensation, expenses, disbursements and advances of the Trustee, its agent and
counsel and any other amounts due the Trustee under Section 6.07, be for the
ratable benefit of the Holders of the Securities of the series in respect of
which such judgment has been recovered.
SECTION 5.06. Application of Money Collected. Any money collected by
-------------------------------
the Trustee with respect to a series of Securities pursuant to this Article
shall be applied in the following order, at the date or dates fixed by the
Trustee and, in case of the distribution of such money on account of principal
(or premium, if any) or interest, upon presentation of the Securities of such
series and the notation thereon of the payment if only partially paid and upon
surrender thereof if fully paid:
(a) to the payment of all amounts due the Trustee under Section 6.07;
(b) subject to Article XIII, to the payment of the amounts then due
and unpaid upon the Securities of that series for principal (and premium, if
any) and interest, in respect of which or for the benefit of which such money
has
<PAGE>
50
been collected, ratably, without preference or priority of any kind, according
to the amounts due and payable on such Securities for principal (and premium, if
any) and interest, respectively.
SECTION 5.07. Limitation on Suits. No Holder of any Security of any
--------------------
series shall have any right to institute any proceeding, judicial or otherwise,
with respect to this Indenture, or for the appointment of a receiver or trustee,
or for any other remedy hereunder, unless
(a) such Holder has previously given written notice to the Trustee of
a continuing Event of Default with respect to Securities of such series;
(b) the Holders of not less than 25% in principal amount of the
Outstanding Securities of such series shall have made written request to
the Trustee to institute proceedings in respect of such Event of Default in
its own name as Trustee hereunder;
(c) such Holder or Holders have offered to the Trustee reasonable
indemnity against the costs, expenses and liabilities to be incurred in
compliance with such request;
(d) the Trustee for 60 days after its receipt of such notice, request
and offer of indemnity has failed to institute any such proceeding; and
(e) no direction inconsistent with such written request has been given
to the Trustee during such 60-day period by the Holders of a majority in
principal amount of the Outstanding Securities of such series; it being
understood and intended that no one or more Holders of Securities of such
series shall have any right in any manner whatever by virtue of, or by
availing of, any provision of this Indenture to affect, disturb or
prejudice the rights of any other Holders of Securities of such series, or
to obtain or to seek to obtain priority or preference over any other such
Holders or to enforce any right under this Indenture, except in the manner
herein provided and for the equal and proportionate benefit of all the
Holders of all Securities of such series.
<PAGE>
51
SECTION 5.08. Unconditional Right of Securityholders To Receive
-------------------------------------------------
Principal, Premium and Interest. Notwithstanding any other provisions in this
- --------------------------------
Indenture except for the provisions of Article XIII, the Holder of any Security
shall have the right, which is absolute and unconditional, to receive payment of
the principal of (and premium, if any) and (subject to Section 3.07) interest on
such Security on the respective Stated Maturities expressed in such Security
(or, in the case of redemption or repayment, on the Redemption Date or Repayment
Date, as the case may be) and to institute suit for the enforcement of any such
payment, and such right shall not be impaired without the consent of such
Holder.
SECTION 5.09. Restoration of Rights and Remedies. If the Trustee or
-----------------------------------
any Securityholder has instituted any proceeding to enforce any right or remedy
under this Indenture and such proceeding has been discontinued or abandoned for
any reason, then and in every such case the Company, the Trustee and the
Securityholders shall, subject to any determination in such proceeding, be
restored severally and respectively to their former positions hereunder, and
thereafter all rights and remedies of the Trustee and the Securityholders shall
continue as though no such proceeding had been instituted.
SECTION 5.10. Rights and Remedies Cumulative. No right or remedy
-------------------------------
herein conferred upon or reserved to the Trustee or to the Securityholders is
intended to be exclusive of any other right or remedy, and every right and
remedy shall, to the extent permitted by law, be cumulative and in addition to
every other right and remedy give hereunder or now or hereafter existing at law
or in equity or otherwise. The assertion or employment of any right or remedy
hereunder, or otherwise, shall not prevent the concurrent assertion or
employment of any other appropriate right or remedy.
SECTION 5.11. Delay or Omission Not Waiver. No delay or omission of
-----------------------------
the Trustee or of any Holder of any Security to exercise any right or remedy
accruing upon any Event of Default shall impair any such right or remedy or
constitute a waiver of any such Event of Default or an acquiescence therein.
Every right and remedy given by this Article or by law to the Trustee or to the
Securityholders may be exercised from time to time, and as often as may be
deemed expedient, by the Trustee or by the Securityholders, as the case may be.
<PAGE>
52
SECTION 5.12. Control by Securityholders. The Holders of a majority
---------------------------
in principal amount of the Outstanding Securities of any series shall have the
right to direct the time, method and place of conducting any proceeding for any
remedy available to the Trustee or exercising any trust or power conferred on
the Trustee with respect to the Securities of such series, provided that:
(a) the Trustee shall have the right to decline to follow any such
direction if the Trustee, being advised by counsel, determines that the
action so directed may not lawfully be taken or would conflict with this
Indenture or if the Trustee in good faith shall, by a Responsible Officer,
determine that the proceedings so directed would involve it in personal
liability or be unjustly prejudicial to the Holders not taking part in such
direction; and
(b) the Trustee may take any other action deemed proper by the Trustee
which is not inconsistent with such direction.
SECTION 5.13. Waiver of Past Defaults. The Holders of not less than
------------------------
a majority in principal amount of the Outstanding Securities of any series may
on behalf of the Holders of all the Securities of such series waive any past
default hereunder with respect to such series and its consequences, except a
default not theretofore cured:
(a) in the payment of the principal of (or premium, if any) or
interest on any Security of such series, or in the payment of any sinking
or purchase fund or analogous obligation with respect to the Securities of
such series; or
(b) in respect of a covenant or provision hereof which under Article
IX cannot be modified or amended without the consent of the Holder of each
Outstanding Security of such series.
Upon any such waiver, such default shall cease to exist, and any Event
of Default arising therefrom shall be deemed to have been cured, for every
purpose of this Indenture; but no such waiver shall extend to any subsequent or
other default or impair any right consequent thereon.
<PAGE>
53
SECTION 5.14. Undertaking for Costs. All parties to this Indenture
----------------------
agree, and each Holder of any Security by his acceptance thereof shall be deemed
to have agreed, that any court may in its discretion require, in any suit for
the enforcement of any right or remedy under this Indenture, or in any suit
against the Trustee for any action taken or omitted by it as Trustee, the filing
by any party litigant in such suit of an undertaking to pay the costs of such
suit, and that such court may in its discretion assess reasonable costs,
including reasonable attorneys' fees, against any party litigant in such suit,
having due regard to the merits and good faith of the claims or defenses made by
such party litigant; but the provisions of this Section shall not apply to any
suit instituted by the Trustee, to any suit instituted by any Securityholder, or
group of Securityholders, holding in the aggregate more than 10% in principal
amount of the Outstanding Securities of any series to which the suit relates, or
to any suit instituted by and Securityholder for the enforcement of the payment
of the principal of (or premium, if any) or interest on any Security on or after
the respective Stated Maturities expressed in such Security (or, in the case of
redemption or repayment, on or after the Redemption Date or Repayment Date, as
the case may be).
SECTION 5.15. Waiver of Stay or Extension Laws. The Company
---------------------------------
covenants (to the extent that it may lawfully do so) that it will not at any
time insist upon, or plead, or in any manner whatsoever claim or take the
benefit or advantage of, any stay or extension law wherever enacted, now or at
any time hereafter in force, which may affect the covenants or the performance
of this Indenture; and the Company (to the extent that it may lawfully do so)
hereby expressly waives all benefit or advantage of any such law, and covenants
that it will not hinder, delay or impede the execution of any power herein
granted to the Trustee, but will suffer and permit the execution of every such
power as though no such law had been enacted.
<PAGE>
54
ARTICLE IV
The Trustee
-----------
SECTION 6.01. Certain Duties and Responsibilities. (a) Except during
------------------------------------
the continuance of an Event of Default with respect to any series of Securities:
(i) the Trustee undertakes to perform such duties and only such duties
as are specifically set forth in this Indenture with respect to the
Securities of such series, and no implied covenants or obligations shall be
read into this Indenture against the Trustee; and
(ii) in the absence of bad faith on its part, the Trustee may, with
respect to Securities of such series, conclusively rely, as to the truth of
the statements and the correctness of the opinions expressed therein, upon
certificates or opinions furnished to the Trustee and conforming to the
requirements of this Indenture; but in the case of any such certificates or
opinions which by any provision hereof are specifically required to be
furnished to the Trustee, the Trustee shall be under a duty to examine the
same to determine whether or not they conform to the requirements of this
Indenture.
(b) In case an Event of Default with respect to any series of
Securities has occurred and is continuing, the Trustee shall exercise with
respect to the Securities of such series such of the rights and powers vested in
it by this Indenture, and use the same degree of care and skill in their
exercise, as a prudent man would exercise or use under the circumstances in the
conduct of his own affairs.
(c) No provision of this Indenture shall be construed to relieve the
Trustee from liability for its own negligent action, its own negligent failure
to act, or its own wilful misconduct, except that:
(i) this Subsection shall not be construed to limit the effect of
Subsection (a) of this Section;
(ii) the Trustee shall not be liable for any error of judgment made in
good faith by a Responsible Officer, unless it shall be proved that the
Trustee was negligent in ascertaining the pertinent facts;
<PAGE>
55
(iii) the Trustee shall not be liable with respect to any action taken
or omitted to be taken by it in good faith in accordance with the direction
of the Holders of a majority in principal amount of the Outstanding
Securities of any series relating to the time, method and place of
conducting any proceeding for any remedy available to the Trustee, or
exercising any trust or power conferred upon the Trustee, under this
Indenture with respect to the Securities of such series; and
(iv) no provision of this Indenture shall require the Trustee to
expend or risk its own funds or otherwise incur any financial liability in
the performance of any of its duties hereunder, or in the exercise of any
of its rights or powers, if it shall have reasonable grounds for believing
that repayment of such funds or adequate indemnity against such risk or
liability is not reasonably assured to it.
(d) Whether or not therein expressly so provided, every provision of
this Indenture relating to the conduct or affecting the liability of or
affording protection to the Trustee shall be subject to the provisions of this
Section.
SECTION 6.02. Notice of Defaults. Within 90 days after the
-------------------
occurrence of any default hereunder with respect to Securities of any series,
the Trustee shall transmit by mail to all Securityholders of such series, as
their names and addresses appear in the Security Register, notice of such
default hereunder known to the Trustee, unless such default shall have been
cured or waived; provided, however, that, except in the case of a default in the
-------- -------
payment of the principal of (or premium, if any) or interest on any Security of
such series or in the payment of any sinking or purchase fund installment or
analogous obligation with respect to Securities of such series, the Trustee
shall be protected in withholding such notice if and so long as the board of
directors, the executive committee or a trust committee of directors and/or
Responsible Officers of the Trustee in good faith determine that the withholding
of such notice is in the interests of the Securityholders of such series; and
provided further that in the case of any default of the character specified in
- -------- -------
Section 5.01(4) with respect to Securities of such series no such notice to
Securityholders of such series shall be given until at least 90 days after the
occurrence thereof. For the purpose of this Section, the term "default", with
respect to Securities
<PAGE>
56
of any series, means any event which is, or after notice or lapse of time or
both would become, an Event of Default with respect to Securities of such
series.
SECTION 6.03. Certain Rights of Trustee. Except as otherwise
--------------------------
provided in Section 6.01:
(a) the Trustee may rely and shall be protected in acting or
refraining from acting upon any resolution, certificate, statement,
instrument, opinion, report, notice, request, direction, consent, order,
bond, debenture or other paper or document believed by it to be genuine and
to have been signed or presented by the proper party or parties;
(b) any request or direction of the Company mentioned herein shall be
sufficiently evidenced by a Company Request or Company Order and any
resolution of the Board of Directors may be sufficiently evidenced by a
Board Resolution;
(c) whenever in the administration of this Indenture the Trustee shall
deem it desirable that a matter be proved or established prior to taking,
suffering or omitting any action hereunder, the Trustee (unless other
evidence be herein specifically prescribed) may, in the absence of bad
faith on its part, rely upon an Officers' Certificate;
(d) the Trustee may consult with counsel and the written advice of
such counsel or any Opinion of Counsel shall be full and complete
authorization and protection in respect of any action taken, suffered or
omitted by it hereunder in good faith and in reliance thereon;
(e) the Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Indenture at the request or direction
of any of the Securityholders pursuant to this Indenture, unless such
Securityholders shall have offered to the Trustee reasonable security or
indemnity against the costs, expenses and liabilities which might be
incurred by it in compliance with such request or direction;
(f) the Trustee shall not be bound to make any investigation into the
facts or matters stated in any resolution, certificate, statement,
instrument,
<PAGE>
57
opinion, report, notice, request, direction, consent, order, bond,
debenture or other paper or document, but the Trustee, in its discretion,
may make such further inquiry or investigation into such facts or matters
as it may see fit, and, if the Trustee shall determine to make such further
inquiry or investigation, it shall be entitled to examine the books,
records and premises of the Company, personally or by agent or attorney;
(g) the Trustee may execute any of the trusts or powers hereunder or
perform any duties hereunder either directly or by or through agents or
attorneys and the Trustee shall not be responsible for any misconduct or
negligence on the part of any agent or attorney appointed with due care by
it hereunder; and
(h) the Trustee shall not be charged with knowledge of any default (as
defined in Section 6.02) or Event of Default with respect to the Securities
of any series for which it is acting as Trustee unless either (1) a
Responsible Officer of the Trustee assigned to the Corporation Trust
Department of the Trustee (or any successor division or department of the
Trustee) shall have actual knowledge of such default or Event of Default or
(2) written notice of such default or Event of Default shall have been
given to the Trustee by the Company or any other obligor on such Securities
or by any Holder of such Securities; and
(i) the Trustee shall not be liable for any action taken, suffered or
omitted by it in good faith and believed by it to be authorized or within
the discretion or rights or powers conferred upon it by this Indenture.
SECTION 6.04. Not Responsible for Recitals or Issuance of Securities.
-------------------------------------------------------
The recitals contained herein and in the Securities, except the certificates of
authentication, shall be taken as the statements of the Company, and the Trustee
assumes no responsibility for their correctness. The Trustee makes no
representations as to the validity or sufficiency of this Indenture or of the
Securities. The Trustee shall not be accountable for the use or application by
the Company of Securities or the proceeds thereof.
SECTION 6.05. May Hold Securities. The Trustee, any Authenticating
--------------------
Agent, any Paying Agent, the Security
<PAGE>
58
Registrar, any Conversion Agent or any other agent of the Company, in its
individual or any other capacity, may become the owner or pledgee of Securities
and, subject to Sections 6.08 and 6.13, may otherwise deal with the Company with
the same rights it would have if it were not Trustee, Authenticating Agent,
Paying Agent, Security Registrar, Conversion Agent or such other agent.
SECTION 6.06. Money Held in Trust. Subject to the provisions of
--------------------
Section 10.03 hereof, all moneys in any currency or currency received by the
Trustee shall, until used or applied as herein provided, be held in trust for
the purposes for which they were received, but need not be segregated from other
funds except to the extent required by law. The Trustee shall be under no
liability for interest on any money received by it hereunder except as otherwise
agreed in writing with the Company.
SECTION 6.07. Compensation and Reimbursement. The Company agrees:
-------------------------------
(a) to pay to the Trustee from time to time reasonable compensation
for all services rendered by it hereunder (which compensation shall not be
limited by any provision of law in regard to the compensation of a trustee
of an express trust);
(b) except as otherwise expressly provided herein, to reimburse the
Trustee upon its request for all reasonable expenses, disbursements and
advances incurred or made by the Trustee in accordance with any provision
of this Indenture (including the reasonable compensation and the expenses
and disbursements of its agents and counsel), except any such expense,
disbursement or advance as may be attributable to its negligence or bad
faith; and
(c) to indemnify the Trustee for, and to hold it harmless against, any
loss, liability or expense incurred without negligence or bad faith on its
part, arising out of or in connection with the acceptance or administration
of this trust, including the costs and expenses of defending itself against
any claim or liability in connection with the exercise or performance of
any of its powers or duties hereunder.
As security for the performance of the obligations of the Company
under this Section the Trustee shall have a
<PAGE>
59
lien prior to the Securities upon all property and funds held or collected by
the Trustee as such, except funds held in trust for the payment of principal of
(and premium, if any) or interest on particular Securities.
When the Trustee incur expenses or renders services in connection with
an Event of Default specified in Section 5.01(e) or (f), the expenses and the
compensation for the services are intended to constitute expenses of
administration under any bankruptcy law.
The Company's obligations under this Section 6.07 and any lien arising
hereunder shall survive the resignation or removal of any Trustee, the discharge
of the Company's obligations pursuant to Article IV of this Indenture and/or the
termination of this Indenture.
SECTION 6.08. Disqualification; Conflicting Interests. The Trustee
----------------------------------------
for the Securities of any series issued hereunder shall be subject to the
provisions of Section 3.10(b) of the Trust Indenture Act during the period of
time provided for therein. In determining whether the Trustee has a conflicting
interest as defined in Section 3.10(b) of the Trust Indenture Act with respect
to the Securities of any series, there shall be excluded this Indenture with
respect to Securities of any particular series of Securities other than that
series. Nothing herein shall prevent the Trustee from filing with the
Commission the application referred to in the second to last paragraph of
Section 3.10(b) of the Trust Indenture Act.
SECTION 6.09. Corporate Trustee Required; Eligibility. There shall
----------------------------------------
at all times be a Trustee hereunder with respect to each series of Securities,
which shall be either:
(a) a corporation organized and doing business under the laws of the
United States of America or of any State, authorized under such laws to
exercise corporate trust powers and subject to supervision or examination
by Federal or State authority; or
(b) a corporation or other Person organized and doing business under
the laws of a foreign government that is permitted to act as Trustee
pursuant to a rule, regulation or order of the Commission, authorized under
such laws to exercise corporate trust powers, and subject to supervision or
examination by authority of
<PAGE>
60
such foreign government or a political subdivision thereof substantially
equivalent to supervision or examination applicable to United States
institutional trustees,
in either case having a combined capital and surplus of at least $50 million.
If such corporation publishes reports of condition at least annually, pursuant
to law or to the requirements of the aforesaid supervising or examining
authority, then for the purposes of this Section, the combined capital and
surplus of such corporation shall be deemed to be its combined capital and
surplus as set forth in its most recent report of condition so published.
Neither the Company nor any Person directly or indirectly controlling,
controlled by, or under common control with the Company shall serve as trustee
for the Securities of any series issued hereunder. If at any time the Trustee
with respect to any series of Securities shall cease to be eligible in
accordance with the provisions of this Section, it shall resign immediately in
the manner and with the effect specified in Section 6.10.
SECTION 6.10. Resignation and Removal; Appointment of Successor. (a)
--------------------------------------------------
No resignation or removal of the Trustee and no appointment of a successor
Trustee pursuant to this Article shall become effective until the acceptance of
appointment by the successor Trustee under Section 6.11.
(b) The Trustee may resign with respect to any series of Securities
at any time by giving written notice thereof to the Company. If an instrument
of acceptance by a successor Trustee shall not have been delivered to the
Trustee within 30 days after the giving of such notice of resignation, the
resigning Trustee may petition any court of competent jurisdiction for the
appointment of a successor Trustee.
(c) The Trustee may be removed with respect to any series of
Securities at any time by Act of the Holders of a majority in principal amount
of the Outstanding Securities of that series, delivered to the Trustee and to
the Company.
<PAGE>
61
(d) If at any time:
(i) the Trustee shall fail to comply with Section 3.10(b) of the Trust
Indenture Act pursuant to Section 6.08 with respect to any series of
Securities after written request therefor by the Company or by any
Securityholder who has been a bona fide Holder of a Security of that series
for at least six months, unless the Trustee's duty to resign is stayed in
accordance with the provisions of Section 3.10(b) of the Trust Indenture
Act; or
(ii) the Trustee shall cease to be eligible under Section 6.09 with
respect to any series of Securities and shall fail to resign after written
request therefor by the Company or by any such Securityholder; or
(iii) the Trustee shall become incapable of acting with respect to any
series of Securities; or
(iv) the Trustee shall be adjudged a bankrupt or insolvent or a
receiver of the Trustee or of its property shall be appointed or any public
officer shall take charge or control of the Trustee or of its property or
affairs for the purpose of rehabilitation, conservation or liquidation;
then, in any such case, (A) the Company by a Board Resolution may remove the
Trustee, with respect to the series, or in the case of Clause (iv), with respect
to all series, or (B) subject to Section 5.14, any Securityholder who has been a
bona fide Holder of a Security of such series for at least six months may, on
behalf of himself and all others similarly situated, petition any court of
competent jurisdiction for the removal of the Trustee and the appointment of a
successor Trustee with respect to the series, or, in the case of Clause (iv),
with respect to all series.
(e) If the Trustee shall resign, be removed or become incapable of
acting with respect to any series of Securities, or if a vacancy shall occur in
the office of the Trustee with respect to any series of Securities for any
cause, the Company, by a Board Resolution, shall promptly appoint a successor
Trustee for that series of Securities. If, within one year after such
resignation, removal or incapacity, or the occurrence of such vacancy, a
successor Trustee with respect to such series of Securities shall be
<PAGE>
62
appointed by Act of the Holders of a majority in principal amount of the
Outstanding Securities of such series delivered to the Company and the retiring
Trustee, the successor Trustee so appointed shall, forthwith upon its acceptance
of such appointment, become the successor Trustee with respect to such series
and supersede the successor Trustee appointed by the Company with respect to
such series. If no successor Trustee with respect to such series shall have
been so appointed by the Company or the Securityholders of such series and
accepted appointment in the manner hereinafter provided, subject to Section
5.14, any Securityholder who has been a bona fide Holder of a Security of that
series for at least six months may, on behalf of himself and all others
similarly situated, petition any court of competent jurisdiction for the
appointment of a successor Trustee with respect to such series.
(f) The Company shall give notice of each resignation and each
removal of the Trustee with respect to any series and each appointment of a
successor Trustee with respect to any series by mailing written notice of such
event by first-class mail, postage prepaid, to the Holders of Securities of that
series as their names and addresses appear in the Security Register. Each
notice shall include the name of the successor Trustee and the address of its
principal Corporate Trust Office.
SECTION 6.11. Acceptance of Appointment by Successor. Every
---------------------------------------
successor Trustee appointed hereunder shall execute, acknowledge and deliver to
the Company and to the predecessor Trustee an instrument accepting such
appointment, and thereupon the resignation or removal of the predecessor Trustee
shall become effective with respect to any series as to which it is resigning or
being removed as Trustee, and such successor Trustee, without any further act,
deed or conveyance, shall become vested with all the rights, powers, trusts and
duties of the predecessor Trustee with respect to any such series; but, on
request of the Company or the successor Trustee, such predecessor Trustee shall,
upon payment of its reasonable charges, if any, execute and deliver an
instrument transferring to such successor Trustee all the rights, powers and
trusts of the predecessor Trustee, and shall duly assign, transfer and deliver
to such successor Trustee all property and money held by such predecessor
Trustee hereunder with respect to all or any such series, subject nevertheless
to its lien, if any, provided for in Section 6.07. Upon request of any such
successor Trustee, the Company shall execute any and all
<PAGE>
63
instruments for more fully and certainly vesting in and confirming to such
successor Trustee all such rights, powers and trusts.
In case of the appointment hereunder of a successor Trustee with
respect to the Securities of one or more (but not all) series, the Company, the
predecessor Trustee and each successor Trustee with respect to the Securities of
any applicable series shall execute and deliver an indenture supplemental hereto
which shall contain such provisions as shall be deemed necessary or desirable to
confirm that all the rights, powers, trusts and duties of the predecessor
Trustee with respect to the Securities of any series as to which the predecessor
Trustee is not being succeeded shall continue to be vested in the predecessor
Trustee, and shall add to or change any of the provisions of this Indenture as
shall be necessary to provide for or facilitate the administration of the trusts
hereunder by more than one Trustee, it being understood that nothing herein or
in such supplemental indenture shall constitute such Trustees co-trustees of the
same trust and that each such Trustee shall be Trustee of a trust or trusts
hereunder separate and apart from any trust or trusts hereunder administered by
any other such Trustee.
No successor Trustee with respect to any series of Securities shall
accept its appointment unless at the time of such acceptance such successor
Trustee shall be qualified and eligible with respect to that series under this
Article.
SECTION 6.12. Merger, Conversion, Consolidation or Succession to
--------------------------------------------------
Business. Any corporation into which the Trustee may be merged or converted or
- ---------
with which it may be consolidated, or any corporation resulting from any merger,
conversion or consolidation to which the Trustee shall be a party, or any
corporation succeeding to all or substantially all of the corporate trust
business of the Trustee, shall be the successor of the Trustee hereunder,
provided such corporation shall be otherwise qualified and eligible under this
Article, without the execution or filing of any paper or any further act on the
part of any of the parties hereto. In case any Securities shall have been
authenticated, but not delivered, by the Trustee then in office, any successor
by merger, conversion or consolidation to such authenticating Trustee may adopt
such authentication and deliver the Securities so authenticated with the same
effect as if such successor Trustee had itself authenticated such Securities.
<PAGE>
64
SECTION 6.13. Preferential Collection of Claims Against Company. (a)
--------------------------------------------------
Subject to Subsection (b) of this Section, if the Trustee shall be or shall
become a creditor, directly or indirectly, secured or unsecured, of the Company
within three months prior to a default, as defined in Subsection (c) of this
Section, or subsequent to such a default, then, unless and until such default
shall be cured, the Trustee shall set apart and hold in a special account for
the benefit of the Trustee individually, the Holders of the Securities and the
holders of other indenture securities (as defined in Subsection (c) of this
Section):
(i) an amount equal to any and all reduction in the amount due and
owing upon any claim as such creditor in respect of principal or interest,
effected after the beginning of such three-month period and valid as
against the Company and its other creditors, except any such reduction
resulting from the receipt or disposition of any property described in
paragraph (ii) of this Subsection, or from the exercise of any right of
set-off which the Trustee could have exercised if a petition in bankruptcy
had been filed by or against the Company upon the date of such default; and
(ii) all property received by the Trustee in respect of any claim as
such creditor, either as security therefor, or in satisfaction or
composition thereof, or otherwise, after the beginning of such three-month
period, or an amount equal to the proceeds of any such property, if
disposed of, subject, however, to the rights, if any, of the Company and
its other creditors in such property or such proceeds.
Nothing herein contained, however, shall affect the right of the Trustee
(A) to retain for its own account (I) payments made on account of any
such claim by any Person (other than the Company) who is liable thereon,
and (II) the proceeds of the bona fide sale of any such claim by the
Trustee to a third Person, and (III) distributions made in cash, securities
or other property in respect of claims filed against the Company in
bankruptcy or receivership or in proceedings for reorganization pursuant to
the Federal Bankruptcy Act or applicable State law;
<PAGE>
65
(B) to realize, for its own account, upon any property held by it as
security for any such claim, if such property was so held prior to the
beginning of such three-month period;
(C) to realize, for its own account, but only to the extent of the
claim hereinafter mentioned, upon any property held by it as security for
any such claim, if such claim was created after the beginning of such
three-month period and such property was received as security therefor
simultaneously with the creation thereof, and if the Trustee shall sustain
the burden of proving that at the time such property was so received the
Trustee had no reasonable cause to believe that a default as defined in
Subsection (c) of this Section would occur within three months; or
(D) to receive payment on any claim referred to in paragraph (B) or
(C) or against the release of any property held as security for such claim
as provided in paragraph (B) or (C), as the case may be, to the extent of
the fair value of such property.
For the purposes of paragraphs (B), (C) and (D), property substituted
after the beginning of such three-month period for property held as security at
the time of such substitution shall, to the extent of the fair value of the
property released, have the same status as the property released, and, to the
extent that any claim referred to in any of such paragraphs is created in
renewal of or in substitution for or for the purpose of repaying or refunding
any pre-existing claim of the Trustee as such creditor, such claim shall have
the same status as such pre-existing claim.
If the Trustee shall be required to account, the funds and property
held in such special account and the proceeds thereof shall be apportioned
between the Trustee, the Securityholders and the holders of other indenture
securities in such manner that the Trustee, the Securityholders and the holders
of other indenture securities realize, as a result of payments from such special
account and payments of dividends on claims filed against the Company in
bankruptcy or receivership or in proceedings for reorganization pursuant to the
Federal Bankruptcy Act or applicable State law, the same percentage of their
respective claims, figured before crediting to the claim of the Trustee anything
on account of the receipt by it from the Company of the funds and property in
such special
<PAGE>
66
account and before crediting to the respective claims of the Trustee and the
Securityholders and the holders of other indenture securities dividends on
claims filed against the Company in bankruptcy or receivership or in proceedings
for reorganization pursuant to the Federal Bankruptcy Act or applicable State
law, but after crediting thereon receipts on account of the indebtedness
represented by their respective claims from all sources other than from such
dividends and from the funds and property so held in such special account. As
used in this paragraph, with respect to any claim, the term "dividends" shall
include any distribution with respect to such claim, in bankruptcy or
receivership or proceedings for reorganization pursuant to the Federal
Bankruptcy Act or applicable State law, whether such distribution is made in
cash, securities, or other property, but shall not include any such distribution
with respect to the secured portion, if any, of such claim. The court in which
such bankruptcy, receivership or proceedings for reorganization is pending shall
have jurisdiction (i) to apportion between the Trustee and the Securityholders
and the holders of other indenture securities, in accordance with the provisions
of this paragraph, the funds and property held in such special account and
proceeds thereof, or (ii) in lieu of such apportionment, in whole or in part, to
give to the provisions of this paragraph due consideration in determining the
fairness of the distributions to be made to the Trustee and the Securityholders
and the holders of other indenture securities with respect to their respective
claims, in which event it shall not be necessary to liquidate or to appraise the
value of any securities or other property held in such special account or as
security for any such claim, or to make a specific allocation of such
distributions as between the secured and unsecured portions of such claims, or
otherwise to apply the provisions of this paragraph as a mathematical formula.
Any Trustee which has resigned or been removed after the beginning of
such three-month period shall be subject to the provisions of this Subsection as
though such resignation or removal had not occurred. If any Trustee has
resigned or been removed prior to the beginning of such three-month period, it
shall be subject to the provisions of
<PAGE>
67
this Subsection if and only if the following conditions exist:
(i) the receipt of property or reduction of claim, which would have
given rise to the obligation to account, if such Trustee had continued as
Trustee, occurred after the beginning of such three-month period; and
(ii) such receipt of property or reduction of claim occurred within
three months after such resignation or removal.
(b) There shall be excluded from the operation of Subsection (a) of
this Section a creditor relationship arising from
(i) the ownership or acquisition of securities issued under any
indenture, or any security or securities having a maturity of one year or
more at the time of acquisition by the Trustee;
(ii) advances authorized by a receivership or bankruptcy court of
competent jurisdiction, or by this Indenture, for the purpose of preserving
any property which shall at any time be subject to the lien of this
Indenture or of discharging tax liens or other prior liens or encumbrances
thereon), if notice of such advances and of the circumstances surrounding
the making thereof is given to the Securityholders at the time and in the
manner provided in this Indenture;
(iii) disbursements made in the ordinary course of business in the
capacity of trustee under an indenture, transfer agent, registrar,
custodian, paying agent, fiscal agent or depository, or other similar
capacity;
(iv) an indebtedness created as a result of services rendered or
premises rented; or an indebtedness created as a result of goods or
securities sold in a cash transaction as defined in Subsection (c) of this
Section;
(v) the ownership of stock or of other securities of a corporation
organized under the provisions of Section 25(a) of the Federal Reserve Act,
as amended, which is directly or indirectly a creditor of the Company; or
<PAGE>
68
(vi) the acquisition, ownership, acceptance or negotiation of any
drafts, bills of exchange, acceptances or obligations which fall within the
classification of self-liquidating paper as defined in Subsection (c) of
this Section.
(c) For the purposes of this Section only:
(i) The term "default" means any failure to make payment in full of
the principal of or interest on any of the Securities or upon the other
indenture securities when and as such principal or interest becomes due and
payable.
(ii) The term "other indenture securities" means securities upon
which the Company is an obligor outstanding under any other indenture (A)
under which the Trustee is also trustee, (B) which contains provisions
substantially similar to the provisions of this Section, and (C) under
which a default exists at the time of the apportionment of the funds and
property held in such special account.
(iii) The term "cash transaction" means any transaction in which full
payment for goods or securities sold is made within seven days after
delivery of the goods or securities in currency or in checks or other
orders drawn upon banks or bankers and payable upon demand.
(iv) The term "self-liquidating paper" means any draft, bill of
exchange, acceptance or obligation which is made, drawn, negotiated or
incurred by the Company for the purpose of financing the purchase,
processing, manufacturing, shipment, storage or sale of goods, wares or
merchandise and which is secured by documents evidencing title to,
possession of, or a lien upon, the goods, wares or merchandise or the
receivables or proceeds arising from the sale of the goods, wares or
merchandise previously constituting the security, provided the security is
received by the Trustee simultaneously with the creation of the creditor
relationship with the Company arising from the making, drawing, negotiating
or incurring of the draft, bill of exchange, acceptance or obligation.
(v) The term "Company" means any obligor upon the securities.
<PAGE>
69
SECTION 6.14. Appointment of Authenticating Agent. At any time when
------------------------------------
any of the Securities remain Outstanding the Trustee, with the approval of the
Company, may appoint an authenticating Agent or Agents with respect to one or
more series of Securities which shall be authorized to act on behalf of the
Trustee to authenticate Securities of such series issued upon original issuance,
exchange, registration of transfer or partial redemption thereof or pursuant to
Section 3.06, and Securities so authenticated shall be entitled to the benefits
of this Indenture and shall be valid and obligatory for all purposes as if
authenticated by the Trustee hereunder. Wherever reference is made in this
Indenture to the authentication and delivery of Securities by the Trustee or the
Trustee's certificate of authentication, such reference shall be deemed to
include authentication and delivery on behalf of the Trustee by an
Authenticating Agent and a certificate of authentication executed on behalf of
the Trustee by an Authenticating Agent. Each Authenticating Agent shall be
acceptable to the Company and shall at all times be a corporation organized and
doing business under the laws of the United States of America, any State thereof
or the District of Columbia, authorized under such laws to act as an
Authenticating Agent, having a combined capital and surplus of not less than
$50 Million and, if other than the Company itself, subject to supervision or
examination by Federal or State authority. If such Authenticating Agent
publishes reports of condition at least annually, pursuant to law or to the
requirements of said supervising or examining authority, then for the purposes
of this Section, the combined capital and surplus of such Authenticating Agent
shall be deemed to be its combined capital and surplus as set forth in its most
recent report of condition so published. If at any time an Authenticating Agent
shall cease to be eligible in accordance with the provisions of this Section,
such Authenticating Agent shall resign immediately in the manner and with the
effect specified in this Section.
Any corporation into which an Authenticating Agent may be merged or
converted or with which it may be consolidated, or any corporation resulting
from any merger, conversion or consolidation to which such Authenticating Agent
shall be a party, or any corporation succeeding to the corporate agency or
corporate trust business of an Authenticating Agent, shall continue to be an
Authenticating Agent, provided such corporation shall be otherwise eligible
under this Section, without the execution or filing of any
<PAGE>
70
paper or any further act on the part of the Trustee or the Authenticating Agent.
An Authenticating Agent may resign at any time by giving written
notice thereof to the Trustee and, if other than the Company, to the Company.
The Trustee may at any time terminate the agency of an Authenticating Agent by
giving written notice thereof to such Authenticating Agent and, if other than
the Company, to the company. Upon receiving such a notice of resignation or
upon such a termination, or in case at any time such Authenticating Agent shall
cease to be eligible in accordance with the provisions of this Section, the
Trustee, with the approval of the Company, may appoint a successor
Authenticating Agent which shall be acceptable to the Company and shall mail
written notice of such appointment by first-class mail, postage prepaid, to all
Holders of Securities of the series with respect to which such Authenticating
Agent will serve, as their names and addresses appear in the Security Register.
Any successor Authenticating Agent upon acceptance of its appointment hereunder
shall become vested with all the rights, powers and duties of its predecessor
hereunder, with like effect as if originally named as an Authenticating Agent.
No successor Authenticating Agent shall be appointed unless eligible under the
provisions of this Section.
The Trustee agrees to pay to each Authenticating Agent from time to
time reasonable compensation for its services under this Section, and the
Trustee shall be entitled to be reimbursed for such payments, subject to the
provisions of Section 6.07.
If an appointment with respect to one or more series is made pursuant
to this Section, the Securities of such series may have endorsed thereon, in
addition to the
<PAGE>
71
Trustee's certificate of authentication, an alternate certificate of
authentication in the following form:
This is one of the Securities of the series designated therein
referred to in the within-mentioned indenture.
CHEMICAL BANK,
as Trustee
by________________________
As Authenticating Agent
by________________________
Authorized Agent
<PAGE>
72
ARTICLE VII
Securityholders' Lists and Reports by
-------------------------------------
Trustee and Company
-------------------
SECTION 7.01. Company To Furnish Trustee Names and Addresses of
------------------------------------ ------------
Securityholders. The Company will furnish or cause to be furnished to the
- ----------------
Trustee:
(a) semi-annually, not more than 15 days after December 15 and June 15
in each year in such form as the Trustee may reasonably require, a list of
the names and addresses of the Holders of Securities of each series as of
such December 15 and June 15, as applicable, and
(b) at such other times as the Trustee may request in writing, within
30 days after the receipt by the Company of any such request, a list of
similar form and content as of a date not more than 15 days prior to the
time such list is furnished;
provided, however, that if and so long as the Trustee shall be the Security
- -------- -------
Registrar for Securities of a series, no such list need be furnished with
respect to such series of Securities.
SECTION 7.02. Preservation of Information; Communications to
----------------------------------------------
Securityholders. (a) The Trustee shall preserve, in as current a term as is
- ----------------
reasonably practicable, the names and addresses of Holders of Securities
contained in the most recent list furnished to the Trustee as provided in
Section 7.01 and the names and addresses of Holders of Securities received by
the Trustee in its capacity as Security Registrar, it so acting. The Trustee
may destroy any list furnished to it as provided in Section 701 upon receipt of
a new list so furnished.
(b) If three or more Holders of Securities of any series (hereinafter
referred to as "applicants") apply in writing to the Trustee, and furnish to the
Trustee reasonable proof that each such applicant has owned a Security of such
series for a period of at least six months preceding the date of such
application, and such application states that the applicants desire to
communicate with other Holders of Securities of such series or with the Holders
of all
<PAGE>
73
Securities with respect to their rights under this Indenture or under such
Securities and is accompanied by a copy of the form of proxy or other
communication which such applicants propose to transmit, then the Trustee shall,
within five Business Days after the receipt of such application, at its
election, either
(i) afford such applicants access to the information preserved at the
time by the Trustee in accordance with Section 7.02(a), or
(ii) inform such applicants as to the approximate number of Holders of
Securities of such series or all Securities, as the case may be, whose
names and addresses appear in the information preserved at the time by the
Trustee in accordance with Section 7.02(a), and as to the approximate cost
of mailing to such Securityholders the form of proxy or other
communication, if any, specified in such application.
If the Trustee shall elect not to afford such applicants access to
such information, the Trustee shall, upon the written request of such
applicants, mail to each Holder of a Security of such series or to all
Securityholders, as the case may be, whose names and addresses appear in the
information preserved at the time by the Trustee in accordance with Section
7.02(a), a copy of the form of proxy or other communication which is specified
in such request, with reasonable promptness after a tender to the Trustee of the
material to be mailed and of payment, or provision for the payment, of the
reasonable expenses of mailing, unless, within five days after such tender, the
Trustee shall mail to such applicants and file with the Commission, together
with a copy of the material to be mailed, a written statement to the effect
that, in the opinion of the Trustee, such mailing would be contrary to the best
interests of the Holders of Securities of such series or all Securityholders, as
the case may be, or would be in violation of applicable law. Such written
statement shall specify the basis of such opinion. If the Commission, after
opportunity for a hearing upon the objections specified in the written statement
so filed, shall enter an order refusing to sustain any of such objections or if,
after the entry of an order sustaining one or more of such objections, the
Commission shall find, after notice and opportunity for hearing, that all the
objections so sustained have been met and shall enter an order so declaring, the
Trustee shall mail copies of such material to
<PAGE>
74
all Securityholders of such series or all Securityholders, as the case may be,
with reasonable promptness after the entry of such order and the renewal of such
tender; otherwise the Trustee shall be relieved of any obligation or duty to
such applicants respecting their application.
(c) Every Holder of Securities, by receiving and holding the same,
agrees with the Company and the Trustee that neither the Company nor the Trustee
shall be held accountable by reason of the disclosure of any such information as
to the names and addresses of the Holders of Securities in accordance with
Section 7.02(b), regardless of the source from which such information was
derived, and that the Trustee shall not be held accountable by reason of mailing
any material pursuant to a request made under Section 7.02(b).
SECTION 7.03. Reports by Trustee. (a) The term to "reporting date"
-------------------
as used in this Section means May 15. Within 60 days after the reporting date
in each year, beginning in 1993, the Trustee shall transmit by mail to all
Securityholders, as their names and addresses appear in the Security Register, a
brief report dated as of such reporting date with respect to any of the
following events which may have occurred during the 12 months preceding the date
of such report (but if no such event has occurred within such period, no report
need be transmitted):
(i) any change to its eligibility under Section 6.09 and its
qualifications under Section 6.08;
(ii) the creation of or any material change to a relationship
specified in Section 3.10(b)(1) through Section 3.10(b)(10) of the Trust
Indenture Act;
(iii) the character and amount of any advances (and if the Trustee
elects so to state, the circumstances surrounding the making thereof) made
by the Trustee (as such) which remain unpaid on the date of such report,
and for the reimbursement of which it claims or may claim a lien or charge,
prior to that of Securities of any series, on any property or funds held or
collected by it as Trustee, except that the Trustee shall not be required
(but may elect) to report such advances if such advances so remaining
unpaid aggregate not more than one-half of 1% of the principal amount of
the Securities of such series Outstanding on the date of such report;
<PAGE>
75
(iv) any change to the amount, interest rate and maturity date of all
other indebtedness owing by the Company (or by any other obligor on the
Securities) to the Trustee in its individual capacity, on the date of such
report, with a brief description of any property held as collateral
security therefor, except an indebtedness based upon a creditor relation-
ship arising in any manner described in Section 613(b)(ii), (iii), (iv),
or (vi);
(v) any change to the property and funds, if any, physically in the
possession of the Trustee as such on the date of such report;
(vi) any additional issue of Securities for which the Trustee so acts
and which the Trustee has not previously reported; and
(vii) any action taken by the Trustee in the performance of its duties
hereunder which it has not previously reported and which in its opinion
materially affects the Securities, except action in respect of a default,
notice of which has been or is to be withheld by the Trustee in accordance
with Section 6.02.
(b) The Trustee shall transmit by mail to all Securityholders, as
their names and addresses appear in the Security Register, a brief report with
respect to the character and amount of any advances (and if the Trustee elects
so to state, the circumstances surrounding the making thereof) made by the
Trustee (as such) since the date of the last report transmitted pursuant to
Subsection (a) of this Section (or if no such report has yet been so
transmitted, since the date of execution of this instrument) for the
reimbursement of which it claims or may claim a lien or charge, prior to that of
the Securities of any series, on property or funds held or collected by it as
Trustee, and which it has not previously reported pursuant to this Subsection,
except that the Trustee shall not be required (but may elect) to report such
advances if such advances remaining unpaid at any time aggregate 10% or less of
the principal amount of the Securities outstanding of such series at such time,
such report to be transmitted within 90 days after such time.
(c) A copy of each such report shall, at the time of such
transmission to Securityholders, be furnished to the Company and be filed by the
Trustee with each stock exchange
<PAGE>
76
upon which the Securities are listed, and also with the Commission. The Company
will notify the Trustee when the Securities are listed on any stock exchange.
SECTION 7.04. Reports by Company. The Company shall file with the
-------------------
Trustee, and transmit to Holders, such information, documents and other reports,
and such summaries thereof, as may be required pursuant to the Trust Indenture
Act at the times and in the manner provided pursuant to such Act; provided that
--------
any such information, documents or reports required to be filed with the
Commission pursuant to Section 13 or 15(d) of the Securities Exchange Act of
1934 shall be filed with the Trustee within 15 days after the same is so
required to be filed with the Commission. The Company also shall comply with
the other provisions of Trust Indenture Act Section 3.14(a).
ARTICLE VIII
Consolidation, Merger, Conveyance or Transfer
---------------------------------------------
SECTION 8.01. Company May Consolidate, etc., only on Certain Terms.
----------------------------------- -----------------
The Company shall not consolidate with or merge into any other corporation or
convey or transfer its properties and assets substantially as an entirety to any
Person, unless:
(a) the corporation formed by such consolidation or into which the
Company is merged or the Person which acquires by conveyance or transfer
the properties and assets of the Company substantially as an entirety shall
be organized and existing under the laws of the United States of America or
any political subdivision thereof, and shall expressly assume, by an
indenture supplemental hereto, executed and delivered to the Trustee, in
form satisfactory to the Trustee, the due and punctual payment of the
principal of (and premium, if any) and interest on all the Securities and
the performance of every covenant of this Indenture on the part of the
Company to be performed or observed;
(b) immediately after giving effect to such transaction, no Event of
Default, and no event which, after notice or lapse of time, or both, would
become an Event of Default, shall have happened and be continuing; and
<PAGE>
77
(c) the Company has delivered to the Trustee an Officers' Certificate
and an Opinion of Counsel each stating that such consolidation, merger,
conveyance or transfer and such supplemental indenture comply with this
Article and that all conditions precedent herein provided for relating to
such transaction have been complied with.
SECTION 8.02. Successor Person Substituted. Upon any consolidation
-----------------------------
or merger, or any conveyance or transfer of the properties and assets of the
Company substantially as an entirety in accordance with Section 8.01, the
successor Person formed by such consolidation or into which the Company is
merged or to which such conveyance or transfer is made shall succeed to, and be
substituted for, and may exercise every right and power of, the Company under
this Indenture with the same effect as if such successor had been named as the
Company herein. In the event of any such conveyance or transfer, the Company as
the predecessor shall be discharged from all obligations and covenants under
this Indenture and the Securities and may be dissolved, wound up or liquidated
at any time thereafter.
ARTICLE IX
Supplemental Indentures
-----------------------
SECTION 9.01. Supplemental Indentures Without Consent of
------------------------------- ----------
Securityholders. Without the consent of the Holders of any Securities, the
- ----------------
Company, when authorized by a Board Resolution, and the Trustee, at any time and
from time to time, may enter into one or more indentures supplemental hereto, in
form satisfactory to the Trustee, for any of the following purposes:
(a) to evidence the succession of another corporation or Person to the
Company, and the assumption by any such successor of the covenants of the
Company herein and in the Securities contained;
(b) to add to the covenants of the Company, or to surrender any right
or power herein conferred upon the Company, for the benefit of the Holders
of the Securities of any or all series (and if such covenants or the
surrender of such right or power are to be for the benefit of less than all
series of Securities, stating that such covenants are expressly being
<PAGE>
78
included or such surrenders are expressly being made solely for the benefit
of one or more specified series);
(c) to cure any ambiguity, to correct or supplement any provision
herein which may be inconsistent with any other provision herein, or to
make any other provisions with respect to matters or questions arising
under this Indenture;
(d) to add to this Indenture such provisions as may be expressly
permitted by the TIA, excluding, however, the provisions referred to in
Section 3.16(a)(2) of the TIA as in effect at the date as of which this
instrument was executed or any corresponding provision in any similar
Federal statute hereafter enacted;
(e) to establish any form of Security, as provided in Article II, and
to provide for the issuance of any series of Securities as provided in
Article III and to set forth the terms thereof, and/or to add to the rights
of the Holders of the Securities of any series;
(f) to evidence and provide for the acceptance of appointment by
another corporation as a successor Trustee hereunder with respect to one or
more series of Securities and to add to or change any of the provisions of
this Indenture as shall be necessary to provide for or facilitate the
administration of the trusts hereunder by more than one Trustee, pursuant
to Section 6.11;
(g) to add any additional Events of Default in respect of the
Securities of any or all series (and if such additional Events of Default
are to be in respect of less than all series of Securities, stating that
such Events of Default are expressly being included solely for the benefit
of one or more specified series);
(h) to provide for the issuance of Securities in coupon as well as
fully registered form;
(i) to provide for the terms and conditions of conversion into Common
Stock or other Marketable Securities of the Securities of any series which
are convertible into Common Stock or other Marketable
<PAGE>
79
Securities, if different from those set forth in Article XII; or
(j) to secure the Securities of any series pursuant to Section 10.06
or otherwise.
No supplemental indenture for the purposes identified in Clauses (b),
(c), (e) or (g) above may be entered into if to do so would adversely affect the
interest of the Holders of Securities of any series in any material respect.
SECTION 9.02. Supplemental Indentures with Consent of
---------------------------------------
Securityholders. With the consent of the Holders of not less than a majority in
- ----------------
principal amount of the Outstanding Securities of each series affected by such
supplemental indenture or indentures, by Act of said Holders delivered to the
Company and the Trustee, the Company, when authorized by a Board Resolution, and
the Trustee may enter into an indenture or indentures supplemental hereto for
the purpose of adding any provisions to or changing in any manner or eliminating
any of the provisions of this Indenture or of modifying in any manner the rights
of the Holders of the Securities of each such series under this Indenture;
provided, however, that no such supplemental indenture shall, without the
- -------- -------
consent of the Holder of each Outstanding Security affected thereby:
(a) change the Maturity of the principal of, or the Stated Maturity of
any premium on, or any installment of interest on, any Security, or reduce
the principal amount thereof or the interest or any premium thereon, or
change the method of computing the amount of principal thereof or interest
thereon on any date or change any Place of Payment where, or the coin or
currency in which, any Security or any premium or interest thereon is
payable, or impair the right to institute suit for the enforcement of any
such payment on or after the Maturity or the Stated Maturity, as the case
may be, thereof (or, in the case of redemption or repayment, on or after
the Redemption Date or the Repayment Date, as the case may be), or alter
the provisions of this Indenture so as to affect adversely the terms, if
any, of conversion of any Securities into Common Stock or other securities,
or alter the provisions of Article XIII or the definition of Senior
Indebtedness so as to affect adversely the rights of any Holder of
Securities;
<PAGE>
80
(b) reduce the percentage in principal amount of the Outstanding
Securities of any series, the consent of whose Holders is required for any
such supplemental indenture, or the consent of whose Holders is required
for any waiver of compliance with certain provisions of this Indenture or
certain defaults hereunder and their consequences, provided for in this
Indenture;
(c) modify any of the provisions of this Section, Section 5.13 or
Section 10.06, except to increase any such percentage or to provide that
certain other provisions of this Indenture cannot be modified or waived
without the consent of the Holder of each Outstanding Security affected
thereby; or
(d) impair or adversely affect the right of any Holder to institute
suit for the enforcement of any payment on, or with respect to, the
Securities of any series on or after the Stated Maturity of such Securities
(or in the case of redemption, on or after the Redemption Date).
A supplemental indenture which changes or eliminates any covenant or
other provision of this Indenture which has expressly been included solely for
the benefit of one or more particular series of Securities, or which modifies
the rights of the Holders of Securities of such series with respect to such
covenant or other provision, shall be deemed not to affect the rights under this
Indenture of the Holders of Securities of any other series.
It shall not be necessary for any Act of Securityholders under this
Section to approve the particular form of any proposed supplemental indenture,
but it shall be sufficient if such Act shall approve the substance thereof.
SECTION 9.03. Execution of Supplemental Indentures. In executing, or
-------------------------------------
accepting the additional trusts created by, any supplemental indenture permitted
by this Article or the modifications thereby of the trusts created by this
Indenture, the Trustee shall be entitled to receive, and (subject to Section
6.01) shall be fully protected in relying upon, an Opinion of Counsel stating
that the execution of such supplemental indenture is authorized or permitted by
this Indenture. The Trustee may, but shall not be obligated to, enter into any
such supplemental indenture which affects the Trustee's own
<PAGE>
81
rights, duties or immunities under this Indenture or otherwise.
SECTION 9.04. Effect of Supplemental Indentures. Upon the execution
----------------------------------
of any supplemental indenture under this Article, this Indenture shall be
modified in accordance therewith, and such supplemental indenture shall form a
part of this Indenture for all purposes; and every Holder of Securities
theretofore or thereafter authenticated and delivered hereunder shall be bound
thereby to the extent provided therein.
SECTION 9.05. Conformity with Trust Indenture Act. Every
------------------------------------
supplemental indenture executed pursuant to this Article shall conform to the
requirements of TIA as then in effect.
SECTION 9.06. Reference in Securities to Supplemental Indentures.
---------------------------------------------------
Securities authenticated and delivered after the execution of any supplemental
indenture pursuant to this Article may, and shall if required by the Trustee,
bear a notation in form approved by the Trustee as to any matter provided for in
such supplemental indenture. If the Company shall so determine, new Securities
so modified as to conform, in the opinion of the Trustee and the Board of
Directors, to any such supplemental indenture may be prepared and executed by
the Company and authenticated and delivered by the Trustee in exchange for
Outstanding Securities.
SECTION 9.07. Subordination Unimpaired. No supplemental indenture
-------------------------
entered into under this Article shall modify, directly or indirectly, the
provisions of Article XIII or the definition of Senior Indebtedness in Section
1.01 in any manner that adversely affects the rights of the holders of Senior
Indebtedness then outstanding under Article XIII unless written consents are
obtained from holders of such Senior Indebtedness; provided, however, that in
-------- -------
any case where the instrument or agreement governing Senior Indebtedness
contains express provisions pertaining to the giving of consent in such
circumstances, such consents shall only be required to the extent they are
required under the terms of such instrument or agreement.
<PAGE>
82
ARTICLE X
Covenants
---------
SECTION 10.01. Payment of Principal, Premium and Interest. With
-------------------------------------------
respect to each series of Securities, the Company will duly and punctually pay
the principal of (and premium, if any) and interest on such Securities in
accordance with their terms and this Indenture, and will duly comply with all
the other terms, agreements and conditions contained in, or made in the
Indenture for the benefit of, the Securities of such series.
SECTION 10.02. Maintenance of Office or Agency. The Company will
--------------------------------
maintain an office or agency in each Place of Payment where Securities may be
presented or surrendered for payment, where Securities may be surrendered for
registration of transfer or exchange, where notices and demands to or upon the
Company in respect of the Securities and this Indenture may be served and where
any Securities with conversion privileges may be presented and surrendered for
conversion. The Company will give prompt written notice to the Trustee of the
location, and of any change in the location, of such office or agency. If at
any time the Company shall fail to maintain such office or agency or shall fail
to furnish the Trustee with the address thereof, such presentations, surrenders,
notices and demands may be made or served at the Corporate Trust Office of the
Trustee, and the Company hereby appoints the Trustee its agent to receive all
such presentations, surrenders, notices and demands.
Unless otherwise set forth in, or pursuant to, a Board Resolution or
Indenture supplemental hereto with respect to a series of Securities, the
Company hereby initially designates as the Place of Payment for each series of
Securities, the Borough of Manhattan, the City and State of New York, and
initially appoints the Trustee at its Corporate Trust office as the Company's
office or agency for each such purpose in such city.
SECTION 10.03. Money for Security Payments To Be Held in Trust. If
------------------------------------------------
the Companies shall at any time act as its own Paying Agent for any series of
Securities, it will, on or before each due date of the principal of (and
premium, if any) or interest on, any of the Securities of such series, segregate
and hold in trust for the benefit of the Persons entitled thereto a sum
sufficient to pay the
<PAGE>
83
principal (and premium, if any) or interest so becoming due until such sums
shall be paid to such Persons or otherwise disposed of as herein provided, and
will promptly notify the Trustee of its action or failure to act.
Whenever the Company shall have one or more Paying Agents for any
series of Securities, it will, on or prior to each due date of the principal of
(and premium, if any) or interest on, any Securities of such series, deposit
with a Paying Agent a sum sufficient to pay the principal (and premium, if any)
or interest so becoming due, such sum to be held in trust for the benefit of the
Persons entitled to such principal (and premium, if any) or interest, and
(unless such Paying Agent is the Trustee) the Company will promptly notify the
Trustee of its action or failure so to act.
The Company will cause each Paying Agent other than the Trustee for
any series of Securities to execute and deliver to the Trustee an instrument in
which such Paying Agent shall agree with the Trustee, subject to the provisions
of this Section, that such Paying Agent will:
(a) hold all sums held by it for the payment of principal of (and
premium, if any) or interest on Securities of such series in trust for the
benefit of the Persons entitled thereto until such sums shall be paid to
such Persons or otherwise disposed of as herein provided;
(b) give the Trustee notice of any default by the Company (or any
other obligor upon the Securities of such series) in the making of any such
payment of principal (and premium, if any) or interest on the Securities of
such series; and
(c) at any time during the continuance of any such default, upon the
written request of the Trustee, forthwith pay to the Trustee all sums so
held in trust by such Paying Agent.
The Company may at any time, for the purpose of obtaining the
satisfaction and discharge of this Indenture with respect to any series of
Securities or for any other purpose, pay, or by Company Order direct any Paying
Agent to pay, to the Trustee all sums held in trust by the Company or such
Paying Agent in respect of each and every series of Securities as to which it
seeks to discharge this Indenture
<PAGE>
84
or, if for any other purpose, all sums so held in trust by the Company in
respect of all Securities, such sums to be held by the Trustee upon the same
trusts as those upon which such sums were held by the Company or such Paying
Agent; and, upon such payment by any Paying Agent to the Trustee, such Paying
Agent shall be released from all further liability with respect to such money.
Any money deposited with the Trustee or any Paying Agent, or then held
by the Company, in trust for the payment of the principal of (and premium, if
any) or interest on any Security of any series and remaining unclaimed for two
years after such principal (and premium, if any) or interest has become due and
payable shall be paid to the Company on Company Request, or (if then held by the
Company) shall be discharged from such trust; and the Holder of such Security
shall thereafter, as an unsecured general creditor, look only to the Company for
payment thereof, and all liability of the Trustee or such Paying Agent with
respect to such trust money, and all liability of the Company as trustee
thereof, shall thereupon cease. The Trustee or such Paying Agent, before being
required to make any such repayment, may at the expense of the Company mail to
the Holders of the Securities as to which the money to be repaid was held in
trust, as their names and addresses appear in the Security Register, a notice
that such moneys remain unclaimed and that, after a date specified in the
notice, which shall not be less than 30 days from the date on which the notice
was first mailed to the Holders of the Securities as to which the money to be
repaid was held in trust, any unclaimed balance of such moneys then remaining
will be paid to the Company free of the trust formerly impressed upon it.
SECTION 10.04. Statement as to Compliance. The Company will deliver
---------------------------
to the Trustee, within 120 days after the end of each fiscal year, a written
statement signed by the principal executive officer, principal financial officer
or principal accounting officer of the Company stating that:
(a) a review of the activities of the Company during such year and of
performance under this Indenture and under the terms of the Securities has
been made under his supervision; and
(b) to the best of his knowledge, based on such review, the Company
has fulfilled all its obligations under this Indenture and has complied
with all conditions and covenants on its part contained in this
<PAGE>
85
Indenture through such year, or, if there has been a default in the
fulfillment of any such obligation, covenant or condition, specifying each
such default known to him and the nature and status thereof.
For the purpose of this Section 10.04, default and compliance shall be
determined without regard to any grace period or requirement of notice provided
pursuant to the terms of this Indenture.
SECTION 10.05. Legal Existence. Subject to Article VIII the Company
----------------
will do or cause to be done all things necessary to preserve and keep in full
force and effect its legal existence.
SECTION 10.06. Waiver of Certain Covenants. The Company may omit in
----------------------------
respect of any series of Securities, in any particular instance, to comply with
any covenant or condition set forth in a Board Resolution or supplemental
indenture with respect to the Securities of such series, unless otherwise
specified in such Board Resolution or supplemental indenture, if before or after
the time for such compliance the Holders of at least a majority in principal
amount of the Securities at the time Outstanding of such series shall, by Act of
such Securityholders, either waive such compliance in such instance or generally
waive compliance with such covenant or condition, but no such waiver shall
extend to or affect such covenant or condition except to the extent so expressly
waived, and, until such waiver shall become effective, the obligations of the
Company and the duties of the Trustee in respect of any such covenant or
condition shall remain in full force and effect. Nothing in this Section 10.06
shall permit the waiver of compliance with any covenant or condition set forth
in such Board Resolution or supplemental indenture which, if in the form of an
indenture supplemental hereto, would not be permitted by Section 9.02 without
the consent of the Holder of each outstanding Security affected thereby.
ARTICLE XI
Redemption of Securities
------------------------
SECTION 11.01. Applicability of Article. The Company may reserve the
-------------------------
right to redeem and pay before Stated Maturity all or any part of the Securities
of any series, either by optional redemption, sinking or purchase
<PAGE>
86
fund or analogous obligation or otherwise, by provision therefor in the form of
Security for such series established and approved pursuant to Section 2.02 and
on such terms as are specified in such form or in the indenture supplemental
hereto with respect to Securities of such series as provided in Section 3.01.
Redemption of Securities of any series shall be made, subject to the provisions
of Section 13.03 hereof, in accordance with the terms of such Securities and, to
the extent that this Article does not conflict with such terms, the succeeding
Sections of this Article. Notwith-standing anything to the contrary in this
Indenture, except in the case of redemption pursuant to a sinking fund, the
Trustee shall not make any payment in connection with the redemption of
Securities until the close of business on the Redemption Date.
SECTION 11.02. Election To Redeem; Notice to Trustee. The election
--------------------------------------
of the Company to redeem any Securities redeemable at the election of the
Company shall be evidenced by, or pursuant to authority granted by, a Board
Resolution. In case of any redemption at the election of the Company of less
than all of the Securities of any series, the Company shall, at least 60 days
prior to the Redemption Date fixed by the Company (unless a shorter notice shall
be satisfactory to the Trustee), notify the Trustee of such Redemption Date and
of the principal amount of Securities of such series and the Tranche (as defined
in Section 11.03) to be redeemed.
In the case of any redemption of Securities (a) prior to the
expiration of any restriction on such redemption provided in the terms of such
Securities or elsewhere in this Indenture, or (b) pursuant to an election of the
Company which is subject to a condition specified in the terms of such
Securities, the Company shall furnish the Trustee with an Officers' Certificate
evidencing compliance with such restriction or condition.
SECTION 11.03. Selection by Trustee of Securities To Be Redeemed. If
--------------------------------------------------
less than all the Securities of like tenor and terms of any series (a "Tranche")
are to be redeemed, the particular Securities to be redeemed shall be selected
not more than 60 days prior to the Redemption Date by the Trustee, from the
Outstanding Securities of such Tranche not previously called for redemption, by
such method as the Trustee shall deem fair and appropriate and which may include
provision for the selection for redemption of portions of the principal of
Securities of such Tranche of a
<PAGE>
87
denomination larger than the minimum authorized denomination for Securities of
that series. Unless otherwise provided in the terms of a particular series of
Securities, the portions of the principal of Securities so selected for partial
redemption shall be equal to the minimum authorized denomination of the
Securities of such series, or an integral multiple thereof, and the principal
amount which remains outstanding shall not be less than the minimum authorized
denomination for Securities of such series. If less than all the Securities of
unlike tenor and terms of series are to be redeemed, the particular Tranche of
Securities to be redeemed shall be selected by the Company.
If any convertible Security selected for partial redemption is
converted in part before the termination of the conversion right with respect to
the portion of the Security so selected, the converted portion of such Security
shall be deemed (so far as may be) to be the portion selected for redemption.
Upon any redemption of fewer than all the Securities of a Series or
Tranche, the Company and the Trustee may treat as Outstanding any Securities
surrendered for conversion during the period of 15 days next preceding the
mailing of a notice of redemption, and need not treat as Outstanding any
Security authenticated and delivered during such period in exchange for the
unconverted portion of any Security converted in part during such period.
The Trustee shall promptly notify the Company in writing of the
Securities selected for redemption and, in the case of any Security selected for
partial redemption, the principal amount thereof to be redeemed.
For all purposes of this Indenture, unless the context otherwise
requires, all provisions relating to the redemption of Securities shall relate,
in the case of any Security redeemed or to be redeemed only in part, to the
portion of the principal of such Security which has been or is to be redeemed.
SECTION 11.04. Notice of Redemption. Notice of redemption shall be
---------------------
given by first-class mail, postage prepaid, mailed not less than 20 (or 15, if
so provided in the Board Resolution establishing the relevant series) nor more
than 45 days prior to the Redemption Date, to each holder of Securities to be
redeemed, at his address appearing in the Security Register.
<PAGE>
88
All notices of redemption shall state:
(a) the Redemption Date;
(b) the Redemption Price;
(c) if less than all Outstanding Securities of any series are to be
redeemed, the identification (and, in the case of partial redemption, the
respective principal amounts) of the Securities to be redeemed, from the
Holder to whom the notice is given;
(d) that on the Redemption Date the Redemption Price will become due
and payable upon each such Security, and that interest, if any, thereon
shall cease to accrue from and after said date;
(e) the place where such Securities are to be surrendered for payment
of the Redemption Price, which shall be the office or agency of the Company
in the Place of Payment;
(f) that the redemption is on account of a sinking or purchase fund,
or other analogous obligation, if that be the case;
(g) if such Securities are convertible into Common Stock or other
securities, the Conversion Price or other conversion price and the date on
which the right to convert such Securities into Common Stock or other
securities will terminate; and
(h) that the redemption may be rescinded by the Company, at its sole
option, pursuant to Section 11.09 of this Indenture upon the occurrence of
a Redemption Rescission Event, except in the case of any redemption on
account of a sinking fund.
Notice of redemption of Securities to be redeemed at the election of
the Company shall be given by the Company or, at the Company's request, by the
Trustee in the name and at the expense of the Company.
SECTION 11.05. Deposit of Redemption Price. On or prior to any
----------------------------
Redemption Date and subject to Section 11.09, the Company shall deposit with the
Trustee or with a Paying Agent (or, if the Company is acting as its own Paying
Agent, segregate and hold in trust as provided in
<PAGE>
89
Section 10.03) an amount of money sufficient to pay the Redemption Price of all
the Securities which are to be redeemed on that date. If any Security to be
redeemed is converted into Common Stock or other securities, any money so
deposited with the Trustee or a Paying Agent shall be paid to the Company upon
Company Request or, if then so segregated and held in trust by the Company,
shall be discharged from such trust.
SECTION 11.06. Securities Payable on Redemption Date. Notice of
--------------------------------------
Redemption having been given as aforesaid, the Securities so to be redeemed
shall, subject to Section 11.09, on the Redemption Date, become due and payable
at the Redemption Price therein specified and from and after such date (unless
the Company shall default in the payment of the Redemption Price) such
Securities shall cease to bear interest and any rights to convert such
Securities shall terminate. Upon surrender of such Securities for redemption in
accordance with the notice and subject to Section 11.09, such Securities shall
be paid by the Company at the Redemption Price. Unless otherwise provided with
respect to such Securities pursuant to Section 3.01, installments of interest
the Stated Maturity of which is on or prior to the Redemption Date shall be
payable to the Holders of such Securities registered as such on the relevant
Regular Record Dates according to their terms and the provisions of Section
3.07.
If any Security called for redemption shall not be so paid upon
surrender thereof for redemption, the principal shall, until paid, bear interest
from the Redemption Date at the rate borne by the Security, or as otherwise
provided in such Security.
SECTION 11.07. Securities Redeemed in Part. Any Security which is to
----------------------------
be redeemed only in part shall be surrendered at the office or agency of the
Company in the Place of Payment with respect to that series (with, if the
Company or the Trustee so requires, due endorsement by, or a written instrument
of transfer in form satisfactory to the Company and the Trustee duly executed
by, the Holder thereof or his attorney duly authorized in writing) and the
Company shall execute and the Trustee shall authenticate and deliver to the
Holder of such Security without service charge, a new Security or Securities of
the same series and Stated Maturity and of like tenor and terms, of any
authorized denomination as requested by such Holder in aggregate principal
<PAGE>
90
amount equal to and in exchange for the unredeemed portion of the principal of
the Security so surrendered.
SECTION 11.08. Provisions with Respect to Any Sinking Funds. Unless
---------------------------------------------
the form or terms of any series of Securities shall provide otherwise, in lieu
of making all or any part of any mandatory sinking fund payment with respect to
such series of Securities in cash, the Company may at its option (a) deliver to
the Trustee for cancellation any Securities of such series theretofore acquired
by the Company or converted by the Holder thereof into Common Stock or other
securities, or (b) receive credit for any Securities of such series (not
previously so credited) acquired by the Company (including by way of optional
redemption (pursuant to the sinking fund or otherwise but not by way of
mandatory sinking fund redemption) or converted by the Holder thereof into
Common Stock or other securities and theretofore delivered to the Trustee for
cancellation, and if it does so (i) Securities so delivered or credited shall be
credited at the applicable sinking fund Redemption Price with respect to
Securities of such series and (ii) on or before the 60th day next preceding each
sinking fund Redemption Date with respect to such series of Securities, the
Company will deliver to the Trustee (A) an Officers' Certificate specifying the
portions of such sinking fund payment to be satisfied by payment of cash and by
delivery or credit of Securities of such series acquired by the Company or
converted by the Holder thereof and (B) such Securities, to the extent not
previously surrendered. Such Officers' Certificate shall also state the basis
for such credit and that the Securities for which the Company elects to receive
credit have not been previously so credited and were not acquired by the Company
through operation of the mandatory sinking fund, if any, provided with respect
to such Securities and shall also state that no Event of Default with respect to
Securities of such series has occurred and is continuing. All Securities so
delivered to the Trustee shall be canceled by the Trustee and no Securities
shall be authenticated in lieu thereof.
If the sinking fund payment or payments (mandatory or optional) with
respect to any series of Securities made in cash plus any unused balance of any
preceding sinking fund payments with respect to Securities of such series made
in cash shall exceed $50,000 (or a lesser, sum if the Company shall so request),
unless otherwise provided by the terms of such series of Securities, that cash
shall be applied by the Trustee on the sinking fund Redemption Date
<PAGE>
91
with respect to Securities of such series next following the date of such
payment to the redemption of Securities of such series at the applicable sinking
fund Redemption Price with respect to Securities of such series, together with
accrued interest, if any, to the date fixed for redemption, with the effect
provided in Section 11.06. The Trustee shall select, in the manner provided in
Section 11.03, for redemption on such sinking fund Redemption Date a sufficient
principal amount of Securities of such series to utilize that cash and shall
thereupon cause notice of redemption of the Securities of such series for the
sinking fund to be given in the manner provided in Section 11.04 (and with the
effect provided in Section 11.06) for the redemption of Securities in part at
the option of the Company. Any sinking fund moneys not so applied or allocated
by the Trustee to the redemption of Securities of such series shall be added to
the next cash sinking fund payment with respect to Securities of such series
received by the Trustee and, together with such payment, shall be applied in
accordance with the provisions of this Section 11.08. Any and all sinking fund
moneys with respect to Securities of any series held by the Trustee at the
Maturity of Securities of such series, and not held for the payment or
redemption of particular Securities of such series, shall be applied by the
Trustee, together with other moneys, if necessary, to be deposited sufficient
for the purpose, to the payment of the principal of the Securities of such
series at Maturity.
On or before each sinking fund Redemption Date provided with respect
to Securities of any series, the Company shall pay to the Trustee in cash a sum
equal to all accrued interest, if any, to the date fixed for redemption on
Securities to be redeemed on such sinking fund Redemption Date pursuant to this
Section 11.08.
SECTION 11.09. Rescission of Redemption. In the event that this
-------------------------
Section 11.09 is specified to be applicable to a series of Securities pursuant
to Section 3.01 and a Redemption Rescission Event shall occur following any day
on which a notice of redemption shall have been given pursuant to Section 11.04
hereof but at or prior to the time and date fixed for redemption as set forth in
such notice of redemption, the Company may, at its sole option, at any time
prior to the earlier of (a) the close of business on that day which is two
Trading Days following such Redemption Rescission Event and (b) the time and
date fixed for redemption as set forth in such notice, rescind the redemption to
which such notice of redemption shall have
<PAGE>
92
related by making a public announcement of such rescission (the date on which
such public announcement shall have been made being hereinafter referred to as
the "Rescission Date"). The Company shall be deemed to have made such
announcement if it shall issue a release to the Dow Jones News Service, Reuters
Information Services or any successor news wire service. From and after the
making of such announcement, the Company shall have no obligation to redeem
Securities called for redemption pursuant to such notice of redemption or to pay
the Redemption Price therefor and all rights of Holders of Securities shall be
restored as if such notice of redemption had not been given. As promptly as
practicable following the making of such announcement, the company shall
telephonically notify the Trustee and the paying Agent of such rescission. The
Company shall give notice of any such rescission by first-class mail, postage
prepaid, mailed as promptly as practicable but in no event later than the close
of business on that day which is five Trading Days following the Rescission Date
to each Holder of Securities at the close of business on the Rescission Date, to
any other Person that was a Holder of Securities and that shall have surrendered
Securities for conversion following the giving of notice of the subsequently
rescinded redemption and to the Trustee and the Paying Agent. Each notice of
rescission shall (i) state that the redemption described in the notice of
redemption has been rescinded, (ii) state that any Converting Holder shall be
entitled to rescind the conversion of Securities surrendered for conversion
following the day on which notice of redemption was given but on or prior to the
date of the mailing of the Company's notice of rescission, (iii) be accompanied
by a form prescribed by the Company to be used by any Converting Holder
rescinding the conversion of Securities so surrendered for conversion (and
instructions for the completion and delivery of such form, including
instructions with respect to any payment that may be required to accompany such
delivery) and (iv) state that such form must be properly completed and received
by the Company no later than the close of business on a date that shall be 15
Trading Days following the date of the mailing of such notice of rescission.
<PAGE>
93
ARTICLE XII
Conversion
----------
SECTION 12.01. Conversion Privilege. If so provided in a Board
---------------------
Resolution with respect to the Securities of any series, the Holder of a
Security of such series shall have the right, at such Holder's option, to
convert, in accordance with the terms of such series of Securities and this
Article XII, all or any part (in a denomination of, unless otherwise specified
in a Board Resolution or supplemental indenture with respect to Securities of
such series, $1,000 in principal amount or any integral multiple thereof) of
such Security into shares of Common Stock or other Marketable Securities
specified in such Board Resolution at any time or, as to any Securities called
for redemption, at any time prior to the time and date fixed for such redemption
(unless the Company shall default in the payment of the Redemption Price, in
which case such right shall not terminate at such time and date). The
provisions of this Article XII shall not be applicable to the Securities of a
series unless otherwise specified in a Board Resolution with respect to the
Securities of such series.
SECTION 12.02. Conversion Procedure; Rescission of Conversion;
-----------------------------------------------
Conversion Price; Fractional Shares. (a) Each Security to which this Article
- ------------------------------------
is applicable shall be convertible at the office of the Conversion Agent, and at
such other place or places, if any, specified in a Board Resolution with respect
to the Securities of such series, into fully paid and nonassessable shares
(calculated to the nearest one-hundredth of a share) of Common Stock or other
Marketable Securities. The Securities will be converted into shares of Common
Stock or such other Marketable Securities at the Conversion Price therefor. No
payment or adjustment shall be made in respect of dividends on the Common Stock
or such other Marketable Securities or accrued interest on a converted Security
except as described in Section 12.09. The Company may, but shall not be
required to, in connection with any conversion of Securities, issue a fraction
of a share of Common Stock or of such other Marketable Security, and, if the
Company shall determine not to issue any such fraction, the Company shall,
subject to Section 12.03(d), make a cash payment (calculated to the nearest
cent) equal to such fraction multiplied by the Closing Price of the Common Stock
or such other Marketable Security on the last Trading Day prior to the date of
conversion.
<PAGE>
94
(b) Before any Holder of a Security shall be entitled to convert the
same into Common Stock or other Marketable Securities, such Holder shall
surrender such Security duly endorsed to the Company or in blank, at the office
of the Conversion Agent or at such other place or places, if any, specified in a
Board Resolution with respect to the Securities of such series, and shall give
written notice to the Company at said office or place that he elects to convert
the same and shall state in writing therein the principal amount of Securities
to be converted and the name or names (with addresses) in which he wishes the
certificate or certificates for Common Stock or for such other marketable
Securities to be issued; provided, however, that no Security or portion thereof
-------- -------
shall be accepted for conversion unless the principal amount of such Security or
such portion, when added to the principal amount of all other Securities or
portions thereof then being surrendered by the Holder thereof for conversion,
exceeds the then effective Conversion Price with respect thereto. If more than
one Security shall be surrendered for conversion at one time by the same Holder,
the number of full shares of Common Stock or such other Marketable Securities
which shall be deliverable upon conversion shall be computed on the basis of the
aggregate principal amount of the Securities (or specified portions thereof to
the extent permitted thereby) so surrendered. Subject to the next succeeding
sentence, the Company will, as soon as practicable thereafter, issue and deliver
at said office or place to such Holder of a Security, or to his nominee or
nominees, certificates for the number of full shares of Common Stock or other
Marketable Securities to which he shall be entitled as aforesaid, together,
subject to the last sentence of paragraph (a) above, with cash in lieu of any
fraction of a share to which he would otherwise be entitled. The Company shall
not be required to deliver certificates for shares of Common Stock or other
Marketable Securities while the stock transfer books for such stock or the
transfer books for such Marketable Securities, as the case may be, or the
Security Register are duly closed for any purpose, but certificates for shares
of Common Stock or other Marketable Securities shall be issued and delivered as
soon as practicable after the opening of such books or Security Register. A
Security shall be deemed to have been converted as of the close of business on
the date of the surrender of such Security for conversion as provided above, and
the person or persons entitled to receive the Common Stock or other Marketable
Securities issuable upon such conversion shall be treated for all purposes as
the record Holder or Holders of such
<PAGE>
95
Common Stock or other Marketable Securities as of the close of business on such
date. In case any Security shall be surrendered for partial conversion, the
Company shall execute and the Trustee shall authenticate and deliver to or upon
the written order of the Holder of the Securities so surrendered, without charge
to such Holder (subject to the provisions of Section 12.08), a new Security or
Securities in authorized denominations in an aggregate principal amount equal to
the unconverted portion of the surrendered Security.
(c) Notwithstanding anything to the contrary contained herein, in the
event the Company shall have rescinded a redemption of Securities Pursuant to
Section 11.09 hereof, any Holder of Securities that shall have surrendered
Securities for conversion following the day on which notice of the subsequently
rescinded redemption shall have been given but prior to the later of (i) the
close of business on the Trading Day next succeeding the date on which public
announcement of the rescission of such redemption shall have been made and (ii)
the date of the mailing of the notice of rescission required by Section 11.09
hereof (a "Converting Holder") may rescind the conversion of such Securities
surrendered for conversion by (A) properly completing a form prescribed by the
Company and mailed to Holders of Securities (including Converting Holders) with
the Company's notice of rescission, which form shall provide for the
certification by any Converting Holder rescinding a conversion on behalf of any
beneficial owner (within the meaning of Rule 13d-3 under the Securities Exchange
Act of 1934) of Securities that the beneficial ownership (within the meaning of
such Rule) of such Securities shall not have changed from the date on which such
Securities were surrendered for conversion to the date of such certification,
and (B) delivering such form to the Company no later than the close of business
on the date which is 15 Trading Days following the date of the mailing of the
Company's notice of rescission. The delivery of such form by a Converting
Holder shall be accompanied by (I) any certificates representing shares Of
Common Stock or other securities issued to such Converting Holder upon a
conversion of Securities that shall be rescinded by the proper delivery of such
form (the "Surrendered Securities"),(II) any securities, evidences of
indebtedness or assets (other than cash) distributed by the Company to such
Converting Holder by reason of such Converting Holder being a record holder of
Surrendered Securities and (III) payment in New York Clearing House funds or
other
<PAGE>
96
funds acceptable to the Company of an amount equal to the sum of (1) any cash
such Converting Holder may have received in lieu of the issuance of fractional
Surrendered Securities and (2) any cash paid or payable by the Company to such
Converting Holder by reason of such Converting Holder being a record holder of
Surrendered Securities. Upon receipt by the Company of any such form properly
completed by a Converting Holder and any certificates, securities, evidences of
indebtedness, assets or cash payments required to be returned by such Converting
Holder to the Company as set forth above, the Company shall instruct the
transfer agent or agents for shares of Common Stock or other securities to
cancel any certificates representing Surrendered Securities (which Surrendered
Securities shall be deposited in the treasury of the Company) and shall instruct
the Registrar to reissue certificates representing Securities to such Converting
Holder (which Securities shall be deemed to have been Outstanding at all times
during the period following their surrender for conversion). The Company shall,
as promptly as practicable, and in no event more than five Trading Days
following the receipt of any such properly completed form and any such
certificates, securities, evidences of indebtedness, assets or cash payments
required to be so returned, pay to the Holder of Securities surrendered to the
Company pursuant to a rescinded conversion or as otherwise directed by such
Holder any interest paid or other payment made to Holders of Securities during
the period from the time such Securities shall have been surrendered for
conversion to the rescission of such conversion. All questions as to the
validity, form, eligibility (including time of receipt) and acceptance of any
form submitted to the Company to rescind the conversion of Securities, including
questions as to the proper completion or execution of any such form or any
certification contained therein, shall be resolved by the Company, whose
determination shall be final and binding.
SECTION 12.03. Adjustment of Conversion Price for Common Stock or
---------------------------------- ---------------
Other Marketable Securities. The Conversion Price with respect to any Security
- ----------------------------
which is convertible into Common Stock or other Marketable Securities shall be
adjusted from time to time as follows:
(a) In case the Company shall, at any time or from time to time while
any of such Securities are outstanding, (i) pay a dividend in shares of its
Common Stock or other Marketable Securities, (ii) combine its outstanding
shares of Common Stock or other Marketable
<PAGE>
97
Securities into a smaller number of shares or securities, (iii) subdivide
its outstanding shares of Common Stock or other Marketable Securities or
(iv) issue by reclassification of its shares of Common stock or other
Marketable Securities any shares of stock or other Marketable Securities of
the Company, the Conversion Price in effect immediately before such action
shall be adjusted so that the Holders of such Securities, upon conversion
thereof into Common Stock or other Marketable Securities immediately
following such event, shall be entitled to receive the kind and amount of
shares of capital stock of the Company or other Marketable Securities which
they would have owned or been entitled to receive upon or by reason of such
event if such Securities had been converted immediately before the record
date (or, if no record date, the effective date) for such event. An
adjustment made pursuant to this Section 12.03(a) shall become effective
retroactively immediately after the record date in the case of a dividend
or distribution and shall become effective retroactively immediately after
the effective date in the case of a subdivision, combination or
reclassification. For the purposes of this Section 12.03(a), each Holder
of Securities shall be deemed to have failed to exercise any right to elect
the kind or amount of securities receivable upon the payment of any such
dividend, subdivision, combination or reclassification (provided that, if
the kind or amount of securities receivable upon such dividend,
subdivision, combination or reclassification is not the same for each
nonelecting share, the kind and amount of securities or other property
receivable upon such dividend, subdivision, combination or reclassification
for each nonelecting share shall be deemed to be the kind and amount so
receivable per share by a plurality of the nonelecting shares).
(b) In case the Company shall, at any time or from time to time while
any of such Securities are outstanding, issue rights or warrants to all
holders of shares of its Common Stock or other Marketable Securities
entitling them (for a period expiring within 45 days after the record date
for such issuance) to subscribe for or purchase shares of Common Stock or
other Marketable Securities (or securities convertible into shares of
Common Stock or other Marketable Securities) at a price per share less than
the Current Market Price of the Common Stock or other Marketable
<PAGE>
98
Securities at such record date (treating the price per share of the
securities convertible into Common Stock or other Marketable Securities as
equal to (i) the sum of (A) the price for a unit of the security
convertible into Common Stock or other Marketable Securities plus (B) any
additional consideration initially payable upon the conversion of such
security into Common Stock or other Marketable Securities divided by (ii)
the number of shares of Common Stock or other Marketable Securities
initially underlying such convertible security), the Conversion Price with
respect to such Securities shall be adjusted so that it shall equal the
price determined by dividing the Conversion Price in effect immediately
prior to the date of issuance of such rights or warrants by a fraction, the
numerator of which shall be the number of shares of Common Stock or other
Marketable Securities outstanding on the date of issuance of such rights or
warrants plus the number of additional shares of Common Stock or other
Marketable securities offered for subscription or purchase (or into which
the convertible securities so offered are initially convertible) and the
denominator of which shall be the number of shares of Common Stock or other
Marketable Securities outstanding on the date of issuance of such rights or
warrants plus the number of shares or securities which the aggregate
offering price of the total number of shares or securities so offered for
subscription or purchase (or the aggregate purchase price of the
convertible securities so offered plus the aggregate amount of any
additional consideration initially payable upon conversion of such
Securities into Common Stock or other Marketable Securities) would purchase
at such Current Market Price of the Common Stock or other Marketable
Securities. Such adjustment shall become effective retroactively
immediately after the record date for the determination of stockholders
entitled to receive such rights or warrants.
(c) In case the Company shall, at any time or from time to time while
any of such Securities are outstanding, distribute to all holders of shares
of its Common Stock or other Marketable Securities (including any such
distribution made in connection with a consolidation or merger in which the
Company is the continuing corporation and the Common Stock or other
Marketable Securities are not changed or exchanged) cash, evidences of its
indebtedness, securities or assets (excluding (i) regular periodic cash
dividends
<PAGE>
99
in amounts, if any, determined from time to time by the Board of Directors,
(ii) dividends payable in shares of Common Stock or other Marketable
Securities for which adjustment is made under Section 12.03(a) or (iii)
rights or warrants to subscribe for or purchase securities of the Company
(excluding those referred to in Section 12.03(b)), the Conversion Price
with respect to such Securities shall be adjusted so that it shall equal
the price determined by dividing the Conversion Price in effect immediately
prior to the date of such distribution by a fraction, the numerator of
which shall be the Current Market Price of the Common Stock or other
Marketable securities on the record date referred to below and the
denominator of which shall be such Current Market Price of the Common Stock
or other Marketable Securities less the then fair market value (as
determined by the Board of Directors of the Company, whose determination
shall be conclusive) of the portion of the cash or assets or evidences of
indebtedness or securities so distributed or of such subscription rights or
warrants applicable to one share of Common Stock or one other Marketable
Security (provided that such denominator shall never be less than one);
provided, however, that no adjustment shall be made with respect to any
-------- -------
distribution of rights to purchase securities of the Company if a Holder of
Securities would otherwise be entitled to receive such rights upon
conversion at any time of such Securities into Common Stock or other
Marketable Securities unless such rights are subsequently redeemed by the
Company, in which case such redemption shall be treated for purposes of
this Section as a dividend on the Common Stock or other Marketable
Securities. Such adjustment shall become effective retroactively
immediately after the record date for the determination of stockholders or
holders of Marketable Securities entitled to receive such distribution;
and, in the event that such distribution is not so made, the Conversion
Price shall again be adjusted to the Conversion Price which would then be
in effect if such record date had not been fixed.
(d) The Company shall be entitled to make such additional adjustments
in the Conversion Price, in addition to those required by Sections
12.03(a), 12.03(b) and 12.03(c), as shall be necessary in order that any
dividend or distribution of Common Stock or other Marketable Securities,
any subdivision, reclassi-
<PAGE>
100
fication or combination of shares of Common Stock or other Marketable
Securities or any issuance of rights or warrants referred to above shall
not be taxable to the holders of Common Stock or other Marketable
Securities for United States Federal income tax purposes.
(e) In any case in which this Section 12.03 shall require that any
adjustment be made effective as of or retroactively immediately following a
record date, the Company may elect to defer (but only for five Trading Days
following the filing of the statement referred to in Section 12.05) issuing
to the Holder of any Securities converted after such record date the shares
of Common Stock or other Marketable Securities and other capital stock of
the Company issuable upon such conversion over and above the shares of
Common Stock or other Marketable Securities and other capital stock of the
Company issuable upon such conversion on the basis of the Conversion Price
prior to adjustment; provided, however, that the Company shall deliver to
-------- -------
such Holder a due bill or other appropriate instrument evidencing such
Holder's right to receive such additional shares upon the occurrence of the
event requiring such adjustment.
(f) All calculations under this Section 12.03 shall be made to the
nearest cent or one-hundredth of a share or security, with one-half cent
and .005 of a share, respectively, being rounded upward. Notwithstanding
any other provision of this Section 12.03, the Company shall not be
required to make any adjustment of the Conversion Price unless such
adjustment would require an increase or decrease of at least 1% of such
price. Any lesser adjustment shall be carried forward and shall be made at
the time of and together with the next subsequent adjustment which,
together with any adjustment or adjustments so carried forward, shall
amount to an increase or decrease of at least 1% in such price. Any
adjustments under this Section 12.03 shall be made successively whenever an
event requiring such an adjustment occurs.
(g) In the event that at any time, as a result of an adjustment made
pursuant to this Section 12.03, the Holder of any Security thereafter
surrendered for conversion shall become entitled to receive any shares of
stock of or other Marketable Securities of the Company other than shares of
Common Stock or Marketable
<PAGE>
101
Securities into which the Securities originally were convertible, the
Conversion Price of such other shares or Marketable Securities so
receivable upon conversion of any such Security shall be subject to
adjustment from time to time in a manner and on terms as nearly equivalent
as practicable to the provisions with respect to Common Stock and
Marketable Securities contained in subparagraphs (a) through (f) of this
Section 12.03, and the provisions of Sections 12.01, 12.02 and 12.04
through 12.09 with respect to the Common Stock or other Marketable
Securities shall apply on like or similar terms to any such other shares or
Marketable Securities and the determination of the Board of Directors as to
any such adjustment shall be conclusive.
(h) No adjustment shall be made pursuant to this Section (i) if the
effect thereof would be to reduce the Conversion Price below the par value
(if any) of the Common Stock or other Marketable Security, if any, or (ii)
subject to Section 12.03(e) hereof, with respect to any Security that is
converted prior to the time such adjustment otherwise would be made.
SECTION 12.04. Consolidation or Merger of the Company. In case of
---------------------------------------
either (a) any consolidation or merger to which the Company is a party, other
than a merger or consolidation in which the Company is the surviving or
continuing corporation and which does not result in a reclassification of, or
change (other than a change in par value or from par value to no par value or
from no par value to par value, as a result of a subdivision or combination) in,
outstanding shares of Common Stock or other Marketable Securities or (b) any
sale or conveyance of all or substantially all the property and assets of the
Company to another Person, each Security then Outstanding shall be convertible
from and after such merger, consolidation, sale or conveyance of property and
assets into the kind and amount of shares of stock or other securities and
property (including cash) receivable upon such consolidation, merger, sale or
conveyance by a holder of the number of shares of Common Stock or other
Marketable Securities into which such Securities would have been converted
immediately prior to such consolidation, merger, sale or conveyance, subject to
adjustments which shall be as nearly equivalent as may be practicable to the
adjustments provided for in this Article XII (and assuming such holder of Common
Stock or other Marketable Securities failed to exercise his rights of
<PAGE>
102
election, if any, as to the kind or amount of securities, cash or other property
(including cash) receivable upon such consolidation, merger, sale or conveyance
(provided that, if the kind or amount of securities, cash or other property
(including cash) receivable upon such consolidation, merger, sale or conveyance
is not the same for each nonelecting share, the kind and amount of securities,
cash or other property (including cash) receivable upon such consolidation,
merger, sale or conveyance for each nonelecting share shall be deemed to be the
kind and amount so receivable per share by a plurality of the nonelecting shares
or securities)). The Company shall not enter into any of the transactions
referred to in clause (a) or (b) of the preceding sentence unless effective
provision shall be made so as to give effect to the provisions set forth in this
Section 12.04. The provisions of this Section 12.04 shall apply similarly to
successive consolidations, mergers, sales or conveyances.
SECTION 12.05. Notice of Adjustment. Whenever an adjustment in the
---------------------
Conversion Price with respect to a series of Securities is required:
(a) the Company shall forthwith place on file with the Trustee and any
Conversion Agent for such Securities a certificate of the Treasurer of the
Company, stating the adjusted Conversion Price determined as provided
herein and setting forth in reasonable detail such facts as shall be
necessary to show the reason for and the manner of computing such
adjustment, such certificate to be conclusive evidence that the adjustment
is correct; and
(b) a notice stating that the Conversion Price has been adjusted and
setting forth the adjusted Conversion Price shall forthwith be mailed,
first-class postage prepaid, by the Company to the Holders of record of
such Outstanding Securities.
SECTION 12.06. Notice in Certain Events. In case:
-------------------------
(a) of a consolidation or merger to which the Company is a party and
for which approval of any stockholders of the Company is required or of the
sale or conveyance to another person or entity or group of persons or
entities acting in concert as a partnership, limited partnership, syndicate
or other group (within
<PAGE>
103
the meaning of Rule 13d-3 under the Securities Exchange Act of 1934) of all
or substantially all the property and assets of the Company;
(b) of the voluntary or involuntary dissolution, liquidation or
winding up of the Company; or
(c) of any action triggering an adjustment of the Conversion Price
pursuant to this Article XII;
the Company shall cause to be filed with the Trustee and the Conversion Agent
for the applicable securities, and shall cause to be mailed, first-class postage
prepaid, to the Holders of record of applicable Securities, at least 15 days
prior to the applicable date hereinafter specified, a notice stating (i) the
date on which a record is to be taken for the purpose of any distribution or
grant of rights or warrants triggering an adjustment to the Conversion Price
pursuant to this Article XII or, if a record is not to be taken, the date as of
which the holders of record of Common Stock or other Marketable Securities
entitled to such distribution, rights or warrants are to be determined or (ii)
the date on which any reclassification, consolidation, merger, sale, conveyance,
dissolution, liquidation or winding up triggering an adjustment to the
Conversion Price pursuant to this Article XII is expected to become effective,
and the date as of which it is expected that holders of Common Stock or other
Marketable Securities of record shall be entitled to exchange their Common Stock
or other Marketable Securities for securities or other property deliverable upon
such reclassification, consolidation, merger, sale, conveyance, dissolution,
liquidation or winding up.
Failure to give such notice or any defect therein shall not affect the
legality or validity of the proceedings described in clause (a), (b) or (c) of
this Section.
SECTION 12.07. Company To Reserve Stock or Other Marketable
--------------------------------------------
Securities; Registration; Listing. (a) The Company shall at all times reserve
- ----------------------------------
and keep available, free from preemptive rights, out of its authorized but
unissued shares of Common Stock or other Marketable Securities, for the purpose
of effecting the conversion of the Securities, such number of its duly
authorized shares of Common Stock or number or principal amount of other
Marketable Securities as shall from time to time be sufficient to effect the
conversion of all applicable outstanding Securities into such
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104
Common Stock or other Marketable Securities at any time (assuming that, at the
time of the computation of such number of shares or securities, all such
Securities would be held by a single Holder); provided, however, that nothing
-------- -------
contained herein shall preclude the Company from satisfying its obligations in
respect of the conversion of the Securities by delivery of purchased shares of
Common Stock or other Marketable Securities which are held in the treasury of
the Company. The Company shall from time to time, in accordance with the laws
of the State of Delaware, use its best efforts to cause the authorized amount of
the Common Stock or other Marketable Securities to be increased if the aggregate
of the authorized amount of the Common Stock or other Marketable Securities
remaining unissued and the issued shares of such Common Stock or other
Marketable Securities in its treasury (other than any such shares reserved for
issuance in any other connection) shall not be sufficient to permit the
conversion of all Securities.
(b) If any shares of Common Stock or other Marketable Securities
which would be issuable upon conversion of Securities hereunder require
registration with or approval of any governmental authority before such shares
or securities may be issued upon such conversion, the Company will in good faith
and as expeditiously as possible endeavor to cause such shares or securities to
be duly registered or approved, as the case may be. The Company will endeavor
to list the shares of Common Stock or other Marketable Securities required to be
delivered upon conversion of the Securities prior to such delivery upon the
principal national securities exchange upon which the outstanding Common Stock
or other Marketable Securities are listed at the time of such delivery.
SECTION 12.08. Taxes on Conversion. The Company shall pay any and
--------------------
all documentary, stamp or similar issue or transfer taxes that may be payable in
respect of the issue or delivery of shares of Common Stock or other Marketable
Securities on conversion of Securities pursuant hereto. The Company shall not,
however, be required to pay any such tax which may be payable in respect of any
transfer involved in the issue or delivery of shares of Common Stock or other
Marketable Securities or the portion, if any, of the Securities which is not so
converted in a name other than that in which the Securities so converted were
registered, and no such issue or delivery shall be made unless and until the
person requesting such issue has paid to the Company the
<PAGE>
105
amount of such tax or has established to the satisfaction of the Company that
such tax has been paid.
SECTION 12.09. Conversion After Record Date. If any Securities are
-----------------------------
surrendered for conversion subsequent to the record date preceding an Interest
Payment Date but on or prior to such Interest Payment Date (except Securities
called for redemption on a Redemption Date between such record date and Interest
Payment Date), the Holder of such Securities at the close of business on such
record date shall be entitled to receive the interest payable on such Securities
on such Interest Payment Date notwithstanding the conversion thereof.
Securities surrendered for conversion during the period from the close of
business on any record date next preceding any Interest Payment Date to the
opening of business on such Interest Payment Date shall (except in the case of
Securities which have been called for redemption on a Redemption Date within
such period) be accompanied by payment in New York Clearing House funds or other
funds acceptable to the Company of an amount equal to the interest payable on
such Interest Payment Date on the Securities being surrendered for conversion.
Except as provided in this Section 12.09, no adjustments in respect of payments
of interest on Securities surrendered for conversion or any dividends or
distributions or interest on the Common Stock or other Marketable Securities
issued upon conversion shall be made upon the conversion of any Securities.
SECTION 12.10. Corporate Action Regarding Par Value of Common Stock.
-----------------------------------------------------
Before taking any action which would cause an adjustment reducing the applicable
Conversion Price below the then par value (if any) of the shares of Common Stock
or other Marketable Securities deliverable upon conversion of the Securities,
the Company will take any corporate action which may, in the opinion of its
counsel, be necessary in order that the Company may validly and legally issue
fully paid and nonassessable shares of Common Stock or other Marketable
Securities at such adjusted Conversion Price.
SECTION 12.11. Company Determination Final. Any determination that
----------------------------
the Company or the Board of Directors must make pursuant to this Article is
conclusive.
SECTION 12.12. Trustee's Disclaimer. The Trustee has no duty to
---------------------
determine when an adjustment under this Article should be made, how it should be
made or what it should be. The Trustee makes no representation as to the
<PAGE>
106
validity or value of any securities or assets issued upon conversion of
Securities. The Trustee shall not be responsible for the Company's failure to
comply with this Article. Each Conversion Agent other than the Company shall
have the same protection under this Section as the Trustee.
ARTICLE XIII
Subordination
-------------
SECTION 13.01. Agreement To Subordinate. The Company agrees, and
-------------------------
each Securityholder by accepting a Security agrees, that the indebtedness
evidenced by the Securities and the payment of the principal of (and premium, if
any) and interest on each and all of the Securities is hereby expressly
subordinated in right of payment, to the extent and in the manner provided in
this Article, to the prior payment in full in cash or cash equivalents of all
Senior Indebtedness and that such subordination is for the benefit of the
holders of Senior Indebtedness.
SECTION 13.02. Liquidation, Dissolution, Bankruptcy. Upon any
-------------------------------------
payment or distribution of all or substantially all the assets of the Company,
whether voluntary or involuntary, or upon any reorganization, readjustment,
arrangement or similar proceeding relating to the Company or its property,
whether or not the Company is a party thereto and whether in bankruptcy,
insolvency, receivership or similar proceedings, or upon any assignment by the
Company for the benefit of creditors or upon any other marshaling of the assets
and liabilities of the Company:
(a) all Senior Indebtedness shall first be paid in full in cash or
cash equivalents, or provisions made for such payment by deposit thereof in
trust with a bank or banks (either theretofore acting as trustees under
indentures pursuant to which Senior Indebtedness shall have been issued or
duly appointed paying agents for the purpose), before any payment or
distribution, whether in cash, property or securities (other than
securities of the Company as reorganized or readjusted, or securities of
the Company or any other corporation provided for by a plan of
reorganization or readjustment, the payment of which is subordinate, at
least to the extent provided in this Article with respect to the
Securities, to the payment of all indebtedness of the
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107
nature of Senior Indebtedness, so long as the rights of the holders of the
Senior Indebtedness are not altered adversely by such reorganization or
readjustment ("Equivalent Securities")), is made on account of the
principal of or interest on the indebtedness evidenced by the Securities;
(b) any payment or distribution of any kind or character in respect of
the principal of or interest on the Securities, whether in cash, property
or securities (other than Equivalent Securities), to which the Holders of
the Securities would be entitled except for the provisions of this Article
shall be paid or delivered by the Company or the liquidating trustee or
agent or other person making such payment or distribution, whether a
trustee in bankruptcy, a receiver or liquidating trustee or other trustee
or agent, directly and ratably to the holders of Senior Indebtedness or
their Representatives (subject to any subordination of any class of Senior
Indebtedness, by the provisions thereof, to any other class or classes of
Senior Indebtedness), ratably according to the aggregate amounts remaining
unpaid on account of the principal of, and the premium, if any, and
interest on, the Senior Indebtedness held or represented by each, to the
extent necessary to make payment in full of all Senior Indebtedness
remaining unpaid, after giving effect to any concurrent payment or
distribution, or provision therefor, to the holders of such Senior
Indebtedness; and
(c) in the event that, notwithstanding the foregoing, any payment or
distribution of any kind or character in respect of the principal of or
interest on the Securities, whether in cash, property or securities (other
than Equivalent Securities), shall be received by the Trustee or the
holders of the Securities before all Senior Indebtedness is paid in full,
or provision made as aforesaid for its payment, such payment or
distribution shall be held in trust for the ratable benefit of and shall be
ratably paid over or delivered to the holders of Senior Indebtedness
remaining unpaid or unprovided for or their Representatives, as provided in
the foregoing subparagraph (b), for application to the payment of all
principal of, and premium, if any, and interest on, such Senior
Indebtedness remaining unpaid until all such Senior Indebtedness shall have
been paid in full, after giving effect to any concur-
<PAGE>
108
rent payment or distribution, or provision therefor, to the holders of such
Senior Indebtedness.
Subject to the payment in full of all Senior Indebtedness or
provisions being made as aforesaid for its payment, the Holders of the
Securities shall be subrogated to the rights of the holders of Senior
Indebtedness to receive payments or distributions of cash, property or
securities of the Company payable or distributable to the holders of the Senior
Indebtedness, until the principal of and interest on the Securities shall be
paid in full. No payment or distribution to the holders of the Senior
Indebtedness of any cash, property or securities to which the Holders of the
Securities would be entitled except for the provisions of this Article, and no
payment over or delivery pursuant to the provisions of this Article to the
holders of the Senior Indebtedness or their Representatives by the Trustee or
the Holders of the Securities, shall, as between the Company, its creditors
other than the holders of Senior Indebtedness and the Holders of the Securities,
be deemed to be a payment by the Company to or on account of the Senior
Indebtedness. Upon any distribution of assets or securities of the Company
referred to in this Article, the Trustee, subject to the provisions of Article
VI, and the Holders of the Securities shall be entitled to rely upon any order
or decree made by any court of competent jurisdiction in which such dissolution,
winding up, liquidation or reorganization proceedings are pending or a
certificate of the liquidating trustee or agent or other person making any
payment or distribution to the Trustee or to the Holders of the Securities for
the purpose of ascertaining the persons entitled to participate in such
distribution, the holders of the Senior Indebtedness and other indebtedness of
the Company, the amount thereof or payable thereon, the amount or amounts paid
or distributed thereon and all other facts pertinent thereto or to this Article.
SECTION 13.03. Default on Senior Indebtedness. Subject to the
-------------------------------
provisions of Section 13.04 hereof, in the event and during the continuation of
any default in the payment of principal of, or premium, if any, or interest on,
or other monetary obligation with respect to, any Senior indebtedness beyond any
applicable period of grace, or in the event that any event of default with
respect to any Senior Indebtedness shall have occurred and be continuing, unless
and until such default or event of default shall have been cured or waived or
shall have ceased to exist, no payment of principal or interest shall be made by
the
<PAGE>
109
Company on the Securities. Nothing contained in this Article or elsewhere in
this Indenture, or in any of the Securities, shall, however, (a) prevent the
Company from setting aside in trust as provided in Section 10.03 or depositing
with the Trustee, at any time, except during the pendency of any of the
proceedings or upon the happening of any of the events referred to in the first
paragraph of Section 13.02 or during the continuation of any such default or
event of default (not cured or waived), moneys for the payment of principal of
or interest on the Securities or (b) prevent the application by the Trustee of
any moneys deposited with it hereunder by the Company to the payment of or on
account of the principal of or interest on the Securities, if, at the time of
such deposit, the Trustee did not have written notice of any event prohibiting
the making of such deposit by the Company.
The Company shall give prompt written notice to the Trustee of any
facts which would prohibit the making of any payment of moneys to or by the
Trustee, including any dissolution, winding up, liquidation or reorganization of
the Company within the meaning of this Article. Anything in this Article or
elsewhere in this Indenture contained to the contrary notwithstanding, the
Trustee shall not be charged with knowledge of the existence of any Senior
Indebtedness or of any default or event of default with respect to any Senior
Indebtedness or of any other facts which would prohibit the making of any
payment of moneys to or by the Trustee, unless and until the Trustee shall have
received notice in writing to that effect signed by an officer of the Company or
by a holder of Senior Indebtedness who shall have been certified by the Company
or otherwise established to the reasonable satisfaction of the Trustee to be
such holder or by a Representative of Senior Indebtedness.
SECTION 13.04. Disputes with Holders of Certain Senior Indebtedness.
-----------------------------------------------------
Any failure by the Company to make any payment on or perform any other
obligation under Senior Indebtedness, other than any indebtedness incurred by
the Company or assumed or guaranteed, directly or indirectly, by the Company for
money borrowed (or any deferral, renewal, extension or refunding thereof) or any
indebtedness or obligation in which the provisions of this Section shall have
been waived by the Company in the instrument or instruments by which the Company
incurred, assumed, guaranteed or otherwise created such indebtedness or
obligation, shall not be deemed a default or event of default under Section
13.03 hereof for so long as (a) the
<PAGE>
110
Company shall be disputing its obligation to make such payment or perform such
obligation and (b) either (i) such dispute shall not have resulted in a judgment
against the Company or the applicable Subsidiary that shall have remained
undischarged or unbonded and have remained in force for more than the applicable
appeal period or (ii) in the event of such a judgment, the Company or the
applicable Subsidiary shall in good faith be prosecuting an appeal or other
proceeding for review and which a stay of execution shall have been obtained
pending such appeal or review.
SECTION 13.05. Acceleration of Notes. If an Event of Default, other
----------------------
than an Event of Default under paragraph (e) or (f) of Section 5.01, shall have
occurred and be continuing, the Trustee or the Holder of Securities electing to
accelerate the Securities pursuant to Section 5.02 shall give the
Representatives of the Senior Indebtedness five days' prior written notice
before accelerating the Securities, which notice shall state that it is a
"Notice of Intent to Accelerate"; provided, however, that the Trustee or such
-------- -------
Holders may so accelerate the Securities immediately without such notice if at
such time payment of any Senior Indebtedness shall have been accelerated. If
payment of the Securities is accelerated because of an Event of Default, the
Company shall promptly notify holders of Senior Indebtedness (or their
Representatives) of the acceleration.
SECTION 13.06. When Distribution Must Be Paid Over. If a
------------------------------------
distribution is made to Securityholders that because of this Article should not
have been made to them, the Securityholders who receive the distribution shall
hold it in trust for holders of Senior Indebtedness and pay it over to them as
their interests may appear.
SECTION 13.07. Relative Rights. This Article defines the relative
----------------
rights of Securityholders and holders of Senior Indebtedness. Nothing in this
Indenture shall:
(a) impair, as between the Company and Securityholders, the obligation
of the Company, which is absolute and unconditional, to pay principal of
and interest on the Securities in accordance with their terms;
(b) affect the relative rights of Securityholders and creditors of the
Company other than holders of Senior Indebtedness; or
<PAGE>
111
(c) prevent the Trustee or any Securityholder from exercising its available
remedies upon an Event of Default, subject to the rights of holders of
Senior Indebtedness to receive distributions otherwise payable to
Securityholders.
If the Company fails because of this Article to pay principal of or
interest on a Security on the due date, the failure is still an Event of
Default.
SECTION 13.08. Subordination May Not Be Impaired by Company. No
---------------------------------------------
right of any holder of Senior Indebtedness to enforce the subordination of the
indebtedness evidenced by the Securities shall be impaired by any act or failure
to act by the Company or by its failure to comply with this Indenture.
SECTION 13.09. Distribution or Notice to Representative. Whenever a
-----------------------------------------
distribution is to be made or a notice given to holders of Senior Indebtedness,
the distribution may be made and the notice given to their Representative.
SECTION 13.10. Rights of Trustee and Paying Agent. The Trustee or
-----------------------------------
Paying Agent may continue to make payments on the Securities until it receives
notice satisfactory to it that payments may not be made under this Article. The
Company, a Representative or a holder of Senior Indebtedness who shall have been
certified by the Company or otherwise established to the reasonable satisfaction
of the Trustee to be such holder may give the notice; provided, however, that if
-------- -------
an issue of Senior Indebtedness has a Representative, only the Representative
may give the notice on behalf of the holders of Senior Indebtedness.
The Trustee in its individual or any other capacity may hold Senior
Indebtedness with the same rights it would have if it were not Trustee. The
Security Registrar, the Paying Agent and the Conversion Agent may do the same
with like rights.
SECTION 13.11. Notice to Trustee. The Company shall give prompt
------------------
written notice to a Trust Officer at the address of the Trustee determined
pursuant to Section 1.05 of any fact known to the Company which would prohibit
the making of any payment to or by the Trustee in respect of the Securities.
<PAGE>
112
SECTION 13.12. Trustee Not a Fiduciary. The Trustee shall not be
------------------------
deemed to owe any fiduciary duty to the holders of Senior Indebtedness, but
shall have only such obligations to such holders as are expressly set forth in
this Article XIII.
SECTION 13.13. Effectuation of Subordination by Trustee. Each holder
-----------------------------------------
of Securities, by his acceptance hereof, authorizes and directs the Trustee on
his behalf to take such action as may be necessary or appropriate to effectuate
the subordination provided in this Article and appoints the Trustee his
attorney-in-fact for any and all such purposes.
SECTION 13.14. Article Applicable to Paying Agents. In case at any
------------------------------------
time any Paying Agent other than the Trustee and the Company shall have been
appointed by the Company and be then acting hereunder, the term "Trustee" as
used in this Article shall in such case (unless the context shall require
otherwise) be construed as extending to and including such Paying Agent within
its meaning as fully for all intents and purposes as if such Paying Agent were
named in this Article in addition to or in place of the Trustee.
SECTION 13.15. Trustee; Compensation Not Prejudiced. Nothing in this
-------------------------------------
Article shall apply to claims of, or payments to, the Trustee pursuant to
Section 6.07.
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to
be duly executed as of the day and year first above written.
TIME WARNER INC.,
by _________________________
Name:
Title:
Attest:
_______________________
Name:
Title:
<PAGE>
113
CHEMICAL BANK,
as Trustee,
by _________________________
Name:
Title:
Attest:
_______________________
Name:
Title:
<PAGE>
EXHIBIT 4.9
================================================================================
TIME WARNER INC.
$[ ] Subordinated Debentures
due [ ], 2025
FIRST SUPPLEMENTAL INDENTURE
Dated as of [ ], 1995
Chemical Bank,
a New York banking corporation,
Trustee
================================================================================
<PAGE>
FIRST SUPPLEMENTAL INDENTURE dated as of [ ], 1995,
between TIME WARNER INC., a Delaware corporation (the "Company"),
and Chemical Bank, a New York banking corporation, as trustee
(the "Trustee") under the Indenture dated as of [ ], 1995
between the Company and the Trustee (the "Indenture").
WHEREAS, the Company executed and delivered the Indenture to the
Trustee to provide for the future issuance of the Company's unsecured
subordinated debt securities to be issued from time to time in one or more
series as might be determined by the Company under the Indenture, in an
unlimited aggregate principal amount which may be authenticated and delivered as
provided in the Indenture;
WHEREAS, pursuant to the terms of the Indenture, the Company desires
to provide for the establishment of a new series of its Securities to be known
as its __% Subordinated Debentures due 2025 (the "Debentures"), the form and
substance of such Debentures and the terms, provisions and conditions thereof to
be set forth as provided in the Indenture and this First Supplemental Indenture;
WHEREAS, Time Warner Capital [ ], a Delaware statutory business trust
(the "Trust"), has offered to the public $[ ] aggregate liquidation amount of
its ___% Preferred Trust Securities (the "Preferred Securities"), representing
undivided beneficial interests in the assets of the Trust and proposes to invest
the proceeds from such offering in $[ ] aggregate principal amount of the
Debentures; and
WHEREAS, the Company has requested that the Trustee execute and
deliver this First Supplemental Indenture and all requirements necessary to make
this First Supplemental Indenture a valid instrument in accordance with its
terms and to make the Debentures, when executed by the Company and authenticated
and delivered by the Trustee, the valid obligations of the Company have been
performed, and the execution and delivery of this First Supplemental Indenture
has been duly authorized in all respects;
<PAGE>
2
NOW THEREFORE, in consideration of the purchase and acceptance of the
Debentures by the Holders thereof, and for the purpose of setting forth, as
provided in the Indenture, the form and substance of the Debentures and the
terms, provisions and conditions thereof, the Company covenants and agrees with
the Trustee as follows:
ARTICLE I
Definitions and Incorporation by Reference
------------------------------------------
SECTION 1.01. Definitions. Capitalized terms used but not defined
------------
herein have the meanings assigned to them in the Indenture. The following terms
have the following meanings.
"Common Securities" means the securities issued by the Trust
representing undivided beneficial interests in the assets of the Trust, having
the terms set forth in Exhibit C to the Declaration.
"Company" means the party named as such in this First Supplemental
Indenture until a successor replaces it pursuant to the applicable provisions of
this Indenture, and thereafter means the successor.
"Debentures" means the Debentures issued under this First Supplemental
Indenture substantially in the form of Exhibit A hereto as amended or
supplemented from time to time.
"Declaration" means the Amended and Restated Declaration of Trust,
dated as of [ ], 1995, among the trustees of the Trust named therein,
the Company as Sponsor, and the holders from time to time of the Preferred
Securities.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Holder" or "Debentureholder" means the Person in whose name a
Debenture is registered on the Registrar's books. All references to Holders of
a particular Principal Amount of the Debentures mean Holders of the relevant
Principal Amount of the Debentures at the time outstanding.
"Nasdaq" means The Nasdaq Stock Market.
<PAGE>
3
"NYSE" means the New York Stock Exchange, Inc.
"Officer" means the Chairman of the Board or any Co-Chairman of the
Board, the Vice Chairman of the Board, the Chief Executive Officer or any Co-
Chief Executive Officer, the President, any Vice President, the Chief Financial
Officer, the Treasurer, any Assistant Treasurer, the Controller, any Assistant
Controller, the Secretary or any Assistant Secretary of the Company.
"Trust Officer" means any officer or assistant officer of the Trustee
with direct responsibility for the administration of this First Supplemental
Indenture and the Indenture.
"Trust Securities" means the Common Securities and the Preferred
Securities.
"Underwriting Agreement" means the underwriting agreement entered into
among the Company, the Trust, Merrill Lynch, Pierce, Fenner & Smith
Incorporated, Morgan Stanley & Co. Incorporated and [ ],
as co-representatives, with respect to, among other things, the Preferred
Securities.
SECTION 1.02. Other Definitions. The following terms have the
------------------
meanings given to them in the Declaration (including the Exhibits thereto) as in
effect on the date hereof: (i) Clearing Agency; (ii) Delaware Trustee; (iii)
Distribution; (iv) Guarantee; (v) No Recognition Opinion; (vi) Property Trustee;
(vii) Preferred Security Certificate; (viii) Regular Trustees; (ix) Special
Event; (x) Tax Event; and (xi) Trust.
The following terms are defined in the relevant Section of this First
Supplemental Indenture as set forth below.
<TABLE>
<CAPTION>
Defined in
Term Section
---- ----------
<S> <C>
"Additional Interest"............... 2.05
"Compounded Interest"............... 4.01
"Coupon Rate"....................... 2.05
"Deferred Interest"................. 4.01
"Extended Interest Payment Period".. 4.01
"Global Debenture".................. 2.04
"Interest Payment Date"............. 2.05
</TABLE>
<PAGE>
4
<TABLE>
<S> <C>
"Ministerial Action"................ 3.02
"Non-Book-Entry Preferred
Securities"......................... 2.04
"No Recognition Opinion"............ 3.02
"Optional Redemption Date".......... 3.01
"90-day Period"..................... 3.02
</TABLE>
SECTION 1.03. Incorporation by Reference of Trust Indenture Act.
---------------------------------------------------
Whenever this First Supplemental Indenture refers to a provision of the TIA, the
provision is incorporated by reference in and made a part of this First
Supplemental Indenture. The following TIA terms used in this First Supplemental
Indenture have the following meanings:
"indenture securities" means the Debentures.
"indenture security holder" means a Noteholder.
"indenture to be qualified" means this First Supplemental Indenture.
"indenture trustee" or "institutional trustee" means the Trustee.
"obligor" on the indenture securities means the Company.
All other TIA terms used in this First Supplemental Indenture that are
defined by the TIA, defined by TIA reference to another statute or defined by
Commission rule have the meanings assigned to them.
SECTION 1.04. Rules of Construction. Unless the context otherwise
----------------------
requires:
(1) a term has the meaning assigned to it;
(2) an accounting term not otherwise defined has the meaning assigned
to it in accordance with generally accepted accounting principles;
(3) "or" is not exclusive;
(4) words in the singular include the plural, and in the plural
include the singular; and
<PAGE>
5
(5) provisions apply to successive events and transactions.
(6) a reference to a Section or Article is to a Section or Article of
this First Supplemental Indenture.
ARTICLE II
General Terms and Conditions of the Debentures
----------------------------------------------
SECTION 2.01. Designation and Principal Amount. There is hereby
---------------------------------
authorized a series of Securities designated as "[ ]% Subordinated Debentures
due 2025". The Debentures shall be limited to an aggregate principal amount for
all Debentures equal to $[ ], such amount being the sum of (i) the aggregate
liquidation amount of the Preferred Securities and (ii) the proceeds received by
the Trust upon issuance of the Common Securities to the Company. The aggregate
principal amount of Debentures outstanding at any time may not exceed that
amount except as provided in Section 3.06 of the Indenture.
SECTION 2.02. Maturity. The Debentures shall mature on [ ],
---------
2025 (the "Maturity Date").
SECTION 2.03. Form and Payment. Except as provided in Section 2.04,
-----------------
the Debentures shall be issued in fully registered certificated form without
interest coupons. Principal and interest on the Debentures issued in
certificated form will be payable, the transfer of such Debentures will be
registrable and such Debentures will be exchangeable for Debentures bearing
identical terms and provisions at the office or agency of the Trustee; provided,
--------
however, that payment of interest may be made at the option of the Company by
- -------
check mailed to the Holder at such address as shall appear in the Security
Register. Notwithstanding the foregoing, so long as the Holder of any
Debentures is the Property Trustee, the payment of the principal of and interest
(including Compounded Interest [and Additional Interest], if any) on such
Debentures held by the Property Trustee will be made at such place and to such
account as may be designated by the Property Trustee.
<PAGE>
6
SECTION 2.04. Global Debenture. (a) In the event the Company
-----------------
causes, pursuant to Section 3.03 or otherwise, the Debentures held by the
Property Trustee to be distributed to holders of the Trust Securities;
(i) except as provided in paragraph (ii) of this Section 2.04, the
Debentures in certificated form shall be presented to the Trustee
by the Property Trustee in exchange for one or more global
Debentures in an aggregate principal amount equal to the
aggregate principal amount of the outstanding Debentures (each, a
"Global Debenture"), to be registered in the name of the
Depositary, or its nominee, and delivered by the Trustee to the
Depositary for crediting to the accounts of its participants
pursuant to the instructions of the Regular Trustees. The
Company upon any such presentation shall execute a Global
Debenture in such aggregate principal amount and deliver the same
to the Trustee for authentication and delivery in accordance with
the Indenture and this First Supplemental Indenture. Payments on
the Debentures issued as a Global Debenture will be made to the
Depositary; and
(ii) to the extent any Preferred Securities are held in non-book-entry
certificated form, any Preferred Security Certificate which
represents Preferred Securities other than Preferred Securities
held by the Clearing Agency or its nominee ("Non-Book-Entry
Preferred Securities") will be deemed to represent beneficial
interests in Debentures presented to the Trustee by the Property
Trustee having an aggregate principal amount equal to the
aggregate liquidation amount of the Non-Book-Entry Preferred
Securities until such Preferred Security Certificate is presented
to the Regular Trustees for transfer or reissuance at which time
such Preferred Security Certificate will be canceled and a
Debenture registered in the name of the holder (or the transferee
thereof) of such Preferred Security Certificate with an aggregate
principal amount equal to the aggregate liquidation
<PAGE>
7
amount of the Preferred Security Certificate canceled will be
executed by the Company and delivered to the Trustee for
authentication and delivery in accordance with the Indenture and
this First Supplemental Indenture. On issue of such Debentures,
Debentures with an equivalent aggregate principal amount that
were presented by the Property Trustee to the Trustee will be
deemed to have been canceled.
(b) A Global Debenture shall be exchangeable for Debentures
registered in the names of persons other than the Depositary or its nominee only
if (i) the Depositary notifies the Company that it is unwilling or unable to
continue as a depositary for such Global Debenture and no successor depositary
shall have been appointed, (ii) the Depositary, at any time, ceases to be a
clearing agency registered under the Exchange Act at which time the Depositary
is required to be so registered to act as such Depositary and no successor
depositary shall have been appointed, or (iii) the Company in its sole
discretion determines that such Global Debenture shall be so exchangeable. Any
Global Debenture that is exchangeable pursuant to the preceding sentence shall
be exchangeable for Debentures registered in such names as the Depositary shall
direct.
SECTION 2.05. Interest. (a) Each Debenture will bear interest at
---------
the rate of __% per annum (the "Coupon Rate") from the original date of issuance
until the principal thereof becomes due and payable, and on any overdue
principal and (to the extent that payment of such interest is enforceable under
applicable law) on any overdue installment of interest at the Coupon Rate,
compounded quarterly, payable (subject to the provisions of Article 4) quarterly
in arrears on [March 30, June 30, September 30 and December 30] of each year
(each, an "Interest Payment Date"), commencing on ____________, 1995 to the
Person in whose name such Debenture or any predecessor Debenture is registered,
at the close of business on the regular record date for such interest
installment, which, in respect of any Debenture of which the Property Trustee is
the Holder or a Global Debenture, shall be the close of business on the March
15, June 15, September 15 and December 15, as the case may be, next preceding
that Interest Payment Date. Notwithstanding the foregoing sentence, if the
Preferred Securities are no longer in book-entry only form or if pursuant to the
Indenture and this First Supplemental
<PAGE>
8
Indenture the Debentures are not represented by a Global Debenture, the Company
may select a regular record date for such interest installment which shall be
any date at least one Business Day before an Interest Payment Date.
(b) The amount of interest payable for any period will be computed on
the basis of a 360-day year of twelve 30-day months. Except as provided in the
following sentence, the amount of interest payable for any period shorter than a
full quarterly period for which interest is computed, will be computed on the
basis of the actual number of days elapsed in such 30-day month. In the event
that any date on which interest is payable on the Debentures is not a Business
Day, then payment of interest payable on such date will be made on the next
succeeding day which is a Business Day (without any interest or other payment in
respect of any such delay), except that, if such Business Day is in the next
succeeding calendar year, such payment shall be made on the immediately
preceding Business Day, in each case, with the same force and effect as if made
on such date.
[(c) If at any time while the Property Trustee is the Holder of any
Debentures, the Trust or the Property Trustee is required to pay any taxes,
duties, assessments or governmental charges of whatever nature (other than
withholding taxes) imposed by the United States, or any other taxing authority,
then, in any case, the Company will pay as additional interest ("Additional
Interest") on the Debentures held by the Property Trustee, such additional
amounts as shall be required so that the net amounts received and retained by
the Trust and the Property Trustee after paying such taxes, duties, assessments
or other governmental charges will be equal to the amounts the Trust and the
Property Trustee would have received had no such taxes, duties, assessments or
other government charges been imposed.
ARTICLE III
Redemption; Distribution
------------------------
SECTION 3.01. Optional Redemption. The Company, subject to the
--------------------
provisions of Article 13 of the Indenture, shall have the right to redeem the
Debentures, in whole or in part, from time to time, on or after [ ],
2000, upon not less than 20 nor more than 45 Business Days' written notice to
the Holders (such date of redemption an
<PAGE>
9
"Optional Redemption Date"), at a redemption price equal to 100% of the
principal amount of Debentures to be redeemed, plus cash in an amount equal to
all accrued and unpaid interest, if any, to but excluding the Optional
Redemption Date.
If a partial redemption of the Debentures would result in the
delisting of the Preferred Securities from any national securities exchange or
other self-regulatory organization (including Nasdaq) on which the Preferred
Securities are then listed, the Company shall not effect such partial redemption
and may only redeem the Debentures in whole.
SECTION 3.02. Special Event Redemption or Distribution. (a) (i) If,
-----------------------------------------
at any time, a Special Event shall occur and be continuing, the Company shall
elect to either:
(A) direct the Regular Trustees to dissolve the Trust and cause
Debentures having an aggregate principal amount equal to the aggregate
liquidation amount of, and accrued and unpaid interest equal to accrued and
unpaid Distributions on, and having the same record date for payment as,
the Trust Securities outstanding at such time, to be distributed by the
Regular Trustee to the holders of the Trust Securities pro rata according
to the aggregate liquidation amount of the Trust Securities held by such
holder in relation to the aggregate liquidation amount of all Trust
Securities outstanding in liquidation of such holders' interests in the
Trust, within 90 days following the occurrence of such Special Event,
provided, however, that in the case of the occurrence of a Tax Event, as a
-------- -------
condition of any such dissolution and distribution, the Regular Trustees
shall have received an opinion of nationally recognized independent tax
counsel experienced in such matters (a "No Recognition Opinion"), which
opinion may rely on any then applicable published revenue ruling of the
Internal Revenue Service, to the effect that the holders of the Preferred
Securities will not recognize any gain or loss for United States Federal
income tax purposes as a result of the dissolution of the Trust and
distribution of Debentures;
<PAGE>
10
(B) to redeem the Debentures in accordance with the Indenture and this
First Supplemental Indenture; or
(C) in the case of a Tax Event, allow the Debentures and the Trust
Securities to remain outstanding and indemnify the Trust for all taxes
payable by it as a result of such change in law or interpretation;
provided that, if and as long as at the time there is available to the Trust the
- --------
opportunity to eliminate, within 90 days following the occurrence of such
Special Event (the "90-Day Period"), the Special Event by taking some
ministerial action, such as filing a form or making an election, or pursuing
some other similar reasonable measure that has no adverse effect on the Trust,
the Company or the holders of the Trust Securities (a "Ministerial Action"), the
Company shall not be permitted to redeem the Debentures; provided further, that
----------------
the Company shall have no right to redeem the Debentures or direct the Regular
Trustees to dissolve the Trust while the Regular Trustees are pursuing such
Ministerial Action unless the Special Event shall not have been so eliminated by
the 85th day following the occurrence thereof, in which case the Company shall
be permitted to direct the Regular Trustees or to provide notice to the holders
of the redemption of the Debentures; provided further, that if dissolution of
----------------
the Trust and distribution of the Debentures to the holders of the Trust
Securities would eliminate the condition causing the Special Event and all other
conditions to such dissolution and distribution have been satisfied, the Company
will not be permitted to redeem the Debentures at the Special Redemption Price;
and provided further, that the Company shall not be permitted to direct the
----------------
Regular Trustees to dissolve the Trust and distribute the Debentures to the
holders of the Trust Securities upon the occurrence of the condition described
in clause (2) in the definition of "Tax Event" if, after giving effect to such
dissolution and distribution, the Company would not be permitted to deduct a
greater percentage of the interest payable on the Debentures than it had been
permitted to deduct for United States Federal income tax purposes prior to the
occurrence of such Tax Event.
(ii) In the event the Company shall elect to redeem the Debentures in
accordance with (and subject to) paragraph (i) above upon the occurrence and
continuation of a Special Event, the Company shall be entitled to so redeem
<PAGE>
11
the Debentures in whole (but not in part), upon not less than 20 nor more than
45 Business Days' written notice to the Holders, within the 90-Day Period (such
date of redemption a "Special Redemption Date") at a redemption price equal to
100% of the principal amount of Debentures to be redeemed, plus cash in an
amount equal to all accrued and unpaid interest on the Debentures to but
excluding the Special Redemption Date. References herein and in the Indenture
to "Redemption Date" shall refer to the Optional Redemption Date or the Special
Redemption Date, as the case may be.
(b) Upon the distribution of Debentures to holders of Preferred
Securities as a result of the occurrence of a Special Event, subject to
applicable law (including, without limitation, United States Federal securities
laws), the Company or any of its Affiliates may at any time and from time to
time purchase outstanding Debentures by tender, in the open market or by private
agreement.
SECTION 3.03. No Sinking Fund. The Debentures are not entitled to
----------------
the benefits of any sinking fund.
ARTICLE IV
Extension of Interest Payment Period
------------------------------------
SECTION 4.01. Extension of Interest Payment Period. The Company
-------------------------------------
shall have the right, at any time during the term of the Debentures, from time
to time to defer payments of interest by extending the interest payment period
of such Debentures for up to 20 consecutive quarters (the "Extended Interest
Payment Period"). To the extent permitted by applicable law, interest, the
payment of which has been deferred because of the extension of the interest
payment period pursuant to this Section 4.01, will bear interest thereon at the
Coupon Rate compounded quarterly for each quarter of the Extended Interest
Payment Period ("Compounded Interest"). At the end of the Extended Interest
Payment Period the Company shall pay all interest accrued and unpaid on the
Debentures, including any [Additional Interest and] Compounded Interest
("Deferred Interest") that shall be payable, to the Holders of the Debentures in
whose names the Debentures are registered in the Security Register on the first
record date after the end of the Extended Interest Payment Period. Before the
<PAGE>
12
termination of any Extended Interest Payment Period, the Company may further
extend such period, provided that such period together with all such further
--------
extensions thereof shall not exceed 20 consecutive quarters. Upon the
termination of any Extended Interest Payment Period and upon the payment of all
Deferred Interest then due, the Company may commence a new Extended Interest
Payment Period, subject to the foregoing requirements. No interest shall be due
and payable during an Extended Interest Payment Period, except at the end
thereof.
SECTION 4.02. Notice of Extension. (a) If the Property Trustee is
--------------------
the only registered Holder of the Debentures at the time the Company selects an
Extended Interest Payment Period, the Company shall give written notice to the
Regular Trustees, the Property Trustee and the Trustee of its selection of such
Extended Interest Payment Period one Business Day before the earlier of (a) the
next succeeding date on which Distributions on the Trust Securities issued by
the Trust are payable, or (b) the date the Trust is required to give notice of
the record date of the date such Distributions are payable to the NYSE or other
applicable self-regulatory organization or to holders of the Preferred
Securities issued by the Trust, but in any event at least one Business Day
before such record date.
(b) If the Property Trustee is not the only Holder of the Debentures
at the time the Company selects an Extended Interest Payment Period, the Company
shall give the Holders of the Debentures and the Trustee written notice of its
selection of such Extended Interest Payment Period 10 Business Days before the
earlier of (i) the next succeeding Interest Payment Date, or (ii) the date the
Company is required to give notice of the record or payment date of such
interest payment to the NYSE or other applicable self-regulatory organization or
to Holders of the Debentures.
(c) The quarter in which any notice is given pursuant to paragraphs
(a) or (b) of this Section 4.02 shall be counted as one of the 20 quarters
permitted in the maximum Extended Interest Payment Period permitted under
Section 4.01.
ARTICLE V
Expenses
--------
<PAGE>
13
SECTION 5.01. Payment of Expenses. In connection with the offering,
--------------------
sale and issuance of the Debentures to the Property Trustee in connection with
the sale of the Trust Securities by the Trust, the Company shall:
(a) pay for all costs and expenses relating to the offering, sale and
issuance of the Debentures, including commissions to the underwriters
payable pursuant to the Underwriting Agreement [and the Pricing Agreement]
and compensation of the Trustee under the Indenture in accordance with the
provisions of Section 6.07 of the Indenture;
(b) pay for all costs and expenses of the Trust (including, but not
limited to, costs and expenses relating to the organization of the Trust,
the offering, sale and issuance of the Trust Securities (including
commissions to the underwriters in connection therewith), the fees and
expenses of the Property Trustee and the Delaware Trustee, the costs and
expenses relating to the operation, maintenance and dissolution of the
Trust and the enforcement by the Property Trustee of the rights of the
holders of Preferred Securities, including without limitation, costs and
expenses of accountants, attorneys, statistical or bookkeeping services,
expenses for printing and engraving and computing or accounting equipment,
paying agent(s), registrar(s), transfer agent(s), duplicating, travel and
telephone and other telecommunications expenses and costs and expenses
incurred in connection with the acquisition, financing and disposition of
Trust assets); and
(c) pay any and all taxes (other than United States withholding taxes
attributable to the Trust or its assets) and all liabilities, costs and
expenses with respect to such taxes of the Trust.
ARTICLE VI
Covenants
---------
SECTION 6.01. Listing on an Exchange. If the Debentures are to be
-----------------------
issued as a Global Debenture in connection with the distribution of the
Debentures to the holders of the Preferred Securities issued by the Trust upon a
Special Event, the Company will use its best efforts to
<PAGE>
14
list such Debentures on the NYSE or on such other exchange as the Preferred
Securities are then listed.
SECTION 6.02. Limitation on Dividends; Transactions with Affiliates.
-----------------------------------------------------
(a) If (i) there shall have occurred any event that would constitute an Event
of Default or (ii) the Company shall be in default with respect of its payment
or any other obligations under the Guarantee, then (A) the Company shall not,
and shall cause any subsidiary of the Company that is not a wholly-owned
subsidiary of the Company not to, declare or pay any dividend on, make any
distributions with respect to, or redeem, purchase, acquire or make a
liquidation payment with respect to, any of its capital stock or the capital
stock of any such subsidiary, and (B) the Company shall not make any payment of
interest, principal or premium, if any, on or repay, repurchase or redeem any
debt securities issued by the Company which rank pari passu with or junior to
such Securities, provided that the foregoing restriction in paragraph (A) does
not apply to any [interest or] dividends paid by the Company or any of its
subsidiaries where the [interest or] dividend is [paid by way of the issuance of
securities that rank pari passu with, or junior to, the securities on which such
interest or dividend is being paid].
(b) If the Company shall have given notice of its election to defer
payments of interest on such Securities by extending the interest payment period
as provided in this First Supplemental Indenture and such period, or any
extension thereof, shall be continuing, then (A) the Company shall not and shall
cause any subsidiary of the Company not to, declare or pay any dividend or, make
any distributions with respect to, or redeem, purchase, acquire or make a
liquidation payment with respect to, any of its capital stock or the capital
stock of any such subsidiary, and (B) the Company shall not make any payment of
interest, principal or premium, if any, on or repay, repurchase or redeem any
debt securities issued by the Company which rank pari passu with or junior to
such Securities, provided that the foregoing restriction in paragraph (A) does
--------
not apply to any [interest or] dividends paid by the Company or any of its
subsidiaries where the [interest or] dividend is [paid by way of the issuance of
securities that rank pari passu with, or junior to, the securities on which such
interest or dividend is being paid].
SECTION 6.03. Covenants as to Trust. For so long as the Preferred
---------------------
Securities remain outstanding, the Company
<PAGE>
15
will (i) maintain 100% direct or indirect ownership of the Common Securities;
provided, however, that any permitted successor of the Company under the
- -------- -------
Indenture may succeed to the Company's ownership of the Common Securities, and
(ii) use its reasonable efforts to cause the Trust (a) to remain a statutory
business trust, except in connection with a distribution of Securities as
provided in the Declaration, the redemption of all of the Trust Securities and
in connection with certain mergers, consolidations or amalgamation permitted by
the Declaration, and (b) otherwise continue to be treated as a grantor trust for
United States Federal income tax purposes.
ARTICLE VII
Original Issue of Debentures
----------------------------
SECTION 7.01. Original Issue of Debentures. Debentures in the
-----------------------------
aggregate principal amount of $________ may, upon execution of this First
Supplemental Indenture, be executed by the Company and delivered to the Trustee
for authentication, and the Trustee shall thereupon authenticate and deliver
said Debentures to or upon the written order of the Company, signed by its
Chairman, its President, or any Vice President and its Treasurer or an Assistant
Treasurer, without any further action by the Company.
ARTICLE VIII
Miscellaneous
-------------
SECTION 8.01. Ratification of Indenture. The Indenture, as
--------------------------
supplemented by this First Supplemental Indenture, is in all respects ratified
and confirmed, and this First Supplemental Indenture shall be deemed part of the
Indenture in the manner and to the extent herein and therein provided.
SECTION 8.02. Trustee Not Responsible for Recitals. The recitals
-------------------------------------
herein contained are made by the Company and not by the Trustee, and the Trustee
assumes no responsibility for the correctness thereof. The Trustee makes no
representation as to the validity or sufficiency of this First Supplemental
Indenture.
<PAGE>
16
SECTION 8.03. Governing Law. This First Supplemental Indenture and
--------------
each Debenture shall be deemed to be a contract made under the internal laws of
the State of New York, and for all purposes shall be construed in accordance
with the laws of said State.
SECTION 8.04. Separability. In case any one or more of the
-------------
provisions contained in this First Supplemental Indenture or in the Debentures
shall for any reason be held to be invalid, illegal or unenforceable in any
respect, such invalidity, illegality or unenforceability shall not affect any
other provisions of this First Supplemental Indenture or of the Debentures, but
this First Supplemental Indenture and the Debentures shall be construed as if
such invalid or illegal or unenforceable provision had never been contained
herein or therein.
SECTION 8.05. Counterparts. This First Supplemental Indenture may be
-------------
executed in any number of counterparts each of which shall be an original, but
such counterparts shall together constitute but one and the same instrument.
SECTION 8.06. Successors. All agreements of the Company in this
-----------
First Supplemental Indenture and the Debentures shall bind its successor. All
agreements of the Trustee in this First Supplemental Indenture shall bind its
successor.
SECTION 8.07. Assignment. The Company will have the right at all
-----------
times to assign any of its rights or obligations under this First Supplemental
Indenture and the Debentures to a direct or indirect wholly owned subsidiary of
the Company, provided that, in the event of any such assignment, the Company
--------
will remain jointly and severally liable for all such obligations. Subject to
the foregoing, this First Supplemental Indenture will be binding upon and inure
to the benefit of the parties thereto and their respective successors and
assigns. This First Supplemental Indenture may not otherwise be assigned by the
parties hereto.
SECTION 8.08. Tax Characterization. The Company, the Trustee and
---------------------
each Holder of a Debenture (by acceptance thereof) agrees to treat the
Debentures as debt instruments for United States Federal, state and local income
and franchise tax purposes and agrees not to take any contrary position before
any taxing authority or on any tax return.
<PAGE>
17
IN WITNESS WHEREOF, the parties hereto have caused this First
Supplemental Indenture to be duly executed as of the day and year first above
written.
TIME WARNER INC.,
by
------------------------------------
Name:
Title:
[Seal]
Attest:
- ----------------------------
Title: Assistant
Secretary
CHEMICAL BANK,
by
------------------------------------
Name:
Title:
[Seal]
Attest:
- ----------------------------
Title: [ ]
<PAGE>
18
STATE OF )
) ss.:
COUNTY OF )
On the ___ day of ____, 1995, before me personally came _______ to be
known, who, being by me duly sworn, did depose and say that he is the ________
of Time Warner Inc., one of the corporations described in and which executed the
above instrument; that he knows the corporate seal of said corporation; that the
seal affixed to the said instrument is such corporation seal; that it was so
affixed by authority of the Board of Directors of said corporation, and that he
signed his name thereto by like authority.
--------------------------------
Notary Public
[Notarial Seal] Commission Expires
<PAGE>
19
STATE OF )
) ss.:
COUNTY OF )
On the ___ day of _______________, 1995, before me personally came
__________ to be known, who, being by me duly sworn, did depose and say that he
is the ________ of [Chemical Bank], one of the corporations described in and
which executed the above instrument; that he knows the corporate seal of said
corporation; that the seal affixed to the said instrument is such corporation
seal; that it was so affixed by authority of the Board of Directors of said
corporation, and that he signed his name thereto by like authority.
----------------------------------
Notary Public
[Notarial Seal] Commission Expires
<PAGE>
EXHIBIT A
(FORM OF FACE OF DEBENTURE)
[IF THE DEBENTURE IS TO BE A GLOBAL DEBENTURE, INSERT - This Debenture
is a Global Debenture within the meaning of the Indenture hereinafter referred
to and is registered in the name of a Depository or a nominee of a Depository.
This Debenture is exchangeable for Debentures registered in the name of a person
other than the Depository or its nominee only in the limited circumstances
described in the Indenture, and no transfer of this Debenture (other than a
transfer of this Debenture as a whole by the Depository to a nominee of the
Depository or by a nominee of the Depository to the Depository or another
nominee of the Depository) may be registered except in limited circumstances.
Unless this Debenture is presented by an authorized representative of
The Depository Trust Company (55 Water Street, New York, New York) to the issuer
or its agent for registration of transfer, exchange or payment, and any
Debenture issued is registered in the name of Cede & Co. or such other name as
requested by an authorized representative of The Depository Trust Company and
any payment hereon is made to Cede & Co., ANY TRANSFER, PLEDGE OR OTHER USE
HEREOF FOR VALUE OR OTHERWISE BY A PERSON IS WRONGFUL since the registered owner
hereof, Cede & Co., has an interest herein.]
Registered $ _____________
No. ___________ CUSIP No. ______
TIME WARNER INC.
___% SUBORDINATED DEBENTURE DUE 2025
TIME WARNER INC., a Delaware corporation (the "Company", which term
includes any successor corporation under the Indenture hereinafter referred to),
for value received, hereby promises to pay to ________, or registered assigns,
the principal sum of _______________ DOLLARS on ____________, 2025, and to pay
interest on said principal sum from _____, 1995, or from the most recent
interest payment date (each such date, an "Interest Payment Date") to which
interest has been paid or duly provided for, quarterly (subject to deferral as
set forth herein) in arrears on [March 31, June 30, September 30 and December
31] of each year commencing ____________, 1995, at the rate of ___ % per
<PAGE>
2
annum until the principal hereof shall have become due and payable, and on any
overdue principal and premium, if any, and (without duplication and to the
extent that payment of such interest is enforceable under applicable law) on any
overdue installment of interest at the same rate per annum compounded quarterly.
The amount of interest payable on any Interest Payment Date shall be computed on
the basis of a 360-day year of twelve 30-day months. In the event that any date
on which interest is payable on this Debenture is not a Business Day, then
payment of interest payable on such date will be made on the next succeeding day
that is a Business Day (and without any interest or other payment in respect of
any such delay), except that, if such Business Day is in the next succeeding
calendar year, such payment shall be made on the immediately preceding Business
Day, in each case with the same force and effect as if made on such date. The
interest installment so payable, and punctually paid or duly provided for, on
any Interest Payment Date will, as provided in the Indenture, be paid to the
person in whose name this Debenture (or one or more Predecessor Debentures, as
defined in said Indenture) is registered at the close of business on the regular
record date for such interest installment, which shall be the close of business
on the business day next preceding such Interest Payment Date. [IF PURSUANT TO
THE PROVISIONS OF THE INDENTURE OR THIS FIRST SUPPLEMENTAL INDENTURE THE
DEBENTURES ARE NO LONGER REPRESENTED BY A GLOBAL DEBENTURE--which shall be the
close of business on the ____th business day next preceding such Interest
Payment Date.] Any such interest installment not punctually paid or duly
provided for shall forthwith cease to be payable to the registered Holders on
such regular record date and may be paid to the Person in whose name this
Debenture (or one or more Predecessor Debentures) is registered at the close of
business on a special record date to be fixed by the Trustee for the payment of
such defaulted interest, notice whereof shall be given to the registered Holders
of this series of Debentures not less than 10 days prior to such special record
date, or may be paid at any time in any other lawful manner not inconsistent
with the requirements of any securities exchange on which the Debentures may be
listed, and upon such notice as may be required by such exchange, all as more
fully provided in the Indenture. The principal of (and premium, if any) and
the interest on this Debenture shall be payable at the office or agency of the
Trustee maintained for that purpose in any coin or currency of the United States
of America that at the time of payment is legal tender for payment of public and
private debts; provided, however, that payment of interest may be made at
-------- -------
<PAGE>
3
the option of the Company by check mailed to the registered Holder at such
address as shall appear in the Security Register. Notwithstanding the
foregoing, so long as the Holder of this Debenture is the Property Trustee, the
payment of the principal of (and premium, if any) and interest on this Debenture
will be made at such place and to such account as may be designated by the
Property Trustee.
The indebtedness evidenced by this Debenture is, to the extent
provided in the Indenture, subordinate and junior in right of payment to the
prior payment in full of all Senior Indebtedness, and this Debenture is issued
subject to the provisions of the Indenture with respect thereto. Each Holder of
this Debenture, by accepting the same, (a) agrees to and shall be bound by such
provisions, (b) authorizes and directs the Trustee on his or her behalf to take
such actions as may be necessary or appropriate to acknowledge or effectuate the
subordination so provided and (c) appoints the Trustee his or her attorney-in-
fact for any and all such purposes. Each Holder hereof, by his or her
acceptance hereof, hereby waives all notice of the acceptance of the
subordination provisions contained in the Indenture by each holder of Senior
Indebtedness, whether now outstanding or hereafter incurred, and waives reliance
by each such holder upon said provisions.
This Debenture shall not be entitled to any benefit under the
Indenture hereinafter referred to, be valid or become obligatory for any purpose
until the Certificate of Authentication hereon shall have been signed by or on
behalf of the Trustee.
Unless the Certificate of Authentication hereon has been executed by
the Trustee referred to on the reverse side hereof, this Debenture shall not be
entitled to any benefit under the Indenture or be valid or obligatory for any
purpose.
The provisions of this Debenture are continued on the reverse side
hereof and such continued provisions shall for all purposes have the same effect
as though fully set forth at this place.
<PAGE>
4
IN WITNESS WHEREOF, the Company has caused this instrument to be
executed.
Dated____________________
TIME WARNER INC.
by_____________________
Name:
Title:
Asset:
By____________________
Secretary
<PAGE>
5
(FORM OF CERTIFICATE OF AUTHENTICATION)
CERTIFICATE OF AUTHENTICATION
This is one of the Debentures of the series of Debentures described in
the within-mentioned Indenture.
[CHEMICAL BANK]
_______________________ ______________________
as Trustee or as Authentication Agent
By_____________________ By______________________
Authorized Signatory Authorized Signatory
(FORM OF REVERSE OF DEBENTURE)
This Debenture is one of a duly authorized series of Debentures of the
Company (herein sometimes referred to as the "Debentures"), specified in the
Indenture, all issued or to be issued in one or more series under and pursuant
to an Indenture dated as of ________, 1995, duly executed and delivered between
the Company and Chemical Bank, as Trustee (the "Trustee"), as supplemented by
the First Supplemental Indenture dated as of ________, 1995, between the Company
and the Trustee (the Indenture as so supplemented, the "Indenture"), to which
Indenture and all indentures supplemental thereto reference is hereby made for a
description of the rights, limitations of rights, obligations, duties and
immunities thereunder of the Trustee, the Company and the Holders of the
Debentures. By the terms of the Indenture, the Debentures are issuable in
series that may vary as to amount, date of maturity, rate of interest and in
other respects as provided in the Indenture. This series of Debentures is
limited in aggregate principal amount as specified in said First Supplemental
Indenture.
Upon the occurrence and continuation of a Special Event in certain
circumstances, the Company will have the right to elect to (a) dissolve the
Trust and cause the Subordinated Debentures to be distributed to holders of the
Preferred Securities, (b) redeem the Debentures at a
<PAGE>
6
redemption price equal to 100% of their principal amount together with any
interest accrued thereon (the "Redemption Price") or (c) in the case of a Tax
Event, allow the Subordinated Debentures to remain outstanding and indemnify the
Trust for any taxes payable by it as a result of such Tax Event. The Redemption
Price shall be paid on the date of such redemption or at such earlier date as
the Company determines. The Company shall have the right to redeem this
Debenture at the option of the Company, without premium or penalty, in whole or
in part of any time or after _____, 2000 (an "Optional Redemption"), at a
redemption price equal to 100% of the principal amount plus any accrued but
unpaid interest, to the date of such redemption (the "Optional Redemption
Price"). Any redemption pursuant to this paragraph will be made upon not less
than 20 nor more than 45 days' notice, at the Optional Redemption Price. If the
Debentures are only partially redeemed by the Company pursuant to an Optional
Redemption, the Debentures will be redeemed pro rata or by lot or by any other
method utilized by the Trustee, provided that if, at the time of redemption, the
Debentures are registered as a Global Debenture, the Depository shall determine
by lot the principal amount of such Debentures held by each Debentureholder to
be redeemed.
In the event of redemption of this Debenture in part only, a new
Debenture or Debentures of this series for the unredeemed portion hereof will be
issued in the name of the Holder hereof upon the cancelation hereof.
In case an Event of Default, as defined in the Indenture, shall have
occurred and be continuing, the principal of all of the Debentures may be
declared, and upon such declaration shall become, due and payable, in the
manner, with the effect and subject to the conditions provided in the Indenture.
The Indenture contains provisions permitting the Company and the
Trustee, with the consent of the Holders of not less than a majority in
aggregate principal amount of the Debentures of each series affected at the time
outstanding, as defined in the Indenture, to execute supplemental indentures for
the purpose of adding any provisions to or changing in any manner or eliminating
any of the provisions of the Indenture or of any supplemental indenture or of
modifying in any manner the rights of the Holders of the Debentures; provided,
--------
however, that no such supplemental indenture shall (i) extend the fixed maturity
- -------
of any Debentures of any series, or reduce the principal
<PAGE>
7
amount thereof, or reduce the rate or extend the time of payment of interest
thereon, without the consent of the Holder of each Debenture so affected, or
(ii) reduce the aforesaid percentage of Debentures, the Holders of which are
required to consent to any such supplemental indenture, without the consent of
the Holders of each Debenture then outstanding and affected thereby. The
Indenture also contains provisions permitting the Holders of a majority in
aggregate principal amount of the Debentures of any series at the time
outstanding affected thereby, on behalf of all of the Holders of the Debentures
of such series, to waive any past default in the performance of any of the
covenants contained in the Indenture, or established pursuant to the Indenture
with respect to such series, and its consequences, except a default in the
payment of the principal of or premium, if any, or interest on any of the
Debentures of such series. Any such consent or waiver by the registered Holder
of this Debenture (unless revoked as provided in the Indenture) shall be
conclusive and binding upon such holder and upon all future Holders and owners
of this Debenture and of any Debenture issued in exchange hereof or in place
hereof (whether by registration of transfer or otherwise), irrespective of
whether or not any notation of such consent or waiver is made upon this
Debenture.
No reference herein to the Indenture and no provision of this
Debenture or of the Indenture shall alter or impair the obligation of the
Company, which is absolute and unconditional, to pay the principal of and
premium, if any, and interest on this Debenture at the time and place and at the
rate and in the money herein prescribed.
The Company shall have the right at any time during the term of the
Debentures from time to time to extend the interest payment period of such
Debentures to up to 20 consecutive quarters (an "Extended Interest Payment
Period"), at the end of which period the Company shall pay all interest then
accrued and unpaid (together with interest thereon at the rate specified for the
Debentures to the extent that payment of such interest is enforceable under
applicable law). Before the termination of any such Extended Interest Payment
Period, the Company may further extend such Extended Interest Payment Period,
provided that such Extended Interest Payment Period together with all such
further extensions thereof shall not exceed 20 consecutive quarters. At the
termination of any such Extended Interest Payment Period and upon the payment of
all accrued and
<PAGE>
8
unpaid interest and any additional amounts then due, the Company may commence a
new Extended Interest Payment Period.
As provided in the Indenture and subject to certain limitations
therein set forth, this Debenture is transferable by the registered Holder
hereof on the Security Register of the Company, upon surrender of this Debenture
for registration of transfer at the office or agency of the Company in the City
and State of New York accompanied by a written instrument or instruments of
transfer in form satisfactory to the Company or the Trustee duly executed by the
registered Holder hereof or his attorney duly authorized in writing, and
thereupon one or more new Debentures of authorized denominations and for the
same aggregate principal amount and series will be issued to the designated
transferee or transferees. No service charge will be made for any such
transfer, but the Company may require payment of a sum sufficient to cover any
tax or other governmental charge payable in relation thereto.
Prior to due presentment for registration of transfer of this
Debenture, the Company, the Trustee, any paying agent and any Security Registrar
may deem and treat the registered holder hereof as the absolute owner hereof
(whether or not this Debenture shall be overdue and notwithstanding any notice
of ownership or writing hereon made by anyone other than the Debenture
Registrar) for the purpose of receiving payment of or on account of the
principal hereof and premium, if any, and interest due hereon and for all other
purposes, and neither the Company nor the Trustee nor any paying agent nor any
Debenture Registrar shall be affected by any notice to the contrary.
No recourse shall be had for the payment of the principal of or the
interest on this Debenture, or for any claim based hereon, or otherwise in
respect hereof, or based on or in respect of the Indenture, against any
incorporator, stockholder, officer or director, past, present or future, as
such, of the Company or of any predecessor or successor corporation, whether by
virtue of any constitution, statute or rule of law, or by the enforcement of any
assessment or penalty or otherwise, all such liability being, by the acceptance
hereof and as part of the consideration for the issuance hereof, expressly
waived and released.
The debentures of this series are issuable only in registered form
without coupons in denominations of $25 and any integral multiple thereof. This
Global Debenture is
<PAGE>
9
exchangeable for Debentures in definitive form only under certain limited
circumstances set forth in the Indenture. Debentures of this series so issued
are issuable only in registered form without coupons in denominations of $25 and
any integral multiple thereof. As provided in the Indenture and subject to
certain limitations therein set forth, Debentures of this series are
exchangeable for a like aggregate principal amount of Debentures of this series
of a different authorized denomination, as requested by the Holder surrendering
the same.
All terms used in this Debenture that are defined in the Indenture
shall have the meanings assigned to them in the Indenture.
<PAGE>
EXHIBIT 4.12
This GUARANTEE AGREEMENT dated as of [ ], 1995,
executed and delivered by TIME WARNER INC., a Delaware
corporation ("Time Warner" or the "Guarantor"), and [ ],
as the initial Guarantee Trustee (as defined herein for the
benefit of the Holders (as defined herein) from time to time of
the Preferred Securities (as defined herein) of Time Warner
Capital I, a Delaware statutory business trust (the "Trust").
WHEREAS, pursuant to an Amended and Restated Declaration of Trust (the
"Declaration"), dated as of [ ], 1995, among the trustees of the Trust named
therein, Time Warner Inc., as Sponsor, and the Holders from time to time of
undivided beneficial interests in the assets of the Trust, the Trust is issuing
as of the date hereof $[ ] aggregate liquidation amount of its %[ ]
Preferred Trust Securities (the "Preferred Securities") representing undivided
beneficial interests in the assets of the Trust, having the terms set forth in
Exhibit B to the Declaration;
WHEREAS the Preferred Securities will be issued by the Trust upon
deposit of the Guarantor's Subordinated Debentures (as defined herein) with the
Trust as trust assets; and
WHEREAS, as incentive for the Holders to purchase the Preferred
Securities, the Guarantor desires to irrevocably and unconditionally agree, to
the extent set forth herein, to pay to the Holders of the Preferred Securities
the Guarantee Payments (as defined herein) and to make certain other payments on
the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the purchase by each Holder of
Preferred Securities, which purchase the Guarantor hereby agrees shall benefit
the Guarantor, the Guarantor executes and delivers this Guarantee Agreement for
the benefit of the Holders from time to time of the Preferred Securities.
<PAGE>
2
ARTICLE I
Definitions
-----------
SECTION 1.01. Terms Generally. (a) The definitions in Section 1.02
---------------
shall apply equally to both the singular and plural forms of the terms defined.
Whenever the context may require, any pronoun shall include the corresponding
masculine, feminine and neuter forms. The words "include", "includes" and
"including" shall be deemed to be followed by the phrase "without limitation".
All references herein to Articles, Sections, Exhibits and Schedules shall be
deemed references to Articles and Sections of, and Exhibits and Schedules to,
this Guarantee Agreement unless the context shall otherwise require. Except as
otherwise expressly provided herein, any reference in this Guarantee Agreement
to this Guarantee Agreement, the Indenture or any other document shall mean such
document as amended, restated, supplemented or otherwise modified from time to
time.
(b) Capitalized terms used in this Guarantee Agreement but not
defined in the preamble above have the respective meanings assigned to them in
Section 1.02.
(c) A term defined anywhere in this Guarantee Agreement has the same
meaning throughout.
(d) A term defined in the Trust Indenture Act has the same meaning
when used in this Guarantee Agreement unless otherwise defined in this Guarantee
Agreement or unless the context otherwise requires.
SECTION 1.02. Definitions. As used in this Guarantee Agreement, the
-----------
following terms shall have the meanings specified below:
"Affiliate" has the same meaning as given to that term in Rule 405 of
the Securities Act of 1933, as amended, or any successor rule thereunder.
"Board of Directors" means (i) the board of directors of Time Warner,
(ii) any duly authorized committee of such board, (iii) any committee of
officers of Time Warner or (iv) any officer of Time Warner acting, in the case
of (iii) or (iv), pursuant to authority granted by the board of directors of
Time Warner or any committee of such board.
<PAGE>
3
"Commission" means the Securities and Exchange Commission.
"Common Securities" means the securities representing undivided
beneficial interests in the assets of the Trust, having the terms set forth in
Exhibit C to the Declaration.
"Covered Person" means any Holder of Preferred Securities.
"Event of Default" means a default by the Guarantor on any of its
payment or other obligations under this Guarantee Agreement.
"Guarantee Payments" shall mean the following payments or
distributions, without duplication, with respect to the Preferred Securities, to
the extent not paid or made by the Trust: (i)(a) any accrued and unpaid
Distributions (as defined in the Declaration) that are required to be paid on
such Preferred Securities and (b) the redemption price, including all accrued
and unpaid distributions to the date of redemption (the "Redemption Price") with
respect to any Preferred Securities subject to mandatory redemption or called
for redemption by the Trust, but if and only if to the extent that in each case
the Guarantor has made a payment to the Property Trustee of interest or
principal on the Subordinated Debentures, as the case may be, and (ii) upon a
voluntary or involuntary dissolution, winding-up or termination of the Trust
(other than in connection with the distribution of Subordinated Debentures to
the Holders in exchange for Preferred Securities upon the maturity or redemption
of the Subordinated Debentures as provided in the Declaration), the lesser of
(a) the aggregate of the liquidation amount and all accrued and unpaid
Distributions on the Preferred Securities to the date of payment to the extent
the Trust has funds available therefor, and (b) the amount of assets of the
Trust remaining available for distribution to Holders upon such liquidation,
dissolution, winding-up or termination of the Trust (in either case, the
"Liquidation Distribution").
"Guarantee Trustee" means The First National Bank of Chicago until a
Successor Guarantee Trustee has been appointed and accepted such appointment
pursuant to the terms of this Guarantee Agreement and thereafter means each such
Successor Guarantee Trustee.
<PAGE>
4
"Holder" shall mean any holder, as registered on the books and records
of the Trust, of any Preferred Securities; provided, however, that, in
-------- -------
determining whether the holders of the requisite percentage of Preferred
Securities have given any request, notice, consent or waiver hereunder, "Holder"
shall not include the Guarantor or any entity directly or indirectly controlling
or controlled by or under direct or indirect common control with the Guarantor.
"Indemnified Person" means the Guarantee Trustee, any Affiliate of the
Guarantee Trustee, and any officers, directors, shareholders, members, partners,
employees, representatives or agents of the Guarantee Trustee.
"Indenture" means the Indenture dated as of [ ], 1995 between
the Guarantor and Chemical Bank, as trustee, and any indenture supplemental
thereto pursuant to which the Subordinated Debentures are to be issued.
"Majority in aggregate liquidation amount of the Preferred Securities"
means, except as otherwise required by the Trust Indenture Act, Holder(s) of
outstanding Preferred Securities voting together as a single class, who are the
record owners of Preferred Securities whose aggregate liquidation amount
represents more than 50% of the aggregate liquidation amount of all outstanding
Preferred Securities.
"Person" means a legal person, including any individual, corporation,
estate, partnership, joint venture, association, joint stock company, limited
liability company, trust, unincorporated association or government or any agency
or political subdivision thereof or any other entity of whatever nature.
"Property Trustee" means the Person acting as Property Trustee under
the Declaration.
"Resignation Request" has the meaning assigned to such term in Section
4.02(d).
"Responsible Officer" means, with respect to the Guarantee Trustee,
the chairman of the Board of Directors, the President, any Vice President, any
Assistant Vice President, the Secretary, any Assistant Secretary, the Treasurer,
any Assistant Treasurer, any Trust Officer or Assistant Trust Officer or any
other Officer of the Guarantee Trustee customarily performing functions similar
<PAGE>
5
to those performed by any of the above designated officers and also means, with
respect to a particular corporate trust matter, any other officer to whom such
matter is referred because of that officer's knowledge of and familiarity with
the particular subject.
"Subordinated Debentures" means the series of Subordinated Debentures
issued by the Guarantor under the Indenture to the Property Trustee and entitled
the " % Subordinated Debentures due 2025".
"Successor Guarantee Trustee" means a successor Guarantee Trustee
possessing the qualifications to act as a Guarantee Trustee under Section 4.01.
"Trust Indenture Act" means the Trust Indenture Act of 1939, as
amended.
ARTICLE II
Trust Indenture Act
-------------------
SECTION 2.01. Trust Indenture Act; Application. (a) This Guarantee
---------------------------------
Agreement is subject to the provisions of the Trust Indenture Act that are
required to be part of this Guarantee Agreement and shall, to the extent
applicable, be governed by such provisions.
(b) If and to the extent that any provision of this Guarantee
Agreement limits, qualifies or conflicts with the duties imposed by (S)(S) 310
to 317, inclusive, of the Trust Indenture Act, such imposed duties shall
control.
(c) The application of the Trust Indenture Act to this Guarantee
Agreement shall not affect the nature of the Preferred Securities as equity
securities representing undivided beneficial interests in the assets of the
Trust.
SECTION 2.02. Lists of Holders of Preferred Securities. (a) The
-----------------------------------------
Guarantor shall provide the Guarantee Trustee with such information as is
required under (S) 312(a) of the Trust Indenture Act at the times and in the
manner provided in (S) 312(a).
(b) The Guarantee Trustee shall comply with its obligations under
(S)(S) 310(b), 311 and 312(b) of the Trust Indenture Act.
<PAGE>
6
SECTION 2.03. Reports by the Guarantee Trustee. Within 60 days after
---------------------------------
May 15 of each year, the Guarantee Trustee shall provide to the Holders of the
Preferred Securities such reports as are required by (S) 313 of the Trust
Indenture Act, if any, in the form, in the manner and at the times provided by
(S) 313 of the Trust Indenture Act. The Guarantee Trustee shall also comply
with the requirements of (S) 313(d) of the Trust Indenture Act.
SECTION 2.04. Periodic Reports to Guarantee Trustee. The Guarantor
--------------------------------------
shall provide to the Guarantee Trustee, the Commission and the Holders of the
Preferred Securities, as applicable, such documents, reports and information as
required by (S) 314(a)(l)-(3), if any, of the Trust Indenture Act and the
compliance certificates required by (S) 314(a)(4) and (c) of the Trust Indenture
Act, any such certificates to be provided in the form, in the manner and at the
times required by (S) 314(a)(4) and (c) of the Trust Indenture Act, provided
that any certificate to be provided pursuant to (S) 314(a)(4) of the Trust
Indenture Act shall be provided within 120 days of the end of each fiscal year
of the Trust.
SECTION 2.05. Evidence of Compliance with Conditions Precedent. The
-------------------------------------------------
Guarantor shall provide to the Guarantee Trustee such evidence of compliance
with any conditions precedent, if any, provided for in this Guarantee Agreement
which relate to any of the matters set forth in (S) 314(c) of the Trust
Indenture Act. Any certificate or opinion required to be given pursuant to (S)
314(c) shall comply with (S) 314(e) of the Trust Indenture Act.
SECTION 2.06. Events of Default; Waiver. (a) Subject to Section
--------------------------
2.06(b), Holders of Preferred Securities may by vote of at least a Majority in
aggregate liquidation amount of the Preferred Securities, (i) direct the time,
method and place of conducting any proceeding for any remedy available to the
Guarantee Trustee, or exercising any trust or power conferred upon the Guarantee
Trustee or (ii) on behalf of the Holders of all Preferred Securities waive any
past Event of Default and its consequences. Upon such waiver, any such default
shall cease to exist, and any Event of Default arising therefrom shall be deemed
to have been cured, for every purpose of this Guarantee Agreement, but no such
waiver shall extend to any subsequent or other default or Event of Default or
impair any right consequent thereon.
<PAGE>
7
(b) The right of any Holder of Preferred Securities to receive
payment of the Guarantee Payments in accordance with this Guarantee Agreement,
or to institute suit for the enforcement of any such payment, shall not be
impaired without the consent of each such Holder.
SECTION 2.07. Disclosure of Information. The disclosure of
--------------------------
information as to the names and addresses of the Holders of the Preferred
Securities in accordance with (S) 312 of the Trust Indenture Act, regardless of
the source from which such information was derived, shall not be deemed to be a
violation of any existing law, or any law hereafter enacted which does not
specifically refer to (S) 312 of the Trust Indenture Act, nor shall the
Guarantee Trustee be held accountable by reason of mailing any material pursuant
to a request made under (S) 312(b) of the Trust Indenture Act.
SECTION 2.08. Conflicting Interest. The Declaration shall be deemed
---------------------
to be specifically described in this Guarantee Agreement for the purposes of
clause (i) of the first proviso contained in Section 310(b) of the Trust
Indenture Act.
ARTICLE III
Powers, Duties and Rights of Guarantee Trustee
----------------------------------------------
SECTION 3.01. Powers and Duties of the Guarantee Trustee. (a) This
-------------------------------------------
Guarantee Agreement shall be held by the Guarantee Trustee in trust for the
benefit of the Holders of the Preferred Securities. The Guarantee Trustee shall
not transfer its right, title and interest in the Guarantee Agreement to any
Person except a Successor Guarantee Trustee on acceptance by such Successor
Guarantee Trustee of its appointment to act as Guarantee Trustee or to a Holder
of Preferred Securities exercising his or her rights pursuant to Section 5.04.
The right, title and interest of the Guarantee Trustee to the Guarantee
Agreement shall vest automatically in each Person who may hereafter be appointed
as Guarantee Trustee in accordance with Article IV. Such vesting and cessation
of title shall be effective whether or not conveyancing documents have been
executed and delivered.
(b) If an Event of Default occurs and is continuing, the Guarantee
Trustee shall enforce this Guarantee Agreement for the benefit of the Holders of
the Preferred Securities.
<PAGE>
8
(c) This Guarantee Agreement and all moneys received by the Property
Trustee hereunder in respect of the Guarantee Payments will not be subject to
any right, charge, security interest, lien or claim of any kind in favor of, or
for the benefit of the Guarantee Trustee or its agents or their creditors.
(d) The Guarantee Trustee shall, within 90 days after the occurrence
of an Event of Default, transmit by mail, first class postage prepaid, to the
holders of the Preferred Securities, as their names and addresses appear upon
the register, notice of all Events of Default known to the Guarantee Trustee,
unless such defaults shall have been cured before the giving of such notice;
provided, that the Guarantee Trustee shall be protected in withholding such
- --------
notice if and so long as the board of directors, the executive committee or a
trust committee of directors and/or Responsible Officers of the Guarantee
Trustee in good faith determine that the withholding of such notice is in the
interests of the Holders of the Preferred Securities. The Guarantee Trustee
shall not be deemed to have knowledge of any default except any default as to
which the Guarantee Trustee shall have received written notice or a Responsible
Officer charged with the administration of this Guarantee Agreement shall have
obtained written notice.
(e) The Guarantee Trustee shall continue to serve until, a Successor
Guarantee Trustee has been appointed and that appointment is in accordance with
Article IV.
SECTION 3.02. Certain Rights and Duties of the Guarantee Trustee. (a)
---------------------------------------------------
The Guarantee Trustee, before the occurrence of an Event of Default and after
the curing or waiver of all Events of Default that may have occurred, shall
undertake to perform only such duties as are specifically set forth in this
Guarantee Agreement, and no implied covenants shall be read into this Guarantee
Agreement against the Guarantee Trustee. In case an Event of Default has
occurred (that has not been cured or waived pursuant to Section 2.06(a)), the
Guarantee Trustee shall exercise such of the rights and powers vested in it by
this Guarantee Agreement, and use the same degree of care and skill in their
exercise, as a prudent person would exercise or use under the circumstances in
the conduct of his or her own affairs.
(b) No provision of this Guarantee Agreement shall be construed to
relieve the Guarantee Trustee from
<PAGE>
9
liability for its own negligent action, its own negligent failure to act or its
own wilful misconduct, except that:
(i) prior to the occurrence of an Event of Default and after the
curing or waiving of all such Events of Default that may have occurred:
(A) the duties and obligations of the Guarantee Trustee shall be
determined solely by the express provisions of this Guarantee Agreement,
and the Guarantee Trustee shall not be liable except for the performance of
such duties and obligations as are specifically set forth in this Guarantee
Agreement, and no implied covenants or obligations shall be read into this
Guarantee Agreement against the Guarantee Trustee; and
(B) in the absence of bad faith on the part of the Guarantee Trustee,
the Guarantee Trustee may conclusively rely, as to the truth of the
statements and the correctness of the opinions expressed therein, upon any
certificates or opinions furnished to the Guarantee Trustee and conforming
to the requirements of this Guarantee Agreement; but in the case of any
such certificates or opinions that by any provision hereof are specifically
required to be furnished to the Guarantee Trustee, the Guarantee Trustee
shall be under a duty to examine the same to determine whether or not they
conform to the requirements of this Guarantee Agreement;
(ii) the Guarantee Trustee shall not be liable for any error of
judgment made in good faith by a Responsible Officer of the Guarantee
Trustee, unless it shall be proved that the Guarantee Trustee was negligent
in ascertaining the pertinent facts upon which such judgment was made;
(iii) the Guarantee Trustee shall not be liable with respect to any
action taken or omitted to be taken by it in good faith in accordance with
the direction of the Holders of Preferred Securities as provided herein
relating to the time, method and place of conducting any proceeding for any
remedy available to the Guarantee Trustee, or exercising any trust or power
conferred upon the Guarantee Trustee under this Guarantee Agreement; and
<PAGE>
10
(iv) no provision of this Guarantee Agreement shall require the
Guarantee Trustee to expend or risk its own funds or otherwise incur
personal financial liability in the performance of any of its duties or in
the exercise of any of its rights or powers, if it shall have reasonable
ground for believing that the repayment of such funds or liability is not
reasonably assured to it under the terms of this Guarantee Agreement or
adequate indemnity against such risk or liability is not reasonably assured
to it.
(c) Subject to the provisions of Sections 3.02(a) and (b):
(i) Whenever in the administration of this Guarantee Agreement, the
Guarantee Trustee shall deem it desirable that a matter be proved or
established prior to taking, suffering or omitting any action hereunder,
the Guarantee Trustee (unless other evidence is herein specifically
prescribed) may, in the absence of bad faith on its part, request and rely
upon a certificate, which shall comply with the provisions of (S) 314(e) of
the Trust Indenture Act, signed by any authorized officer of the Guarantor;
(ii) the Guarantee Trustee (A) may consult with counsel (which may be
counsel to the Guarantor or any of its Affiliates and may include any of
its employees) selected by it in good faith and with due care and the
written advice or opinion of such counsel with respect to legal matters
shall be full and complete authorization and protection in respect of any
action taken, suffered or omitted by it hereunder in good faith and in
reliance thereon and in accordance with such advice and opinion and (B)
shall have the right at any time to seek instructions concerning the
administration of this Guarantee Agreement from any court of competent
jurisdiction;
(iii) the Guarantee Trustee may execute any of the trusts or powers
hereunder or perform any duties hereunder either directly or by or through
agents or attorneys and the Guarantee Trustee shall not be responsible for
any misconduct or negligence on the part of any agent or attorney appointed
by it in good faith and with due care;
<PAGE>
11
(iv) the Guarantee Trustee shall be under no obligation to exercise
any of the rights or powers vested in it by this Guarantee Agreement at the
request or direction of any Holders of Preferred Securities, unless such
Holders shall have offered to the Guarantee Trustee reasonable security and
indemnity against the costs, expenses (including attorneys' fees and
expenses) and liabilities that might be incurred by it in complying with
such request or direction; provided that nothing contained in this clause
(iv) shall relieve the Guarantee Trustee of the obligation, upon the
occurrence of an Event of Default (which has not been cured or waived) to
exercise such of the rights and powers vested in it by this Guarantee
Agreement, and to use the same degree of care and skill in this exercise as
a prudent person would exercise or use under the circumstances in the
conduct of his or her own affairs; and
(v) any action taken by the Guarantee Trustee or its agents hereunder
shall bind the Holders of the Preferred Securities and the signature of the
Guarantee Trustee or its agents alone shall be sufficient and effective to
perform any such action; and no third party shall be required to inquire as
to the authority of the Guarantee Trustee so to act, or as to its
compliance with any of the terms and provisions of this Guarantee
Agreement, both of which shall be conclusively evidenced by the Guarantee
Trustee's or its agent's taking such action.
SECTION 3.03. Not Responsible for Recitals or Issuance of Guarantee.
------------------------------------------------------
The recitals contained in this Guarantee shall be taken as the statements of the
Guarantor and the Guarantee Trustee does not assume any responsibility for their
correctness. The Guarantee Trustee makes no representations as to the validity
or sufficiency of this Guarantee Agreement.
ARTICLE IV
Guarantee Trustee
-----------------
SECTION 4.01. Qualifications. (a) There shall at all times be a
---------------
Guarantee Trustee which shall:
(i) not be an Affiliate of the Guarantor; and
<PAGE>
12
(ii) be a corporation organized and doing business under the laws of
the United States of America or any State or Territory thereof or of the
District of Columbia, or a corporation or Person permitted by the
Commission to act as an institutional trustee under the Trust Indenture
Act, authorized under such laws to exercise corporate trust powers, having
a combined capital and surplus of at least $50 million and subject to
supervision or examination by Federal, State, Territorial or District of
Columbia authority. If such corporation publishes reports of condition at
least annually, pursuant to law or to the requirements of the supervising
or examining authority referred to above, then for the purposes of this
Section 4.01(a)(ii), the combined capital and surplus of such corporation
shall be deemed to be its combined capital and surplus as set forth in its
most recent report of condition so published.
If at any time the Guarantee Trustee shall cease to satisfy the
requirements of clauses (i) and (ii) above, the Guarantee Trustee shall
immediately resign in the manner and with the effect set out in Section 4.02.
If the Guarantee Trustee has or shall acquire any "conflicting interest" within
the meaning of (S) 310(b) of the Trust Indenture Act, the Guarantee Trustee and
the Guarantor shall in all respects comply with the provisions of (S) 310(b) of
the Trust Indenture Act.
SECTION 4.02. Appointment, Removal and Resignation of Guarantee
-------------------------------------------------
Trustee. (a) Subject to Section 4.02(b), the Guarantee Trustee may be
- --------
appointed or removed without cause at any time by the Guarantor.
(b) The Guarantee Trustee shall not be removed in accordance with
Section 4.02(a) until a Successor Guarantee Trustee possessing the
qualifications to act as Guarantee Trustee under Section 4.01(a) has been
appointed and has accepted such appointment by written instrument executed by
such Successor Guarantee Trustee and delivered to the Guarantor and the
Guarantee Trustee being removed.
(c) The Guarantee Trustee appointed to office shall hold office until
his successor shall have been appointed or until its removal or resignation.
(d) The Guarantee Trustee may resign from office (without need for
prior or subsequent accounting) by an
<PAGE>
13
instrument (a "Resignation Request") in writing signed by the Guarantee Trustee
and delivered to the Guarantor, which resignation shall take effect upon such
delivery or upon such later date as is specified therein; provided, however,
-------- -------
that no such resignation of the Guarantee Trustee shall be effective until a
Successor Guarantee Trustee possessing the qualifications to act as Guarantee
Trustee under Section 4.1(a) has been appointed and has accepted such
appointment by instrument executed by such Successor Guarantee Trustee and
delivered to Guarantor and the resigning Guarantee Trustee.
(e) If no Successor Guarantee Trustee shall have been appointed and
accepted appointment as provided in this Section 4.02 within 60 days after
delivery to the Guarantor of a Resignation Request, the resigning Guarantee
Trustee may petition any court of competent jurisdiction for appointment of a
Successor Guarantee Trustee. Such court may thereupon after such notice, if
any, as it may deem proper and prescribe, appoint a Successor Guarantee Trustee.
ARTICLE V
Guarantee
---------
SECTION 5.01. Guarantee. The Guarantor irrevocably and
----------
unconditionally agrees to pay in full to the Holders the Guarantee Payments
(without duplication of amounts theretofore paid by the Trust) regardless of any
defense, right of set-off or counterclaim which the Trust may have or assert.
The Guarantor's obligation to make a Guarantee Payment may be satisfied by
direct payment of the required amounts by the Guarantor to the Holders or by
causing the Trust to pay such amounts to the Holders.
SECTION 5.02. Waiver of Notice. The Guarantor hereby waives notice
-----------------
of acceptance of this Guarantee Agreement and of any liability to which it
applies or may apply, presentment, demand for payment, any right to require a
proceeding first against the Trust or any other Person before proceeding against
the Guarantor, protest, notice of nonpayment, notice of dishonor, notice of
redemption and all other notices and demands.
SECTION 5.03. Obligations Not Affected. The obligations, covenants,
-------------------------
agreements and duties of the Guarantor under this Guarantee Agreement shall in
no way be
<PAGE>
14
affected or impaired by reason of the happening from time to time of any of the
following:
(a) the release or waiver, by operation of law or otherwise, of
the performance or observance by the Trust of any express or implied
agreement, covenant, term or condition relating to the Preferred Securities
to be performed or observed by the Trust;
(b) the extension of time for the payment by the Trust of all or
any portion of the Distributions, Redemption Price, Liquidation
Distribution or any other sums payable under the terms of the Preferred
Securities or the extension of time for the performance of any other
obligation under, arising out of, or in connection with, the Preferred
Securities (other than an extension of time for payment of Distributions,
Redemption Price, Liquidation Distribution or other sum payable that
results from the extension of any interest payment period on the Debentures
or any extension of the maturity date of the Debentures permitted by the
Indenture);
(c) any failure, omission, delay or lack of diligence on the part
of the Holders to enforce, assert or exercise any right, privilege, power
or remedy conferred on the Holders pursuant to the terms of the Preferred
Securities, or any action on the part of the Trust granting indulgence or
extension of any kind;
(d) the voluntary or involuntary liquidation, dissolution, sale
of any collateral, receivership, insolvency, bankruptcy, assignment for the
benefit of creditors, reorganization, arrangement, composition or
readjustment of debt of, or other similar proceedings affecting, the Trust
or any of the assets of the Trust;
(e) any invalidity of, or defect or deficiency in, the Preferred
Securities;
(f) the settlement or compromise of any obligation guaranteed
hereby or hereby incurred; or
(g) any other circumstance whatsoever that might otherwise
constitute a legal or equitable discharge or defense of a guarantor, it
being the intent of this Section 5.03 that the obligations of the
<PAGE>
15
Guarantor hereunder shall be absolute and unconditional under any and all
circumstances.
There shall be no obligation of the Holders to give notice to, or obtain consent
of, the Guarantor with respect to the happening of any of the foregoing.
SECTION 5.04. Enforcement of Guarantee. The Guarantor and the
-------------------------
Guarantee Trustee expressly acknowledge that (i) this Guarantee Agreement will
be deposited with the Guarantee Trustee to be held for the benefit of the
Holders; (ii) the Guarantee Trustee has the right to enforce this Guarantee
Agreement on behalf of the Holders; (iii) Holders representing not less than a
Majority in aggregate liquidation amount of the Preferred Securities have the
right to direct the time, method and place of conducting any proceeding for any
remedy available in respect of this Guarantee Agreement including the giving of
directions to the Guarantee Trustee, or exercising any trust or other power
conferred upon the Guarantee Trustee under this Guarantee Agreement; provided,
--------
however, that, except for directing the time, method and place of conducting any
- -------
proceeding for any remedy available to the Guarantee Trustee, the Guarantee
Trustee shall not take any of the foregoing actions at the direction of the
Holders unless the Guarantee Trustee shall have received, at the expense of Time
Warner, an opinion of nationally recognized independent tax counsel experienced
in such matters to the effect that such action will not result in the Trust
being treated as an association taxable as a corporation or a partnership for
United States Federal income tax purposes and that, following such action, each
holder of Trust Securities will be treated for United States Federal income tax
purposes as owning an undivided beneficial interest in the Subordinated
Debentures; and (iv) if the Guarantee Trustee fails to enforce this Guarantee
Agreement for any reason, any Holder of Preferred Securities may, at its own
expense, after a period of 30 days has elapsed from such Holder's written
request to the Guarantee Trustee to enforce this Guarantee Agreement, institute
a legal proceeding directly against the Guarantor to enforce its rights under
this Guarantee Agreement, without first instituting a legal proceeding against
the Trust, the Guarantee Trustee, or any other Person.
SECTION 5.05. Guarantee of Payment. This Guarantee Agreement creates
---------------------
a guarantee of payment and not merely of collection.
<PAGE>
16
SECTION 5.06. Subrogation. The Guarantor shall be subrogated to all
------------
(if any) rights of the Holders against the Trust in respect of any amounts paid
to the Holders by the Guarantor under this Guarantee Agreement; provided,
--------
however, that the Guarantor shall not (except to the extent required by
- -------
mandatory provisions of law) be entitled to enforce or exercise any rights which
it may acquire by way of subrogation or any indemnity, reimbursement or other
agreement, in all cases as a result of payment under this Guarantee Agreement,
if, at the time of any such payment, any amounts are due and unpaid under this
Guarantee Agreement. If any amount shall be paid to the Guarantor in violation
of the preceding sentence, the Guarantor agrees to hold such amount in trust for
the Holders and to pay over such amount to the Holders.
SECTION 5.07. Independent Obligations. The Guarantor acknowledges
------------------------
that its obligations hereunder are independent of the obligations of the Trust
with respect to the Preferred Securities and that the Guarantor shall be liable
as principal and as debtor hereunder to make Guarantee Payments pursuant to the
terms of this Guarantee Agreement notwithstanding the occurrence of any event
referred to in subsections (a) through (g), inclusive, of Section 5.03 hereof.
ARTICLE VI
Limitation of Transactions; Subordination
-----------------------------------------
SECTION 6.01. Limitation of Transactions. So long as any Preferred
---------------------------
Securities remain outstanding, if there shall have occurred any Event of Default
or an event of default under the Declaration, (a) the Guarantor shall not
declare or pay any dividend on, or make any distribution with respect to, or
redeem, purchase, acquire or make a liquidation payment with respect to, any of
its capital stock and (b) the Guarantor shall not make any payment of interest,
principal or premium, if any, on or repay, repurchase or redeem any debt
securities issued by the Guarantor which rank pari passu with or junior to the
Subordinated Debentures; provided, however, that the foregoing restriction shall
-------- -------
not apply to any [interest or] dividend payments by the Guarantor where the
[interest or] dividend is [paid by way of the issuance of securities that rank
pari passu with, or junior to, the securities on which such interest or dividend
is being paid].
<PAGE>
17
SECTION 6.02. Subordination. This Guarantee Agreement will
--------------
constitute an unsecured obligation of the Guarantor and will rank (i)
subordinate and junior in right of payment to all other liabilities of the
Guarantor, including the Subordinated Debentures, except those made pari passu
---- -----
or subordinate by their terms, (ii) pari passu with the most senior preferred or
---- -----
preference stock outstanding on the date of this Guarantee Agreement or
hereafter issued and with any guarantee now or hereafter entered into by the
Guarantor in respect of any preferred or preference stock of any affiliate of
the Guarantor and (iii) senior to the Guarantor's common stock.
ARTICLE VII
Termination
-----------
SECTION 7.01. Termination. This Guarantee Agreement shall terminate
------------
and be of no further force and effect upon (i) full payment of the Redemption
Price of all Securities, (ii) upon the distribution of the Subordinated
Debentures to the Holders of all of the Preferred Securities or (iii) upon full
payment of the amounts payable in accordance with the Declaration upon
liquidation of the Trust. Notwithstanding the foregoing, this Guarantee
Agreement will continue to be effective or will be reinstated, as the case may
be, if at any time any Holder of Preferred Securities must restore payment of
any sums paid under the Preferred Securities or under this Guarantee.
ARTICLE VIII
Limitation of Liability; Indemnification
----------------------------------------
SECTION 8.01. Exculpation. (a) No Indemnified Person shall be
------------
liable, responsible or accountable in damages or otherwise to the Guarantor or
any Covered Person for any loss, damage or claim incurred by reason of any act
or omission performed or omitted by such Indemnified Person in good faith and in
a manner such Indemnified Person reasonably believed to be within the scope of
the authority conferred on such Indemnified Person by this Guarantee Agreement
or by law, except that an Indemnified Person shall be liable for any such loss,
damage or claim incurred by reason of such Indemnified Person's gross negligence
(or, in the case of the Guarantee Trustee, except as otherwise set
<PAGE>
18
forth in Section 3.02 hereof) or wilful misconduct with respect to such acts or
omissions.
(b) An Indemnified Person shall be fully protected in relying in good
faith upon the records of the Guarantor and upon such information, opinions,
reports or statements presented to the Guarantor by any Person as to matters the
Indemnified Person reasonably believes are within such other Person's
professional or expert competence and who has been selected with reasonable care
by or on behalf of the Guarantor, including information, opinions, reports or
statements as to the value and amount of the assets, liabilities, profits,
losses or any other facts pertinent to the existence and amount of assets from
which Distributions to Holders of Preferred Securities might properly be paid.
SECTION 8.02. Indemnification. (a) To the fullest extent permitted
----------------
by applicable law, the Guarantor shall indemnify and hold harmless each
Indemnified Person from and against any loss, damage or claim incurred by such
Indemnified Person by reason of any act or omission performed or omitted by such
Indemnified Person in good faith and in a manner such Indemnified Person
reasonably believed to be within the scope of authority conferred on such
Indemnified Person by this Guarantee Agreement, except that no Indemnified
Person shall be entitled to be indemnified in respect of any loss, damage or
claim incurred by such Indemnified Person by reason of gross negligence (or, in
the case of the Guarantee Trustee, except as otherwise set forth in Section 3.02
hereof) or wilful misconduct with respect to such acts or omissions.
(b) To the fullest extent permitted by applicable law, expenses
(including reasonable legal fees) incurred by an Indemnified Person in defending
any claim, demand, action, suit or proceeding shall, from time to time, be
advanced by the Guarantor prior to the final disposition of such claim, demand,
action, suit or proceeding upon receipt by the Guarantor of an undertaking by or
on behalf of the Indemnified Person to repay such amount if it shall be
determined that the Indemnified Person is not entitled to be indemnified as
authorized in Section 8.02(a).
ARTICLE IX
Miscellaneous
-------------
<PAGE>
19
SECTION 9.01. Successors and Assigns. All guarantees and agreements
-----------------------
contained in this Guarantee Agreement shall bind the successors, assigns,
receivers, trustees and representatives of the Guarantor, including any
successors permitted under Article Five of the Indenture, and shall inure to the
benefit of the Holders of the Preferred Securities then outstanding. Except in
connection with a consolidation, merger or sale involving the Guarantor that is
permitted under Article Five of the Indenture, the Guarantor shall not assign
its obligations hereunder.
SECTION 9.02. Amendments. Except with respect to any changes which
-----------
do not adversely affect the rights of Holders (in which case no consent of
Holders will be required), this Guarantee Agreement may be amended only with the
prior approval of the Holders of not less than a Majority in aggregate
liquidation amount of the Preferred Securities and in either case only if the
Guarantee Trustee shall have obtained either a ruling from the Internal Revenue
Service or a written unqualified opinion of nationally recognized independent
tax counsel experienced in such matters to the effect that such action will not
result in the Trust being treated as an association taxable as a corporation or
a partnership for United States Federal income tax purposes and that, following
such action, each holder of Common Securities and Preferred Securities will be
treated as owning an undivided beneficial interest in the Subordinated
Debentures. The provisions of Section 12.2 of the Declaration concerning
meetings of Holders shall apply to the giving of such approval.
SECTION 9.03. Notices. Any notice, request or other communication
--------
required or permitted to be given hereunder shall be in writing, duly signed by
the party giving such notice, and delivered, telecopied or mailed by first class
mail as follows:
(a) if given to the Guarantor, to the address set forth below or such
other address as the Guarantor may give notice of to the Holders:
Time Warner Inc.
75 Rockefeller Plaza
New York, New York 10019
Facsimile No.: (212) 956-7281
Attention: General Counsel
<PAGE>
20
(b) if given to the Guarantee Trustee, to the address set forth below
or such other address as the Guarantee Trustee may give notice of to the
Holders:
Corporate Trust Securities Division
The First National Bank of Chicago
One First National Plaza, Suite 0126
Chicago, Illinois 60670-0126
Facsimile No.: (312) 407-1708
Attention: Trust #19-[ ]
(c) if given to any Holder of Preferred Securities, at the address set
forth on the books and records of the Trust.
All notices hereunder shall be deemed to have been given when received
in person, telecopied with receipt confirmed, or three Business Days after
mailed by first class mail, postage prepaid except that if a notice or other
document is refused delivery or cannot be delivered because of a changed address
of which no notice was given, such notice or other document shall be deemed to
have been delivered on the date of such refusal or inability to deliver.
SECTION 9.04. Benefit. This Guarantee Agreement is solely for the
--------
benefit of the Holders and subject to Section 3.01(a) is not separately
transferable from the Preferred securities.
<PAGE>
21
SECTION 9.05. Governing Law. THIS GUARANTEE AGREEMENT SHALL BE
--------------
GOVERNED BY AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF NEW YORK.
THIS GUARANTEE AGREEMENT is executed as of the day and year first
above written.
TIME WARNER INC.,
By
___________________________
Name:
Title:
THE FIRST NATIONAL BANK OF CHICAGO,
as Guarantee Trustee,
By
_______________________________
Name:
Title:
<PAGE>
EXHIBIT 12.1
TIME WARNER
RATIO OF EARNINGS TO FIXED CHARGES
<TABLE>
<CAPTION>
Pro Forma Historical
--------------------------- ----------------------------------------------------
Three Months
Three Months Year Ended Years Ended December 31,
Ended Ended March 31, ---------------------------------------
March 31, December 31, -----------
1995 1994 1995 1994 1994 1993 1992 1992 1991 1990
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
(in millions, except ratios )
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Earnings:
Net income (loss) before income taxes
and extraordinary item............. $(35) $ (152) $(15) $(19) $ 89 $ 81 $ 323 $ 320 $ 52 $ (145)
Interest expense..................... 275 983 210 182 769 698 287 729 912 1,096
Amortization of capitalized
interest............................ -- 2 -- -- 2 -- 1 19 23 22
Portion of rents representative of an
interest factor.................... 13 52 13 13 52 54 52 85 78 74
Adjustment for partially owned
subsidiaries and 50% owned
companies........................... 158 603 180 159 665 663 590 97 73 57
Undistributed losses of less than
50% owned companies................. 17 82 17 25 82 47 56 56 56 17
---- ------ ---- ---- ------ ------ ------ ------ ------ ------
Total earnings..................... $428 $1,570 $405 $360 $1,659 $1,543 $1,309 $1,306 $1,194 $1,121
==== ====== ==== ==== ====== ====== ====== ====== ====== ======
Fixed Charges:
Interest expense..................... $275 $ 983 $210 $182 $ 769 $ 698 $ 287 $ 729 $ 912 $1,096
Capitalized interest................. -- 2 -- -- 2 -- -- 15 17 19
Portion of rents representative of
an interest factor.................. 13 52 13 13 52 54 52 85 78 74
Adjustment for partially owned
subsidiaries and 50% owned
companies........................... 158 606 180 159 668 664 571 81 45 33
---- ------ ---- ---- ------ ------ ------ ----- ------ ------
Total combined fixed charges ...... $446 $1,643 $403 $354 $1,491 $1,416 $ 910 $ 910 $1,052 $1,222
==== ====== ==== ==== ====== ====== ====== ===== ====== ======
Ratio of earnings to fixed charges
(deficiency in the coverage of fixed
charges by earnings before fixed
charges)................................ $(18) $ (73) 1.0x 1.0x 1.1x 1.1x 1.4x 1.4x 1.1x $ (101)
==== ====== ==== ==== ====== ====== ====== ===== ====== ======
</TABLE>
<PAGE>
EXHIBIT 12.2
TIME WARNER
RATIO OF EARNINGS TO COMBINED FIXED CHARGES
AND PREFERRED STOCK DIVIDENDS
<TABLE>
<CAPTION>
Pro Forma Historical
--------------------------- ----------------------------------------------------
Three Months
Three Months Year Ended Years Ended December 31,
Ended Ended March 31, ---------------------------------------
March 31, December 31, -----------
1995 1994 1995 1994 1994 1993 1992 1992 1991 1990
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
(in millions, except ratios)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Earnings:
Net income (loss) before
income taxes and
extraordinary item.......... $(35) $(152) $(15) $(19) $ 89 $ 81 $323 $320 $ 52 $ (145)
Interest expense............. 275 983 210 182 769 698 287 729 912 1,096
Amortization of capitalized
interest.................... -- 2 -- -- 2 -- 1 19 23 22
Portion of rents representat-
tive of an interest factor.. 13 52 13 13 52 54 52 85 78 74
Adjustment for partially
owned subsidiaries and
50% owned companies......... 158 603 180 159 665 663 590 97 73 57
Undistributed losses of less
than 50% owned companies.... 17 82 17 25 82 47 56 56 56 17
---- ------ ---- ---- ------ ------ ------ ------ ------ ------
Total earnings............ $428 $1,570 $405 $360 $1,659 $1,543 $1,309 $1,306 $1,194 $1,121
==== ====== ==== ==== ====== ====== ====== ====== ====== ======
Combined Fixed Charges and
Preferred Stock Dividends:
Interest expense............ $275 $ 983 $210 $182 $ 769 $ 698 $ 287 $ 729 $ 912 $1,096
Capitalized interest......... -- 2 -- -- 2 -- -- 15 17 19
Portion of rents represent-
ative of an interest
factor...................... 13 52 13 13 52 54 52 85 78 74
Adjustment for partially
owned subsidiaries and 50%
owned companies............. 158 606 180 159 668 664 571 81 45 33
Pretax income necessary to
cover preferred stock
dividend requirements....... 37 136 5 5 20 218 905 905 1,382 1,234
---- ------ ---- ---- ------ ------ ------ ------ ------ ------
Total combined fixed
charges and preferred
stock dividends.......... $483 $1,779 $408 $359 $1,511 $1,634 $1,815 $1,815 $2,434 $2,456
==== ====== ===== ==== ====== ====== ====== ====== ====== ======
Ratio of earnings to combined
fixed charges and preferred
stock dividend requirements
(deficiency in the coverage
of combined fixed charges
and preferred stock dividends
by earnings before fixed
charges and preferred stock
dividends).................... $(55) $(209) $ (3) 1.0x 1.1x $(91) $(506) $(509) $(1,240) $(1,335)
==== ====== ==== ==== ==== ==== ===== ===== ======= =======
</TABLE>
<PAGE>
EXHIBIT 12.3
TWE
RATIO OF EARNINGS TO FIXED CHARGES
<TABLE>
<CAPTION>
Pro Forma Historical
------------------------------ ---------------------------------------------------------------
Three Months
Three Months Year Ended Year Ended December 31,
Ended Ended March 31, --------------------------------------------
March 31, December 31, ------------- Restated
1995 1994 1995 1994 1994 1993 1992 1992 1991 1990
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
(In millions, except ratios)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Earnings:
Net income (loss) before
income taxes and
extraordinary item.......... $ 49 $242 $ 15 $ 52 $201 $272 $210 $210 $132 $(159)
Interest expense............. 127 499 150 135 563 573 486 436 479 630
Amortization of capitalized
interest.................... 7 25 7 6 25 19 18 18 22 22
Portion of rents representat-
tive of an interest factor.. 13 47 13 10 47 39 36 33 27 30
Adjustment for partially
owned subsidiaries and
50% owned companies......... 32 115 7 5 24 22 27 80 30 31
Undistributed losses of less
than 50% owned companies.... 8 89 8 5 58 14 40 40 58 19
---- ---- ---- ---- ---- ---- ---- ---- ---- -----
Total earnings............ $236 $998 $200 $213 $918 $939 $817 $817 $748 $ 582
==== ==== ==== ==== ==== ==== ==== ==== ==== =====
Fixed Charges:
Interest expense............. $127 $499 $150 $135 $563 $573 $486 $436 $479 $ 639
Capitalized interest......... 7 25 7 6 25 20 15 15 17 19
Portion of rents represent-
ative of an interest
factor...................... 13 47 13 10 47 39 36 33 27 30
Adjustment for partially
owned subsidiaries and 50%
owned companies............. 5 17 7 5 24 22 27 80 31 32
---- ---- ---- ---- ---- ---- ---- ---- ---- -----
Total fixed charges........ $152 $588 $177 $156 $659 $654 $564 $564 $554 $ 720
==== ==== ==== ==== ==== ==== ==== ==== ==== =====
Ratio of earnings to
fixed charges
(deficiency in the coverage
of fixed charges
by earnings before fixed
charges)....................... 1.6x 1.7x 1.1x 1.4x 1.4x 1.4x 1.4x 1.4x 1.4x $(138)
==== ==== ==== ==== ==== ==== ==== ==== ==== =====
</TABLE>
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in the
Registration Statement on Form S-3 and related Prospectus of Time Warner Inc.
("TWI") and Time Warner Capital I, Time Warner Capital II and Time Warner
Capital III (each a "Trust") and related Prospectus Supplement of TWI and Time
Warner Capital I for the registration of Preferred Trust Securities of the
Trusts, Subordinated Debentures of TWI, and the guarantees of Preferred
Securities of the Trusts by TWI, and to the incorporation by reference therein
of our reports dated February 7, 1995, with respect to the consolidated
financial statements and schedule of TWI and Time Warner Entertainment Company,
L.P. included in TWI's Annual Report on Form 10-K for the year ended December
31, 1994, as amended by Amendment No. 1 thereto dated June 28, 1995 ("TWI's 1994
Form 10-K"), and our report dated March 3, 1995, with respect to the combined
financial statements of the Time Warner Service Partnerships incorporated by
reference in TWI's 1994 Form 10-K, filed with the Securities and Exchange
Commission.
/s/ Ernst & Young LLP
ERNST & YOUNG LLP
New York, New York
August 1, 1995
<PAGE>
EXHIBIT 23.3
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Registration Statement of
Time Warner Inc., Time Warner Capital I, Time Warner Capital II and Time Warner
Capital III on Form S-3 of our report dated March 10, 1995, with respect to the
consolidated financial statements of Summit Communications Group, Inc.
incorporated by reference in the Form 8-K of Time Warner Inc. dated May 30,
1995, and to the reference to us under the heading "Experts" in the Prospectus,
which is part of such Registration Statement.
DELOITTE & TOUCHE LLP
Atlanta, Georgia
August 2, 1995
<PAGE>
EXHIBIT 23.4
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the caption "Experts" in the
Registration Statement on Form S-3 and related Prospectus of Time Warner Inc.
("TWI") and Time Warner Capital I, Time Warner Capital II and Time Warner
Capital III (each a "Trust") and related Prospectus Supplement of TWI and Time
Warner Capital I for the registration of Preferred Trust Securities of the
Trusts, Subordinated Debentures of TWI, and the guarantees of Preferred
Securities of the Trusts by TWI, and to the incorporation by reference therein
of (i) our report dated October 7, 1994, with respect to the financial
statements of Newhouse Broadcasting Cable Division of Newhouse Broadcasting
Corporation and Subsidiaries for each of the three years in the period ended
July 31, 1994, and (ii) our report dated March 24, 1995, with respect to the
financial statements of Vision Cable Division of Vision Cable Communications,
Inc. and Subsidiaries for each of the three years in the period ended December
31, 1994, appearing in the Current Report on Form 8-K of TWI dated May 30, 1995,
filed with the Securities and Exchange Commission.
PAUL SCHERER & COMPANY LLP
New York, New York
August 1, 1995
<PAGE>
EXHIBIT 23.5
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our reports
and to all references to our Firm included in or made a part of this
Registration Statement on Form S-3.
/s/ Arthur Andersen LLP
Arthur Andersen LLP
Stamford, Connecticut
August 2, 1995
<PAGE>
EXHIBIT 23.6
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Registration Statement of
Time Warner Inc., Time Warner Capital I, Time Warner Capital II and Time Warner
Capital III on Form S-3 of our report dated April 20, 1995, with respect to the
consolidated financial statements of KBLCOM Incorporated appearing in the Form
8-K of Time Warner Inc. date May 30, 1995, and to the reference to us under the
heading "Experts" in the Prospectus, which is part of such Registration
Statement.
/s/ Deloitte & Touche LLP
DELOITTE & TOUCHE LLP
Houston, Texas
August 2, 1995
<PAGE>
Exhibit 23.7
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectus
constituting part of this Registration Statement on Form S-3 of Time Warner
Inc., Time Warner Capital I, Time Warner Capital II and Time Warner Capital III
of our report on the Paragon Communications financial statements and schedule
dated January 19, 1995, except as to Note 6, which is as of January 27, 1995,
which appears on page F-82 of the Annual Report on Form 10-K of Time Warner
Entertainment Company, L.P. for the year ended December 31, 1994, which is
incorporated by reference in the Time Warner Inc. Annual Report on Form 10-K for
the year ended December 31, 1994. We also consent to the reference to us under
the heading "Experts" in such Prospectus.
/s/ Price Waterhouse LLP
PRICE WATERHOUSE LLP
Denver, Colorado
August 2, 1995
<PAGE>
EXHIBIT 24.1
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each of the undersigned officers and
directors of TIME WARNER INC., a Delaware corporation (the "Corporation"),
hereby constitutes and appoints RICHARD J. BRESSLER, PETER R. HAJE, GERALD M.
LEVIN, PHILIP R. LOCHNER, JR., and RICHARD D. PARSONS, and each of them, his or
her true and lawful attorneys-in-fact and agents, with full power to act without
the others, for him or her and in his or her name, place and stead, in any and
all capacities, to sign a Registration Statement on Form S-3 or other
appropriate form and any and all amendments to any such Registration Statement
(including post-effective amendments) and any subsequent Reqistration Statements
filed by the Corporation pursuant to Rule 462(b) of the Securities Act of 1933,
as amended (the "Securities Act"), to be filed with the Securities and Exchange
Commission in connection with the registration under the Securities Act of (i)
preferred trust securities (the "Preferred Securities"), from which up to
$600,000,000 in aggregate proceeds will be received by certain trusts, each a
statutory business trust formed under the laws of the State of Delaware, of
which all of the common securities are to be held by the Corporation, (ii)
unsecured subordinated debentures of the Corporation to be offered from time to
time (the "Subordinated Debentures"), from which the Corporation will receive up
to $600,000,000 in aggregate proceeds, and (iii) Guarantees by the Corporation
of the payment of distributions out of moneys held by such trusts and payments
on liquidation of such trusts or the redemption of such Preferred Securities,
with power where appropriate to affix thereto the corporate seal of the
Corporation and to attest said seal, and to file such Registration Statements,
including a form of prospectus, and any and all supplements, amendments and
post-effective amendments to such Registration Statement, and any subsequent
Registration Statement filed by the Corporation pursuant to Rule 462(b) of the
Securities Act, with all exhibits thereto, and any and all documents in
connection therewith, with the Securities and Exchange Commission, hereby
granting unto said attorneys-in-fact and agents, and each of them, full power
and authority to do and perform any and all acts and things requisite and
necessary to be done in and about the premises, as fully to all intents and
purposes as he or she
<PAGE>
2
might or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents, or any of them, may lawfully do or cause to be
done by virtue hereof.
IN WITNESS WHEREOF, each of the undersigned has hereunto set his or her
name as of the day of , 1995.
(i) Principal Executive
Officers:
- --------------------------------- ---------------------------------
Gerald M. Levin Richard D. Parsons
Director, Chairman of the Board Director and President
and Chief Executive Officer
(ii) Principal Financial (iii) Principal Accounting
Officer: Officer:
- --------------------------------- ---------------------------------
Richard J. Bressler, John A. LaBarca,
Senior Vice President and Vice President and
Chief Financial Officer Controller
(iv) Directors:
- --------------------------------- ---------------------------------
Merv Adelson, Carla A. Hills,
Director Director
- --------------------------------- ---------------------------------
Lawrence B. Buttenwieser, David T. Kearns,
Director Director
- --------------------------------- ---------------------------------
Edward S. Finkelstein, Henry Luce III,
Director Director
- --------------------------------- ---------------------------------
Beverly Sills Greenough, Reuben Mark,
Director Director
<PAGE>
3
- ---------------------------------
Michael A. Miles,
Director
- ---------------------------------
J. Richard Munro,
Director
- ---------------------------------
Donald S. Perkins,
Director
- ---------------------------------
Raymond S. Troubh,
Director
- ---------------------------------
Francis T. Vincent, Jr.,
Director
<PAGE>
EXHIBIT 25.1
___________________________________________________________________
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
_________________________
FORM T-1
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939 OF
A CORPORATION DESIGNATED TO ACT AS TRUSTEE
___________________________________________
CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF
A TRUSTEE PURSUANT TO SECTION 305(b)(2) ________
________________________________________
CHEMICAL BANK
(Exact name of trustee as specified in its charter)
NEW YORK 13-4994650
(State of incorporation (I.R.S. employer
if not a national bank) identification No.)
270 PARK AVENUE
NEW YORK, NEW YORK 10017
(Address of principal executive offices) (Zip Code)
William H. McDavid
General Counsel
270 Park Avenue
New York, New York 10017
Tel: (212) 270-2611
(Name, address and telephone number of agent for service)
_____________________________________________
TIME WARNER INC.
(Exact name of obligor as specified in its charter)
DELAWARE 13-1388520
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification No.)
75 ROCKEFELLER PLAZA
NEW YORK, NEW YORK 10019
(Address of principal executive offices) (Zip Code)
___________________________________________
SUBORDINATED DEBENTURES DUE 2025
(Title of the indenture securities)
_____________________________________________________
<PAGE>
GENERAL
Item 1. General Information.
Furnish the following information as to the trustee:
(a) Name and address of each examining or supervising authority to which
it is subject.
New York State Banking Department, State House, Albany, New York
12110.
Board of Governors of the Federal Reserve System, Washington, D.C.,
20551
Federal Reserve Bank of New York, District No. 2, 33 Liberty Street,
New York, N.Y.
Federal Deposit Insurance Corporation, Washington, D.C., 20429.
(b) Whether it is authorized to exercise corporate trust powers.
Yes.
Item 2. Affiliations with the Obligor.
If the obligor is an affiliate of the trustee, describe each such
affiliation.
None.
- 2 -
<PAGE>
Item 16. List of Exhibits
List below all exhibits filed as a part of this Statement of
Eligibility.
1. A copy of the Articles of Association of the Trustee as now in
effect, including the Organization Certificate and the Certificates of Amendment
dated February 17, 1969, August 31, 1977, December 31, 1980, September 9, 1982,
February 28, 1985 and December 2, 1991 (see Exhibit 1 to Form T-1 filed in
connection with Registration Statement No. 33-50010, which is incorporated by
reference).
2. A copy of the Certificate of Authority of the Trustee to Commence
Business (see Exhibit 2 to Form T-1 filed in connection with Registration
Statement No. 33-50010, which is incorporated by reference).
3. None, authorization to exercise corporate trust powers being
contained in the documents identified above as Exhibits 1 and 2.
4. A copy of the existing By-Laws of the Trustee (see Exhibit 4 to
Form T-1 filed in connection with Registration Statement No. 33-84460, which is
incorporated by reference).
5. Not applicable.
6. The consent of the Trustee required by Section 321(b) of the Act
(see Exhibit 6 to Form T-1 filed in connection with Registration Statement No.
33-50010, which is incorporated by reference).
7. A copy of the latest report of condition of the Trustee, published
pursuant to law or the requirements of its supervising or examining authority.
8. Not applicable.
9. Not applicable.
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939, the
Trustee, Chemical Bank, a corporation organized and existing under the laws of
the State of New York, has duly caused this statement of eligibility to be
signed on its behalf by the undersigned, thereunto duly authorized, all in the
City of New York and State of New York, on the 31ST day of JULY, 1995.
CHEMICAL BANK
By /s/ R. Lorenzen
--------------------------------------
R. Lorenzen
Senior Trust Officer
- 3 -
<PAGE>
Exhibit 7 to Form T-1
Bank Call Notice
RESERVE DISTRICT NO. 2
CONSOLIDATED REPORT OF CONDITION OF
Chemical Bank
of 270 Park Avenue, New York, New York 10017
and Foreign and Domestic Subsidiaries,
a member of the Federal Reserve System,
at the close of business March 31, 1995, in
accordance with a call made by the Federal Reserve Bank of this
District pursuant to the provisions of the Federal Reserve Act.
DOLLAR AMOUNTS
ASSETS IN MILLIONS
Cash and balances due from depository institutions:
Noninterest-bearing balances and
currency and coin ................................ $ 5,797
Interest-bearing balances ........................ 2,523
Securities: .......... ............................
Held to maturity securities......................... 6,195
Available for sale securities....................... 17,785
Federal Funds sold and securities purchased under
agreements to resell in domestic offices of the
bank and of its Edge and Agreement subsidiaries,
and in IBF's:
Federal funds sold................................ 2,493
Securities purchased under agreements to resell... 50
Loans and lease financing receivables:
Loans and leases, net of unearned income $ 68,937
Less: Allowance for loan and lease losses 1,898
Less: Allocated transfer risk reserve...... 113
--------
Loans and leases, net of unearned income,
allowance, and reserve............................ 66,926
Trading Assets...................................... 37,294
Premises and fixed assets (including capitalized
leases)........................................... 1,402
Other real estate owned............................. 99
Investments in unconsolidated subsidiaries and
associated companies.............................. 148
Customer's liability to this bank on acceptances
outstanding....................................... 1,051
Intangible assets................................... 512
Other assets........................................ 6,759
--------
TOTAL ASSETS........................................ $149,034
========
- 4 -
<PAGE>
LIABILITIES
Deposits
In domestic offices..................................... $ 44,882
Noninterest-bearing ......................... $14,690
Interest-bearing ............................ 30,192
-------
In foreign offices, Edge and Agreement subsidiaries,
and IBF's............................................... 32,537
Noninterest-bearing ......................... $ 146
Interest-bearing ............................ 32,391
-------
Federal funds purchased and securities sold under agree-
ments to repurchase in domestic offices of the bank and
of its Edge and Agreement subsidiaries, and in IBF's
Federal funds purchased................................. 10,587
Securities sold under agreements to repurchase.......... 3,083
Demand notes issued to the U.S. Treasury.................. 464
Trading liabilities....................................... 31,358
Other Borrowed money:
With original maturity of one year or less.............. 7,527
With original maturity of more than one year............ 914
Mortgage indebtedness and obligations under capitalized
leases.................................................. 20
Bank's liability on acceptances executed and outstanding.. 1,054
Subordinated notes and debentures......................... 3,410
Other liabilities......................................... 5,986
TOTAL LIABILITIES......................................... 141,822
--------
EQUITY CAPITAL
Common stock......................................... 620
Surplus.............................................. 4,501
Undivided profits and capital reserves............... 2,558
Net unrealized holding gains (Losses)
on available-for-sale securities..................... (476)
Cumulative foreign currency translation adjustments.. 9
TOTAL EQUITY CAPITAL................................. 7,212
--------
TOTAL LIABILITIES, LIMITED-LIFE PREFERRED
STOCK AND EQUITY CAPITAL............................ $149,034
========
I, Joseph L. Sclafani, S.V.P. & Controller of the
above-named bank, do hereby declare that this Report of
Condition has been prepared in conformance with the in-
structions issued by the appropriate Federal regulatory
authority and is true to the best of my knowledge and
belief.
JOSEPH L. SCLAFANI
We, the undersigned directors, attest to the correctness
of this Report of Condition and declare that it has been
examined by us, and to the best of our knowledge and
belief has been prepared in conformance with the in-
structions issued by the appropriate Federal regulatory
authority and is true and correct.
WALTER V. SHIPLEY )
EDWARD D. MILLER )DIRECTORS
WILLIAM B. HARRISON )
- 5 -
<PAGE>
EXHIBIT 25.2
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM T-1
--------
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939
OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305(B)(2)_____
-----------------------
THE FIRST NATIONAL BANK OF CHICAGO
(Exact name of trustee as specified in its charter)
A National Banking Association 36-0899825
(I.R.S. employer
identification number)
One First National Plaza, Chicago, Illinois 60670-0126
(Address of principal executive offices) (Zip Code)
The First National Bank of Chicago
One First National Plaza, Suite 0286
Chicago, Illinois 60670-0286
Attn: Lynn A. Goldstein, Law Department (312) 732-6919
(Name, address and telephone number of agent for service)
---------------------
TIME WARNER CAPITAL I
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of To be applied for
incorporation or organization) (IRS Employer Identification No.)
75 Rockefeller Plaza
New York, New York 10019
(Address of Principal Executive Offices) (Zip Code)
Preferred Trust Securities
(Title of the indenture securities)
<PAGE>
Item 1. General Information. Furnish the following information as to the
-------------------
trustee:
(a) Name and address of each examining or supervision authority to
which it is subject.
Comptroller of Currency, Washington, D. C., Federal Deposit
Insurance Corporation, Washington, D. C., The Board of Governors
of the Federal Reserve System, Washington, D. C..
(b) WHETHER IT IS AUTHORIZED TO EXERCISE CORPORATE TRUST POWERS.
The trustee is authorized to exercise corporate trust powers.
ITEM 2. AFFILIATIONS WITH THE OBLIGOR. IF THE OBLIGOR IS AN AFFILIATE OF THE
-----------------------------
TRUSTEE, DESCRIBE EACH SUCH AFFILIATION.
No such affiliation exists with the trustee.
ITEM 16. LIST OF EXHIBITS. LIST BELOW ALL EXHIBITS FILED AS A PART OF THIS
----------------
STATEMENT OF ELIGIBILITY.
1. A copy of the articles of association of the trustee now in
effect.*
2. A copy of the certificates of authority of the trustee to
commence business.*
3. A copy of the authorization of the trustee to exercise corporate
trust powers.*
4. A copy of the existing by-laws of the trustee.*
5. Not applicable.
6. The consent of the trustee required by Section 321(b) of the
Act.
7. A copy of the latest report of condition of the trustee
published pursuant to law or the requirements of its supervising
or examining
authority.
8. Not applicable.
9. Not applicable.
* EXHIBIT 1,2,3 AND 4 ARE HEREIN INCORPORATED BY REFERENCE TO EXHIBITS BEARING
IDENTICAL NUMBERS IN ITEM 12 OF THE FORM T-1 OF THE FIRST NATIONAL BANK OF
CHICAGO, FILED AS EXHIBIT 26 TO THE REGISTRATION STATEMENT ON FORM S-3 OF THE
CIT GROUP HOLDINGS, INC., FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON
FEBRUARY 16, 1993 (REGISTRATION NO. 33-58418).
<PAGE>
Pursuant to the requirements of the Trust Indenture Act of 1939, as amended, the
trustee, The First National Bank of Chicago, a national banking association
organized and existing under the laws of the United States of America, has duly
caused this Statement of Eligibility to be signed on its behalf by the
undersigned, thereunto duly authorized, all in the City of New York in the State
of New York, on the 1st day of August, 1995.
The First National Bank of Chicago,
Trustee,
By: /s/ Melissa G. Weisman
----------------------------------
Melissa G. Weisman
Assistant Vice President
<PAGE>
EXHIBIT 6
THE CONSENT OF THE TRUSTEE REQUIRED
BY SECTION 321(b) OF THE ACT
August 1, 1995
Securities and Exchange Commission
Washington, D. C. 20549
Gentlemen:
In connection with the qualification of an Amended and Restated Declaration of
Trust of Time Warner Capital I, the undersigned, in accordance with Section
321(b) of the Trust Indenture Act of 1939, as amended, hereby consents that the
reports of examinations of the undersigned, made by Federal or State Authorities
authorized to make such examinations, may be furnished by such authorities to
the Securities and Exchange Commission upon its request therefor.
Very truly yours,
THE FIRST NATIONAL BANK OF CHICAGO
By: /s/ Melissa G. Weisman
----------------------------------
Melissa G. Weisman
Assistant Vice President
<PAGE>
EXHIBIT 7
A copy of the latest report of condition of the trustee published pursuant
to law or the requirements of its supervising or examining authority.
<PAGE>
<TABLE>
<CAPTION>
Legal Title of Bank: The First National Bank of Chicago Call Date: 3/31/95 ST-BK: 17-1630 FFIEC 031
Address: One First National Plaza, Suite 0460 Page RC-1
City, State Zip: Chicago, IL 60670-0460
FDIC Certificate No.: 0/3/6/1/8
---------
Consolidated Report of Condition for Insured Commercial
and State-Chartered Savings Banks for March 31, 1995
All schedules are to be reported in thousands of dollars. Unless otherwise
indicated, report the amount outstanding of the last business day of the
quarter.
Schedule RC--Balance Sheet
C400
Dollar Amounts in ------------
Thousands RCFD BIL MIL THOU
----------------- ---- ------------
<S> <C> <C> <C> <C>
ASSETS
1. Cash and balances due from depository institutions (from Schedule
RC-A):
a. Noninterest-bearing balances and currency and coin(1).............. 0081 2,948,128 1.a.
b. Interest-bearing balances(2)....................................... 0071 8,482,108 1.b.
2. Securities
a. Held-to-maturity securities(from Schedule RC-B, column A).......... 1754 167,911 2.a.
b. Available-for-sale securities (from Schedule RC-B, column D)....... 1773 540,011 2.b.
3. Federal funds sold and securities purchased under agreements to
resell in domestic offices of the bank and its Edge and Agreement
subsidiaries, and in IBFs:
a. Federal Funds sold................................................. 0276 2,508,883 3.a.
b. Securities purchased under agreements to resell.................... 0277 1,422,695 3.b.
4. Loans and lease financing receivables:
a. Loans and leases, net of unearned income (from Schedule
RC-C)................................................................. RCFD 2122 16,238,310 4.a.
b. LESS: Allowance for loan and lease losses.......................... RCFD 3123 358,207
4.b. c. LESS: Allocated transfer risk reserve................... RCFD 3128 0
4.c.
d. Loans and leases, net of unearned income, allowance, and
reserve (item 4.a minus 4.b and 4.c)............................... 2125 15,880,103 4.d.
5. Assets held in trading accounts....................................... 3545 13,257,798 5.
6. Premises and fixed assets (including capitalized leases).............. 2145 516,827 6.
7. Other real estate owned (from Schedule RC-M).......................... 2150 13,166 7.
8. Investments in unconsolidated subsidiaries and associated
companies (from Schedule RC-M)........................................ 2130 10,363 8.
9. Customers' liability to this bank on acceptances outstanding.......... 2155 463,961 9.
10.Intangible assets (from Schedule RC-M)................................ 2143 119,715
10.
11.Other assets (from Schedule RC-F)..................................... 2160 1,346,941 11.
12.Total assets (sum of items 1 through 11).............................. 2170 47,678,610 12.
</TABLE>
- ----------
(1) Includes cash items in process of collection and unposted debits.
(2) Includes time certificates of deposit not held in trading accounts.
<PAGE>
<TABLE>
<CAPTION>
Legal Title of Bank: The First National Bank of Chicago Call Date: 3/31/95 ST-BK: 17-1630 FFIEC 031
Address: One First National Plaza, Suite 0460 Page RC-2
City, State Zip: Chicago, IL 60670-0460
FDIC Certificate No.: 0/3/6/1/8
Schedule RC-Continued
Dollar Amounts in
Thousands Bil Mil Thou
----------------- ------------
<S> <C> <C>
LIABILITIES
13.Deposits:
a. In domestic offices (sum of totals of columns A and C
from Schedule RC-E, part 1)........................... RCON 2200 14,675,401 13.a.
(1) Noninterest-bearing(1)............................ RCON 6631 5,498,690 13.a.(1)
(2) Interest-bearing.................................. RCON 6636 9,176,711 13.a.(2)
b. In foreign offices, Edge and Agreement subsidiaries,
and IBFs (from Schedule RC-E, part II)................ RCFN 2200 11,809,645 13.b.
(1) Noninterest bearing............................... RCFN 6631 304,669 13.b.(1)
(2) Interest-bearing.................................. RCFN 6636 11,504,976 13.b.(2)
14.Federal funds purchased and securities sold under
agreements to repurchase in domestic offices of the
bank and of its Edge and Agreement subsidiaries,
and in IBFs:
a. Federal funds purchased............................... RCFD 0278 2,072,830 14.a.
b. Securities sold under agreements to repurchase........ RCFD 0279 1,484,164 14.b.
15.a. Demand notes issued to the U.S. Treasury.............. RCON 2840 103,138 15.a.
b. Trading Liabilities................................... RCFD 3548 9,101,186
15.b.
16.Other borrowed money:
a. With original maturity of one year or less............ RCFD 2332 2,307,860 16.a.
b. With original maturity of more than one year......... RCFD 2333 506,476
16.b. 17. Mortgage indebtedness and obligations under
capitalized leases....................................... RCFD 2910 278,108 17.
18.Bank's liability on acceptance executed and outstanding.. RCFD 2920 463,961 18.
19.Subordinated notes and debentures........................ RCFD 3200 1,225,000 19.
20.Other liabilities (from Schedule RC-G)................... RCFD 2930 699,375 20.
21.Total liabilities (sum of items 13 through 20)........... RCFD 2948 44,727,144 21.
22.Limited-Life preferred stock and related surplus......... RCFD 3282 0 22.
EQUITY CAPITAL
23.Perpetual preferred stock and related surplus............ RCFD 3838 0 23.
24.Common stock............................................. RCFD 3230 200,858 24.
25.Surplus (exclude all surplus related to preferred stock). RCFD 3839 2,304,657 25.
26. a. Undivided profits and capital reserves............... RCFD 3632 447,916
26.a. b. Net unrealized holding gains (losses) on
available-for-sale securities......................... RCFD 8434 [ 2,165)
26.b.
27.Cumulative foreign currency translation adjustments...... RCFD 3284 200 27.
28.Total equity capital (sum of items 23 through 27)........ RCFD 3210 2,951,466 28.
29.Total liabilities, limited-life preferred stock, and equity
capital (sum of items 21, 22, and 28).................... RCFD 3300 47,678,610 29.
Memorandum
To be reported only with the March Report of Condition.
1. Indicate in the box at the right the number of the
statement below that best describes the most comprehensive
level of auditing work performed for the bank by
independent external..................................... NUMBER
auditors as of any date during 1993...................... RCFD 6724 N/A M.1.
</TABLE>
1 = Independent audit of the bank conducted in accordance with generally
accepted auditing standards by a certified public accounting firm which
submits a report on the bank
2 = Independent audit of the bank's parent holding company conducted in
accordance with generally accepted auditing standards by a certified public
accounting firm which submits a report on the consolidated holding
company (but not on the bank separately)
3 = Directors' examination of the bank conducted in accordance with generally
accepted auditing standards by a certified public accounting firm (may be
required by state chartering authority)
4.= Directors' examination of the bank performed by other external auditors (may
be required by state chartering authority)
5 = Review of the bank's financial statements by external auditors
6 = Compilation of the bank's financial statements by external auditors.
7 = Other audit procedures (excluding tax preparation work)
8 = No external audit work
- ----------
(1) Includes total demand deposits and noninterest-bearing time and savings
deposits.
<PAGE>
EXHIBIT 25.3
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM T-1
--------
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939
OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305(B)(2)_____
-----------------------
THE FIRST NATIONAL BANK OF CHICAGO
(Exact name of trustee as specified in its charter)
A National Banking Association 36-0899825
(I.R.S. employer
identification number)
One First National Plaza, Chicago, Illinois 60670-0126
(Address of principal executive offices) (Zip Code)
The First National Bank of Chicago
One First National Plaza, Suite 0286
Chicago, Illinois 60670-0286
Attn: Lynn A. Goldstein, Law Department (312) 732-6919
(Name, address and telephone number of agent for service)
---------------------
TIME WARNER CAPITAL II
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of To be applied for
incorporation or organization) (IRS Employer Identification No.)
75 Rockefeller Plaza
New York, New York 10019
(Address of Principal Executive Offices) (Zip Code)
Preferred Trust Securities
(Title of the indenture securities)
<PAGE>
Item 1. General Information. Furnish the following information as to the
-------------------
trustee:
(a) Name and address of each examining or supervision authority to which it
is subject.
Comptroller of Currency, Washington, D. C., Federal Deposit Insurance
Corporation, Washington, D. C., The Board of Governors of the Federal
Reserve System, Washington, D. C..
(b) Whether it is authorized to exercise corporate trust powers.
The trustee is authorized to exercise corporate trust powers.
ITEM 2. AFFILIATIONS WITH THE OBLIGOR. IF THE OBLIGOR IS AN AFFILIATE OF THE
-----------------------------
TRUSTEE, DESCRIBE EACH SUCH AFFILIATION.
No such affiliation exists with the trustee.
ITEM 16. LIST OF EXHIBITS. LIST BELOW ALL EXHIBITS FILED AS A PART OF THIS
----------------
STATEMENT OF ELIGIBILITY.
1. A copy of the articles of association of the trustee now in effect.*
2. A copy of the certificates of authority of the trustee to commence
business.*
3. A copy of the authorization of the trustee to exercise corporate trust
powers.*
4. A copy of the existing by-laws of the trustee.*
5. Not applicable.
6. The consent of the trustee required by Section 321(b) of the Act.
7. A copy of the latest report of condition of the trustee published
pursuant to law or the requirements of its supervising or examining authority.
8. Not applicable.
9. Not applicable.
* EXHIBIT 1,2,3 AND 4 ARE HEREIN INCORPORATED BY REFERENCE TO EXHIBITS BEARING
IDENTICAL NUMBERS IN ITEM 12 OF THE FORM T-1 OF THE FIRST NATIONAL BANK OF
CHICAGO, FILED AS EXHIBIT 26 TO THE REGISTRATION STATEMENT ON FORM S-3 OF THE
CIT GROUP HOLDINGS, INC., FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON
FEBRUARY 16, 1993 (REGISTRATION NO. 33-58418).
<PAGE>
Pursuant to the requirements of the Trust Indenture Act of 1939, as amended, the
trustee, The First National Bank of Chicago, a national banking association
organized and existing under the laws of the United States of America, has duly
caused this Statement of Eligibility to be signed on its behalf by the
undersigned, thereunto duly authorized, all in the City of New York in the State
of New York, on the 1st day of August, 1995.
The First National Bank of Chicago,
Trustee,
MELISSA G. WEISMAN
By:__________________________________________________
Melissa G. Weisman
Assistant Vice President
<PAGE>
EXHIBIT 6
THE CONSENT OF THE TRUSTEE REQUIRED
BY SECTION 321(b) OF THE ACT
August 1, 1995
Securities and Exchange Commission
Washington, D. C. 20549
Gentlemen:
In connection with the qualification of an Amended and Restated Declaration of
Trust of Time Warner Capital II, the undersigned, in accordance with Section
321(b) of the Trust Indenture Act of 1939, as amended, hereby consents that the
reports of examinations of the undersigned, made by Federal or State Authorities
authorized to make such examinations, may be furnished by such authorities to
the Securities and Exchange Commission upon its request therefor.
Very truly yours,
THE FIRST NATIONAL BANK OF CHICAGO
By: MELISSA G. WEISMAN
________________________________
Melissa G. Weisman
Assistant Vice President
<PAGE>
EXHIBIT 7
A copy of the latest report of condition of the trustee published pursuant
to law or the requirements of its supervising or examining authority.
<PAGE>
<TABLE>
<CAPTION>
Legal Title of Bank: The First National Bank of Chicago Call Date: 3/31/95 ST-BK: 17-1630 FFIEC 031
Address: One First National Plaza, Suite 0460 Page RC-1
City, State Zip: Chicago, IL 60670-0460
FDIC Certificate No.: 0/3/6/1/8
---------
CONSOLIDATED REPORT OF CONDITION FOR INSURED COMMERCIAL
AND STATE-CHARTERED SAVINGS BANKS FOR MARCH 31, 1995
All schedules are to be reported in thousands of dollars. Unless otherwise indicated, report the amount
outstanding of the last business day of the quarter.
SCHEDULE RC--BALANCE SHEET
C400
DOLLAR AMOUNTS IN -----------
THOUSANDS RCFD BIL MIL THOU
----------------- ---- ------------
<S> <C> <C> <C> <C>
ASSETS
1. Cash and balances due from depository institutions (from Schedule RC-A):
a. Noninterest-bearing balances and currency and coin(1) ................. 0081 2,948,128 1.a.
b. Interest-bearing balances(2)........................................... 0071 8,482,108 1.b.
2. Securities
a. Held-to-maturity securities(from Schedule RC-B, column A).............. 1754 167,911 2.a.
b. Available-for-sale securities (from Schedule RC-B, column D)........... 1773 540,011 2.b.
3. Federal funds sold and securities purchased under agreements to
resell in domestic offices of the bank and its Edge and Agreement
subsidiaries, and in IBFs:
a. Federal Funds sold..................................................... 0276 2,508,883 3.a.
b. Securities purchased under agreements to resell 0277 1,422,695 3.b.
4. Loans and lease financing receivables:
a. Loans and leases, net of unearned income (from Schedule RC-C).......... RCFD 2122 16,238,310 4.a.
b. LESS: Allowance for loan and lease losses.............................. RCFD 3123 358,207 4.b.
c. LESS: Allocated transfer risk reserve....................... RCFD 3128 0 4.c.
d. Loans and leases, net of unearned income, allowance, and
reserve (item 4.a minus 4.b and 4.c)................................... 2125 15,880,103 4.d.
5. Assets held in trading accounts........................................... 3545 13,257,798 5.
6. Premises and fixed assets (including capitalized leases).................. 2145 516,827 6.
7. Other real estate owned (from Schedule RC-M).............................. 2150 13,166 7.
8. Investments in unconsolidated subsidiaries and associated
companies (from Schedule RC-M)............................................ 2130 10,363 8.
9. Customers' liability to this bank on acceptances outstanding.............. 2155 463,961 9.
10.Intangible assets (from Schedule RC-M).................................... 2143 119,715 10.
11.Other assets (from Schedule RC-F)......................................... 2160 1,346,941 11.
12.Total assets (sum of items 1 through 11).................................. 2170 47,678,610 12.
</TABLE>
- --------------
(1) Includes cash items in process of collection and unposted debits.
(2) Includes time certificates of deposit not held in trading accounts.
<PAGE>
<TABLE>
<CAPTION>
Legal Title of Bank: The First National Bank of Chicago Call Date: 3/31/95 ST-BK: 17-1630 FFIEC 031
Address: One First National Plaza, Suite 0460 Page RC-2
City, State Zip: Chicago, IL 60670-0460
FDIC Certificate No.: 0/3/6/1/8
---------
SCHEDULE RC-CONTINUED
DOLLAR AMOUNTS IN
THOUSANDS BIL MIL THOU
----------------- ------------
<S> <C> <C> <C> <C>
LIABILITIES
13.Deposits:
a. In domestic offices (sum of totals of columns A and C
from Schedule RC-E, part 1)............................... RCON 2200 14,675,401 13.a.
(1) Noninterest-bearing(1)................................ RCON 6631 5,498,690 13.a.(1)
(2) Interest-bearing...................................... RCON 6636 9,176,711 13.a.(2)
b. In foreign offices, Edge and Agreement subsidiaries, and
IBFs (from Schedule RC-E, part II)........................ RCFN 2200 11,809,645 13.b.
(1) Noninterest bearing................................... RCFN 6631 304,669 13.b.(1)
(2) Interest-bearing...................................... RCFN 6636 11,504,976 13.b.(2)
14.Federal funds purchased and securities sold under agreements
to repurchase in domestic offices of the bank and of
its Edge and Agreement subsidiaries, and in IBFs:
a. Federal funds purchased................................... RCFD 0278 2,072,830 14.a.
b. Securities sold under agreements to repurchase............ RCFD 0279 1,484,164 14.b.
15.a. Demand notes issued to the U.S. Treasury.................. RCON 2840 103,138 15.a.
b. Trading Liabilities....................................... RCFD 3548 9,101,186 15.b.
16.Other borrowed money:
a. With original maturity of one year or less................ RCFD 2332 2,307,860 16.a.
b. With original maturity of more than one year............. RCFD 2333 506,476 16.b.
17. Mortgage indebtedness and obligations under capitalized
leases....................................................... RCFD 2910 278,108 17.
18.Bank's liability on acceptance executed and outstanding...... RCFD 2920 463,961 18.
19.Subordinated notes and debentures............................ RCFD 3200 1,225,000 19.
20.Other liabilities (from Schedule RC-G)....................... RCFD 2930 699,375 20.
21.Total liabilities (sum of items 13 through 20)............... RCFD 2948 44,727,144 21.
22.Limited-Life preferred stock and related surplus............. RCFD 3282 0 22.
EQUITY CAPITAL
23.Perpetual preferred stock and related surplus................ RCFD 3838 0 23.
24.Common stock................................................. RCFD 3230 200,858 24.
25.Surplus (exclude all surplus related to preferred stock)..... RCFD 3839 2,304,657 25.
26. a. Undivided profits and capital reserves................... RCFD 3632 447,916 26.a.
b. Net unrealized holding gains (losses) on
available-for-sale securities............................ RCFD 8434 [2,165) 26.b.
27.Cumulative foreign currency translation adjustments.......... RCFD 3284 200 27.
28.Total equity capital (sum of items 23 through 27)............ RCFD 3210 2,951,466 28.
29.Total liabilities, limited-life preferred stock, and equity
capital (sum of items 21, 22, and 28)........................ RCFD 3300 47,678,610 29.
Memorandum
To be reported only with the March Report of Condition.
1. Indicate in the box at the right the number of the statement
below that best describes the most comprehensive level of
auditing work performed for the bank by independent external Number
auditors as of any date during 1993.......................... RCFD 6724 N/A M.1.
</TABLE>
1 = Independent audit of the bank conducted in accordance with generally
accepted auditing standards by a certified public accounting firm which
submits a report on the bank
2 = Independent audit of the bank's parent holding company conducted in
accordance with generally accepted auditing standards by a certified public
accounting firm which submits a report on the consolidated holding company
(but not on the bank separately)
3 = Directors' examination of the bank conducted in accordance with generally
accepted auditing standards by a certified public accounting firm (may be
required by state chartering authority)
4.= Directors' examination of the bank performed by other external auditors (may
be required by state chartering authority)
5 = Review of the bank's financial statements by external auditors
6 = Compilation of the bank's financial statements by external auditors
7 = Other audit procedures (excluding tax preparation work)
8 = No external audit work
- ----------
(1) Includes total demand deposits and noninterest-bearing time and savings
deposits.
<PAGE>
EXHIBIT 25.4
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM T-1
--------
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939
OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305(B)(2)_____
-----------------------
THE FIRST NATIONAL BANK OF CHICAGO
(Exact name of trustee as specified in its charter)
A National Banking Association 36-0899825
(I.R.S. employer
identification number)
One First National Plaza, Chicago, Illinois 60670-0126
(Address of principal executive offices) (Zip Code)
The First National Bank of Chicago
One First National Plaza, Suite 0286
Chicago, Illinois 60670-0286
Attn: Lynn A. Goldstein, Law Department (312) 732-6919
(Name, address and telephone number of agent for service)
---------------------
TIME WARNER CAPITAL III
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of To be applied for
incorporation or organization) (IRS Employer Identification No.)
75 Rockefeller Plaza
New York, New York 10019
(Address of Principal Executive Offices) (Zip Code)
Preferred Trust Securities
(Title of the indenture securities)
<PAGE>
Item 1. General Information. Furnish the following information as to the
-------------------
trustee:
(a) Name and address of each examining or supervision authority to which it
is subject.
Comptroller of Currency, Washington, D. C., Federal Deposit Insurance
Corporation, Washington, D. C., The Board of Governors of the Federal
Reserve System, Washington, D. C..
(B) WHETHER IT IS AUTHORIZED TO EXERCISE CORPORATE TRUST POWERS.
The trustee is authorized to exercise corporate trust powers.
ITEM 2. AFFILIATIONS WITH THE OBLIGOR. IF THE OBLIGOR IS AN AFFILIATE OF THE
-----------------------------
TRUSTEE, DESCRIBE EACH SUCH AFFILIATION.
No such affiliation exists with the trustee.
ITEM 16. LIST OF EXHIBITS. LIST BELOW ALL EXHIBITS FILED AS A PART OF THIS
----------------
STATEMENT OF ELIGIBILITY.
1. A copy of the articles of association of the trustee now in effect.*
2. A copy of the certificates of authority of the trustee to commence
business.*
3. A copy of the authorization of the trustee to exercise corporate trust
powers.*
4. A copy of the existing by-laws of the trustee.*
5. Not applicable.
6. The consent of the trustee required by Section 321(b) of the Act.
7. A copy of the latest report of condition of the trustee published
pursuant to law or the requirements of its supervising or examining
authority.
8. Not applicable.
9. Not applicable.
* EXHIBIT 1,2,3 AND 4 ARE HEREIN INCORPORATED BY REFERENCE TO EXHIBITS BEARING
IDENTICAL NUMBERS IN ITEM 12 OF THE FORM T-1 OF THE FIRST NATIONAL BANK OF
CHICAGO, FILED AS EXHIBIT 26 TO THE REGISTRATION STATEMENT ON FORM S-3 OF THE
CIT GROUP HOLDINGS, INC., FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON
FEBRUARY 16, 1993 (REGISTRATION NO. 33-58418).
<PAGE>
Pursuant to the requirements of the Trust Indenture Act of 1939, as amended, the
trustee, The First National Bank of Chicago, a national banking association
organized and existing under the laws of the United States of America, has duly
caused this Statement of Eligibility to be signed on its behalf by the
undersigned, thereunto duly authorized, all in the City of New York in the State
of New York, on the 1st day of August, 1995.
The First National Bank of Chicago,
Trustee,
By: /s/ MELISSA G. WEISMAN
_____________________________________
Melissa G. Weisman
Assistant Vice President
<PAGE>
EXHIBIT 6
THE CONSENT OF THE TRUSTEE REQUIRED
BY SECTION 321(B) OF THE ACT
August 1, 1995
Securities and Exchange Commission
Washington, D.C. 20549
Gentlemen:
In connection with the qualification of an Amended and Restated Declaration of
Trust of Time Warner Capital III, the undersigned, in accordance with Section
321(b) of the Trust Indenture Act of 1939, as amended, hereby consents that the
reports of examinations of the undersigned, made by Federal or State Authorities
authorized to make such examinations, may be furnished by such authorities to
the Securities and Exchange Commission upon its request therefor.
Very truly yours,
THE FIRST NATIONAL BANK OF CHICAGO
By: /s/ MELISSA G. WEISMAN
_______________________________
Melissa G. Weisman
Assistant Vice President
<PAGE>
EXHIBIT 7
A copy of the latest report of condition of the trustee published pursuant
to law or the requirements of its supervising or examining authority.
<PAGE>
<TABLE>
<CAPTION>
Legal Title of Bank: The First National Bank of Chicago Call Date: 3/31/95 ST-BK: 17-1630 FFIEC 031
Address: One First National Plaza, Suite 0460 Page RC-1
City, State Zip: Chicago, IL 60670-0460
FDIC Certificate No.: 0/3/6/1/8
---------
CONSOLIDATED REPORT OF CONDITION FOR INSURED COMMERCIAL
AND STATE-CHARTERED SAVINGS BANKS FOR MARCH 31, 1995
All schedules are to be reported in thousands of dollars. Unless otherwise
indicated, report the amount outstanding of the last business day of the quarter.
SCHEDULE RC--BALANCE SHEET
Dollar Amounts in C400
Thousands RCFD BIL MIL THOU
----------------- ---- ------------
<S> <C> <C> <C> <C>
ASSETS
1. Cash and balances due from depository institutions (from Schedule
RC-A):
a. Noninterest-bearing balances and currency and coin(1)............. 0081 2,948,128 1.a.
b. Interest-bearing balances(2)...................................... 0071 8,482,108 1.b.
2. Securities
a. Held-to-maturity securities(from Schedule RC-B, column A)......... 1754 167,911 2.a.
b. Available-for-sale securities (from Schedule RC-B, column D)...... 1773 540,011 2.b.
3. Federal funds sold and securities purchased under agreements to
resell in domestic offices of the bank and its Edge and Agreement
subsidiaries, and in IBFs:
a. Federal Funds sold................................................ 0276 2,508,883 3.a.
b. Securities purchased under agreements to resell................... 0277 1,422,695 3.b.
4. Loans and lease financing receivables:
a. Loans and leases, net of unearned income (from Schedule
RC-C)................................................................ RCFD 2122 16,238,310 4.a.
b. LESS: Allowance for loan and lease losses......................... RCFD 3123 358,207
4.b. c. LESS: Allocated transfer risk reserve.................. RCFD 3128 0
4.c.
d. Loans and leases, net of unearned income, allowance, and
reserve (item 4.a minus 4.b and 4.c).............................. 2125 15,880,103 4.d.
5. Assets held in trading accounts...................................... 3545 13,257,798 5.
6. Premises and fixed assets (including capitalized leases)............. 2145 516,827 6.
7. Other real estate owned (from Schedule RC-M)......................... 2150 13,166 7.
8. Investments in unconsolidated subsidiaries and associated
companies (from Schedule RC-M)....................................... 2130 10,363 8.
9. Customers' liability to this bank on acceptances outstanding......... 2155 463,961 9.
10.Intangible assets (from Schedule RC-M)............................... 2143 119,715
10.
11.Other assets (from Schedule RC-F).................................... 2160 1,346,941 11.
12.Total assets (sum of items 1 through 11)............................. 2170 47,678,610 12.
</TABLE>
(1) Includes cash items in process of collection and unposted debits.
(2) Includes time certificates of deposit not held in trading accounts.
<PAGE>
<TABLE>
<CAPTION>
Legal Title of Bank: The First National Bank of Chicago Call Date: 3/31/95 ST-BK: 17-1630 FFIEC 031
Address: One First National Plaza, Suite 0460 Page RC-2
City, State Zip: Chicago, IL 60670-0460
FDIC Certificate No.: 0/3/6/1/8
Schedule RC-Continued
Dollar Amounts in
Thousands Bil Mil Thou
----------------- ------------
<S> <C> <C> <C> <C>
LIABILITIES
13.Deposits:
a. In domestic offices (sum of totals of columns A and C
from Schedule RC-E, part 1)................................... RCON 2200 14,675,401 13.a.
(1) Noninterest-bearing(1).................................... RCON 6631 5,498,690 13.a.(1)
(2) Interest-bearing.......................................... RCON 6636 9,176,711 13.a.(2)
b. In foreign offices, Edge and Agreement subsidiaries, and
IBFs (from Schedule RC-E, part II)............................ RCFN 2200 11,809,645 13.b.
(1) Noninterest bearing....................................... RCFN 6631 304,669 13.b.(1)
(2) Interest-bearing.......................................... RCFN 6636 11,504,976 13.b.(2)
14.Federal funds purchased and securities sold under agreements
to repurchase in domestic offices of the bank and of
its Edge and Agreement subsidiaries, and in IBFs:
a. Federal funds purchased....................................... RCFD 0278 2,072,830 14.a.
b. Securities sold under agreements to repurchase................ RCFD 0279 1,484,164 14.b.
15.a. Demand notes issued to the U.S. Treasury...................... RCON 2840 103,138 15.a.
b. Trading Liabilities................................................ RCFD 3548 9,101,186
15.b.
16.Other borrowed money:
a. With original maturity of one year or less.................... RCFD 2332 2,307,860 16.a.
b. With original maturity of more than one year................. RCFD 2333 506,476
16.b. 17. Mortgage indebtedness and obligations under capitalized
leases........................................................... RCFD 2910 278,108 17.
18.Bank's liability on acceptance executed and outstanding.......... RCFD 2920 463,961 18.
19.Subordinated notes and debentures................................ RCFD 3200 1,225,000 19.
20.Other liabilities (from Schedule RC-G)........................... RCFD 2930 699,375 20.
21.Total liabilities (sum of items 13 through 20)................... RCFD 2948 44,727,144 21.
22.Limited-Life preferred stock and related surplus................. RCFD 3282 0 22.
EQUITY CAPITAL
23.Perpetual preferred stock and related surplus.................... RCFD 3838 0 23.
24.Common stock..................................................... RCFD 3230 200,858 24.
25.Surplus (exclude all surplus related to preferred stock)......... RCFD 3839 2,304,657 25.
26. a. Undivided profits and capital reserves....................... RCFD 3632 447,916
26.a. b. Net unrealized holding gains (losses) on available-for-sale
securities.................................................... RCFD 8434 [ 2,165)
26.b.
27.Cumulative foreign currency translation adjustments.............. RCFD 3284 200 27.
28.Total equity capital (sum of items 23 through 27)................ RCFD 3210 2,951,466 28.
29.Total liabilities, limited-life preferred stock, and equity
capital (sum of items 21, 22, and 28)............................ RCFD 3300 47,678,610 29.
Memorandum
To be reported only with the March Report of Condition.
1. Indicate in the box at the right the number of the statement below that best describes the most
comprehensive level of auditing work performed for the bank by independent external Number
auditors as of any date during 1993 . . . . . . . . . . . . . . . . . . . . . . . . . . . .RCFD 6724 N/A M.1.
</TABLE>
1 = Independent audit of the bank conducted in accordance with generally
accepted auditing standards by a certified public accounting firm which
submits a report on the bank
2 = Independent audit of the bank's parent holding company conducted in
accordance with generally accepted auditing standards by a certified public
accounting firm which submits a report on the consolidated holding company
(but not on the bank separately)
3 = Directors' examination of the bank conducted in accordance with generally
accepted auditing standards by a certified public accounting firm (may be
required by state chartering authority)
4. =Directors' examination of the bank performed by other external auditors (may
be required by state chartering authority)
5 = Review of the bank's financial statements by external auditors
6 = Compilation of the bank's financial statements by external auditors
7 = Other audit procedures (excluding tax preparation work)
8 = No external audit work
- --------------------
(1) Includes total demand deposits and noninterest-bearing time and savings
deposits.
<PAGE>
EXHIBIT 25.5
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM T-1
--------
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939
OF A CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305(B)(2)___
-------------
THE FIRST NATIONAL BANK OF CHICAGO
(Exact name of trustee as specified in its charter)
A National Banking Association 36-0899825
(I.R.S. employer
identification number)
One First National Plaza, Chicago, Illinois 60670-0126
(Address of principal executive offices) (Zip Code)
The First National Bank of Chicago
One First National Plaza, Suite 0286
Chicago, Illinois 60670-0286
Attn: Lynn A. Goldstein, Law Department (312) 732-6919
(Name, address and telephone number of agent for service)
----------
TIME WARNER INC.
(Exact name of registrant as specified in its charter)
Delaware
(State or other jurisdiction of 13-1388520
incorporation or organization) (IRS Employer Identification No.)
75 Rockefeller Plaza
New York, New York 10019
(Address of Principal Executive Offices) (Zip Code)
Guarantee by Time Warner Inc. of Preferred Trust Securities of Time Warner
Capital I,
Time Warner Capital II, and Time Warner Capital III
(Title of the indenture securities)
<PAGE>
Item 1.General Information. Furnish the following information as to the
-------------------
trustee:
(a)Name and address of each examining or supervision authority to which it is
subject.
Comptroller of Currency, Washington, D. C., Federal Deposit Insurance
Corporation, Washington, D. C., The Board of Governors of the Federal Reserve
System, Washington, D. C..
(B)WHETHER IT IS AUTHORIZED TO EXERCISE CORPORATE TRUST POWERS.
The trustee is authorized to exercise corporate trust powers.
ITEM 2.AFFILIATIONS WITH THE OBLIGOR. IF THE OBLIGOR IS AN AFFILIATE OF THE
-----------------------------
TRUSTEE, DESCRIBE EACH SUCH AFFILIATION.
No such affiliation exists with the trustee.
ITEM 16.LIST OF EXHIBITS. LIST BELOW ALL EXHIBITS FILED AS A PART OF THIS
----------------
STATEMENT OF ELIGIBILITY.
1.A copy of the articles of association of the trustee now in effect.*
2.A copy of the certificates of authority of the trustee to commence business.*
3.A copy of the authorization of the trustee to exercise corporate trust
powers.*
4.A copy of the existing by-laws of the trustee.*
5.Not applicable.
6.The consent of the trustee required by Section 321(b) of the Act.
7.A copy of the latest report of condition of the trustee published pursuant to
law or the requirements of its supervising or examining authority.
8.Not applicable.
9.Not applicable.
* EXHIBIT 1,2,3 AND 4 ARE HEREIN INCORPORATED BY REFERENCE TO EXHIBITS BEARING
IDENTICAL NUMBERS IN ITEM 12 OF THE FORM T-1 OF THE FIRST NATIONAL BANK OF
CHICAGO, FILED AS EXHIBIT 26 TO THE REGISTRATION STATEMENT ON FORM S-3 OF THE
CIT GROUP HOLDINGS, INC., FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON
FEBRUARY 16, 1993 (REGISTRATION NO. 33-58418).
<PAGE>
Pursuant to the requirements of the Trust Indenture Act of 1939, as amended, the
trustee, The First National Bank of Chicago, a national banking association
organized and existing under the laws of the United States of America, has duly
caused this Statement of Eligibility to be signed on its behalf by the
undersigned, thereunto duly authorized, all in the City of New York, and State
of New York, on the 1st day of August, 1995.
The First National Bank of Chicago,
Trustee,
By: /s/ Melissa G. Weisman
------------------------------
Melissa G. Weisman
Assistant Vice President
<PAGE>
EXHIBIT 6
THE CONSENT OF THE TRUSTEE REQUIRED
BY SECTION 321(b) OF THE ACT
August 1, 1995
Securities and Exchange Commission
Washington, D. C. 20549
Gentlemen:
In connection with the qualification of a Guaratnee Agreement of Time Warner
Inc., the undersigned, in accordance with Section 321(b) of the Trust Indenture
Act of 1939, as amended, hereby consents that the reports of examinations of the
undersigned, made by Federal or State Authorities authorized to make such
examinations, may be furnished by such authorities to the Securities and
Exchange Commission upon its request therefor.
Very truly yours,
THE FIRST NATIONAL BANK OF CHICAGO
By: /s/ Melissa G. Weisman
--------------------------------
Melissa G. Weisman
Assistant Vice President
<PAGE>
EXHIBIT 7
A copy of the latest report of condition of the trustee published
pursuant to law or the requirements of its supervising or examining authority.
<PAGE>
<TABLE>
<CAPTION>
Legal Title of Bank: The First National Bank of Chicago Call Date: 3/31/95 ST-BK: 17-1630 FFIEC 031
Address: One First National Plaza, Suite 0460 Page RC-1
City, State Zip: Chicago, IL 60670-0460
FDIC Certificate No.: 0/3/6/1/8
---------
CONSOLIDATED REPORT OF CONDITION FOR INSURED COMMERCIAL
AND STATE-CHARTERED SAVINGS BANKS FOR MARCH 31, 1995
All schedules are to be reported in thousands of dollars. Unless otherwise
indicated, report the amount outstanding of the last business day of the quarter.
SCHEDULE RC--BALANCE SHEET
Dollar Amounts in C400
Thousands RCFD BIL MIL THOU
----------------- ---- ------------
<S> <C> <C> <C> <C>
ASSETS
1. Cash and balances due from depository institutions (from Schedule
RC-A):
a. Noninterest-bearing balances and currency and coin(1)............. 0081 2,948,128 1.a.
b. Interest-bearing balances(2)...................................... 0071 8,482,108 1.b.
2. Securities
a. Held-to-maturity securities(from Schedule RC-B, column A)......... 1754 167,911 2.a.
b. Available-for-sale securities (from Schedule RC-B, column D)...... 1773 540,011 2.b.
3. Federal funds sold and securities purchased under agreements to
resell in domestic offices of the bank and its Edge and Agreement
subsidiaries, and in IBFs:
a. Federal Funds sold................................................ 0276 2,508,883 3.a.
b. Securities purchased under agreements to resell................... 0277 1,422,695 3.b.
4. Loans and lease financing receivables:
a. Loans and leases, net of unearned income (from Schedule
RC-C)................................................................ RCFD 2122 16,238,310 4.a.
b. LESS: Allowance for loan and lease losses......................... RCFD 3123 358,207
4.b. c. LESS: Allocated transfer risk reserve.................. RCFD 3128 0
4.c.
d. Loans and leases, net of unearned income, allowance, and
reserve (item 4.a minus 4.b and 4.c).............................. 2125 15,880,103 4.d.
5. Assets held in trading accounts...................................... 3545 13,257,798 5.
6. Premises and fixed assets (including capitalized leases)............. 2145 516,827 6.
7. Other real estate owned (from Schedule RC-M)......................... 2150 13,166 7.
8. Investments in unconsolidated subsidiaries and associated
companies (from Schedule RC-M)....................................... 2130 10,363 8.
9. Customers' liability to this bank on acceptances outstanding......... 2155 463,961 9.
10.Intangible assets (from Schedule RC-M)............................... 2143 119,715
10.
11.Other assets (from Schedule RC-F).................................... 2160 1,346,941 11.
12.Total assets (sum of items 1 through 11)............................. 2170 47,678,610 12.
</TABLE>
(1) Includes cash items in process of collection and unposted debits.
(2) Includes time certificates of deposit not held in trading accounts.
<PAGE>
<TABLE>
<CAPTION>
Legal Title of Bank: The First National Bank of Chicago Call Date: 3/31/95 ST-BK: 17-1630 FFIEC 031
Address: One First National Plaza, Suite 0460 Page RC-2
City, State Zip: Chicago, IL 60670-0460
FDIC Certificate No.: 0/3/6/1/8
Schedule RC-Continued
Dollar Amounts in
Thousands Bil Mil Thou
----------------- ------------
<S> <C> <C> <C> <C>
LIABILITIES
13.Deposits:
a. In domestic offices (sum of totals of columns A and C
from Schedule RC-E, part 1)................................... RCON 2200 14,675,401 13.a.
(1) Noninterest-bearing(1).................................... RCON 6631 5,498,690 13.a.(1)
(2) Interest-bearing.......................................... RCON 6636 9,176,711 13.a.(2)
b. In foreign offices, Edge and Agreement subsidiaries, and
IBFs (from Schedule RC-E, part II)............................ RCFN 2200 11,809,645 13.b.
(1) Noninterest bearing....................................... RCFN 6631 304,669 13.b.(1)
(2) Interest-bearing.......................................... RCFN 6636 11,504,976 13.b.(2)
14.Federal funds purchased and securities sold under agreements
to repurchase in domestic offices of the bank and of
its Edge and Agreement subsidiaries, and in IBFs:
a. Federal funds purchased....................................... RCFD 0278 2,072,830 14.a.
b. Securities sold under agreements to repurchase................ RCFD 0279 1,484,164 14.b.
15.a. Demand notes issued to the U.S. Treasury...................... RCON 2840 103,138 15.a.
b. Trading Liabilities................................................ RCFD 3548 9,101,186
15.b.
16.Other borrowed money:
a. With original maturity of one year or less.................... RCFD 2332 2,307,860 16.a.
b. With original maturity of more than one year................. RCFD 2333 506,476
16.b. 17. Mortgage indebtedness and obligations under capitalized
leases........................................................... RCFD 2910 278,108 17.
18.Bank's liability on acceptance executed and outstanding.......... RCFD 2920 463,961 18.
19.Subordinated notes and debentures................................ RCFD 3200 1,225,000 19.
20.Other liabilities (from Schedule RC-G)........................... RCFD 2930 699,375 20.
21.Total liabilities (sum of items 13 through 20)................... RCFD 2948 44,727,144 21.
22.Limited-Life preferred stock and related surplus................. RCFD 3282 0 22.
EQUITY CAPITAL
23.Perpetual preferred stock and related surplus.................... RCFD 3838 0 23.
24.Common stock..................................................... RCFD 3230 200,858 24.
25.Surplus (exclude all surplus related to preferred stock)......... RCFD 3839 2,304,657 25.
26. a. Undivided profits and capital reserves....................... RCFD 3632 447,916
26.a. b. Net unrealized holding gains (losses) on available-for-sale
securities.................................................... RCFD 8434 [ 2,165)
26.b.
27.Cumulative foreign currency translation adjustments.............. RCFD 3284 200 27.
28.Total equity capital (sum of items 23 through 27)................ RCFD 3210 2,951,466 28.
29.Total liabilities, limited-life preferred stock, and equity
capital (sum of items 21, 22, and 28)............................ RCFD 3300 47,678,610 29.
Memorandum
To be reported only with the March Report of Condition.
1. Indicate in the box at the right the number of the statement below that best describes the most
comprehensive level of auditing work performed for the bank by independent external Number
auditors as of any date during 1993 . . . . . . . . . . . . . . . . . . . . . . . . . . . .RCFD 6724 N/A M.1.
</TABLE>
1 = Independent audit of the bank conducted in accordance with generally
accepted auditing standards by a certified public accounting firm which
submits a report on the bank
2 = Independent audit of the bank's parent holding company conducted in
accordance with generally accepted auditing standards by a certified public
accounting firm which submits a report on the consolidated holding company
(but not on the bank separately)
3 = Directors' examination of the bank conducted in accordance with generally
accepted auditing standards by a certified public accounting firm (may be
required by state chartering authority)
4. =Directors' examination of the bank performed by other external auditors (may
be required by state chartering authority)
5 = Review of the bank's financial statements by external auditors
6 = Compilation of the bank's financial statements by external auditors
7 = Other audit procedures (excluding tax preparation work)
8 = No external audit work
- --------------------
(1) Includes total demand deposits and noninterest-bearing time and savings
deposits.
