<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 6, 1995
REGISTRATION NOS. 33-61523, 33-61523-01, 33-61523-02 AND 33-61523-03
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------
AMENDMENT NO. 1
TO
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
(I.R.S. EMPLOYER IDENTIFICATION NO.) 36-7121096
(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)
36-7121097 36-7121098
(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]
---------------
CALCULATION OF REGISTRATION FEE
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<TABLE>
<CAPTION>
PROPOSED MAXIMUM PROPOSED MAXIMUM TOTAL 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)
- ----------------------------------------------------------------------------------------------------
<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, and certain
back-up obligations of,
Time Warner Inc.(4)....
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Total................... $575,000,000 100% $575,000,000 $172,414(5)
25,862(5)
</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 $575,000,000.
(3) Exclusive of accrued interest and distributions, if any.
(4) The back-up obligations of Time Warner Inc., in addition to the Guarantees
and the Subordinated Debentures, consist of the agreement set forth in
each Declaration of Trust pursuant to which Time Warner Inc. has agreed to
pay debts and obligations of the relevant Trust (other than with respect
to the Trust Securities), and all costs or expenses of the relevant Trust,
including fees, expenses and taxes, all as provided herein. No separate
consideration will be received for any Guarantees or such back-up
obligations. See "Effect of the Obligations Under the Subordinated
Debentures and the Guarantee" in the applicable Prospectus Supplement.
(5) Calculated pursuant to Rule 457. Total registration fee equals $198,276,
of which $172,414 was previously paid. The balance of $25,862 is being
paid concurrently herewith.
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. Certain
capitalized terms used in this Prospectus Supplement have the meaning ascribed
to them under "Glossary of Terms" in Annex I hereto.
(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 (the "NYSE") under the symbol " ". 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 the Issue Date (as defined
herein).
(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 New York 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 (the "Liquidation Amount"), 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 by Time Warner;
provided that the Guarantee will rank pari passu with the guarantee delivered
by Time Warner in connection with the issuance of the $1.24 Preferred
Exchangeable Redemption Cumulative Securities of Time Warner Financing Trust
(the "PERCS"). See "Recent Developments". 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 $10.4 billion
at June 30, 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 $14.5 billion
at June 30, 1995. The indebtedness of Time Warner's consolidated and
unconsolidated subsidiaries is expected to increase $3.9 billion as a result of
the Transactions (as defined herein) that are expected to be consummated after
June 30, 1995. See "Recent Developments".
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 Preferred Securities--
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.
S-2
<PAGE>
SUMMARY OF THE OFFERING
The information in this Prospectus Supplement 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. 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. Certain capitalized terms used in this
Prospectus Supplement have the meanings ascribed to them under the "Glossary of
Terms" in Annex I hereto.
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 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--
Mandatory Redemption; --Optional Redemption". 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 Security, 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 when, as and if available for payment by the Property
Trustee (as defined herein), except as otherwise described herein. The first
distribution payment will be for the period from and including the Issue Date
to but excluding , 1995. Distributions (or amounts equal to accrued and
unpaid distributions) payable on the Preferred Securities for any period
shorter than a quarterly distribution period will be computed 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. 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. Such right to extend the interest payment period for the
Subordinated Debentures is limited to an Extension 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
S-3
<PAGE>
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 above requirements. In
the event that Time Warner exercises its right to commence an Extension Period
or an extension period or other deferral of interest feature under any debt
security of Time Warner that ranks pari passu with the Subordinated Debentures,
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 the Subordinated Debentures or 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 (i) 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, (ii) any payments of interest, principal or premium, if any, on, or
repayment, repurchase or redemption of, the 4% Subordinated Notes due December
23, 1997 (the "Subordinated Notes"), and (iii) any payments of distributions
with respect to, or redemptions, purchases or acquisitions of, or any payments
in liquidation of, the PERCS (including any of the foregoing with respect to
the guarantee agreement entered into by Time Warner for the benefit of the
holders of the PERCS). See "Description of the Preferred Securities--Option to
Extend Interest Payment Period; --Distributions" and "Description of the
Subordinated Debentures--Option To Extend Interest Payment Period".
In the event Time Warner exercises its right to defer payments of interest on
the Subordinated Debentures or on any debt securities ranking pari passu
thereto, 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. In the opinion of Cravath, Swaine & Moore, special tax counsel to Time
Warner and Time Warner Capital ("Tax Counsel"), under current law, each holder
of Preferred Securities will be required to 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. See "Risk Factors--
Option to Extend Interest Payment Period" and "United States Federal Income
Taxation--Original Issue Discount".
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 Security plus
(b) accrued and unpaid distributions thereon to but excluding the date of
redemption. See "Description of the Preferred Securities--Mandatory
Redemption".
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
S-4
<PAGE>
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".
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 herein), 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 Preferred 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 Trust Securities, Time Warner will use its reasonable best
efforts to have the Subordinated Debentures listed on the NYSE. 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 (as defined herein) (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 Liquidation
Distribution (as defined herein) 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 by Time Warner and senior to the common stock of Time Warner. The
Guarantee will rank pari passu with the guarantee delivered by Time Warner in
connection with the issuance of the PERCS and with any guarantee now or
hereafter entered into in respect of any preferred securities of any affiliate
of Time Warner. See "Recent Developments".
The mechanisms and obligations relating to the Guarantee and the Subordinated
Debentures and the obligations of Time Warner under the Declaration to pay
certain obligations, costs and expenses of Time Warner Capital, taken together,
are equivalent to a full and unconditional guarantee by Time Warner of payments
due on the Preferred Securities. See "Risk Factors--Ranking of Subordinated
Obligations Under the Guarantee and 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
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
S-5
<PAGE>
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 Trust
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 (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 $10.4 billion at June 30, 1995. The Subordinated Debentures rank
pari passu with the Subordinated Notes issued by Time Warner in connection with
the issuance of the PERCS. See "Recent Developments". 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 $14.5 billion at June 30, 1995. The indebtedness
of Time Warner's consolidated and unconsolidated subsidiaries is expected to
increase $3.9 billion as a result of the Transactions that are expected to be
consummated after June 30, 1995. See "Recent Developments".
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 (as defined herein) 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 (as defined herein),
which voting rights are vested exclusively in the holder of the Common
Securities. See "Description of the Preferred Securities--Voting Rights; --
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 June 30, 1995, was approximately 8.3%. The
weighted average maturity of Time Warner's outstanding indebtedness as of June
30, 1995, was approximately 15 years. See "Use of Proceeds".
LISTING
Application will be made to list the Preferred Securities on the NYSE under
the symbol " ".
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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 delivered by Time Warner in connection with the
issuance of the PERCS and with any guarantee now or hereafter entered into by
Time Warner in respect of any preferred securities of any affiliate of Time
Warner. 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 $10.4 billion at June 30, 1995. The Subordinated Debentures rank
pari passu with the Subordinated Notes issued by Time Warner in connection with
the issuance of the PERCS. See "Recent Developments". 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 $14.5 billion
at June 30, 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 certain
acquisitions by subsidiaries of Time Warner, 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 to make
distributions or other payments to Time Warner. See "Recent Developments",
"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. 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. 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. In the event that Time Warner
exercises its right to commence an Extension Period or an extension period or
other deferral of interest feature under any debt security of Time Warner that
ranks pari passu with the Subordinated Debentures, 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 the
Subordinated Debentures or 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 (i) 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, (ii)
any payments of interest, principal or premium, if any, on, or repayment,
repurchase or redemption of, the Subordinated Notes and (iii) any payments or
distributions with respect to, or redemptions, purchases or acquisitions of, or
any payments in liquidation of, the PERCS (including any of the foregoing with
respect to the guarantee agreement entered into by Time Warner for the benefit
of the holders of the PERCS). See "Description of
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the Preferred Securities--Option to Extend Interest Payment Period" and
"Description of the Subordinated Debentures--Option To Extend Interest Payment
Period".
In the event Time Warner exercises its right to defer payments of interest on
the Subordinated Debentures or on any debt securities ranking pari passu
thereto, 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. In the opinion of Tax Counsel, under current law, during such 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 where
the issuer does not have such rights. See "United States Federal Income
Taxation--Original Issue Discount".
RIGHTS UNDER THE GUARANTEE AND THE SUBORDINATED DEBENTURES
The Guarantee will be a full and unconditional guarantee with respect to the
Preferred Securities from the time of issuance of such Preferred Securities but
will not apply to any payment of distributions or other amounts due to the
extent Time Warner has failed to make a payment of principal or interest on the
Subordinated Debentures. To the extent Time Warner were to default on its
obligation to pay amounts payable on the Subordinated Debentures, Time Warner
Capital would lack available funds for the payment of distributions on or
amounts payable on redemption of the Trust Securities and, in such event,
holders of the Preferred Securities would not be able to rely on the Guarantee
for payment of such amounts. Instead, holders of the Preferred Securities would
rely on the enforcement by the Property Trustee of its rights as registered
holder of the Subordinated Debentures against Time Warner pursuant to the terms
of the Indenture and may also vote to appoint a Special Regular Trustee who
shall have the same rights, powers and privileges as the Regular Trustees (as
defined herein). The mechanisms and obligations relating to the Guarantee and
the Subordinated Debentures and the obligations of Time Warner under the
Declaration to pay certain obligations, costs and expenses of Time Warner
Capital, 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" and "Description of the Subordinated Debentures".
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 on a Pro Rata Basis (determined without regard to the proviso
in the definition of such term) in connection with the liquidation of Time
Warner Capital. In certain circumstances,
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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
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; --Modification of the Declaration".
TRADING PRICE
Application will be made to list the Preferred Securities as equity
securities on the NYSE 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; --Sales of Preferred Securities".
HOLDING COMPANY STRUCTURE
Time Warner Capital's ability to make distributions and other payments on the
Preferred Securities is solely dependent upon Time Warner's making interest and
other payments on the Subordinated Debentures deposited as trust assets as and
when required. Time Warner is a holding company and its assets consist
primarily of investments in its subsidiaries. Time Warner Entertainment Company
L.P. ("TWE"), in which Time Warner owns directly or indirectly 74.49% of the
pro rata priority capital and residual equity interests (together with certain
other priority interests), which is not consolidated with Time Warner for
financial reporting purposes, also has substantial indebtedness and other
liabilities. See "Time Warner Inc." Time
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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
TWE) 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 under the Guarantee is dependent primarily upon the
earnings of its subsidiaries and TWE and the distribution or other payment of
such earnings to Time Warner. The TWE Agreement of Limited Partnership and the
bank credit facilities of TWE and certain subsidiaries of Time Warner limit
distributions and other transfers of funds to Time Warner. Generally,
distributions by TWE other than tax distributions are subject to restricted
payments limitations and availability under certain financial ratios applicable
to TWE contained in certain bank credit facilities. As a result of certain
acquisitions by subsidiaries of Time Warner, 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
"Selected Historical and Pro Forma Financial Information".
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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.
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. Time Warner
and certain of its wholly owned subsidiaries (the "Time Warner General
Partners") collectively own 74.49% of the pro rata priority capital and
residual equity interests in TWE and a wholly owned subsidiary of U S WEST Inc.
("U S WEST") owns pro rata priority capital and residual equity interests in
TWE of 25.51%. In addition, the Time Warner General Partners own priority
capital interests senior and junior to the pro rata priority capital interests.
See "Recent Developments".
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.
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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
person with a residence in the State of Delaware or 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 national
banking association, 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. 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.
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".
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RECENT DEVELOPMENTS
As summarized below and more fully described in Time Warner's Current Reports
on Form 8-K dated August 14, 1995, August 31, 1995, and September 22, 1995,
Time Warner has recently entered into or consummated a number of transactions.
These transactions will, among other things, result in the acquisition of
Turner Broadcasting System, Inc. ("TBS"), the acquisition of cable systems
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) and the restructuring of the
ownership of TWE.
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").
Time Warner (i) closed on May 2, 1995, its acquisition of Summit
Communications Group, Inc. ("Summit") (the "Summit Acquisition"); (ii) closed
on July 6, 1995, its acquisition of KBLCOM Incorporated ("KBLCOM"), a
subsidiary of Houston Industries Incorporated (the "KBLCOM Acquisition"); and
(iii) agreed on February 6, 1995, to acquire Cablevision Industries Corporation
("CVI") and certain related companies (the "CVI Acquisition" and together with
the Summit Acquisition and the KBLCOM Acquisition, 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.
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 (the "Six Flags Transaction") and (ii) on May 18, 1995, announced the
sale of 15 of its unclustered cable television systems serving approximately
144,000 subscribers, certain of which transactions closed during the second
quarter of 1995 (the "Unclustered Cable Disposition", and together with the Six
Flags Transaction, 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, a wholly owned subsidiary of Time Warner ("TWI Cable"), TWE
and the TWE-A/N Partnership executed a five-year revolving credit facility (the
"New Credit Agreement"). 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 "Bank Refinancing").
On August 15, 1995, Time Warner and Time Warner Financing Trust completed a
public offering of 12,057,561 PERCS of Time Warner Financing Trust (the "PERCS
Offering"). The PERCS are subject to mandatory redemption on December 23, 1997,
for an amount per PERCS equal to the lesser of $54.41 and the market value of a
share of common stock of Hasbro, Inc. ("Hasbro") on December 17, 1997, payable
in cash or, at Time Warner's option, Hasbro common stock.
On August 15, 1995, Time Warner redeemed all of its $1.8 billion principal
amount of outstanding Redeemable Reset Notes Due August 15, 2002 (the "Reset
Notes") 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
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principal amount of 8.11% Debentures Due August 15, 2006, and approximately
$548 million aggregate principal amount of 8.18% Debentures Due August 15, 2007
(collectively the "Exchange Securities") (the "Reset Notes Refinancing"). The
Exchange Securities were issued under Time Warner's senior indenture dated
January 15, 1993 and rank pari passu with all other senior indebtedness of Time
Warner.
On September 5, 1995, and October 2, 1995, ITOCHU Corporation ("ITOCHU") and
Toshiba Corporation ("Toshiba"), respectively, each exchanged their 5.61% pro
rata equity interests in TWE and their 6.25% residual equity interests in TW
Service Holding I, L.P. and TW Service Holding II, L.P., each of which owns
certain assets related to the TWE businesses (the "Time Warner Service
Partnerships"), for, in the case of ITOCHU, 8 million shares of two series of
new convertible preferred stock ("Series G Preferred Stock" and "Series H
Preferred Stock") of Time Warner and, in the case of Toshiba, 7 million shares
of new convertible preferred stock of Time Warner ("Series I Preferred Stock")
and $10 million in cash (the "ITOCHU/Toshiba Transaction"). As a result of the
ITOCHU/Toshiba Transaction, Time Warner directly or indirectly holds 74.49% of
the pro rata priority capital and residual equity interests in TWE. A
subsidiary of U S WEST owns the remaining 25.51% of the pro rata priority
capital and residual equity interests in TWE.
On September 18, 1995, Time Warner redeemed approximately $1 billion
principal amount of its 8.75% Convertible Subordinated Debentures due 2015 (the
"8.75% Convertible Debentures") for an aggregate redemption price of
approximately $1.06 billion, including redemption premiums and accrued interest
thereon. The redemption was financed with approximately $500 million of
proceeds raised from the issuance of 7.75% ten-year notes (the "7.75% Notes")
in June 1995, $363 million of net proceeds raised from the issuance of the
PERCS and available cash and equivalents (the "Market Refinancings").
The Market Refinancings, the Reset Notes Refinancing and the Bank Refinancing
are referred to herein as the "1995 Debt Refinancings."
Time Warner has entered into an Agreement and Plan of Merger dated as of
September 22, 1995 (the "Merger Agreement"), providing for the merger of Turner
Broadcasting System, Inc. ("TBS") with a wholly owned subsidiary of Time Warner
(the "Merger"). Alternatively, the Merger Agreement contemplates that the
structure of the transaction may be changed, if the parties so agree, so that
each of Time Warner and TBS will merge with separate subsidiaries of a newly
formed holding company (the "Holding Company Transaction" and together with the
Merger, the "TBS Transaction"). If the Holding Company Transaction is
implemented, the issued and outstanding shares of each class of the capital
stock of Time Warner will be converted into shares of an identical class of
capital stock of the newly formed holding company. In connection with the TBS
Transaction, Time Warner has agreed to enter into certain agreements and
related transactions with certain shareholders of TBS, including R. E. Turner
and Liberty Media Corporation ("LMC"). The Merger Agreement and certain related
agreements provide for the issuance by either Time Warner or the newly formed
holding company, as applicable, of approximately 171.3 million shares of common
stock ("Common Stock"), the issuance of approximately 13 million stock options
to replace all outstanding TBS options and the assumption or incurrence of
approximately $2.4 billion of indebtedness (including $283 million of
convertible debt securities).As part of the TBS Transaction, LMC will exchange
the 50.8 million shares of Common Stock to be received by LMC in the TBS
Transaction for a number of shares of a new class of voting stock economically
equivalent to such Common Stock ("LMC Class Stock") and will receive a number
of additional shares of LMC Class Stock equivalent to five million shares of
Common Stock pursuant to a separate option agreement, all of which will be
placed in a voting trust or, in certain circumstances, exchanged for non-voting
stock.
The TBS Transaction and the related transactions are subject to customary
closing conditions, including the approval of the shareholders of TBS and Time
Warner and certain regulatory approvals. For further discussion of the TBS
Transaction and the related transactions, reference is made to Time Warner's
Current Report on Form 8-K dated September 22, 1995, which is incorporated
herein by reference.
The TBS Transaction, the Acquisitions, the TWE-A/N Transaction, the Asset
Sale Transactions, the 1995 Debt Refinancings and the ITOCHU/Toshiba
Transaction are collectively referred to herein as the "Transactions". For a
further discussion of the Transactions, reference is made to Time Warner's
Current Reports on Form 8-K dated August 14, 1995, August 31, 1995, and
September 22, 1995, which are incorporated herein by reference.
S-14
<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 June 30, 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>
SIX MONTHS
ENDED YEARS ENDED DECEMBER 31,
JUNE 30, -------------------------------------------------------
--------------- 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................. $ 3,724 $3,225 $ 7,396 $ 6,581 $ 6,309 $ 13,070 $ 12,021 $ 11,517
Depreciation and
amortization............ 231 210 437 424 384 1,172 1,109 1,138
Business segment
operating income........ 322 282 713 591 529 1,343 1,154 1,114
Equity in pretax income
of Entertainment Group.. 106 111 176 281 226 -- -- --
Interest and other, net.. 356 337 724 718 351 882 966 1,133
Net income (loss)(a)(b).. (55) (71) (91) (221) 86 86 (99) (227)
Net loss applicable to
common shares (after
preferred dividends).... (63) (77) (104) (339) (542) (542) (692) (786)
Per share of common
stock:
Net loss(a)(b)......... $ (.17) $ (.20) $ (.27) $ (.90) $ (1.46) $ (1.46) $ (2.40) $ (3.42)
Dividends.............. $ .18 .17 $ .35 $ .31 $ .265 $ .265 $ .25 $ .25
Average common shares(b). 380.5 378.7 378.9 374.7 371.0 371.0 288.2 229.9
Ratio of earnings to
fixed charges
(deficiency in the
coverage of fixed
charges by earnings
before fixed
charges)(c)............. 1.1x 1.1x 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)........... 1.1x 1.1x 1.1x $ (91) $ (506) $ (509) $ (1,240) $ (1,335)
</TABLE>
S-15
<PAGE>
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------------------------------
JUNE 30, 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.... $ 5,471 $ 5,350 $ 5,627 $ 5,392 $ -- $ -- $ --
Total assets............ 17,788 16,716 16,892 17,043 27,366 24,889 25,337
Long-term debt.......... 9,593 8,839 9,291 2,897 10,068 8,716 11,184
Shareholders' equity:
Preferred stock
liquidation
preference............ 394 140 140 6,532 6,532 6,256 5,954
Equity applicable to
common stock.......... 1,085 1,008 1,230 1,635 1,635 2,242 360
Total shareholders'
equity................ 1,479 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 six months
ended June 30, 1995 and 1994 and the year ended December 31, 1994 include
noncash interest expense of $119 million, $110 million and $219 million,
respectively, relating to the Reset Notes and Time Warner's zero coupon
convertible 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 June 30, 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-16
<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>
SIX MONTHS ENDED YEARS ENDED DECEMBER 31,
JUNE 30, ----------------------------------------------
------------------ 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................ $ 4,508 $ 3,990 $8,509 $7,963 $7,251 $6,761 $6,068 $5,671
Depreciation and
amortization........... 513 458 959 909 857 788 733 775
Business segment
operating income....... 475 437 852 905 855 814 724 549
Interest and other, net. 339 296 616 564 569 531 526 648
Net income (loss)(a).... 70 95 136 207 173 173 103 (180)
TWE ratio of earnings to
fixed charges
(deficiency in the
coverage of fixed
charges by earnings
before fixed
charges)(b)............ 1.4x 1.5x 1.4x 1.4x 1.4x 1.4x 1.4x $ (138)
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------------------------------
JUNE 30, RESTATED
1995 1994 1993 1992 1992 1991 1990
----------- ------- ------- ------- ------- ------- -------
(UNAUDITED) (MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET
INFORMATION
Total assets............ $19,620 $18,992 $18,202 $16,733 $15,886 $14,230 $14,415
Long-term debt.......... 7,037 7,160 7,125 7,684 7,171 4,571 6,516
Time Warner General
Partners' senior
capital................ 1,730 1,663 1,536 -- -- -- --
Partners' capital....... 6,350 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 June 30, 1995 set forth below gives effect to the
Unclustered Cable Disposition and the 1995 Debt Refinancings and, with respect
to Time Warner only, also gives effect to the TBS Transaction, the KBLCOM
Acquisition, the CVI Acquisition and the ITOCHU/Toshiba Transaction, in each
case as if such transactions
S-17
<PAGE>
occurred at such date. The Summit Acquisition, the TWE-A/N Transaction and the
Six Flags Transaction are already reflected in the historical balance sheets of
Time Warner and the Entertainment Group as of June 30, 1995. The unaudited
selected pro forma operating statement information of Time Warner and the
Entertainment Group for the six months ended June 30, 1995 and the year ended
December 31, 1994 set forth below gives effect to the Asset Sale Transactions,
the TWE-A/N Transaction and the 1995 Debt Refinancings and, with respect to the
statements of operations of Time Warner only, also gives effect to the
Acquisitions, the TBS Transaction and the ITOCHU/Toshiba Transaction, in each
case as if the transactions occurred at the beginning of such periods. No pro
forma effect has been given in the information set forth below to the issuance
of the Preferred Securities offered hereby because it 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 Reports on Form 8-K dated August
14, 1995, August 31, 1995, and September 22, 1995, which are 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>
SIX MONTHS YEAR ENDED
ENDED JUNE 30, 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................ $ 5,646 $ 4,588 $ 11,026 $ 8,790
Depreciation and
amortization........... 655 541 1,268 1,040
Business segment
operating income....... 367 488 699 928
Equity in pretax income
of Entertainment Group. 130 -- 208 --
Interest and other, net. 582 328 1,152 660
Net income (loss)....... (199) 97 (446) 174
Net loss applicable to
common shares (after
preferred dividends)... (272) -- (592) --
Per share of common
stock:
Net loss.............. (.48) -- (1.06) --
Dividends............. .18 -- .35 --
Average common shares... 561.3 -- 560.3 --
Time Warner and TWE
ratio of earnings to
fixed charges
(deficiency in the
coverage of fixed
charges by earnings
before fixed
charges)(a)............ $ (100) 1.6x $ (302) 1.6x
Time Warner deficiency
in the coverage of
combined fixed charges
and preferred stock
dividends by earnings
before fixed charges
and preferred stock
dividends(a)........... $ (228) -- $ (523) --
</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 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
S-18
<PAGE>
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 six
months ended June 30, 1995 and the year ended December 31, 1994 included
noncash interest expense of $54 million and $96 million, respectively,
relating to Time Warner's zero coupon convertible notes due 2012 and 2013
and TBS's zero coupon convertible notes due 2007.
<TABLE>
<CAPTION>
JUNE 30, 1995
---------------------
TIME ENTERTAINMENT
WARNER GROUP
------- -------------
(MILLIONS)
<S> <C> <C>
PRO FORMA BALANCE SHEET INFORMATION
Investments in and amounts due to and from Entertainment
Group................................................... $ 6,936 $ --
Total assets............................................. 37,196 19,137
Long-term debt........................................... 14,181 6,317
Shareholders' equity:
Preferred stock liquidation preference.................. 3,644 --
Equity applicable to common stock....................... 8,978 --
Total shareholders' equity.............................. 12,622 --
Time Warner General Partners' senior capital............. -- 1,730
Partners' capital........................................ -- 6,339
</TABLE>
S-19
<PAGE>
CONSOLIDATED CAPITALIZATION
The consolidated historical and pro forma capitalization of Time Warner and
Time Warner's Entertainment Group, consisting principally of TWE, at June 30,
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
Unclustered Cable Disposition and the 1995 Debt Refinancings and, with respect
to Time Warner only, also gives effect to the TBS Transaction, the KBLCOM
Acquisition, the CVI Acquisition and the ITOCHU/Toshiba Transaction, 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
specified above and (ii) the issuance of the Preferred Securities offered
hereby as if such transactions occurred at such date. Although the proceeds to
Time Warner of the issuance of the Preferred Securities offered hereby 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)................ 1,795 -- -- -- --
Exchange Securities.... -- 1,795 1,795 (a)
Zero coupon convertible
notes due 2012 (6.25%
yield)................ 564 564 564 -- --
Zero coupon convertible
notes due 2013 (5%
yield)................ 994 994 994 -- --
8.75%, 9.125% and 9.15%
Debentures............ 2,248 2,248 2,248 -- --
8.75% Convertible
subordinated
debentures............ 2,226 1,226 1,226 -- --
7.75% Notes............ 497 497 497 -- --
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............ 140 140 140 -- --
New credit
agreement(d).......... -- 2,701 2,701 -- 1,855
TBS credit agreement
(weighted average
interest rate of
7.5%)................. -- 1,250 1,250 -- --
TBS 8 3/8% and 7.4%
Senior notes.......... -- 547 547 -- --
TBS 8.4% Senior
debentures............ -- 200 200 -- --
TBS Zero coupon
convertible notes due
2007 (7.25% yield).... -- 254 254 -- --
TBS other indebtedness. -- 36 36 -- --
TWE credit agreement
(weighted average
interest rate of
6.7%)(e).............. -- -- -- 2,575 --
TWE commercial paper
(weighted average
interest rate of
6.5%)(e).............. -- -- -- 622 622
TWE 8 7/8%, 9 5/8% and
10.15% Notes(e)....... -- -- -- 1,197 1,197
TWE 7 1/4%, 8 3/8% and
8 3/8% Debentures(e).. -- -- -- 2,584 2,584
Other.................. 129 229 229 59 59
Reduction of debt with
proceeds from the
issuance of the
Preferred Securities
offered hereby........ -- -- (b) -- --
------- ------- ------- --------- ---------
Subtotal............... 9,993 14,581 7,037 6,317
Reclassification of
debt due to TWE to
investments in and
amounts due to the
Entertainment
Group(c).............. (400) (400) (400) -- --
------- ------- ------- --------- ---------
Total long-term
debt............... 9,593 14,181 7,037 6,317
Company obligated
mandatorily redeemable
preferred securities of
subsidiaries (*)....... -- 374 (b) -- --
Shareholders' equity:
Preferred stock
liquidation
preference............ 394 3,644 3,644 -- --
Equity applicable to
common stock.......... 1,085 8,978 8,978 -- --
------- ------- ------- --------- ---------
Total shareholders'
equity................ 1,479 12,622 12,622 -- --
Time Warner General
Partners' senior
capital................ -- -- -- 1,730 1,730
Partners' capital....... -- -- -- 6,350 6,339
------- ------- ------- --------- ---------
Total capitalization.... $11,072 $27,177 $ $ 15,117 $ 14,386
======= ======= ======= ========= =========
</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-20
<PAGE>
(a) Reflects the accreted value of the Reset Notes on June 30, 1995. The
accreted value of the Reset Notes on the redemption date, August 15, 1995,
was $1,827,929,000; and the aggregate principal amount of the Exchange
Securities issued on that date was equal to $1,827,929,000.
(b) Although the proceeds to Time Warner of the issuance of the Preferred
Securities offered hereby 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 August 14, 1995, incorporated by reference herein
for a description of the New Credit Agreement.
(e) Guaranteed by certain subsidiaries of Time Warner which are the general
partners of TWE.
S-21
<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 June 30, 1995, was 8.3%. The
weighted average maturity of Time Warner's outstanding indebtedness as of June
30, 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 Prospectus of
which this Prospectus Supplement is a part, 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 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
Preferred Securities pro rata according to the aggregate liquidation amount of
the Preferred Securities held by such holder in relation to the aggregate
liquidation 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
S-22
<PAGE>
Securities pro rata according to the aggregate liquidation amount of the Common
Securities held by such holder in relation to the aggregate liquidation 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 beyond the first date such Distributions are payable (or would be
payable if not for any Extension Period or default by Time Warner on the
Subordinated Debentures) 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 the Issue Date 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".
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 at least 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 its right to commence any Extension Period or
an extension period or other deferral of interest feature under any debt
security of Time Warner that ranks pari passu with the Subordinated Debentures,
then (a) Time Warner shall not declare or pay dividends on, make distributions
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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 the Subordinated Debentures or 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 (i) 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, (ii) any payments of interest, principal or premium, if any, on, or
repayment, repurchase or redemption of, the Subordinated Notes and (iii) any
payments or distributions with respect to, or redemptions, purchases or
acquisitions of, or any payments in liquidation of, the PERCS (including any of
the foregoing with respect to the guarantee agreement entered into by Time
Warner for the benefit of the holders of the PERCS). 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 Preferred Securities 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;--
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 for the payment date next following the
termination of such deferral period.
In the event Time Warner exercises its right to defer payments of interest on
the Subordinated Debentures or on any debt securities ranking pari passu
thereto, 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. In the opinion of Tax Counsel, under current law, during such 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 present intention of exercising its right to defer
payments of interest by extending the interest payment period on the
Subordinated Debentures.
MANDATORY REDEMPTION
Unless previously redeemed pursuant to the optional or special redemption
provisions, each of the outstanding Trust Securities, including the Preferred
Securities, will be redeemed by Time Warner Capital, in cash, on the Maturity
Date, at the Preferred Redemption Price.
OPTIONAL REDEMPTION
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, in each case at a price
equal to the Debenture Redemption Price. 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. 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.
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On any Redemption 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 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 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 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 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 Time Warner Capital, 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 liquidation 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
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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, 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 NYSE or on such exchange as the Preferred
Securities are then listed.
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 Time Warner Capital's
obligations with respect to the Preferred Securities, including any obligation
to pay accrued and unpaid distributions thereon.
Under current United States 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
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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" and
"Description of the Subordinated Debentures" herein 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 the amount of the applicable Preferred Redemption Price 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".
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". 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 book-entry 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". 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.
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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 may 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.
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 liquidation 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
(determined without regard to the proviso in the definition of such term).
Pursuant to the Declaration, Time Warner Capital shall terminate on the
earliest of (i) 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 (ii) 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
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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,
(ii) Time Warner Capital fails to pay the Preferred Redemption Price of any
Preferred Securities to be redeemed on the applicable redemption date or (iii)
a Declaration 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 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, (iii) exercise
any right to rescind or annul a declaration that the principal of all 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; provided, however, that,
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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 written 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 aggregate liquidation amount of the Trust Securities voting
together as a single class; provided, however, that, where any amendment,
modification or termination 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 aggregate 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 by the Property Trustee at the
direction of the holders of the Preferred Securities 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".
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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 aggregate 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
aggregate liquidation amount of such class of Trust Securities.
Notwithstanding the foregoing, (i) no amendment or modification may be made
to the Declaration unless the Regular Trustees shall have obtained (A) 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 Time Warner Capital 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 Time Warner Capital 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 the Declaration that may be defective or
inconsistent with any other provision of the Declaration, (iii) add to the
covenants, restrictions or obligations of Time Warner and (iv) 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 NYSE under the symbol " ".
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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.
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 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
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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 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
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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
interpreted in accordance with the 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 following
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 Prospectus
of which this Prospectus Supplement is a part, 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.
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 herein) (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 Trust Securities or the redemption of all of the Trust
Securities upon maturity or redemption of the Subordinated Debentures) the
lesser of (A) the Liquidation Distribution 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 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
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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 (i) any interest or dividend
payments by Time Warner, where the interest or dividend is paid by way of the
issuance of securities that rank junior to the Subordinated Debentures, (ii)
any payments of interest, principal or premium, if any, on, or repayment,
repurchase or redemption of, the Subordinated Notes and (iii) any payments or
distributions with respect to, or redemptions, purchases or acquisitions of, or
any payments in liquidation of, the PERCS (including any of the foregoing with
respect to the Guarantee Agreement entered into by Time Warner for the benefit
of the holders of the PERCS).
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 aggregate liquidation amount of the outstanding
Preferred Securities and, in either case, only if the Guarantee Trustee shall
have obtained 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.
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 aggregate 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 institute a legal proceeding
directly against Time Warner to enforce such holder'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.
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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. The
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 delivered by Time Warner in
connection with the issuance of 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 and interpreted in accordance
with the laws of the State of New York.
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 Prospectus of which this Prospectus Supplement is a part, the Subordinated
Debentures Indenture, dated as of , 1995, between Time Warner and Chemical
Bank, as Trustee (the "Indenture Trustee"), as supplemented by the First
Supplemental Indenture between Time Warner and the Indenture Trustee (the
"Indenture"), 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 NYSE 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)
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the aggregate Initial Public Offering Price 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--Mandatory Redemption;--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.
SUBORDINATION
The payment of the principal of and interest on the Subordinated Debentures
will be subordinated in right of payment 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 $10.4 billion
at June 30, 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 $14.5 billion
at June 30, 1995. The indebtedness of Time Warner's consolidated and
unconsolidated subsidiaries is expected to increase by approximately $3.9
billion as a result of the Transactions referred to under "Recent
Developments". 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 issued by Time Warner in
connection with the issuance of the PERCS. See "Recent Developments".
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
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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 or is subordinated 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 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 issued in connection with the issuance of the PERCS.
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.
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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 or an extension period or other deferral of interest
feature under any debt security of Time Warner that ranks pari passu with the
Subordinated Debentures, (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 the Subordinated Debentures or 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 (i) 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 securities on which such interest or dividend is being paid, (ii)
any payments of interest, principal or premium, if any, on, or repayment,
repurchase or redemption of, the Subordinated Notes and (iii) any payments or
distributions with respect to, or redemptions, purchases or acquisitions of, or
any payments in liquidation of, the PERCS (including any of the foregoing with
respect to the guarantee agreement entered into by Time Warner for the benefit
of the holders of the PERCS). 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.
If the Property Trustee shall be the sole holder of the Subordinated
Debentures, Time Warner shall give the Regular Trustees, the Property Trustee
and the Indenture Trustee written notice of its selection of such Extension
Period one Business Day prior to the earlier of (i) the next succeeding date
distributions on the Preferred Securities are payable or (ii) the date the
Regular Trustees are required to give notice to the NYSE (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 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 and the Indenture Trustee notice of its
selection of such Extension Period ten Business Days prior to the earlier of
(i) the next succeeding Interest Payment Date or (ii) the date upon which Time
Warner is required to give notice to the NYSE (or other applicable self-
regulatory organization) or to holders of the Subordinated Debentures of the
record or payment date of such related interest payment. If the Property
Trustee is not the only holder of the Subordinated Debentures at the time of
election of an Extension Period, the Company shall give the holders of the
Subordinated Debentures and the Indenture Trustee written notice of such
Extension Period 10 Business Days before the earlier of (i) the next succeeding
interest payment date or (ii) the date Time Warner 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 Subordinated
Debentures.
In the event Time Warner exercises its right to defer payments of interest on
the Subordinated Debentures or on any debt securities ranking pari passu
thereto, 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. In the opinion of Tax Counsel, under current law, during such 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
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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 present intention of exercising its right to defer
payments of interest by extending the interest payment period on the
Subordinated Debentures.
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 Debenture 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 Redemption or Distribution".
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 depositary shall have been appointed or (iii) Time Warner, in its
sole discretion, determines that such Global
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Security shall be so exchangeable. 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 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
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of its issuance but does not apply to any distributions or other payments
unless and until Time Warner has made payment of interest or other payments 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;--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 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 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.
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. 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.
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 (without regard to the
proviso in the definition of such term) 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.
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UNITED STATES FEDERAL INCOME TAXATION
GENERAL
The following is a summary of the material United States Federal income tax
consequences of the purchase, ownership and disposition of Preferred Securities
by U.S. Holders (as defined below). 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"). This
summary does not address tax considerations applicable to investors that may be
subject to special U.S. Federal income tax treatment, such as dealers in
securities 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. 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. In the
opinion of Tax Counsel, the statements contained in the following summary, to
the extent they constitute matters of law, accurately describe the material
U.S. Federal income tax consequences to holders of the acquisition, ownership
and disposition of Preferred Securities. For purposes of this summary, a "U.S.
Holder" shall mean a holder who is (i) a citizen or a resident of the United
States (or any state thereof), (ii) a corporation, partnership or other entity
created or organized in or under the laws of the United States or any political
subdivision thereof, (iii) an estate or trust, the income of which is subject
to United States Federal income tax regardless of its source, and (iv) any
other person subject to United States Federal income tax on net income.
CLASSIFICATION OF THE SUBORDINATED DEBENTURES
In connection with the issuance of the Subordinated Debentures, Tax Counsel
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 will 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, Tax Counsel 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
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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 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 "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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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.
S-46
<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 (the "Underwriters"), 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 without the consent of the Representatives.
Application will be made to list the Preferred Securities as equity
securities on the NYSE. Trading of the Preferred Securities on the NYSE 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 NYSE. 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.
S-47
<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. Certain legal matters will be passed upon
for the Underwriters by Shearman & Sterling, New York, New York.
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 by Amendment No. 1 thereto dated June 28, 1995, 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 Ernst & Young 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 Ernst & Young 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.
S-48
<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.
The financial statements of Turner Broadcasting System, 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 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.
S-49
<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. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
PROSPECTUS (SUBJECT TO COMPLETION)
$575,000,000
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, preferred trust 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
$575,000,000. 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". 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 "Commission") 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 Commission. 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
Commission 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
Commission. Reports, proxy statements and other information concerning Time
Warner can be inspected and copied at prescribed rates at the Commission's
Public Reference Room, Judiciary Plaza, 450 Fifth Street, Northwest,
Washington, D.C. 20549, as well as the following Regional Offices of the SEC:
Seven 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 thereto 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 Quarterly Report on Form 10-Q for the
quarter ended June 30, 1995; (iv) Time Warner's
2
<PAGE>
Current Report on Form 8-K dated January 26, 1995; (v) Time Warner's Current
Report on Form 8-K dated February 6, 1995; (vi) Time Warner's Current Report on
Form 8-K dated April 1, 1995; (vii) Time Warner's Current Report on Form 8-K
dated May 30, 1995; (viii) Time Warner's Current Report on Form 8-K dated June
15, 1995; (ix) Time Warner's Current Report on Form 8-K dated July 6, 1995; (x)
Time Warner's Current Report on Form 8-K dated August 14, 1995; (xi) Time
Warner's Current Report on Form 8-K dated August 31, 1995; and (xii) Time
Warner's Current Report on Form 8-K dated September 22, 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. Time Warner and certain of its wholly owned
subsidiaries (the "Time Warner General Partners") collectively own 74.49% of
the pro rata priority capital and residual equity interest in TWE and a wholly
owned subsidiary of U S WEST Inc. ("U S WEST") owns pro rata priority capital
and residual equity interests in TWE of 25.51%. 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 is 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
person with a residence in the State of Delaware or 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 national
banking association, 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. 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 six months ended June 30, 1995
and the year ended December 31, 1994 give effect to the TBS Transaction, the
ITOCHU/Toshiba Transaction, the Acquisitions, the TWE-A/N Transaction, the 1995
Debt Refinancings and the 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 Reports on Form 8-K dated August
14, 1995, August 31, 1995, and September 22, 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>
SIX MONTHS ENDED
JUNE 30, 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). $(100) 1.1x $(302) 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)............ $(228) 1.1x $(523) 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. Historical fixed
charges for the six months ended June 30, 1995 and the year ended December 31,
1994 include noncash interest expense of $119 million and $219 million,
respectively, relating to the Reset Notes and Time Warner's zero coupon
convertible notes due 2012 and 2013. Pro forma fixed charges for the six months
ended June 30, 1995, and the year ended December 31, 1994, include noncash
interest expense of $54 million and $96 million, respectively, relating to Time
Warner's zero coupon convertible notes due 2012 and 2013 and TBS's zero coupon
convertible notes due 2007.
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<PAGE>
DESCRIPTION OF THE 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 permits, under certain circumstances, the issuance of a series
of Subordinated Debentures that would provide the holders with the right to
convert at any time, at such holders' option, all or any part of such
Subordinated Debentures into shares of common stock of Time Warner or other
marketable securities of any person. The Indenture requires that such shares of
common stock of Time Warner or other marketable securities be registered under
the Exchange Act and listed on one or more national securities exchanges or
approved for quotation on the National Association of Securities Dealers, Inc.
Automated Quotation System or any similar system. Time Warner has no present
intention to issue any series of Subordinated Debentures that are convertible
into shares of common stock of Time Warner or other marketable securities. This
prospectus does not constitute an offer to sell or the solicitation of any
offer to buy Subordinated Debentures that are convertible into common stock of
Time Warner or other marketable securities.
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.
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<PAGE>
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.
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, Time Warner 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 Time Warner 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 or
certain affiliates. 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 or in the observance of a
provision which cannot be amended without the consent of each holder of
Subordinated
8
<PAGE>
Debentures, 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 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 defined herein), 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.
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
9
<PAGE>
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 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 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
10
<PAGE>
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.
11
<PAGE>
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
herein), 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 junior to the
securities on which such interest or dividend is being paid and any payments
made in connection with the $1.24 Preferred Exchangeable Redeemable Cumulative
Securities of Time Warner Financing Trust, the 4% Subordinated Notes due
December 23, 1997 of Time Warner issued in connection therewith and the
guarantee related thereto.
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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 aggregate liquidation amount of the outstanding
Preferred Securities issued by the applicable Trust and, in either case, only
if the Guarantee Trustee shall have obtained 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 aggregate 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 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 guarantee delivered by
Time Warner in connection with the issuance of the $1.24 Preferred Exchangeable
Redeemable Securities of Time Warner, (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 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 and interpreted in
accordance with the 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
14
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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. Certain legal matters will be passed upon for the
Underwriters by Shearman & Sterling, New York, New York.
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 by Amendment No. 1 thereto dated June 28, 1995, 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 Ernst & Young 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 Ernst & Young 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.
The financial statements of Turner Broadcasting System, 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 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.
----------------
The following information is being disclosed pursuant to Florida law and is
accurate as of the date of this Prospectus: A subsidiary of Time Warner pays
royalties to Artex, S.A. a corporation organized under the laws of Cuba, in
connection with the distribution in the United States of certain Cuban musical
recordings. Current information concerning this matter may be obtained from the
State of Florida Department of Banking & Finance, The Capitol, Tallahassee,
Florida 32399-0350, 904-488-9805.
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<PAGE>
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, Sunday or
any other day on which banking institu-
tions in New York, New York, are permit-
ted or required by any applicable law to
close.
CODE...............................
the Internal Revenue Code of 1986, as
amended.
COMMISSION......................... the Securities and Exchange Commission.
COMMON SECURITIES..................
the common securities of Time Warner Cap-
ital representing undivided beneficial
interests in the assets of Time Warner
Capital, directly or indirectly 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 Time Warner Cap-
ital.
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.
DELAWARE TRUSTEE.............. The First National Bank of Chicago.
DISTRIBUTIONS......................
cumulative cash distributions payable to
holders of Preferred Securities in an
amount per annum equal to % of the liq-
uidation amount of $25 per Preferred Se-
curity, accruing from and including the
Issue Date and payable quarterly in ar-
rears on , , and of each
year, commencing , 1995, except as
described herein.
DTC................................
the Depository Trust Company.
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ERISA..............................
the Employee Retirement Income Security
Act of 1974.
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, but if and only
to the extent that, in each of case, Time
Warner has made a payment of interest or
principal on the Subordinated Debentures,
as the case may be, and (ii) upon a Liq-
uidation Event (other than in connection
with the distribution of the Subordinated
Debentures to the holders of Preferred
Securities or the redemption of all the
Preferred Securities upon the maturity or
redemption of the Subordinated Deben-
tures), the lesser of (A) the Liquidation
Distribution to the extent Time Warner
Capital has funds available therefor, and
(B) the amount of assets of Time Warner
Capital remaining available for distribu-
tion to holders of the Preferred Securi-
ties upon such Liquidation Event.
GUARANTEE TRUSTEE.................. The First National Bank of Chicago.
INDENTURE..........................
the Subordinated Debentures Indenture
dated as of , 1995, between 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;
and (iv) certain events of bankruptcy,
insolvency, receivership or reorganiza-
tion involving Time Warner or certain af-
filiates.
INDENTURE TRUSTEE.................. Chemical Bank.
INITIAL HOLDERS.................... holders who purchase the Preferred Secu-
rities upon original issuance.
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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 AMOUNT................. $25 per Preferred Security.
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 Time Warner Capital,
whether voluntary or involuntary.
MATURITY DATE...................... , 2025.
MINIMUM DENOMINATION...............
with respect to the Subordinated Deben-
tures, $25 per Subordinated 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 Trust Securities will not
recognize any gain or loss for United
States Federal
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income tax purposes as a result of the
dissolution of Time Warner Capital and
the distribution of the Subordinated De-
bentures.
NYSE............................... the New York Stock Exchange, Inc.
OPTIONAL REDEMPTION................ the redemption of the Subordinated Deben-
tures by Time Warner in whole or in part,
from time to time, on or after , 2000
at the Debenture Redemption Price. If
Time Warner redeems Subordinated Deben-
tures, Time Warner Capital must redeem
Trust Securities having an aggregate liq-
uidation amount equal to the aggregate
principal amount of the Subordinated De-
bentures so redeemed at the Preferred Re-
demption Price.
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.
PERCS.............................. $1.24 Preferred Exchangeable Redeemable
Cumulative Securities of Time Warner Fi-
nancing Trust.
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 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 Time Warner Capital 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 liquidation amount of
all the Preferred Securities outstanding
up to an aggregate liquidation 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 liquidation amount of the
Common Securities held by such holder in
relation to the aggregate liquidation
amount of all the Common Securities
outstanding.
PROPERTY ACCOUNT.............. a segregated noninterest-bearing bank ac-
count maintained under the exclusive con-
trol of the Property Trustee
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to hold all payments made in respect of
the Subordinated Debentures for the bene-
fit of the holders of the Trust Securi-
ties.
PROPERTY TRUSTEE................... The First National Bank of Chicago.
any of a Maturity Date, Optional Redemp-
REDEMPTION DATE.................... tion Date or Special Redemption Date.
REGULAR TRUSTEES................... the three Time Warner Trustees who are
employees or officers of, or affiliated
with, Time Warner.
REPRESENTATIVES.................... Merrill Lynch, Pierce, Fenner & Smith In-
corporated, Morgan Stanley & Co. Incorpo-
rated and Bear, Stearns & Co. Inc.
RESET NOTES........................ the Redeemable Reset Notes Due August 15,
2002 of Time Warner.
SECURITIES ACT..................... the Securities Act of 1933.
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.
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SPECIAL EVENT......................
either a Tax Event or an Investment Com-
pany Event.
SPECIAL REDEMPTION................. upon the occurrence and during the con-
tinuation of a Special Event, in certain
limited circumstances, Time Warner will
have the right to redeem the Subordinated
Debentures for cash at the Debenture Re-
demption Price, with the result that Time
Warner Capital will redeem Trust Securi-
ties on a Pro Rata Basis for cash at the
Preferred Redemption Price.
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 Trust 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.
SPONSOR............................ Time Warner, as sponsor of Time Warner
Capital and an executor of the Declara-
tion.
SUBORDINATED DEBENTURES............ Time Warner's % Subordinated Debentures
due , 2025.
SUBORDINATED NOTES ................ Time Warner's 4% Subordinated Notes due
December 23, 1997.
TAX COUNSEL........................ Cravath, Swaine & Moore, special tax
counsel to Time Warner and Time Warner
Capital.
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 (or any regulations thereunder) of
the United States or any political subdi-
vision 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
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<PAGE>
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, Time Warner Cap-
ital and each of Merrill Lynch, Pierce,
Fenner & Smith Incorporated, Morgan Stan-
ley & Co. Incorporated and Bear, Stearns
& Co., as representative of the several
underwriters named therein, with respect
to, among other things, the Preferred Se-
curities.
A-7
<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-11
Time Warner Capital....................................................... S-12
Recent Developments....................................................... S-13
Selected Historical and Pro Forma Financial Information................... S-15
Consolidated Capitalization............................................... S-20
Use of Proceeds........................................................... S-22
Description of the Preferred Securities................................... S-22
Description of the Guarantee.............................................. S-34
Description of the Subordinated Debentures................................ S-36
Effect of Obligations Under the Subordinated Debentures and the Guarantee. S-42
United States Federal Income Taxation..................................... S-44
Erisa Considerations...................................................... S-46
Underwriting.............................................................. S-47
Legal Matters............................................................. S-48
Experts................................................................... S-48
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
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<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.................... $ 198,276
Rating Agency Fees............................................... 250,000
Blue Sky Fees and Expenses....................................... 17,500
Trustee's Expenses............................................... 25,000
Printing Fees and Expenses....................................... 250,000
Accounting Fees and Expenses..................................... 125,000
NYSE Listing Fee................................................. 40,000
Legal Fees and Expenses.......................................... 250,000
Miscellaneous.................................................... 44,224
----------
Total.......................................................... $1,200,000
==========
</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>
Each 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
applicable 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 applicable 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 applicable 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 applicable
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
applicable 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. Each
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 applicable Trust and in a manner such
Indemnified Person reasonably believed to be within the scope of authority
conferred on such Indemnified Person by the applicable 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. Each 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 such
Declaration.
ITEM 16. EXHIBITS.
Exhibits identified in parentheses below are on file with the Commission 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 Debentures
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
8.1 --Opinion of Cravath, Swaine & Moore
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.
</TABLE>
II-2
<PAGE>
<TABLE>
<C> <S>
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 (included in Exhibit 5.1 and 8.1)
23.3 --Consent of Deloitte & Touche 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
23.8 --Consent of Price Waterhouse LLP, Independent Accountants
23.9 --Consent of Richards, Layton & Finger (included in Exhibit 5.2)
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>
- --------
* Previously filed.
ITEM 17. UNDERTAKING.
The Registrants hereby undertake that, for purposes of determining any
liability under the Securities Act, each filing of Time Warner'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.
II-3
<PAGE>
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 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 Time Warner 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 5TH DAY OF
OCTOBER, 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 INDICATED
ON THE 5TH DAY OF OCTOBER, 1995.
SIGNATURE TITLE
* Director, Chairman
------------------------------------- of the Board and
(GERALD M. LEVIN) Chief Executive
Officer (principal
executive officer)
* Director, President
-------------------------------------
(RICHARD D. PARSONS)
Senior Vice
/s/ Richard J. Bressler President and Chief
------------------------------------- Financial Officer
(RICHARD J. BRESSLER) (principal
financial officer)
Vice President and
/s/ John A. LaBarca Controller
------------------------------------- (principal
(JOHN A. LABARCA) accounting officer)
* Director
-------------------------------------
(MERV ADELSON)
* Director
-------------------------------------
(LAWRENCE B. BUTTENWIESER)
II-5
<PAGE>
SIGNATURE TITLE
* Director
-------------------------------------
(EDWARD S. FINKELSTEIN)
* Director
-------------------------------------
(BEVERLY SILLS GREENOUGH)
* Director
-------------------------------------
(CARLA A. HILLS)
* Director
-------------------------------------
(DAVID T. KEARNS)
* Director
-------------------------------------
(HENRY LUCE III)
* Director
-------------------------------------
(REUBEN MARK)
* Director
-------------------------------------
(MICHAEL A. MILES)
* Director
-------------------------------------
(J. RICHARD MUNRO)
* Director
-------------------------------------
(DONALD S. PERKINS)
* Director
-------------------------------------
(RAYMOND S. TROUBH)
* Director
-------------------------------------
(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 5TH DAY OF OCTOBER, 1995.
Time Warner Capital I
By: Time Warner Inc., as Sponsor
/s/ Thomas W. McEnerney
By __________________________________
THOMAS W. MCENERNEYVICE PRESIDENT
Time Warner Capital II
By: Time Warner Inc., as Sponsor
/s/ Thomas W. McEnerney
By __________________________________
THOMAS W. MCENERNEYVICE PRESIDENT
Time Warner Capital III
By: Time Warner Inc., as Sponsor
/s/ Thomas W. McEnerney
By __________________________________
THOMAS W. MCENERNEYVICE PRESIDENT
II-7
<PAGE>
REGISTRATION NOS. 33-61523, 33-61523-01, 33-61523-02 AND 61523-03
- --------------------------------------------------------------------------------
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
EXHIBITS
TO
AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------------
TIME WARNER INC.
TIME WARNER CAPITAL I
TIME WARNER CAPITAL II
TIME WARNER CAPITAL III
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
- --------------------------------------------------------------------------------
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<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
PAGE
EXHIBITS NO.
-------- ----
<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 Debentures Indenture between Time
Warner Inc. and Chemical Bank, as Trustee*
4.9 --Form of First Supplemental Indenture to Subordinated
Debentures 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
8.1 --Opinion of Cravath, Swaine & Moore
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 (included in Exhibit 5.1
and 8.1)
23.3 --Consent of Deloitte & Touche 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
23.8 --Consent of Price Waterhouse LLP, Independent Accountants
23.9 --Consent of Richards, Layton & Finger (included in Exhibit
5.2)
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>
- --------
* Previously filed.
<PAGE>
EXHIBIT 1.1
TIME WARNER CAPITAL I and TIME WARNER INC.
Underwriting Agreement
New York, New York
September __, 1995
To the Representatives
named in Schedule II
hereto of the Underwriters
named in Schedule I hereto
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 "Representatives") are acting as
representatives, [ ] [____]% Preferred Trust Securities (the "Preferred
Securities") to be specified in Schedule II hereto. If the firm or firms listed
in Schedule I hereto include only the firm or firms listed in Schedule II
hereto, then the terms "Underwriters" and "Representatives", as used herein,
shall each be deemed to refer to such firm or firms.
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
August 2, 1995, as amended and restated as of ________, 1995 (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 person with a residence in the State of
Delaware or a financial institution or an affiliate thereof which maintains a
principal place of business or residence in the State of Delaware, meeting the
requirements of the Delaware Act (the "Delaware Trustee"). Initially, The First
National Bank of Chicago will act as the Property Trustee and such person or
institution 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
<PAGE>
2
a 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,
between the Company and Chemical Bank, as Trustee (the "Indenture Trustee"), as
supplemented by a supplemental indenture dated as of __________, 1995 between
the Company and the Indenture Trustee (the "Supplemental Indenture", the
indenture as so supplemented being the "Indenture"). 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
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 (w) hereof.
(a) If the offering of the Securities is a Delayed Offering (as
specified in Schedule II hereto), paragraph (i) below is applicable and, if
the offering of the Securities is a Non-Delayed Offering (as so specified),
paragraph (ii) below is applicable.
(i) 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 (the file number of which is set forth in
Schedule II hereto) on such Form, including a basic prospectus, for
registration under the Act of the offering and sale of the Securities.
The Offerors may have filed one or more amendments thereto, and may
have used a Preliminary Final Prospectus, each of which has previously
been furnished to you. Such registration statement, as so amended,
has become effective. The offering of the Securities is a Delayed
Offering and, although the Basic Prospectus may not include all the
information with respect to the Securities and the offering thereof
required by
<PAGE>
3
the Act and the rules thereunder to be included in the Final
Prospectus, the Basic Prospectus includes all such information
required by the Act and the rules thereunder to be included therein as
of the Effective Date. The Offerors will next file with the
Commission pursuant to Rules 415 and 424(b)(2) or (5) a final
supplement to the form of prospectus included in such registration
statement relating to the Securities and the offering thereof. As
filed, such final prospectus supplement shall include all required
information with respect to the Securities and the offering thereof
and, except to the extent the Representatives shall agree in writing
to a modification, shall be in all substantive respects in the form
furnished to you prior to the Execution Time or, to the extent not
completed at the Execution Time, shall contain only such specific
additional information and other changes (beyond that contained in the
Basic Prospectus and any Preliminary Final Prospectus) as the Offerors
have advised you, prior to the Execution Time, will be included or
made therein.
(ii) Each of the Offerors meets the requirements for the use of
Form S-3 under the Act and has filed with the Commission a
registration statement (the file number of which is set forth in
Schedule II hereto) on such Form, including a basic prospectus, for
registration under the Act of the offering and sale of the Securities.
The Offerors may have filed one or more amendments thereto, including
a Preliminary Final Prospectus, each of which has previously been
furnished to you. The Offerors will next file with the Commission
either (x) a final prospectus supplement relating to the Securities in
accordance with Rules 430A and 424(b)(1) or (4), or (y) prior to the
effectiveness of such registration statement, an amendment to such
registration statement, including the form of final prospectus
supplement. In the case of clause (x), the Offerors have included in
such registration statement, as amended at the Effective Date, all
information (other than Rule 430A Information) required by the Act and
the rules thereunder to be included in the Final Prospectus with
respect to the Securities and the offering thereof. As filed, such
final prospectus supplement or such amendment and form of final
prospectus supplement shall contain all Rule 430A Information,
together with all other such required information, with respect to the
Securities and the offering thereof and, except to the extent the
Representatives shall agree in writing to a modification, shall be in
all substantive respects in the form furnished to you prior to the
Execution Time or, to the extent not completed at the Execution Time,
shall contain only such specific additional information and other
changes (beyond that contained in the Basic Prospectus and any
Preliminary Final Prospectus) as the Offerors have advised you, prior
to the Execution Time, will be included or made therein.
<PAGE>
4
(b) On the Effective Date, the Registration Statement did or will, and
when the Final Prospectus is first filed (if required) in accordance with
Rule 424(b) and on the Closing Date, the Final Prospectus (and any
supplement thereto) 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 Effective Date, the Final Prospectus, if not filed pursuant to Rule
424(b), did not or will not, and on the date of any filing pursuant to Rule
424(b) and on the Closing Date, the Final Prospectus (together with any
supplement thereto) will not, include any untrue statement of a material
fact or omit 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; 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 (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 Final Prospectus (or any
supplement thereto) in reliance upon and in conformity with information
furnished in writing to the Offerors by or on behalf of any Underwriter
through the Representatives specifically for inclusion in the Registration
Statement or the Final Prospectus (or any supplement thereto).
(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 Basic Prospectus, and any amendment or supplement thereto,
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
<PAGE>
5
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 Basic Prospectus,
and any amendment or supplement thereto, 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 Basic Prospectus, and any
amendment or supplement thereto.
(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 Basic Prospectus, and any amendment or
supplement thereto, and to enter into and perform its obligations under
this Agreement, the Preferred 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 Basic Prospectus, and any amendment or supplement
thereto; 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 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 Basic Prospectus, and
any amendment or supplement thereto; 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; if
the Preferred Securities are to be listed on any stock exchange (as
indicated in Schedule II hereto), authorization therefor has been given,
subject to official notice of issuance and evidence of satisfactory
distribution, or the
<PAGE>
6
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); the
Declaration will conform to all statements relating thereto contained in
the Basic Prospectus, and any amendment or supplement thereto; and the
Declaration, at the Closing Date, will have been duly qualified under the
Trust Indenture Act.
(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 statements relating thereto contained in the
Basic Prospectus, and any amendment or supplement thereto; 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 Basic Prospectus, and any amendment or supplement thereto.
(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 Basic
Prospectus, and any amendment or supplement thereto, will constitute valid
and binding obligations of the Company, enforceable against the Company in
accordance with their terms, will be in the form
<PAGE>
7
contemplated by, and entitled to the benefits of, the Indenture and will
conform to all statements relating thereto in the Basic Prospectus, and any
amendment or supplement thereto.
(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.
(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 their subsidiaries of
a character required to be disclosed in the Registration Statement which is
not adequately disclosed in the Basic Prospectus, and any amendment or
supplement thereto, and there is no franchise, contract or other document
of a character required to be described in the Registration Statement or
Basic Prospectus, and any amendment or supplement thereto, 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 or the consummation by the Trust and the Company of the
transactions contemplated by this Agreement.
(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
<PAGE>
8
(i) that certain Amended and Restated Credit Agreement (the "TWE Credit
Agreement"), dated as of June 30, 1995, among Time Warner Entertainment
Company, L.P., a Delaware limited partnership ("TWE"), the Time Warner
Entertainment-Advance/Newhouse Partnership, a New York general partnership,
TWI Cable, a wholly owned subsidiary of the Company and Chemical Bank, as
Administrative Agent, the Agents 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.
(r) The documents incorporated by reference in the Basic Prospectus,
and any amendment or supplement thereto, 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.
<PAGE>
9
(v) The consolidated financial statements and the related notes of each of
the Company and TWE included or incorporated by reference in the
Registration Statement present fairly in accordance with generally accepted
accounting principles the consolidated financial position of each of the
Company and TWE as of the dates indicated, and the consolidated results of
operations and cash flows of each of the Company and TWE 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.
(w) The terms which follow, when used in this Agreement, shall have
the meanings indicated. The term "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. "Basic
Prospectus" shall mean the prospectus referred to in paragraph (a) above
contained in the Registration Statement at the Effective Date, including,
in the case of a Non-Delayed Offering, any Preliminary Final Prospectus.
"Preliminary Final Prospectus" shall mean any preliminary prospectus
supplement to the Basic Prospectus which describes the Securities and the
offering thereof and is used prior to filing of the Final Prospectus.
"Final Prospectus" shall mean the prospectus supplement relating to the
Securities that is first filed pursuant to Rule 424(b) after the Execution
Time, together with the Basic Prospectus or, if, in the case of a Non-
Delayed Offering, no filing pursuant to Rule 424(b) is required, shall mean
the form of final prospectus relating to the Securities, including the
Basic Prospectus, included in the Registration Statement at the Effective
Date. "Registration Statement" shall mean the registration statement
referred to in paragraph (a) above, including incorporated documents,
exhibits and financial statements, as amended at the Execution Time (or, if
not effective at the Execution Time, in the form in which it
<PAGE>
10
shall become effective) and, in the event any post-effective amendment
thereto becomes effective prior to the Closing Date (as hereinafter
defined), shall also mean such registration statement as so amended. Such
term shall include any Rule 430A Information deemed to be included therein
at the Effective Date as provided by Rule 430A. "Rule 415", "Rule 424",
"Rule 430A" and "Regulation S-K" refer to such rules or regulation under
the Act. "Rule 430A Information" means information with respect to the
Securities and the offering thereof permitted to be omitted from the
Registration Statement when it becomes effective pursuant to Rule 430A.
All references in this Agreement to the Registration Statement, the Basic
Prospectus, any Preliminary Final Prospectus or the Final Prospectus shall
be deemed to refer to and include the documents incorporated by reference
therein pursuant to Item 12 of Form S-3 which were filed under the Exchange
Act on or before the Effective Date of the Registration Statement or the
issue date of the Basic Prospectus, any Preliminary Final Prospectus or the
Final Prospectus, as the case may be; all references in this Agreement to
financial statements and schedules and other information that is
"contained", "included" or "stated" in the Registration Statement, the
Basic Prospectus, any Preliminary Final Prospectus or the Final 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, the Basic Prospectus, any Preliminary Final Prospectus or the
Final Prospectus, as the case may be; and all references in this Agreement
to amendments or supplements to the Registration Statement, the Basic
Prospectus, any Preliminary Final Prospectus or the Final Prospectus shall
be deemed to mean and include the filing of any document under the Exchange
Act after the Effective Date of the Registration Statement or the issue
date of the Basic Prospectus, any Preliminary Final Prospectus or the Final
Prospectus, as the case may be, deemed to be incorporated therein by
reference. A "Non-Delayed Offering" shall mean an offering of securities
which is intended to commence promptly after the effective date of a
registration statement, with the result that, pursuant to Rules 415 and
430A, all information (other than Rule 430A Information) with respect to
the securities so offered must be included in such registration statement
at the effective date thereof. A "Delayed Offering" shall mean an offering
of securities pursuant to Rule 415 which does not commence promptly after
the effective date of a registration statement, with the result that only
information required pursuant to Rule 415 need be included in such
registration statement at the effective date thereof with respect to the
securities so offered. Whether the offering of the Securities is a Non-
Delayed Offering or a Delayed Offering shall be set forth in Schedule II
hereto.
(x) None of the Trust, the Time Warner Trustees, the Company, its
directors or officers or any person who controls the Trust or the Company,
as the case may be, within the meaning of Section 15 of the Act has taken,
directly or
<PAGE>
11
indirectly, any action which has constituted or resulted in stabilization
or manipulation of the price of any debt security of the Trust or the
Company in order to facilitate the sale or resale of the Preferred
Securities.
2. Purchase and Sale. 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.
3. Delivery and Payment. Delivery of and payment for the Preferred
--------------------
Securities shall be made on the date and at the time specified in Schedule II
hereto, which date and time may be postponed to a date not later than five
business days after such specified date by agreement between the
Representatives, acting jointly and without regard to any agreement among
underwriters, and the Company or as provided in Section 8 hereof (such date and
time of delivery and payment for the Preferred Securities being herein called
the "Closing Date"). Delivery of the Preferred Securities shall be made to the
Representatives for the respective accounts of the several Underwriters against
payment by the several Underwriters through the Representatives of the purchase
price thereof to or upon the order of the Trust by certified or official bank
check or checks drawn on or by a New York Clearing House bank and payable in
next day funds (unless another form of payment is specified in Schedule II
hereto). Delivery of the Preferred Securities shall be made at such location as
the Representatives shall reasonably designate on the Closing Date and payment
for the Preferred Securities shall be made at the office specified in Schedule
II hereto. Certificates for the Preferred Securities shall be registered in
such names and in such denominations as the Representatives 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 Representatives 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 Preferred Securities, the Offerors will not file any amendment to the
Registration Statement or supplement (including the Final Prospectus or any
Preliminary Final Prospectus) to the Basic Prospectus unless the Offerors
have furnished you a copy for your review prior to
<PAGE>
12
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 Final Prospectus, properly completed, and any
supplement thereto 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 Representatives of such timely
filing. The Offerors will promptly advise the Representatives (i) when the
Registration Statement, if not effective at the Execution Time, and any
amendment thereto, shall have become effective, (ii) when the Final
Prospectus, and any supplement thereto, 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 to the Registration Statement or
supplement to the Final 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
best efforts to prevent the issuance of any such stop order and, if issued,
to obtain as soon as possible the withdrawal thereof.
(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 Final Prospectus as then supplemented 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 the
Registration Statement or supplement the Final 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 Company will make generally available
to the Trust's security holders and to the Representatives 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) If and to the extent specified in Schedule II, 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.
<PAGE>
13
(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 Final Prospectus.
(g) The Offerors will furnish to the Representatives 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 Final Prospectus and the Final Prospectus and any supplement
thereto as the Representatives 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 supplements and the Basic
Prospectus, the Preliminary Final Prospectus and the Final Prospectus and
any amendments or supplements thereto, and the 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 Subordinated Debentures,
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, the Subordinated Debentures and the Guarantee 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 and Delaware 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) if the Securities are to be listed on any exchange (as
indicated in Schedule II hereto), any expenses and
<PAGE>
14
listing fees in connection with the listing of the Preferred Securities
and, if applicable, the Subordinated Debentures on such 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 Representatives 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 Closing Date or such other date as may be specified in
Schedule II, neither of the Offerors will, without the consent of Merrill
Lynch & Co. and Morgan Stanley & Co. Incorporated, 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 or (ii) the Company or TWE from filing with
the Commission a "shelf" registration statement for the offering of
securities under 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 such securities are not issued until the business
day following the Closing Date or such other date as may be specified in
Schedule I.
(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 Preferred 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
<PAGE>
15
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 Agreement, 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) If the Registration Statement has not become effective prior to
the Execution Time, unless the Representatives agree in writing to a later
time, the Registration Statement will become effective not later than (i)
5:30 PM New York City time on the date of determination of the public
offering price, if such determination occurred at or prior to 3:00 PM New
York City time on such date or (ii) 12:00 Noon on the business day
following the day on which the public offering price was determined, if
such determination occurred after 3:00 PM New York City time on such date;
if filing of the Final Prospectus, or any supplement thereto, is required
pursuant to Rule 424(b), the Final Prospectus, and any such supplement,
shall have been filed in the manner and within the time period required by
Rule 424(b); 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.
(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.
(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 Agreement, dated the Closing Date,
substantially in the form of Exhibit D hereto.
(f) The Representatives shall have received from Shearman & Sterling,
counsel for the Underwriters, such opinion or opinions, dated the Closing
Date, with
<PAGE>
16
respect to the legal existence of the Trust, the Preferred Securities, the
Indenture, the Guarantee Agreement, this Agreement, the Registration
Statement, the Final Prospectus (together with any supplement thereto) and
other related matters as the Representatives 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) Each of the Trust and the Company shall have furnished to the
Representatives a certificate of the Trust and the Company, respectively,
signed by any two 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 Final Prospectus, any supplement to the Final 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
(iii) since the date of the most recent financial statements
included in the Final Prospectus (exclusive of any supplement
thereto), 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 Final Prospectus (exclusive of any supplement
thereto).
(h) At the Closing Date and, if specified in Schedule II, at the
Execution Time, Ernst & Young shall have furnished to the Representatives a
letter or letters, dated as of the Closing Date and the Execution Time,
respectively, in form and substance satisfactory to the Representatives,
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:
<PAGE>
17
(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 Final 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
Final 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 Final
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 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 Final 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 Final 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
<PAGE>
18
with the amounts shown on the most recent consolidated balance
sheet included or incorporated in the Registration Statement and
the Final Prospectus for such entities, or for the period from
the date of the most recent unaudited financial statements
included or incorporated in the Registration Statement and the
Final 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 Final 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 Final
Prospectus or on the pro forma adjustments applied to the historical
amounts included or incorporated by reference in the Registration
Statement and the Final 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
(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
Final 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 Final 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
<PAGE>
19
(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 Final 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.
(i) At the Closing Date and, if specified in Schedule II, at the
Execution Time, each of (i) Paul Scherer & Company LLP, (ii) Deloitte &
Touche LLP and (iii) Arthur Andersen LLP shall have furnished to the
Representatives a letter or letters, dated respectively as of the Closing
Date and the Execution Time, in form and substance satisfactory to the
Representatives, 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(h)(i) and
5(h)(ii)(l) hereto.
(j) 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 Final Prospectus (exclusive of any supplement
thereto), 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 or the Company 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 Representatives, 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 Final Prospectus (exclusive of any
supplement thereto).
(k) 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.
<PAGE>
20
(l) If any of the Preferred Securities are to be listed on any stock
exchange (as indicated in Schedule II hereto), at the Closing Date the
Preferred Securities shall have been approved for listing on such exchange
upon notice of issuance.
(m) Prior to the Closing Date, the Offerors shall have furnished to
the Representatives such further information, certificates and documents as
the Representatives 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 Representatives 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 the Representatives 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 Underwriters' 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 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) 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 the Basic Prospectus, any Preliminary
Final Prospectus or the Final Prospectus, or in any amendment thereof or
supplement thereto or (ii) the omission or alleged omission to state in the
documents referred to in clause (i) 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
<PAGE>
21
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 (A) any such untrue
statement or alleged untrue statement or omission or alleged omission made in
the documents referred to in clause (i) above in reliance upon and in conformity
with written information furnished to the Trust and the Company by or on behalf
of any Underwriter through the Representatives specifically for inclusion
therein or (B) those parts of the Registration Statement which shall constitute
the Statements 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 or on behalf of such Underwriter through the Representatives
specifically for inclusion in the documents referred to in clause (i) 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, the first sentence and list
of Underwriters in the first paragraph under the heading "Underwriting" and the
second paragraph 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 Representatives, 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
<PAGE>
22
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 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 (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
<PAGE>
23
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 Final 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 or the Company 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).
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 Representatives shall determine in order that the required
changes in the Registration Statement and the Final Prospectus or in any other
documents or
<PAGE>
24
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 Representatives, 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 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 Representatives, impracticable or inadvisable to proceed
with the offering or delivery of the Securities as contemplated by the Final
Prospectus (exclusive of any supplement thereto). 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 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 Representatives, will be mailed,
delivered or telegraphed and confirmed to them, at the address specified in
Schedule II hereto, 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
<PAGE>
25
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>
26
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 CAPITAL I
By: Time Warner Inc., as Sponsor
By:
-------------------------------------------
Name:
Title:
TIME WARNER INC.
By:
-------------------------------------------
Name:
Title:
The foregoing Agreement is
hereby confirmed and accepted as of
the date specified in Schedule II hereto.
MERRILL LYNCH & CO.
MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED
MORGAN STANLEY & CO. INCORPORATED
BEAR, STEARNS & CO. INC.
By: MERRILL LYNCH & CO.
MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED
By:
-------------------------------------------
Name:
Title:
For themselves and the other
several Underwriters, if any,
named in Schedule I to
the foregoing Agreement.
<PAGE>
SCHEDULE I
----------
<TABLE>
<CAPTION>
Number of Preferred
Securities to Be
Underwriter Purchased
- ----------- -------------------
<S> <C>
Merrill Lynch, Pierce, Fenner & Smith Incorporated
Morgan Stanley & Co. Incorporated
Bear, Stearns & Co. Inc.
</TABLE>
<PAGE>
SCHEDULE II
-----------
TIME WARNER CAPITAL I and TIME WARNER INC.
Underwriting Agreement: dated September __, 1995
Registration Statement: No. 33-
Representatives: 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: March __, June __, September __ and
December __, beginning December __, 1995
Mandatory redemption date: , 2025
Purchase price (include accrued
interest or amortization, if
any): _____%
Initial public offering price:
Other provisions:
(continued)
<PAGE>
2
SCHEDULE II (continued)
Closing Date, Time and Location: September __, 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
Type of Offering:
Listing requirements: New York Stock Exchange
Comfort letter at Execution Time:
<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 Final 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
Basic Prospectus, and any amendment or supplement thereto, 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 Final Prospectus;
(iv) 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
Final Prospectus, and there is no franchise, contract or other document of
a character required to be described in the Registration Statement or Final
Prospectus, or to be filed as an exhibit, which is not described or filed
as required;
(v) 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
<PAGE>
A-2
authorization, issuance, sale and delivery of the Preferred Securities or
the Common Securities or the offering of the Subordinated Debentures or the
Guarantee or the consummation by the Trust and the Company of the
transactions contemplated by the Underwriting Agreement;
(vi) the Declaration, the Underwriting Agreement, the Indenture and
the Guarantee Agreement have been duly authorized, executed and delivered
by the Company;
(vii) the execution, delivery and performance of the Underwriting
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 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 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 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;
(viii) the execution, delivery and performance of the Underwriting
Agreement and the consummation of the transactions contemplated therein and
compliance by the Trust with its obligations thereunder 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
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
which the Trust may be bound or to which any of the Trust's
<PAGE>
A-3
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 (ii) any judgment, order or decree of any
government, governmental instrumentality or court having jurisdiction over
the Trust or any of its properties;
(ix) the documents incorporated by reference in the Final 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
(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 Final Prospectus, including the documents incorporated by
reference therein. In examining the Registration Statement and Final
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
Final 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 Final 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 not misleading or that the Final 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>
A-4
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 Final 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 subject to official notice of issuance and evidence of
satisfactory distribution;
(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,
assuming the due authorization, execution and delivery thereof by the
Indenture Trustee, constitutes
<PAGE>
B-2
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 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 Final 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 Final Prospectus;
(x) the Registration Statement has become effective under the Act; any
required filing of the Final Prospectus, and any supplements thereto,
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; and the Registration Statement and the Final 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;
(xii) the statements made in the Final Prospectus under "Description
of the Preferred Securities", "Description of the Guarantee", "Description
of the Subordinated Debentures", "Effect of Obligations Under the
Subordinated Debentures and the Guarantee" and "United States Federal
Income Taxation" in the prospectus supplement and under "Description of the
Preferred Securities", "Description of the Subordinated Debentures" and
"Description of the Guarantees" in the base prospectus, 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; and
<PAGE>
B-3
(xiii) the execution, delivery and performance of the Underwriting
Agreement and the consummation of the transactions contemplated therein and
compliance by the Trust with its obligations thereunder 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
under 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).
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 Final 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 Final Prospectus (the documents
incorporated by reference in the Final 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 thereto, and our examination
of the Registration Statement and the Final 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 Final 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 all filings
required under the laws of the State of Delaware with respect to the
creation and valid existence of the Trust as a business trust have been
made;
(ii) under the Declaration and the Delaware Act, the Trust has the
power and authority to own property and to conduct its business as
described in the Final Prospectus and to enter into and perform its
obligations under the Underwriting Agreement, the Preferred Securities, the
Common Securities and the Declaration;
(iii) no authorization, approval, consent or order of any Delaware
court or governmental authority or agency is required to be obtained by the
Trust solely in connection with the issuance and sale of the Preferred
Securities;
(iv) under the Delaware Act and the Declaration, the execution and
delivery of the Underwriting Agreement and the performance by the Trust of
its obligations thereunder, have been duly authorized by all necessary
action on the part of the Trust and do not and will not result in any
violation of the Declaration or any applicable Delaware law or regulation;
(v) 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 undivided beneficial
interests in the assets of the Trust and will be entitled to the benefits
of the Declaration; under the Declaration and the Delaware Act, the
issuance of the Preferred Securities is not subject to preemptive rights;
and the holders of Preferred Securities, as beneficial owners of the Trust,
will 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;
(vi) the holders of the Preferred Securities (other than those holders
of the Preferred Securities who reside or are domiciled in the State of
Delaware) will have no liability for income taxes imposed by the State of
Delaware or any political subdivision or taxing authority thereof solely as
a result of their participation in the Trust, and the Trust will not be
liable for any income tax imposed by the State of Delaware or any political
subdivision or taxing authority thereof; and
<PAGE>
C-2
(vii) the Declaration constitutes a legal, valid and binding obligation of
Time Warner and the Time Warner Trustees and is enforceable against 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).
<PAGE>
EXHIBIT D
FORM OF OPINION OF
THE LAW DEPARTMENT OF
THE FIRST NATIONAL BANK OF CHICAGO
___________, 1995
As counsel to the Corporate Trust Services Division of The First
National Bank of Chicago (the "Bank"), we have examined (i) the Declaration of
Trust, dated as of August 2, 1995, as amended and restated in its entirety
effective as of ________, 1995 (the "Declaration"), of Time Warner Capital I, a
Delaware business trust, pursuant to which the Bank has been appointed Property
Trustee (in such capacity, the "Property Trustee") and (ii) the Guarantee
Agreement dated as of ________, 1995 (the "Guarantee") between Time Warner Inc.
and the Bank, as Guarantee Trustee (in such capacity, the "Guarantee Trustee").
Except as otherwise defined herein, capitalized terms used herein shall have the
meanings assigned them in either the Declaration or the Guarantee.
As such counsel we are familiar with the articles of association and
the bylaws of the Bank, with certificates of authority to exercise corporate
trust powers issued to the Bank by the Federal Reserve Board of the United
States (as predecessor in jurisdiction to the Comptroller of the Currency of the
United States), and with certain resolutions of the board of directors of the
Bank pertaining to the operation of the Corporate Trust Services Division of the
Bank with respect to the authorization, execution and delivery of the
Declaration and the Guarantee.
Basing our conclusions on such examination and familiarity, we are of
the opinion that:
(1) The Bank 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 (i)
to execute and deliver the Declaration and the Guarantee, and (ii) to
carry out and perform its obligations in its respective capacities as
Property Trustee under the Declaration and Guarantee Trustee under the
Guarantee.
(2) (i) The execution and delivery by the Bank of, and (ii) the
performance by the Bank of its obligations in its respective
capacities as Property Trustee and Guarantee Trustee under, the
Declaration and the Guarantee, as the case may be, has been duly
authorized by all necessary corporate action on the part of the Bank,
and each of the Declaration and the Guarantee have been
<PAGE>
duly executed and delivered by the Bank respectively. 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.
(3) To the best of our knowledge, there are no actions, proceedings or
investigations pending or threatened against or affecting the Bank
before any court, arbitrator, administrative agency or other
governmental authority which, if adversely decided, would materially
and adversely affect the Bank's ability to carry out the transactions
contemplated in the Declaration or in the Guarantee.
(4) (i) The execution and delivery by the Bank of, and (ii) the
performance by the Property Trustee and the Guarantee Trustee under,
each of the Declaration and the Guarantee, respectively, do not
conflict with or constitute a breach of the articles of association or
bylaws of the Bank.
(5) No consent, approval or authorization of, or registration with or
notice to, any Illinois or federal banking authority, other than such
as has been obtained or accomplished, is required for (i) the
execution and delivery by the Bank of, or (ii) the performance by the
Bank in its respective capacities as Property Trustee and Guarantee
Trustee under, the Declaration and the Guarantee, as the case may be.
(6) The Bank in its capacity as 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.
We are attorneys licensed to practice law in the State of Illinois and
do not express any opinion as to any matters governed by any laws other than the
laws of the State of Illinois and federal laws applicable to the fiduciary
powers of national banks. Furthermore, no opinion is expressed as to any
federal or state securities or tax laws.
This opinion is furnished solely for your benefit in connection with the
transactions contemplated by the Declaration, and may not be used, circulated,
quoted or otherwise referred to without our prior written consent.
D-2
<PAGE>
EXHIBIT 4.7
AMENDED AND RESTATED DECLARATION OF TRUST (the
"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, Sunday or any
other day on which banking institutions in New York, New York, are permitted or
required by any applicable 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).
"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
Clearing Agency or pursuant to the Clearing Agency's instruction, all in
accordance with this Declaration, which shall be registered in the name of the
Clearing Agency or its nominee and which shall represent all of the outstanding
Preferred Securities.
"Guarantee" means the Guarantee Agreement to be dated as of [ ],
1995, of Time Warner in respect of the Preferred Securities.
<PAGE>
5
"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 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 an
aggregate liquidation amount representing more than 50% of
<PAGE>
6
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).
"Payment Amount" has the meaning set forth in Section 6.01.
"Payments" has the meaning set forth in Section 6.01.
"PERCS" means the $1.24 Preferred Exchangeable Redemption Cumulative
Securities issued by Time Warner.
"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 Account" has the meaning specified in Section 3.08(c)(i).
<PAGE>
7
"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.
"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.
<PAGE>
8
"Special Redemption Price" has the meaning set forth in the terms of
the Trust Securities as set forth in Exhibits B and C hereto.
"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 an
aggregate liquidation amount representing 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
<PAGE>
9
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.
"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 Merrill Lynch, Pierce, Fenner & Smith
Incorporated, Morgan Stanley & Co. Incorporated and Bear, Stearns & Co. Inc. 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.
<PAGE>
10
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).
(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
<PAGE>
11
accordance with the terms of the Preferred Securities as set forth in Exhibit B
hereto, 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
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 as set
forth in Exhibit C hereto, 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 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:
<PAGE>
12
(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
(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
<PAGE>
13
to the Common Securities or impair any right consequent thereon.
(c) The right of any Holder of Trust Securities to receive Payments on
the Trust Securities in accordance with this Declaration and the terms of the
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.
<PAGE>
14
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 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
-------
<PAGE>
15
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;
(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
Payments, 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;
<PAGE>
16
(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;
(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 activities set forth in this section 3.06;
(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
<PAGE>
17
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 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;
<PAGE>
18
(b) acquire any assets other than as expressly provided herein;
(c) possess Trust property for other than a Trust purpose;
(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
<PAGE>
19
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 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;
<PAGE>
20
(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 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
<PAGE>
21
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 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 make 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.
<PAGE>
22
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 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 waiving 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 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
<PAGE>
23
are specifically set forth in this Declaration, and no implied
covenants or obligations shall be read into this Declaration against
the Property Trustee; and
(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.
<PAGE>
24
(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 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
<PAGE>
25
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 their 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 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
<PAGE>
26
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,
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 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.
<PAGE>
27
SECTION 3.12. Filing of Amendments to Certificate of Trust. The
---------------------------------------------
Certificate of Trust 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 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 approximately equal to 3% of the
capital of the Trust after giving effect to such purchase.
<PAGE>
28
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 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 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 and the Property
Trustee 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 or the Property Trustee 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,
<PAGE>
29
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 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; 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
<PAGE>
30
of the Preferred Securities as set forth in Exhibit B hereto.
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.
(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
<PAGE>
31
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.
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,
<PAGE>
32
(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 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 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
<PAGE>
33
"Resignation Request") in writing signed by the Trustee and delivered to the
Sponsor and the Trust, which resignation 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, as the case may be,
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
<PAGE>
34
existence of 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
<PAGE>
35
any documents contemplated in Section 3.11, including any registration statement
or amendment thereto or other 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
Payments
--------
SECTION 6.01. Payments. Holders shall receive periodic
---------
distributions, redemption payments and liquidation distributions in accordance
with the terms of the Trust Securities ("Payments"). Payments 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
<PAGE>
36
having such terms as are set forth in Exhibit B (the "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 issue 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 a
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 a 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 Payments 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 Section 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 Payments
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 making
of Payments 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
<PAGE>
40
set forth herein, shall 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 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. The Property Trustee, as registrar and paying agent for the Regular
Trustees in accordance with Section 3.06(j), shall have the right and obligation
to perform any task of the Regular Trustees under this Section 9.08. 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 as set forth in
Exhibits B and C hereto, the Sponsor:
(i) shall not be personally liable for the return of any portion of
the capital contributions of the
<PAGE>
42
Holders of the Trust Securities, which shall be made solely from assets of
the Trust; and
(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 Payments 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
<PAGE>
43
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 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
<PAGE>
44
holders of securities or other obligations of the Sponsor or its Affiliates.
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 and 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
<PAGE>
45
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
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
<PAGE>
46
Trust may reduce subsequent Payments by the amount of such withholding.
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) 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), 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 Stock
Market) 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.
Whenever a vote, consent or approval of the Holders of
<PAGE>
48
securities is permitted or required under this Declaration or the rules of
any stock exchange or other self-regulatory organization (including the
Nasdaq Stock Market) 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 aggregate
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 Stock Market) 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
<PAGE>
52
(c) if given to the Delaware Trustee, at the mailing address of the
Delaware Trustee set forth below (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
<PAGE>
53
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 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
<PAGE>
54
States Federal income tax purposes. The provisions of this 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: Melissa G. Weisman
Title: Assistant Vice
President
<PAGE>
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
trustee, 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
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 Inc. ("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 Preferred 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 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 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 the Subordinated
<PAGE>
2
Debentures to be held by the Property Trustee. Distributions in arrears beyond
the first date such Distributions are payable (or would be payable in not for
any Extension Period (as hereinafter defined) or default by Time Warner on the
Subordinated Debentures) 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 will include the first
day but exclude the last day of such period, 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 and will include the first day but exclude the last day of
such period.
(b) Distributions on the Preferred Securities will be cumulative, will
accrue from and including [ ], 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. In the event that Time Warner exercises its rights to
commence any Extension Period or an extension period or other deferral of
interest feature under any debt security of Time Warner that ranks pari passu
with the Subordinated Debentures, then (a) Time Warner shall not declare or pay
dividends on, make distributions with respect to, or redeem, purchase or
<PAGE>
3
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 the Subordinated Debentures
or 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 (i) 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, (ii) any payments of interest,
principal or premium, if any, on, or repayment, repurchase or redemption of,
Time Warner's 4% Subordinated Notes due December 23, 1995 and (iii) any payments
or distributions with respect to, or redemptions, purchases or acquisitions of,
or any payments in liquidation of, the $1.24% Preferred Exchangeable Redemption
Cumulative Securities issued by Time Warner (the "PERCS") (including any of the
foregoing with respect to the guarantee agreement entered into by Time Warner
for the benefit of the holders of the PERCS). Prior to the termination of any
such Extension Period, Time Warner may further extend such Extension 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, 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 for the first payment 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 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
<PAGE>
4
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
Subordinated 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), 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
<PAGE>
5
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") whether voluntary or involuntary, 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 (a) $25 per Trust Security plus (b) the amount of 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 of, and accrued and
unpaid interest equal to accrued and unpaid
<PAGE>
6
Distributions on, 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 to but excluding the date
of the redemption, payable in cash. Holders will be given not less than 20 nor
more than 45 Business 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 automated
inter-dealer quotation system, (including the Nasdaq Stock Market) 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 (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
-------- -------
<PAGE>
7
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)
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 the Trust
shall redeem in cash on a Pro Rata Basis Trust Securities having an
aggregate liquidation 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 (1)
$25, plus (2) 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 the Trust for all taxes payable by it as a result of such Tax
Event; provided that, if 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; and provided further, that if dissolution of the Trust and
----------------
distribution of
<PAGE>
8
the Subordinated 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, Time Warner will
not be permitted to redeem the Subordinated Debentures.
(ii) "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 (includ-
ing 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) the interest payable by Time Warner to the
Trust on the Subordinated Debentures is not, or would be, deductible by
Time Warner for United States Federal income tax purposes or (3) the Trust
is, or would not be, subject to more than a de minimis amount of other
-- -------
taxes, duties, assessments or other governmental charges.
- ---------------
/1/ Insert date of prospectus.
/2/ Insert date of prospectus.
<PAGE>
9
(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 Clearing Agency 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 Clearing Agency or its nominee will be deemed to
represent 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
- ---------------
/3/Insert date of prospectus.
<PAGE>
10
have the Subordinated Debentures listed on the New York Stock Exchange or on
such other exchange or self-regulatory organization (including the Nasdaq Stock
Market) 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 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 Clearing Agency or its nominee (or any successor Clearing Agency or its
nominee), the Clearing Agency 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
<PAGE>
11
fractional interests in the Preferred Securities, the Clearing Agency 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 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
<PAGE>
12
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) 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 the Subordinated
Debentures so distributed to the Holders of Preferred Securities, 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.
(vi) 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
<PAGE>
13
such failure continues unremedied for 6 consecutive quarterly Distribution
periods (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 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.
<PAGE>
14
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, 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
<PAGE>
15
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 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, 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.
(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
<PAGE>
16
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 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, 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. 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
<PAGE>
17
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 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.
<PAGE>
18
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 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
<PAGE>
19
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.
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>
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):
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.
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 beyond the first date such
Distributions are payable (or would be payable if not for any Extension Period
(as hereinafter defined) or default by Time Warner on the Subordinated
Debentures) 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
<PAGE>
2
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 will include the first day but exclude the last day of such period,
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 and will include the
first day but exclude the last day of such period.
(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. In the event that Time Warner exercises its rights to
commence any Extension Period or an extension period or other deferral of
interest feature under any debt security of Time Warner that ranks pari passu
with the Subordinated Debentures, 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 the Subordinated Debentures
or 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 (i) to any interest or dividend payment by Time
<PAGE>
3
Warner where the interest or dividend is paid by way of the issuance of
securities that rank junior to the Subordinated Debentures, (ii) any payments of
interest, principal or premium, if any, on, or repayment, repurchase or
redemption of, Time Warner's 4% Subordinated Notes due December 23, 1995 and
(iii) any payments or distributions with respect to, or redemptions, purchases
or acquisitions of, or any payments in liquidation of, the $1.24 Preferred
Exchangeable Redemption Securities (the "PERCS") issued by Time Warner
(including any of the foregoing with respect to the guarantee agreement entered
into by Time Warner for the benefit of the holders of the PERCS). Prior to the
termination of any such Extension Period, Time Warner may further extend such
Extension 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, 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 for the first payment 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 payment dates on the Subordinated Debentures.
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 Subordinated 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
<PAGE>
4
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 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") whether voluntary or involuntary, 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 (a) $25 per Trust Security plus (b) the amount of 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
<PAGE>
5
(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).
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 of, and
accrued and unpaid interest equal to accrued and unpaid distributions on, 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 Security (the "Redemption Price") plus an amount equal to
all accrued and unpaid Distributions thereon to but excluding the date of the
redemption, payable in cash. Holders will be given not less than 20 nor more
than 45 Business 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 automated
inter-dealer quotation system (including the Nasdaq Stock Market) 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
<PAGE>
6
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 (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 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) 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 the Trust shall
redeem in cash on a Pro Rata Basis Trust Securities having an aggregate
liquidation 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 (1) $25, plus (2) 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 the Trust for all taxes payable
by it as a result of such Tax Event; provided that, if 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
----------------
<PAGE>
7
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; and 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 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.
(ii) "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
- ---------------
/1/ Insert date of prospectus.
/2/ Insert date of prospectus.
<PAGE>
8
respect to income accrued or received on the Subordinated Debentures, (2)
the interest payable by Time Warner to the Trust on the Subordinated
Debentures is not, or would not 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,
-- -------
assessments 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 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.
- ---------------
/3/Insert date of prospectus.
<PAGE>
9
(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 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
Clearing Agency or its nominee (or any successor Clearing Agency or its
nominee), the Clearing Agency 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 Clearing Agency will adjust the amount of the interest of
each clearing Agency Participant to be redeemed to avoid such fractional
interests.
<PAGE>
10
(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 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
<PAGE>
11
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 calculating the
Redemption Price and the amount of any such accrued and unpaid
Distributions.
(v) Upon the date of dissolution of the Trust and distribution
of Subordinated Debentures to the Holders of the Trust Securities as a
result of the occurrence of a Special Event, Common Security Certificates
shall be deemed to represent the Subordinated Debentures so distributed to
the Holders of Trust Securities, 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
in respect of which the Subordinated Debentures shall have been so
distributed.
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
<PAGE>
12
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 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
<PAGE>
13
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, 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.
(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
<PAGE>
14
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 recognized independent tax counsel experienced in such
matters 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.
(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 4.9
- --------------------------------------------------------------------------------
TIME WARNER INC.
$[ ] Subordinated Debentures
due [ ], 2025
FIRST SUPPLEMENTAL INDENTURE
Dated as of [ ], 1995
Chemical Bank,
a New York banking corporation,
Trustee
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE I
Definitions and Incorporation by Reference
------------------------------------------
<TABLE>
<CAPTION>
<S> <C> <C>
SECTION 1.01. Definitions............................................ 2
SECTION 1.02. Other Definitions...................................... 3
SECTION 1.03. Incorporation by Reference of Trust
Indenture Act........................................ 4
SECTION 1.04. Rules of Construction.................................. 4
<CAPTION>
ARTICLE II
General Terms and Conditions of the Debentures
----------------------------------------------
<S> <C> <C>
SECTION 2.01. Designation and Principal Amount....................... 5
SECTION 2.02. Maturity............................................... 5
SECTION 2.03. Form and Payment....................................... 5
SECTION 2.04. Global Debenture....................................... 6
SECTION 2.05. Interest............................................... 7
<CAPTION>
ARTICLE III
Redemption; Distribution
------------------------
<S> <C> <C>
SECTION 3.01. Optional Redemption.................................... 9
SECTION 3.02. Special Event Redemption
or Distribution...................................... 9
SECTION 3.03. No Sinking Fund........................................ 11
<CAPTION>
ARTICLE IV
Extension of Interest Payment Period
------------------------------------
<S> <C> <C>
SECTION 4.01. Extension of Interest Payment
Period.............................................. 11
SECTION 4.02. Notice of Extension................................... 12
</TABLE>
<PAGE>
2
ARTICLE V
Expenses
--------
<TABLE>
<S> <C> <C>
SECTION 5.01. Payment of Expenses................................... 13
<CAPTION>
ARTICLE VI
Covenants
---------
<S> <C> <C>
SECTION 6.01. Listing on an Exchange................................ 14
SECTION 6.02. Limitation on Dividends;
Transactions with Affiliates........................ 14
SECTION 6.03. Covenants as to Trust................................. 15
SECTION 6.04. Expenses.............................................. 15
<CAPTION>
ARTICLE VII
Original Issue of Debentures
----------------------------
<S> <C> <C>
SECTION 7.01. Original Issue of Debentures.......................... 16
<CAPTION>
ARTICLE VIII
Miscellaneous
-------------
<S> <C> <C>
SECTION 8.01. Ratification of Indenture............................. 16
SECTION 8.02. Trustee Not Responsible for
Recitals............................................ 16
SECTION 8.03. Governing Law......................................... 17
SECTION 8.04. Separability.......................................... 17
SECTION 8.05. Counterparts.......................................... 17
SECTION 8.06. Successors............................................ 17
SECTION 8.07. Assignment............................................ 17
SECTION 8.08. Tax Characterization.................................. 17
</TABLE>
<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 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;
NOW THEREFORE, in consideration of the purchase and acceptance of the
Debentures by the Holders thereof, and
<PAGE>
2
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.
"Business Day" means any day other than a 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.
"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
the 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
<PAGE>
3
Amount of the Debentures mean Holders of the relevant Principal Amount of the
Debentures at the time outstanding.
"Nasdaq" means The Nasdaq Stock Market.
"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.
"PERCS" means the $1.24 Preferred Exchangeable Redemption Cumulative
Securities issued by the Company.
"Subordinated Notes" means 4% Subordinated Notes due December 23,
1997, issued by 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 Bear, Stearns & Co. Inc., 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) Delaware Trustee; (ii) Distribution; (iii)
Guarantee; (iv) Property Trustee; (v) Preferred Security Certificate; (vi)
Regular Trustees; (vii) Special Event; and (viii) Tax Event.
The following terms are defined in the relevant Section of this First
Supplemental Indenture as set forth below.
<PAGE>
4
<TABLE>
<CAPTION>
Defined in
Term Section
---- ----------
<S> <C>
"Additional Interest"...................................... 2.05
"Compounded Interest"...................................... 4.01
"Coupon Rate".............................................. 2.05
"Deferred Interest"........................................ 4.01
"Extension Period"......................................... 4.01
"Global Debenture"......................................... 2.04
"Interest Payment Date".................................... 2.05
"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 Holder or Debentureholder.
"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:
<PAGE>
5
(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
(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 such
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
<PAGE>
6
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.
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) if all the Preferred Securities are held in book-entry-only form
in the form of one or more Global Certificates, 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 Depository, or
its nominee, and delivered by the Trustee to the Depository in
exchange for one or more Global Certificate or Certificates held
by the Depository 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 Depository; and
(ii) if any Preferred Securities are held in non-book-entry
certificated form, (A) the Debentures in certificated form and
(B) the register of holders of the Preferred Securities shall be
presented to the Trustee by the Property Trustee and each
Preferred Security Certificate which represents Preferred
Securities (including Preferred Securities registered in the name
of the
<PAGE>
7
Depository or its nominee) ("Non-Book-Entry Preferred
Securities") will be deemed to represent 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 (and the Trustee shall register such
holders of such Preferred Securities as the registered holders of
such Debentures) until such Preferred Security Certificate is
presented to the Trustees for registration of transfer or
exchange 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 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. Upon surrender of such Preferred Security Certificate
and the concurrent issue of such Debentures, Debentures
represented by such Preferred Security Certificate 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 Depository or its nominee only
if (i) the Depository notifies the Company that it is unwilling or unable to
continue as a depository for such Global Debenture and no successor depository
shall have been appointed, (ii) the Depository, at any time, ceases to be a
clearing agency registered under the Exchange Act at any time the Depository is
required to be so registered to act as such Depository and no successor
depository 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 Depository shall
direct.
<PAGE>
8
SECTION 2.05. Interest. (a) Each Debenture will bear interest at
---------
the rate of __% per annum (the "Coupon Rate") from and including the original
date of issuance to but excluding the date 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 Indenture the
Debentures have been distributed to holders of Trust Securities and 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 and will include the first
day but exclude the last day of such period. 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 and will include
the first day but exclude the last day of such period. 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.
<PAGE>
9
(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 XIII 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 "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
thereon, 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
<PAGE>
10
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 Trustees 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;
(B) redeem the 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 the Trust shall redeem
pro rata in cash all Trust Securities 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 Debentures and the Trust
Securities to remain outstanding and indemnify the Trust for all taxes
payable by it as a result of such Tax Event;
provided that, if at the time there is available to the Trust the opportunity to
- --------
eliminate such Special Event, within 90 days following the occurrence of such
Special Event (the "90-Day Period"), 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 Trust
<PAGE>
11
will pursue such Ministerial Action in lieu of dissolution or redemption;
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; and 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.
(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 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 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
------------------------------------
<PAGE>
12
SECTION 4.01. Extension of Interest Payment Period. The Company
-------------------------------------
shall have the right, at any time, and from time to time, during the term of the
Debentures, to defer payments of interest by extending the interest payment
period for a period not exceeding 20 consecutive quarters (an "Extension
Period"), at the end of which Extension Period the Company shall pay all
interest then accrued and unpaid together with interest thereon compounded
quarterly at the rate specified for the Debentures to the extent permitted by
applicable law ("Compound Interest"); provided that, during any such Extension
--------
Period or an extension period or other deferral of interest feature under any
debt security of the Company that ranks pari passu with the Debentures, (a) the
---- -----
Company 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 an of its capital stock and (b) the Company shall not make any
payment of interest, principal or premium, if any, on or repay, repurchase or
redeem the Debentures or any debt securities issued by the Company that rank
pari passu with or junior to the Debentures; provided, however, that the
- ---- ----- -------- -------
foregoing restrictions do not apply to (i) any interest or dividend payment by
the Company, where the interest or dividend is paid by way of the issuance of
securities that rank junior to the Subordinated Debentures, (ii) any payments of
interest, principal or premium, if any, on, or repayment, repurchase or
redemption of, the Subordinated Notes and (iii) any payments or distributions
with respect to, or redemptions, purchases or acquisitions of, or any payments
in liquidation of, the PERCS (including any of the foregoing with respect to the
guarantee agreement entered into by the Company for the benefit of the holders
of the PERCS). Prior to the termination of any such Extension Period, the
Company 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,
the Company may commence a new Extension Period for up to 20 consecutive
quarters, subject to the terms set forth in this Section 4.01. No interest shall
be due and payable during an Extension 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
Extension Period, the Company shall give written notice to the Regular
<PAGE>
13
Trustees, the Property Trustee and the Trustee of its selection of such
Extension Period one Business Day before the earlier of (i) the next succeeding
date on which Distributions on the Trust Securities issued by the Trust are
payable, or (ii) the date the Trust is required to give (A) notice of the record
date with respect to the date such Distributions are payable to the NYSE or
other applicable self-regulatory organization or (B) notice of such Extension
Period 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 Extension Period, the Company shall give the
Holders of the Debentures and the Trustee written notice of its selection of
such Extension 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 Extension Period permitted under Section 4.01.
ARTICLE V
Expenses
--------
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 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
<PAGE>
14
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 reasonable best efforts to list such
Debentures on the NYSE or on such other national securities exchange (or other
self-regulatory organization (including Nasdaq)) 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 in respect of its payment or
any other obligations under the Guarantee, then (A) the Company shall not
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, and (B) the Company shall not make any payment of interest,
principal or premium, if any, on,
<PAGE>
15
or repay, repurchase or redeem, any debt securities issued by the Company which
rank pari passu with or junior to the Debentures; provided, however, that
-------- -------
foregoing restrictions shall not apply to (i) any interest or dividend payments
by the Company, where the interest or dividend is paid by way of the issuance of
securities that rank junior to the Debentures, (ii) any payments of interest,
principal or premium, if any, on, or repayment, repurchase or redemption of, the
Subordinated Notes and (iii) any payments or distributions with respect to, or
redemptions, purchases or acquisitions of, or any payments in liquidation of,
the PERCS (including any of the foregoing with respect to the guarantee
agreement entered into by the Company for the benefit of the holders of the
PERCS).
(b) If the Company shall have given notice of an Extension Period, or
any extension thereof, shall be continuing, then (A) the Company shall not
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, and (B) the Company shall not make any payment of interest,
principal or premium, if any, on, or repay, repurchase or redeem, the Debentures
or any debt securities issued by the Company which rank pari passu with or
junior to the Debentures; provided, however, that foregoing restrictions shall
-------- -------
not apply to (i) any interest or dividend payments by the Company, where the
interest or dividend is paid by way of the issuance of securities that rank
junior to the Debentures, (ii) any payments of interest, principal or premium,
if any, on, or repayment, repurchase or redemption of, the Subordinated Notes
and (iii) any payments or distributions with respect to, or redemptions,
purchases or acquisitions of, or any payments in liquidation of, the PERCS
(including any of the foregoing with respect to the guarantee agreement entered
into by the Company for the benefit of the holders of the PERCS).
SECTION 6.03. Covenants as to Trust. For so long as the
------------------------------------
Preferred Securities remain outstanding, the Company 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 best
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
<PAGE>
16
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.
SECTION 6.04. Expenses. (a) The Company 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 issuance of the
Preferred Securities, the fees and expenses (including reasonable counsel fees
and expenses) of the Property Trustee, the Regular Trustees and the Trust
(including any amounts payable under Article X of the Declaration) 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 Company will pay any and all taxes and all liabilities, costs
and expenses with respect to such taxes of the Trust.
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.
<PAGE>
17
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.
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.
<PAGE>
18
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.
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
<PAGE>
19
CHEMICAL BANK,
by
-----------------------------------
Name:
Title:
[Seal]
Attest:
- -------------------------------
Title: [ ]
<PAGE>
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>
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
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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 and include the first day
but exclude the last day of such period. 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
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private debts; provided, however, that payment of interest may be made at the
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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.
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.
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4
IN WITNESS WHEREOF, the Company has caused this instrument to be
executed.
Dated____________________
TIME WARNER INC.
by_____________________
Name:
Title:
Asset:
By____________________
Secretary
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(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 under certain
circumstances to (a) dissolve the Trust and cause the Debentures to be
distributed pro rata to holders of the Trust Securities, (b) redeem the
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6
Debentures at a redemption price equal to 100% of their principal amount
together with any accrued and unpaid interest 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 from time to time on or after _____,
2000 (an "Optional Redemption"), at a redemption price equal to 100% of the
principal amount plus any accrued and unpaid interest, to but excluding 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 Business
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
- -------
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7
supplemental indenture shall (i) extend the fixed maturity of any Debentures of
any series, or reduce the principal 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, and from time to time,
during the term of the Debentures to defer payments of interest by extending the
interest payment period for a period not exceeding 20 consecutive quarters (the
"Extension Period"), at the end of which Extension Period, the Company shall pay
all interest then accrued and unpaid together with interest thereon compounded
quarterly at the rate specified for the Debentures to the extent permitted by
applicable law ("Compound Interest"); provided that, during any such Extension
--------
Period or an extension period or other deferral of interest feature under any
debt security of the Company that ranks pari passu with the Debentures, (a) the
Company shall not declare or pay dividends on, make any distribution with
respect to, or
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8
redeem, purchase, acquire or make a liquidation payment with respect to any of
its capital stock and (b) the Company shall not make any payment of interest,
principal or premium, if any, on or repay, repurchase or redeem the Debentures
or any debt securities issued by the Company that rank pari passu with or junior
to the Debentures; provided, however, that, the foregoing restrictions do not
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apply to (i) any interest or dividend payment by the Company, where the interest
or dividend is paid by way of the issuance of securities that rank junior to the
Debentures, (ii) any payments of interest, principal or premium, if any, on, or
repayment, repurchase or redemption of, the 4% Subordinated Notes due December
23, 1997 and (iii) any payments or distributions with respect to, or
redemptions, purchases or acquisitions of, or any payments in liquidation of,
the $1.24 Preferred Exchangeable Redemption Cumulative Securities ("PERCS")
issued by the Company (including any of the foregoing with respect to the
guarantee agreement entered into by the Company for the benefit of the holders
of the PERCS). Prior to the termination of any such Extension Period, the
Company may further defer payments of interest by extending the interest payment
period; provided, however, that such Extension Period, including all such
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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.
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.
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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 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 (the "Guarantor"), and The First National Bank of
Chicago, as the initial Guarantee Trustee (as defined herein for
the benefit of the holders from time to time of the Preferred
Securities of Time Warner Capital [ ], 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, the Guarantor, as Sponsor, and the Holders of the Trust Securities, 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 Subordinated Debentures 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 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, which
purchase the Guarantor hereby agrees shall benefit the Guarantor, the Guarantor
executes and delivers this Guarantee Agreement for the benefit of the Holders.
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ARTICLE I
Definitions
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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 the
Guarantor, (ii) any duly authorized committee of such board, (iii) any committee
of officers of the Guarantor or (iv) any officer of the Guarantor acting, in the
case of (iii) or (iv), pursuant to authority granted by the board of directors
of the Guarantor or any committee of such board.
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"Business Day" means any day other than a 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.
"Commission" means the Securities and Exchange Commission.
"Common Securities" means the common securities of the Trust
representing undivided beneficial interests in the assets of the Trust, directly
or indirectly initially owned by the Guarantor.
"Covered Person" means any Holder.
"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
the Preferred Securities and (b) the Redemption Price, 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 and (ii) upon a
Liquidation Event (other than in connection with the distribution of
Subordinated Debentures to the holders of Trust Securities in exchange for
Preferred Securities or the redemption of all of the Trust Securities upon the
maturity or redemption of the Subordinated Debentures as provided in the
Declaration), the lesser of (a) the Liquidation Distribution 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 Event.
"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.
"Holder" shall mean any holder, as registered on the books and records
of the Trust, of any Preferred Securities; provided, however, that, in
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determining whether
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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.
"Liquidation Distribution" means, in respect of any Liquidation Event,
the sum of (a) $25 per Trust Security plus (b) the amount of accrued and unpaid
distributions on such Trust Security to but excluding the date of payment.
"Liquidation Event" means any liquidation, dissolution, winding-up or
termination of the Trust.
"Majority in aggregate liquidation amount of the Preferred Securities"
means, except as otherwise required by the Trust Indenture Act, Holders 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.
"PERCS" means the $1.24 Preferred Exchangeable Redemption Cumulative
Securities issued by Time Warner Financing Trust on August 9, 1995.
"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.
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5
"Preferred Securities" mean the % Preferred Trust Securities of the
Trust.
"Property Trustee" means the Person acting as Property Trustee under
the Declaration.
"Redemption Price" means, 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.
"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
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 % Subordinated Debentures due [
], 2025 issued by the Guarantor.
"Subordinated Notes" means the 4% Subordinated Notes due December 23,
1997 issued by the Guarantor.
"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.
"Trust Securities" mean the Common Securities and the Preferred
Securities.
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.
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(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.
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 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, 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
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7
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 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 all of the Holders 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.
(b) The right of any Holder 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 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
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Guarantee Agreement shall be held by the
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8
Guarantee Trustee in trust for the benefit of the Holders. The Guarantee Trustee
shall not transfer its right, title and interest in this 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
exercising his or her rights pursuant to Section 5.04. The right, title and
interest of the Guarantee Trustee to this 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.
(c) This Guarantee Agreement and all moneys received by the Guarantee
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, 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. 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 such appointment is in accordance with
Article IV.
SECTION 3.02. Certain Rights and Duties of the
--------------------------------
<PAGE>
9
Guarantee Trustee. (a) The Guarantee Trustee, before the occurrence of an
- ------------------
Event of Default and after the curing or waiving 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 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;
<PAGE>
10
(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 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
(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
<PAGE>
11
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;
(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, 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 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.
<PAGE>
12
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. There shall at all times be a
---------------
Guarantee Trustee which shall:
(i) not be an Affiliate of the Guarantor; 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 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.
<PAGE>
13
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 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
its 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 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 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), as and when due,
regardless of any defense, right of set-off or counterclaim which the Trust may
have or assert. The Guarantor's
<PAGE>
14
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 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
Subordinated Debentures or any extension of the maturity date of the
Subordinated 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;
<PAGE>
15
(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 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 the
Guarantor, 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
<PAGE>
16
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 may, at its own
expense, 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.
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.
<PAGE>
17
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 restrictions
-------- -------
do not apply to (i) any interest or dividend payments by the Guarantor where the
interest or dividend is paid by way of the issuance of securities that rank
junior to the Subordinated Debentures, (ii) any payments of interest, principal
or premium, if any, on, or repayment, repurchase or redemption of, the
Subordinated Notes and (iii) any payments or distributions with respect to, or
redemptions, purchases or acquisitions of, or any payments in liquidation of,
the PERCS (including any of the foregoing with respect to the guarantee
agreement entered into by the Guarantor for the benefit of the holders of the
PERCS).
SECTION 6.02. Subordination. This Guarantee Agreement constitutes an
--------------
unsecured obligation of the Guarantor that ranks (i) subordinate and junior in
right of payment to all other liabilities of the Guarantor, (ii) pari passu with
the guarantee delivered by the Guarantor in connection with the issuance of the
PERCS, (iii) pari passu with the most senior preferred or preference stock of
the Guarantor 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 (iv) senior to the Guarantor's common stock.
<PAGE>
18
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 of the Preferred Securities, (ii) the distribution of the
Subordinated Debentures to all of the Holders or (iii) 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 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 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 might properly be paid.
<PAGE>
19
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
-------------
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 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
<PAGE>
20
Majority in aggregate liquidation amount of the Preferred Securities and in
either case only if the Guarantee Trustee shall have obtained 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 Trust 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
(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, 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
<PAGE>
21
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.
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 5.1
[Letterhead of]
CRAVATH, SWAINE & MOORE
October 5, 1995
Time Warner Inc.
----------------
Time Warner Capital I
---------------------
Preferred Trust Securities
--------------------------
Ladies and Gentlemen:
We have acted as counsel for Time Warner Inc., a Delaware corporation (the
"Company"), and Time Warner Capital I, a statutory business trust created under
the Business Trust Act of the State of Delaware (the "Trust"), in connection
with the proposed issuance by the Trust of Preferred Trust Securities (the
"Preferred Securities") pursuant to the terms of a declaration of trust, dated
as of August 2, 1995 (the "Declaration"), as amended and restated by an Amended
and Restated Declaration of Trust dated as of the date of issuance of the
Preferred Securities (as so amended and restated from time to time, the "Amended
Declaration"), among the Company, as sponsor, the trustees named therein and the
holders from time to time of undivided beneficial interests in the assets of the
Trust. The Preferred Securities will be guaranteed by the Company on a
subordinated basis with respect to distributions and payments upon liquidation,
redemption or otherwise (the "Guarantee") pursuant to a Guarantee Agreement to
be dated as of the date of issuance of the Preferred Securities (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
Subordinated Debentures of the Company (the "Subordinated Debentures"), which
will be issued under an indenture dated as of the date of issuance of the
Preferred Securities (the "Base Indenture"), between the Company and Chemical
Bank, as Trustee (the "Indenture Trustee"), and the First
<PAGE>
2
Supplemental Indenture dated as of the date of issuance of the Preferred
Securities, between the Company and the Indenture Trustee under the Indenture
(the "Supplemental Indenture" and together with the Base Indenture, the
"Indenture").
In that connection, we have examined originals, or copies certified or
otherwise identified to our satisfaction, of such documents, corporate records
and other instruments as we have deemed necessary or appropriate for the purpose
of this opinion, including (a) the Restated Certificate of Incorporation of the
Company, as amended; (b) the By-laws of the Company; (c) the Registration
Statement on Form S-3 (Registration Nos. 33-61523 and 33-61523-01) filed with
the Securities and Exchange Commission (the "Commission") on August 2, 1995, as
amended, (such Registration Statement, including all material incorporated by
reference therein, the "Registration Statement"); (d) the Certificate of Trust
of the Trust dated August 2, 1995, and filed with the Secretary of State of the
State of Delaware on August 2, 1995; (e) the Declaration; (f) the form of the
Amended Declaration; (g) the form of the Indenture; (h) the form of the
Supplemental Indenture; (i) the form of Preferred Security attached as Exhibit B
to the form of Amended Declaration and a specimen thereof; (j) the form of
Common Security attached as Exhibit C to the form of Amended Declaration and a
specimen thereof; (k) the Guarantee Agreement; and (l) the form of Subordinated
Debentures attached as Exhibit A to the Indenture and a specimen thereof.
Based on the foregoing, we are of opinion as follows:
(i) the Company is validly existing as a corporation and 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 Guarantee Agreement has been duly authorized and, when executed
and delivered by the Company, assuming the due authorization execution and
delivery thereof by the Guarantee Trustee, each of the Guarantee Agreement and
the Guarantee will constitute 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
<PAGE>
3
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 Indenture has been duly authorized and, when executed and
delivered by the Company assuming the due authorization, execution and delivery
thereof by the Indenture Trustee, the Indenture will constitute 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 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
(iv) the Subordinated Debentures have been duly authorized and, when
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 contained in the Registration Statement (the
"Prospectus"), the Subordinated Debentures will constitute valid and binding
obligations of the Company, enforceable against the Company in accordance with
their terms.
We are members of the bar of the State of New York and we do not express
any opinion as to any laws other than the laws of the State of New York and the
Federal laws of the United States of America.
We know that we may be referred to, as counsel who has passed upon the
validity of the Subordinated Notes and the Guarantee Agreement, in the
Prospectus forming a part of the Registration Statement, and we hereby consent
to such use of our name in the Registration Statement, as well as to the use of
this letter as an exhibit to the Registration Statement.
Very truly yours,
Time Warner Inc.
75 Rockefeller Plaza
New York, NY 10019
<PAGE>
EXHIBIT 5.2
[LETTERHEAD OF RICHARDS, LAYTON & FINGER]
October 3, 1995
Time Warner Capital I
c/o Time Warner Inc.
75 Rockefeller Plaza
New York, NY 10019
Re: Time Warner Capital I
---------------------
Ladies and Gentlemen:
We have acted as special Delaware counsel for Time Warner Inc., a
Delaware corporation ("Time Warner"), and Time Warner Capital I, a Delaware
business trust (the "Trust"), in connection with the matters set forth herein.
At your request, this opinion is being furnished to you.
For purposes of giving the opinions hereinafter set forth, our
examination of documents has been limited to the examination of originals or
copies of the following:
(a) The Certificate of Trust of the Trust, dated as of August
2, 1995 (the "Certificate"), as filed in the office of the Secretary of
State of the State of Delaware (the "Secretary of State") on August 2, 1995;
(b) The Declaration of Trust of the Trust, dated as of August
2, 1995, between Time Warner and the trustees of the Trust named therein;
(c) Amendment No. 1 to the Registration Statement (the
"Registration Statement") on Form S-3, including a preliminary Prospectus (the
"Prospectus"), relating to the Preferred Securities of the Trust representing
preferred undivided
<PAGE>
Time Warner Capital I
October 3, 1995
Page 2
beneficial interests in the assets of the Trust (each, a "Preferred Security"
and collectively, the "Preferred Securities"), as proposed to be filed by Time
Warner and the Trust with the Securities and Exchange Commission on October 3,
1995;
(d) A form of Amended and Restated Declaration of Trust of the
Trust, to be entered into between Time Warner, the trustees of the Trust named
therein, and the holders, from time to time, of the undivided beneficial
interests in the assets of the Trust (including the exhibits thereto) (the
"Declaration"), attached as an exhibit to the Registration Statement; and
(e) A Certificate of Good Standing for the Trust, dated October
3, 1995, obtained from the Secretary of State.
Initially capitalized terms used herein and not otherwise defined
are used as defined in the Declaration.
For purposes of this opinion, we have not reviewed any documents
other than the documents listed in paragraphs (a) through (e) above. In
particular, we have not reviewed any document (other than the documents listed
in paragraphs (a) through (e) above) that is referred to in or incorporated by
reference into the documents reviewed by us. We have assumed that there exists
no provision in any document that we have not reviewed that is inconsistent with
the opinions stated herein. We have conducted no independent factual
investigation of our own but rather have relied solely upon the foregoing
documents, the statements and information set forth therein and the additional
matters recited or assumed herein, all of which we have assumed to be true,
complete and accurate in all material respects.
With respect to all documents examined by us, we have assumed (i)
the authenticity of all documents submitted to us as authentic originals, (ii)
the conformity with the originals of all documents submitted to us as copies or
forms, and (iii) the genuineness of all signatures.
For purposes of this opinion, we have assumed (i) that the
Declaration when executed, will constitute the entire agreement among the
parties thereto with respect to the subject matter thereof, including with
respect to the creation, operation and termination of the Trust, and that the
Declaration and the Certificate will be in full force and effect and will not
been amended, (ii) except to the extent provided in paragraph 1 below, the due
organization or due formation, as the case may be, and valid existence in good
standing of each party to the documents examined by us under the laws of the
jurisdiction governing its organization or formation, (iii) the legal
<PAGE>
Time Warner Capital I
October 3, 1995
Page 3
capacity of natural persons who are parties to the documents examined by us,
(iv) that each of the parties to the documents examined by us has the power and
authority to execute and deliver, and to perform its obligations under, such
documents, (v) the due authorization, execution and delivery by all parties
thereto of all documents examined by us, (vi) the receipt by each Person to whom
a Preferred Security is to be issued by the Trust (collectively, the "Preferred
Security Holders") of a Preferred Security Certificate and the payment for the
Preferred Security acquired by it, in accordance with the Declaration and the
Registration Statement, and (vii) that the Preferred Securities are issued and
sold to the Preferred Security Holders in accordance with the Declaration and
the Registration Statement. We have not participated in the preparation of the
Registration Statement and assume no responsibility for its contents.
This opinion is limited to the laws of the State of Delaware (excluding
the securities laws of the State of Delaware), and we have not considered and
express no opinion on the laws of any other jurisdiction, including federal laws
and rules and regulations relating thereto. Our opinions are rendered only with
respect to Delaware laws and rules, regulations and orders thereunder which are
currently in effect.
Based upon the foregoing, and upon our examination of such questions of
law and statutes of the State of Delaware as we have considered necessary or
appropriate, and subject to the assumptions, qualifications, limitations and
exceptions set forth herein, we are of the opinion that:
1. The Trust has been duly created and is validly existing in good
standing as a business trust under the Business Trust Act.
2. The Preferred Securities, when issued will represent valid and,
subject to the qualifications set forth in paragraph 3 below, fully paid and
nonassessable undivided beneficial interests in the assets of the Trust.
3. The Preferred Security Holders, as beneficial owners of the
Trust, will 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. We note that the Preferred Security
Holders may be obligated pursuant to the Declaration, to (i) provide indemnity
and security in connection with and pay taxes or governmental charges arising
fromm transfers of Preferred Security Certificates and the issuance of
replacement Preferred Security Certificates and the issuance of replacement
Preferred Security Certificates, (ii) provide security and indemnity in
connection with requests of or directions to the Property Trustee to exercise
its rights and powers under the Declaration, and (iii) undertake as a party
litigation to pay costs in any suit for the
<PAGE>
Time Warner Capital I
October 3, 1995
Page 4
enforcement of any right or remedy under the Declaration or against the Property
Trustee, to the extent provided in the Declaration.
We consent to the filing of this opinion with the Securities and
Exchange Commission as an exhibit to the Registration Statement. We hereby
consent to the use of our name under the heading "Legal Matters" in the
Prospectus. In giving the foregoing consents, we do not thereby admit that we
come within the category of Persons whose consent is required under Section 7 of
the Securities Act of 1933, as amended, or rules and regulations of the
Securities and Exchange Commission thereunder. Except as stated above, without
our prior written consent, this opinion may not be furnished or quoted to, or
relied upon by, any other Person for any purpose.
Very truly yours,
/s/ Richards, Layton & Finger
CDK/rp
<PAGE>
EXHIBIT 8.1
[Letterhead of]
CRAVATH, SWAINE & MOORE
October 5, 1995
Time Warner Inc.
----------------
Time Warner Capital I
---------------------
Preferred Trust Securities
--------------------------
Ladies and Gentlemen:
We have acted as counsel for Time Warner Inc., a Delaware corporation (the
"Company"), and Time Warner Capital I, a statutory business trust created under
the Business Trust Act of the State of Delaware (the "Trust"), in connection
with the proposed issuance by the Trust of Preferred Trust Securities (the
"Preferred Securities") pursuant to the terms of a declaration of trust, dated
as of August 2, 1995 (the "Declaration"), as amended and restated by an Amended
and Restated Declaration of Trust dated as of the date of issuance of the
Preferred Securities (as so amended and restated from time to time, the
"Amended Declaration"), among the Company, as sponsor, the trustees named
therein and the holders from time to time of undivided beneficial interests in
the assets of the Trust. The Preferred Securities will be guaranteed by the
Company on a subordinated basis with respect to distributions and payments upon
liquidation, redemption or otherwise (the "Guarantee") pursuant to a Guarantee
Agreement to be dated as of the date of issuance of the Preferred Securities
(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 Subordinated Debentures of the Company (the "Subordinated
Debentures"), which will be issued under an indenture dated as of the date of
issuance of the Preferred Securities (the "Base Indenture"), between the Company
and Chemical Bank, as Trustee (the "Indenture Trustee"), and the First
<PAGE>
2
Supplemental Indenture dated as of the date of issuance of the Preferred
Securities, between the Company and the Indenture Trustee under the Indenture
(the "Supplemental Indenture" and together with the Base Indenture, the
"Indenture").
In that connection, we have examined originals, or copies certified or
otherwise identified to our satisfaction, of such documents, corporate records
and other instruments as we have deemed necessary or appropriate for the purpose
of this opinion, including (a) the Restated Certificate of Incorporation of the
Company; (b) the By-laws of the Company; (c) the Registration Statement on Form
S-3 (Registration Nos. 33-61523 and 33-61523-01) filed with the Securities and
Exchange Commission (the "Commission") on August 2, 1995, as amended, (such
Registration Statement, including all material incorporated by reference
therein, the "Registration Statement"); (d) the Certificate of Trust of the
Trust dated August 2, 1995, and filed with the Secretary of State of the State
of Delaware on August 2, 1995; (e) the Declaration; (f) the form of the Amended
Declaration; (g) the form of the Indenture; (h) the form of the Supplemental
Indenture; (i) the form of Preferred Security attached as Exhibit B to the form
of Amended Declaration and a specimen thereof; (j) the form of Common Security
attached as Exhibit C to the form of Amended Declaration and a specimen thereof;
(k) the Guarantee Agreement; and (l) the form of Subordinated Debentures
attached as Exhibit A to the Indenture and a specimen thereof.
Based on the foregoing, we are of opinion that the statements set forth in
the Prospectus contained in the Registration Statement (the "Prospectus") under
the caption "United States Federal Income Taxation", to the extent they
constitute matters of law, accurately describe the material United States
Federal income tax consequences to holders of the acquisition, holding and
disposition of the Preferred Securities.
We also confirm that the statements set forth in the Prospectus under the
caption "United States Federal Income Taxation" purporting to describe our
opinion as to certain matters accurately describe our opinion as to those
matters.
<PAGE>
3
We do not express any opinion as to any laws other than the Federal income
tax laws of the United States of America.
We know that we may be referred to in the Prospectus in the discussion
captioned "United States Federal Income Taxation", and we hereby consent to such
use of our name in the Registration Statement, as well as to the use of this
letter as an exhibit to the Registration Statement.
Very truly yours,
Time Warner Inc.
75 Rockefeller Plaza
New York, NY 10019
<PAGE>
EXHIBIT 12.1
TIME WARNER
RATIO OF EARNINGS TO FIXED CHARGES
(In milions, except ratios)
<TABLE>
<CAPTION>
Pro Forma Historical
--------------------------- ----------------------------------------------------
Six Months
Six Months Year Ended Years Ended December 31,
Ended Ended June 30, --------------------------------------
June 30, December 31, ----------- Restated
1995 1994 1995 1994 1994 1993 1992 1992 1991 1990
---------- ----------- ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Earnings:
- --------
Net income (loss) before income taxes
and extraordinary item.............. $ (124) $ (321) $ 33 $ 19 $ 89 $ 81 $ 323 $ 320 $ 52 $ (145)
Interest expense..................... 624 1,145 429 374 769 698 287 729 912 1,096
Amortization of capitalized
interest............................ 7 9 2 1 2 -- 1 19 23 22
Portion of rents representative of an
interest factor..................... 41 81 26 27 52 54 52 85 78 74
Adjustment for partially owned
subsidiaries and 50% owned
companies........................... 319 613 356 321 665 663 590 97 73 57
Undistributed losses of less than
50% owned companies................. 36 44 34 37 82 47 56 56 56 17
------ ------ ---- ---- ------ ------ ------ ------ ------ ------
Total earnings..................... $ 903 $1,571 $680 $779 $1,659 $1,543 $1,309 $1,306 $1,194 $1,121
====== ====== ==== ==== ====== ====== ====== ====== ====== ======
Fixed Charges:
- -------------
Interest expense..................... $ 624 $1,145 $429 $374 $ 769 $ 698 $ 287 $ 729 $ 912 $1,096
Capitalized interest................. 9 16 2 -- 2 -- -- 15 17 19
Portion of rents representative of
an interest factor.................. 41 51 26 27 52 54 52 85 78 74
Preferred stock dividend requirements
of majority owned subs.............. 7 15 -- -- -- -- -- -- -- --
Adjustment for partially owned
subsidiaries and 50% owned
companies........................... 322 616 359 320 668 664 571 81 45 33
------ ------ ---- ---- ------ ------ ------ ----- ------ ------
Total fixed charges ............... $1,003 $1,673 $816 $721 $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)................................ $ (100) $ (302) 1.1x 1.1x 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
(in millions, except ratios)
<TABLE>
<CAPTION>
Pro Forma Historical
------------------------- -----------------------------------------------------------
Six Months
Six Months Year Ended Years Ended December 31,
Ended Ended June 30, ---------------------------------------------
June 30, December 31, ----------- Restated
1995 1994 1995 1994 1994 1993 1992 1992 1991 1990
---------- ----------- ---- ---- ---- ---- -------- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Earnings:
- --------
Net income (loss) before
income taxes and
extraordinary item.......... $ (124) $ (321) $ 33 $ 19 $ 89 $ 81 $ 323 $320 $ 52 $ (145)
Interest expense............. 624 1,145 428 374 769 698 287 729 912 1,096
Amortization of capitalized
interest.................... 7 2 2 1 2 -- 1 19 23 22
Portion of rents represent-
ative of an interest factor. 41 81 26 27 52 54 52 85 78 74
Adjustment for partially
owned subsidiaries and
50% owned companies......... 318 513 356 321 665 663 590 97 73 57
Undistributed losses of less
than 50% owned companies.... 35 44 34 37 82 47 56 56 56 17
------ ------ ---- ---- ----- ----- ------ ------ ------ ------
Total earnings............ $ 903 $1,571 $880 $779 $1,659 $1,543 $1,309 $1,306 $1,194 $1,121
====== ====== ==== ==== ====== ====== ====== ====== ====== ======
Fixed Charges:
- -------------
Interest expense............ $ 524 $1,145 $429 $374 $ 769 $ 698 $ 287 $ 729 $ 912 $1,096
Capitalized interest......... 9 16 2 -- 2 -- -- 15 17 19
Portion of rents represent-
ative of an interest
factor...................... 41 51 26 27 52 54 52 85 78 74
Preferred stock dividend
requirements of majority
owned subs.................. 7 15 -- -- -- -- -- -- -- --
Adjustment for partially
owned subsidiaries and 50%
owned companies............. 322 616 359 320 668 664 571 81 45 33
Pretax income necessary to
cover preferred stock
dividend requirements....... 128 221 14 11 20 218 905 905 1,382 1,234
------ ------ ---- ---- ------ ------ ------ ------ ------ ------
Total combined fixed
charges and preferred
stock dividends.......... $1,131 $2,094 $830 $732 $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).................... $ (228) $ (523) $1.1x 1.1x 1.1x (91)x (506)x (509)x (1,240)x (1,335)
====== ====== ==== === === === ==== ==== ====== ======
</TABLE>
<PAGE>
EXHIBIT 12.3
TWE
RATIO OF EARNINGS TO FIXED CHARGES
(In millions, except ratios)
<TABLE>
<CAPTION>
Pro Forma Historical
------------------------------ ---------------------------------------------------------------
Six Months
Six Months Year Ended Year Ended December 31,
Ended Ended June 30, --------------------------------------------
June 30, December 31, ------------- Restated
1995 1994 1995 1994 1994 1993 1992 1992 1991 1990
------------ ------------ ---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Earnings:
- --------
Net income (loss) before
income taxes and
extraordinary item.......... $120 $233 $ 96 $120 $201 $272 $210 $210 $132 $(159)
Interest expense............. 258 509 296 273 563 573 486 436 479 630
Amortization of capitalized
interest.................... 16 25 16 12 25 19 18 18 22 22
Portion of rents representa-
tive of an interest factor.. 27 47 27 21 47 39 36 33 27 30
Adjustment for partially
owned subsidiaries and
50% owned companies......... 72 115 48 11 24 22 27 80 30 31
Undistributed losses of less
than 50% owned companies.... 18 31 20 27 58 14 40 40 58 19
---- ---- ---- ---- ---- ---- ---- ---- ---- -----
Total earnings............ $511 $960 $503 $464 $918 $939 $817 $817 $748 $ 582
==== ==== ==== ==== ==== ==== ==== ==== ==== =====
Fixed Charges:
Interest expense............. $258 $509 $296 $273 $563 $573 $486 $436 $479 $ 639
Capitalized interest......... 18 25 16 11 25 20 15 15 17 19
Portion of rents representa-
tive of an interest factor.. 27 47 72 21 47 39 36 33 27 30
Adjustment for partially
owned subsidiaries and 50%
owned companies............. 10 17 13 11 24 22 27 80 31 32
---- ---- ---- ---- ---- ---- ---- ---- ---- -----
Total fixed charges........ $311 $598 $352 $316 $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 1.6x 1.4x 1.5x 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 Amendment
No. 1 to 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 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"), (ii) 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, and (iii) our reports dated July 28, 1995
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 Vision Cable Division of Vision
Cable Communication, Inc. and Subsidiaries for each of the three years in the
period ended December 31, 1994, included in the Current Report on Form 8-K of
TWI dated August 14, 1995, filed with the Securities and Exchange Commission.
/s/ Ernst & Young LLP
ERNST & YOUNG LLP
New York, New York
October 2, 1995
<PAGE>
EXHIBIT 23.3
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Amendment No. 1 to
Registration Statement Nos. 33-61523, 33-61523-01, 33-61523-02 and 33-61523-03
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
October 2, 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,
October 3, 1995
<PAGE>
EXHIBIT 23.6
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Amendment No. 1 to
Registration Statement of Time Warner Inc., Time Warner Capital I, Time Warner
Capital II and Time Warner Capital III on Form S-3 (Nos. 33-61523, 33-61523-01,
33-61523-02 and 33-61523-03) 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. dated 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
October 2, 1995
<PAGE>
EXHIBIT 23.7
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectus
constituting part of the Amendment No. 1 to 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
October 2, 1995
<PAGE>
EXHIBIT 23.8
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectus Supplement
constituting part of this Registration Statement on Form S-3 of Time Warner Inc.
of our report dated February 15, 1995, which appears on page 53 of Turner
Broadcasting System, Inc.'s 1994 Annual Reprot to Shareholders, which is
incorporated by reference in Turner Broadcasting System, Inc.'s Annual Report on
Form 10-K for the year ended december 31, 1994 and which report has been
incorporated by reference in the Current Report on Form 8-K of Time Warner Inc.
dated September 22, 1995. We also consent to the reference to us under the
heading "Experts" in such Prospectus Supplement.
PRICE WATERHOUSE LLP
Atlanta, Georgia
October 2, 1995
