<PAGE>
<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 23, 1996
REGISTRATION NO. 33-
________________________________________________________________________________
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
TIME WARNER INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
DELAWARE 7812 13-1388520
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
</TABLE>
------------------------
75 ROCKEFELLER PLAZA
NEW YORK, NEW YORK 10019
(212) 484-8000
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------
PETER R. HAJE, ESQ.
75 ROCKEFELLER PLAZA
NEW YORK, NEW YORK 10019
(212) 484-7580
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
------------------------
WITH A COPY TO:
ROBERT B. SCHUMER, ESQ.
PAUL, WEISS, RIFKIND, WHARTON & GARRISON
1285 AVENUE OF THE AMERICAS
NEW YORK, NEW YORK 10019
(212) 373-3097
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF SALE TO THE PUBLIC: As soon as
practicable after the effective date of this Registration Statement.
If the Securities registered on this Form are to be offered in connection
with the formation of a holding company and there is compliance with General
Instruction G, 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]
------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF SECURITIES AMOUNT TO OFFERING PRICE AGGREGATE
TO BE REGISTERED BE REGISTERED PER UNIT(1) OFFERING PRICE(1)
<S> <C> <C> <C>
10 1/4% Series M Exchangeable Preferred Stock.............. 1.6 million shares(2) $1,000 $1.6 billion
10 1/4% Series L Exchangeable Preferred Stock.............. (3) (4) (4)
10 1/4% Senior Subordinated Debentures due 2011............ (5) (4) (4)
<CAPTION>
AMOUNT OF
TITLE OF EACH CLASS OF SECURITIES REGISTRATION
TO BE REGISTERED FEE
<S> <C>
10 1/4% Series M Exchangeable Preferred Stock.............. $551,724
10 1/4% Series L Exchangeable Preferred Stock.............. (4)
10 1/4% Senior Subordinated Debentures due 2011............ (4)
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457.
(2) The maximum number of shares of Series M Exchangeable Preferred Stock that
may be issued pursuant to this Registration Statement. This Registration
Statement also relates to an indeterminate number of shares of Series M
Exchangeable Preferred Stock that may be issued as dividends payable on
shares of Series M Exchangeable Preferred Stock pursuant to the terms
thereof.
(3) The Series M Exchangeable Preferred Stock is exchangeable for the Series L
Exchangeable Preferred Stock in certain circumstances. This Registration
Statement relates to an indeterminate number of shares of Series L
Exchangeable Preferred Stock that may be issued (i) in exchange for Series M
Exchangeable Preferred Stock and (ii) as dividends payable on shares of
Series L Exchangeable Preferred Stock pursuant to the terms thereof.
(4) Pursuant to Rule 457(i) of the Securities Act of 1933, as amended, no
additional registration fee is payable in respect thereof.
(5) The Series L Exchangeable Preferred Stock is exchangeable for the Senior
Subordinated Debentures due 2011 in certain circumstances. This Registration
Statement relates to an indeterminate principal amount of Senior
Subordinated Debentures that may be issued (i) in exchange for Series L
Exchangeable Preferred Stock and (ii) as interest payable on such debentures
pursuant to the terms thereof.
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(a), MAY DETERMINE.
________________________________________________________________________________
<PAGE>
<PAGE>
CROSS REFERENCE SHEET
LOCATION IN PROSPECTUS OF INFORMATION REQUIRED BY
PART I OF FORM S-4
<TABLE>
<CAPTION>
ITEM NO. CAPTION LOCATION IN PROSPECTUS
- -------- ------------------------------------------------------------------ ------------------------------------
<C> <S> <C>
1. Forepart of the Registration Statement and Outside Front Cover
Page of Prospectus.............................................. Facing Page of Registration
Statement; Cross-Reference Sheet;
Outside Front and Inside Front
Cover Page of Prospectus
2. Inside Front and Outside Back Cover Pages of Prospectus........... Inside Front Cover Pages of
Prospectus; Available Information
3. Risk Factors, Ratio of Earnings to Fixed Charges, and Other
Information..................................................... Prospectus Summary; Risk Factors;
The Company; Selected Historical
and Pro Forma Financial
Information; Consolidated
Capitalization
4. Terms of the Transaction.......................................... Prospectus Summary; The Exchange
Offer; The Company; Description of
Series M Preferred Stock; Certain
Federal Income Tax Considerations
5. Pro Forma Financial Information................................... Not Applicable
6. Material Contracts with the Company being Acquired................ Not Applicable
7. Additional Information Required for Reoffering by Persons and
Parties Deemed to be Underwriters............................... Plan of Distribution
8. Interests of Named Experts and Counsel............................ Legal Opinion; Experts
9. Disclosure of Commission Position on Indemnification for
Securities Act Liabilities...................................... Not Applicable
10. Information with Respect to S-3 Registrants....................... Incorporation of Certain Documents
by Reference; Recent Developments
11. Incorporation of Certain Information by Reference................. Incorporation of Certain Documents
by Reference
12. Information with Respect to S-2 or S-3 Registrants................ Not Applicable
13. Incorporation of Certain Information by Reference................. Not Applicable
14. Information with Respect to Registrants Other than S-3 or S-2
Registrants..................................................... Not Applicable
15. Information with Respect to S-3 Companies......................... Not Applicable
16. Information with Respect to S-2 or S-3 Companies.................. Not Applicable
17. Information with Respect to Companies Other than S-2 or S-3
Companies....................................................... Not Applicable
18. Information if Proxies, Consents or Authorizations are to Be
Solicited....................................................... Not Applicable
19. Information if Proxies, Consents or Authorizations are Not to Be
Solicited, or in an Exchange Offer.............................. Summary; The Exchange Offer;
Description of Series M Preferred
Stock; Certain Federal Income Tax
Considerations; Incorporation of
Certain Documents by Reference
</TABLE>
<PAGE>
<PAGE>
SUBJECT TO COMPLETION, DATED , 1996
PROSPECTUS
OFFER TO EXCHANGE ALL OUTSTANDING SHARES OF
10 1/4% SERIES K EXCHANGEABLE PREFERRED STOCK
FOR SHARES OF
10 1/4% SERIES M EXCHANGEABLE PREFERRED STOCK OF
TIME WARNER INC.
------------------------
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M.,
NEW YORK CITY TIME, ON , 1996, UNLESS EXTENDED
------------------------
Time Warner Inc., a Delaware corporation (the 'Company'), hereby offers,
upon the terms and subject to the conditions set forth in this Prospectus and
the accompanying letter of transmittal (the 'Letter of Transmittal,' and
together with this Prospectus, the 'Exchange Offer'), to exchange shares of its
10 1/4% Series M Exchangeable Preferred Stock, par value $1.00 per share (the
'Series M Preferred Stock'), for any and all of the outstanding shares of
10 1/4% Series K Exchangeable Preferred Stock, par value $1.00 per share (the
'Series K Preferred Stock'), of the Company. The terms of the Series M Preferred
Stock are substantially identical to the terms of the Series K Preferred Stock,
except that the shares of Series M Preferred Stock will have been registered
under the Securities Act of 1933, as amended (the 'Securities Act'), and will
not contain terms restricting the transfer of such shares.
The Company will accept for exchange any and all shares of Series K
Preferred Stock that are validly tendered on or prior to 5:00 p.m., New York
City time, on the date the Exchange Offer expires, which will be ,
1996, unless the Exchange Offer is extended (the 'Expiration Date'). Tenders of
shares of Series K Preferred Stock may be withdrawn at any time prior to 5:00
p.m., New York City time, on the business day prior to the Expiration Date. The
Exchange Offer is not conditioned upon any minimum number of shares of Series K
Preferred Stock being tendered for exchange. However, the Exchange Offer is
subject to certain conditions which may be waived by the Company and to the
terms and provisions of the Registration Rights Agreement. See 'Exchange Offer.'
The Company has agreed to pay the expenses of the Exchange Offer.
Holders of shares of Series K Preferred Stock whose shares of Series K
Preferred Stock are not tendered and accepted in the Exchange Offer will
continue to hold such shares of Series K Preferred Stock. Following consummation
of the Exchange Offer, the holders of shares of Series K Preferred Stock will
continue to be subject to the existing restrictions upon transfer thereof and,
except as provided herein, the Company will have no further obligation to such
holders to provide for the registration under the Securities Act of the shares
of Series K Preferred Stock held by them.
(cover continued on next page)
- ----------------------------------------------------------
SEE 'RISK FACTORS' FOR A DISCUSSION OF CERTAIN RISKS ASSOCIATED WITH AN
INVESTMENT IN THE SERIES M PREFERRED STOCK.
The Company will not receive any proceeds from this Exchange Offer and no
underwriter is being utilized in connection with the Exchange Offer.
THE SECURITIES OFFERED HEREBY 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.
------------------------
The date of this Prospectus is , 1996.
INFORMATION CONTAINED IN THIS PRELIMINARY PROSPECTUS 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 OR 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.
<PAGE>
<PAGE>
(cover continued from previous page)
The Series K Preferred Stock was issued and sold on April 11, 1996 in a
transaction not registered under the Securities Act, in reliance upon the
exemption provided in Section 4(2) of the Securities Act. Accordingly, the
Series K Preferred Stock may not be reoffered, resold or otherwise pledged,
hypothecated or transferred in the United States unless so registered or unless
an applicable exemption from the registration requirements of the Securities Act
is available. Shares of Series M Preferred Stock are being offered hereby in
order to satisfy the obligations of the Company under the registration rights
agreement relating to the Series K Preferred Stock (the 'Registration Rights
Agreement'). See 'The Exchange Offer -- Purpose of the Exchange Offer.' Based on
no-action letters issued by the staff of the Securities and Exchange Commission
(the 'Commission') to third parties, the Company believes shares of Series M
Preferred Stock to be issued in exchange for shares of Series K Preferred Stock
pursuant to the Exchange Offer may be offered for resale, resold and otherwise
transferred by holders thereof (other than (i) a broker-dealer who purchases
such shares of Series K Preferred Stock directly from the Company to resell
pursuant to Rule 144A or any other available exemption under the Securities Act
or (ii) a person that is an 'affiliate' of the Company within the meaning of
Rule 405 under the Securities Act), without compliance with the registration and
prospectus delivery provisions of the Securities Act provided that such shares
of Series M Preferred Stock are acquired in the ordinary course of such holders'
business and such holders have no arrangements with any person to participate in
the distribution of such shares of Series M Preferred Stock. Eligible holders
wishing to accept the Exchange Offer must represent to the Company that such
conditions have been met. Each broker-dealer that receives shares of Series M
Preferred Stock for its own account in exchange for shares of Series K Preferred
Stock acquired as a result of market-making or other trading activities must
acknowledge that it will deliver a prospectus in connection with any resale of
such shares of Series M Preferred Stock. The Letter of Transmittal states that
by so acknowledging and by delivering a prospectus, a broker-dealer will not be
deemed to admit that it is an 'underwriter' within the meaning of the Securities
Act. This Prospectus, as it may be amended or supplemented from time to time,
may be used by a broker-dealer in connection with resales of shares of Series M
Preferred Stock received in exchange for shares of Series K Preferred Stock
acquired by such broker-dealer as a result of market-making activities or other
trading activities. For a period of 90 days following the consummation of the
Exchange Offer, the Company has agreed to use its best efforts to make this
Prospectus available to broker-dealers who have identified themselves as such
for use in connection with such resales. See 'Plan of Distribution.'
Dividends on the Series M Preferred Stock, at the rate of 10 1/4% per
annum, are cumulative and payable quarterly in arrears on March 30, June 30,
September 30 and December 30 of each year, commencing on
(the 'First Dividend Payment Date'). Holders of Series K Preferred Stock whose
shares of Series K Preferred Stock are accepted for exchange will be deemed to
have waived the right to receive any payment in respect of any unpaid dividends
on the Series K Preferred Stock that have accumulated or accrued to the date of
the issuance of the Series M Preferred Stock. Consequently, on the First
Dividend Payment Date holders who exchange their shares of Series K Preferred
Stock for Series M Preferred Stock will receive the same dividends on the Series
M Preferred Stock that holders of the Series K Preferred Stock who do not accept
the Exchange Offer will receive on the Series K Preferred Stock. Dividends on
the Series M Preferred Stock may be paid in cash or by issuing fully paid and
nonassessable shares of Series M Preferred Stock as described herein.
THE EXCHANGE OFFER IS NOT BEING MADE TO, NOR WILL THE COMPANY ACCEPT
SURRENDERS FOR EXCHANGE FROM, HOLDERS OF SERIES K PREFERRED STOCK IN ANY
JURISDICTION IN WHICH THE EXCHANGE OFFER OR THE ACCEPTANCE THEREOF WOULD NOT BE
IN COMPLIANCE WITH THE SECURITIES OR BLUE SKY LAWS OF SUCH JURISDICTION.
There can be no assurance that an active public or private market for the
Series M Preferred Stock will develop. Whether or not a market for the Series M
Preferred Stock should develop, the shares of Series M Preferred Stock could
trade at a discount from their aggregate liquidation preference. The Company
does not intend to list the Series M Preferred Stock on a national securities
exchange or to apply for quotation of the Series M Preferred Stock through the
National Association of Securities Dealers Automated Quotation System. To the
extent shares of Series K Preferred Stock are tendered and accepted in the
Exchange Offer, the trading market for untendered and tendered but unaccepted
shares of Series K Preferred Stock could be adversely affected.
The Company has been advised by the Initial Purchasers (as defined herein)
that they intend to make a market in the Series M Preferred Stock; however, such
entities are under no obligation to do so and any market making activities with
respect to the Series M Preferred Stock may be discontinued at any time.
2
<PAGE>
<PAGE>
AVAILABLE INFORMATION
The Company has filed with the Commission a registration statement relating
to the Series M Preferred Stock offered hereby (together with all amendments and
exhibits, referred to as the 'Registration Statement') under the Securities Act.
This Prospectus does not contain all of the information set forth in the
Registration Statement, certain parts of which are omitted in accordance with
the rules and regulations of the Commission. For further information, reference
is hereby made to the Registration Statement. Statements made in this Prospectus
as to the contents of any contract, agreement or other document referred to are
not necessarily complete. With respect to each such contract, agreement or other
document filed or incorporated by reference as an exhibit to the Registration
Statement, reference is made to such exhibit for a more complete description
thereof, and each such statement shall be deemed qualified in its entirety by
such reference. The Registration Statement and the exhibits and schedules
thereto may be inspected without charge and copied at prescribed rates at the
Public Reference Section maintained by the Commission at Room 1024, 450 Fifth
Street, N.W., Washington, D.C. 20549, and at the Commission's regional offices
located at Seven World Trade Center, 13th Floor, New York, New York 10048; and
Northwestern Atrium Center, 500 West Madison Street (Suite 1400), Chicago,
Illinois 60661-2511.
The Company 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 filed by the Company
with the Commission pursuant to the informational requirements of the Exchange
Act may be inspected without charge and copied at prescribed rates at the public
reference facilities maintained by the Commission at Room 1024, 450 Fifth
Street, N.W., Washington, D.C. 20549, and at the Commission's regional offices
located at Seven World Trade Center, 13th Floor, New York, New York 10048; and
Northwestern Atrium Center, 500 West Madison Street (Suite 1400), Chicago,
Illinois 60661; and copies of such material may be obtained upon written request
addressed to the Public Reference Section of the Commission, at 450 Fifth
Street, N.W., Washington, D.C. 20549, at prescribed rates. Such reports, proxy
statements and other information may also be inspected at the offices of the New
York Stock Exchange, Inc. ('NYSE'), 20 Broad Street, New York, New York, and the
Pacific Stock Exchange Incorporated ('PSE'), 233 South Beaudry Avenue, Los
Angeles, California 90012 and 301 Pine Street, San Francisco, California, on
which one or more of the Company's securities are listed.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Company hereby incorporates by reference in this Prospectus the
following documents or information filed with the Commission:
(a) the Company's Current Report on Form 8-K dated May 15, 1996 (the
'May 15, 1996 8-K');
(b) the Company's Quarterly Report on Form 10-Q for the fiscal quarter
ended March 31, 1996 (the 'First Quarter 10-Q');
(c) the Company's Current Reports on Form 8-K dated April 11, 1996,
April 4, 1996, April 2, 1996, March 25, 1996, March 22, 1996 and January 4,
1996;
(d) the Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1995 (the '10-K');
(e) the description of the Company's Common Stock contained in Item 4
of the Company's Registration Statement on Form 8-B filed with the
Commission on December 8, 1983, pursuant to Section 12(b) of the Exchange
Act, as amended from time to time;
(f) the description of the rights issued to stockholders of the
Company pursuant to the Rights Agreement, dated as of January 20, 1994,
between the Company and Chemical Bank, as Rights Agent, contained in Item 1
of the Company's Registration Statement on Form 8-A filed with the
Commission on January 24, 1994;
(g) the TWE Partnership Agreement included as Exhibit (A) to the
Company's Current Report on Form 8-K dated October 29, 1991, Exhibit 10(b)
and Exhibit 10(c) to the Company's
3
<PAGE>
<PAGE>
Current Report on Form 8-K dated July 14, 1992 and Exhibit 3.2 to the
Company's Annual Report on Form 10-K for the fiscal year ended December 31,
1993; and
(h) all documents and reports filed by the Company pursuant to Section
13(a), 13(c), 14 or 15(d) of the Exchange Act subsequent to the date of
this Prospectus and prior to the termination of the offering made hereby.
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 document subsequently filed with the Commission which also is or
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.
THE COMPANY WILL PROVIDE WITHOUT CHARGE TO EACH PERSON TO WHOM THIS
PROSPECTUS IS DELIVERED, UPON THE WRITTEN OR ORAL REQUEST OF SUCH PERSON, A COPY
OF ANY OR ALL OF THE DOCUMENTS INCORPORATED BY REFERENCE HEREIN BUT NOT
DELIVERED HEREWITH (NOT INCLUDING THE EXHIBITS TO SUCH DOCUMENTS, UNLESS SUCH
EXHIBITS ARE SPECIFICALLY INCORPORATED BY REFERENCE IN SUCH DOCUMENTS). REQUESTS
FOR SUCH COPIES SHOULD BE DIRECTED TO: SHAREHOLDER RELATIONS, TIME WARNER INC.,
75 ROCKEFELLER PLAZA, NEW YORK, NEW YORK 10019 (TELEPHONE NUMBER: (212)
484-6971).
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED OR INCORPORATED BY REFERENCE IN THIS
PROSPECTUS AND THE ACCOMPANYING LETTER OF TRANSMITTAL AND, IF GIVEN OR MADE,
SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY OR THE EXCHANGE AGENT. NEITHER THE DELIVERY OF THIS
PROSPECTUS OR THE ACCOMPANYING LETTER OF TRANSMITTAL, OR BOTH TOGETHER, NOR ANY
SALE MADE HEREUNDER SHALL UNDER ANY CIRCUMSTANCES CREATE AN IMPLICATION THAT
THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF.
NEITHER THIS PROSPECTUS NOR THE ACCOMPANYING LETTER OF TRANSMITTAL, NOR BOTH
TOGETHER, CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY
OF THE SECURITIES OFFERED HEREBY BY ANYONE IN ANY JURISDICTION 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 ANY PERSON TO WHOM IT IS
UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION.
4
<PAGE>
<PAGE>
PROSPECTUS SUMMARY
The following summary information is qualified in its entirety by reference
to the more detailed information and financial statements (including the notes
thereto) appearing elsewhere in this Prospectus and in the documents
incorporated by reference in this Prospectus. Capitalized terms used in this
Prospectus and not otherwise defined herein shall have the meanings set forth in
the Glossary of Significant Terms beginning on page G-1.
THE COMPANY
GENERAL
The Company is the world's leading media company, and has interests in
three fundamental areas of business: Entertainment, consisting principally of
interests in recorded music and music publishing, filmed entertainment,
broadcasting, theme parks and cable television programming; News and
Information, consisting principally of interests in magazine publishing, book
publishing and direct marketing; and Telecommunications, consisting principally
of interests in cable television systems. The Company is a holding company and
its assets consist primarily of investments in its consolidated and
unconsolidated subsidiaries, including Time Warner Entertainment Company, L.P.,
a Delaware limited partnership ('TWE').
TWE
Substantially all of the Company's interests in filmed entertainment,
broadcasting, theme parks and cable television programming and a majority of its
interests in cable television systems are held through TWE. TWE was formed as a
Delaware limited partnership in February 1992 pursuant to an Agreement of
Limited Partnership, dated as of October 29, 1991, as amended from time to time
(the 'TWE Partnership Agreement').
The Company and certain wholly owned subsidiaries of the Company
collectively own 74.49% of the pro rata priority capital interests in TWE (the
'TWE Series A Capital') and the residual equity partnership interests in TWE
(the 'TWE Residual Capital'). The 25.51% of the TWE Series A Capital and TWE
Residual Capital not owned by the Company and its subsidiaries are held by a
wholly owned subsidiary of U S WEST, Inc., a Delaware corporation ('U S WEST').
Certain wholly owned subsidiaries of the Company (the 'Time Warner General
Partners') also own 100% of the priority capital interests senior to the TWE
Series A Capital (the 'TWE Senior Capital') and the priority capital interests
that are junior to the TWE Series A Capital (the 'TWE Series B Capital'). The
TWE Residual Capital, together with the TWE Contingent Capital (as defined
herein) and any other interests which may be issued in the future, which are
junior to the TWE Series B Capital, are sometimes referred to as 'TWE Junior
Capital.' See 'TWE Partnership Interests.'
TBS TRANSACTION
In September 1995, the Company announced that it had agreed to merge with
Turner Broadcasting System, Inc. ('TBS'), a diversified information and
entertainment company, by acquiring the approximate 80% interest in TBS that the
Company does not already own. The Company has entered into an Amended and
Restated Agreement and Plan of Merger dated as of September 22, 1995 (as amended
from time to time, the 'Merger Agreement'), to provide for the merger of each of
the Company and TBS with separate subsidiaries of a holding company ('New Time
Warner') to be named Time Warner Inc. (the 'TBS Transaction'). Pursuant to the
TBS Transaction, the issued and outstanding shares of each class of the capital
stock of the Company, including the Series K Preferred Stock and the Series M
Preferred Stock, are to be converted into shares of a substantially identical
class of capital stock of New Time Warner. The TBS Transaction and the related
transactions are subject to customary closing conditions, including approval of
the shareholders of TBS and the Company, all necessary approvals of the Federal
Communications Commission (the 'FCC') and appropriate antitrust
5
<PAGE>
<PAGE>
approvals. There can be no assurance that all these approvals can be obtained,
or in the case of governmental approvals, if obtained, will not be conditioned
upon changes to the terms of the Merger Agreement. The holders of the Series M
Preferred Stock will not be entitled to vote on the TBS Transaction. For a
further discussion of the TBS Transaction and related transactions, and certain
litigation relating thereto (including litigation with U S WEST (the 'U S WEST
Litigation')), reference is made to the 10-K and First Quarter 10-Q, which are
incorporated herein by reference.
TWE PARTNERSHIP INTERESTS
Each partner's interest in TWE consists of the initial priority capital and
residual equity amounts that were assigned to that partner or its predecessor
based on the estimated fair value of the net assets each contributed to TWE, as
adjusted for the fair value of certain assets distributed by TWE to the Time
Warner General Partners in 1993 which were not subsequently reacquired by TWE in
1995 ('Contributed Capital'), plus, with respect to the priority capital
interests only, any undistributed priority capital return. The priority capital
return consists of net partnership income allocated to date in accordance with
the provisions of the TWE Partnership Agreement and the right to be allocated
additional partnership income which, together with any previously allocated net
partnership income, provide for the various priority capital rates of return
specified in the table below. The sum of Contributed Capital and the
undistributed priority capital return is referred to as 'Cumulative Priority
Capital.' The ultimate realization of Cumulative Priority Capital could be
affected by the fair value of TWE, which is subject to fluctuation. See 'Risk
Factors.'
A summary of the priority of Contributed Capital, the Company's ownership
of Contributed Capital and Cumulative Priority Capital at March 31, 1996 and
priority capital rates of return thereon is as set forth below.
<TABLE>
<CAPTION>
CUMULATIVE
PRIORITY PRIORITY
CAPITAL AT CAPITAL % OWNED BY
CONTRIBUTED MARCH 31, RATES THE
PRIORITY OF CONTRIBUTED CAPITAL CAPITAL(a) 1996 OF RETURN(b) COMPANY
- --------------------------------- ----------- ---------- ------------ ----------
(BILLIONS) (% PER ANNUM
COMPOUNDED
QUARTERLY)
<S> <C> <C> <C> <C>
TWE Senior Capital............... $1.4 $1.5(c) 8.00% 100.00%
TWE Series A Capital............. 5.6 9.0 13.00(d) 74.49
TWE Series B Capital............. 2.9(g) 4.7 13.25(e) 100.00
TWE Residual Capital............. 3.3(g) 3.3(f) -- (f) 74.49%
</TABLE>
- ------------
(a) Excludes partnership income or loss allocated thereto and is subject to any
special income allocations for tax purposes.
(b) Income allocations related to priority capital rates of return are based on
partnership income after any special income allocations for tax purposes.
(c) Net of $366 million of partnership income distributed in 1995 representing
the priority capital return thereon through June 30, 1995.
(d) 11.00% to the extent concurrently distributed.
(e) 11.25% to the extent concurrently distributed.
(f) TWE Residual Capital is not entitled to stated priority rates of return
and, as such, the Cumulative Priority Capital relating thereto is equal to
the Contributed Capital relating thereto. However, in the case of certain
events such as the liquidation or dissolution of TWE, the TWE Residual
Capital is entitled to any excess of the then fair value of the net assets
of TWE over the aggregate amount of Cumulative Priority Capital and special
tax allocations.
(footnotes continued on next page)
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(footnotes continued from previous page)
(g) The Contributed Capital relating to the TWE Series B Capital has priority
over the priority returns on the TWE Series A Capital. The Contributed
Capital relating to the TWE Residual Capital has priority over the priority
returns on the TWE Series B Capital and the TWE Series A Capital.
------------------------
For a further discussion of the TWE Partnership Interests, including
allocations of partnership income and loss and distributions, see 'TWE
Partnership Interests.'
------------------------
As used in this Prospectus, unless the context otherwise requires, the term
'Company' refers to Time Warner Inc. and its consolidated and unconsolidated
subsidiaries, including TWE. Following the TBS Transaction, unless the context
otherwise requires, references to the Company in its capacity as issuer of the
Securities (as defined herein) will be deemed to be references to New Time
Warner. For financial reporting purposes, the Company does not consolidate the
results of operations of the Entertainment Group, consisting principally of TWE,
with the Company's results of operations. TWE holds substantially all of the
Company's interests in filmed entertainment, broadcasting, theme parks and cable
television programming and a majority of the Company's interests in cable
television systems. Although TWE manages substantially all the cable systems
owned by the Company, TWE and a joint venture ('TWE-Advance/Newhouse
Partnership') between TWE and Advance/Newhouse Partnership ('Advance/Newhouse'),
the results of operations of the cable systems owned by the Company's
consolidated subsidiaries are included in the Company's consolidated results,
while the results of operations of the cable systems owned by TWE and the
TWE-Advance/Newhouse Partnership are included in the consolidated results of the
Entertainment Group. See 'Selected Historical and Pro Forma Financial
Information.'
The Company's principal executive offices are located at 75 Rockefeller
Plaza, New York, New York 10019, and its telephone number is (212) 484-8000.
7
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THE EXCHANGE OFFER
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Securities Offered..................... 1.6 million shares of 10 1/4% Series M Exchangeable Preferred Stock. The
terms of the Series M Preferred Stock are substantially identical to
the terms of the Series K Preferred Stock except that the Series M
Preferred Stock will have been registered under the Securities Act and
will not contain terms restricting the transfer of such stock. See
'Description of Series M Preferred Stock.'
The Exchange Offer..................... Shares of Series M Preferred Stock are being offered in exchange for any
and all of the outstanding shares of Series K Preferred Stock (on a
share for share basis). As of the date hereof, 1.6 million shares of
Series K Preferred Stock with an aggregate liquidation preference of
$1.6 billion are issued and outstanding. The Company is making the
Exchange Offer in order to satisfy its obligations under the
Registration Rights Agreement. For a description of the procedures for
tendering, see 'Exchange Offer -- Procedures for Tendering Series K
Preferred Stock.'
Expiration Date; Withdrawal............ The Exchange Offer will expire at 5:00 p.m., New York City time, on
, 1996, or such later date and time to which it may be
extended in the sole discretion of the Company (the 'Expiration
Date'). Shares of Series K Preferred Stock tendered pursuant to the
Exchange Offer may be withdrawn at any time prior to the Expiration
Date. Any shares of Series K Preferred Stock not accepted for exchange
for any reason will be returned without expense to the tendering
holders thereof as promptly as practicable after the expiration or
termination of the Exchange Offer. See 'Exchange Offer -- Expiration
Date; Extensions; Termination; Amendments' and 'Exchange Offer
Withdrawal Rights.'
Conditions to Exchange Offer........... The Exchange Offer is subject to certain conditions. See 'Exchange
Offer -- Certain Conditions to the Exchange Offer.' The Exchange Offer
is not conditioned upon any minimum number of shares of Series K
Preferred Stock being tendered for exchange.
Certain Federal Income Tax
Considerations....................... The exchange of the Series K Preferred Stock for the Series M Preferred
Stock should not be a taxable event to the holder for federal income
tax purposes, and the holder should not recognize any taxable gain or
loss as a result of such exchange. See 'Certain Federal Income Tax
Considerations.'
Untendered Series K Preferred Stock.... Upon consummation of the Exchange Offer, the holders of Series K
Preferred Stock, if any, will have no further registration or other
rights under the Registration Rights Agreement, except as provided
herein. Holders of shares of Series K Preferred Stock who do not
tender their shares of Series K Preferred Stock in the Exchange Offer
or whose shares of Series K Preferred Stock are not accepted for
exchange will continue to hold such shares of Series K Preferred Stock
and will be entitled to all the rights and preferences thereof and
will be subject to all the limitations applicable thereto, except for
any such rights or limitations which, by their terms, terminate or
cease to be effective as a result of this Exchange Offer. All
untendered and tendered but unaccepted shares of Series K Preferred
Stock will continue to be subject to the restrictions on transfer
provided therein. To the extent that shares of Series K Preferred
Stock are tendered and accepted in the Exchange Offer, the trading
market for untendered and tendered but unaccepted shares of Series K
Preferred Stock could be adversely affected.
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TERMS OF THE SERIES M PREFERRED STOCK
The terms of the Series M Preferred Stock are substantially identical to the
terms of the Series K Preferred Stock.
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Dividends.............................. Holders of the Series M Preferred Stock are entitled, when, as and if
declared by the Board of Directors of the Company out of funds legally
available therefor, to receive dividends on each outstanding share of
Series M Preferred Stock, at the rate of 10 1/4% per annum. Dividends
on the Series M Preferred Stock are payable quarterly in arrears on
March 30, June 30, September 30 and December 30 of each year (each, a
'Dividend Payment Date'), commencing on the First Dividend Payment
Date to holders of record on the immediately preceding March 10, June
10, September 10 and December 10, respectively (each, a 'Record
Date'). Dividends on the Series M Preferred Stock will be cumulative
(whether or not earned or declared) from the date of issuance of the
Series M Preferred Stock. Dividends which are not declared and paid
when due will compound quarterly at the dividend rate.
Dividends may, at the option of the Company, be paid on any Dividend
Payment Date in cash or by issuing fully paid and nonassessable shares
of Series M Preferred Stock with an aggregate liquidation preference
equal to the amount of such dividends; provided, however, that
dividends shall be paid (i) in cash, to the extent of an amount equal
to the Pro Rata Percentage as of the Preceding Record Date, multiplied
by the amount of cash distributions, excluding certain Tax
Distributions, if any, received by the Company (and its subsidiaries)
on or after the Preceding Record Date to, but not including, the
current Record Date with respect to its TWE Series B Capital and any
TWE Junior Capital, and (ii) in Series M Preferred Stock or cash, at
the Company's option, to the extent of any balance.
At March 31, 1996, if 1.6 million shares of Series M Preferred Stock had
been outstanding at such date, the Pro Rata Percentage would have been
34.0%. See 'TWE Partnership Interests.' TWE's ability to make
distributions is subject to certain restrictions. See 'Description of
Series M Preferred Stock -- Dividends' and 'Risk Factors --
Limitations on Dividends and Other Payments.'
Holders of Series K Preferred Stock whose shares of Series K Preferred
Stock are accepted for exchange will be deemed to have waived the
right to receive any payment in respect of any unpaid dividends on the
Series K Preferred Stock that have accumulated or accrued to the date
of issuance of the Series M Preferred Stock. Consequently, on the
First Dividend Payment Date holders who exchange their shares of
Series K Preferred Stock for Series M Preferred Stock will receive the
same dividends on the Series M Preferred Stock that holders of the
Series K Preferred Stock who do not accept the Exchange Offer will
receive on the Series K Preferred Stock.
Liquidation Preference................. $1,000 per share.
Voting Rights.......................... Holders of the Series M Preferred Stock have no general voting rights
except as provided by law and as provided in the Certificate of
Designation therefor. Upon the failure of the Company to (i) pay
dividends on the Series M Preferred Stock in cash or, to the extent
permitted by its terms, by the issuance of additional shares of Series
M Preferred Stock, for more than six consecutive quarterly dividend
periods or (ii) discharge any redemption or exchange obligation with
respect to the Series M Preferred Stock, the size of the Company's
Board of Directors will be increased by two directors, and holders of
the outstanding shares of Series M Preferred Stock, voting or
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consenting, as the case may be, together as a class with the holders
of any shares of Parity Stock as to which dividends are similarly in
arrears or unpaid or the Company has failed to satisfy its redemption
or exchange obligation, and to which similar voting rights apply, will
be entitled to elect two directors to fill the newly created
directorships. The Company may not issue any new class of capital
stock senior to the Series M Preferred Stock without the approval of
the holders of at least a majority of the shares of Series M Preferred
Stock then outstanding, voting or consenting, as the case may be,
separately as a class. See 'Description of Series M Preferred
Stock -- Voting Rights.'
Optional Redemption.................... The Series M Preferred Stock may not be redeemed at the option of the
Company prior to July 1, 2006. Thereafter, the Series M Preferred
Stock will be redeemable at any time, in whole or in part, at the
option of the Company, initially at 105.125% of the liquidation
preference, declining to 100% of the liquidation preference on or
after July 1, 2010, in each case plus accumulated and accrued and
unpaid dividends; provided, however, that no optional redemption shall
be made unless the Company shall have obtained a Rating Confirmation
with respect to such redemption. The Company's ability to effect an
optional redemption is subject to the legal availability at the
Company of funds therefor. See 'Description of Series M Preferred
Stock -- Optional Redemption' and 'Description of Series M Preferred
Stock -- General.'
Mandatory Redemption................... On July 1 of 2012, 2013, 2014 and 2015 (each, a 'Mandatory Redemption
Date'), the Company is required to redeem the Redeemable Number of
shares of Series M Preferred Stock at the Mandatory Redemption Price.
On July 1, 2016 (the 'Final Redemption Date'), the Company is required
to redeem all of the then out standing shares of Series M Preferred
Stock at the lesser of the Mandatory Redemption Amount and the
Mandatory Redemption Price; provided that if the Company does not
obtain a TWE Valuation within 150 days following the final Series B
Redemption Date or if the TWE Series B Capital has been fully redeemed
in accordance with the TWE Partnership Agreement, the Company shall
redeem the outstanding Series M Preferred Stock at the Mandatory
Redemption Price.
Upon redemption of the Series M Preferred Stock on the Final Redemption
Date, the Company's obligations with respect thereto will be
discharged, and if such redemption is effected at the Mandatory
Redemption Amount, holders of shares of Series M Preferred Stock may
have received less than the liquidation preference thereof plus
accumulated and accrued and unpaid dividends thereon. See 'Risk
Factors.' The Company's obligation to redeem the Series M Preferred
Stock is subject to the legal availability at the Company of funds
therefor. See 'Description of Series M Preferred Stock -- Mandatory
Redemption.'
Redemption Upon
Insolvency of TWE.................... In the event of the liquidation, winding up or dissolution of TWE as a
result of the Insolvency of TWE, the Series M Preferred Stock will be
mandatorily redeemable on the Insolvency Redemption Date at the
Insolvency Redemption Amount. Upon such a redemption of Series M
Preferred Stock, the Company's obligations with respect thereto will
be discharged and holders of Series M Preferred Stock may have
received less than the liquidation preference thereof plus accumulated
and accrued and unpaid dividends thereon. The Company's obligations to
redeem the Series M Preferred Stock upon an Insolvency of TWE is
subject to the legal availability at the
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Company of funds therefor. See 'Description of Series M Preferred
Stock -- Redemption Upon Insolvency of TWE' and 'Risk Factors.'
Reorganization of TWE.................. Upon a Reorganization of TWE, the Company shall, within 90 days, make a
public announcement that, on the Reorganization Redemption/Exchange
Date, it intends to either (i) exchange each outstanding share of
Series M Preferred Stock for shares of Series L Preferred Stock having
an aggregate liquidation preference equal to the liquidation
preference of such share of Series M Preferred Stock plus the
accumulated and accrued and unpaid dividends thereon at the date of
exchange (a 'Reorganization Exchange'), or (ii) redeem the outstanding
shares of Series M Preferred Stock at the Reorganization Redemption
Price (a 'Reorganization Redemption'); provided, however, that the
Company may not effect a Reorganization Redemption prior to July 1,
2011 unless the Company shall have obtained a Rating Confirmation with
respect thereto; and provided further that the Company may not effect
a Reorganization Exchange on or after July 1, 2011. The Company's
ability to effect a Reorganization Redemption is subject to the legal
availability at the Company of funds therefor. See 'Description of
Series M Preferred Stock -- Reorganization of TWE.'
Change of Control...................... Upon a Change of Control of the Company, the Company shall offer to
purchase all or any part of the outstanding Series M Preferred Stock
at 101% of the liquidation preference thereof, plus accumulated and
accrued and unpaid dividends thereon. The Company's obligation to
offer to purchase the Series M Preferred Stock is subject to the legal
availability at the Company of funds therefor. See 'Description of
Series M Preferred Stock -- Change of Control.'
Ranking................................ The Series M Preferred Stock will rank pari passu with the Series K
Preferred Stock and all other classes of Parity Stock and will rank
senior to all classes of Junior Stock. See 'Description of Series M
Preferred Stock -- Ranking.'
Insolvency of the Company.............. In the event of a liquidation, winding-up, dissolution or bankruptcy of
the Company, the holders of the Series M Preferred Stock will be
entitled to their pro rata portion of the assets of the Company
available for distribution to holders of Parity Stock up to the amount
of the liquidation preference of the Series M Preferred Stock plus
accumulated and accrued and unpaid dividends thereon. See 'Description
of Series M Preferred Stock -- Liquidation Preference' and 'Risk
Factors.'
Covenants.............................. The Certificate of Designation imposes certain restrictions on the
ability of the Company to (i) declare dividends or make distributions
with respect to, or purchase, redeem or exchange, any Junior Stock or
Parity Stock, except in or for Junior Stock, if full cumulative
dividends have not been paid on, or redemption or exchange obligations
have not been satisfied with respect to, the Series M Preferred Stock,
in cash or, to the extent permitted by its terms, by the issuance of
additional shares of Series M Preferred Stock or (ii) consolidate or
merge with or into or sell all or substantially all of its assets to
any person or entity. Without limiting the generality of the
foregoing, the TBS Transaction will not require the affirmative vote
or consent of the holders of the Series M Preferred Stock. If the TBS
Transaction is consummated, the Series M Preferred Stock will be
converted into a substantially identical class of preferred stock of
New Time Warner. See 'Description of Series M Preferred Stock --
Dividends' and 'Description of Series M Preferred Stock -- Merger,
Consolidation and Sale of Assets.'
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TERMS OF SERIES L PREFERRED STOCK
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Dividends.............................. Holders of the Series L Preferred Stock are entitled, when, as and if
declared by the Board of Directors of the Company, out of funds
legally available therefor, to receive dividends on each outstanding
share of the Series L Preferred Stock, at the rate of 10 1/4% per
annum. Dividends on the Series L Preferred Stock are payable quarterly
in arrears on March 30, June 30, September 30 and December 30 of each
year, commencing on the first Dividend Payment Date following the
exchange of the Series M Preferred Stock for the Series L Preferred
Stock to holders of record as of the immediately preceding March 15,
June 15, September 15 and December 15, respectively. Dividends on the
Series L Preferred Stock will be cumulative (whether or not earned or
declared) from the date of issuance of the Series L Preferred Stock.
Dividends which are not declared and paid when due will compound
quarterly at the dividend rate.
Until June 30, 2006 dividends may, at the option of the Company, be paid
in cash or by issuing fully paid and nonassessable shares of Series L
Preferred Stock with an aggregate liquidation preference equal to such
dividends. Thereafter, dividends are payable only in cash. See
'Description of Series L Preferred Stock -- Dividends' and 'Risk
Factors.'
Liquidation Preference................. Same as Series M Preferred Stock.
Voting Rights.......................... Same as Series M Preferred Stock.
Optional Redemption.................... Same as Series M Preferred Stock.
Mandatory Redemption................... The Company is required to redeem the outstanding shares of Series L
Preferred Stock on July 1, 2011 at a price equal to the liquidation
preference thereof, plus accumulated and accrued and unpaid dividends.
The Company's obligation to redeem the Series L Preferred Stock is
subject to the legal availability at the Company of funds therefor.
See 'Description of Series L Preferred Stock -- Mandatory Redemption'
and 'Risk Factors.'
Exchange at Option
of Company........................... The Company has the option on any Dividend Payment Date to exchange (the
'Debt Exchange'), in whole but not in part, the outstanding shares of
Series L Preferred Stock for Senior Subordinated Debentures having a
principal amount equal to the liquidation preference of the Series L
Preferred Stock plus accrued and unpaid dividends thereon, provided
that the Debt Exchange shall not be made unless all accumulated
dividends have been paid in full and the Company shall have obtained a
Rating Confirmation with respect thereto. The Company's ability to
exchange the Series L Preferred Stock for the Senior Subordinated
Debentures is subject to the legal availability at the Company of
funds equal to the aggregate principal amount of the Senior
Subordinated Debentures to be issued. See 'Description of Series L
Preferred Stock -- Exchange at Option of Company.'
Change of Control...................... Same as Series M Preferred Stock.
Ranking................................ Same as Series M Preferred Stock.
Covenants.............................. Same as Series M Preferred Stock.
TERMS OF SENIOR SUBORDINATED DEBENTURES
Maturity Date.......................... July 1, 2011.
Interest............................... Interest will accrue at 10 1/4% per annum and be payable in arrears on
June 30 and December 30 of each year, commencing with the first of
such dates to occur after the date upon which Senior Subordinated
Debentures are issued in exchange for the
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Series L Preferred Stock ('Exchange Date'). Until June 30, 2006,
interest may, at the option of the Company, be paid in cash or by
issuing additional Senior Subordinated Debentures with a principal
amount equal to such interest. Thereafter, interest on the Senior
Subordinated Debentures must be paid in cash. See 'Description of
Senior Subordinated Debentures -- Interest.'
Optional Redemption.................... On and after July 1, 2006, the Senior Subordinated Debentures are
redeemable at any time, in whole or in part, at the option of the
Company, initially at 105.125% of the principal amount, declining to
100% of the principal amount on or after July 1, 2010, in each case
plus accrued and unpaid interest; provided, however, that no optional
redemption shall be made unless the Company shall obtain a Rating
Confirmation with respect thereto. See 'Description of Senior
Subordinated Debentures -- Optional Redemption.'
Change of Control...................... Same as Series M Preferred Stock.
Subordination.......................... The Senior Subordinated Debentures will be subordinated to all existing
and future Senior Indebtedness (as defined herein) of the Company. The
Senior Subordinated Debentures will rank pari passu with the Company's
senior subordinated indebtedness outstanding from time to time (the
'Senior Subordinated Indebtedness') and will rank senior to all
existing and future subordinated indebtedness of the Company that by
its terms is subordinated to Senior Subordinated Indebtedness (the
'Subordinated Indebtedness'). At March 31, 1996 after adjusting to
give pro forma effect to the Series K Refinancing (as defined herein),
(i) the Company (excluding its subsidiaries) had outstanding
approximately $8.3 billion of Senior Indebtedness and $977 million of
Subordinated Indebtedness and (ii) the consolidated and unconsolidated
subsidiaries of the Company had outstanding approximately $16.1
billion of liabilities (including indebtedness) which, insofar as the
assets of those subsidiaries are concerned, would have been
effectively senior to the Senior Subordinated Debentures. As of the
date of this Prospectus, the Company has no Senior Subordinated
Indebtedness. See 'Description of Senior Subordinated Debentures --
Subordination.'
Certain Restrictions................... In the event of a default under the Senior Subordinated Debentures or
any other Senior Subordinated Indebtedness (i) 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 (ii) the Company shall not
make any payment of interest, principal or premium, if any, on, or
repay, repurchase or redeem, any debt securities issued by the Company
which rank pari passu with or junior to the Senior Subordinated
Debentures; provided, however, that the foregoing restrictions shall
not apply to 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 Senior Subordinated Debentures. See
'Description of Senior Subordinated Debentures -- Subordination.'
The Senior Subordinated Indenture (as defined herein) for the Senior
Subordinated Debentures will, among other things, also contain
restrictions (with certain exceptions) on the ability of the Company
and certain of its subsidiaries to merge or consolidate with or
transfer all or substantially all of their assets to another entity.
The TBS Transaction is not subject to approval by the holders of the
Senior Subordinated
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Debentures. See 'Description of Senior Subordinated
Debentures -- Consolidation, Merger and Sale.' The Senior Subordinated
Indenture also will prohibit the Company from issuing any indebtedness
that is senior in right of payment to the Senior Subordinated
Debentures and expressly subordinate in right of payment to any other
indebtedness of the Company.
See 'Description of Senior Subordinated Debentures -- Covenants.'
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RISK FACTORS
LIMITATIONS ON DIVIDENDS AND OTHER PAYMENTS
As a general matter, dividends declared by the Board of Directors on the
Series M Preferred Stock need only be paid in cash to the extent of the Pro Rata
Percentage of cash distributions, excluding certain Tax Distributions, to the
Company (and its subsidiaries) with respect to the TWE Series B Capital and TWE
Junior Capital. Under the TWE Partnership Agreement, distributions (other than
Tax Distributions) with respect to the TWE Series B Capital may not be made
prior to June 30, 1998. After June 30, 1998 such distributions are limited to an
amount up to the priority return on the TWE Series B Capital accruing from June
30, 1998. There can be no assurance that sufficient partnership income will be
allocated to the TWE Series B Capital to satisfy the entire priority return to
which it is entitled (11.25% to the extent paid concurrently, and 13.25%
otherwise). Further, the TWE Partnership Agreement provides for quarterly cash
distributions on the TWE Series B Capital and TWE Junior Capital only out of
Excess Cash (as defined herein), and subject to prior payments with respect to
partnership interests that are senior thereto. See 'TWE Partnership Interests.'
TWE is not currently generating Excess Cash and there can be no assurance that
sufficient Excess Cash will be generated by TWE in the future to enable TWE to
make distributions with respect to the TWE Series B Capital and/or the TWE
Junior Capital such that cash dividends would be payable on the Series M
Preferred Stock. In addition, under Delaware law, dividends on capital stock may
only be paid out of funds legally available therefor.
Payments in respect of mandatory redemption obligations with respect to the
Series M Preferred Stock in 2012, 2013, 2014 and 2015 will be limited to an
amount equal to the Pro Rata Percentage of any cash received by the Company (and
its subsidiaries) in connection with the Series B Redemption occurring on June
30 of the calendar year immediately preceding the year in which such mandatory
redemption is to be made and any cash received by the Company (and its
subsidiaries) in respect of its TWE Junior Capital from such June 30 to the
record date for such mandatory redemption of the Series M Preferred Stock. In
the event that TWE has not redeemed the TWE Series B Capital in full, payments
in respect of the final mandatory redemption obligation in 2016 with respect to
the Series M Preferred Stock will only be made to the extent of an amount equal
to the Pro Rata Percentage of the fair market value of TWE (net of taxes)
attributable to the TWE Series B Capital and the TWE Junior Capital. There can
be no assurance that such value will be sufficient to permit the Company to
redeem the Series M Preferred Stock at the liquidation preference plus
accumulated and accrued and unpaid dividends. In addition, payments in respect
of all mandatory redemptions with respect to the Series M Preferred Stock are
subject to the Company having funds legally available therefor. See 'Description
of Series M Preferred Stock -- Mandatory Redemption.'
Upon an insolvency of the Company, the rights of the holders of the Series
M Preferred Stock will be subordinated to claims of creditors of the Company and
its subsidiaries, including TWE, and the holders will no longer have the right
to be paid to the extent of an amount equal to the Pro Rata Percentage of
distributions on, or value attributable to, the TWE Series B Capital and TWE
Junior Capital.
Under the Credit Agreement, dated as of June 30, 1995, as amended (the 'TWE
Credit Agreement'), TWE is not permitted to make distributions (other than Tax
Distributions) unless, after giving effect to such distributions, TWE would be
in compliance with specified leverage ratios and would otherwise not be in
default under the TWE Credit Agreement. In addition, the Indenture, dated as of
April 30, 1992, as amended (the 'TWE Indenture'), which governs TWE's $3.8
billion of outstanding public debt securities, prohibits TWE from making
distributions if (i) TWE shall have failed to pay any interest on such debt
securities and such failure shall be continuing or (ii) an 'event of default'
shall have occurred and be continuing. Any payments by TWE in respect of its
partnership interests may also be subject to restrictions imposed under credit
agreements, indentures and other agreements entered into after the date hereof.
HOLDING COMPANY STRUCTURE
The Company is a holding company and its assets consist primarily of
investments in its consolidated and unconsolidated subsidiaries, including TWE.
The Company's ability to pay dividends on and redeem the Series M Preferred
Stock and the Series L Preferred Stock, as well as its ability to
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make interest and principal payments on the Senior Subordinated Debentures
(which together with the Series M Preferred Stock and the Series L Preferred
Stock, are collectively referred to as the 'Securities'), is dependent primarily
upon the earnings of its consolidated and unconsolidated subsidiaries, including
TWE, and the distribution or other payment of such earnings to the Company. The
Company's rights and the rights of its stockholders and creditors, including
holders of the Series M Preferred Stock, and if issued, the Series L Preferred
Stock and the Senior Subordinated Debentures, to participate in the distribution
of assets of any person in which the Company owns an equity interest (including
TWE) upon such person's liquidation or reorganization will be subject to prior
claims of such person's creditors, including trade creditors, except to the
extent that the Company may itself be a creditor with recognized claims against
such person (in which case the claims of the Company 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 the Company).
Accordingly, the rights of holders of the Series M Preferred Stock, and if
issued, the Series L Preferred Stock and the Senior Subordinated Debentures,
will be effectively subordinated to such claims.
EXCHANGE OFFER PROCEDURES
Issuance of shares of Series M Preferred Stock in exchange for shares of
Series K Preferred Stock pursuant to the Exchange Offer will be made only after
a timely receipt by the Company of such shares of Series K Preferred Stock, a
properly completed and duly executed Letter of Transmittal and all other
required documents. All questions as to the validity, form, eligibility
(including time of receipt) and acceptance of shares of Series K Preferred Stock
tendered for exchange will be determined by the Company in its sole discretion,
which determination will be final and binding on all parties. Holders of shares
of Series K Preferred Stock desiring to tender such shares of Series K Preferred
Stock in exchange for shares of Series M Preferred Stock should allow sufficient
time to ensure timely delivery. The Company is under no duty to give
notification of defects or irregularities with respect to the tenders of shares
of Series K Preferred Stock for exchange. Shares of Series K Preferred Stock
that are not tendered or are tendered but not accepted will, following the
consummation of the Exchange Offer, continue to be subject to the existing
restrictions upon transfer thereof and, except as provided herein, the Company
will have no further obligations to provide for the registration under the
Securities Act of such shares of Series K Preferred Stock. In addition, any
holder of Series K Preferred Stock who tenders in the Exchange Offer for the
purpose of participating in a distribution of the Series M Preferred Stock may
be deemed to have received restricted securities, and, if so, will be required
to comply with the registration and prospectus delivery requirements of the
Securities Act in connection with any resale transaction. To the extent that
shares of Series K Preferred Stock are tendered and accepted in the Exchange
Offer, the trading market for untendered and tendered but unaccepted shares of
Series K Preferred Stock could be adversely affected. See 'Exchange Offer.'
ABSENCE OF PUBLIC MARKET
The Series M Preferred Stock is a new security for which there currently is
no market. Although the Initial Purchasers have informed the Company that they
currently intend to make a market in the Series M Preferred Stock, and if
issued, the Series L Preferred Stock and the Senior Subordinated Debentures,
they are not obligated to do so and any such market making may be discontinued
at any time without notice. Accordingly, there can be no assurance as to the
development or liquidity of any market for the Securities. The Company does not
intend to apply for listing of the Securities on any securities exchange or for
quotation through the National Association of Securities Dealers Automated
Quotation System.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
See 'Certain Federal Income Tax Consequences.'
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THE COMPANY
GENERAL
The Company is the world's leading media company, and has interests in
three fundamental areas of business: Entertainment, consisting principally of
interests in recorded music and music publishing, filmed entertainment,
broadcasting, theme parks and cable television programming; News and
Information, consisting principally of interests in magazine publishing, book
publishing and direct marketing; and Telecommunications, consisting principally
of interests in cable television systems.
The Company was incorporated in the State of Delaware in August 1983 and is
the successor to a New York corporation originally organized in 1922. The
Company changed its name from Time Incorporated 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 the Company in January 1990 upon the
completion of the merger of WCI and a subsidiary of the Company.
PUBLISHING
The Company's publishing operations are conducted through wholly owned
subsidiaries and include the publication of magazines such as TIME, PEOPLE,
SPORTS ILLUSTRATED, FORTUNE, MONEY, ENTERTAINMENT WEEKLY, PARENTING and MARTHA
STEWART LIVING and regional magazines such as SOUTHERN LIVING and SUNSET. The
publication and distribution of books is conducted by Time Life Inc.,
Book-of-the-Month Club, Inc., Warner Books, Inc., Little, Brown and Company,
Oxmoor House and Sunset Books.
MUSIC
The Company's worldwide music business is conducted through wholly owned
subsidiaries and includes the production and sale of compact discs and cassette
tapes marketed throughout the world under various labels, including the
proprietary labels 'Warner Bros.,' 'Elektra,' 'Atlantic,' 'Reprise,' 'Sire,'
'EastWest,' 'WEA,' 'Teldec,' 'Erato' and 'Carrere.' The Company also owns 50% of
the Columbia House Company, a direct marketer of compact discs, cassette tapes
and videocassettes in the U.S. and Canada. The Company's music publishing
subsidiaries, headed by Warner/Chappell, Inc., own or control the rights to many
standard and contemporary compositions, and CPP/Belwin, Inc. and other
subsidiaries market sheet music and song books throughout the world.
FILMED ENTERTAINMENT
The Company's filmed entertainment operations are conducted primarily as a
division of TWE. These operations include Warner Bros. which produces and
distributes feature motion pictures, television programming and animated
programming for theatrical and television exhibition. Warner Home Video
distributes home videocassettes and laser discs throughout the world. In
addition, TWE is engaged in product licensing and the ownership and operation of
retail stores, movie theaters and theme parks, including the management of TWE's
interest in Six Flags Theme Parks.
PROGRAMMING-HBO
Programming-HBO, a division of TWE, consists principally of Home Box
Office, which operates two pay television programming services, HBO and Cinemax.
Home Box Office also has a number of international joint ventures, including HBO
Ole in Latin America and a movie-based HBO service in Asia. The Home Box Office
division also produces television programming and operates TVKO, an entity that
produces boxing matches and other programming for pay-per-view.
CABLE
Time Warner Cable, a division of TWE, is the second largest multiple system
cable operator in the United States. In addition, as a result of the recent
acquisitions of Summit, KBLCOM and CVI, wholly owned subsidiaries of the Company
own cable television systems that are managed by Time Warner
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Cable. See 'Recent Developments.' As of December 31, 1995, the Company's wholly
and partially owned cable systems served approximately 11.7 million subscribers.
THE WB TELEVISION NETWORK
Warner Bros., a division of TWE, launched The WB, a new national television
network, which completed its first full year of broadcast operations in January
1996. Combining The WB's current broadcast affiliate line-up of 95 stations with
the reach of Tribune Broadcasting Company's WGN Superstation, The WB's national
coverage is more than 80% of all United States television households.
SIX FLAGS THEME PARKS
Six Flags Entertainment Corporation ('Six Flags'), in which TWE currently
owns a 49% interest, operates 11 theme parks in seven locations, making it the
second largest operator of theme parks in the United States and the leading
operator of national system regional theme parks. Six Flags' theme parks include
seven major ride-based theme parks, as well as three separately-gated water
parks and one wild-life safari park.
TWE
TWE owns and operates substantially all of the Company's interests in
filmed entertainment, broadcasting, theme parks and cable television programming
and a majority of the Company's interests in cable television systems.
As of the date of this Prospectus, the Company and certain wholly owned
subsidiaries of the Company collectively own 74.49% of the TWE Series A Capital
and the TWE Residual Capital and 100% of the TWE Senior Capital (which is senior
to the TWE Series A Capital) and the TWE Series B Capital (which is junior to
the TWE Series A Capital). A wholly owned subsidiary of U S WEST owns the 25.51%
of the TWE Series A Capital and the TWE Residual Capital not owned by the
Company and its wholly owned subsidiaries. See 'TWE Partnership Interests.'
TWE is not consolidated with the Company for financial reporting purposes
because of certain limited partnership approval rights related to TWE's interest
in certain cable television systems. Although TWE manages substantially all the
cable systems owned by the Company, TWE and the TWE-Advance/Newhouse
Partnership, in which TWE owns a two-thirds interest, the results of operations
of the cable systems owned by the Company's consolidated subsidiaries are
included in the Company's consolidated results, while the results of operations
of the cable systems owned by TWE and the TWE-Advance/Newhouse Partnership are
included in TWE's consolidated results.
TBS TRANSACTION
In September 1995, the Company announced that it had agreed to merge with
TBS by acquiring the approximately 80% interest in TBS not already owned by the
Company. At March 31, 1996, the Company had economic and voting interests in TBS
of approximately 19.4% and 6.4%, respectively. Pursuant to the Merger Agreement
each of the Company and TBS would merge with separate subsidiaries of New Time
Warner, a holding company. In connection with the TBS Transaction, the issued
and outstanding shares of each class of the capital stock of the Company,
including the Series K Preferred Stock and the Series M Preferred Stock, are to
be converted into shares of a substantially identical class of capital stock of
New Time Warner. TBS's business includes the ownership and operation of domestic
and international entertainment networks (including TBS SuperStation, Turner
Network Television, the Cartoon Network and TNT Latin America); the production
and distribution of entertainment and news programming worldwide (including
Turner Pictures, TBS Productions, Hanna-Barbera Cartoons, Castle Rock
Entertainment, New Line Cinema, Cable News Network, Headline News and CNN
International); and the ownership of two professional sports teams (the Atlanta
Braves and the Atlanta Hawks). The TBS Transaction and the related transactions
are subject to customary closing conditions, including approval of the
shareholders of TBS and the Company, all necessary approvals of the FCC and
appropriate antitrust approvals. There can be no assurance that all these
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approvals can be obtained, or in the case of governmental approvals, if
obtained, will not be conditioned upon changes to the terms of the Merger
Agreement. For a further discussion of the TBS Transaction and related
transactions, and certain litigation relating thereto (including the U S WEST
Litigation), reference is made to the 10-K and the First Quarter 10-Q, which are
incorporated herein by reference.
TWE PARTNERSHIP INTERESTS
The summary of the TWE Partnership Agreement provisions described below
does not purport to be complete and is qualified in its entirety by the TWE
Partnership Agreement which is incorporated by reference herein.
PARTNERSHIP INTERESTS
Each partner's interest in TWE consists of the initial priority capital and
residual equity amounts that were assigned to that partner or its predecessor
based on the estimated fair value of the net assets each contributed to TWE, as
adjusted for the fair value of certain assets distributed by TWE to the Time
Warner General Partners in 1993 which were not subsequently reacquired by TWE in
1995 ('Contributed Capital'), plus, with respect to the priority capital
interests only, any undistributed priority capital return. The priority capital
return consists of net partnership income allocated to date in accordance with
the provisions of the TWE Partnership Agreement and the right to be allocated
additional partnership income which, together with any previously allocated net
partnership income, provides for the various priority capital rates of return
specified in the table below. The sum of Contributed Capital and the
undistributed priority capital return is referred to as 'Cumulative Priority
Capital.' The ultimate realization of Cumulative Priority Capital could be
affected by the fair value of TWE, which is subject to fluctuation.
A summary of the priority of Contributed Capital, the Company's ownership
of Contributed Capital and Cumulative Priority Capital at March 31, 1996 and
priority capital rates of return thereon is as set forth below.
<TABLE>
<CAPTION>
CUMULATIVE
PRIORITY PRIORITY
CAPITAL AT CAPITAL % OWNED
PRIORITY OF CONTRIBUTED MARCH 31, RATES OF BY THE
CONTRIBUTED CAPITAL CAPITAL(a) 1996 RETURN(b) COMPANY
- ---------------------------------------------- ----------- ---------- ------------ --------
(% PER ANNUM
COMPOUNDED
(BILLIONS) QUARTERLY)
<S> <C> <C> <C> <C>
TWE Senior Capital............................ $1.4 $1.5(c) 8.00% 100.00%
TWE Series A Capital.......................... 5.6 9.0 13.00%(d) 74.49%
TWE Series B Capital.......................... 2.9(g) 4.7 13.25%(e) 100.00%
TWE Residual Capital.......................... 3.3(g) 3.3(f) -- (f) 74.49%
</TABLE>
- ------------
(a) Excludes partnership income or loss allocated thereto and is subject to any
special income allocations for tax purposes.
(b) Income allocations related to priority capital rates of return are based on
partnership income after any special income allocations for tax purposes.
(c) Net of $366 million of partnership income distributed in 1995 representing
the priority capital return thereon through June 30, 1995.
(d) 11.00% to the extent concurrently distributed.
(e) 11.25% to the extent concurrently distributed.
(f) TWE Residual Capital is not entitled to stated priority rates of return
and, as such, the Cumulative Priority Capital relating thereto is equal to
the Contributed Capital. However, in the case of certain events such as the
liquidation or dissolution of TWE, the TWE Residual Capital is entitled to
any
(footnotes continued on next page)
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(footnotes continued from previous page)
excess of the then fair value of the net assets of TWE over the aggregate
amount of Cumulative Priority Capital and special tax allocations.
(g) The Contributed Capital relating to the TWE Series B Capital has priority
over the priority returns on the TWE Series A Capital. The Contributed
Capital relating to the TWE Residual Capital has priority over the priority
returns on the TWE Series B Capital and the TWE Series A Capital.
------------------------
Because Contributed Capital is based on the fair value of the net assets
that each partner contributed to TWE, the aggregate of such amounts is
significantly higher than TWE's partners' capital as reflected in the
consolidated financial statements, which is based on the historical cost of the
contributed net assets. For purposes of allocating partnership income or loss to
the partners, partnership income or loss is based on the fair value of the net
assets contributed to TWE and results in significantly less partnership income,
or results in partnership losses, in contrast to the net income reported by TWE
for financial statement purposes, which is also based on the historical cost of
contributed net assets.
If certain operating performance targets are achieved by TWE with respect
to the five-year period ending December 31, 1996 and the ten-year period ending
December 31, 2001, the Time Warner General Partners would be entitled to
increased partnership interests (the 'TWE Contingent Capital'), which generally
would be junior to the TWE Series B Capital but senior to the TWE Residual
Capital. Although TWE is unable to determine whether it will satisfy the
ten-year operating performance target at this time, it is not expected that the
five-year target will be attained.
U S WEST has an option (the 'U S WEST Option') to increase its share of the
TWE Series A Capital and the TWE Residual Capital by up to 6.33%, depending on
the operating performance of TWE's cable business. The option is exercisable
between January 1, 1999 and on or about May 1, 2005 at a maximum exercise price
of $1.25 billion to $1.8 billion, depending on the year of exercise. Either U S
WEST or TWE may elect that the exercise price be paid with partnership interests
rather than cash. The issuance of partnership interests upon exercise of the U S
WEST Option may result in a dilution of the TWE Junior Capital owned by the
Company, and accordingly, the rights of the holders of Series M Preferred Stock
with respect to cash distributed thereon or value attributable thereto.
ALLOCATIONS OF PARTNERSHIP INCOME AND LOSS
Under the TWE Partnership Agreement, partnership income, to the extent
earned, is first allocated to the partners' capital accounts so that the
economic burden of income taxes is borne as though TWE were taxed as a
corporation ('special income allocation for tax purposes'), then to the TWE
Senior Capital, the TWE Series A Capital and the TWE Series B Capital, in order
of priority, at rates of return ranging from 8% to 13.25% per annum, and finally
to the TWE Residual Capital. Partnership losses generally are allocated first to
eliminate prior allocations of partnership income to, and then to reduce the
Contributed Capital relating to the TWE Residual Capital, the TWE Series B
Capital and the TWE Series A Capital, in that order, then to reduce the Time
Warner General Partners' TWE Senior Capital, including partnership income
allocated thereto, and finally to reduce any special income allocation for tax
purposes. To the extent partnership income is insufficient to satisfy all
special allocations in a particular accounting period, the right to receive
additional partnership income necessary to provide for the various priority
capital rates of return is carried forward until satisfied out of future
partnership income, including any partnership income that may result from any
liquidation or dissolution of TWE. A liquidation, sale or dissolution of TWE,
other than as a result of the Insolvency of TWE, will result in a Reorganization
of TWE. See 'Description of Series M Preferred Stock -- Reorganization of TWE.'
Under certain circumstances, there may be adjustments to the partners' capital
accounts to reflect changes in the fair value of the assets of TWE.
DISTRIBUTIONS
Allocations of income to the partners' capital accounts do not result in
the distribution of cash to the partners. Under the TWE Partnership Agreement,
distributions of cash, including upon liquidation,
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are required to be made first to the partners of TWE to permit them to pay taxes
at statutory rates on their taxable income from TWE, including any special
income allocation for tax purposes. Subject to any applicable contractual
restrictions contained in the agreements governing the indebtedness of TWE, cash
distributions (after Tax Distributions) will generally be made on a quarterly
basis to the extent of Excess Cash as follows and in the following order of
priority: (i) first, with respect to the TWE Senior Capital up to an amount
equal to its priority return; (ii) second, with respect to the TWE Series A
Capital, up to an amount (including any Tax Distributions thereon) equal to its
priority return accruing from June 30, 1995; (iii) third, beginning June 30,
1998, with respect to the TWE Series B Capital up to an amount (including any
Tax Distributions thereon) equal to its priority return accruing from June 30,
1998; (iv) fourth, with respect to TWE Contingent Capital, if any, up to an
amount (including any Tax Distributions thereon) equal to its priority return
and (v) thereafter, with respect to (and in proportion to) the TWE Residual
Capital. 'Excess Cash' generally means the net income of TWE, as determined in
accordance with generally accepted accounting principles, after adjusting for
non-cash items, capital expenditures, investments, acquisitions, debt service
requirements, changes in working capital and reserves for future operations, as
determined by TWE's Board of Representatives. There can be no assurance that
Excess Cash in any period will be sufficient to make cash distributions,
including with respect to the TWE Series B Capital. See 'Risk Factors.'
If the Class A Partners have not received aggregate distributions
(generally from all sources) at least equal to $800 million by June 30, 1997,
distributions (other than Tax Distributions) to the Time Warner General Partners
with respect to their TWE Series A Capital and TWE Residual Capital will be
deferred until such threshold is met. 'Class A Partners' include U S WEST, the
Company and a wholly-owned subsidiary of the Company and exclude the Time Warner
General Partners. Similarly, if the Class A Partners have not received aggregate
distributions (generally from all sources) at least equal to $1.6 billion by
June 30, 1998, distributions (other than Tax Distributions) to the Time Warner
General Partners with respect to their TWE Series B Capital and TWE Contingent
Capital will be deferred until such threshold is met.
The TWE Senior Capital and, to the extent not previously distributed,
partnership income allocated thereto, is required to be redeemed in three annual
installments: 33 1/3% of the amount outstanding, on July 1, 1997; 50% of the
amount outstanding, on July 1, 1998; and 100% of the amount outstanding, on July
1, 1999. In addition, the TWE Series A Capital and the TWE Series B Capital and,
to the extent not previously distributed, partnership income allocated thereto,
are to be redeemed out of available cash, on a pro rata basis, in five annual
installments: 20% of the amounts outstanding, on June 30, 2011; 25% of the
amounts outstanding, on June 30, 2012; 33 1/3% of the amounts outstanding, on
June 30, 2013; 50% of the amounts outstanding, on June 30, 2014; and 100% of the
amounts outstanding, on June 30, 2015. Such distributions with respect to the
TWE Series B Capital are referred to as the 'Series B Redemptions' and the date
of each Series B Redemption is referred to as the 'Series B Redemption Date.'
There can be no assurance that TWE will have sufficient available cash to make
any such distribution. To the extent any such distributions are not made in full
on the scheduled distribution date, TWE will make up such shortfall prior to
making any subsequently scheduled distributions.
In addition, the TWE Partnership Agreement provides that the net proceeds
of any sale of a division of TWE or a substantial portion thereof, or the cash
available from any financing or refinancing of TWE's debt (in each case, less
expenses and proceeds used to repay outstanding debt) will be required to be
distributed with respect to the partners' partnership interests. Such a sale
would constitute a Reorganization of TWE. See 'Description of Series M Preferred
Stock -- Reorganization of TWE.'
Under the TWE Credit Agreement, TWE is not permitted to make distributions
(other than Tax Distributions) unless, after giving effect to such
distributions, TWE would be in compliance with specified leverage ratios and
would otherwise not be in default under the TWE Credit Agreement. In addition,
the TWE Indenture prohibits TWE from making distributions if (i) TWE shall have
failed to pay any interest on any debt securities issued under the TWE Indenture
and such failure shall be continuing or (ii) an 'event of default' shall have
occurred and be continuing. There can be no assurance that TWE will be permitted
to make distributions with respect to the partnership interests
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therein, including the TWE Series B Capital and the TWE Junior Capital, under
the TWE Credit Agreement or the Indenture.
RECENT DEVELOPMENTS
The Company and TWE have recently completed, or have entered into, the
transactions described below.
On April 11, 1996, the Company issued the Series K Preferred Stock for
approximately $1.552 billion of net proceeds. In April and May of 1996, the
Company used approximately $1.265 billion of such proceeds to redeem all $250
million principal amount of its outstanding 8.75% Debentures due 2017 (plus
redemption premiums and accrued interest thereon of $15 million) and to reduce
bank debt of TWI Cable Inc. ('TWI Cable'), a wholly-owned subsidiary of the
Company, by $1 billion. The remaining proceeds will be used by the Company to
reduce approximately $287 million of other outstanding indebtedness. However,
the Company has not yet determined which indebtedness it will repurchase, redeem
or otherwise repay. The issuance of the Series K Preferred Stock and the use of
the proceeds therefrom to reduce outstanding indebtedness of the Company are
referred to herein as the 'Series K Refinancing.'
On February 1, 1996, the Company redeemed the remaining $1.2 billion
principal amount of 8.75% Convertible Subordinated Debentures due 2015 (the
'8.75% Convertible Debentures') for $1.28 billion, including redemption premiums
and accrued interest thereon (the 'February 1996 Redemption'). In addition, in
September 1995, the Company redeemed approximately $1 billion principal amount
of 8.75% Convertible Debentures for $1.06 billion, including redemption premiums
and accrued interest thereon (the 'September 1995 Redemption'). The September
1995 Redemption was financed with (i) approximately $500 million of proceeds
raised from the issuance in June 1995 of 7.75% notes due 2005, (ii) $363 million
of net proceeds raised in August 1995 from the issuance of approximately 12.1
million Company-obligated mandatorily redeemable preferred securities of a
subsidiary ('PERCS') that are redeemable for cash or, at the Company's option,
approximately 12.1 million shares of Hasbro, Inc. common stock owned by the
Company and that pay cash distributions at a rate of 4% per annum and (iii)
available cash and equivalents (the '1995 Convertible Debt Refinancing'). The
February 1996 Redemption was financed with (i) $557 million of net proceeds
raised in December 1995 from the issuance of Company-obligated mandatorily
redeemable preferred securities of a subsidiary (the 'Preferred Trust
Securities') that pay cash distributions at a rate of 8 7/8% per annum and (ii)
proceeds raised from the $750 million issuance of debentures in January 1996,
consisting of (w) $400 million principal amount of 6.85% debentures due 2026,
which are redeemable at the option of the holders thereof in 2003, (x) $200
million principal amount of 8.3% discount debentures due 2036, which do not pay
cash interest until 2016, (y) $166 million principal amount of 7.48% debentures
due 2008 and (z) $150 million principal amount of 8.05% debentures due 2016
(collectively referred to herein as the 'January 1996 Debentures'). The issuance
of the Preferred Trust Securities and the January 1996 Debentures, together with
the February 1996 Redemption are collectively referred to as the '1996
Convertible Debt Refinancing.' The 1995 Convertible Debt Refinancing and the
1996 Convertible Debt Refinancing are collectively referred to herein as the
'Convertible Debt Refinancings.'
On January 4, 1996 (as previously reported on the Current Report on Form
8-K of the Company dated January 4, 1996), the Company completed its acquisition
of Cablevision Industries Corporation ('CVI') and certain affiliated entities of
CVI (the 'Gerry Companies'). CVI and the Gerry Companies owned cable television
systems serving approximately 1.3 million subscribers (the 'CVI Acquisition').
On October 2, 1995 and September 5, 1995 (as previously reported on the
Current Report on Form 8-K of the Company dated August 31, 1995), Toshiba
Corporation ('Toshiba') and ITOCHU Corporation ('ITOCHU'), respectively, each
exchanged (i) their 5.61% TWE Series A Capital and TWE Residual Capital
interests, (ii) their 6.25% residual equity interests in TW Service Holding I,
L.P. and TW Service Holding II, L.P., each of which owned certain assets related
to the TWE businesses (the 'Time Warner Service Partnerships') and (iii) their
options to increase their interests in TWE under certain circumstances 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 the Company
and, in the case of Toshiba, 7 million shares of new convertible preferred stock
of Time Warner ('Series I
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Preferred Stock') and $10 million in cash (the 'ITOCHU/Toshiba Transaction'). As
a result of the ITOCHU/Toshiba Transaction, the Company and certain of its
wholly-owned subsidiaries collectively now own 74.49% of the TWE Series A
Capital and TWE Residual Capital and 100% of the TWE Senior Capital and TWE
Series B Capital in TWE. A subsidiary of U S WEST owns the remaining 25.51% of
the TWE Series A Capital and TWE Residual Capital.
On September 22, 1995 (as previously reported on the Current Report on Form
8-K of the Company dated September 22, 1995), the Company announced that it had
entered into the Merger Agreement which, as amended, provides for the merger of
each of the Company and TBS with separate subsidiaries of New Time Warner, which
will combine, for financial reporting purposes, the consolidated net assets and
operating results of the Company and TBS. In connection therewith, the issued
and outstanding shares of each class of the capital stock of the Company,
including the Series K Preferred Stock and the Series M Preferred Stock, will be
converted into shares of a substantially identical class of capital stock of New
Time Warner. In addition, the Company has agreed to enter into certain
agreements and related transactions with certain shareholders of TBS, including
R. E. Turner and Liberty Media Corporation ('LMC'), an affiliate of
Tele-Communications, Inc. The Merger Agreement and certain related agreements
provide for the issuance by New Time Warner of approximately 172.8 million
shares of common stock, par value $.01 per share (such holding company stock,
or, prior to the formation of such holding company, the existing Company common
stock, being referred to herein as the 'Common Stock') (including 50.6 million
shares of a special class of non-redeemable Common Stock to be issued to LMC,
the 'LMC Class Common Stock'), in exchange for the outstanding TBS capital
stock, the issuance of approximately 13 million stock options to replace all
outstanding TBS options and the assumption of TBS's indebtedness (which
approximated $2.5 billion at March 31, 1996). As part of the TBS Transaction,
LMC will receive an additional five million shares of LMC Class Common Stock
pursuant to a separate option agreement (the 'Option Agreement'), which,
together with the 50.6 million shares received pursuant to the TBS Transaction,
will be placed in a voting trust or, in certain circumstances, exchanged for
shares of another special class of non-voting, non-redeemable common stock of
New Time Warner.
On August 15, 1995, the Company redeemed all of its $1.8 billion principal
amount of outstanding Redeemable Reset Notes due 2002 (the 'Reset Notes') in
exchange for new securities (the 'Reset Notes Refinancing'), consisting of
approximately $454 million aggregate principal amount of Floating Rate Notes due
2000, approximately $272 million aggregate principal amount of 7.975% Notes due
2004, approximately $545 million aggregate principal amount of 8.11% Debentures
due 2006, and approximately $545 million aggregate principal amount of 8.18%
Debentures due 2007.
On July 6, 1995 (as previously reported on the Current Report on Form 8-K
of the Company dated July 6, 1995), the Company acquired KBLCOM Incorporated
('KBLCOM') which owned cable television systems serving approximately 700,000
subscribers and a 50% interest in Paragon Communications ('Paragon'), which
owned cable television systems serving an additional 972,000 subscribers (the
'KBLCOM Acquisition'). The other 50% interest in Paragon was already owned by
TWE.
On June 30, 1995, TWI Cable, TWE and the TWE-Advance/Newhouse Partnership
executed a five-year revolving credit facility. Such credit facility enabled
such entities to refinance certain indebtedness assumed in the Acquisitions (as
defined herein), to refinance TWE's indebtedness under a pre-existing bank
credit agreement and to finance the ongoing working capital, capital expenditure
and other corporate needs of each borrower (the 'Bank Refinancing'). The
Convertible Debt Refinancings, the Reset Notes Refinancing and the Bank
Refinancing are referred to herein as the 'Debt Refinancings.'
On June 23, 1995, (i) Six Flags was recapitalized, (ii) TWE sold 51% of its
interest in Six Flags to an investment group led by Boston Ventures Management,
Inc. and (iii) TWE granted certain licenses to Six Flags (collectively, the 'Six
Flags Transaction').
On May 2, 1995, the Company acquired Summit Communications Group, Inc.
('Summit'), which owned cable television systems serving approximately 162,000
subscribers (the 'Summit Acquisition').
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On April 1, 1995 (as previously reported on the Current Report on Form 8-K
of the Company dated April 1, 1995), TWE closed its transaction (the 'TWE-A/N
Transaction') with Advance/Newhouse, pursuant to which TWE and Advance/Newhouse
formed the TWE-Advance/ Newhouse Partnership, to which Advance/Newhouse and TWE
contributed cable television systems (or interests therein) serving
approximately 4.5 million subscribers, as well as certain foreign cable
investments and certain programming investments that included Advance/Newhouse's
10% interest in Primestar Partners, L.P. TWE owns a two-thirds equity interest
in the TWE-Advance/Newhouse Partnership and is the managing partner and
Advance/Newhouse owns a one-third equity interest.
During 1995, TWE entered into agreements to sell, or announced its
intention to sell, 17 of its unclustered cable television systems serving
approximately 180,000 subscribers, of which certain of the transactions closed
during 1995 and the remaining transactions, which are not material, have closed
or are expected to close in 1996 (the 'Unclustered Cable Transactions').
The Unclustered Cable Transactions and the Six Flags Transaction are
referred to herein as the 'Asset Sale Transactions'; the Summit Acquisition,
KBLCOM Acquisition and CVI Acquisition are referred to herein as the
'Acquisitions'; and the Acquisitions and the TWE-A/N Transaction are referred to
herein as the 'Cable Transactions.'
CONSOLIDATED CAPITALIZATION
The consolidated historical and pro forma capitalization of the Company and
the Company's Entertainment Group, consisting principally of TWE, at March 31,
1996, is set forth below. The Entertainment Group is not consolidated with the
Company for financial reporting purposes. The consolidated as adjusted
capitalization of the Company set forth in column (1) gives effect to the Series
K Refinancing, as if such transaction occurred at such date; the consolidated
pro forma capitalization of the Company set forth in column (2) gives effect to
the TBS Transaction, as if such transaction occurred at such date; and the
consolidated pro forma as adjusted capitalization of the Company set forth in
column (3) gives effect to the transactions reflected in columns (1) and (2), as
if such transactions occurred at such date. The pro forma capitalization is
presented for informational purposes only and is not necessarily indicative of
the future capitalization of the Company, any new holding company and the
Entertainment Group. Capitalized terms are as defined and described in the 'Time
Warner Inc. and Entertainment Group Pro Forma Consolidated Condensed Financial
Statements' included in the May 15, 1996 8-K and incorporated herein by
reference, or elsewhere herein.
24
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
TIME WARNER INC. ENTERTAINMENT GROUP
-------------------------------------------------------- -------------------
(3)
POST-TBS
(2) PRO FORMA
(1) POST-TBS AS
HISTORICAL AS ADJUSTED(a) PRO FORMA(b) ADJUSTED(b) HISTORICAL
---------- -------------- ------------ ----------- -------------------
(MILLIONS)
<S> <C> <C> <C> <C> <C>
Long-term debt:
Time Warner Debt:
7.45%, 7.75%, 7.95% and
7.975% notes....................... $ 1,769 $ 1,769 $ 1,769 $ 1,769 --
Floating rate notes due 2000 (6.2%
interest rate)................... 454 454 454 454 --
8.11% and 8.18% Debentures......... 1,090 1,090 1,090 1,090 --
Zero coupon convertible notes due
2012 (6.25% yield)(c)............ 590 590 590 590 --
Zero coupon convertible notes due
2013 (5% yield)(c)............... 1,032 1,032 1,032 1,032 --
8.75%, 9.125% and 9.15%
Debentures(d).................... 2,248 2,000 2,248 2,000 --
Debt due to TWE (6.4% interest
rate)(e)......................... 400 400 400 400 --
6.85%, 7.48% and 8.05%
Debentures....................... 716 716 716 716 --
8.30% Discount Debentures due
2036(c).......................... 35 35 35 35 --
Time Warner Cable Subsidiaries Debt:
CVI 10 3/4% senior notes........... 300 300 300 300 --
CVI 9 1/4% senior
debentures....................... 200 200 200 200 --
Summit 10 1/2% senior subordinated
debentures....................... 140 140 140 140 --
New Credit Agreement (weighted
average interest rate of 6.2%
with respect to TWI Cable and
5.9% with respect to TWE and the
TWE-A/N Partnership)(f)(g)....... 2,800 1,800 2,800 1,800 $ 1,740
TBS Debt:
TBS credit agreement (weighted
average interest rate of 6.4%)... -- -- 1,475 1,475 --
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)(c)........ -- -- 268 268 --
TBS other indebtedness............. -- -- 5 5 --
</TABLE>
(table continued on next page)
25
<PAGE>
<PAGE>
(table continued from previous page)
<TABLE>
<CAPTION>
TIME WARNER INC. ENTERTAINMENT GROUP
-------------------------------------------------------- -------------------
(3)
POST-TBS
(2) PRO FORMA
(1) POST-TBS AS
HISTORICAL AS ADJUSTED(a) PRO FORMA(b) ADJUSTED(b) HISTORICAL
---------- -------------- ------------ ----------- -------------------
(MILLIONS)
<S> <C> <C> <C> <C> <C>
TWE Debt:
TWE commercial paper (weighted
average interest rate of
5.7%)(g)......................... -- -- -- -- 190
TWE 8 7/8%, 9 5/8% and 10.15%
notes(g)......................... -- -- -- -- 1,197
TWE 7 1/4%, 8 3/8% and 8 3/8%
debentures(g).................... -- -- -- -- 2,584
Other................................... 83 83 178 178 13
Reduction of debt with remaining
proceeds from offering of Series K
Preferred Stock(h).................... -- (287) -- (287) --
---------- -------------- ------------ ----------- ----------
Subtotal................................ 11,857 10,322 14,447 12,912 5,724
Reclassification of debt due
to TWE to investments
in and amounts due to
the Entertainment Group(e)............ (400) (400) (400) (400) --
---------- -------------- ------------ ----------- ----------
Total long-term debt.......... 11,457 9,922 14,047 12,512 5,724
Company-obligated mandatorily redeemable
preferred securities of subsidiaries
holding solely subordinated notes and
debentures of the Company............. 949 949 949 949 --
Series K Preferred Stock(i)............. -- 1,552 -- 1,552 --
Shareholders' equity:
Preferred stock liquidation
preference....................... 3,643 3,643 3,643 3,643 --
Equity applicable to common
stock............................ 684 675 7,946 7,937 --
---------- -------------- ------------ ----------- ----------
Total shareholders' equity.... 4,327 4,318 11,589 11,580 --
Time Warner General Partners'
Senior Capital................... -- -- -- -- 1,454
Partners' capital.................. -- -- -- -- 6,604
---------- -------------- ------------ ----------- ----------
Total capitalization.......... $ 16,733 $ 16,741 $ 26,585 $26,593 $13,782
---------- -------------- ------------ ----------- ----------
---------- -------------- ------------ ----------- ----------
</TABLE>
- ------------
(a) Also reflects, on an as adjusted basis, the capitalization of the Company
as a separate subsidiary of the new holding company after consummation of
the TBS Transaction. See 'The Company -- TBS Transaction.'
(b) Reflects, on a pro forma basis, the capitalization of the new holding
company after consummation of the TBS Transaction (in which case the
Company expects that the new holding company would provide guarantees of
the Company's outstanding public debt).
(c) The zero coupon convertible notes due 2012 and 2013 are reflected net of
unamortized original issue discount of $1.061 billion and $1.383 billion,
respectively. The 8.3% Discount Debentures due 2036 are reflected net of
unamortized original issue discount of $165 million. The TBS zero coupon
convertible notes due 2007 are reflected net of unamortized original issue
discount of $314 million.
(footnotes continued on next page)
26
<PAGE>
<PAGE>
(footnotes continued from previous page)
(d) The $250 million principal amount of 8.75% Debentures due 2017 redeemed in
connection with the Series K Refinancing are reflected net of unamortized
original issue discount of $2 million.
(e) The Company and TWE entered into a credit agreement in 1994 that allows the
Company to borrow up to $400 million from TWE through September 15, 2000.
Outstanding borrowings from TWE bear interest at LIBOR plus 1% per annum.
For financial reporting purposes, the $400 million of currently outstanding
loans from TWE to the Company have been reclassified and shown as a
reduction in the Company's investments in and amounts due to the
Entertainment Group.
(f) The TWE Credit Agreement permits borrowings in an aggregate amount of up to
$8.3 billion, with no scheduled reductions in credit availability prior to
maturity. 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 bear interest at different rates for each of
the three borrowers, generally equal to LIBOR plus a margin initially
ranging from 50 to 87.5 basis points, which margin will vary based on the
credit rating or financial leverage of the applicable borrower. Unused
credit is available for general business purposes and to support any
commercial paper borrowings. The TWE 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.
(g) Except for borrowings by TWI Cable and the TWE-Advance/Newhouse Partnership
under the TWE Credit Agreement, such indebtedness is guaranteed by certain
subsidiaries of the Company which are the general partners of TWE.
(h) Although the remaining net proceeds from the issuance of the Series K
Preferred Stock will be used to reduce approximately $287 million of
outstanding indebtedness of the Company, the Company has not yet determined
which indebtedness it will repurchase, redeem or otherwise repay. The
weighted average interest rate on the Company's outstanding indebtedness as
of March 31, 1996 was approximately 7.5%. The weighted average maturity of
the Company's outstanding indebtedness as of March 31, 1996 was
approximately 13 years.
(i) The shares of Series K Preferred Stock are to be exchanged for shares of
Series M Preferred Stock.
27
<PAGE>
<PAGE>
SELECTED HISTORICAL AND PRO FORMA FINANCIAL INFORMATION
COMPANY SELECTED HISTORICAL FINANCIAL INFORMATION
The selected historical financial information of the Company set forth
below has been derived from and should be read in conjunction with the
consolidated financial statements and other financial information of the Company
contained in the 10-K and with the unaudited consolidated financial statements
of the Company for the quarter ended March 31, 1996 contained in the First
Quarter 10-Q, 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. Capitalized terms are as defined and described in such historical
financial statements, or elsewhere herein.
The selected historical financial information for 1996 reflects the
issuance of 6.5 million shares of convertible preferred stock having an
aggregate liquidation preference of $648 million in connection with the CVI
Acquisition. The selected historical financial information for 1995 reflects the
issuance of 29.3 million shares of convertible preferred stock having an
aggregate liquidation preference of $2.926 billion in connection with (i) the
KBLCOM Acquisition and the Summit Acquisition and (ii) the ITOCHU/Toshiba
Transaction. 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 for the exchange or redemption of preferred stock having an
aggregate liquidation preference of $6.4 billion. The selected historical
financial information for 1992 reflects the capitalization of TWE on June 30,
1992 and associated refinancings, and the acquisition of the 18.7% minority
interest in American Television and Communications Corporation ('ATC') as of
June 30, 1992, using the purchase method of accounting for business
combinations. Per common share amounts and average common shares have been
restated to give effect to the four-for-one common stock split that occurred on
September 10, 1992.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31, YEARS ENDED DECEMBER 31,
---------------------------------- ------------------------------------------------
1996 1995 1995 1994 1993 1992 1991
--------------- --------------- ------ ------ ------ ------- -------
(MILLIONS, EXCEPT PER SHARE AMOUNTS AND RATIOS)
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATING STATEMENT INFORMATION
Revenues................................. $ 2,068 $ 1,817 $8,067 $7,396 $6,581 $13,070 $12,021
Depreciation and amortization............ 228 112 559 437 424 1,172 1,109
Business segment operating income(a)..... 110 138 697 713 591 1,343 1,154
Equity in pretax income of Entertainment
Group.................................. 116 22 256 176 281 -- --
Interest and other, net.................. 296 155 877 724 718 882 966
Income (loss) before extraordinary
item................................... (93) (47) (124) (91) (164) 86 (99)
Net income (loss)(b)(c).................. (119) (47) (166) (91) (221) 86 (99)
Net loss applicable to common shares
(after preferred dividends)............ (153) (50) (218) (104) (339) (542) (692)
Per share of common stock:
Loss before extraordinary items..... $ (0.32) $ (0.13) $ (.46) $ (.27) $ (.75) $ (1.46) $ (2.40)
Net loss(b)(c)...................... $ (0.39) $ (0.13) $ (.57) $ (.27) $ (.90) $ (1.46) $ (2.40)
Dividends........................... $ .09 $ .09 $ .36 $ .35 $ .31 $ .265 $ .25
Average common shares(c)................. 391.7 379.5 383.8 378.9 374.7 371.0 288.2
Ratio of earnings to fixed charges
(deficiency in the coverage of fixed
charges by earnings before fixed
charges)(d)............................ $ (76) 1.0x 1.1x 1.1x 1.1x 1.4x 1.1x
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)(d).......................... $ (131) $(3) 1.0x 1.1x $ (91) $ (509) $(1,240)
</TABLE>
28
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
DECEMBER 31,
MARCH 31, --------------------------------------------------
1996 1995 1994 1993 1992 1991
------------------ ------- ------ ------- ------- -------
(MILLIONS)
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET INFORMATION
Investments in and amounts due to and
from Entertainment Group............ $ 5,931 $ 5,734 $5,350 $ 5,627 $ -- $ --
Total assets.......................... 24,832 22,132 16,716 16,892 27,366 24,889
Long-term debt........................ 11,457 9,907 8,839 9,291 10,068 8,716
Company-obligated mandatorily
redeemable preferred securities of
subsidiaries holding solely
subordinated notes and debentures of
the Company(e)...................... 949 949 -- -- -- --
Shareholders equity:
Preferred stock liquidation
preference.......................... 3,643 2,994 140 140 6,532 6,256
Equity applicable to common stock..... 684 673 1,008 1,230 1,635 2,242
Total shareholders equity............. $ 4,327 $ 3,667 $1,148 $ 1,370 $ 8,167 $ 8,498
Total capitalization.................. $ 16,733 $14,523 $9,987 $10,661 $18,235 $17,214
</TABLE>
- ------------
(a) Business segment operating income for the year ended December 31, 1995
includes $85 million in losses relating to certain businesses and joint
ventures owned by the Music division which were restructured or closed.
Business segment operating income for the year ended December 31, 1991
includes a $60 million charge relating to the restructuring of the
Publishing division.
(b) The net loss for the three months ended March 31, 1996 includes an
extraordinary loss on the retirement of debt of $26 million ($.07 per
common share). The net loss for the year ended December 31, 1995 includes
an extraordinary loss on the retirement of debt of $42 million ($.11 per
common share). 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 the Company's deferred income
tax liability.
(c) In August 1991, the Company 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 the
Company'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.
(d) 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 (i) pretax income, (ii) interest expense,
including previously capitalized interest amortized to expense and the
portion of rents representative of an interest factor for the Company and
its majority-owned subsidiaries, (iii) the Company's proportionate share of
the items included in (ii) above for its 50%-owned companies, (iv)
preferred stock dividend requirements of majority-owned subsidiaries, (v)
minority interest in the income of majority-owned subsidiaries that have
fixed charges and (vi) undistributed losses of its less-than-50%-owned
companies. Fixed charges consist of (i) interest expense, including
interest capitalized and the portion of rents representative of an interest
factor for the Company and its majority-owned subsidiaries, (ii) the
Company's proportionate share of such items for its 50%-owned companies and
(iii) preferred stock dividend requirements of majority-owned subsidiaries.
Combined fixed charges and preferred stock dividends also include the
amount of pretax income necessary to cover preferred stock dividend
requirements of the Company. For periods in which earnings before fixed
charges were insufficient to cover fixed charges or combined
(footnotes continued on next page)
29
<PAGE>
<PAGE>
(footnotes continued from previous page)
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. In addition,
fixed charges for the three months ended March 31, 1996 and 1995 and the
years ended December 31, 1995 and 1994 include noncash interest expense of
$22 and $57, and $176 million and $219 million, respectively, relating to
the Company's zero coupon convertible notes due 2012 and 2013 and, in 1995
and 1994 only, the Reset Notes.
(e) Includes $374 million of preferred securities that are redeemable for cash
or, at the Company's option, approximately 12.1 million shares of Hasbro,
Inc. common stock owned by the Company.
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 the Company
and TWE contained in the 10-K and the First Quarter 10-Q, which are incorporated
herein by reference. Capitalized terms are as defined and described in such
historical financial statements, or elsewhere herein. For periods prior to
January 1, 1993, the Entertainment Group is consolidated with the Company for
financial reporting purposes and, accordingly, is also reflected in the
Company's summary historical financial information.
The selected historical financial information for 1995 reflects the
consolidation by TWE of the TWE-Advance/Newhouse Partnership resulting from the
formation of such partnership, effective as of April 1, 1995, and the
consolidation of Paragon effective as of July 6, 1995. The selected historical
financial information gives effect to the consolidation of Six Flags effective
as of January 1, 1993 as a result of an increase in TWE's ownership of Six Flags
from 50% to 100% in September 1993, and the subsequent deconsolidation of Six
Flags resulting from the disposition by TWE of a 51% interest in Six Flags
effective as of June 23, 1995. The selected historical financial information for
1993 also 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 TWE's then existing
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 the Company's acquisition of the ATC minority interest as of June 30, 1992,
using the purchase method of accounting. The Company's cost to acquire the ATC
minority interest is reflected in the consolidated financial statements of TWE
under the pushdown method of accounting.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31, YEARS ENDED DECEMBER 31,
---------------------------- -------------------------------------------
1996 1995 1995 1994 1993 1992 1991
------ ------ ------ ------ ------ ------ ------
(MILLIONS, EXCEPT RATIOS)
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATING STATEMENT INFORMATION
Revenues.............................. $2,487 $2,073 $9,629 $8,509 $7,963 $6,761 $6,068
Depreciation and amortization......... 290 230 1,060 959 909 788 733
Business segment operating income..... 271 201 992 852 905 814 724
Interest and other, net............... 88 164 539 616 564 531 526
Income before extraordinary item...... 98 11 170 136 217 173 103
Net income(a)......................... 98 11 146 136 207 173 103
TWE ratio of earnings to fixed
charges(b).......................... 2.2x 1.1x 1.6x 1.4x 1.4x 1.4x 1.4x
</TABLE>
30
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
DECEMBER 31,
MARCH 31, ---------------------------------------------------
1996 1995 1994 1993 1992 1991
------------------ ------- ------- ------- ------- -------
(MILLIONS)
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET INFORMATION
Total assets........................ $18,636 $18,960 $18,992 $18,202 $15,886 $14,230
Long-term debt...................... 5,724 6,137 7,160 7,125 7,171 4,571
Time Warner General Partners' Senior
capital........................... 1,454 1,426 1,663 1,536 -- --
Partners' capital................... 6,604 6,576 6,491 6,228 6,483 6,717
</TABLE>
- ------------
(a) Net income for the years ended December 31, 1995 and 1993 includes an
extraordinary loss on the retirement of debt of $24 million and $10
million, respectively.
(b) For purposes of the ratio of earnings to fixed charges, earnings were
calculated by adding (i) pretax income, (ii) interest expense, including
previously capitalized interest amortized to expense and the portion of
rents representative of an interest factor for TWE and its majority-owned
subsidiaries, (iii) TWE's proportionate share of the items included in (ii)
above for its 50%-owned companies, (iv) minority interest in the income of
majority-owned subsidiaries that have fixed charges and (v) undistributed
losses of its less-than-50%-owned companies. Fixed charges consist of (i)
interest expense, including interest capitalized and the portion of rents
representative of an interest factor for TWE and its majority-owned
subsidiaries and (ii) TWE's proportionate share of such items for its
50%-owned companies.
COMPANY AND ENTERTAINMENT GROUP SELECTED PRO FORMA FINANCIAL INFORMATION
The unaudited selected pro forma balance sheet information of the Company
at March 31, 1996 set forth below gives effect to the TBS Transaction as if it
had occurred at such date. The unaudited selected pro forma operating statement
information of the Company for the three months ended March 31, 1996 set forth
below gives effect in column (1) to the 1996 Convertible Debt Refinancing and in
column (2) to such transaction and the TBS Transaction, in each case as if the
transactions had occurred at the beginning of such period. The ITOCHU/Toshiba
Transaction, the Cable Transactions, the 1995 Convertible Debt Refinancing, the
Reset Notes Refinancing, the Bank Refinancing, the Asset Sale Transactions and,
with respect to the balance sheet only, the 1996 Convertible Debt Refinancing,
are already reflected in the historical financial statements of the Company as
of and for the three months ended March 31, 1996. The unaudited selected pro
forma operating statement information of the Company for the year ended December
31, 1995 set forth below gives effect in column (1) to the ITOCHU/Toshiba
Transaction, the Cable Transactions, the Debt Refinancings and the Asset Sale
Transactions and in column (2) to each of such transactions and the TBS
Transaction, in each case as if the transactions had occurred at the beginning
of such period.
The unaudited selected pro forma operating statement information of the
Entertainment Group for the year ended December 31, 1995 set forth below gives
effect to the TWE-A/N Transaction, the Debt Refinancings, the consolidation of
Paragon and the Asset Sale Transactions, in each case as if the transactions had
occurred at the beginning of such period. Unaudited selected pro forma financial
statement information of the Entertainment Group as of and for the three months
ended March 31, 1996 has not been presented since all such transactions
consummated by TWE are reflected, in all material respects, in the historical
financial statements of the Entertainment Group as of and for the three months
ended March 31, 1996. The incremental effect on the Company's loss before
extraordinary item per common share on a Post-TBS basis would be an increase of
$.05 and $.19 per common share, respectively.
The selected pro forma financial information should be read in conjunction
with the 'Time Warner Inc. and Entertainment Group Pro Forma Consolidated
Condensed Financial Statements' included in the May 15, 1996 8-K and
incorporated herein by reference. Consistent with the pro forma information
presented in conformity with the instructions of Form 8-K and included in the
May 15, 1996 8-K, no pro forma effect has been given in the information set
forth below for the Series K Refinancing or the issuance of the Series M
Preferred Stock offered hereby. However, giving additional pro forma effect to
31
<PAGE>
<PAGE>
the Series K Refinancing for the three months ended March 31, 1996 and the year
ended December 31, 1995, as if the transaction had occurred at the beginning of
such periods, the incremental effect on the Company's Pre-TBS pro forma results
would have been a decrease in the loss before extraordinary item of $16 million
and $65 million, respectively, resulting from the after-tax effect of lower
interest expense, and an increase in the loss before extraordinary item per
common share of $.07 and $.29 per common share, respectively, resulting from an
increase in preferred dividend requirements that more than offsets the effect of
lower interest expense.
The selected pro forma financial information is presented for informational
purposes only and is not necessarily indicative of the financial position or
operating results that would have occurred if the transactions given retroactive
effect therein had been consummated as of the dates indicated, nor is it
necessarily indicative of future financial conditions or operating results.
<TABLE>
<CAPTION>
THREE MONTHS ENDED YEAR ENDED
MARCH 31, 1996 DECEMBER 31, 1995
--------------------------- -------------------------------------------
(1) (2) (1) (2)
COMPANY COMPANY COMPANY COMPANY
PRE-TBS POST-TBS PRE-TBS POST-TBS ENTERTAINMENT
PRO FORMA(a) PRO FORMA(b) PRO FORMA(a) PRO FORMA(b) GROUP
------------ ------------ ------------ ------------ -------------
(MILLIONS, EXCEPT PER SHARE AMOUNTS AND RATIOS)
<S> <C> <C> <C> <C> <C>
PRO FORMA OPERATING
STATEMENT INFORMATION
Revenues.................................... $2,068 $2,843 $8,742 $12,179 $9,686
Depreciation and amortization............... 228 320 935 1,312 1,078
Business segment operating income........... 110 86 656 803 994
Equity in pretax income of Entertainment
Group..................................... 116 116 286 286 --
Interest and other, net..................... 289 328 1,037 1,249 484
Income (loss) before extraordinary item..... (89) (145) (255) (366) 203
Loss before extraordinary item applicable to
common shares (after preferred
dividends)................................ (123) (179) (398) (509) --
Per share of common stock:
Loss before extraordinary item.............. $ (.31) $ (.31) $(1.02) $ (.90) --
Dividends................................... $ .09 $ .09 $ .36 $ .36 --
Average common shares....................... 391.7 569.5 387.7 565.5 --
Company and TWE ratio of earnings to fixed
charges (deficiency in the coverage of
fixed charges by earnings before fixed
charges)(c)............................... $ (69) $ (141) $ (60) $ (142) 1.8x
Company deficiency in the coverage of
combined fixed charges and preferred stock
dividends by earnings before fixed charges
and preferred stock dividends(c).......... $ (124) $ (196) $ (258) $ (340) --
</TABLE>
<TABLE>
<CAPTION>
MARCH 31, 1996
----------------
COMPANY POST-TBS
PRO FORMA(b)
--------------
(MILLIONS)
<S> <C>
PRO FORMA BALANCE SHEET INFORMATION
Investments in and amounts due to and from Entertainment Group.............................. $ 5,931
Total assets................................................................................ 36,050
Long-term debt.............................................................................. 14,047
Company-obligated mandatorily redeemable preferred securities of subsidiaries holding solely
subordinated notes and debentures of the Company.......................................... 949
Shareholders' equity:
Preferred stock liquidation preference...................................................... 3,643
Equity applicable to common stock........................................................... 7,946
Total shareholders' equity.................................................................. 11,589
</TABLE>
(footnotes on next page)
32
<PAGE>
<PAGE>
(footnotes from previous page)
(a) Also reflects, on a pro forma basis, the Company as a separate subsidiary
of the new holding company after consummation of the TBS Transaction. See
'The Company -- TBS Transaction.'
(b) Reflects, on a pro forma basis, the new holding company after consummation
of the TBS Transaction (in which case the Company expects that the new
holding company would provide guarantees of the Company's outstanding
public debt).
(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 (i) pretax income, (ii) interest expense,
including previously capitalized interest amortized to expense and the
portion of rents representative of an interest factor for each of the
Company and TWE, respectively, and each of their respective majority-owned
subsidiaries, (iii) each of the Company's and TWE's proportionate share of
the items included in (ii) above for each of their respective 50%-owned
companies, (iv) minority interest in the income of majority-owned
subsidiaries that have fixed charges and (v) undistributed losses of each
of their respective less-than-50%-owned companies. Fixed charges consist of
(i) interest expense, including interest capitalized and the portion of
rents representative of an interest factor for each of the Company and TWE,
respectively, and its majority-owned subsidiaries and (ii) each of the
Company's and TWE's proportionate share of such items for each of their
respective 50%-owned companies. Combined fixed charges and preferred stock
dividends also include the amount of pretax income necessary to cover
preferred stock dividend requirements of the Company, 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 Company for the three months ended
March 31, 1996 and the year ended December 31, 1995 in column (1) and
column (2) included noncash interest expense of $22 million and $83
million, respectively, relating to the Company's zero coupon convertible
notes due 2012 and 2013 and, in column (2) only, an additional $5 million
and $18 million, respectively, relating to TBS's zero coupon convertible
notes due 2007.
EXCHANGE OFFER
GENERAL
The Company hereby offers, upon the terms and subject to the conditions set
forth in this Prospectus and in the accompanying Letter of Transmittal (which
together constitute the Exchange Offer), to exchange shares of Series M
Preferred Stock for any and all of the outstanding shares of Series K Preferred
Stock (on a share for share basis) properly tendered on or prior to the
Expiration Date and not withdrawn as permitted pursuant to the procedures
described below.
PURPOSE OF THE EXCHANGE OFFER
On April 11, 1996, the Company issued 1.6 million shares of the Series K
Preferred Stock. The issuance of Series K Preferred Stock was not registered
under the Securities Act in reliance upon the exemption provided in Section 4(2)
of the Securities Act.
In connection with the issuance and sale of the Series K Preferred Stock,
the Company entered into the Registration Rights Agreement, which requires the
Company to (i) use its best efforts to cause to be filed with the Commission by
May 26, 1996 a registration statement (the 'Exchange Offer Registration
Statement') relating to a registered Exchange Offer for the Series K Preferred
Stock under the Securities Act; (ii) use its best efforts to have the Exchange
Offer Registration Statement declared effective under the Securities Act by
October 8, 1996; and (iii) commence the Exchange Offer as soon as practicable
after the effectiveness of the Exchange Offer Registration Statement and use its
best efforts to consummate the Exchange Offer as promptly as practicable, but in
any event by December 7, 1996. In the event that applicable interpretations of
the staff of the Commission do not permit the Company to effect the Exchange
Offer or do not permit any holder of the Series K Preferred Stock (including the
Initial Purchasers) to participate in the Exchange Offer, the Company will use
its best
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efforts to cause to be filed with the Commission a shelf registration statement
(the 'Shelf Registration Statement') to cover resales of the Series K Preferred
Stock by such holders who satisfy certain conditions relating to, among other
things, the provision of information in connection with the Shelf Registration
Statement. If the Exchange Offer is not consummated or the Shelf Registration
Statement is not declared effective by December 7, 1996, the annual dividend
rate borne by the Series K Preferred Stock will immediately increase by .50
percent per annum; provided that if the Company had also failed to file with the
Commission the Exchange Offer Registration Statement by May 26, 1996, then the
annual dividend rate will immediately increase by 1.0 percent (instead of .50
percent) per annum. Upon the consummation of the Exchange Offer or the
effectiveness of a Shelf Registration Statement, as the case may be, the
dividend rate borne by the Series K Preferred Stock will be reduced to the
original dividend rate. The Exchange Offer is being made by the Company to
satisfy its obligations under the Registration Rights Agreement.
Based on no action letters issued by the staff of the Commission to third
parties, the Company believes that the Series M Preferred Stock issued in
exchange for Series K Preferred Stock pursuant to the Exchange Offer may be
offered for resale, resold and otherwise transferred by holders thereof (other
than (i) a broker-dealer who purchases such Series K Preferred Stock directly
from the Company to resell pursuant to Rule 144A or any other available
exemption under the Securities Act or (ii) a person that is an affiliate of the
Company within the meaning of Rule 405 under the Securities Act), without
compliance with the registration and prospectus delivery requirements of the
Securities Act provided that such shares of Series M Preferred Stock are
acquired in the ordinary course of such holders' business and such holders have
no arrangement with any person to participate in the distribution of such Series
M Preferred Stock. Any holder of Series K Preferred Stock who tenders in the
Exchange Offer for the purpose of participating in a distribution of the Series
M Preferred Stock could not rely on such interpretation by the staff of the
Commission and must comply with the registration and prospectus delivery
requirements of the Securities Act in connection with any resale transaction.
Thus, any shares of Series M Preferred Stock acquired by such holders will not
be freely transferable except in compliance with the Securities Act. Each
broker-dealer that receives shares of Series M Preferred Stock for its own
account in exchange for shares of Series K Preferred Stock acquired by such
broker-dealer as a result of market-making activities or other trading
activities, must acknowledge that it will deliver a prospectus in connection
with any resale of such shares of Series M Preferred Stock. See 'Plan of
Distribution.'
EXPIRATION DATE; EXTENSIONS; TERMINATION; AMENDMENTS
The Exchange Offer will expire at 5:00 p.m., New York City time, on
, 1996, unless the Company, in its sole discretion, has extended the
period of time (as described below) for which the Exchange Offer is open (such
date, as it may be extended, is referred to herein as the 'Expiration Date').
The Expiration Date will be at least 20 business days after the commencement of
the Exchange Offer in accordance with Rule 14e-1(a) under the Exchange Act. The
Company expressly reserves the right, at any time or from time to time, to
extend the period of time during which the Exchange Offer is open, and thereby
delay acceptance for exchange of any shares of Series K Preferred Stock by
giving oral notice (confirmed in writing) or written notice to the Exchange
Agent and by giving written notice of such extension to the holders thereof or
by timely public announcement communicated, unless otherwise required by
applicable law or regulation, by making a release through the Dow Jones News
Service, in each case, no later than 9:00 a.m. New York City time, on the next
business day after the previously scheduled Expiration Date. Such announcement
may state that the Company is extending the Exchange Offer for a specified
period of time. During any such extension, all shares of Series K Preferred
Stock previously tendered will remain subject to the Exchange Offer.
In addition, the Company expressly reserves the right to terminate or amend
the Exchange Offer and not to accept for exchange any shares of Series K
Preferred Stock not theretofore accepted for exchange upon the occurrence of any
of the events specified below under ' -- Certain Conditions to the Exchange
Offer.' If any such termination or amendment occurs, the Company will notify the
Exchange Agent and will either issue a press release or give oral or written
notice to the holders of the Series K Preferred Stock as promptly as
practicable.
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For purposes of the Exchange Offer, a 'business day' means any day other
than Saturday, Sunday or a federal holiday, and consists of the time period from
12:01 a.m. through 12:00 midnight, New York City time.
PROCEDURES FOR TENDERING SERIES K PREFERRED STOCK
The tender to the Company of shares of Series K Preferred Stock by a holder
thereof as set forth below and the acceptance thereof by the Company will
constitute a binding agreement between the tendering holder and the Company upon
the terms and subject to the conditions set forth in this Prospectus and in the
accompanying Letter of Transmittal.
A holder of shares of Series K Preferred Stock may tender the same by (i)
properly completing and signing the Letter of Transmittal or a facsimile thereof
(all references in this Prospectus to the Letter of Transmittal shall be deemed
to include a facsimile thereof) and delivering the same, together with the
certificate or certificates representing the shares of Series K Preferred Stock
being tendered and any required signature guarantees, to the Exchange Agent at
its address set forth below on or prior to 5:00 p.m., New York City time, on the
Expiration Date (or complying with the procedure for book-entry transfer
described below) or (ii) complying with the guaranteed delivery procedures
described below.
THE METHOD OF DELIVERY OF SHARES OF SERIES K PREFERRED STOCK, LETTER OF
TRANSMITTAL AND ALL OTHER REQUIRED DOCUMENTS IS AT THE ELECTION AND RISK OF THE
HOLDERS. IF SUCH DELIVERY IS BY MAIL, IT IS RECOMMENDED THAT REGISTERED MAIL
PROPERLY INSURED, WITH RETURN RECEIPT REQUESTED, OR AN OVERNIGHT OR HAND
DELIVERY SERVICE, BE USED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO
INSURE TIMELY DELIVERY. NO SHARES OF SERIES K PREFERRED STOCK OR LETTER OF
TRANSMITTAL SHOULD BE SENT TO THE COMPANY.
Signatures on a Letter of Transmittal or a notice of withdrawal, as the
case may be, must be guaranteed unless the shares of Series K Preferred Stock
surrendered for exchange pursuant thereto are tendered (i) by a registered
holder of the shares of Series K Preferred Stock who has not completed the box
entitled 'Special Issuance Instructions' or 'Special Delivery Instructions' on
the Letter of Transmittal or (ii) for the account of an Eligible Institution (as
defined herein). In the event that signatures on a Letter of Transmittal or a
notice of withdrawal, as the case may be, are required to be guaranteed, such
guarantees must be by a firm which is a member of a registered national
securities exchange or a member of the National Association of Securities
Dealers, Inc. or by a commercial bank or trust company having an office or
correspondent in the United States (each an 'Eligible Institution'). If shares
of Series K Preferred Stock are registered in the name of a person other than a
signer of the Letter of Transmittal, the shares of Series K Preferred Stock
surrendered for exchange must be endorsed by, or be accompanied by a written
instrument or instruments of transfer or exchange, in satisfactory form as
determined by the Company in its sole discretion, duly executed by the
registered holder with the signature thereon guaranteed by an Eligible
Institution.
The Exchange Agent will make a request promptly after the date of this
Prospectus to establish accounts with respect to the Series K Preferred Stock at
the book-entry transfer facility, The Depository Trust Company, for the purpose
of facilitating the Exchange Offer, and subject to the establishment thereof,
any financial institution that is a participant in the book-entry transfer
facility's system may make book-entry delivery of shares of Series K Preferred
Stock by causing such book-entry transfer facility to transfer such shares of
Series K Preferred Stock into the Exchange Agent's account with respect to the
shares of Series K Preferred Stock in accordance with the book-entry transfer
facility's procedures for such transfer. Although delivery of shares of Series K
Preferred Stock may be effected through book-entry transfer in the Exchange
Agent's account at the book-entry transfer facility, an appropriate Letter of
Transmittal with any required signature guarantee and other required documents
must in each case be transmitted to and received or confirmed by the Exchange
Agent at its address set forth below on or prior to the Expiration Date, or, if
the guaranteed delivery procedures described below are complied with, within the
time period provided under such procedures.
If a holder desires to accept the Exchange Offer and time will not permit a
Letter of Transmittal or shares of Series K Preferred Stock to reach the
Exchange Agent before the Expiration Date or the procedure for book-entry
transfer cannot be completed on a timely basis, a tender may be effected if the
Exchange Agent has received at its address or facsimile number set forth below
on or prior to the
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Expiration Date a letter, telegram or facsimile from an Eligible Institution
setting forth the name and address of the tendering holder, the name in which
the shares of Series K Preferred Stock are registered and, if possible, the
certificate number or numbers of the certificate or certificates representing
the shares of Series K Preferred Stock to be tendered, and stating that the
tender is being made thereby and guaranteeing that within three business days
after the Expiration Date the shares of Series K Preferred Stock in proper form
for transfer (or a confirmation of book-entry transfer of such shares of Series
K Preferred Stock into the Exchange Agent's account at the book-entry transfer
facility), will be delivered by such Eligible Institution together with a
properly completed and duly executed Letter of Transmittal (and any other
required documents). Unless shares of Series K Preferred Stock being tendered by
the above-described method are deposited with the Exchange Agent within the time
period set forth above (accompanied or preceded by a properly completed Letter
of Transmittal and any other required documents), the Company may, at its
option, reject the tender. Copies of a Notice of Guaranteed Delivery which may
be used by an Eligible Institution for the purposes described in this paragraph
are available from the Exchange Agent.
A tender will be deemed to have been received as of the date when (i) the
tendering holder's properly completed and duly signed Letter of Transmittal
accompanied by the shares of Series K Preferred Stock (or a confirmation of
book-entry transfer of such shares of Series K Preferred Stock into the Exchange
Agent's account at the book-entry transfer facility) is received by the Exchange
Agent, or (ii) a Notice of Guaranteed Delivery or letter, telegram or facsimile
to similar effect (as provided above) from an Eligible Institution is received
by the Exchange Agent. Issuances of shares of Series M Preferred Stock in
exchange for shares of Series K Preferred Stock tendered pursuant to a Notice of
Guaranteed Delivery or letter, telegram or facsimile to similar effect (as
provided above) by an Eligible Institution will be made only against deposit of
the Letter of Transmittal (and any other required documents) and the tendered
shares of Series K Preferred Stock.
All questions as to the validity, form, eligibility (including time of
receipt) and acceptance of shares of Series K Preferred Stock tendered for
exchange will be determined by the Company in its sole discretion, which
determination will be final and binding on all parties. The Company reserves the
right to reject any and all tenders of any particular shares of Series K
Preferred Stock not properly tendered or reject any particular shares of Series
K Preferred Stock the acceptance of which might, in the judgment of the Company
or its counsel, be unlawful. The Company also reserves the absolute right to
waive any defects or irregularities or condition of the Exchange Offer as to any
particular shares of Series K Preferred Stock either before or after the
Expiration Date (including the right to waive the ineligibility of any holder
who seeks to tender shares of Series K Preferred Stock in the Exchange Offer).
The interpretation of the terms and conditions of the Exchange Offer (including
the Letter of Transmittal and the instructions thereto) by the Company shall be
final and binding on all parties. Unless waived, any defects or irregularities
in connection with tenders of shares of Series K Preferred Stock for exchange
must be cured within such time as the Company shall determine. Neither the
Company nor any other person shall be under any duty to give notification of
defects or irregularities with respect to tenders of shares of Series K
Preferred Stock for exchange, nor shall any of them incur any liability for
failure to give such notification.
If the Letter of Transmittal or any shares of Series K Preferred Stock or
powers of attorney are signed by trustees, executors, administrators, guardians,
attorneys-in-fact, officers of corporations or others acting in a fiduciary or
representative capacity, such persons should so indicate when signing, and
unless waived by the Company, proper evidence satisfactory to the Company of
their authority to so act must be submitted.
By tendering, each holder that is not a broker-dealer or is a broker-dealer
but is not receiving shares of Series M Preferred Stock for its own account will
represent to the Company that, among other things, the shares of Series M
Preferred Stock acquired pursuant to the Exchange Offer are being obtained in
the ordinary course of such holder's business, that such holder has no
arrangement with any person to participate in the distribution of such shares of
Series M Preferred Stock and that such holder is not an 'affiliate' of the
Company as defined in Rule 405 under the Securities Act. Each broker-dealer that
is receiving shares of Series M Preferred Stock for its own account in exchange
for shares of Series K Preferred Stock that were acquired as a result of
market-making or other trading activities will
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represent to the Company that it will deliver a prospectus in connection with
any resale of such shares of Series M Preferred Stock.
In addition, the Company reserves the right in its sole discretion to (a)
purchase or make offers for any shares of Series K Preferred Stock that remain
outstanding subsequent to Expiration Date, or, as set forth under ' -- Certain
Conditions to the Exchange Offer,' to terminate the Exchange Offer and (b) to
the extent permitted by applicable law, purchase shares of Series K Preferred
Stock in the open market, in privately negotiated transactions or otherwise. The
terms of any such purchases or offers may differ from the terms of the Exchange
Offer.
WITHDRAWAL RIGHTS
Tenders of shares of Series K Preferred Stock may be withdrawn at any time
prior to the Expiration Date. For a withdrawal to be effective, a written notice
of withdrawal sent by letter, telegram or facsimile must be received by the
Exchange Agent prior to the Expiration Date at its address or facsimile number
set forth below. Any such notice of withdrawal must (i) specify the name of the
person having tendered the shares of Series K Preferred Stock to be withdrawn
(the 'Depositor'), (ii) identify the shares of Series K Preferred Stock to be
withdrawn (including the certificate number or numbers of the certificate or
certificates representing such shares of Series K Preferred Stock and number of
shares of such Series K Preferred Stock), (iii) be signed by the holder in the
same manner as the original signature on the Letter of Transmittal by which such
shares of Series K Preferred Stock were tendered (including any required
signature guarantees) or be accompanied by documents of transfer sufficient to
permit the Transfer Agent with respect to the shares of Series K Preferred Stock
to register the transfer of such shares of Series K Preferred Stock into the
name of the person withdrawing the tender and (iv) specify the name in which any
such shares of Series K Preferred Stock are to be registered, if different from
that of the Depositor. All questions as to the validity, form and eligibility
(including time of receipt) of such withdrawal notices will be determined by the
Company in its sole discretion, which determination will be final and binding on
all parties. Any shares of Series K Preferred Stock so withdrawn will be deemed
not to have been validly tendered for purposes of the Exchange Offer and no
shares of Series M Preferred Stock will be issued with respect thereto unless
the shares of Series K Preferred Stock so withdrawn are validly retendered. Any
shares of Series K Preferred Stock which have been tendered but which are
withdrawn will be returned to the holder thereof without cost to such holder as
soon as practicable after such withdrawal. Properly withdrawn shares of Series K
Preferred Stock may be retendered by following one of the procedures described
above under ' -- Procedures for Tendering Series K Preferred Stock' at any time
prior to the Expiration Date.
ACCEPTANCE OF SERIES K PREFERRED STOCK FOR EXCHANGE; DELIVERY OF SERIES M
PREFERRED STOCK
Upon satisfaction or waiver of all of the conditions to the Exchange Offer,
the Company will accept, promptly after the Expiration Date, all shares of
Series K Preferred Stock properly tendered and will issue the shares of Series M
Preferred Stock promptly after acceptance of the Exchange Offer. See
' -- Certain Conditions to the Exchange Offer' below. For purposes of the
Exchange Offer, the Company will be deemed to have accepted properly tendered
shares of Series K Preferred Stock for exchange when the Company has given oral
or written notice thereof to the Exchange Agent.
In all cases, issuance of the shares of Series M Preferred Stock in
exchange for shares of Series K Preferred Stock pursuant to the Exchange Offer
will be made only after timely receipt by the Company of such shares of Series K
Preferred Stock, a properly completed and duly executed Letter of Transmittal
and all other required documents. If any tendered shares of Series K Preferred
Stock are not accepted for exchange for any reason set forth in the terms and
conditions of the Exchange Offer, such unaccepted shares of Series K Preferred
Stock will be returned without expense to the tendering holder thereof as
promptly as practicable after the rejection of such tender or the expiration or
termination of the Exchange Offer.
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UNTENDERED SERIES K PREFERRED STOCK
Holders of shares of Series K Preferred Stock whose shares of Series K
Preferred Stock are not tendered or are tendered but not accepted in the
Exchange Offer will continue to hold such shares of Series K Preferred Stock and
will be entitled to all the rights and preferences and subject to the
limitations applicable thereto. Following consummation of the Exchange Offer,
the holders of shares of Series K Preferred Stock will continue to be subject to
the existing restrictions upon transfer thereof and, except as provided herein,
the Company will have no further obligation to such holders to provide for the
registration under the Securities Act of the shares of Series K Preferred Stock
held by them. To the extent that shares of Series K Preferred Stock are tendered
and accepted in the Exchange Offer, the trading market for untendered and
tendered but unaccepted shares of Series K Preferred Stock could be adversely
affected.
CERTAIN CONDITIONS TO THE EXCHANGE OFFER
Notwithstanding any other term of the Exchange Offer, the Company will not
be required to accept for exchange, or issue shares of Series M Preferred Stock
in exchange for, any shares of Series K Preferred Stock, and may terminate or
amend the Exchange Offer, if at any time before the acceptance of such shares of
Series K Preferred Stock for exchange, any of the following events shall occur:
(i) an injunction, order or decree shall have been issued by any court
or governmental agency that would prohibit, prevent or otherwise materially
impair the ability of the Company to proceed with the Exchange Offer; or
(ii) there shall occur a change in the current interpretation of the
staff of the Commission which current interpretation permits the shares of
Series M Preferred Stock issued pursuant to the Exchange Offer in exchange
for the shares of Series K Preferred Stock to be offered for resale, resold
and otherwise transferred by holders thereof (other than (i) a
broker-dealer who purchases such Series K Preferred Stock directly from the
Company to resell pursuant to Rule 144A or any other available exemption
under the Securities Act or (ii) a person that is an affiliate of the
Company within the meaning of Rule 405 under the Securities Act), without
compliance with the registration and prospectus delivery provisions of the
Securities Act provided that such shares of Series M Preferred Stock are
acquired in the ordinary course of such holders' business and such holders
have no arrangement with any person to participate in the distribution of
shares of Series M Preferred Stock.
The foregoing conditions are for the sole benefit of the Company and may be
asserted by the Company regardless of the circumstances giving rise to any such
condition or may be waived by the Company in whole or in part at any time and
from time to time in its sole discretion. The failure by the Company at any time
to exercise any of the foregoing rights shall not be deemed a waiver of any such
right and each such right shall be deemed an ongoing right which may be asserted
at any time and from time to time.
If the Company determines that it may terminate the Exchange Offer, as set
forth above, the Company may (i) refuse to accept any shares of Series K
Preferred Stock and return all shares of Series K Preferred Stock that have been
tendered to the holders thereof, (ii) extend the Exchange Offer and retain all
shares of Series K Preferred Stock tendered prior to the Expiration Date,
subject to the rights of such holders of tendered shares of Series K Preferred
Stock to withdraw their tendered shares of Series K Preferred Stock, or (iii)
waive such termination event with respect to the Exchange Offer and accept all
properly tendered shares of Series K Preferred Stock that have not been
withdrawn. If such waiver constitutes a material change in the Exchange Offer,
the Company will disclose such change by means of a supplement to this
Prospectus that will be distributed to each registered holder of shares of
Series K Preferred Stock, and the Company will extend the Exchange Offer for a
period of five to ten business days, depending upon the significance of the
waiver and the manner of disclosure to the registered holders of the shares of
Series K Preferred Stock, if the Exchange Offer would otherwise expire during
such period.
In addition, the Company will not accept for exchange any Series K
Preferred Stock tendered, and no Series M Preferred Stock will be issued in
exchange for any such Series K Preferred Stock, if at any
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time any stop order shall be threatened by the Commission or in effect with
respect to the Registration Statement.
The Exchange Offer is not conditioned on any minimum number of shares of
Series K Preferred Stock being tendered for exchange.
EXCHANGE AGENT
Chemical Mellon Shareholder Services, L.L.C. ('Chemical') has been
appointed as Exchange Agent for the Exchange Offer. Questions regarding Exchange
Offer procedures and requests for additional copies of this Prospectus or the
Letter of Transmittal should be directed to the Exchange Agent addressed as
follows:
<TABLE>
<S> <C>
By Mail: By Hand or Overnight Delivery:
85 Challenger Road 85 Challenger Road
Ridgefield Park NJ 07660 Ridgefield Park NJ 07660
Attention: Reorganization Department Attention: Reorganization Department
</TABLE>
SOLICITATION OF TENDERS; FEES AND EXPENSES
The Company has not retained any dealer-manager in connection with the
Exchange Offer and will not make any payments to brokers, dealers or other
persons soliciting acceptances of the Exchange Offer. The Company, however, will
pay the Exchange Agent reasonable and customary fees for its services and will
reimburse the Exchange Agent for its reasonable out-of-pocket expenses in
connection therewith. The cash expenses to be incurred by the Company in
connection with the Exchange Offer will be paid by the Company.
No person has been authorized to give any information or to make any
representation in connection with the Exchange Offer other than those contained
in this Prospectus. If given or made, such information or representations should
not be relied upon as having been authorized by the Company. Neither the
delivery of this Prospectus nor any exchange made hereunder shall, under any
circumstances, create any implication that there has been no change in the
affairs of the Company since the respective dates as of which information is
given herein. The Exchange Offer is not being made to (nor will tenders be
accepted from or on behalf of) holders of shares of Series K Preferred Stock in
any jurisdiction in which the making of the Exchange Offer or the acceptance
thereof would not be in compliance with the laws of such jurisdiction.
TRANSFER TAXES
The Company will pay all transfer taxes, if any, applicable to the exchange
of shares of Series K Preferred Stock pursuant to the Exchange Offer. If,
however, certificates representing shares of Series M Preferred Stock or shares
of Series K Preferred Stock not tendered or accepted for exchange are to be
delivered to, or are to be registered or issued in the name of, any person other
than the registered holder of the shares of Series K Preferred Stock tendered,
or if tendered shares of Series K Preferred Stock are registered in the name of
any person other than the person signing the Letter of Transmittal,
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or if a transfer tax is imposed for any reason other than the exchange of shares
of Series K Preferred Stock pursuant to the Exchange Offer, then the amount of
any such transfer taxes (whether imposed on the registered holder or any other
persons) will be payable by the tendering holder. If satisfactory evidence of
payment of such taxes or exemption therefrom is not submitted with the Letter of
Transmittal, the amount of such transfer taxes will be billed directly to such
tendering holder.
ACCOUNTING TREATMENT
No gain or loss for accounting purposes will be recognized by the Company
upon the consummation of the Exchange Offer. Expenses incurred in connection
with the issuance of the Series M Preferred Stock will be amortized by the
Company over the term of the Series M Preferred Stock under generally accepted
accounting principles.
PLAN OF DISTRIBUTION
Each broker-dealer that receives shares of Series M Preferred Stock for its
own account in exchange for shares of Series K Preferred Stock acquired as a
result of market-making or other trading activities must acknowledge that it
will deliver a prospectus in connection with any resale of such shares of Series
M Preferred Stock. For a period of 90 days after the Expiration Date, this
Prospectus, as it may be amended or supplemented from time to time, may be used
by a broker-dealer in connection with resales of such shares of Series M
Preferred Stock. During such 90-day period, the Company will use best efforts to
make this Prospectus available to any broker-dealer for use in connection with
such resales, provided that such broker-dealer indicates in the Letter of
Transmittal that it is a broker-dealer.
The Company will not receive any proceeds from any sale of shares of Series
M Preferred Stock by broker-dealers. Shares of Series M Preferred Stock received
by broker-dealers for their own account pursuant to the Exchange Offer may be
sold from time to time in one or more transactions in the over-the-counter
market, in negotiated transactions, through the writing of options on the shares
of Series M Preferred Stock or a combination of such methods of resale, at
market prices prevailing at the time of resale, at prices related to such
prevailing market prices or negotiated prices. Any such resale may be made
directly to purchasers or to or through broker-dealers who may receive
compensation in the form of commissions or concessions from any such
broker-dealer and/or the purchasers of any such shares of Series M Preferred
Stock. Any broker-dealer that resells shares of Series M Preferred Stock that
were received by it for its own account pursuant to the Exchange Offer and any
person that participates in the distribution of such shares of Series M
Preferred Stock may be deemed to be an 'underwriter' within the meaning of the
Securities Act and any profit on any such resale of shares of Series M Preferred
Stock and any commissions or concessions received by any such broker-dealers may
be deemed to be underwriting compensation under the Securities Act. The Letter
of Transmittal states that a broker-dealer, by acknowledging that it will
deliver and by delivering a prospectus, will not be deemed to admit that it is
an 'underwriter' within the meaning of the Securities Act. The Company will
indemnify the holders of the Series M Preferred Stock (including any
broker-dealers) against certain liabilities, including liabilities under the
Securities Act.
In addition, the Company has agreed that if upon expiration of the Exchange
Offer, any of the Initial Purchasers of the Series K Preferred Stock shall not
have sold all of the Series K Preferred Stock initially purchased from the
Company by such Initial Purchasers to unaffiliated investors, upon such
purchasers' request (made within 10 days after the Expiration Date), the Company
will use its best efforts to file promptly, or if so requested by the Initial
Purchasers, on a later date (no later than six months after the Expiration
Date), a shelf registration statement relating to the resale of the Existing
Debentures and keep such shelf registration statement effective for a period of
120 days.
DESCRIPTION OF SERIES M PREFERRED STOCK
The Series M Preferred Stock will be issued pursuant to a certificate of
designation (the 'Certificate of Designation'). The summary contained herein of
certain provisions of the Series M Preferred Stock does not purport to be
complete and is qualified in its entirety by reference to the provisions of the
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Certificate of Designation. The definitions of certain terms used in the
Certificate of Designation and in the following summary are set forth in the
'Glossary of Significant Terms.'
GENERAL
The Company is authorized to issue 1 billion shares of capital stock, of
which 750 million shares are common stock, par value $1.00 per share ('Common
Stock'), and 250 million shares are preferred stock, par value $1.00 per share.
On April 30, 1996, there were outstanding 391.6 million shares of Common
Stock and 37.8 million shares of preferred stock.
The Board of Directors of the Company has adopted resolutions reserving for
issuance an adequate number of shares of the Series M Preferred Stock and the
Series L Preferred Stock, and the Company will file the Certificates of
Designation with respect thereto with the Secretary of State of the State of
Delaware as required by Delaware law. Shares of Series M Preferred Stock when
issued in exchange for shares of Series K Preferred Stock will be fully paid and
nonassessable, and the holders thereof will have no subscription or preemptive
rights related thereto.
Pursuant to the Company's Certificate of Incorporation, the shares of
Series M Preferred Stock shall always be subject to redemption by the Company at
a redemption price equal to fair market value payable in cash, by action of the
Board of Directors, if in the judgment of the Board of Directors such action
should be taken, pursuant to Section 151(b) of the General Corporation Law of
the State of Delaware (or by any other provision of applicable law), to the
extent necessary to prevent the loss or secure the reinstatement of any license
or franchise from any governmental agency held by the Company or any subsidiary
to conduct any portion of the business of the Company, which license or
franchise is conditioned upon some or all of the holders of the Company's stock
of any class or series possessing prescribed qualifications.
RANKING
The Series M Preferred Stock, with respect to dividends and distributions
upon the liquidation, winding up and dissolution of the Company, ranks senior to
all classes of Junior Stock and pari passu with the other classes of Parity
Stock of the Company.
DIVIDENDS
Holders of Series M Preferred Stock are entitled, when, as and if declared
by the Board of Directors of the Company out of funds legally available
therefor, to receive dividends on each outstanding share of Series M Preferred
Stock, at the rate of 10 1/4% per annum. Dividends on the Series M Preferred
Stock are payable quarterly in arrears on each Dividend Payment Date, commencing
on the First Dividend Payment Date, to holders of record of the Series M
Preferred Stock on the Record Date immediately preceding such Dividend Payment
Date. Dividends on the Series M Preferred Stock will be cumulative (whether or
not earned or declared) from the date of issuance of the Series M Preferred
Stock. Dividends which are not declared and paid when due will compound
quarterly on each Dividend Payment Date at the dividend rate until payment is
made.
Dividends may, at the option of the Company, be paid on any Dividend
Payment Date either in cash or by issuing fully paid and nonassessable shares of
Series M Preferred Stock with an aggregate liquidation preference equal to the
amount of such dividends; provided, however, that dividends payable on any
Dividend Payment Date shall be paid (i) in cash, to the extent of an amount
equal to the Pro Rata Percentage as of the Preceding Record Date, multiplied by
the amount of cash distributions, excluding Tax Distributions other than
Included Tax Distributions, if any, received by the Company (and its
subsidiaries) on or after the Preceding Record Date to, but not including, the
current Record Date with respect to its TWE Series B Capital and TWE Junior
Capital, and (ii) in Series M Preferred Stock or cash, at the Company's option,
to the extent of any balance. TWE's ability to make distributions is subject to
certain restrictions. See 'Risk Factors.'
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Holders of Series K Preferred Stock whose shares of Series K Preferred
Stock are accepted for exchange will be deemed to have waived the right to
receive any payment in respect of any unpaid dividends on the Series K Preferred
Stock that have accumulated or accrued to the date of issuance of the Series M
Preferred Stock. Consequently, on the First Dividend Payment Date holders who
exchange their shares of Series K Preferred Stock for Series M Preferred Stock
will receive the same dividends on the Series M Preferred Stock that holders of
the Series K Preferred Stock who do not accept the Exchange Offer will receive
on the Series K Preferred Stock.
No dividends may be declared or paid or set apart for payment on Series M
Preferred Stock or any other Parity Stock, and no Parity Stock, including the
Series M Preferred Stock, may be repurchased, exchanged, redeemed or otherwise
retired by the Company, nor may funds be set apart for payment with respect
thereto, unless full cumulative dividends shall have been paid or set apart for
such payment on, and all applicable redemption, exchange and repurchase
obligations shall have been satisfied with respect to, all outstanding shares of
Series M Preferred Stock and such other Parity Stock; provided that dividends
may be paid on Parity Stock if they are payable in Junior Stock; and provided
further that Parity Stock may be converted into or exchanged for Parity Stock
(having the same liquidation preference) or Junior Stock. If full dividends are
not so paid, the Series M Preferred Stock shall share dividends with all other
Parity Stock so that the amount of dividends declared per share on the Series M
Preferred Stock and all such other Parity Stock shall in all cases bear the same
ratio that cumulative dividends per share on the Series M Preferred Stock and
all such other Parity Stock bear to each other. No dividends may be paid or set
apart for such payment on Junior Stock, and no Junior Stock may be repurchased,
exchanged, redeemed or otherwise retired nor may funds be set apart for payment
with respect thereto, if full cumulative dividends have not been paid on the
Series M Preferred Stock or any applicable redemption, exchange or repurchase
obligation has not been satisfied with respect to all outstanding shares of
Series M Preferred Stock; provided that dividends or distributions may be made
on Junior Stock if they are payable-in-kind in additional shares of, or
warrants, rights, calls or options exercisable for or convertible into
additional shares of Junior Stock; and provided further that Junior Stock may be
converted into or exchanged for Junior Stock. In addition, in the event that
there shall have occurred certain events of default in connection with the
Company's debt, the Company shall not declare or pay or make any distributions
on or with respect to, or purchase, redeem or exchange any of its capital stock,
except where such dividend or payment is made in the form of, or such exchange
is for, capital stock.
OPTIONAL REDEMPTION
The Series M Preferred Stock may not be redeemed at the option of the
Company prior to July 1, 2006. Thereafter, the Series M Preferred Stock will be
redeemable, at the Company's option, in whole or in part, at any time and from
time to time upon not less than 30 nor more than 60 days' prior notice mailed by
first-class mail to the registered address of each holder of the Series M
Preferred Stock as of the record date for such redemption. The redemption price
for each share of Series M Preferred Stock called for redemption during the
12-month period commencing on July 1 of the years set forth below shall be the
amounts (expressed as percentages of the liquidation preference thereof) set
forth opposite such years, plus accumulated and accrued and unpaid dividends to
the redemption date.
<TABLE>
<CAPTION>
PERCENTAGE OF
LIQUIDATION
PERIOD PREFERENCE
- ------ -------------
<C> <S> <C>
2006 ......................................................................... 105.125%
2007 ......................................................................... 103.844
2008 ......................................................................... 102.563
2009 ......................................................................... 101.281
2010 and thereafter.............................................................. 100.000
</TABLE>
No optional redemption shall be effected unless the Company shall have
obtained a Rating Confirmation with respect to such redemption.
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MANDATORY REDEMPTION
On each Mandatory Redemption Date, the Company is required to redeem the
Redeemable Number of shares of Series M Preferred Stock at the Mandatory
Redemption Price.
On July 1, 2016, the Final Redemption Date, the Company is required to
redeem all of the then outstanding shares of Series M Preferred Stock at the
lesser of the Mandatory Redemption Amount and the Mandatory Redemption Price;
provided that if the Company does not obtain a TWE Valuation within 150 days
following the final Series B Redemption Date or if the TWE Series B Capital has
been fully redeemed in accordance with the TWE Partnership Agreement, the
Company shall redeem the Series M Preferred Stock at the Mandatory Redemption
Price.
Upon the redemption of Series M Preferred Stock on the Final Redemption
Date, the Company's obligations with respect thereto will be discharged, and if
such redemption is effected at the Mandatory Redemption Amount, holders of
shares of Series M Preferred Stock may have received less than the liquidation
preference thereof plus accumulated and accrued and unpaid dividends thereon.
The Company's obligation to redeem the Series M Preferred Stock is subject to
the legal availability at the Company of funds therefor. See 'Risk Factors.'
REDEMPTION UPON INSOLVENCY OF TWE
In the event of a liquidation, winding up or dissolution of TWE as a result
of the Insolvency of TWE, the Series M Preferred Stock will be mandatorily
redeemable on the Insolvency Redemption Date at the Insolvency Redemption
Amount. Upon such a redemption of Series M Preferred Stock, the Company's
obligation with respect thereto will be discharged and holders of Series M
Preferred Stock may have received less than the liquidation preference thereof
plus accumulated and accrued and unpaid dividends thereon. The Company's
obligations to redeem the Series M Preferred Stock upon an Insolvency of TWE is
subject to the legal availability at the Company of funds therefor. See 'Risk
Factors.'
REORGANIZATION OF TWE
Upon a Reorganization of TWE, the Company shall, within 90 days, make a
public announcement that it intends, on the Reorganization Redemption/Exchange
Date, to either (i) exchange each outstanding share of Series M Preferred Stock
for shares of the Series L Preferred Stock having an aggregate liquidation
preference equal to the liquidation preference of such share of Series M
Preferred Stock plus accumulated and accrued and unpaid dividends thereon at the
date of exchange, or (ii) redeem the outstanding shares of Series M Preferred
Stock at the Reorganization Redemption Price; provided, however, that the
Company may not effect a Reorganization Redemption (as described in clause (ii))
prior to July 1, 2011 unless the Company shall have obtained a Rating
Confirmation with respect to such Reorganization Redemption and provided further
that the Company may not effect a Reorganization Exchange (as described in
clause (i)) on or after July 1, 2011. The Company's ability to effect a
Reorganization Redemption is subject to the legal availability at the Company of
funds therefor.
CHANGE OF CONTROL
Upon the occurrence of a Change of Control, the Company shall make an offer
(the 'Preferred Stock Change of Control Offer') to each holder of Series M
Preferred Stock to repurchase all or any part of such holder's Series M
Preferred Stock at a purchase price in cash equal to 101% of the liquidation
preference thereof, plus an amount equal to all accumulated and accrued and
unpaid dividends per share to the date of purchase. The Preferred Stock Change
of Control Offer must be made within 30 days following a Change of Control, must
remain open for at least 30 and not more than 40 days and must comply with the
requirements of Rule 14e-1 under the Exchange Act and any other applicable
securities laws and regulations. The Company's obligation to offer to purchase
the Series M Preferred Stock is subject to the legal availability at the Company
of funds therefor. See Risk Factors.
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PROCEDURE FOR REDEMPTION OR EXCHANGE
On and after a redemption or exchange date, unless the Company defaults in
the payment of the applicable redemption price or exchange obligations,
dividends will cease to accrue on shares of Series M Preferred Stock called for
redemption or exchange and all rights of holders of such shares will terminate
except for the right to receive the redemption price or the Series L Preferred
Stock, as the case may be, without interest. The Company will send a written
notice of redemption by first class mail to each holder of record of shares of
Series M Preferred Stock, not fewer than 30 days nor more than 60 days prior to
the date fixed for such redemption. Shares of Series M Preferred Stock issued
and reacquired will, upon compliance with the applicable requirements of
Delaware law, have the status of authorized but unissued shares of preferred
stock of the Company undesignated as to Series and may with any and all other
authorized but unissued shares of preferred stock of the Company be designated
or redesignated and issued or reissued, as the case may be, as part of any
Series of preferred stock of the Company, except that any issuance or reissuance
of shares of Series M Preferred Stock must be in compliance with the Certificate
of Designation.
In the event of partial redemptions of Series M Preferred Stock, the shares
to be redeemed will be determined pro rata or by lot, as determined by the
Company, except that the Company may redeem such shares held by any holder of
fewer than 100 shares (or shares held by holders who would hold less than 100
shares as a result of such redemption), as may be determined by the Company.
LIQUIDATION PREFERENCE
In the event of any liquidation, winding-up or dissolution of the Company,
holders of Series M Preferred Stock will be entitled to their pro rata portion
of the assets of the Company available for distribution to holders of Parity
Stock up to the liquidation preference of the Series M Preferred Stock, plus
accumulated and accrued and unpaid dividends thereon, before any distribution is
made on any Junior Stock, including, without limitation, on any Common Stock. If
upon any liquidation, winding-up or dissolution of the Company, the amounts
payable with respect to the Series M Preferred Stock and the other Parity Stock
are not paid in full, the holders of the Series M Preferred Stock and the other
Parity Stock will share equally and ratably in any distribution of assets of the
Company in proportion to the full liquidation preference to which each is
entitled. After payment of the full amount of the liquidation preferences to
which they are entitled, the holders of shares of Series M Preferred Stock will
not be entitled to any further participation in any distribution of assets of
the Company. Neither the sale, conveyance, exchange or transfer (for cash,
shares of stock, securities or other consideration) of all or substantially all
of the property or assets of the Company nor the consolidation or merger of the
Company with one or more corporations shall be deemed to be a liquidation,
winding-up or dissolution of the Company.
The Certificate of Designation for the Series M Preferred Stock does not
contain any provision requiring funds to be set aside to protect the liquidation
preference of the Series M Preferred Stock, although such liquidation preference
will be substantially in excess of the par value of such shares of Series M
Preferred Stock. In addition, the Company is not aware of any provision of
Delaware law or any controlling decision of the courts of the State of Delaware
(the state of incorporation of the Company) that requires a restriction upon the
surplus of the Company solely because the liquidation preference of the Series M
Preferred Stock will exceed its par value. Consequently, there will be no
restriction upon any surplus of the Company solely because the liquidation
preference of the Series M Preferred Stock will exceed the par value and there
will be no remedies available to holders of the Series M Preferred Stock before
or after the payment of any dividend, other than in connection with the
liquidation preference of the Company, solely by reason of the fact that such
dividend would reduce the surplus of the Company to an amount less than the
difference between the liquidation preference of the Series M Preferred Stock
and its par value.
VOTING RIGHTS
Holders of the Series M Preferred Stock will have no voting rights with
respect to general corporate matters except as provided by law or as set forth
in the Certificate of Designation therefor.
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The Certificate of Designation provides that upon a failure of the Company to
(a) pay dividends on the Series M Preferred Stock in cash or, to the extent
permitted by its terms, by the issuance of additional shares of Series M
Preferred Stock, for more than six consecutive quarterly dividend periods or (b)
discharge any redemption or exchange obligation with respect to the Series M
Preferred Stock, the size of the Company's Board of Directors will be increased
by two directors, and holders of the outstanding shares of Series M Preferred
Stock, voting or consenting, as the case may be, together as a class with the
holders of any shares of Parity Stock as to which dividends are similarly in
arrears or unpaid or the Company's redemption or exchange obligation has not
been satisfied, and to which similar voting rights apply, will be entitled to
elect two directors to fill the newly created directorships. Such voting rights
will continue until such time as all dividends in arrears on the Series M
Preferred Stock are paid in full and any failure, breach or default referred to
in clause (b) is remedied, at which time the term of the directors elected
pursuant to the provisions of this paragraph shall terminate. Each such event
described in clauses (a) and (b) above is referred to herein as a 'Voting Rights
Triggering Event.' Any vacancy occurring in the office of the directors elected
by holders of the Series M Preferred Stock (and such other Parity Stock) may be
filled by the remaining director elected by such holders unless and until such
vacancy shall be filled by such holders.
The Certificate of Designation also provides that the Company will not
create, authorize or issue any new class of capital stock senior to the Series M
Preferred Stock without the affirmative vote or consent of holders of at least a
majority of the outstanding shares of Series M Preferred Stock, voting or
consenting, as the case may be, separately as one class. The Certificate of
Designation also provides that the Company may not amend the Certificate of
Designation or the Certificate of Incorporation so as to affect adversely the
specified rights, preferences, privileges or voting rights of holders of shares
of the Series M Preferred Stock, without the affirmative vote or consent of the
holders of at least a majority of the outstanding shares of Series M Preferred
Stock, voting or consenting, as the case may be, separately as one class. The
holders of at least a majority of the outstanding shares of Series M Preferred
Stock, voting or consenting, as the case may be, separately as one class, may
also waive compliance with any provision of the Certificate of Designation. The
Certificate of Designation also provides that, except as set forth above, (a)
the creation, authorization or issuance of any shares of Junior Stock or Parity
Stock or (b) the increase or decrease in the amount of authorized capital stock
of any class, including any preferred stock, shall not require the consent of
the holders of Series M Preferred Stock, voting or consenting separately as one
class, and shall not be deemed to affect adversely the rights, preferences,
privileges or voting rights of holders of shares of Series M Preferred Stock.
Under Delaware law, holders of Series M Preferred Stock will be entitled to
vote together as a class with holders of any shares of preferred stock upon a
proposed amendment to the certificate of incorporation, whether or not entitled
to vote thereon by the certificate of incorporation, if the amendment would
increase or decrease the number of authorized shares of preferred stock,
increase or decrease the par value of the shares of such class, or alter or
change the powers, preferences or special rights of the shares of such class so
as to affect them adversely. If any proposed amendment would alter or change the
powers, preferences or special rights of one or more series of any class so as
to affect them adversely, but shall not so affect the entire class, then only
the shares of the series so affected by such amendment will be entitled to vote
thereon separately as one class.
MERGER, CONSOLIDATION AND SALE OF ASSETS
Without the affirmative vote or consent of the holders of at least a
majority of the outstanding shares of Series M Preferred Stock, voting or
consenting, as the case may be, separately as one class, the Company may not
consolidate or merge with or into, or sell, assign, transfer, lease, convey or
otherwise dispose of all or substantially all of its assets to, any person or
entity unless: (a) the entity formed by such consolidation or merger (if other
than the Company) or to which such sale, assignment, transfer, lease, conveyance
or other disposition shall have been made shall be a corporation organized or
existing under the laws of the United States or any State thereof or the
District of Columbia; (b) the Series M Preferred Stock shall be converted into
or exchanged for and shall become shares of such successor, transferee or
resulting corporation or a parent corporation of such corporation (each, a
'Successor Corporation'), having in respect of such successor, transferee or
resulting corporation or parent
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corporation substantially the same powers, preferences and relative
participating, optional or other special rights, and the qualifications,
limitations or restrictions thereon, that the Series M Preferred Stock had
immediately prior to such transaction; and (c) immediately after giving effect
to such transaction, no Voting Rights Triggering Event shall have occurred or be
continuing. The Company may consolidate or merge with or into, or sell, assign,
transfer, lease, convey or otherwise dispose of all or substantially all of its
assets to, any person or entity if such merger, consolidation or sale has been
approved by the affirmative vote or consent of holders of at least a majority of
the outstanding shares of Series M Preferred Stock, voting or consenting, as the
case may be, separately as one class. Without limiting the generality of the
foregoing, the consummation of the TBS Transaction will not require the
affirmative vote or consent of the holders of the Series M Preferred Stock. If
the TBS Transaction is consummated, the Series M Preferred Stock will be
converted into a substantially identical class of preferred stock of New Time
Warner.
COVENANT TO REPORT
Notwithstanding that the Company or any Successor Corporation, as the case
may be, may not be subject to the reporting requirements of Section 13 or
Section 15(d) of the Exchange Act, the Company or any Successor Corporation, as
the case may be, will provide the Transfer Agent and the holders of the Series M
Preferred Stock with all information, documents and reports specified in Section
13 and Section 15(d) of the Exchange Act.
TRANSFER AGENT AND REGISTRAR
Chemical is the transfer agent and registrar for the Series M Preferred
Stock.
DESCRIPTION OF SERIES L PREFERRED STOCK
The Series L Preferred Stock will be issued pursuant to a certificate of
designation (the 'Series L Certificate of Designation'). The provisions of the
Series L Preferred Stock are substantially similar to those of the Series M
Preferred Stock, except as set forth below. See'Description of Series M
Preferred Stock.' The summary contained herein of certain provisions of the
Series L Preferred Stock does not purport to be complete and is qualified in its
entirety by reference to the provisions of the Series L Certificate of
Designation filed with the Secretary of State of Delaware as an exhibit to the
Certificate of Designation. The definitions of certain terms used in the Series
L Certificate of Designation and in the following summary are set forth in the
'Glossary of Significant Terms.'
DIVIDENDS
Holders of the Series L Preferred Stock are entitled, when, as and if
declared by the Board of Directors of the Company out of funds legally available
therefor, to receive dividends on each outstanding share of the Series L
Preferred Stock, at the rate of 10 1/4% per annum. Dividends on the Series L
Preferred Stock are payable quarterly in arrears on each Dividend Payment Date,
commencing on the first Dividend Payment Date following the exchange of the
Series M Preferred Stock for the Series L Preferred Stock to holders of record
as of the immediately preceding March 15, June 15, September 15 and December 15,
respectively. Dividends on the Series L Preferred Stock will be cumulative
(whether or not earned or declared) from the date of issuance of the Series L
Preferred Stock. Dividends which are not declared and paid when due will
compound quarterly on each Dividend Payment Date at the dividend rate until
payment is made.
Until June 30, 2006, dividends payable on any Dividend Payment Date may, at
the option of the Company, be paid either in cash or by issuing fully paid and
nonassessable shares of Series L Preferred Stock with an aggregate liquidation
preference equal to the amount of such dividends. Thereafter, dividends are
payable only in cash. See 'Risk Factors.'
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MANDATORY REDEMPTION
The Company is required to redeem the outstanding shares of Series L
Preferred Stock on July 1, 2011 at a price equal to the liquidation preference
thereof plus accumulated and accrued and unpaid dividends thereon. The Company's
obligation to redeem the Series L Preferred Stock is subject to the legal
availability at the Company of funds therefor. See 'Risk Factors.'
EXCHANGE AT OPTION OF COMPANY
The Company has the option on any Dividend Payment Date to exchange, in
whole but not in part, outstanding shares of Series L Preferred Stock for Senior
Subordinated Debentures having a principal amount equal to the liquidation
preference of the Series L Preferred Stock plus accrued and unpaid dividends
thereon; provided that the Debt Exchange shall not be effected unless all
accumulated dividends have been paid in full and the Company shall have obtained
a Rating Confirmation with respect to such Debt Exchange. The Company's ability
to exchange the Series L Preferred Stock for the Senior Subordinated Debentures
is subject to the legal availability at the Company of funds therefor.
To the extent the TBS Transaction has occurred and substantially all of the
debt of the Company immediately prior to the TBS Transaction is assumed by New
Time Warner, New Time Warner may exchange the Series L Preferred Stock for
Senior Subordinated Debentures issued by New Time Warner; provided that, if
substantially all the debt of the Company immediately prior to the TBS
Transaction is assumed by New Time Warner and is guaranteed by the Company, the
Company shall similarly provide a senior subordinated guarantee for the Senior
Subordinated Debentures. But if substantially all of the debt of the Company is
not assumed by New Time Warner upon the consummation of the TBS Transaction, New
Time Warner may, at its option, exchange the Series L Preferred Stock for (i)
Senior Subordinated Debentures issued by the Company or (ii) Senior Subordinated
Debentures issued by New Time Warner with a senior subordinated guarantee of the
Company.
DESCRIPTION OF SENIOR SUBORDINATED DEBENTURES
The Senior Subordinated Debentures will be issued under an indenture
substantially in the form of the senior subordinated indenture described below
(the 'Senior Subordinated Indenture') between the Company and a trustee to be
designated by the Company prior to the issuance of the Senior Subordinated
Debentures (the 'Trustee'). The Senior Subordinated Indenture does not limit the
amount of securities which may be issued thereunder. The following description
does not purport to be complete and is subject to, and is qualified in its
entirety by reference to the Senior Subordinated Indenture, the Trust Indenture
Act of 1939, as amended (the 'Trust Indenture Act'), and the other documents
incorporated by reference herein. The terms of the Senior Subordinated
Debentures include those set forth in the Trust Indenture Act. Certain
capitalized terms are used herein as defined in the Senior Subordinated
Indenture.
GENERAL
The Senior Subordinated Debentures will be issued as direct, unsecured,
senior subordinated obligations of the Company, in an aggregate principal amount
equal to the aggregate liquidation preference of the Series L Preferred Stock
plus accrued and unpaid dividends thereon. Upon the Debt Exchange, Senior
Subordinated Debentures will be issued in fully registered form, without
coupons, only in principal amounts of $1,000 and integral multiples thereof.
Principal of and premium, if any, and interest on the Senior Subordinated
Debentures will be payable, and the Senior Subordinated Debentures will be
exchangeable and transferable, at the office or agency of the Company in The
City of New York (which initially will be the Corporate Trust Office of the
Trustee); provided, however, that payment of interest, to the extent paid in
cash, may be made at the option of the Company by check mailed to the person
entitled thereto as shown on the Register of the Senior Subordinated Debentures.
No service charge will be made for any registration of transfer or exchange of
Senior Subordinated Debentures, except for any tax or other governmental charge
that may be imposed in connection therewith.
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SUBORDINATION
The payment of the principal of and interest on the Senior Subordinated
Debentures will be subordinated in right of payment to the prior payment in full
in cash or cash equivalents of all of the Company's existing and future Senior
Indebtedness, which at March 31, 1996, after adjustment to give pro forma effect
to the Series K Refinancing, would have been approximately $8.3 billion. In
addition to such Senior Indebtedness, the Company's obligations under the Senior
Subordinated Debentures are effectively subordinated to all liabilities
(including indebtedness) of its consolidated and unconsolidated subsidiaries,
which at March 31, 1996, after adjustment to give pro forma effect to the Series
K Refinancing, aggregated approximately $16.1 billion. The Senior Subordinated
Debentures will rank senior to all existing and future Subordinated
Indebtedness. The amount of Subordinated Indebtedness outstanding at March 31,
1996, was $977 million. As of the date of this Prospectus, the Company has no
Senior Subordinated Indebtedness outstanding. In the event of an event of
default under the Company's Senior Subordinated Indebtedness or, an Event of
Default under the Senior Subordinated Debentures, 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 any of its capital stock
and the Company shall not make any payment of interest, principal or premium, if
any, on or repay, repurchase or redeem any debt securities issued by the Company
that rank pari passu with or junior to the Senior Subordinated Debentures;
provided, however, that the foregoing restrictions shall not apply to 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 Senior
Subordinated Debentures.
The Senior Subordinated Indenture does not limit the amount of Senior
Indebtedness which the Company may incur. Moreover, the Company'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 the
Company's subsidiaries will be superior to those of the Company as a
stockholder, and, therefore, the Senior Subordinated Debentures may be deemed to
be effectively subordinated to the claims of such third parties. The Senior
Subordinated Debentures will rank pari passu with the Senior Subordinated
Indebtedness and senior to the Subordinated Indebtedness.
Upon any payment or distribution of all or substantially all of the assets
of the Company or in the event of any insolvency, bankruptcy, receivership,
liquidation, dissolution, reorganization or other similar proceeding whether
voluntary or involuntary relative to the Company 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 Senior Subordinated
Debentures will be entitled to receive any distribution on account thereof. No
payments on account of the Senior Subordinated Debentures, including by way of
any Claim (as defined herein) may be made if, at any time, there is a default in
the payment of principal of or interest on or other monetary obligation with
respect to any Senior Indebtedness (including, without limitation, fees,
expenses and indemnities) or if there is an event of default with respect to any
Senior Indebtedness or any agreement pursuant to which the Senior Indebtedness
is issued which, or any event that, with the giving of notice or lapse of time,
would be an event of default and permit the holders to accelerate the maturity
thereof. The Company is obligated, upon the occurrence of any such default or
event of default, to provide written notice to the Trustee of such default or
event of default. By reason of such subordination, in the event of insolvency,
under certain circumstances the holders of Senior Subordinated Debentures may
receive less, ratably, than the Company's general creditors. As used herein,
'Claim' means any claim against the Company or any of its subsidiaries for
rescission of the Senior Subordinated Debentures or for monetary damages from
the purchase or receipt of the Senior Subordinated Debentures.
As used in the Senior Subordinated Indenture, the term 'Senior
Indebtedness' means all indebtedness or obligations, whether outstanding at the
date of execution of the Senior Subordinated Indenture or thereafter incurred,
assumed, guaranteed or otherwise created, unless the terms of the instrument or
instruments by which the Company incurred, assumed, guaranteed or otherwise
created any such indebtedness or obligation expressly provide that such
indebtedness or obligation is subordinate to all other indebtedness of the
Company or that such indebtedness or obligation is pari passu or is subordinated
in right of payment to the Senior Subordinated Debentures with respect to any of
the following (including, without limitation, interest accruing on or after a
bankruptcy or other
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similar event, whether or not an allowed claim therein): (i) any indebtedness
incurred by the Company or assumed or guaranteed, directly or indirectly, by the
Company (a) for money borrowed, (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
the Company (or of a subsidiary which is guaranteed by the Company) as lessee
under a lease of real or personal property; (iii) any obligation of the Company
to purchase property at a future date in connection with a financing by the
Company or a subsidiary of the Company; (iv) letters of credit; (v) currency
swaps and interest rate hedges; and (vi) any deferral, renewal, extension or
refunding of any of the foregoing.
INTEREST
Each Senior Subordinated Debenture shall bear interest at the rate equal to
the dividend rate of the Series L Preferred Stock from the original date of
issuance, payable semi-annually in arrears on June 30 and December 30 of each
year (each, an 'Interest Payment Date'), to the person in whose name such Senior
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 Senior Subordinated Debentures shall not continue
to remain in book-entry only form, the Company shall have the right to select
record dates, which shall be more than one Business Day prior to the Interest
Payment Date.
Until June 30, 2006, interest may, at the option of the Company, be paid in
cash or by issuing additional Senior Subordinated Debentures with a principal
amount equal to such interest. Thereafter, interest on the Senior Subordinated
Debentures must be paid in cash. 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 semi-annual 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 Senior 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.
CHANGE OF CONTROL
Upon the occurrence of a Change of Control, the Company shall make an offer
(a 'Debt Change of Control Offer') to each holder of the Senior Subordinated
Debentures to repurchase all or any part of such holder's Senior Subordinated
Debentures at a purchase price in cash equal to 101% of the principal amount of
the Senior Subordinated Debentures, plus an amount equal to all accrued and
unpaid interest thereon. The Debt Change of Control Offer must be made within 30
days following a Change of Control, must remain open for at least 30 and not
more than 40 days and must comply with the requirements of Rule 14e-1 under the
Exchange Act and any other applicable securities laws and regulations.
OPTIONAL REDEMPTION
The Company shall have the right to redeem the Senior Subordinated
Debentures, in whole or in part, from time to time, on or after July 1, 2006
(the 'Optional Redemption Date'), upon at least 30 and no more than 60 days'
notice, mailed by first-class mail to each holder's registered address. The
redemption price for the Senior Subordinated Debentures called for redemption
during the 12-month period commencing on July 1 of the years set forth below
shall be the amounts (expressed as percentages of the principal amount of the
Senior Subordinated Debentures) set forth opposite such years, plus accrued and
unpaid interest to the redemption date.
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<PAGE>
<TABLE>
<CAPTION>
PERCENTAGE
OF
PRINCIPAL
YEAR AMOUNT
- ---- ------------
<S> <C>
2006............................................................................. 105.125%
2007............................................................................. 103.844
2008............................................................................. 102.563
2009............................................................................. 101.281
2010 and thereafter.............................................................. 100.000
</TABLE>
If less than all of the Senior Subordinated Debentures are to be redeemed,
the Trustee shall select the Senior Subordinated Debentures or portions thereof
to be redeemed either pro rata or by lot. No optional redemption shall be
effected unless the Company shall have obtained a Rating Confirmation with
respect to such redemption.
COVENANTS
The Senior Subordinated Indenture will provide that the Company will not
incur, create, assume, guarantee or in any other manner become directly or
indirectly liable with respect to or responsible for, or permit to remain
outstanding, any indebtedness that is subordinate or junior in right of payment
to any Senior Indebtedness unless such indebtedness is also pari passu with, or
subordinate in right of payment to, the Senior Subordinated Debentures pursuant
to subordination provisions substantially similar to those contained in the
Senior Subordinated Indenture.
DEFEASANCE
The Senior Subordinated Indenture provides that the Company, at its option,
(a) will be Discharged (as defined in the Senior Subordinated Indenture) from
any and all obligations in respect of the Senior Subordinated Debentures (except
for certain obligations to register the transfer or exchange of the Senior
Subordinated Debentures, replace stolen, lost or mutilated Senior Subordinated
Debentures, maintain paying agencies and hold moneys for payment in trust) or
(b) need not comply with any restrictive covenant described herein, and certain
Events of Default (as defined herein) (other than those arising out of the
failure to pay interest or principal on the Senior Subordinated Debentures and
certain events of bankruptcy, insolvency and reorganization) will no longer
constitute Events of Default with respect to the Senior Subordinated Debentures,
in each case if the Company deposits with the Trustee, in trust, money or the
equivalent in U.S. Government Obligations (as defined in the Senior Subordinated
Indenture), 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 of, and interest on, the Senior
Subordinated Debentures on the dates such payments are due in accordance with
the terms of the Senior Subordinated Indenture. To exercise any such option, the
Company is required, among other things, to deliver to the Trustee an opinion of
counsel to the effect that 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), such opinion must be based on a ruling to such effect received from or
published by the United States Internal Revenue Service or upon a change in
applicable Federal income tax law. In addition, the Company is required to
deliver to the Trustee an Officers' Certificate stating that such deposit was
not made by the Company with the intent of defeating, hindering, delaying or
defrauding creditors of the Company or others.
EVENTS OF DEFAULT
If any Event of Default shall occur with respect to the Senior Subordinated
Debentures and be continuing, the Trustee will have the right to declare the
principal of and the interest on the Senior Subordinated Debentures and any
other amounts payable under the Senior Subordinated Indenture to be forthwith
due and payable and to enforce its other rights as a creditor with respect to
the Senior Subordinated Debentures. An 'Event of Default' is defined as: (i)
default for 30 days in the payment of interest on the Senior Subordinated
Debentures; (ii) default in payment of the principal amount at
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maturity or the amount payable upon redemption of the Senior Subordinated
Debentures; (iii) failure by the Company for 90 days after receipt of notice to
it by the Trustee (or the holders of at least 25% in principal amount of the
Senior Subordinated Debentures then outstanding) to comply with any of its
covenants or agreements contained in the Senior Subordinated Indenture; and (iv)
certain events of bankruptcy, insolvency, receivership or reorganization
involving the Company or certain affiliates. If any Event of Default described
in clause (i), (ii) or (iii) above occurs and is continuing, the Trustee by
notice to the Company, or the holders of not less than 25% in aggregate
principal amount of the Senior Subordinated Debentures outstanding by notice to
the Trustee and the Company, may declare the Senior Subordinated Debentures to
be due and payable and, upon any such declaration, the Senior Subordinated
Debentures shall become immediately due and payable along with any accrued and
unpaid interest. If any Event of Default described in clause (iv) above occurs
and is continuing, the Senior Subordinated Debentures 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 Senior Subordinated
Debentures then outstanding may waive certain past defaults and their
consequences with respect to the Senior Subordinated Debentures, 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 Senior
Subordinated 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 Trustee.
MODIFICATION OF THE INDENTURE
The Company and the Trustee may, without the consent of the holders of the
Senior Subordinated Debentures, enter into indentures supplemental to the Senior
Subordinated Indenture for, among others, one or more of the following purposes:
(i) to evidence the succession of another person to the Company, and the
assumption by such successor of the Company's obligations under the Senior
Subordinated Indenture and the Senior Subordinated Debentures; (ii) to add
covenants of the Company, or surrender any rights of the Company, for the
benefit of the holders of Senior Subordinated Debentures or Subordinated
Debentures of any or all series; (iii) to cure any ambiguity, or correct any
inconsistency in the Senior Subordinated Indenture; (iv) to evidence and provide
for the acceptance of any successor Trustee with respect to the Senior
Subordinated Debentures or to facilitate the administration of the trusts
thereunder by one or more trustees in accordance with the Senior Subordinated
Indenture; (v) to establish the form or terms of any series of Senior
Subordinated Debentures; and (vi) to provide any additional Events of Default.
The Senior Subordinated Indenture contains provisions permitting the
Company and the Trustee, with the consent of the holders of not less than a
majority in principal amount of the outstanding Senior Subordinated Debentures,
to modify the Senior Subordinated Indenture; provided that no such modification
may, without the consent of the holders of each outstanding Senior Subordinated
Debenture affected thereby, (i) reduce the amount of Senior Subordinated
Debentures the holders of which must consent to any amendment, supplement or
waiver of the Senior Subordinated Indenture; (ii) reduce the rate of or extend
the time for the payment of interest on any Senior Subordinated Debenture; (iii)
alter the method of calculation of, or reduce, the amount paid at maturity or
extend the fixed maturity of any Senior Subordinated Debenture; (iv) make any
Senior Subordinated Debenture payable in money or property other than that
stated in the Senior Subordinated Debenture; (v) make any change to the
subordination terms that adversely affects the rights of any holder of the
Senior Subordinated Debentures; or (vi) make any change to the provisions
relating to waivers of past defaults or the rights of holders of the Senior
Subordinated Debentures to receive payments or reduce the percentage of Senior
Subordinated Debentures the holders of which are required to consent to any such
modification.
CONSOLIDATION, MERGER AND SALE
The Senior Subordinated Indenture provides that the Company may, without
the consent of the holders of the Senior 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;
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provided that in any such case (i) the successor person (if other than the
Company) (a) is an entity organized and existing under the laws of the United
States of America or any political subdivision thereof and (b) such entity or
its parent corporation assumes by a supplemental indenture the Company's
obligations under the Senior Subordinated Indenture, (ii) immediately after
giving effect to such transaction, no Event of Default shall have occurred and
be continuing and (iii) the Company shall have delivered to the Trustee an
officer's certificate and opinion of counsel stating that such consolidation,
merger or transfer and such supplemental indenture comply with the Senior
Subordinated Indenture. The TBS Transaction is not subject to approval by the
holders of the Senior Subordinated Debt.
GOVERNING LAW
The Senior Subordinated Indenture and the Senior Subordinated Debentures
will be governed by, and construed in accordance with, the laws of the State of
New York.
INFORMATION CONCERNING THE TRUSTEE
The Trustee, prior to default, undertakes to perform only such duties as
are specifically set forth in the Senior Subordinated 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 Trustee is under no obligation to exercise any of the powers vested in it by
the Senior Subordinated Indenture at the request of any holder of Senior
Subordinated Debentures, unless offered reasonable indemnity by such holder
against the costs, expenses and liabilities that might be incurred thereby. The
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 Trustee may be one of a number of banks with which the
Company and its subsidiaries maintain ordinary banking and trust relationships.
MISCELLANEOUS
The Company will have the right at all times to assign any of its rights or
obligations under the Senior Subordinated Indenture 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, the Senior Subordinated Indenture will be
binding upon and inure to the benefit of the parties thereto and their
respective successors and assigns.
DESCRIPTION OF OUTSTANDING CAPITAL STOCK
The summary contained herein of the outstanding capital stock of the
Company does not purport to be complete and is qualified in its entirety by
reference to the following documents: (i) the Company's Certificate of
Incorporation; (ii) the Company's by laws; and (iii) the Rights Agreement, as
amended, between the Company and Chemical Bank, Rights Agent (the 'Rights
Agreement').
The outstanding capital stock of the Company at April 30, 1996 consisted of
37.8 million shares of preferred stock and 391.6 million shares of Common Stock
(net of 46.8 million shares of Common Stock in treasury).
COMMON STOCK
Subject to the rights of the holders of any outstanding shares of preferred
stock, holders of Common Stock are entitled to receive dividends when, as and if
declared by the Board of Directors out of funds legally available therefor.
Each holder of Common Stock is entitled to one vote for each share held on
all matters voted upon by the stockholders of the Company, including the
election of directors. The Common Stock does not have cumulative voting rights.
Election of directors is decided by the holders of a plurality of the shares
entitled to vote and present in person or by proxy at a meeting for the election
of directors. See
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'Description of Series M Preferred Stock' for a discussion of the voting rights
of the Series M Preferred Stock.
In the event of any voluntary or involuntary liquidation, dissolution or
winding up of the Company, after the payment or provision for payment of the
debts and other liabilities of the Company and the preferential amounts to which
holders of the Company's preferred stock are entitled, the holders of Common
Stock are entitled to share ratably in the remaining assets of the Company.
The Common Stock has no preemptive or conversion rights and there are no
redemption or sinking fund provisions applicable thereto.
The Common Stock of the Company is listed on the New York Stock Exchange,
the Pacific Stock Exchange and the International Stock Exchange and Stock
Exchange of the United Kingdom and the Republic of Ireland, Ltd. The transfer
agent and the registrar for the Common Stock is Chemical Bank.
PREFERRED STOCK
Set forth below is a summary of the principal terms of the Company's
outstanding issues of preferred stock, all of which are Parity Stock:
<TABLE>
<CAPTION>
NUMBER OF
SHARES
SHARES OF COMMON STOCK EARLIEST EARLIEST
OUTSTANDING AT ISSUABLE UPON EXCHANGE REDEMPTION
DESCRIPTION APRIL 30, 1996 CONVERSION DATE DATE
------------ -------------- --------------- -------- ------------
(MILLIONS) (MILLIONS)
<S> <C> <C> <C> <C>
Series B Preferred Stock................ .4 -- -- At any time
Series C Preferred Stock................ 3.3 6.8 5/2/98 5/2/00
Series D Preferred Stock................ 11.0 22.9 7/6/99 7/6/00
Series E Preferred Stock................ 3.3 6.8 1/4/01 1/4/01
Series F Preferred Stock................ 3.2 6.7 1/4/00 1/4/01
Series G Preferred Stock................ 6.2 12.9 9/5/99 9/5/99
Series H Preferred Stock................ 1.8 3.7 9/5/00 9/5/99
Series I Preferred Stock................ 7.0 14.6 10/2/99 10/2/99
Series K Preferred Stock................ 1.6 --
----- -----
Total shares....................... 37.8 74.4
----- -----
----- -----
</TABLE>
Each share of Series B Preferred Stock: (1) is entitled to a liquidation
preference of $145 per share, (2) is not convertible, (3) entitles the holder
thereof to receive an annual dividend equal to $4.35 per share beginning in June
1995, and $9.28 per share prior thereto, (4) does not generally entitle the
holder thereof to vote, except in certain limited circumstances and (5) is
redeemable, in whole or in part, by the Company and the holders thereof in
exchange for cash or shares of any class or series of publicly-traded Company
stock, at the Company's option, equal in value to the liquidation value of the
Series B Preferred Stock plus a premium of 2% of liquidation value for each year
after May 31, 1995 to the redemption date.
The principal terms of each series of convertible preferred stock issued in
1995 and 1996 (the Series C Preferred Stock, the Series D Preferred Stock, the
Series E Preferred Stock, the Series F Preferred Stock, the Series G Preferred
Stock, the Series H Preferred Stock and the Series I Preferred Stock,
collectively referred to as the 'Convertible Preferred Stock') are similar in
nature, unless otherwise noted below. Each share of Convertible Preferred Stock:
(1) is entitled to a liquidation preference of $100 per share, (2) is
immediately convertible into 2.08264 shares of the Common Stock at a conversion
price of $48 per share (based on its liquidation value), except that shares of
the Series H Preferred Stock are generally not convertible until September 5,
2000, (3) entitles the holder thereof (i) to receive for a four-year period from
the date of issuance (or a five year period with respect to the Series C and
Series E Preferred Stock) an annual dividend per share equal to the greater of
$3.75 and an amount equal to the dividends paid on the Common Stock into which
each share may be converted and (ii) to the extent that any of such shares of
preferred stock remain outstanding at the end of the period in which the minimum
$3.75 per share dividend is to be paid, the holders thereafter will receive
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dividends equal to the dividends paid on shares of Common Stock multiplied by
the number of shares into which their shares of preferred stock are convertible
and (4) except for the Series H Preferred Stock, which is generally not entitled
to vote, entitles the holder thereof to vote with the common stockholders on all
matters on which the common stockholders are entitled to vote, and each share of
such Convertible Preferred Stock is entitled to two votes on any such matter.
The Company has the right to exchange each series of Convertible Preferred
Stock for Common Stock at the stated conversion price at any time on or after
the respective exchange date. The Series C Preferred Stock is exchangeable by
the holder beginning after the third year from its date of issuance and by the
Company after the fourth year at the stated conversion price plus a declining
premium in years four and five and no premium thereafter. In addition, the
Company has the right to redeem each series of Convertible Preferred Stock, in
whole or in part, for cash at the liquidation value plus accrued dividends, at
any time on or after the respective redemption date.
In 1993, the Company redeemed or exchanged $6.4 billion of Series C and
Series D preferred stock ('old Series C and Series D preferred stock') that were
issued in the Company's 1989 acquisition of Warner Communications Inc. The cash
redemption of the old Series D Preferred Stock was financed principally by the
proceeds from the issuance of long-term notes and debentures. The old Series C
Preferred Stock was exchanged for the 8.75% Convertible Debentures.
At March 31, 1996, the Company had reserved 177 million shares of Common
Stock for the conversion of its Convertible Preferred Stock, zero coupon
convertible notes and other convertible securities, and for the exercise of
outstanding options to purchase shares of Common Stock.
SHAREHOLDER RIGHTS PLAN
Pursuant to a shareholder rights plan adopted in January 1994, the Company
distributed one right per share of Common Stock which becomes exercisable in
certain events involving the acquisition of 15% or more of the then outstanding
Common Stock of the Company. Upon the occurrence of such an event, each right
entitled its holder to purchase for $150 the economic equivalent of Common
Stock, or in certain circumstances, common stock of the acquiror, worth twice as
much. In connection with the plan, 4 million shares of Series A Preferred Stock,
which is junior to the Parity Stock, were reserved. The rights expire on January
20, 2004. In connection with the TBS Transaction, the Company expects to amend
the shareholder rights plan principally to change the basis for determining if
an acquisition of 15% or more of the Common Stock has occurred to a
fully-diluted basis.
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The following discussion of certain of the anticipated federal income tax
consequences of an exchange of the Series K Preferred Stock for Series M
Preferred Stock and of the purchase, ownership, and disposition of the Series M
Preferred Stock, Series L Preferred Stock, and Senior Subordinated Debentures is
based upon the provisions of the Internal Revenue Code of 1986, as amended (the
'Code'), the final, temporary, and proposed regulations promulgated thereunder,
and administrative rulings and judicial decisions now in effect, all of which
are subject to change (possibly with retroactive effect) or different
interpretations. In particular, Congress could enact legislation affecting the
treatment of stock with characteristics similar to the Series M Preferred Stock
or the Treasury Department could change the current law in future regulations,
including regulations issued pursuant to its authority under Section 337(d) of
the Code. Any such legislation or regulations could be enacted or promulgated to
apply retroactively to the Series M Preferred Stock. This summary does not
purport to deal with all aspects of federal income taxation that may be relevant
to a particular investor, nor any tax consequences arising under the laws of any
state, locality, or foreign jurisdiction, and it is not intended to be
applicable to all categories of investors, some of which, such as dealers in
securities, banks, insurance companies, tax-exempt organizations, foreign
persons, persons that hold Series M Preferred Stock, Series L Preferred Stock,
or Senior Subordinated Debentures as part of a straddle or conversion
transaction, or holders subject to the alternative minimum tax, may be subject
to special rules. In addition, the summary is limited to persons that will hold
the Series M Preferred Stock, Series L Preferred Stock, and Senior Subordinated
Debentures as 'capital assets'(generally, property held for
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investment) within the meaning of Section 1221 of the Code. No ruling has been
or will be requested by the Company from the Internal Revenue Service ('the
Service') on any tax matters relating to the Series M Preferred Stock, Series L
Preferred Stock, or Senior Subordinated Debentures, and there can be no
assurance that the Service will agree with the views expressed below. ALL
INVESTORS ARE ADVISED TO CONSULT THEIR OWN TAX ADVISERS REGARDING THE FEDERAL,
STATE, LOCAL, AND FOREIGN TAX CONSEQUENCES OF THE PURCHASE, OWNERSHIP, AND
DISPOSITION OF SERIES M PREFERRED STOCK, SERIES L PREFERRED STOCK, OR SENIOR
SUBORDINATED DEBENTURES.
TAXATION OF HOLDERS ON EXCHANGE
Although the matter is not free from doubt, an exchange of shares of Series
K Preferred Stock for shares of Series M Preferred Stock pursuant to the
Exchange Offer should not be a taxable event to holders of Series K Preferred
Stock, and holders should not recognize any taxable gain or loss as a result of
such an exchange or a filing. Accordingly, a holder would have the same adjusted
basis and holding period in the Series M Preferred Stock as it had in the Series
K Preferred Stock immediately before the exchange. Further, the tax consequences
of ownership and disposition of any shares of Series M Preferred Stock should be
the same as the tax consequences of ownership and disposition of shares of the
Series K Preferred Stock.
SERIES M PREFERRED STOCK
In the opinion of counsel, the Series M Preferred Stock will be stock of
the Company for federal income tax purposes. There are, however, no federal
income tax regulations, court decisions, or published Service rulings bearing
directly on certain features of the Series M Preferred Stock. In addition, the
Service announced during 1987 that it was studying the federal income tax
consequences of stock that has certain voting and liquidation rights in an
issuing corporation, but whose dividend rights are determined by reference to
the earnings and profits of a segregated portion of the issuing corporation's
assets, and that it would not issue any advance rulings regarding such stock. In
1995, the Service withdrew such stock from its list of matters under
consideration and reiterated that it would not issue advance rulings regarding
such stock. In the absence of such a ruling, it is possible that the Service
could claim that the Series M Preferred Stock represents property other than
stock of the Company. While counsel recognizes that this matter cannot be viewed
as free from doubt because there is no conclusive authority dealing with the
precise facts presented by the Series M Preferred Stock, counsel believes that
if the status of the Series M Preferred Stock as stock of the Company for
federal income tax purposes were challenged, a court would agree that the Series
M Preferred Stock is stock of the Company.
Legislation has recently been proposed that would require taxpayers to
recognize gain upon a constructive sale (i.e., the substantial elimination of
risk of loss and opportunity for gain) of an appreciated position in stock, a
debt instrument, or a partnership interest. Although the scope of the provision
is unclear in the absence of Congressional committee reports or other further
elaboration, the Company believes that such proposed legislation should not
apply to the Series M Preferred Stock. Further, it is not clear whether or in
what form the proposed legislation will be enacted.
If the Series M Preferred Stock is not considered stock of the Company,
then holders might be considered for federal income tax purposes to own
interests in TWE. In such event, a holder would be treated as receiving a
distributive share of the income, gain, loss, deductions, and credits of TWE and
would not be eligible for the dividends-received deduction. In addition, the
timing of the items of income and deduction holders would receive with respect
to such deemed interests in TWE would be uncertain and most likely would not
correspond to the timing of the distributions they would receive as holders of
the Series M Preferred Stock.
If the Series M Preferred Stock is not considered stock of the Company or
the Company is treated as having constructively sold a portion of the TWE Series
B Capital, then the Company would recognize substantial taxable gain in
connection with the issuance of the Series M Preferred Stock.
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The discussion herein is based upon the foregoing opinion that the Series M
Preferred Stock is stock of the Company for federal income tax purposes.
DISTRIBUTIONS ON SERIES M PREFERRED STOCK OR SERIES L PREFERRED STOCK
The amount of any distribution with respect to the Series M Preferred Stock
or Series L Preferred Stock will be equal to the amount of cash or the fair
market value of the shares of Series M Preferred Stock or Series L Preferred
Stock distributed. A stockholder's initial tax basis in any additional shares of
Series M Preferred Stock or Series L Preferred Stock distributed by the Company
will be equal to the fair market value of such additional shares of Series K
Preferred Stock or Series L Preferred Stock on the date of distribution. A
stockholder's holding period for such additional shares of Series M Preferred
Stock or Series L Preferred Stock will commence on the day following the date of
distribution and will not include such stockholder's holding period for the
shares of Series M Preferred Stock or Series L Preferred Stock with respect to
which the additional shares of Series M Preferred Stock or Series L Preferred
Stock were distributed.
The amount of any distribution with respect to the Series M Preferred Stock
or Series L Preferred Stock, whether paid in cash or in additional shares of
Series M Preferred Stock or Series L Preferred Stock, will be a dividend,
taxable as ordinary income to the recipient thereof, to the extent of the
Company's current or accumulated earnings and profits ('earnings and profits')
as determined under U.S. federal income tax principles. Under Section 243 of the
Code, corporate shareholders generally will be able to deduct 70% of the amount
of any distribution qualifying as a dividend. There are, however, many
exceptions and restrictions relating to the availability of such
dividends-received deduction such as restrictions relating to (i) the holding
period of stock the dividends on which are sought to be deducted, (ii)
debt-financed portfolio stock, (iii) dividends treated as 'extraordinary
dividends' for purposes of Section 1059 of the Code, and (iv) taxpayers that pay
alternative minimum tax. Corporate shareholders should consult their own tax
advisers regarding the extent, if any, to which such exceptions and restrictions
may apply to their particular factual situation. Additionally, recently proposed
legislation would reduce the applicable dividends-received deduction from 70% to
50% and could also affect the availability of such deduction to corporate
shareholders that do not meet applicable holding period requirements. It is
uncertain whether or in what form such legislation will be enacted into law.
Corporate shareholders should consult their own tax advisers regarding the
extent, if any, to which such legislation may apply to their particular factual
situation.
Additionally, the excess of the liquidation preference over the issue price
of the Series M Preferred Stock or the Series L Preferred Stock, if more than a
de minimis amount, would be accrued as dividend income (to the extent of the
Company's earnings and profits) by a holder on a constant yield basis over its
term. Because the issue price of any additional shares of Series M Preferred
Stock or Series L Preferred Stock distributed by the Company in lieu of a cash
payment generally will equal the fair market value of such shares of Series M
Preferred Stock or Series L Preferred Stock on the date of distribution, the
amount of any redemption premium, and the tax consequences thereof, may need to
be separately determined for each such distribution. Further, it is not clear
whether the issue price of any shares of Series L Preferred Stock issued in
exchange for shares of Series M Preferred Stock, or any shares of stock of New
Time Warner issued to holders of the Series M Preferred Stock or Series L
Preferred Stock in the TBS Transaction, will equal the issue price of the shares
so exchanged or will equal the fair market value of the shares received at the
time of such exchange. Holders should consult their own tax advisers regarding
the application of the redemption premium rules to their particular situation.
REDEMPTION, SALE, OR EXCHANGE
No gain or loss will be recognized by a holder that exchanges shares of
Series M Preferred Stock for shares of Series L Preferred Stock (except to the
extent that such shares of Series L Preferred Stock are attributable to declared
dividends, which will be treated in the same manner as distributions described
above). The basis of shares of Series L Preferred Stock so received by such
holder in the exchange will be the same as that of the shares of Series M
Preferred Stock exchanged therefor. The holder's holding period for such shares
of Series L Preferred Stock will include the holder's holding
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period for the shares of Series M Preferred Stock so exchanged, provided that
the shares of Series M Preferred Stock were held as a capital asset. Recently
proposed legislation would tax gain on an exchange of preferred stock for
preferred stock unless the new preferred stock is comparable to the preferred
stock exchanged therefor and of a same or lesser value. It is uncertain whether
or in what form such legislation will be enacted into law.
A sale or redemption of the shares of Series M Preferred Stock or Series L
Preferred Stock for cash by a holder who will not continue to own stock of the
Company, actually or constructively, following the redemption will be a taxable
transaction on which a holder will generally recognize capital gain or loss
(except to the extent of amounts received on the exchange that are attributable
to declared dividends, which will be treated in the same manner as distributions
described above). The gain or loss recognized on such exchange will generally be
equal to the difference between the amount realized by the holder and such
holder's adjusted tax basis in the shares of Series M Preferred Stock or shares
of Series L Preferred Stock surrendered in the redemption. Different rules may
apply to holders that continue to own stock of the Company, actually or
constructively, following the redemption.
A redemption of shares of Series L Preferred Stock in exchange for Senior
Subordinated Debentures will be subject to the same general rules as a
redemption for cash, except that the holder would have capital gain or loss
equal to the difference between the issue price of the Senior Subordinated
Debentures received and the holder's adjusted tax basis in the shares of Series
L Preferred Stock redeemed. The issue price of the Senior Subordinated
Debentures would be determined in the manner described below under ' -- Original
Issue Discount' for purposes of computing original issue discount on the Senior
Subordinated Debentures.
Depending upon a holder's particular circumstances, the tax consequences of
holding Senior Subordinated Debentures may be less advantageous than the tax
consequences of holding Series M Preferred Stock or Series L Preferred Stock
because, for example, payments of interest on the Senior Subordinated Debentures
will not be eligible for any dividends-received deduction that may be available
to corporate holders and because, as discussed below, Senior Subordinated
Debentures may be issued with original issue discount ('OID').
ORIGINAL ISSUE DISCOUNT
If the Series L Preferred Stock is exchanged for Senior Subordinated
Debentures at a time when the stated redemption price at maturity of the Senior
Subordinated Debentures exceeds their issue price by more than a de minimis
amount, the Senior Subordinated Debentures will be treated as having OID equal
to the entire amount of such excess. If the Senior Subordinated Debentures are
deemed to be traded on an established securities market at any time during the
60-day period ending 30 days after their issue date, the issue price of the
Senior Subordinated Debentures will be their fair market value as determined as
of their issue date. Subject to certain limitations described in the
regulations, the Senior Subordinated Debentures will be deemed to be traded on
an established securities market if, among other things, price quotations are
readily available from dealers, brokers, or traders. Similarly, if the Series L
Preferred Stock, but not the Senior Subordinated Debentures issued and exchanged
therefor, is deemed to be traded on an established securities market at the time
of the exchange, then the issue price of each Senior Subordinated Debenture
should be the fair market value of the shares of Series L Preferred Stock
exchanged therefor at the time of the exchange. The Series L Preferred Stock
will generally be deemed to be traded on an established securities market if it
appears on a system of general circulation that provides a reasonable basis to
determine fair market value based either on recent price quotations or recent
sales transactions. In the event that neither the Series L Preferred Stock nor
the Senior Subordinated Debentures is deemed to be traded on an established
securities market, the issue price of the Senior Subordinated Debentures will be
their stated principal amount or, in the event the Senior Subordinated
Debentures do not bear 'adequate stated interest' within the meaning of Section
1274 of the Code, their 'imputed principal amount,' which is generally the sum
of the present values of all payments due under the Senior Subordinated
Debentures, discounted from the date of payment to their issue date at the
appropriate 'applicable federal rate.'
The stated redemption price at maturity of the Senior Subordinated
Debentures would equal the total of all payments required to be made thereon,
other than payments of qualified stated interest.
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Qualified stated interest generally is stated interest that is unconditionally
payable in cash or other property (other than debt instruments of the issuer) at
least annually at a single fixed rate. Therefore, Senior Subordinated Debentures
that are issued when the Company has the option to pay interest in additional
Senior Subordinated Debentures will be treated as having been issued with
interest in excess of qualified stated interest. Accordingly, the excess of (x)
all interest payable pursuant to the stated interest rate on such Senior
Subordinated Debentures over (y) the qualified stated interest, in each case
determined over the entire term, will be treated as OID and accrued under a
constant yield method by the holder, and the holder should not also treat the
receipt of such excess stated interest on such Senior Subordinated Debentures as
interest for federal income tax purposes.
An additional Senior Subordinated Debenture (a 'Secondary Debenture')
issued in payment of interest with respect to an initially issued Senior
Subordinated Debenture (an 'Initial Debenture') will not be considered as a
payment made on the Initial Debenture and will be aggregated with the Initial
Debenture for purposes of computing and accruing OID on the Initial Debenture.
As between the Initial Debenture and the Secondary Debenture, the Company will
allocate the adjusted issue price of the Initial Debenture between the Initial
Debenture and the Secondary Debenture in proportion to their respective
principal amounts. That is, upon its issuance of a Secondary Debenture with
respect to an Initial Debenture, the Company intends to treat the Initial
Debenture and the Secondary Debenture derived from the Initial Debenture as
initially having the same adjusted issue price and inherent amount of OID per
dollar of principal amount. The Initial Debenture and the Secondary Debenture
derived therefrom will be treated as having the same yield to maturity. Similar
treatment will be applied when additional Senior Subordinated Debentures are
issued on Secondary Debentures.
BOND PREMIUM ON SENIOR SUBORDINATED DEBENTURES RECEIVED IN EXCHANGE
If, at the time the Series L Preferred Stock is exchanged for Senior
Subordinated Debentures or a holder purchases Senior Subordinated Debentures,
the holder's tax basis in any such Senior Subordinated Debenture exceeds the
amount payable at the maturity date, such excess may constitute amortizable bond
premium that the holder may elect to amortize over the term of the Senior
Subordinated Debenture on a constant yield method. A holder who elects to
amortize bond premium must reduce its tax basis in the Senior Subordinated
Debentures by the amount so amortized, and the amount amortized in any year will
be treated as a reduction of interest income on the Senior Subordinated
Debentures. The election to amortize premium applies to all obligations owned or
acquired by the holder in the current and all subsequent tax years and may not
be revoked without the consent of the Service. Bond premium on a Senior
Subordinated Debenture held by a holder that does not make such an election will
decrease the gain or increase the loss otherwise recognized on disposition of
the Senior Subordinated Debenture.
ACQUISITION PREMIUM
A holder of a Senior Subordinated Debenture issued with OID who purchases
such Senior Subordinated Debenture for an amount greater than the sum of all
amounts payable on the Senior Subordinated Debenture after the purchase date
other than qualified stated interest will not be required to include any OID in
income. A holder of a Senior Subordinated Debenture issued with OID who
purchases such Senior Subordinated Debenture for an amount that is greater than
its adjusted issue price but equal to or less than the sum of all amounts
payable on the Senior Subordinated Debenture after the purchase date other than
payments of qualified stated interest will be considered to have purchased such
Senior Subordinated Debenture at an 'acquisition premium.' Under the acquisition
premium rules, the amount of OID that such holder must include in income with
respect to such Senior Subordinated Debenture for any taxable year will be
reduced by the portion of such acquisition premium properly allocable to such
year.
MARKET DISCOUNT ON RESALE OF SENIOR SUBORDINATED DEBENTURES
Holders of Senior Subordinated Debentures should be aware that a
disposition of the Senior Subordinated Debentures may be affected by the market
discount provisions of Sections 1276-78 of the
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Code. These rules generally provide that, if a holder acquires Senior
Subordinated Debentures at a market discount that equals or exceeds one-fourth
of one percent of the stated redemption price of the Senior Subordinated
Debentures at maturity multiplied by the number of remaining years to maturity
and thereafter recognizes gain upon a disposition of the Senior Subordinated
Debentures, the lesser of (i) such gain or (ii) the portion of the market
discount that accrued while the Senior Subordinated Debenture was held by such
holder will be treated as ordinary income at the time of the disposition. For
these purposes, market discount means the excess (if any) of the stated
redemption price at maturity (or, if an instrument is issued with OID, the
instrument's revised issue price, which is the sum of the issue price of the
instrument and the aggregate amount of OID includible in the gross income of all
previous holders of the instrument) over the basis of such Senior Subordinated
Debenture immediately after its acquisition by the holder. A holder of a Senior
Subordinated Debenture may elect to include any market discount in income
currently rather than upon disposition of the Senior Subordinated Debenture.
This election once made applies to all market discount obligations acquired in
or after the first taxable year to which the election applies and may not be
revoked without the consent of the Service.
A holder of any Senior Subordinated Debenture who acquired such Senior
Subordinated Debenture at a market discount generally will be required to defer
the deduction of a portion of the interest on any indebtedness incurred or
maintained to purchase or carry such Senior Subordinated Debenture until the
market discount is recognized upon a subsequent disposition of such Senior
Subordinated Debenture. Such a deferral is not required, however, if the holder
elects to include accrued market discount in income currently.
REDEMPTION OR SALE OF SENIOR SUBORDINATED DEBENTURES
Generally, any redemption or sale of Senior Subordinated Debentures by a
holder will result in taxable gain or loss equal to the difference between the
amount of cash received (except to the extent the cash received is attributable
to accrued interest) and the holder's adjusted tax basis in such Senior
Subordinated Debentures. The adjusted tax basis of a holder who received such
Senior Subordinated Debentures in exchange for the Series L Preferred Stock will
generally be equal to the issue price of such Senior Subordinated Debentures,
increased by any OID or market discount on the Senior Subordinated Debentures
included in such holder's income prior to their sale or redemption, and reduced
by any bond premium previously allowed as an offset to interest payments on such
Senior Subordinated Debentures and any cash payments on the Senior Subordinated
Debentures other than qualified stated interest. Such gain or loss would be
capital gain or loss if the Senior Subordinated Debentures were held as a
capital asset and would be long-term gain or loss if the holder's holding period
exceeded one year. Cash received that is attributable to accrued interest will
be included in income as ordinary income.
APPLICABLE HIGH YIELD DISCOUNT OBLIGATIONS
Pursuant to Section 163 of the Code a portion of the OID accruing on
certain debt instruments may be treated as a dividend eligible for the
dividends-received deduction and the corporation issuing such debt instrument
would not be entitled to deduct the 'disqualified portion' of the OID accruing
on such debt instrument and would be allowed to deduct the remainder of the OID
only when paid.
This treatment would apply to 'applicable high yield discount obligations'
('AHYDO'), that is, debt instruments that have a term of more than five years,
have a yield to maturity that equals or exceeds five percentage points over the
'applicable federal rate,' and have 'significant' OID. A debt instrument is
treated as having 'significant' OID if the aggregate amount that would be
includible in gross income with respect to such debt instrument for periods
before the close of any accrual period ending after a date five years after the
date of issue exceeds the sum of (i) the aggregate amount of interest to be paid
in cash under the debt instrument before the close of such accrual period and
(ii) the product of the initial issue price of such debt instrument and its
yield to maturity. Because the amount of OID attributable to the Senior
Subordinated Debentures will be determined at the time such Senior Subordinated
Debentures are issued and the applicable federal rate at the time the Senior
Subordinated
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Debentures are issued is not predictable, it is impossible to determine at the
present time whether a Senior Subordinated Debenture will be treated as an
AHYDO.
If a Senior Subordinated Debenture is treated as an AHYDO, a holder would
be treated as receiving dividend income (to the extent of the Company's earnings
and profits) solely for purposes of the dividends-received deduction in an
amount equal to the 'dividend equivalent portion' of the 'disqualified portion'
of the OID of such AHYDO. The 'disqualified portion' of the OID is equal to the
lesser of (i) the amount of OID or (ii) the portion of the 'total return' (the
excess of all payments to be made with respect to such obligation over its issue
price) on such obligation that bears the same ratio to the obligation's total
return as the 'disqualified yield' (the extent to which the yield exceeds the
applicable federal rate plus 6%) bears to the obligation's yield to maturity.
The dividend equivalent portion of the disqualified portion is the portion of
such portion that would be treated as a dividend if distributed by the issuer
with respect to its stock. The Company's deduction for OID will be substantially
deferred with respect to a Senior Subordinated Debenture that is treated as an
AHYDO. In addition, such deduction will be disallowed if and to the extent that
the yield on such AHYDO exceeds the applicable federal rate by more than 6%.
BACKUP WITHHOLDING
In general, a noncorporate holder of Series M Preferred Stock, Series L
Preferred Stock, or Senior Subordinated Debentures will be subject to backup
withholding at the rate of 31% with respect to reportable payments of dividends,
interest, or OID accrued with respect to, or the proceeds of a sale, exchange,
or redemption of, Series M Preferred Stock, Series L Preferred Stock, or Senior
Subordinated Debentures, as the case may be, if the holder fails to provide a
taxpayer identification number or certification of foreign or other exempt
status or fails to report in full dividend and interest income. Amounts paid as
backup withholding do not constitute an additional tax and will be credited
against the holder's federal income tax liabilities.
THE UNITED STATES FEDERAL TAX DISCUSSION SET FORTH ABOVE IS INCLUDED FOR
GENERAL INFORMATION ONLY AND MAY OR MAY NOT BE APPLICABLE DEPENDING UPON A
HOLDER'S PARTICULAR SITUATION. HOLDERS SHOULD CONSULT THEIR TAX ADVISERS WITH
RESPECT TO THE TAX CONSEQUENCES TO THEM OF THE OWNERSHIP AND DISPOSITION OF THE
SERIES M PREFERRED STOCK, THE SERIES L PREFERRED STOCK, OR THE SENIOR
SUBORDINATED DEBENTURES, INCLUDING THE TAX CONSEQUENCES UNDER STATE, LOCAL,
FOREIGN, AND OTHER TAX LAWS AND THE POSSIBLE EFFECTS OF CHANGES IN FEDERAL OR
OTHER TAX LAWS.
LEGAL OPINION
Certain legal matters in connection with the exchange of the Series K
Preferred Stock for the Series M Preferred Stock will be passed upon for the
Company by Paul, Weiss, Rifkind, Wharton & Garrison, New York, New York. As of
May 20, 1996 certain members of Paul, Weiss, Rifkind, Wharton & Garrison, who
are participating in the representation of the Company, owned approximately
14,050 shares of Common Stock.
EXPERTS
The consolidated financial statements and schedules of the Company and TWE
appearing in the 10-K, the combined financial statements of the Time Warner
Service Partnerships incorporated by reference therein, and the consolidated
financial statements and schedule of Cablevision Industries Corporation as of
December 31, 1995, and for the year then ended incorporated by reference in this
Prospectus from the May 15, 1996 8-K, have been audited by Ernst & Young LLP,
independent auditors, as set forth in their reports thereon included therein and
incorporated herein by reference. Such financial statements and schedules are
incorporated herein by reference in reliance upon such reports given 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, 1994 and 1993,
and for each of the three years in the period ended July 31, 1994, and the
financial statements of Vision Cable Division of Vision Cable Communications,
Inc. and Subsidiaries as of December 31, 1994 and 1993, and for each of the
three years in the period ended December 31, 1994, incorporated by reference in
this Prospectus from the May 15, 1996 8-K, have been audited by Ernst & Young
LLP, independent auditors, as set forth in their reports thereon included
therein and incorporated herein by reference. Such financial statements are
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 Paragon Communications as of December 31,
1994 and 1993, and for each of the three years in the period ended December 31,
1994, incorporated by reference in this Prospectus from the 10-K, and the
consolidated financial statements of Turner Broadcasting System, Inc. as of
December 31, 1995 and 1994, and for the three years in the period ended
December 31, 1995, incorporated by reference in this Prospectus from the May
15, 1996 8-K, have been audited by Price Waterhouse LLP, independent
accountants, as set forth in their reports thereon included therein and
incorporated herein by reference. Such financial statements are incorporated
herein by reference in reliance upon such reports given upon the authority of
such firm as experts in accounting and auditing.
The consolidated financial statements of Cablevision Industries Corporation
as of December 31, 1994, and for each of the two years in the period ended
December 31, 1994, incorporated by reference in this Prospectus from the May 15,
1996 8-K, have been audited by Arthur Andersen LLP, Independent Public
Accountants, as set forth in their report thereon included therein and
incorporated herein by reference. Such consolidated financial statements have
been incorporated herein by reference in reliance upon such report given upon
the authority of such firm as experts in accounting and auditing.
The consolidated financial statements of KBLCOM Incorporated as of December
31, 1994 and 1993, and for each of the three years in the period ended December
31, 1994, incorporated by reference in this Prospectus from the May 15, 1996
8-K, have been audited by Deloitte & Touche LLP, Independent Auditors, as set
forth in their report thereon included therein and incorporated herein by
reference. Such consolidated financial statements have been incorporated herein
by reference in reliance upon such report given upon the authority of such firm
as experts in accounting and auditing.
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The following information is being disclosed pursuant to Florida law and is
accurate as of the date hereof: A subsidiary of Warner Communications Inc. 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 Capital, Tallahassee,
Florida 32399-0350, 904-488-9805.
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GLOSSARY OF SIGNIFICANT TERMS
As used in this Prospectus, the following terms shall have the meanings set
forth below:
'Change of Control' means:
(i) whenever, in any three-year period, a majority of the members of
the Board of Directors of the Company elected during such three-year period
shall have been so elected against the recommendation of the management of
the Company or the Board of Directors of the Company in office immediately
prior to such election; provided, however, that for purposes of this clause
(i) a member of such Board of Directors shall be deemed to have been
elected against the recommendation of such Board of Directors if his or her
initial election occurs as a result of either an actual or threatened
election contest (as such terms are used in Rule 14a-11 of Regulation 14A
promulgated under the Exchange Act) or other actual or threatened
solicitation of proxies or consents by or on behalf of a person other than
such Board of Directors; or
(ii) whenever any person shall acquire (whether by merger,
consolidation, sale, assignment, lease, transfer or otherwise, in one
transaction or any related series of transactions) or otherwise
beneficially own voting securities of the Company that represent in excess
of 50% of the voting power of all outstanding voting securities of the
Company generally entitled to vote for the election of directors, if such
person had acquired or publicly announced its intention to initially
acquire ten percent or more of such voting securities in a transaction that
had not been approved by the management of the Company within 30 days after
the date of such acquisition or public announcement.
'Included Tax Distributions' means, with respect to any period, Tax
Distributions made by TWE during such period with respect to the TWE Series B
Capital, but only if the total distributions made by TWE during such period with
respect to the TWE Series B Capital exceed such Tax Distributions.
'Initial Purchasers' means Bear, Stearns & Co. Inc. and Morgan Stanley &
Co. Incorporated.
'Insolvency of TWE' means:
(i) the entry by a court having jurisdiction in the premises of (a) a
decree or order for relief in respect of TWE in an involuntary case or
proceeding under any applicable federal or state bankruptcy, insolvency,
reorganization or other similar law or (b) a decree or order adjudging TWE
a bankrupt or insolvent, or approving as properly filed a petition seeking
reorganization, arrangement, adjustment or composition of or in respect of
TWE under any applicable federal or state law, or appointing a custodian,
receiver, liquidator, assignee, trustee, sequestrator or other similar
official of TWE or of any substantial part of its property, or ordering the
winding up or liquidation of its affairs, and the continuance of any such
decree or order for relief or any such other decree or order under either
clause (a) or (b) above unstayed and in effect for a period of 60
consecutive days; or
(ii) the commencement by TWE of a voluntary case or proceeding under
any applicable federal or state bankruptcy, insolvency, reorganization or
other similar law or of any other case or proceeding to be adjudicated a
bankrupt or insolvent, or the consent by it to the entry of a decree or
order for relief in respect of TWE in an involuntary case or proceeding
under any applicable federal or state bankruptcy, insolvency,
reorganization or other similar law or to the commencement of any
bankruptcy or insolvency case or proceeding against it, or the filing by it
of a petition or answer or consent seeking reorganization or relief under
any applicable federal or state law, or the consent by it to the filing of
such petition or to the appointment of or taking possession by a custodian,
receiver, liquidator, assignee, trustee, sequestrator or other similar
official of TWE or of any substantial part of its property, or the making
by it of a general assignment for the benefit of creditors, or the
admission by it in writing of its inability to pay its debts generally as
they become due, or the adoption of a resolution by the Board of
Representatives of TWE to take any of the foregoing actions.
'Insolvency Distribution Date' means the date of the completion of the
liquidation, winding up or dissolution of TWE upon the Insolvency of TWE.
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'Insolvency Redemption Amount' means an amount equal to the lesser of (i)
the sum of (a) the Pro Rata Percentage as of the Insolvency Distribution Date
multiplied by the sum of cash distributions and non-cash distributions (the
value of which shall be determined pursuant to a TWE Insolvency Valuation)
received by the Company (and its subsidiaries) with respect to its TWE Series B
Capital and its TWE Junior Capital in connection with such liquidation,
winding-up or dissolution, in accordance with the TWE Partnership Agreement, and
(b) an amount equal to dividends on the outstanding shares of the Series M
Preferred Stock for four quarters and one day and (ii) the liquidation
preference of the Series M Preferred Stock plus accumulated and accrued and
unpaid dividends thereon.
'Insolvency Redemption Date' means the day following the first anniversary
of the Insolvency Distribution Date.
'Junior Stock' means the Common Stock, the Series A Preferred Stock and all
classes of capital stock established after the initial issuance of the Series M
Preferred Stock by the Company's Board of Directors that by their terms are
junior in right of payment to the Parity Stock.
'Mandatory Redemption Amount' means an amount equal to (i) the Pro Rata
Percentage (determined as of June 30, 2015 without giving effect to the Series B
Redemption occurring on such date) multiplied by the amount (as determined by a
TWE Valuation) that the Company (and its subsidiaries) would have received in
accordance with the TWE Partnership Agreement with respect to its TWE Series B
Capital and its TWE Junior Capital had TWE sold all of its assets and liquidated
on June 30, 2015, plus (ii) dividends on the outstanding shares of Series M
Preferred Stock from July 1, 2015 to July 1, 2016.
'Mandatory Redemption Price' means a redemption price equal to the
liquidation preference of the Series M Preferred Stock to be redeemed, plus
accumulated and accrued and unpaid dividends thereon.
'Material Contribution of Assets' means a contribution to TWE in a single
transaction or a series of related transactions of Relevant Assets (as defined
below) net of associated debt, the fair market value of which is in excess of
$1,000,000,000 (as determined by the Board of Directors of the Company in good
faith). For purposes of the foregoing definition, 'Relevant Assets' means filmed
entertainment or programming assets currently owned by the Company or any of its
subsidiaries (other than TWE) or which the Company or any of its subsidiaries
(other than TWE) currently has an agreement to acquire.
'Nationally Recognized Investment Banking Firm' means an investment banking
firm having a national reputation in the United States which shall have
experience in valuation or securities rating matters, as the case may be, and
which shall be approved by a majority of the members of the Board of Directors
of the Company who are not officers or employees of the Company or its
subsidiaries, including TWE.
'Parity Stock' means the Company's Series B Preferred Stock, Series C
Preferred Stock, Series D Preferred Stock, Series E Preferred Stock, Series F
Preferred Stock, Series G Preferred Stock, Series H Preferred Stock, Series I
Preferred Stock, Series K Preferred Stock, Series M Preferred Stock and all
classes of capital stock established after the initial issuance of the Series M
Preferred Stock by the Company's Board of Directors that by their terms are pari
passu with the Series M Preferred Stock. The terms of any Series L Preferred
Stock will provide that they are pari passu with the Series M Preferred Stock.
'Preceding Record Date' means (i) with respect to the First Dividend
Payment Date, the date twenty days prior to the last dividend payment date for
the Series K Preferred Stock prior to the issuance of the Series M Preferred
Stock and (ii) with respect to any other Dividend Payment Date, the Record Date
applicable to the immediately preceding Dividend Payment Date.
'Pro Rata Percentage' means, as of any date, a fraction, the numerator of
which shall be the aggregate liquidation preference of the outstanding shares of
Series M Preferred Stock as of such date, plus accumulated and unpaid dividends
thereon, and the denominator of which shall be the Cumulative Priority Capital
of the TWE Series B Capital as of such date; provided that the Pro Rata
Percentage as of any date prior to the issuance of the Series M Preferred Stock,
means a fraction, the numerator of which shall be the aggregate liquidation
preference as of such date of the outstanding shares of Series K Preferred Stock
which Series K Preferred Stock have been exchanged for shares of Series M
Preferred
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Stock in the Exchange Offer, plus accumulated and unpaid dividends thereon, and
the denominator of which shall be the Cumulative Priority Capital of the TWE
Series B Capital as of such date. In calculating the Pro Rata Percentage in
connection with the final mandatory redemption or upon an Insolvency of TWE, the
Cumulative Priority Capital of the TWE Series B Capital shall be increased by
the sum of all Tax Distributions (other than Included Tax Distributions) made by
TWE to the Company (and its subsidiaries) following the issuance of the Series K
Preferred Stock with respect to the TWE Series B Capital.
'Rating Confirmation' means either (i) a confirmation from each of Moody's
Investors Service, Inc. or any successor to its rating agency business
('Moody's') and Standard and Poor's Corporation or any successor to its rating
agency business ('S&P') that any contemplated redemption or exchange by the
Company would not result in a downgrade of its rating of the Company's senior
unsecured long-term debt, or (ii) a good faith determination by the Board of
Directors of the Company or any committee thereof (after consultation with a
Nationally Recognized Investment Banking Firm) that any contemplated redemption
or exchange by the Company should not result in a downgrade in the rating of the
Company's senior unsecured long-term debt by either Moody's or S&P.
'Redeemable Number' means, with respect to any Mandatory Redemption Date, a
number (rounded down to the nearest whole number) of shares of Series M
Preferred Stock equal to (i) the Pro Rata Percentage (determined as of the June
30 occurring one year and one day prior to such Mandatory Redemption Date
without giving effect to the Series B Redemption occurring on such date) of the
amount of (a) cash distributions received by the Company (and its subsidiaries)
in respect of the Series B Redemption occurring on such June 30, plus (b) cash
distributions received by the Company in respect of its TWE Junior Capital from
such June 30 to such Mandatory Redemption Date, divided by (ii) the liquidation
preference of $1,000 per share plus accumulated and accrued and unpaid dividends
thereon; provided, however, that in no event shall the Redeemable Number exceed
20%, 25%, 33 1/3% and 50% of the number of shares of Series M Preferred Stock
outstanding on the Mandatory Redemption Dates occurring on July 1 of 2012, 2013,
2014 and 2015, respectively.
'Reorganization of TWE' means (i) any merger or consolidation of TWE or any
sale of all or substantially all of the assets of TWE, (ii) the liquidation,
winding up or dissolution of TWE other than as a result of the Insolvency of
TWE, (iii) the making of any distributions, in cash or other property (other
than cash distributions in accordance with the TWE Partnership Agreement), on
the partnership interests in TWE from and after the date of initial issuance of
the Series K Preferred Stock having an aggregate fair market value (together
with any such prior distributions) in excess of $500,000,000 as determined by
the Board of Directors of the Company in good faith, (iv) any transaction or
series of related transactions which results in a sale or transfer of 10% or
more of the total assets of TWE (excluding asset swaps and contributions to
subsidiaries or joint ventures, other than joint ventures with any existing
partner of TWE that is not a subsidiary of the Company) unless such sale or
transfer is made at fair market value, the net proceeds of such sale or transfer
are substantially in cash and such cash is used to repay debt or is reinvested
in the business of TWE, (v) any transfer in the beneficial ownership of a class
of partnership interests in TWE that would result in the Company (directly or
indirectly) owning (after giving effect to any reductions permitted by clause
(a) or (b)) less than 90% or more than 110% of its percentage ownership interest
in any class as of the date of initial issuance of the Series K Preferred Stock,
other than any change resulting from (a) cash distributions in accordance with
the TWE Partnership Agreement or (b) the issuance of partnership interests upon
exercise of the U S WEST Option, (vi) any material reduction in voting or
management rights of the Company (and its subsidiaries) in TWE, (vii) any
issuance of additional partnership interests which rank senior to the TWE Series
B Capital (other than (a) the TWE Contingent Capital, (b) partnership interests
issued upon exercise of the U S WEST Option or (c) partnership interests having
a fair market value (together with any such prior issuances) no greater than
$500,000,000, as determined by the Board of Directors of the Company in good
faith, issued in connection with any contribution of assets to TWE), it being
understood that allocations of income or accretion with respect to the capital
accounts associated with the outstanding partnership interests shall not be
considered issuances of additional partnership interests in TWE, (viii) any
amendment (other than an amendment to effectuate an issuance permitted by clause
(vii)(c) above) to the TWE Partnership Agreement that adversely affects the
allocation of income, payment of distributions, priority capital rate of return
or the priority of the TWE Series B
G-3
<PAGE>
<PAGE>
Capital or (ix) the six month anniversary of a Material Contribution of Assets
which does not otherwise result in the occurrence of an event specified in (i)
through (viii) above.
'Reorganization Redemption/Exchange Date' means, with respect to any
Reorganization of TWE, the first Dividend Payment Date following the 90th day
after such Reorganization of TWE; provided that if such first Dividend Payment
Date occurs on or prior to the 30th day following such 90th day, then the
Reorganization Redemption/Exchange Date means the second Dividend Payment Date
following the 90th day after such Reorganization of TWE.
'Reorganization Redemption Price' means 110% of the liquidation preference
of the Series K Preferred Stock, plus accumulated and accrued and unpaid
dividends, or, if the Series M Preferred Stock may be redeemed at the option of
the Company at such time, the optional redemption price then in effect.
'Series B Redemption' means the distributions with respect to the TWE
Series B Capital on June 30 of each of 2011, 2012, 2013, 2014 and 2015.
'Tax Distributions' means cash distributions to the Company (and its
subsidiaries) required to be made under the TWE Partnership Agreement to the
partners of TWE to permit them to pay taxes at assumed statutory rates on their
allocations of income from TWE.
'TWE Insolvency Valuation' means the average of the determinations of two
Nationally Recognized Investment Banking Firms with respect to the fair market
values, as of the Insolvency Distribution Date, of any non-cash distributions
from TWE received by the Company (and its subsidiaries) upon a liquidation,
winding up or distribution of TWE as a result of the Insolvency of TWE. The
Nationally Recognized Investment Banking Firms shall be selected by the Company
within 30 days following the Insolvency Distribution Date and shall render their
opinions within 90 days following such Insolvency Distribution Date. For
purposes of the foregoing, (i) the fair market value of such non-cash
distributions shall be based on the price at which such property would be sold
in an arm's length transaction between a willing buyer and a willing seller, and
to the extent such property comprises an operating business, it shall be valued
on a going concern basis; and (ii) such value shall be increased by the sum of
all Tax Distributions other than Included Tax Distributions made by TWE to the
Company (and its subsidiaries) following the initial issuance of the Series K
Preferred Stock with respect to the TWE Series B Capital.
'TWE Valuation' means the average of the determinations of two Nationally
Recognized Investment Banking Firms with respect to the fair market values of
the assets of TWE as of June 30, 2015 (without giving effect to the Series B
Redemption or any distribution in respect of TWE Junior Capital occurring on
such date). The Nationally Recognized Investment Banking Firms shall be selected
by the Company within 90 days following the final Series B Redemption Date and
shall render their opinions within 150 days following the final Series B
Redemption Date. For purposes of the foregoing, (i) the fair market value of the
assets of TWE shall be determined on a going concern basis, assuming that each
division of TWE is sold in a separate arm's length transaction between a willing
buyer and a willing seller; and (ii) such value shall be increased by the sum of
all Tax Distributions (other than Included Tax Distributions) made by TWE
following the issuance of the Series K Preferred Stock with respect to the TWE
Series B Capital.
G-4
<PAGE>
<PAGE>
________________________________________________________________________________
NO DEALER, SALESPERSON OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED OR
INCORPORATED BY REFERENCE IN THIS PROSPECTUS IN CONNECTION WITH THE OFFERING
COVERED BY THIS PROSPECTUS. IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE
COMPANY. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION
OF AN OFFER TO BUY, THE SECURITIES OFFERED HEREBY IN ANY JURISDICTION 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 ANY PERSON TO WHOM IT IS
UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS
PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE
ANY IMPLICATION THAT THERE HAS NOT BEEN ANY CHANGE IN THE FACTS SET FORTH IN
THIS PROSPECTUS OR IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Available Information..................................................... 3
Incorporation of Certain Documents by Reference........................... 3
Prospectus Summary........................................................ 5
Risk Factors.............................................................. 15
The Company............................................................... 17
TWE Partnership Interests................................................. 19
Recent Developments....................................................... 22
Consolidated Capitalization............................................... 24
Selected Historical and Pro Forma Financial Information................... 28
Exchange Offer............................................................ 33
Plan of Distribution...................................................... 40
Description of Series M Preferred Stock................................... 40
Description of Series L Preferred Stock................................... 46
Description of Senior Subordinated Debentures............................. 47
Description of Outstanding Capital Stock.................................. 52
Certain Federal Income Tax Considerations................................. 54
Legal Opinion............................................................. 60
Experts................................................................... 60
Glossary of Significant Terms............................................. G-1
</TABLE>
TIME WARNER INC.
--------------------------
PROSPECTUS
--------------------------
, 1996
________________________________________________________________________________
<PAGE>
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 102(b)(7) of the Delaware General Corporation Law (the 'DGCL'),
enables a corporation in its original certificate of incorporation or an
amendment thereto to eliminate or limit the personal liability of a director to
the corporation or its stockholders for monetary damages for violations of the
director's fiduciary duty, except (i) for any breach of the director's duty of
loyalty to the corporation or its stockholders, (ii) for acts or omissions not
in good faith or which involve intentional misconduct or a knowing violation of
law, (iii) pursuant to Section 174 of the DGCL (providing for liability of
directors for unlawful payment of dividends or unlawful stock purchases or
redemptions) or (iv) for any transaction from which a director derived an
improper personal benefit. Section 1, Article X of the Company's Certificate of
Incorporation eliminates the liability of directors to the extent permitted by
Section 102(b)(7).
Section 145(a) of the DGCL empowers a corporation to indemnify any director
or officer, or former director or officer, who was or is a party or is
threatened to be made a party to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(other than an action by or in the right of the corporation) by reason of the
fact that such person is or was a director or officer of the corporation, or is
or was serving at the request of the corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise, against expenses (including attorneys' fees), judgments, fines
and amounts paid in settlement actually and reasonably incurred in connection
with such action, suit or proceeding provided that such director or officer
acted in good faith in a manner reasonably believed to be in, or not opposed to,
the best interests of the corporation, and, with respect to any criminal action
or proceeding, provided further that such director or officer had no reasonable
cause to believe his conduct was unlawful.
Section 145(b) empowers a corporation to indemnify any director or officer,
or former director or officer, who was or is a party or is threatened to be made
a party to any threatened, pending or completed action or suit by or in the
right of the corporation to procure a judgment in its favor by reason of the
fact that such person acted in any of the capacities set forth above, against
expenses (including attorneys' fees) actually and reasonably incurred in
connection with the defense or settlement of such action or suit provided that
such director or officer acted in good faith and in a manner he reasonably
believed to be in, or not opposed to, the best interests of the corporation,
except that no indemnification may be made in respect of any claim, issue or
matter as to which such director or officer shall have been adjudged to be
liable to the corporation unless and only to the extent that the Court of
Chancery or that court in which such action or suit was brought shall determine
upon application that, despite the adjudication of liability but in view of all
of the circumstances of the case, such director or officer is fairly and
reasonably entitled to indemnity for such expenses which the Court of Chancery
or such other court shall deem proper.
Section 145 further provides that to the extent a director or officer of a
corporation has been successful in the defense of any action, suit or proceeding
referred to in subsections (a) and (b) or in the defense of any claim, issue or
matter therein, he shall be indemnified against expenses (including attorneys'
fees) actually and reasonably incurred by him in connection therewith; that
indemnification and advancement of expenses provided for, by, or granted
pursuant to, Section 145 shall not be deemed exclusive of any other rights to
which the indemnified party may be entitled, and empowers the corporation to
purchase and maintain insurance on behalf of any person who is or was a director
or officer of the corporation, or is or was serving at the request of the
corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise against any liability
asserted against him or incurred by him in any such capacity, or arising out of
his status as such, whether or not the corporation would have the power to
indemnify him against such liabilities under Section 145.
Article VI of the Company's By-Laws requires indemnification to the fullest
extent permitted under applicable law of any person who is or was a director or
officer of the Company or who is or was involved or threatened to be made so
involved in any action, suit or proceeding, whether criminal, civil,
II-1
<PAGE>
<PAGE>
administrative or investigative, by reason of the fact that such person is or
was serving as a director, officer or employee of the Company or any predecessor
of the Company or was serving at the request of the Company as a director,
officer or employee of another corporation, partnership, joint venture, trust or
other enterprise.
The Company's Directors' and Officers' Liability and Reimbursement
Insurance Policy is designed to reimburse the Company for any payments made by
it pursuant to the foregoing indemnification. Such policy has coverage of $50
million.
The Purchase Agreement, dated April 2, 1996 between the Company and the
Initial Purchasers, contains provisions by which the Initial Purchasers agree to
indemnify the Company, the Company's stockholders, the Company's officers and
directors and each person who controls the Company within the meaning of the
Securities Act of 1933 against certain liabilities.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
Exhibits.
<TABLE>
<C> <S>
4.1 -- Certificate of the Voting Powers, Designations, Preferences and Relative, Participating, Optional or Other
Special Rights, and Qualifications, Limitations or Restrictions thereof, of 10 1/4% Series K Exchangeable
Preferred Stock of the Registrant filed with the Secretary of State of the State of Delaware on April 10,
1996 (which is incorporated herein by reference to Exhibit 4.1 to the Company's Current Report on Form 8-K
dated April 11, 1996 (the 'April 11, 1996 8-K')).*
4.2 -- Form of Certificate of the Voting Powers, Designations, Preferences and Relative, Participating, Optional
or Other Special Rights, and Qualifications, Limitations or Restrictions thereof, of 10 1/4% Series M
Exchangeable Preferred Stock of the Registrant.
4.3 -- Form of Certificate of the Voting Powers, Designations, Preferences and Relative, Participating, Optional
or Other Special Rights, and Qualifications, Limitations or Restrictions thereof, of 10 1/4% Series L
Exchangeable Preferred Stock of the Registrant filed with the Secretary of State of the State of Delaware on
April 10, 1996 (which is incorporated by reference herein to Exhibit A of Exhibit 4.1 to the April 11, 1996
8-K).*
4.4 -- Form of Senior Subordinated Indenture (which is incorporated herein by reference to Exhibit 4.2 to the
April 11, 1996 8-K).*
4.5 -- Specimen certificate of share of Series M Preferred Stock.
4.6 -- Specimen certificate of share of Series L Preferred Stock.
5 -- Opinion of Paul, Weiss, Rifkind, Wharton & Garrison regarding the legality of the securities being
registered.
12.1 -- Statement re computation of ratio of earnings to fixed charges for Time Warner Inc.
12.2 -- Statement re computation of ratio of earnings to fixed charges and preferred stock dividends for Time
Warner Inc.
12.3 -- Statement re computation of ratio of earnings to fixed charges for Time Warner Entertainment Company, L.P.
23.1 -- Consent of Ernst & Young LLP, Independent Auditors.
23.2 -- Consent of Price Waterhouse LLP, Independent Accountants.
23.3 -- Consent of Paul, Weiss, Rifkind, Wharton & Garrison (included in their opinion filed as Exhibit 5).
23.4 -- Consent of Arthur Andersen LLP, Independent Public Accountants.
23.5 -- Consent of Deloitte & Touche LLP, Independent Auditors.
23.6 -- Consent of Price Waterhouse LLP, Independent Accountants.
24.1 -- Power of Attorney.
99.1 -- Registration Rights Agreement, dated April 11, 1996, among Time Warner Inc. and Bear, Stearns & Co. Inc.
and Morgan Stanley & Co. Incorporated.
99.2 -- Form of Letter of Transmittal.
99.3 -- Form of Notice of Guaranteed Delivery.
99.4 -- Form of Exchange Agency Agreement between the Exchange Agent and Time Warner Inc.
</TABLE>
- ------------
* Incorporated by reference
II-2
<PAGE>
<PAGE>
ITEM 22. UNDERTAKINGS.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of each of the
registrants pursuant to the foregoing provisions, or otherwise, the registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities 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 registrant will, unless in the opinion of their respective
counsel the matter has been settled by controlling precedent, submit to a court
of appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the Prospectus pursuant to
Item 4, 10(b), 11 or 13 of this form, within one business day of receipt of such
request, and to send the incorporated documents by first class mail or other
equally prompt means. This includes information contained in documents filed
subsequent to the effective date of the Registration Statement through the date
of responding to the request.
The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired or involved therein, that was not the subject of and
included in the Registration Statement when it became effective.
The undersigned registrant hereby undertakes:
(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 of 1933;
(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) which, 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.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, 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 undersigned registrant hereby undertakes to file an application for the
purpose of determining the eligibility of the trustee to act under subsection
(a) of section 310 of the Trust Indenture Act in accordance with the rules and
regulations prescribed by the Commission under section 305(b)(2) of the Act.
II-3
<PAGE>
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant 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 May 22, 1996.
TIME WARNER INC.
By /s/ Peter R. Haje
..................................
PETER R. HAJE
EXECUTIVE VICE PRESIDENT,
GENERAL COUNSEL AND SECRETARY
Pursuant to the requirements of the Securities Act, this Registration
Statement has been signed below by the following persons in the capacities and
on May 22, 1996.
<TABLE>
<CAPTION>
SIGNATURE TITLE
---------- -----
<C> <S>
* Director, Chairman of the Board and Chief Executive Officer
......................................... (principal executive officer)
(GERALD M. LEVIN)
* Director and President
.........................................
(RICHARD D. PARSONS)
/s/ Richard J. Bressler Senior Vice President and Chief Financial Officer
......................................... (principal financial officer)
(RICHARD J. BRESSLER)
/s/ John A. LaBarca Vice President and Controller
......................................... (principal accounting officer)
(JOHN A. LABARCA)
* Director
.........................................
(MERV ADELSON)
* Director
.........................................
(LAWRENCE B. BUTTENWIESER)
* Director
.........................................
(BEVERLY SILLS GREENOUGH)
* Director
.........................................
(CARLA A. HILLS)
* Director
.........................................
(DAVID T. KEARNS)
* Director
.........................................
(REUBEN MARK)
* Director
.........................................
(MICHAEL A. MILES)
* Director
.........................................
(J. RICHARD MUNRO)
</TABLE>
II-4
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- ------
<C> <S>
* Director
.........................................
(DONALD S. PERKINS)
* Director
.........................................
(RAYMOND S. TROUBH)
* Director
.........................................
(FRANCIS T. VINCENT, JR.)
*By /s/ Peter R. Haje
.....................................
(ATTORNEY-IN-FACT)
</TABLE>
II-5
<PAGE>
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
LOCATION OF
EXHIBIT IN
SEQUENTIAL
EXHIBIT NUMBERING
NUMBER DESCRIPTION OF DOCUMENT SYSTEM
- ------ ----------------------- ----------
<S> <C> <C>
4.1 -- Certificate of the Voting Powers, Designations, Preferences and Relative, Participating, *
Optional or Other Special Rights, and Qualifications, Limitations or Restrictions thereof,
of 10 1/4% Series K Exchangeable Preferred Stock of the Registrant filed with the Secretary
of State of the State of Delaware on April 10, 1996 (which is incorporated herein by
reference to Exhibit 4.1 to the Company's Current Report on Form 8-K dated April 11, 1996
(the 'April 11, 1996 8-K')).*...............................................................
4.2 -- Form of Certificate of the Voting Powers, Designations, Preferences and Relative,
Participating, Optional or Other Special Rights, and Qualifications, Limitations or
Restrictions thereof, of 10 1/4% Series M Exchangeable Preferred Stock of the Registrant.
4.3 -- Form of Certificate of the Voting Powers, Designations, Preferences and Relative, *
Participating, Optional or Other Special Rights, and Qualifications, Limitations or
Restrictions thereof, of 10 1/4% Series L Exchangeable Preferred Stock of the Registrant
filed with the Secretary of State of the State of Delaware on April 10, 1996 (which is
incorporated by reference herein to Exhibit A of Exhibit 4.1 to the April 11, 1996 8-K).*...
4.4 -- Form of Senior Subordinated Indenture (which is incorporated herein by reference to Exhibit *
4.2 to the April 11, 1996 8-K).*............................................................
4.5 -- Specimen certificate of share of Series M Preferred Stock.
4.6 -- Specimen certificate of share of Series L Preferred Stock.
5 -- Opinion of Paul, Weiss, Rifkind, Wharton & Garrison regarding the legality of the
securities being registered.
12.1 -- Statement re computation of ratio of earnings to fixed charges for Time Warner Inc.
12.2 -- Statement re computation of ratio of earnings to fixed charges and preferred stock
dividends for Time Warner Inc.
12.3 -- Statement re computation of ratio of earnings to fixed charges for Time Warner
Entertainment Company, L.P.
23.1 -- Consent of Ernst & Young LLP, Independent Auditors.
23.2 -- Consent of Price Waterhouse LLP, Independent Accountants.
23.3 -- Consent of Paul, Weiss, Rifkind, Wharton & Garrison (included in their opinion filed as
Exhibit 5).
23.4 -- Consent of Arthur Andersen LLP, Independent Public Accountants.
23.5 -- Consent of Deloitte & Touche LLP, Independent Auditors.
23.6 -- Consent of Price Waterhouse LLP, Independent Accountants.
24.1 -- Power of Attorney.
99.1 -- Registration Rights Agreement, dated April 11, 1996, among Time Warner Inc. and Bear,
Stearns & Co. Inc. and Morgan Stanley & Co. Incorporated.
99.2 -- Form of Letter of Transmittal.
99.3 -- Form of Notice of Guaranteed Delivery.
99.4 -- Form of Exchange Agency Agreement between the Exchange Agent and Time Warner Inc.
</TABLE>
- ------------
* Incorporated by reference.
II-6
<PAGE>
<PAGE>
[FORM OF]
CERTIFICATE OF THE VOTING POWERS, DESIGNATIONS, PREFERENCES
AND RELATIVE, PARTICIPATING, OPTIONAL OR OTHER SPECIAL
RIGHTS, AND QUALIFICATIONS, LIMITATIONS OR RESTRICTIONS
THEREOF, OF 10 1/4% SERIES M EXCHANGEABLE PREFERRED STOCK
OF
TIME WARNER INC.
----------
Pursuant to Section 151 of the General Corporation Law
of the State of Delaware
--------------
TIME WARNER INC., a corporation organized and existing by virtue of the
General Corporation Law of the State of Delaware (the "Corporation"), does
hereby certify that the following resolution was duly adopted by action of the
Board of Directors of the Corporation, with the provisions thereof fixing the
number of shares of the series, the dividend rate, and the optional redemption
prices being set by action of the Pricing Committee of the Board of Directors of
the Corporation:
RESOLVED that pursuant to the authority expressly granted to and vested
in the Board of Directors of the Corporation by the provisions of Section 2 of
Article IV of the Restated Certificate of Incorporation of the Corporation, as
amended from time to time (the "Certificate of Incorporation"), and pursuant to
authority expressly delegated to the Pricing Committee of the Board of Directors
of the Corporation by such Board of Directors, and pursuant to Section 151(g) of
the General Corporation Law of the State of Delaware, there be created from the
250,000,000 shares of Preferred Stock, par value $1.00 per share (the "Preferred
Stock"), of the Corporation authorized to be issued pursuant to the Certificate
of Incorporation, a series of Preferred Stock, consisting of 15,200,000 shares
of 10 1/4% Series M Exchangeable Preferred Stock, the voting powers,
designations, preferences and relative, participating, optional or other special
rights of which, and qualifications, limitations or restrictions thereof, shall
be as follows:
The series of Preferred Stock hereby established shall consist of
15,200,000 shares of 10 1/4% Series M Exchangeable Preferred Stock (such
series being hereinafter referred to as "Series M Preferred Stock" or "this
Series"). The rights, preferences and limitations of the Series M Preferred
Stock shall be as follows:
1. Definitions. As used herein, the following terms shall have the
following meanings:
<PAGE>
<PAGE>
1.1 "Accrued Dividends" shall mean, with respect to any share
of this Series, as of any specified date, the accrued and unpaid dividends on
such share plus, with respect to any share of the Series issued in exchange
for a share of Series K Preferred Stock, any accrued and unpaid dividends on
the share of Series K Preferred Stock that was exchanged for such share of
this Series from the Dividend Accrual Date applicable to such share to such
specified date.
1.2 "Accumulated Dividends" shall mean, with respect to any
share of this Series, as of any specified date, the aggregate accumulated and
unpaid dividends on such share plus, with respect to any share of the Series
issued in exchange for a share of Series K Preferred Stock, any accumulated and
unpaid dividends on the share of Series K Preferred Stock that was exchanged
for such share of this Series from the Dividend Accumulation Date applicable
to such share until the most recent Dividend Payment Date (or, with respect
to any share of this Series issued in exchange for a share of Series K Preferred
Stock the most recent dividend payment date applicable to the share of Series K
Preferred Stock that was exchanged for such share of this Series, if
such specified date is prior to the first Dividend Payment Date); provided that
there shall be no Accumulated Dividends with respect to any
share of this Series prior to the first Dividend Payment Date applicable to such
share (or, if applicable, the first dividend payment date applicable to the
share of Series K Preferred Stock exchanged for such share of this Series).
1.3 "Applicable Series B Redemption Date" shall mean, with
respect to any Mandatory Redemption Date, the Series B Redemption Date occurring
one year and one day prior to such Mandatory Redemption Date.
1.4 "Board of Directors" shall mean the Board of Directors of
the Corporation or, with respect to any action to be taken by the Board of
Directors, any committee of the Board of Directors duly authorized to take such
action.
1.5 "Board of Representatives of TWE" shall mean the Board of
Representatives of TWE (as defined in the TWE Partnership Agreement).
1.6 "Business Day" shall mean any day other than a Saturday,
Sunday or other day on which commercial banks in the City of New York are
authorized or required by law or executive order to close.
1.7 "Change of Control" shall mean:
(i) whenever, in any three-year period, a majority of
the members of the Board of Directors elected during such three-year period
shall have been so elected against the recommendation of the management of the
Corporation or the Board of Directors in office immediately prior to such
election; it being understood that for purposes of this clause (i) a member of
such Board of Directors shall be deemed to have been elected against the
recommendation of such Board of Directors if his or her initial election occurs
as a result of either an actual or threatened election contest (as such terms
are used in Rule 14a-11 of Regulation 14A promulgated under the Exchange Act) or
other actual or threatened solicitation of
2
<PAGE>
<PAGE>
proxies or consents by or on behalf of a Person other than such Board of
Directors; or
(ii) whenever any Person shall acquire (whether by
merger, consolidation, sale, assignment, lease, transfer or otherwise, in one
transaction or any related series of transactions) or otherwise beneficially own
voting securities of the Corporation that represent in excess of 50% of the
voting power of all outstanding voting securities of the Corporation generally
entitled to vote for the election of directors, if such Person had acquired or
publicly announced its intention to initially acquire ten percent or more of
such voting securities in a transaction that had not, within 30 days after the
date of such acquisition or public announcement, been approved by the management
of the Corporation.
1.8 "Common Stock" shall mean the class of Common Stock, par
value $1.00 per share, of the Corporation or any other class of stock resulting
from successive changes or reclassifications of such Common Stock consisting
solely of changes in par value, or from par value to no par value, or as a
result of a subdivision or combination.
1.9 "Cumulative Priority Capital of the TWE Series B
Interests" shall mean, as of any date, the excess of (a) the sum of (i) the
aggregate B Contributions (as defined in the TWE Partnership Agreement) of the
Corporation (and its subsidiaries) and (ii) the aggregate cumulative B Returns
(as defined in the TWE Partnership Agreement) of the Corporation (and its
subsidiaries) as of such date, over (b) the sum of all distributions theretofore
made to the Corporation (and its subsidiaries) with respect to the TWE Series B
Interests pursuant to the TWE Partnership Agreement.
1.10 "Dividend Accumulation Date" shall mean (a) with respect
to any share of this Series issued in exchange for a share of Series K Preferred
Stock, the date on which such share of Series K Preferred Stock was issued and
(b) with respect to any other share of this Series, the Issue Date applicable to
such share.
1.11 "Dividend Accrual Date" shall mean (a) with respect to
any share of this Series issued in exchange for a share of Series K Preferred
Stock, (i) the most recent Dividend Payment Date or (ii) prior to the first
Dividend Payment Date applicable to such share of this Series, the most recent
dividend payment date applicable to the share of Series K Preferred Stock in
exchange for which such share of this Series was issued; and (b) with respect to
any other share of this Series, (i) the most recent Dividend Payment Date or
(ii) prior to the first Dividend Payment Date applicable to such share of this
Series, the Issue Date applicable to such share.
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1.12 "Dividend Payment Date" shall mean March 30, June 30,
September 30 and December 30 of each year, commencing on the first such date to
occur following the Initial Issue Date (the "First Dividend Payment Date").*/
1.13 "Dividend Record Date" shall mean, with respect to each
Dividend Payment Date, the twentieth day immediately preceding such Dividend
Payment Date.
1.14 "Exchange Act" shall mean the Securities Exchange Act of
1934, as amended.
1.15 "Excluded Tax Distributions" shall mean, with respect to
any period, all Tax Distributions made by TWE during such period other than
Included Tax Distributions.
1.16 "Final Redemption Date" shall mean July 1, 2016.
1.17 "Included Tax Distributions" shall mean, with respect to
any period, Tax Distributions made by TWE during such period with respect to the
TWE Series B Interests, but only if the total distributions made by TWE during
such period with respect to the TWE Series B Interests exceed such Tax
Distributions.
1.18 "Initial Issue Date" shall mean the date on which shares
of this Series are first issued in exchange for shares of Series K Preferred
Stock.
1.19 "Insolvency Distribution Date" shall mean the date of the
completion of the liquidation, winding up or dissolution of TWE upon the
Insolvency of TWE, including the distribution of all of the cash and non-cash
assets to the partners of TWE.
1.20 "Insolvency of TWE" shall mean:
(i) the entry by a court having jurisdiction in the
premises of (a) a decree or order for relief in respect of TWE in an involuntary
case or proceeding under any applicable federal or state bankruptcy, insolvency,
reorganization or other similar law or (b) a decree or order adjudging TWE a
bankrupt or insolvent, or approving as properly filed a petition seeking
reorganization, arrangement, adjustment or composition of or in respect of TWE
under any applicable federal or state law, or appointing a custodian, receiver,
liquidator, assignee, trustee, sequestrator or other similar official of TWE or
of any substantial part of its property, or ordering the winding up or
liquidation of its affairs,
- ----------
*/ The definition of First Dividend Payment Date as well as certain of the
dividend provisions contained in Section 2 assume that the
Exchange Offer will not close between a Dividend Record Date and a
Dividend Payment Date for the Series K Preferred Stock.
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and the continuance of any such decree or order for relief or any such other
decree or order under either clause (a) or (b) above unstayed and in effect for
a period of 60 consecutive days; or
(ii) the commencement by TWE of a voluntary case or
proceeding under any applicable federal or state bankruptcy, insolvency,
reorganization or other similar law or of any other case or proceeding to be
adjudicated a bankrupt or insolvent, or the consent by it to the entry of a
decree or order for relief in respect of TWE in an involuntary case or
proceeding under any applicable federal or state bankruptcy, insolvency,
reorganization or other similar law or to the commencement of any bankruptcy or
insolvency case or proceeding against it, or the filing by it of a petition or
answer or consent seeking reorganization or relief under any applicable federal
or state law, or the consent by it to the filing of such petition or to the
appointment of or taking possession by a custodian, receiver, liquidator,
assignee, trustee, sequestrator or other similar official of TWE or of any
substantial part of its property, or the making by it of a general assignment
for the benefit of creditors, or the admission by it in writing of its inability
to pay its debts generally as they become due, or the adoption of a resolution
by the Board of Representatives of TWE to take any of the foregoing actions.
1.21 "Insolvency Redemption Amount" shall mean an amount equal
to the lesser of (i) the sum of (a) the Pro Rata Percentage as of the Insolvency
Distribution Date, multiplied by the sum of cash distributions and non-cash
distributions (the value of which shall be determined pursuant to a TWE
Insolvency Valuation) received by the Corporation (and its subsidiaries) with
respect to its TWE Series B Interests and its TWE Junior Interests in connection
with such liquidation, winding up or dissolution in accordance with the TWE
Partnership Agreement, and (b) an amount equal to the aggregate dividends
payable during the period from the Insolvency Distribution Date to the
Insolvency Redemption Date on the shares of Series M Preferred Stock outstanding
from time to time during such period and (ii) the aggregate Liquidation
Preference of the outstanding shares of Series M Preferred Stock plus
Accumulated Dividends and Accrued Dividends thereon.
1.22 "Insolvency Redemption Amount Per Share" shall mean an
amount equal to (i) the Insolvency Redemption Amount divided by (ii) the number
of shares of Series M Preferred Stock outstanding on the Insolvency Redemption
Date.
1.23 "Insolvency Redemption Date" shall mean the day that is
one year and one day following the Insolvency Distribution Date.
1.24 "Issue Date" shall mean, with respect to each share of
Series M Preferred Stock, the date upon which such share is first issued.
1.25 "Junior Stock" shall mean the Common Stock, the Series A
Participating Cumulative Preferred Stock and the shares of any other class or
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series of stock of the Corporation created after the Initial Issue Date that, by
the terms of the Certificate of Incorporation or of the instrument by which the
Board of Directors, acting pursuant to authority granted in the Certificate of
Incorporation, shall fix the relative rights, preferences and limitations
thereof, shall be junior to the Series M Preferred Stock in respect of the right
to receive dividends or to participate in any other distribution of assets.
1.26 "Liquidation Preference" shall mean, with respect to each
share of Series M Preferred Stock, $1,000.
1.27 "Mandatory Redemption Amount" shall mean an amount equal
to (i) the Pro Rata Percentage (determined as of June 30, 2015 without giving
effect to the Series B Redemption occurring on such date) multiplied by the
amount (as determined by a TWE Valuation) that the Corporation (and its
subsidiaries) would have received in accordance with the TWE Partnership
Agreement with respect to its TWE Series B Interests and its TWE Junior
Interests, had TWE sold all of its assets and liquidated on June 30, 2015, plus
(ii) the aggregate dividends payable from July 1, 2015 to July 1, 2016 on the
shares of Series M Preferred Stock from time to time outstanding during such
period.
1.28 "Mandatory Redemption Amount Per Share" shall mean an
amount equal to (i) the Mandatory Redemption Amount divided by (ii) the number
of shares of Series M Preferred Stock outstanding on the Final Redemption Date.
1.29 "Mandatory Redemption Date" shall mean July 1 of each of
2012, 2013, 2014 and 2015.
1.30 "Mandatory Redemption Price Per Share" shall mean an
amount equal to the Liquidation Preference of each share of Series M Preferred
Stock to be redeemed, plus Accumulated Dividends and Accrued Dividends thereon.
1.31 "Material Contribution of Assets" shall mean a
contribution to TWE in a single transaction or a series of related transactions
of Relevant Assets, the fair market value of which (net of associated debt) is
in excess of $1,000,000,000 (as determined by the Board of Directors in good
faith).
1.32 "Nationally Recognized Investment Banking Firm" shall
mean an investment banking firm having a national reputation in the United
States which shall have experience in valuation or securities rating matters, as
the case may be, and which shall be approved by a majority of the members of the
Board of Directors who are not officers or employees of the Corporation or its
subsidiaries, including TWE.
1.33 "Optional Redemption Price Per Share" shall mean, as of
any date, the price at which the Corporation may, at its option, redeem one
share of the Series M Preferred Stock pursuant to Section 3.1.
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1.34 "Parity Stock" shall mean the shares of the Corporation's
Series B 6.40% Preferred Stock, Series C Convertible Preferred Stock, Series D
Convertible Preferred Stock, Series E Convertible Preferred Stock, Series F
Convertible Preferred Stock, Series G Convertible Preferred Stock, Series H
Convertible Preferred Stock, Series I Convertible Preferred Stock, Series K
Preferred Stock, Series M Preferred Stock and any other class or series of stock
of the Corporation created after the Initial Issue Date that, by the terms of
the Certificate of Incorporation or of the instrument by which the Board of
Directors, acting pursuant to authority granted in the Certificate of
Incorporation, shall fix the relative rights, preferences and limitations
thereof, shall, in the event that the stated dividends thereon are not paid in
full, be entitled to share ratably with the Series M Preferred Stock in the
payment of dividends, including accumulations, if any, in accordance with the
sums which would be payable on such shares if all dividends were declared and
paid in full, or shall, in the event that the amounts payable thereon in
liquidation are not paid in full, be entitled to share ratably with the Series M
Preferred Stock in any other distribution of assets in accordance with the sums
which would be payable in such distribution if all sums payable were discharged
in full; provided, however, that the term "Parity Stock" shall be deemed to
refer (i) in Section 2.3 hereof, to any stock which is Parity Stock in respect
of dividend rights; (ii) in Section 10 hereof, to any stock which is Parity
Stock in respect of the distribution of assets; and (iii) in Section 9.1 hereof,
to any stock which is Parity Stock in respect of either dividend rights or the
distribution of assets and which, pursuant to the Certificate of Incorporation
or any instrument in which the Board of Directors, acting pursuant to authority
granted in the Certificate of Incorporation, shall so designate, is entitled to
vote as part of the Voting Rights Class.
1.35 "Person" shall mean any individual, corporation, general
partnership, limited partnership, limited liability partnership, joint venture,
association, joint-stock company, trust, limited liability company,
unincorporated organization or government or any agency or political subdivision
thereof.
1.36 "Preceding Dividend Record Date" shall mean (i) with
respect to the First Dividend Payment Date, the date that is twenty days prior
to the last dividend payment date for the Series K Preferred Stock prior to the
Initial Issue Date, and (ii) with respect to any other Dividend Payment Date,
the Dividend Record Date applicable to the immediately preceding Dividend
Payment Date.
1.37 "Pro Rata Percentage" shall mean, as of any date, a
fraction, the numerator of which shall be the aggregate Liquidation Preference
of the outstanding shares of Series M Preferred Stock as of such date, plus
Accumulated Dividends thereon, and the denominator of which shall be the
Cumulative Priority Capital of the TWE Series B Interests as of such date;
provided that the Pro Rata Percentage, as of any date prior to the Initial Issue
Date, means a fraction, the numerator of which shall be the aggregate
liquidation preference as of such date of the outstanding shares of Series K
Preferred Stock that were exchanged for shares of Series M Preferred Stock on
the Initial Issue Date, plus Accumulated Dividends
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thereon, and the denominator of which shall be the Cumulative Priority Capital
of the TWE Series B Interests as of such date. In calculating the Pro Rata
Percentage in connection with the mandatory redemption on the Final Redemption
Date or upon an Insolvency of TWE, the Cumulative Priority Capital of the TWE
Series B Interests shall be increased by the sum of all Tax Distributions (other
than Included Tax Distributions) made by TWE to the Corporation (and its
subsidiaries) following April 11, 1996 with respect to the TWE Series B
Interests.
1.38 "Rating Confirmation" shall mean either (i) a
confirmation from each of Moody's Investors Service, Inc. or any successor to
its rating agency business ("Moody's") and Standard and Poor's Corporation or
any successor to its rating agency business ("S&P") that any contemplated
redemption or exchange by the Corporation would not result in a downgrade of its
rating of the Corporation's senior unsecured long-term debt, or (ii) a good
faith determination by the Board of Directors or any committee thereof (after
consultation with a Nationally Recognized Investment Banking Firm) that any
contemplated redemption or exchange by the Corporation should not result in a
downgrade in the rating of the Corporation's senior unsecured long-term debt by
either Moody's or S&P.
1.39 "Redeemable Number" shall mean, with respect to any
Mandatory Redemption Date, a number (rounded down to the nearest whole number)
of shares of Series M Preferred Stock equal to (i) the Pro Rata Percentage (as
of the Applicable Series B Redemption Date without giving effect to the Series B
Redemption occurring on such date) of the amount of (a) cash distributions
received by the Corporation (and its subsidiaries) in respect of the Series B
Redemption occurring on the Applicable Series B Redemption Date, plus (b) cash
distributions received by the Corporation in respect of its TWE Junior Interests
from the Applicable Series B Redemption Date to such Mandatory Redemption Date,
divided by (ii) the Liquidation Preference per share of Series M Preferred Stock
plus Accumulated Dividends and Accrued Dividends thereon; provided, however,
that in no event shall the Redeemable Number exceed 20%, 25%, 33 1/3% and 50% of
the number of shares of Series M Preferred Stock outstanding on the Mandatory
Redemption Dates occurring on July 1 of 2012, 2013, 2014 and 2015, respectively.
1.40 "Relevant Assets" shall mean filmed entertainment or
programming assets currently owned by the Corporation or any of its subsidiaries
(other than TWE) or which the Corporation or any of its subsidiaries (other than
TWE) currently has an agreement to acquire.
1.41 "Reorganization of TWE" shall mean (i) any merger or
consolidation of TWE or any sale of all or substantially all of the assets of
TWE, (ii) the liquidation, winding up or dissolution of TWE other than as a
result of the Insolvency of TWE, (iii) the making of any distributions, in cash
or other property (other than cash distributions in accordance with the TWE
Partnership Agreement), on the partnership interests in TWE from and after April
11, 1996 having an aggregate fair market value (together with any such prior
distributions) in excess of
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$500,000,000 as determined by the Board of Directors in good faith, (iv) any
transaction or series of related transactions which results in a sale or
transfer of 10% or more of the total assets of TWE (excluding asset swaps and
contributions to subsidiaries or joint ventures, other than joint ventures with
any partner of TWE as of the Initial Issue Date that is not a subsidiary of the
Company) unless such sale or transfer is made at fair market value, the proceeds
of such sale or transfer are substantially in cash and such cash is used to
repay debt or is reinvested in the business of TWE, (v) any transfer in the
beneficial ownership of a class of partnership interests in TWE that would
result in the Corporation (directly or indirectly) owning (after giving effect
to any reductions permitted by clauses (a) or (b) of this clause (v)) less than
90% or more than 110% of its percentage ownership interest in such class of
partnership interests in TWE as of April 11, 1996, other than any change
resulting from (a) cash distributions in accordance with the TWE Partnership
Agreement or (b) the issuance of partnership interests in TWE upon exercise of
the U S WEST Option, (vi) any material reduction in voting or management rights
of the Corporation (and its subsidiaries) in TWE, (vii) any issuance of
additional partnership interests in TWE which rank senior to the TWE Series B
Interests (other than (a) the TWE Contingent Interests, (b) partnership
interests in TWE issued upon exercise of the U S WEST Option or (c) partnership
interests in TWE having a fair market value (together with any such prior
issuances) no greater than $500,000,000, as determined by the Board of Directors
in good faith, issued in connection with any contribution of assets to TWE), it
being understood that allocations of income or accretion with respect to the
capital accounts associated with the outstanding partnership interests in TWE
shall not be considered issuances of additional partnership interests in TWE,
(viii) any amendment to the TWE Partnership Agreement (other than an amendment
to effectuate an issuance of partnership interests in TWE permitted by clause
(vii)(c) above) that adversely affects the allocation of income or payment of
distributions to, or priority capital rate of return or priority of, the TWE
Series B Interests or (ix) the date that is six months following the occurrence
of a Material Contribution of Assets which does not otherwise result in the
occurrence of an event specified in clauses (i) through (viii) above.
1.42 "Reorganization Redemption/Exchange Date" means, with
respect to any Reorganization of TWE, the first Dividend Payment Date following
the 90th day after such Reorganization of TWE; provided that if such first
Dividend Payment Date occurs on or prior to the 30th day following such 90th
day, then the Reorganization Redemption/Exchange Date means the second Dividend
Payment Date following the 90th day after such Reorganization of TWE.
1.43 "Reorganization Redemption Price Per Share" shall mean,
with respect to each share of Series M Preferred Stock, (i) (a) 110% of the
Liquidation Preference thereof, plus (b) Accumulated Dividends and Accrued
Dividends thereon, or (ii) if the Series M Preferred Stock may be redeemed at
the option of the Corporation at such time, the Optional Redemption Price Per
Share then in effect.
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1.44 "Senior Stock" shall mean the shares of any class or
series of stock of the Corporation created after the Initial Issue Date that, by
the terms of the Certificate of Incorporation or of the instrument by which the
Board of Directors, acting pursuant to authority granted in the Certificate of
Incorporation, shall fix the relative rights, preferences and limitations
thereof, shall be senior to the Series M Preferred Stock in respect of the right
to receive dividends or to participate in any other distribution of assets.
1.45 "Series B Redemption" shall mean each distribution with
respect to the TWE Series B Interests in accordance with Section 8.4(c)(ii) of
the TWE Partnership Agreement.
1.46 "Series B Redemption Date" shall mean June 30 of each of
2011, 2012, 2013, 2014 and 2015.
1.47 "Series L Preferred Stock" shall mean the Corporation's
10-1/4% Series L Exchangeable Preferred Stock which may be issued after the
Initial Issue Date upon a Reorganization of TWE pursuant to Section 6.1(i), and
which shall have the voting powers, designations, preferences and relative,
participating, optional or other special rights, and qualifications, limitations
or restrictions as are set forth in a certificate of designation substantially
in the form attached hereto as Exhibit A.
1.48 "Tax Distributions" shall mean cash distributions made to
the Corporation (and its subsidiaries) pursuant to Section 8.5 of the TWE
Partnership Agreement.
1.49 "TBS Merger Agreement" shall mean the Amended and
Restated Agreement and Plan of Merger dated as of September 22, 1995, among the
Corporation, certain of its subsidiaries and Turner Broadcasting System, Inc.,
as the same may be amended from time to time.
1.50 "TBS Transaction" shall mean the transactions
contemplated by the TBS Merger Agreement.
1.51 "TWE" shall mean Time Warner Entertainment Company, L.P.,
a Delaware limited partnership.
1.52 "TWE Contingent Interests" shall mean the partnership
interests in TWE associated with the C Sub-Accounts and the D Sub-Accounts (each
as defined in the TWE Partnership Agreement) of the Corporation (and its
subsidiaries).
1.53 "TWE Insolvency Valuation" shall mean the average of the
determinations of two Nationally Recognized Investment Banking Firms with
respect to the fair market value, as of the Insolvency Distribution Date, of
each non-cash distribution from TWE received by the Corporation (and its
subsidiaries) upon a
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liquidation, winding up or dissolution of TWE upon the Insolvency of TWE. The
Nationally Recognized Investment Banking Firms shall be selected by the
Corporation within 30 days following the Insolvency Distribution Date and shall
render their opinions within 90 days following the Insolvency Distribution Date.
For purposes of the foregoing, (i) the fair market value of such non-cash
distributions shall be based on the price at which such property would be sold
in an arm's-length transaction between a willing buyer and a willing seller, and
to the extent such property comprises an operating business, it shall be valued
on a going concern basis; and (ii) such value shall be increased by the sum of
all Tax Distributions (other than Included Tax Distributions) made by TWE to the
Corporation (and its subsidiaries) following April 11, 1996 with respect to the
TWE Series B Interests.
1.54 "TWE Junior Interests" shall mean the TWE Residual
Interests together with the TWE Contingent Interests.
1.55 "TWE Partnership Agreement" shall mean that certain
Agreement of Limited Partnership, dated as of October 29, 1991, as the same may
be amended from time to time.
1.56 "TWE Residual Interests" shall mean the partnership
interests in TWE associated with the Common Sub-Accounts (as defined in the TWE
Partnership Agreement) of the Corporation (and its subsidiaries).
1.57 "TWE Series A Interests" shall mean the partnership
interests in TWE associated with the A Sub-Accounts (as defined in the TWE
Partnership Agreement) of the Corporation (and its subsidiaries).
1.58 "TWE Series B Interests" shall mean the partnership
interests in TWE associated with the B Sub-Accounts (as defined in the TWE
Partnership Agreement) of the Corporation (and its subsidiaries).
1.59 "TWE Valuation" shall mean the average of the
determinations of two Nationally Recognized Investment Banking Firms with
respect to the fair market value of the assets of TWE as of June 30, 2015
(without giving effect to the Series B Redemption or any distribution in respect
of the TWE Junior Interests occurring on such date). The Nationally Recognized
Investment Banking Firms shall be selected by the Corporation by September 28,
2015 and shall render their opinions by November 27, 2015. For purposes of the
foregoing, (i) the fair market value of the assets of TWE shall be determined on
a going concern basis, assuming that each division of TWE is sold in a separate
arm's-length transaction between a willing buyer and a willing seller; and (ii)
such value shall be increased by the sum of all Tax Distributions (other than
Included Tax Distributions) made by TWE to the Corporation (and its
subsidiaries) following April 11, 1996 with respect to the TWE Series B
Interests.
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1.60 "U S WEST Option" shall mean the option granted to U S
WEST, Inc., a Delaware corporation, to increase its share of the partnership
interests in TWE pursuant to the Option Agreement, dated as of September 15,
1992, between TWE and U S WEST, Inc.
1.61 "Voting Rights Triggering Event" shall mean the failure
of the Corporation to (i) pay dividends on the Series M Preferred Stock in cash,
or to the extent permitted by its terms, by the issuance of additional shares of
Series M Preferred Stock, for more than six consecutive quarterly dividend
periods or (ii) discharge any redemption or exchange obligation with respect to
the Series M Preferred Stock.
2. Dividends.
2.1 The holders of shares of the outstanding Series M
Preferred Stock shall be entitled, when, as and if declared by the Board of
Directors out of funds legally available therefor, to receive dividends on each
outstanding share of Series M Preferred Stock. Except as otherwise provided in
this Section 2.1, each quarter-annual dividend shall be an amount per share
(rounded to the nearest $.01) equal to $25.625 per
$1,000 Liquidation Preference of Series M Preferred Stock and shall be payable
on each Dividend Payment Date, to the holders of record of Series M Preferred
Stock at the close of business on the Dividend Record Date applicable to such
Dividend Payment Date, commencing on the First Dividend Payment Date. Holders of
shares of Series K Preferred Stock exchanged for shares of Series M Preferred
Stock will not be entitled to receive any payments with respect to unpaid
dividends on the shares of Series K Preferred Stock so exchanged.
Notwithstanding the foregoing, on the First Dividend Payment Date, each share
of Series M Preferred Stock that was issued in exchange for a share of
Series K Preferred Stock shall entitle the holder thereof to receive, when,
as and if declared by the Board of Directors out of funds legally available
therefor dividends in an amount to equal to the cumulative dividends to which
the holder of the share of Series K Preferred Stock in exchange for which such
share of Series M Preferred Stock was issued would have
been entitled had such share of Series K Preferred Stock been outstanding on the
Dividend Record Date for such First Dividend Payment Date. Such dividends shall
be cumulative and shall accrue on a day-to-day basis, whether or not earned or
declared, from and after the Issue Date applicable to each share of this Series.
Dividends on the Series M Preferred Stock which are not declared and paid when
due will compound quarterly on each Dividend Payment Date at the dividend rate.
Dividends payable for any partial dividend period shall be computed on the basis
of actual days elapsed over a 365- (or 366-) day year.
2.2 Dividends may, at the option of the Corporation, be paid
on any Dividend Payment Date either in cash or by issuing fully paid and
nonassessable shares of Series M Preferred Stock with an aggregate Liquidation
Preference equal to the amount of such dividends; provided, however, that
dividends payable on any Dividend Payment Date shall be paid (i) in cash, to the
extent of an amount equal to the Pro Rata Percentage as of the Preceding
Dividend Record Date multiplied by the amount of cash distributions, other than
Excluded Tax Distributions, if any, received by the Corporation (and its
subsidiaries) with respect to its TWE
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Series B Interests and TWE Junior Interests on or after the Preceding Dividend
Record Date to but not including, the current Dividend Record Date, and (ii) in
Series M Preferred Stock or cash, at the Corporation's option, to the extent of
any balance.
2.3 Except as hereinafter provided in this Section 2.3, no
full dividends or other distributions may be declared or paid or set apart for
payment on Series M Preferred Stock or any other Parity Stock, and no Parity
Stock, including the Series M Preferred Stock, may be repurchased, exchanged,
redeemed or otherwise acquired by the Corporation, nor may funds be set apart
for payment with respect thereto, unless full cumulative dividends shall have
been paid or set apart for such payment on, and all applicable redemption,
exchange and repurchase obligations shall have been satisfied with respect to,
all outstanding shares of Series M Preferred Stock and such other Parity Stock;
provided that dividends or distributions may be made on Parity Stock if they are
payable in Junior Stock, and Parity Stock may be converted into or exchanged for
Parity Stock (having no greater preference upon liquidation) or Junior Stock;
and provided further that if the Company shall have satisfied all applicable
redemption, exchange and repurchase obligations with respect to all outstanding
shares of Series M Preferred Stock and other Parity Stock, but if full dividends
are not so paid, the Series M Preferred Stock shall share dividends with all
other Parity Stock, so that the amount of dividends declared per share on Series
M Preferred Stock and all such other Parity Stock shall in all cases bear to
each other the same ratio that full cumulative dividends per share on the shares
of Series M Preferred Stock and all such other Parity Stock bear to each other.
No dividends or other distributions may be paid or set apart for such payment on
Junior Stock, and no Junior Stock may be repurchased, exchanged, redeemed or
otherwise acquired nor may funds be set apart for payment with respect thereto,
if full cumulative dividends have not been paid on, or any applicable
redemption, exchange or repurchase obligations shall not have been satisfied
with respect to, the Series M Preferred Stock and all other Parity Stock;
provided that dividends or distributions may be made on Junior Stock if they are
payable-in-kind in additional shares of, or warrants, rights, calls or options
exercisable for or convertible into additional shares of Junior Stock; and
provided further that Junior Stock may be converted into or exchanged for Junior
Stock.
2.4 Holders of shares of Series M Preferred Stock shall not be
entitled to any dividends, whether payable in cash, property or stock, in excess
of full cumulative dividends, as herein provided, on the Series M Preferred
Stock. No interest, or sum of money in lieu of interest, shall be payable in
respect of any dividend payment or payments on the Series M Preferred Stock
which may be in arrears (it being understood that the compounding of unpaid
dividends shall not constitute money in lieu of interest).
2.5 To the extent that the amount of any quarter-annual
dividend payable to a holder of Series M Preferred Stock (in respect of all
shares held by such holder) that is payable in additional shares of Series M
Preferred Stock, valued at the Liquidation Preference thereof, does not equal a
whole number of shares
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of Series M Preferred Stock, such fractional amount shall be paid in cash to
such holder of Series M Preferred Stock.
3. Optional Redemption.
3.1 At any time on or after July 1, 2006, the Corporation may,
at its sole option, subject to the provisions of Sections 2.3 and 3.2, redeem,
out of funds legally available therefor, all or any part of the outstanding
shares of Series M Preferred Stock. The redemption prices for each share of
Series M Preferred Stock called for redemption during the 12-month periods
commencing on July 1 of the years set forth below shall be the amount (expressed
as a percentage of the Liquidation Preference thereof) set forth opposite such
years, plus Accumulated Dividends and Accrued Dividends thereon to the
redemption date.
<TABLE>
<CAPTION>
Period Percentage of Liquidation Preference
------ ------------------------------------
<S> <C>
2006 105.125%
2007 103.844%
2008 102.563%
2009 101.281%
2010 and thereafter 100.000%
</TABLE>
3.2 No optional redemption shall be effected unless the
Corporation shall have obtained a Rating Confirmation with respect to such
redemption.
4. Mandatory Redemption.
4.1 On each Mandatory Redemption Date, the Corporation shall
redeem, out of funds legally available therefor, the Redeemable Number of shares
of Series M Preferred Stock with respect to such Mandatory Redemption Date at
the Mandatory Redemption Price Per Share.
4.2 On the Final Redemption Date, the Corporation shall
redeem, out of funds legally available therefor, each of the then outstanding
shares of Series M Preferred Stock at the lesser of the Mandatory Redemption
Amount Per Share and the Mandatory Redemption Price Per Share; provided that if
the Corporation does not obtain a TWE Valuation within 120 days following the
final Series B Redemption Date, the Corporation shall redeem, out of funds
legally available therefor, such shares at the Mandatory Redemption Price Per
Share; and provided further that, if the TWE Series B Interests have been fully
redeemed in accordance with the TWE Partnership Agreement, the Corporation shall
redeem, out of funds legally available therefor, such shares at the Mandatory
Redemption Price Per Share.
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4.3 Upon the redemption of all of the outstanding shares of
Series M Preferred Stock on the Final Redemption Date pursuant to Section 4.2,
the Corporation's obligations with respect thereto will be discharged.
5. Redemption upon Insolvency of TWE.
5.1 In the event of a liquidation, winding up or dissolution
of TWE upon the Insolvency of TWE, the Corporation shall redeem, out of funds
legally available therefor, each of the outstanding shares of Series M Preferred
Stock on the Insolvency Redemption Date at the Insolvency Redemption Amount Per
Share.
5.2 Upon such redemption, the Corporation's obligation with
respect to the Series M Preferred Stock will be discharged.
6. Reorganization of TWE.
6.1 In the event of a Reorganization of TWE, on the
Reorganization Redemption/Exchange Date, the Corporation shall either (at its
election) (i) exchange each outstanding share of Series M Preferred Stock for
shares of Series L Preferred Stock having an aggregate liquidation preference of
$1,000 plus the Accumulated Dividends and Accrued Dividends on such share of
Series M Preferred Stock so exchanged (the "Reorganization Exchange") or (ii)
redeem, out of funds legally available therefor, each outstanding share of
Series M Preferred Stock at the Reorganization Redemption Price Per Share (the
"Reorganization Redemption"); provided, however, that the Corporation may not
effect a Reorganization Redemption prior to July 1, 2011 unless the Corporation
shall have obtained a Rating Confirmation with respect to such Reorganization
Redemption; and provided, further, that the Corporation may not effect a
Reorganization Exchange on or after July 1, 2011. Within 90 days after a
Reorganization of TWE, the Corporation shall make a public announcement that a
Reorganization of TWE has occurred and as to whether it will effect a
Reorganization Exchange or Reorganization Redemption.
6.2 The Corporation shall be entitled to effect a
Reorganization Exchange only to the extent that upon issuance of shares of
Series L Preferred Stock such shares shall be duly authorized and validly
issued, fully paid and nonassessable shares of Series L Preferred Stock.
Certificates for shares of Series L Preferred Stock issued in exchange for
surrendered shares of this Series pursuant to a Reorganization Exchange shall be
made available by the Corporation not later than the fifth Business Day
following the Reorganization Redemption/Exchange Date.
6.3 Prior to giving notice of its intention to effect a
Reorganization Exchange, the Corporation shall execute and file with the
Secretary of State of the State of Delaware a Certificate of Designation
substantially in the form of Exhibit A hereto relating to the Series L Preferred
Stock, with such changes as may be required by law or that would not adversely
affect the interests of the holders of the Series L Preferred Stock.
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6.4 To the extent that in connection with a Reorganization
Exchange any holder of Series M Preferred Stock shall be entitled to receive, in
respect of all of its shares of Series M Preferred Stock, a number of shares of
Series L Preferred Stock that does not equal a whole number of shares, then such
holder shall receive cash in lieu of such fractional amount.
7. Procedure for Redemption or Exchange.
7.1 In the event the Corporation shall elect or be required to
redeem or exchange shares of Series M Preferred Stock pursuant to Sections 3, 4,
5 or 6 hereof, notice of such redemption or exchange shall be given by
first-class mail, not less than 30 nor more than 60 days prior to the redemption
or exchange date, to each record holder of the shares to be redeemed or
exchanged, at such holder's address as the same appears on the books of the
Corporation. Each such notice shall state: (i) whether the redemption or
exchange is pursuant to Section 3, 4, 5 or 6 hereof; (ii) the time and date as
of which the redemption or exchange shall occur; (iii) the total number of
shares of Series M Preferred Stock to be redeemed or exchanged and, if fewer
than all the shares held by such holder are to be redeemed, the number of such
shares to be redeemed from such holder; (iv) in the case of a redemption, the
redemption price; (v) the place or places where certificates for such shares are
to be surrendered for payment of the redemption price in the case of a
redemption, or for delivery of certificates representing shares of Series L
Preferred Stock in the case of an exchange; (vi) that dividends on the shares to
be redeemed will cease to accrue on such redemption or exchange date unless the
Corporation defaults in the payment of the redemption price or fails to satisfy
its exchange obligation; and (vii) in the case of redemption, the name of any
bank or trust company, if any, performing the duties referred to in Section 7.3.
7.2 On or before any redemption or exchange date, each holder
of shares of Series M Preferred Stock to be redeemed or exchanged shall
surrender the certificate or certificates representing such shares of Series M
Preferred Stock to the Corporation, in the manner and at the place designated in
the notice of redemption or exchange, and on the redemption or exchange date,
the full redemption price or shares of Series L Preferred Stock, as the case may
be, for such shares of Series M Preferred Stock shall be paid or delivered to
the Person whose name appears on such certificate or certificates as the owner
thereof, and each surrendered certificate shall be returned to authorized but
unissued shares. Upon surrender (in accordance with the notice of redemption or
exchange) of the certificate or certificates representing any shares to be so
redeemed or exchanged (properly endorsed or assigned for transfer, if the
Corporation shall so require and the notice of redemption or exchange shall so
state), such shares shall be redeemed by the Corporation at the redemption price
or exchanged by the Corporation for shares of Series L Preferred Stock. If fewer
than all the shares represented by any such certificate are to be redeemed, a
new certificate shall be issued representing the unredeemed shares,
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without cost to the holder thereof, together with the amount of cash, if any, in
lieu of fractional shares.
7.3 If a notice of redemption or exchange shall have been
given as provided in Section 7.1, dividends on the shares of Series M Preferred
Stock so called for redemption shall cease to accrue, such shares shall no
longer be deemed to be outstanding, and all rights of the holders thereof as
stockholders of the Corporation with respect to shares so called for redemption
or exchange (except the right to receive from the Corporation the redemption
price or the Series L Preferred Stock without interest) shall cease (including
any right to receive dividends otherwise payable on any Dividend Payment Date
that would have occurred after the time and date of redemption or exchange)
either (i) from and after the time and date fixed in the notice of redemption or
exchange as the time and date of redemption or exchange (unless the Corporation
shall default in the payment of the redemption price or shall fail to satisfy
its exchange obligation, in which case such rights shall not terminate at such
time and date) or (ii) if the Corporation shall so elect and state in the notice
of redemption, from and after the time and date (which date shall be the date
fixed for redemption or an earlier date not less than 30 days after the date of
mailing of the redemption notice) on which the Corporation shall irrevocably
deposit in trust for the holders of the shares to be redeemed with a designated
bank or trust company doing business in the Borough of Manhattan, City and State
of New York, as paying agent, money sufficient to pay at the office of such
paying agent, on the redemption date, the redemption price. Any money so
deposited with any such paying agent which shall not be required for such
redemption shall be returned to the Corporation forthwith. Subject to applicable
escheat laws, any moneys so set aside by the Corporation and unclaimed at the
end of one year from the redemption date shall revert to the general funds of
the Corporation, after which reversion the holders of such shares so called for
redemption shall look only to the general funds of the Corporation for the
payment of the redemption price without interest. Any interest accrued on funds
so deposited shall be paid to the Corporation from time to time.
7.4 In the event that fewer than all the outstanding shares of
Series M Preferred Stock are to be redeemed, the shares to be redeemed shall be
determined pro rata or by lot, as determined by the Corporation, except that the
Corporation may redeem such shares held by any holder of fewer than 100 shares
(or shares held by holders who would hold fewer than 100 shares as a result of
such redemption), as may be determined by the Corporation.
8. Change of Control.
8.1 Upon the occurrence of a Change of Control of the
Corporation, the Corporation shall make an offer (the "Change of Control Offer")
to each holder of Series M Preferred Stock to repurchase, out of funds legally
available therefor, all or any part of such holder's Series M Preferred Stock at
a purchase price per share in cash equal to 101% of the Liquidation Preference
thereof, plus an amount equal to all Accumulated Dividends and Accrued Dividends
thereon to the
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<PAGE>
date of purchase. The Change of Control Offer must be made within 30 days
following a Change of Control, shall remain open for at least 30 and not more
than 40 days and shall comply with the requirements of Rule 14e-1 under the
Exchange Act and any other applicable securities laws and regulations.
8.2 In the event the Corporation shall be required to make a
Change of Control Offer pursuant to Section 8.1 hereof, notice of such Change of
Control Offer shall be given by first-class mail, to each record holder of
shares of Series M Preferred Stock, at such holder's address as the same appears
on the books of the Corporation. Each such notice shall state: (i) that a Change
of Control has occurred; (ii) the last day on which the Change of Control Offer
may be accepted (the "Expiration Date"); (iii) the repurchase price; (iv) the
name and address of the paying agent; and (v) the procedures that holders must
follow to accept the Change of Control Offer.
8.3 On or before the Expiration Date, each holder of shares of
Series M Preferred Stock wishing to accept the Change of Control Offer shall
surrender the certificate or certificates representing such shares of Series M
Preferred Stock that such holder wishes to have repurchased to the Corporation,
in the manner and at the place designated in the notice described in Section
8.2, and on the repurchase date, the full repurchase price for such shares of
Series M Preferred Stock shall be payable to the Person whose name appears on
such certificate or certificates as the owner thereof, and each surrendered
certificate shall be returned to authorized but unissued shares. Upon surrender
(in accordance with the notice described in Section 8.2) of the certificate or
certificates representing any shares to be so repurchased (properly endorsed or
assigned for transfer, if the Corporation shall so require and the notice of a
Change of Control Offer shall so state), such shares shall be repurchased by the
Corporation at the repurchase price. In case fewer than all the shares
represented by any such certificate are to be repurchased, a new certificate
shall be issued representing the non-repurchased shares, without cost to the
holder thereof, together with the amount of cash, if any, in lieu of fractional
shares.
9. Voting.
9.1 The shares of Series M Preferred Stock shall have no
voting rights except as required by law or as set forth below:
(a) If and whenever at any time or times, a Voting
Rights Triggering Event occurs, then the number of directors constituting the
Board of Directors shall be increased by two (without duplication of any such
increase in directorships required under the terms of any other Parity Stock)
and the holders of shares of Series M Preferred Stock, voting or consenting, as
the case may be, together as a class with the holders of any shares of Parity
Stock entitled to vote thereon and as to which (i) dividends are in arrears or
unpaid in an aggregate amount equal to or exceeding the amount of dividends
payable thereon for six quarterly dividend periods or (ii) redemption or
exchange obligations have not been satisfied
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(together with the Series M Preferred Stock, the "Voting Rights Class"), will be
entitled to elect two directors of the Corporation to fill the newly created
directorships.
(b) Such voting rights may be exercised initially either
by written consent or at a special meeting of the holders of the shares of the
Voting Rights Class, called as hereinafter provided, or at any annual meeting of
stockholders held for the purpose of electing directors, and thereafter at each
such annual meeting until such time as all dividends in arrears on the shares of
this Series shall have been paid in full and/or all redemption or exchange
obligations have been satisfied, as applicable, at which time or times such
voting rights and the term of the directors elected pursuant to Section 9.1(a)
shall terminate.
(c) At any time when such voting rights shall have
vested in holders of shares of the Voting Rights Class described in Section
9.1(a), and if such rights shall not already have been exercised by written
consent, a proper officer of the Corporation may call, and, upon the written
request of the record holders of shares representing twenty-five percent (25%)
of the voting power of the shares then outstanding of the Voting Rights Class,
addressed to the Secretary of the Corporation, shall call a special meeting of
the holders of shares of Voting Rights Class. Such meeting shall be held at the
earliest practicable date upon the notice required for annual meetings of
stockholders at the place for holding annual meetings of stockholders of the
Corporation, or, if none, at a place designated by the Board of Directors.
Notwithstanding the provisions of this Section 9.1(c), no such special meeting
shall be called during a period within the 60 days immediately preceding the
date fixed for the next annual meeting of stockholders.
(d) At any meeting held for the purpose of electing
directors at which the holders of the Voting Rights Class shall have the right
to elect directors as provided herein, the presence in person or by proxy of the
holders of shares representing more than fifty percent (50%) in voting power of
the then outstanding shares of the Voting Rights Class shall be required and
shall be sufficient to constitute a quorum of such class for the election of
directors by such class.
(e) Any director elected pursuant to the voting rights
created under this Section 9.1 shall hold office until the next annual meeting
of stockholders (unless such term has previously terminated pursuant to Section
9.1(b)) and any vacancy in respect of any such director shall be filled only by
vote of the remaining director so elected by holders of the Voting Rights Class,
or if there be no such remaining director, by the holders of shares of the
Voting Rights Class by written consent or at a special meeting called in
accordance with the procedures set forth in this Section 9, or, if no such
special meeting is called or written consent executed, at the next annual
meeting of stockholders. Upon any termination of such voting rights, the term of
office of all directors elected pursuant to this Section 9 shall terminate.
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(f) So long as any shares of Series M Preferred Stock
remain outstanding, unless a greater percentage shall then be required by law,
the Corporation shall not, without the affirmative vote at a meeting or the
written consent with or without a meeting of the holders of shares of Series M
Preferred Stock representing at least a majority of the outstanding shares of
Series M Preferred Stock voting or consenting, as the case may be, separately as
one class, (i) create, authorize or issue any Senior Stock or (ii) amend the
Certificate of Designation or the Certificate of Incorporation so as to affect
adversely the specified rights, preferences, privileges or voting rights of
holders of shares of Series M Preferred Stock. The holders of at least a
majority of the outstanding shares of Series M Preferred Stock, voting or
consenting, as the case may be, separately as one class, may waive compliance
with any provision of the Certificate of Designation.
(g) In exercising the voting rights set forth in this
Section 9.1, each share of Series M Preferred Stock shall have a number of votes
equal to its Liquidation Preference.
9.2 Except as set forth in Section 9.1, the Corporation may
(a) create, authorize or issue any shares of Junior Stock or Parity Stock or (b)
increase or decrease the amount of authorized capital stock of any class,
including any preferred stock, without the consent of the holders of Series M
Preferred Stock, voting or consenting separately as a class, and in taking the
actions specified in (a) and (b) the Corporation shall not be deemed to have
affected adversely the rights, preferences, privileges or voting rights of
holders of shares of Series M Preferred Stock.
10. Liquidation Rights.
10.1 In the event of any liquidation, dissolution or winding-
up of the Corporation, whether voluntary or involuntary, the holders of the
shares of Series M Preferred Stock shall be entitled to receive out of the
assets of the Corporation available for distribution to stockholders up to their
Liquidation Preference of $1,000 per share plus Accumulated Dividends and
Accrued Dividends thereon in preference to the holders of, and before any
distribution is made on, any Junior Stock, including, without limitation on any
Common Stock.
10.2 Neither the sale, conveyance, exchange or transfer (for
cash, shares of stock, securities or other consideration) of all or
substantially all the property and assets of the Corporation nor the merger or
consolidation of the Corporation into or with any other corporation, or the
merger or consolidation of any other corporation into or with the Corporation,
shall be deemed to be a liquidation, dissolution or winding up, voluntary or
involuntary, for the purposes of this Section 10.
10.3 After the payment to the holders of the shares of Series
M Preferred Stock of full preferential amounts provided for in this Section 10,
the
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holders of Series M Preferred Stock as such shall have no right or claim to any
of the remaining assets of the Corporation.
10.4 In the event the assets of the Corporation available for
distribution to the holders of shares of Series M Preferred Stock upon any
liquidation, dissolution or winding up of the Corporation, whether voluntary or
involuntary, shall be insufficient to pay in full all amounts to which such
holders are entitled pursuant to Section 10.1, no such distribution shall be
made on account of any shares of any Parity Stock upon such liquidation,
dissolution or winding up unless proportionate distributable amounts shall be
paid on account of the shares of Series M Preferred Stock, ratably, in
proportion to the full distributable amounts for which holders of all Parity
Stock are entitled upon such liquidation, dissolution or winding up.
11. Merger, Consolidation and Sale of Assets. Subject to the next
sentence, without the affirmative vote or consent of the holders of at least a
majority of the outstanding shares of Series M Preferred Stock, voting or
consenting, as the case may be, separately as one class, the Corporation may not
consolidate or merge with or into, or sell, assign, transfer, lease, convey or
otherwise dispose of all or substantially all of its assets to, any Person
unless: (a) the Person formed by such consolidation or merger (if other than the
Corporation) or to which such sale, assignment, transfer, lease, conveyance or
other disposition shall have been made shall be a corporation organized or
existing under the laws of the United States or any State thereof or the
District of Columbia; (b) each share of Series M Preferred Stock shall be
converted into or exchanged for and shall become a share of such successor,
transferee or resulting corporation or a parent corporation of such corporation,
having in respect of such successor, transferee or resulting corporation or
parent corporation substantially the same powers, preferences and relative
participating, optional or other special rights, and the qualifications,
limitations or restrictions thereon, that the Series M Preferred Stock had
immediately prior to such transaction; and (c) immediately after giving effect
to such transaction, no Voting Rights Triggering Event shall have occurred or be
continuing. The consummation of the TBS Transaction pursuant to the TBS Merger
Agreement will not require the affirmative vote or consent of the holders of
shares of the Series M Preferred Stock.
12. Transfer Agent and Registrar. The transfer agent and registrar (the
"Transfer Agent") for the Series M Preferred Stock shall be Chemical Mellon
Shareholder Services, L.L.C. The Corporation may, in its sole discretion, remove
the Transfer Agent with 10 days' prior written notice to the Transfer Agent and
appoint a successor Transfer Agent prior to such removal.
13. Covenant to Report. Notwithstanding that the Corporation may not be
subject to the reporting requirements of Section 13 or Section 15(d) of the
Exchange Act, the Corporation will provide the Transfer Agent and the holders of
Series M Preferred Stock with all information, documents and reports specified
in Section 13 and Section 15(d) of the Exchange Act.
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14. Other Provisions.
14.1 With respect to any notice to a holder of shares of
Series M Preferred Stock required to be provided hereunder, neither failure to
mail such notice, nor any defect therein or in the mailing thereof, to any
particular holder shall affect the sufficiency of the notice or the validity of
the proceedings referred to in such notice with respect to the other holders or
affect the legality or validity of any distribution, right, warrant,
reclassification, consolidation, merger, conveyance, transfer, dissolution,
liquidation or winding up, or the vote upon any such action. Any notice which
was mailed in the manner herein provided shall be conclusively presumed to have
been duly given whether or not the holder receives the notice.
14.2 Shares of Series M Preferred Stock issued and reacquired
will, upon compliance with the applicable requirements of Delaware law, have the
status of authorized but unissued shares of Preferred Stock of the Corporation
undesignated as to series and may with any and all other authorized but unissued
shares of Preferred Stock of the Corporation be designated or redesignated and
issued or reissued, as the case may be, as part of any series of Preferred Stock
of the Corporation, except that any issuance or reissuance of shares of Series M
Preferred Stock must be in compliance with the Certificate of Designation.
14.3 The shares of Series M Preferred Stock shall be issuable
in whole shares.
14.4 The Corporation shall be entitled to recognize the
exclusive right of a person registered on its records as the holder of shares of
Series M Preferred Stock for all purposes.
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14.5 All notice periods referred to herein shall commence on
the date of the mailing of the applicable notice.
IN WITNESS WHEREOF, Time Warner Inc. has caused this certificate to be
signed and attested this ______ day of ________, 1996.
TIME WARNER INC.
By: _____________________________________
Name:
Title:
Attest:
__________________________________
Name:
Title:
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Exhibit A
[FORM OF]
CERTIFICATE OF THE VOTING POWERS, DESIGNATIONS, PREFERENCES
AND RELATIVE, PARTICIPATING, OPTIONAL OR OTHER SPECIAL
RIGHTS, AND QUALIFICATIONS, LIMITATIONS OR RESTRICTIONS
THEREOF, OF 10 1/4% SERIES L EXCHANGEABLE PREFERRED STOCK
OF
TIME WARNER INC.
Pursuant to Section 151 of the General Corporation Law
of the State of Delaware
TIME WARNER INC., a corporation organized and existing by virtue of the
General Corporation Law of the State of Delaware (the "Corporation"), does
hereby certify that the following resolution was duly adopted by action of the
Board of Directors of the Corporation, with the provisions thereof fixing the
number of shares of the series, the dividend rate, and the optional redemption
prices being set by action of the Pricing Committee of the Board of Directors of
the Corporation:
RESOLVED that pursuant to the authority expressly granted to and vested
in the Board of Directors of the Corporation by the provisions of Section 2 of
Article IV of the Restated Certificate of Incorporation of the Corporation, as
amended from time to time (the "Certificate of Incorporation"), and pursuant to
authority expressly delegated to the Pricing Committee of the Board of Directors
of the Corporation by such Board of Directors, and pursuant to Section 151(g) of
the General Corporation Law of the State of Delaware, there be created from the
250,000,000 shares of Preferred Stock, par value $1.00 per share (the "Preferred
Stock"), of the Corporation authorized to be issued pursuant to the Certificate
of Incorporation, a series of Preferred Stock, consisting of [9,000,000] shares
of 10 1/4% Series L Exchangeable Preferred Stock, the voting powers,
designations, preferences and relative, participating, optional or other special
rights of which, and qualifications, limitations or restrictions thereof, shall
be as follows:
The series of Preferred Stock hereby established shall consist of
[9,000,000] shares of 10 1/4% Series L Exchangeable Preferred Stock (such series
being hereinafter referred to as "Series L Preferred Stock" or "this Series").
The rights, preferences and limitations of the Series L Preferred Stock shall be
as follows:
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<PAGE>
1. Definitions. As used herein, the following terms
shall have the following meanings:
1.1 "Accrued Dividends" shall mean, with respect to
any share of this Series, as of any date, the accrued and unpaid dividends on
such share from the most recent Dividend Payment Date (or the Issue Date
applicable to such share, if such date is prior to the first Dividend Payment
Date applicable to such share) to such date.
1.2 "Accumulated Dividends" shall mean, with respect
to any share of this Series, as of any date, the aggregate accumulated and
unpaid dividends on such share from the Issue Date applicable to such share
until the most recent Dividend Payment Date prior to such date. There shall be
no Accumulated Dividends with respect to any share of this Series prior to the
first Dividend Payment Date applicable to such share.
1.3 "Board of Directors" shall mean the Board of
Directors of the Corporation or, with respect to any action to be taken by the
Board of Directors, any committee of the Board of Directors duly authorized to
take such action.
1.4 "Business Day" shall mean any day other than a
Saturday, Sunday or other day on which commercial banks in the City of New York
are authorized or required by law or executive order to close.
1.5 "Change of Control" shall mean:
(i) whenever, in any three-year period, a
majority of the members of the Board of Directors elected during such three-year
period shall have been so elected against the recommendation of the management
of the Corporation or the Board of Directors in office immediately prior to such
election; it being understood that for purposes of this clause (i) a member of
such Board of Directors shall be deemed to have been elected against the
recommendation of such Board of Directors if his or her initial election occurs
as a result of either an actual or threatened election contest (as such terms
are used in Rule 14a-11 of Regulation 14A promulgated under the Exchange Act) or
other actual or threatened solicitation of proxies or consents by or on behalf
of a Person other than such Board of Directors; or
(ii) whenever any Person shall acquire
(whether by merger, consolidation, sale, assignment, lease, transfer or
otherwise, in one transaction or any related series of transactions) or
otherwise beneficially own voting securities of the Corporation that represent
in excess of 50% of the voting power of all outstanding voting securities of the
Corporation generally entitled to vote for the election of directors, if such
Person had acquired or publicly announced its intention to initially acquire ten
percent or more of such voting securities in a transaction that
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had not, within 30 days after the date of such acquisition or public
announcement, been approved by the management of the Corporation.
1.6 "Common Stock" shall mean the class of Common
Stock, par value $1.00 per share, of the Corporation or any other class of stock
resulting from successive changes or reclassifications of such Common Stock
consisting solely of changes in par value, or from par value to no par value, or
as a result of a subdivision or combination.
1.7 "Debt Exchange" shall mean the exchange of Series
L Preferred Stock for Senior Subordinated Debentures pursuant to Section 5.
1.8 "Dividend Payment Date" shall mean March 30,
June 30, September 30 and December 30 of each year, commencing on the first such
date to occur after the Issue Date.
1.9 "Dividend Record Date" shall mean, with respect
to each Dividend Payment Date, the fifteenth day immediately preceding such
Dividend Payment Date.
1.10 "Exchange Act" shall mean the Securities
Exchange Act of 1934, as amended.
1.11 "Exchange Date" shall mean the date upon which
the Debt Exchange occurs.
1.12 "Initial Issue Date" shall mean the first date
on which shares of Series L Preferred Stock are issued in exchange for shares of
Series K Preferred Stock.
1.13 "Issue Date" shall mean, with respect to each
share of Series L Preferred Stock, the date upon which such share is first
issued.
1.14 "Junior Stock" shall mean the Common Stock, the
Series A Participating Cumulative Preferred Stock and the shares of any other
class or series of stock of the Corporation established, authorized or issued
after April 11, 1996 that, by the terms of the Certificate of Incorporation or
of the instrument by which the Board of Directors, acting pursuant to authority
granted in the Certificate of Incorporation, shall fix the relative rights,
preferences and limitations thereof, shall be junior to the Series L Preferred
Stock in respect of the right to receive dividends or to participate in any
other distribution of assets.
1.15 "Liquidation Preference" shall mean, with
respect to each share of Series L Preferred Stock, $1,000.
1.16 "Mandatory Redemption Date" shall mean July 1,
2011.
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1.17 "Mandatory Redemption Price Per Share" shall
mean, with respect to each share of Series L Preferred Stock to be redeemed, an
amount equal to the Liquidation Preference thereof, plus Accumulated Dividends
and Accrued Dividends thereon.
1.18 "Nationally Recognized Investment Banking Firm"
shall mean an investment banking firm having a national reputation in the United
States which shall have experience in securities rating matters and which shall
be approved by a majority of the members of the Board of Directors who are not
officers or employees of the Corporation or its subsidiaries, including TWE.
1.19 "New Time Warner" shall mean Holdco (as defined
in the TBS Merger Agreement).
1.20 "Optional Redemption Price Per Share" shall
mean, as of any date, the price at which the Corporation may, at its option,
redeem one share of Series L Preferred Stock pursuant to Section 3.1.
1.21 "Parity Stock" shall mean the shares of the
Corporation's Series B 6.40% Preferred Stock, Series C Convertible Preferred
Stock, Series D Convertible Preferred Stock, Series E Convertible Preferred
Stock, Series F Convertible Preferred Stock, Series G Convertible Preferred
Stock, Series H Convertible Preferred Stock, Series I Convertible Preferred
Stock, Series K Preferred Stock, Series L Preferred Stock, Series M Preferred
Stock and any other class or series of stock of the Corporation created after
April 11, 1996 that, by the terms of the Certificate of Incorporation or of the
instrument by which the Board of Directors, acting pursuant to authority granted
in the Certificate of Incorporation, shall fix the relative rights, preferences
and limitations thereof, shall, in the event that the stated dividends thereon
are not paid in full, be entitled to share ratably with the Series L Preferred
Stock in the payment of dividends, including accumulations, if any, in
accordance with the sums which would be payable on such shares if all dividends
were declared and paid in full, or shall, in the event that the amounts payable
thereon in liquidation are not paid in full, be entitled to share ratably with
the Series L Preferred Stock in any other distribution of assets in accordance
with the sums which would be payable in such distribution if all sums payable
were discharged in full; provided, however, that the term "Parity Stock" shall
be deemed to refer (i) in Section 2.3 hereof, to any stock which is Parity Stock
in respect of dividend rights; (ii) in Section 9 hereof, to any stock which is
Parity Stock in respect of the distribution of assets; and (iii) in Section 8.1
hereof, to any stock which is Parity Stock in respect of either dividend rights
or the distribution of assets and which, pursuant to the Certificate of
Incorporation or any instrument in which the Board of Directors, acting pursuant
to authority granted in the Certificate of Incorporation, shall so designate, is
entitled to vote as part of the Voting Rights Class.
1.22 "Person" shall mean any individual, corporation,
general partnership, limited partnership, limited liability partnership, joint
venture,
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association, joint-stock company, trust, limited liability company,
unincorporated organization or government or any agency or political subdivision
thereof.
1.23 "Rating Confirmation" shall mean either (i) a
confirmation from each of Moody's Investors Service, Inc. or any successor to
its rating agency business ("Moody's") and Standard and Poor's Corporation or
any successor to its rating agency business ("S&P") that any contemplated
redemption or exchange by the Corporation would not result in a downgrade of its
rating of the Corporation's senior unsecured long-term debt, or (ii) a good
faith determination by the Board of Directors or any committee thereof (after
consultation with a Nationally Recognized Investment Banking Firm) that any
contemplated redemption or exchange by the Corporation should not result in a
downgrade in the rating of the Corporation's senior unsecured long-term debt by
either Moody's or S&P.
1.24 "Senior Stock" shall mean the shares of any
class or series of stock of the Corporation created after April 11, 1996 that,
by the terms of the Certificate of Incorporation or of the instrument by which
the Board of Directors, acting pursuant to authority granted in the Certificate
of Incorporation, shall fix the relative rights, preferences and limitations
thereof, shall be senior to the Series L Preferred Stock in respect of the right
to receive dividends or to participate in any other distribution of assets.
1.25 "Senior Subordinated Debentures" shall mean the
10 1/4% Senior Subordinated Debentures 2011 issued by the Corporation or New
Time Warner, as the case may be, pursuant to the Senior Subordinated Indenture.
1.26 "Senior Subordinated Indenture" shall mean an
indenture substantially in the form filed as an exhibit to the Corporation's
Current Report on Form 8-K dated April 11, 1996.
1.27 "Series K Preferred Stock" shall mean the
Corporation's 10 1/4% Series K Exchangeable Preferred Stock in exchange for
which shares of this Series were first issued.
1.28 "TBS Merger Agreement" shall mean the Amended
and Restated Agreement and Plan of Merger dated as of September 22, 1995, among
the Corporation, certain of its subsidiaries and Turner Broadcasting System,
Inc., as the same may be amended from time to time.
1.29 "TBS Transaction" shall mean the transactions
contemplated by the TBS Merger Agreement.
1.30 "Trust Indenture Act" shall mean the Trust
Indenture Act of 1939, as amended.
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1.31 "TWE" shall mean Time Warner Entertainment
Company, L.P., a Delaware limited partnership.
1.32 "Voting Rights Triggering Event" shall mean the
failure of the Corporation to (i) pay dividends on the Series L Preferred Stock
in cash, or to the extent permitted by its terms, by the issuance of additional
shares of Series L Preferred Stock, for more than six consecutive quarterly
dividend periods or (ii) discharge any redemption or exchange obligation with
respect to the Series L Preferred Stock.
2. Dividends.
2.1 The holders of outstanding shares of Series L
Preferred Stock shall be entitled, when, as and if declared by the Board of
Directors out of funds legally available therefor, to receive dividends on each
outstanding share of Series L Preferred Stock. Each quarter-annual dividend
shall be an amount per share (rounded to the nearest $.01) equal to $25.625 per
$1,000 Liquidation Preference of Series L Preferred Stock and shall be payable
on each Dividend Payment Date, to the holders of record of Series L Preferred
Stock at the close of business on the Dividend Record Date applicable to such
Dividend Payment Date, commencing on the first Dividend Payment Date following
the Initial Issue Date. Such dividends shall be cumulative and shall accrue on a
day-to-day basis, whether or not earned or declared, from and after the Issue
Date applicable to each share of this Series. Dividends on the Series L
Preferred Stock which are not declared and paid when due will compound quarterly
on each Dividend Payment Date at the dividend rate. Dividends payable for any
partial dividend period shall be computed on the basis of actual days elapsed
over a 365- (or 366-) day year.
2.2 With respect to any periods ending on or prior to
June 30, 2006, dividends may, at the option of the Corporation, be paid on any
Dividend Payment Date either in cash or by issuing fully paid and nonassessable
shares of Series L Preferred Stock with an aggregate Liquidation Preference
equal to the amount of such dividends (or, in connection with a Debt Exchange,
by issuing Senior Subordinated Debentures with an aggregate principal amount
equal to the amount of such dividends as provided in Section 5.1). Thereafter,
dividends payable on any Dividend Payment Date shall be paid only in cash.
2.3 Except as hereinafter provided in this Section
2.3, no full dividends or other distributions may be declared or paid or set
apart for payment on Series L Preferred Stock or any other Parity Stock, and no
Parity Stock, including the Series L Preferred Stock, may be repurchased,
exchanged, redeemed or otherwise acquired by the Corporation, nor may funds be
set apart for payment with respect thereto, unless full cumulative dividends
shall have been paid or set apart for such payment on, and all applicable
redemption, exchange and repurchase obligations shall have been satisfied with
respect to, all outstanding shares of Series L Preferred Stock and such other
Parity Stock; provided that dividends or distributions may be made on
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Parity Stock if they are payable in Junior Stock, and Parity Stock may be
converted into or exchanged for Parity Stock (having no greater preference upon
liquidation) or Junior Stock; and provided further that if the Company shall
have satisfied all applicable redemption, exchange and repurchase obligations
with respect to all outstanding shares of Series K Preferred Stock and other
Parity Stock, but if full dividends are not so paid, the Series L Preferred
Stock shall share dividends with all other Parity Stock, so that the amount of
dividends declared per share on Series L Preferred Stock and all such other
Parity Stock shall in all cases bear to each other the same ratio that full
cumulative dividends per share on the shares of Series L Preferred Stock and all
such other Parity Stock bear to each other. No dividends or other distributions
may be paid or set apart for such payment on Junior Stock, and no Junior Stock
may be repurchased, redeemed, exchanged or otherwise acquired nor may funds be
set apart for payment with respect thereto, if full cumulative dividends have
not been paid on, or any applicable redemption, exchange or repurchase
obligations shall not have been satisfied with respect to, the Series L
Preferred Stock and all other Parity Stock; provided that dividends or
distributions may be made on Junior Stock if they are payable-in-kind in
additional shares of, or warrants, rights, calls or options exercisable for or
convertible into additional shares of Junior Stock and; and provided further
that Junior Stock may be converted into or exchanged for Junior Stock.
2.4 Holders of shares of Series L Preferred Stock
shall not be entitled to any dividends, whether payable in cash, property or
stock, in excess of full cumulative dividends, as herein provided, on the Series
L Preferred Stock. No interest, or sum of money in lieu of interest, shall be
payable in respect of any dividend payment or payments on the Series L Preferred
Stock which may be in arrears (it being understood that compounding of unpaid
dividends shall not constitute money in lieu of interest).
2.5 To the extent that the amount of any
quarter-annual dividend payable to a holder of Series L Preferred Stock (in
respect of all shares held by such holder) that is payable in additional shares
of Series L Preferred Stock, valued at the Liquidation Preference thereof, does
not equal a whole number of shares of Series L Preferred Stock, such fractional
amount shall be paid in cash to such holder of Series L Preferred Stock.
3. Optional Redemption.
3.1 At any time on or after July 1, 2006, the
Corporation may, at its sole option, subject to the provisions of Sections 2.3
and 3.2, redeem, out of funds legally available therefor, all or any part of the
outstanding shares of Series L Preferred Stock. The redemption prices for each
share of Series L Preferred Stock called for redemption during the 12-month
periods commencing on July 1 of the years set forth below shall be the amount
(expressed as a percentage of the Liquidation Preference thereof) set forth
opposite such years, plus Accumulated Dividends and Accrued Dividends thereon to
the redemption date.
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<TABLE>
<CAPTION>
Period Percentage of Liquidation Preference
<S> <C>
2006 105.125%
2007 103.844%
2008 102.563%
2009 101.281%
2010 and thereafter 100.000%
</TABLE>
3.2 No optional redemption shall be effected unless
the Corporation shall have obtained a Rating Confirmation with respect to such
redemption.
4. Mandatory Redemption.
4.1 On the Mandatory Redemption Date, the Corporation
shall redeem, out of funds legally available therefor, each of the then
outstanding shares of Series L Preferred Stock as of the Mandatory Redemption
Date at the Mandatory Redemption Price Per Share.
4.2 Upon the redemption of all of the outstanding
shares of Series L Preferred Stock on the Mandatory Redemption Date pursuant to
Section 4.1, the Corporation's obligations with respect thereto will be
discharged.
5. Debt Exchange
5.1 On any Dividend Payment Date, subject to the
provisions of Sections 2.3 and 5.2, the Corporation may, at its sole option,
exchange, out of funds legally available therefor, each of the shares of Series
L Preferred Stock, in whole but not in part, for Senior Subordinated Debentures
having an aggregate principal amount equal to the Liquidation Preference on the
Series L Preferred Stock plus Accrued Dividends thereon. Notwithstanding the
foregoing, the Corporation may not exercise such exchange option unless all
Accumulated Dividends in respect of shares of Series L Preferred Stock
surrendered to the Corporation upon exchange shall have been paid either in cash
or, in respect of Accumulated Dividends relating to any Dividend Payment Date
prior to July 1, 2006, at the option of the Corporation, in cash, additional
shares of Series L Preferred Stock or Senior Subordinated Debentures having a
principal amount equal to such amount.
5.2 No Debt Exchange shall be effected unless the
Corporation shall have obtained a Rating Confirmation with respect to the Debt
Exchange.
5.3 Upon the Debt Exchange, the Corporation shall
issue Senior Subordinated Debentures only in denominations of $1,000 and
integral
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multiples thereof and shall pay cash in lieu of issuing Senior Subordinated
Debentures in principal amounts of less than $1,000.
5.4 Prior to giving notice of its intention to effect
the Debt Exchange, the Corporation shall execute and deliver with a bank or
trust company selected by the Corporation, the Senior Subordinated Indenture.
6. Procedure for Redemption or Exchange.
6.1 In the event the Corporation shall elect or be
required to redeem or exchange shares of Series L Preferred Stock pursuant to
Sections 3, 4 or 5 hereof, notice of such redemption or exchange shall be given
by first-class mail, not less than 30 nor more than 60 days prior to the
redemption or exchange date, to each record holder of the shares to be redeemed
or exchanged, at such holder's address as the same appears on the books of the
Corporation. Each such notice shall state: (i) whether the redemption or
exchange is pursuant to Section 3, 4 or 5 hereof; (ii) the time and date as of
which the redemption or exchange shall occur; (iii) the total number of shares
of Series L Preferred Stock to be redeemed or exchanged and, if fewer than all
the shares held by such holder are to be redeemed, the number of such shares to
be redeemed from such holder; (iv) in the case of a redemption, the redemption
price; (v) the place or places where certificates for such shares are to be
surrendered for payment of the redemption price in the case of a redemption, or
for delivery of Senior Subordinated Debentures in the case of the Debt Exchange;
(vi) that dividends on the shares to be redeemed will cease to accrue on such
redemption or exchange date unless the Corporation defaults in the payment of
the redemption price or fails to satisfy its exchange obligation; and (vii) in
the case of redemption, the name of any bank or trust company, if any,
performing the duties referred to in Section 6.3.
6.2 On or before any redemption or exchange date,
each holder of shares of Series L Preferred Stock to be redeemed or exchanged
shall surrender the certificate or certificates representing such shares of
Series L Preferred Stock to the Corporation, in the manner and at the place
designated in the notice of redemption or exchange, and on the redemption or
exchange date, the full redemption price or Senior Subordinated Debentures in
the principal amount specified in Section 5.1, as the case may be, for such
shares of Series L Preferred Stock shall be paid or delivered to the Person
whose name appears on such certificate or certificates as the owner thereof, and
each surrendered certificate shall be returned to authorized but unissued
shares. Upon surrender (in accordance with the notice of redemption or exchange)
of the certificate or certificates representing any shares to be so redeemed or
exchanged (properly endorsed or assigned for transfer, if the Corporation shall
so require and the notice of redemption or exchange shall so state), such shares
shall be redeemed by the Corporation at the redemption price or exchanged by the
Corporation for Senior Subordinated Debentures in the principal amount specified
in Section 5.1. If fewer than all the shares represented by any such certificate
are to be redeemed, a
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new certificate shall be issued representing the unredeemed shares, without cost
to the holder thereof, together with the amount of cash, if any, in lieu of
fractional shares.
6.3 If a notice of redemption or exchange shall have
been given as provided in Section 6.1, dividends on the shares of Series L
Preferred Stock so called for redemption or exchange shall cease to accrue, such
shares shall no longer be deemed to be outstanding, and all rights of the
holders thereof as stockholders of the Corporation with respect to shares so
called for redemption or exchange (except the right to receive from the
Corporation the redemption price or the Senior Subordinated Debentures without
interest) shall cease (including any right to receive dividends otherwise
payable on any Dividend Payment Date that would have occurred after the time and
date of redemption or exchange) either (i) from and after the time and date
fixed in the notice of redemption or exchange as the time and date of redemption
or exchange (unless the Corporation shall default in the payment of the
redemption price or shall fail to satisfy its exchange obligation, in which case
such rights shall not terminate at such time and date) or (ii) if the
Corporation shall so elect and state in the notice of redemption, from and after
the time and date (which date shall be the date fixed for redemption or an
earlier date not less than 30 days after the date of mailing of the redemption
notice) on which the Corporation shall irrevocably deposit in trust for the
holders of the shares to be redeemed with a designated bank or trust company
doing business in the Borough of Manhattan, City and State of New York, as
paying agent, money sufficient to pay at the office of such paying agent, on the
redemption date, the redemption price. Any money so deposited with any such
paying agent which shall not be required for such redemption shall be returned
to the Corporation forthwith. Subject to applicable escheat laws, any moneys so
set aside by the Corporation and unclaimed at the end of one year from the
redemption date shall revert to the general funds of the Corporation, after
which reversion the holders of such shares so called for redemption shall look
only to the general funds of the Corporation for the payment of the redemption
price without interest. Any interest accrued on funds so deposited shall be paid
to the Corporation from time to time.
6.4 In the event that fewer than all the outstanding
shares of Series L Preferred Stock are to be redeemed, the shares to be redeemed
shall be determined pro rata or by lot, as determined by the Corporation, except
that the Corporation may redeem such shares held by any holder of fewer than 100
shares (or shares held by holders who would hold fewer than 100 shares as a
result of such redemption), as may be determined by the Corporation.
7. Change of Control.
7.1 Upon the occurrence of a Change of Control of the
Corporation, the Corporation shall make an offer (the "Change of Control Offer")
to each holder of Series L Preferred Stock to repurchase, out of funds legally
available therefor, all or any part of such holder's Series L Preferred Stock at
a purchase price per share in cash equal to 101% of the Liquidation Preference
thereof, plus an
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amount equal to all Accumulated Dividends and Accrued Dividends thereon to the
date of purchase. The Change of Control Offer must be made within 30 days
following a Change of Control, shall remain open for at least 30 and not more
than 40 days and shall comply with the requirements of Rule 14e-1 under the
Exchange Act and any other applicable securities laws and regulations.
7.2 In the event the Corporation shall be required to
make a Change of Control Offer pursuant to Section 7.1 hereof, notice of such
Change of Control Offer shall be given by first-class mail, to each record
holder of shares of Series L Preferred Stock, at such holder's address as the
same appears on the books of the Corporation. Each such notice shall state: (i)
that a Change of Control has occurred; (ii) the last day on which the Change of
Control Offer may be accepted (the "Expiration Date"); (iii) the repurchase
price; (iv) the name and address of the paying agent; and (v) the procedures
that holders must follow to accept the Change of Control Offer.
7.3 On or before the Expiration Date, each holder of
shares of Series L Preferred Stock wishing to accept the Change of Control Offer
shall surrender the certificate or certificates representing such shares of
Series L Preferred Stock that such holder wishes to have repurchased to the
Corporation, in the manner and at the place designated in the notice described
in Section 7.2, and on the repurchase date, the full repurchase price for such
shares of Series L Preferred Stock shall be payable to the Person whose name
appears on such certificate or certificates as the owner thereof, and each
surrendered certificate shall be returned to authorized but unissued shares.
Upon surrender (in accordance with the notice described in Section 7.2) of the
certificate or certificates representing any shares to be so repurchased
(properly endorsed or assigned for transfer, if the Corporation shall so require
and the notice of a Change of Control Offer shall so state), such shares shall
be repurchased by the Corporation at the repurchase price. In case fewer than
all the shares represented by any such certificate are to be repurchased, a new
certificate shall be issued representing the non-repurchased shares, without
cost to the holder thereof, together with the amount of cash, if any, in lieu of
fractional shares.
8. Voting.
8.1 The shares of Series L Preferred Stock shall have
no voting rights except as required by law or as set forth below:
(a) If and whenever at any time or times, a
Voting Rights Triggering Event occurs, then the number of directors constituting
the Board of Directors shall be increased by two (without duplication of any
such increase in directorships required under the terms of any other Parity
Stock) and the holders of shares of Series L Preferred Stock, voting or
consenting, as the case may be, together as a class with the holders of any
shares of Parity Stock entitled to vote thereon and as to which (i) dividends
are in arrears or unpaid in an aggregate amount equal to or exceeding the amount
of dividends payable thereon for six quarterly dividend periods
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or (ii) redemption or exchange obligations have not been satisfied (together
with the Series L Preferred Stock, the "Voting Rights Class"), will be entitled
to elect two directors of the Corporation to fill the newly created
directorships.
(b) Such voting rights may be exercised
initially either by written consent or at a special meeting of the holders of
the shares of the Voting Rights Class, called as hereinafter provided, or at any
annual meeting of stockholders held for the purpose of electing directors, and
thereafter at each such annual meeting until such time as all dividends in
arrears on the shares of this Series shall have been paid in full and/or all
redemption or exchange obligations have been satisfied, as applicable, at which
time or times such voting rights and the term of the directors elected pursuant
to Section 8.1(a) shall terminate.
(c) At any time when such voting rights
shall have vested in holders of shares of the Voting Rights Class described in
Section 8.1(a), and if such rights shall not already have been exercised by
written consent, a proper officer of the Corporation may call, and, upon the
written request of the record holders of shares representing twenty-five percent
(25%) of the voting power of the shares then outstanding of the Voting Rights
Class, addressed to the Secretary of the Corporation, shall call a special
meeting of the holders of shares of Voting Rights Class. Such meeting shall be
held at the earliest practicable date upon the notice required for annual
meetings of stockholders at the place for holding annual meetings of
stockholders of the Corporation, or, if none, at a place designated by the Board
of Directors. Notwithstanding the provisions of this Section 8.1(c), no such
special meeting shall be called during a period within the 60 days immediately
preceding the date fixed for the next annual meeting of stockholders.
(d) At any meeting held for the purpose of
electing directors at which the holders of the Voting Rights Class shall have
the right to elect directors as provided herein, the presence in person or by
proxy of the holders of shares representing more than fifty percent (50%) in
voting power of the then outstanding shares of the Voting Rights Class shall be
required and shall be sufficient to constitute a quorum of such class for the
election of directors by such class.
(e) Any director elected pursuant to the
voting rights created under this Section 8.1 shall hold office until the next
annual meeting of stockholders (unless such term has previously terminated
pursuant to Section 8.1(b)) and any vacancy in respect of any such director
shall be filled only by vote of the remaining director so elected by holders of
the Voting Rights Class, or if there be no such remaining director, by the
holders of shares of the Voting Rights Class by written consent or at a special
meeting called in accordance with the procedures set forth in this Section 8,
or, if no such special meeting is called or written consent executed, at the
next annual meeting of stockholders. Upon any termination of such voting rights,
the term of office of all directors elected pursuant to this Section 8 shall
terminate.
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(f) So long as any shares of Series L
Preferred Stock remain outstanding, unless a greater percentage shall then be
required by law, the Corporation shall not, without the affirmative vote at a
meeting or the written consent with or without a meeting of the holders of
shares of Series L Preferred Stock representing at least a majority of the
outstanding shares of Series L Preferred Stock voting or consenting, as the case
may be, separately as one class, (i) create, authorize or issue any Senior Stock
or (ii) amend the Certificate of Designation or the Certificate of Incorporation
so as to affect adversely the specified rights, preferences, privileges or
voting rights of holders of shares of Series L Preferred Stock. The holders of
at least a majority of the outstanding shares of Series L Preferred Stock,
voting or consenting, as the case may be, separately as one class, may waive
compliance with any provision of the Certificate of Designation.
(g) In exercising the voting rights set
forth in this Section 8.1, each share of Series L Preferred Stock shall have a
number of votes equal to its Liquidation Preference.
8.2 Except as set forth in Section 8.1, the
Corporation may (a) create, authorize or issue any shares of Junior Stock or
Parity Stock or (b) increase or decrease the amount of authorized capital stock
of any class, including any preferred stock, without the consent of the holders
of Series L Preferred Stock, voting or consenting separately as a class, and in
taking the actions specified in (a) and (b) the Corporation shall not be deemed
to have affected adversely the rights, preferences, privileges or voting rights
of holders of shares of Series L Preferred Stock.
9. Liquidation Rights.
9.1 In the event of any liquidation, dissolution or
winding-up of the Corporation, whether voluntary or involuntary, the holders of
the shares of Series L Preferred Stock shall be entitled to receive out of the
assets of the Corporation available for distribution to stockholders up to their
Liquidation Preference of $1,000 per share plus Accumulated Dividends and
Accrued Dividends thereon in preference to the holders of, and before any
distribution is made on, any Junior Stock, including, without limitation on any
Common Stock.
9.2 Neither the sale, conveyance, exchange or
transfer (for cash, shares of stock, securities or other consideration) of all
or substantially all the property and assets of the Corporation nor the merger
or consolidation of the Corporation into or with any other corporation, or the
merger or consolidation of any other corporation into or with the Corporation,
shall be deemed to be a liquidation, dissolution or winding up, voluntary or
involuntary, for the purposes of this Section 9.
9.3 After the payment to the holders of the shares of
Series L Preferred Stock of full preferential amounts provided for in this
Section 9, the holders
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of Series L Preferred Stock as such shall have no right or claim to any of the
remaining assets of the Corporation.
9.4 In the event the assets of the Corporation
available for distribution to the holders of shares of Series L Preferred Stock
upon any liquidation, dissolution or winding up of the Corporation, whether
voluntary or involuntary, shall be insufficient to pay in full all amounts to
which such holders are entitled pursuant to Section 9.1, no such distribution
shall be made on account of any shares of any Parity Stock upon such
liquidation, dissolution or winding up unless proportionate distributable
amounts shall be paid on account of the shares of Series L Preferred Stock,
ratably, in proportion to the full distributable amounts for which holders of
all Parity Stock are entitled upon such liquidation, dissolution or winding up.
10. Merger, Consolidation and Sale of Assets. Subject to the
next sentence, without the affirmative vote or consent of the holders of at
least a majority of the outstanding shares of Series L Preferred Stock, voting
or consenting, as the case may be, separately as one class, the Corporation may
not consolidate or merge with or into, or sell, assign, transfer, lease, convey
or otherwise dispose of all or substantially all of its assets to, any Person
unless: (a) the Person formed by such consolidation or merger (if other than the
Corporation) or to which such sale, assignment, transfer, lease, conveyance or
other disposition shall have been made shall be a corporation organized or
existing under the laws of the United States or any State thereof or the
District of Columbia; (b) each share of Series L Preferred Stock shall be
converted into or exchanged for and shall become a share of such successor,
transferee or resulting corporation or a parent corporation of such corporation,
having in respect of such successor, transferee or resulting corporation or
parent corporation substantially the same powers, preferences and relative
participating, optional or other special rights, and the qualifications,
limitations or restrictions thereon, that the Series L Preferred Stock had
immediately prior to such transaction; and (c) immediately after giving effect
to such transaction, no Voting Rights Triggering Event shall have occurred or be
continuing. The consummation of the TBS Transaction pursuant to the TBS Merger
Agreement will not require the affirmative vote or consent of the holders of
shares of the Series L Preferred Stock.
11. Transfer Agent and Registrar. The transfer agent and
registrar (the "Transfer Agent") for Series L Preferred Stock shall be
_______________. The Corporation may, in its sole discretion, remove the
Transfer Agent with 10 days' prior written notice to the Transfer Agent and
appoint a successor Transfer Agent prior to such removal.
12. Covenant to Report. Notwithstanding that the Corporation
may not be subject to the reporting requirements of Section 13 or Section 15(d)
of the Exchange Act, the Corporation will provide the Transfer Agent and the
holders of Series L Preferred Stock with all information, documents and reports
specified in Section 13 and Section 15(d) of the Exchange Act.
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13. Other Provisions.
13.1 With respect to any notice to a holder of shares
of Series L Preferred Stock required to be provided hereunder, neither failure
to mail such notice, nor any defect therein or in the mailing thereof, to any
particular holder shall affect the sufficiency of the notice or the validity of
the proceedings referred to in such notice with respect to the other holders or
affect the legality or validity of any distribution, right, warrant,
reclassification, consolidation, merger, conveyance, transfer, dissolution,
liquidation or winding up, or the vote upon any such action. Any notice which
was mailed in the manner herein provided shall be conclusively presumed to have
been duly given whether or not the holder receives the notice.
13.2 Shares of Series L Preferred Stock issued and
reacquired will, upon compliance with the applicable requirements of Delaware
law, have the status of authorized but unissued shares of Preferred Stock of the
Corporation undesignated as to series and may with any and all other authorized
but unissued shares of Preferred Stock of the Corporation be designated or
redesignated and issued or reissued, as the case may be, as part of any series
of Preferred Stock of the Corporation, except that any issuance or reissuance of
shares of Series L Preferred Stock must be in compliance with the Certificate of
Designation.
13.3 The shares of Series L Preferred Stock shall be
issuable in whole shares.
13.4 The Corporation shall be entitled to recognize
the exclusive right of a person registered on its records as the holder of
shares of Series L Preferred Stock for all purposes.
15
<PAGE>
<PAGE>
13.5 All notice periods referred to herein shall
commence on the date of the mailing of the applicable notice.
IN WITNESS WHEREOF, Time Warner Inc. has caused this
certificate to be signed and attested this ______ day of ____________ , _____.
TIME WARNER INC.
By:
---------------------------------------
Name:
Title:
Attest:
- ------------------------
Name:
Title:
16
<PAGE>
<PAGE>
Exhibit 4.5
SPECIMEN STOCK CERTIFICATE
SERIES M SERIES M
EXCHANGEABLE PREFERRED EXCHANGEABLE PREFERRED
NUMBER SHARES
NMI
- ------ -------
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE
SECURITIES LAWS. NEITHER THIS SECURITY NOR ANY INTEREST OR
PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED,
TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN
THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION
IS EXEMPT FROM, OR NOT SUBJECT TO, REGISTRATION.
THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES
TO OFFER, SELL OR OTHERWISE TRANSFER SUCH SECURITY, PRIOR TO
THE DATE (THE "RESALE REGISTRATION TERMINATION DATE") WHICH
IS THREE YEARS AFTER THE LATER OF THE ORIGINAL ISSUE DATE
HEREOF AND THE LAST DATE ON WHICH THE CORPORATION OR AN
AFFILIATE OF THE CORPORATION WAS THE OWNER OF THIS SECURITY
(OR ANY PREDECESSOR OF SUCH SECURITY), ONLY (A) TO THE
CORPORATION, (B) PURSUANT TO A REGISTRATION STATEMENT THAT
HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C)
FOR SO LONG AS THE SECURITIES ARE ELIGIBLE FOR RESALE
PURSUANT TO RULE 144A, TO A PERSON IT REASONABLY BELIEVES IS
A "QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A
UNDER THE SECURITIES ACT THAT PURCHASES FOR ITS OWN ACCOUNT
OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO
WHOM NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN
RELIANCE ON RULE 144A, (D) PURSUANT TO OFFERS AND SALES TO
NON-U.S. PERSONS THAT OCCUR OUTSIDE THE UNITED STATES IN
ACCORDANCE WITH REGULATION S UNDER THE SECURITIES ACT, (E)
TO AN INSTITUTIONAL ACCREDITED INVESTOR WITHIN THE MEANING
OF SUBPARAGRAPHS (A)(1), (2), (3) OR (7) OF RULE 501 UNDER
THE SECURITIES ACT THAT IS ACQUIRING THE SECURITY FOR ITS
OWN ACCOUNT, OR FOR THE ACCOUNT OF SUCH AN INSTITUTIONAL
ACCREDITED INVESTOR, IN EACH CASE HAVING AN AGGREGATE
LIQUIDATION PREFERENCE OF NOT LESS THAN $250,000, FOR
INVESTMENT PURPOSES AND NOT WITH A VIEW TO, OR FOR OFFER OR
SALE IN CONNECTION WITH, ANY DISTRIBUTION IN VIOLATION OF
THE SECURITIES ACT, OR (F) PURSUANT TO ANOTHER AVAILABLE
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT, PROVIDED THAT AN INITIAL INVESTOR THAT IS AN
INSTITUTIONAL "ACCREDITED INVESTOR" PURCHASING AS DESCRIBED
IN CLAUSE (E) ABOVE SHALL NOT BE PERMITTED TO TRANSFER THIS
SECURITY TO AN INSTITUTIONAL "ACCREDITED INVESTOR" WITHIN
THE MEANING OF SUBPARAGRAPHS (A)(1), (2), (3) OR (7) OF RULE
501 UNDER THE SECURITIES ACT; AND SUBJECT TO THE
CORPORATION'S RIGHT PRIOR TO ANY SUCH OFFER, SALE OR
TRANSFER PURSUANT TO CLAUSE (D), (E) OR (F) TO REQUIRE THE
DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION AND/OR
OTHER INFORMATION SATISFACTORY TO IT, AND IN THE CASE OF ANY
OF THE FOREGOING CLAUSES (A)-(F), A CERTIFICATE OF TRANSFER
IN THE FORM APPEARING ON THE OTHER SIDE OF THIS SECURITY IS
COMPLETED AND DELIVERED BY THE TRANSFEROR TO THE
CORPORATION. THIS LEGEND WILL BE REMOVED UPON THE REQUEST OF
THE HOLDER AFTER THE RESALE RESTRICTION TERMINATION DATE.
TIME WARNER INC.
THIS CERTIFICATE IS TRANSFERABLE IN NEW YORK, NEW YORK
INCORPORATED UNDER THE LAWS SEE REVERSE FOR CERTAIN DEFINITIONS
OF THE STATE OF DELAWARE CUSIP___________________
This Certifies that_____________________________________________________________
is the owner of_________________________________________________________________
<PAGE>
<PAGE>
2
FULLY PAID AND NON-ASSESSABLE SHARES OF SERIES M EXCHANGEABLE PREFERRED STOCK
OF THE PAR VALUE OF $1.00 PER SHARE OF TIME WARNER INC.,
transferable on the books of the Corporation by said owner in person or by a
duly authorized attorney upon surrender of this certificate properly endorsed.
This certificate and the shares represented hereby are issued and shall be held
subject to all the provisions of the Certificate of Incorporation and By-Laws of
the Corporation, as amended, to which reference is hereby made with the same
effect as if it were herein set forth in full. A copy of said Certificate of
Incorporation and By-Laws, as amended, is on file in the office of the Transfer
Agent of the Corporation. This certificate is not valid until countersigned by
the Transfer Agent and registered by the Registrar.
In Witness Whereof the Corporation has caused this certificate to be signed by
its proper officers and its corporate seal to be hereunto affixed.
Dated__________________________
COUNTERSIGNED AND REGISTERED: TIME WARNER INC. CORPORATE SEAL
DELAWARE 1983
CHEMICAL MELLON SHAREHOLDER SERVICES, L.L.C.
TRANSFER AGENT AND REGISTRAR
BY __________________________________________
AUTHORIZED OFFICER
/s/ Gerald M. Levin
- -------------------------------------------------
Chairman of the Board and Chief Executive Officer
/s/ Peter R. Haje
- -------------------------------------------------
Secretary
<PAGE>
<PAGE>
3
TIME WARNER INC.
THE CORPORATION WILL FURNISH TO ANY STOCKHOLDER UPON REQUEST AND WITHOUT CHARGE,
A FULL STATEMENT OF THE DESIGNATION, PREFERENCES AND RELATIVE, PARTICIPATING,
OPTIONAL AND/OR OTHER SPECIAL RIGHTS OF EACH CLASS OF CAPITAL STOCK OR SERIES
THEREOF AUTHORIZED TO BE ISSUED AND THE QUALIFICATIONS, LIMITATIONS OR
RESTRICTIONS OF SUCH PREFERENCES AND/OR RIGHTS, SO FAR AS THE SAME HAVE BEEN
FIXED, AND THE AUTHORITY OF THE BOARD OF DIRECTORS TO DESIGNATE AND FIX THE
RELATIVE RIGHTS, PREFERENCES AND LIMITATIONS OF SERIES OF PREFERRED STOCK. SUCH
REQUEST MAY BE MADE EITHER TO THE CORPORATION OR TO THE TRANSFER AGENT.
The following abbreviations, when used in the inscription on the face of this
certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM - as tenants in common
TEN ENT - as tenants by the entireties
JT TEN - as joint tenants with right of survivorship and not as tenants in
common
UNIF GIFT MIN ACT - ____________________Custodian____________________
(Cust) (Minor)
under Uniform Gifts to Minors Act
---------------------
(State)
Additional abbreviations may also be used though not in the above list.
For value received _____ hereby sell, assign and transfer unto
PLEASE INSERT SOCIAL SECURITY OR
OTHER IDENTIFYING NUMBER OF ASSIGNEE____________________________________________
- --------------------------------------------------------------------------------
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING POSTAL ZIP CODE, OF
ASSIGNEE)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
__________________________________________________________________________Shares
of the capital stock represented by the within Certificate, and do hereby
irrevocably constitute and appoint _____________________________________Attorney
to transfer the said stock on the books of the within-named Corporation with
full power of substitution in the premises.
Dated ________________________________
-----------------------------------------------------------------------
NOTICE: THE SIGNATURE TO THIS ASSIGNMENT MUST CORRESPOND WITH THE
NAME AS WRITTEN UPON THE FACE OF THE CERTIFICATE IN EVERY PARTICULAR
WITHOUT ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATEVER.
<PAGE>
<PAGE>
SPECIMEN STOCK CERTIFICATE
SERIES M SERIES M
EXCHANGEABLE PREFERRED EXCHANGEABLE PREFERRED
NUMBER SHARES
NMG
- ------ ------
Unless this certificate is presented by an authorized
representative of The Depository Trust Company, a New York
corporation ("DTC"), to the Corporation or its agent for
registration of transfer, exchange or payment, and any
certificate issued is registered in the name of Cede & Co.
or in such other name as is requested by an authorized
representative of DTC (and any payment is made to Cede & Co.
or to such other entity as is requested by an authorized
representative of DTC), ANY TRANSFER, PLEDGE OR OTHER USE
HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS
WRONGFUL in as much as the registered owner hereof, Cede &
Co., has an interest herein. Unless and until it is
exchanged in whole or in part for Preferred Stock in
definitive registered form, this certificate may not be
transferred except as a whole by DTC to a nominee of DTC or
by a nominee of DTC to DTC or another nominee of DTC or by
DTC or any such nominee to a successor Depository or a
nominee of such successor Depository.
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE
SECURITIES LAWS. NEITHER THIS SECURITY NOR ANY INTEREST OR
PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED,
TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN
THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION
IS EXEMPT FROM, OR NOT SUBJECT TO, REGISTRATION.
THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES
TO OFFER, SELL OR OTHERWISE TRANSFER SUCH SECURITY, PRIOR TO
THE DATE (THE "RESALE REGISTRATION TERMINATION DATE") WHICH
IS THREE YEARS AFTER THE LATER OF THE ORIGINAL ISSUE DATE
HEREOF AND THE LAST DATE ON WHICH THE CORPORATION OR AN
AFFILIATE OF THE CORPORATION WAS THE OWNER OF THIS SECURITY
(OR ANY PREDECESSOR OF SUCH SECURITY), ONLY (A) TO THE
CORPORATION, (B) PURSUANT TO A REGISTRATION STATEMENT THAT
HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C)
FOR SO LONG AS THE SECURITIES ARE ELIGIBLE FOR RESALE
PURSUANT TO RULE 144A, TO A PERSON IT REASONABLY BELIEVES IS
A "QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A
UNDER THE SECURITIES ACT THAT PURCHASES FOR ITS OWN ACCOUNT
OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO
WHOM NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN
RELIANCE ON RULE 144A, (D) PURSUANT TO OFFERS AND SALES TO
NON-U.S. PERSONS THAT OCCUR OUTSIDE THE UNITED STATES IN
ACCORDANCE WITH REGULATION S UNDER THE SECURITIES ACT, (E)
TO AN INSTITUTIONAL ACCREDITED INVESTOR WITHIN THE MEANING
OF SUBPARAGRAPHS (A)(1), (2), (3) OR (7) OF RULE 501 UNDER
THE SECURITIES ACT THAT IS ACQUIRING THE SECURITY FOR ITS
OWN ACCOUNT, OR FOR THE ACCOUNT OF SUCH AN INSTITUTIONAL
ACCREDITED INVESTOR, IN EACH CASE HAVING AN AGGREGATE
LIQUIDATION PREFERENCE OF NOT LESS THAN $250,000, FOR
INVESTMENT PURPOSES AND NOT WITH A VIEW TO, OR FOR OFFER OR
SALE IN CONNECTION WITH, ANY DISTRIBUTION IN VIOLATION OF
THE SECURITIES ACT, OR (F) PURSUANT TO ANOTHER AVAILABLE
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT, PROVIDED THAT AN INITIAL INVESTOR THAT IS AN
INSTITUTIONAL "ACCREDITED INVESTOR" PURCHASING AS DESCRIBED
IN CLAUSE (E) ABOVE SHALL NOT BE PERMITTED TO TRANSFER THIS
SECURITY TO AN INSTITUTIONAL "ACCREDITED INVESTOR" WITHIN
THE MEANING OF SUBPARAGRAPHS (A)(1), (2), (3) OR (7) OF RULE
501 UNDER THE SECURITIES ACT; AND SUBJECT TO THE
CORPORATION'S RIGHT PRIOR TO ANY SUCH OFFER, SALE OR
TRANSFER PURSUANT TO CLAUSE (D), (E) OR (F) TO REQUIRE THE
DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION AND/OR
OTHER INFORMATION SATISFACTORY TO IT, AND IN THE CASE OF ANY
OF THE FOREGOING CLAUSES (A)-(F), A CERTIFICATE OF TRANSFER
IN THE FORM APPEARING ON THE OTHER SIDE OF THIS SECURITY IS
COMPLETED AND DELIVERED BY THE TRANSFEROR TO THE
CORPORATION. THIS LEGEND WILL BE REMOVED UPON THE REQUEST OF
THE HOLDER AFTER THE RESALE RESTRICTION TERMINATION DATE.
TIME WARNER INC.
THIS CERTIFICATE IS TRANSFERABLE IN NEW YORK, NEW YORK
INCORPORATED UNDER THE LAWS SEE REVERSE FOR CERTAIN DEFINITIONS
OF THE STATE OF DELAWARE CUSIP__________________
This Certifies that_____________________________________________________________
<PAGE>
<PAGE>
2
is the owner of_________________________________________________________________
FULLY PAID AND NON-ASSESSABLE SHARES OF SERIES M EXCHANGEABLE PREFERRED STOCK
OF THE PAR VALUE OF $1.00 PER SHARE OF TIME WARNER INC.,
transferable on the books of the Corporation by said owner in person or by a
duly authorized attorney upon surrender of this certificate properly endorsed.
This certificate and the shares represented hereby are issued and shall be held
subject to all the provisions of the Certificate of Incorporation and By-Laws of
the Corporation, as amended, to which reference is hereby made with the same
effect as if it were herein set forth in full. A copy of said Certificate of
Incorporation and By-Laws, as amended, is on file in the office of the Transfer
Agent of the Corporation. This certificate is not valid until countersigned by
the Transfer Agent and registered by the Registrar.
In Witness Whereof the Corporation has caused this certificate to be signed by
its proper officers and its corporate seal to be hereunto affixed.
Dated _____________________________
COUNTERSIGNED AND REGISTERED: TIME WARNER INC. CORPORATE SEAL
DELAWARE 1983
CHEMICAL MELLON SHAREHOLDER SERVICES, L.L.C.
TRANSFER AGENT AND REGISTRAR
BY____________________________________________
AUTHORIZED OFFICER
/s/ Gerald M. Levin
- -------------------------------------------------
Chairman of the Board and Chief Executive Officer
/s/ Peter R. Haje
- -------------------------------------------------
Secretary
<PAGE>
<PAGE>
3
TIME WARNER INC.
THE CORPORATION WILL FURNISH TO ANY STOCKHOLDER UPON REQUEST AND WITHOUT CHARGE,
A FULL STATEMENT OF THE DESIGNATION, PREFERENCES AND RELATIVE, PARTICIPATING,
OPTIONAL AND/OR OTHER SPECIAL RIGHTS OF EACH CLASS OF CAPITAL STOCK OR SERIES
THEREOF AUTHORIZED TO BE ISSUED AND THE QUALIFICATIONS, LIMITATIONS OR
RESTRICTIONS OF SUCH PREFERENCES AND/OR RIGHTS, SO FAR AS THE SAME HAVE BEEN
FIXED, AND THE AUTHORITY OF THE BOARD OF DIRECTORS TO DESIGNATE AND FIX THE
RELATIVE RIGHTS, PREFERENCES AND LIMITATIONS OF SERIES OF PREFERRED STOCK. SUCH
REQUEST MAY BE MADE EITHER TO THE CORPORATION OR TO THE TRANSFER AGENT.
The following abbreviations, when used in the inscription on the face of this
certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM - as tenants in common
TEN ENT - as tenants by the entireties
JT TEN - as joint tenants with right of survivorship and not as tenants in
common.
UNIF GIFT MIN ACT - ____________________Custodian____________________
(Cust) (Minor)
under Uniform Gifts to Minors Act
---------------------
(State)
Additional abbreviations may be used though not i the above list.
For value received _____ hereby sell, assign and transfer unto
PLEASE INSERT SOCIAL SECURITY OR
OTHER IDENTIFYING NUMBER OF
ASSIGNEE________________________________________________________________________
- --------------------------------------------------------------------------------
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING POSTAL ZIP CODE, OF
ASSIGNEE)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
__________________________________________________________________________Shares
of the capital stock represented by the within Certificate, and do hereby
irrevocably constitute and appoint______________________________________Attorney
to transfer the said stock on the books of the within-named Corporation with
full power of substitution in the premises.
Dated_____________________________________
--------------------------------------------------------------------
NOTICE: THE SIGNATURE TO THIS ASSIGNMENT MUST CORRESPOND WITH THE
NAME AS WRITTEN UPON THE FACE OF THE CERTIFICATE IN EVERY PARTICULAR
WITHOUT ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATEVER.
<PAGE>
<PAGE>
SPECIMEN STOCK CERTIFICATE
SERIES M SERIES M
EXCHANGEABLE PREFERRED EXCHANGEABLE PREFERRED
NUMBER SHARES
NMS
- ------ ------
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE
SECURITIES LAWS. NEITHER THIS SECURITY NOR ANY INTEREST OR
PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED,
TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN
THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION
IS EXEMPT FROM, OR NOT SUBJECT TO, REGISTRATION.
THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES
TO OFFER, SELL OR OTHERWISE TRANSFER SUCH SECURITY, PRIOR TO
THE DATE (THE "RESALE REGISTRATION TERMINATION DATE") WHICH
IS THREE YEARS AFTER THE LATER OF THE ORIGINAL ISSUE DATE
HEREOF AND THE LAST DATE ON WHICH THE CORPORATION OR AN
AFFILIATE OF THE CORPORATION WAS THE OWNER OF THIS SECURITY
(OR ANY PREDECESSOR OF SUCH SECURITY), ONLY (A) TO THE
CORPORATION, (B) PURSUANT TO A REGISTRATION STATEMENT THAT
HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C)
FOR SO LONG AS THE SECURITIES ARE ELIGIBLE FOR RESALE
PURSUANT TO RULE 144A, TO A PERSON IT REASONABLY BELIEVES IS
A "QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A
UNDER THE SECURITIES ACT THAT PURCHASES FOR ITS OWN ACCOUNT
OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO
WHOM NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN
RELIANCE ON RULE 144A, (D) PURSUANT TO OFFERS AND SALES TO
NON-U.S. PERSONS THAT OCCUR OUTSIDE THE UNITED STATES IN
ACCORDANCE WITH REGULATION S UNDER THE SECURITIES ACT, (E)
TO AN INSTITUTIONAL ACCREDITED INVESTOR WITHIN THE MEANING
OF SUBPARAGRAPHS (A)(1), (2), (3) OR (7) OF RULE 501 UNDER
THE SECURITIES ACT THAT IS ACQUIRING THE SECURITY FOR ITS
OWN ACCOUNT, OR FOR THE ACCOUNT OF SUCH AN INSTITUTIONAL
ACCREDITED INVESTOR, IN EACH CASE HAVING AN AGGREGATE
LIQUIDATION PREFERENCE OF NOT LESS THAN $250,000, FOR
INVESTMENT PURPOSES AND NOT WITH A VIEW TO, OR FOR OFFER OR
SALE IN CONNECTION WITH, ANY DISTRIBUTION IN VIOLATION OF
THE SECURITIES ACT, OR (F) PURSUANT TO ANOTHER AVAILABLE
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT, PROVIDED THAT AN INITIAL INVESTOR THAT IS AN
INSTITUTIONAL "ACCREDITED INVESTOR" PURCHASING AS DESCRIBED
IN CLAUSE (E) ABOVE SHALL NOT BE PERMITTED TO TRANSFER THIS
SECURITY TO AN INSTITUTIONAL "ACCREDITED INVESTOR" WITHIN
THE MEANING OF SUBPARAGRAPHS (A)(1), (2), (3) OR (7) OF RULE
501 UNDER THE SECURITIES ACT; AND SUBJECT TO THE
CORPORATION'S RIGHT PRIOR TO ANY SUCH OFFER, SALE OR
TRANSFER PURSUANT TO CLAUSE (D), (E) OR (F) TO REQUIRE THE
DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION AND/OR
OTHER INFORMATION SATISFACTORY TO IT, AND IN THE CASE OF ANY
OF THE FOREGOING CLAUSES (A)-(F), A CERTIFICATE OF TRANSFER
IN THE FORM APPEARING ON THE OTHER SIDE OF THIS SECURITY IS
COMPLETED AND DELIVERED BY THE TRANSFEROR TO THE
CORPORATION. THIS LEGEND WILL BE REMOVED UPON THE REQUEST OF
THE HOLDER AFTER THE RESALE RESTRICTION TERMINATION DATE.
TIME WARNER INC.
THIS CERTIFICATE IS TRANSFERABLE IN NEW YORK, NEW YORK
INCORPORATED UNDER THE LAWS SEE REVERSE FOR CERTAIN DEFINITIONS
OF THE STATE OF DELAWARE CUSIP__________________
This Certifies that ____________________________________________________________
is the owner of ________________________________________________________________
FULLY PAID AND NON-ASSESSABLE SHARES OF SERIES M EXCHANGEABLE PREFERRED STOCK
OF THE PAR VALUE OF $1.00 PER SHARE OF TIME WARNER INC.,
transferable on the books of the Corporation by said owner in person or by a
duly authorized attorney upon surrender of this certificate properly endorsed.
This certificate and the shares represented hereby are issued and shall be held
subject to all the provisions of the Certificate of Incorporation and By-Laws of
the Corporation, as amended, to which
<PAGE>
<PAGE>
2
reference is hereby made with the same effect as if it were herein set forth in
full. A copy of said Certificate of Incorporation and By-Laws, as amended, is on
file in the office of the Transfer Agent of the Corporation. This certificate is
not valid until countersigned by the Transfer Agent and registered by the
Registrar.
In Witness Whereof the Corporation has caused this certificate to be signed by
its proper officers and its corporate seal to be hereunto affixed.
Dated__________________________________
COUNTERSIGNED AND REGISTERED: TIME WARNER INC. CORPORATE SEAL
DELAWARE 1983
CHEMICAL MELLON SHAREHOLDER SERVICES, L.L.C.
TRANSFER AGENT AND REGISTRAR
BY_____________________________________________
AUTHORIZED OFFICER
/s/ Gerald M. Levin
- --------------------------------------------------
Chairman of the Board and Chief Executive Officer
/s/ Peter R. Haje
- --------------------------------------------------
Secretary
<PAGE>
<PAGE>
3
TIME WARNER INC.
THE CORPORATION WILL FURNISH TO ANY STOCKHOLDER UPON REQUEST AND WITHOUT CHARGE,
A FULL STATEMENT OF THE DESIGNATION, PREFERENCES AND RELATIVE, PARTICIPATING,
OPTIONAL AND/OR OTHER SPECIAL RIGHTS OF EACH CLASS OF CAPITAL STOCK OR SERIES
THEREOF AUTHORIZED TO BE ISSUED AND THE QUALIFICATIONS, LIMITATIONS OR
RESTRICTIONS OF SUCH PREFERENCES AND/OR RIGHTS, SO FAR AS THE SAME HAVE BEEN
FIXED, AND THE AUTHORITY OF THE BOARD OF DIRECTORS TO DESIGNATE AND FIX THE
RELATIVE RIGHTS, PREFERENCES AND LIMITATIONS OF SERIES OF PREFERRED STOCK. SUCH
REQUEST MAY BE MADE EITHER TO THE CORPORATION OR TO THE TRANSFER AGENT.
The following abbreviations, when used in the inscription on the face of this
certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM - as tenants in common
TEN ENT - as tenants by the entireties
JT TEN - as joint tenants with right of survivorship and not as tenants in
common.
UNIF GIFT MIN ACT - ____________________Custodian____________________
(Cust) (Minor)
under Uniform Gifts to Minors Act
---------------------
(State)
Additional abbreviations may also be used though not in the above list.
For value received _____ hereby sell, assign and transfer unto
PLEASE INSERT SOCIAL SECURITY OR
OTHER IDENTIFYING NUMBER OF
ASSIGNEE________________________________________________________________________
- --------------------------------------------------------------------------------
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING POSTAL ZIP CODE, OF
ASSIGNEE)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
__________________________________________________________________________Shares
of the capital stock represented by the within Certificate, and do hereby
irrevocably constitute and appoint______________________________________Attorney
to transfer the said stock on the books of the within-named Corporation with
full power of substitution in the premises.
Dated______________________________________
--------------------------------------------------------------------
NOTICE: THE SIGNATURE TO THIS ASSIGNMENT MUST CORRESPOND WITH THE
NAME AS WRITTEN UPON THE FACE OF THE CERTIFICATE IN EVERY PARTICULAR
WITHOUT ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATEVER.
<PAGE>
<PAGE>
Exhibit 4.6
SPECIMEN STOCK CERTIFICATE
SERIES L SERIES L
EXCHANGEABLE PREFERRED EXCHANGEABLE PREFERRED
NUMBER SHARES
NLI
- ------ ------
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE
SECURITIES LAWS. NEITHER THIS SECURITY NOR ANY INTEREST OR
PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED,
TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN
THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION
IS EXEMPT FROM, OR NOT SUBJECT TO, REGISTRATION.
THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES
TO OFFER, SELL OR OTHERWISE TRANSFER SUCH SECURITY, PRIOR TO
THE DATE (THE "RESALE REGISTRATION TERMINATION DATE") WHICH
IS THREE YEARS AFTER THE LATER OF THE ORIGINAL ISSUE DATE
HEREOF AND THE LAST DATE ON WHICH THE CORPORATION OR AN
AFFILIATE OF THE CORPORATION WAS THE OWNER OF THIS SECURITY
(OR ANY PREDECESSOR OF SUCH SECURITY), ONLY (A) TO THE
CORPORATION, (B) PURSUANT TO A REGISTRATION STATEMENT THAT
HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C)
FOR SO LONG AS THE SECURITIES ARE ELIGIBLE FOR RESALE
PURSUANT TO RULE 144A, TO A PERSON IT REASONABLY BELIEVES IS
A "QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A
UNDER THE SECURITIES ACT THAT PURCHASES FOR ITS OWN ACCOUNT
OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO
WHOM NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN
RELIANCE ON RULE 144A, (D) PURSUANT TO OFFERS AND SALES TO
NON-U.S. PERSONS THAT OCCUR OUTSIDE THE UNITED STATES IN
ACCORDANCE WITH REGULATION S UNDER THE SECURITIES ACT, (E)
TO AN INSTITUTIONAL ACCREDITED INVESTOR WITHIN THE MEANING
OF SUBPARAGRAPHS (A)(1), (2), (3) OR (7) OF RULE 501 UNDER
THE SECURITIES ACT THAT IS ACQUIRING THE SECURITY FOR ITS
OWN ACCOUNT, OR FOR THE ACCOUNT OF SUCH AN INSTITUTIONAL
ACCREDITED INVESTOR, IN EACH CASE HAVING AN AGGREGATE
LIQUIDATION PREFERENCE OF NOT LESS THAN $250,000, FOR
INVESTMENT PURPOSES AND NOT WITH A VIEW TO, OR FOR OFFER OR
SALE IN CONNECTION WITH, ANY DISTRIBUTION IN VIOLATION OF
THE SECURITIES ACT, OR (F) PURSUANT TO ANOTHER AVAILABLE
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT, PROVIDED THAT AN INITIAL INVESTOR THAT IS AN
INSTITUTIONAL "ACCREDITED INVESTOR" PURCHASING AS DESCRIBED
IN CLAUSE (E) ABOVE SHALL NOT BE PERMITTED TO TRANSFER THIS
SECURITY TO AN INSTITUTIONAL "ACCREDITED INVESTOR" WITHIN
THE MEANING OF SUBPARAGRAPHS (A)(1), (2), (3) OR (7) OF RULE
501 UNDER THE SECURITIES ACT; AND SUBJECT TO THE
CORPORATION'S RIGHT PRIOR TO ANY SUCH OFFER, SALE OR
TRANSFER PURSUANT TO CLAUSE (D), (E) OR (F) TO REQUIRE THE
DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION AND/OR
OTHER INFORMATION SATISFACTORY TO IT, AND IN THE CASE OF ANY
OF THE FOREGOING CLAUSES (A)-(F), A CERTIFICATE OF TRANSFER
IN THE FORM APPEARING ON THE OTHER SIDE OF THIS SECURITY IS
COMPLETED AND DELIVERED BY THE TRANSFEROR TO THE
CORPORATION. THIS LEGEND WILL BE REMOVED UPON THE REQUEST OF
THE HOLDER AFTER THE RESALE RESTRICTION TERMINATION DATE.
TIME WARNER INC.
THIS CERTIFICATE IS TRANSFERABLE IN NEW YORK, NEW YORK
INCORPORATED UNDER THE LAWS SEE REVERSE FOR CERTAIN DEFINITIONS
OF THE STATE OF DELAWARE CUSIP__________________
This Certifies that_____________________________________________________________
is the owner of_________________________________________________________________
FULLY PAID AND NON-ASSESSABLE SHARES OF SERIES L EXCHANGEABLE PREFERRED STOCK
OF THE PAR VALUE OF $1.00 PER SHARE OF TIME WARNER INC.,
transferable on the books of the Corporation by said owner in person or by a
duly authorized attorney upon surrender of this certificate properly endorsed.
This certificate and the shares represented hereby are issued and shall be held
subject to all the provisions of the Certificate of Incorporation and By-Laws of
the Corporation, as amended, to which
<PAGE>
<PAGE>
2
reference is hereby made with the same effect as if it were herein set forth in
full. A copy of said Certificate of Incorporation and By-Laws, as amended, is on
file in the office of the Transfer Agent of the Corporation. This certificate is
not valid until countersigned by the Transfer Agent and registered by the
Registrar.
In Witness Whereof the Corporation has caused this certificate to be signed by
its proper officers and its corporate seal to be hereunto affixed.
Dated______________________________
COUNTERSIGNED AND REGISTERED: TIME WARNER INC. CORPORATE SEAL
DELAWARE 1983
CHEMICAL MELLON SHAREHOLDER SERVICES, L.L.C.
TRANSFER AGENT AND REGISTRAR
BY_____________________________________________
AUTHORIZED OFFICER
/s/ Gerald M. Levin
- --------------------------------------------------
Chairman of the Board and Chief Executive Officer
/s/ Peter R. Haje
- --------------------------------------------------
Secretary
<PAGE>
<PAGE>
3
TIME WARNER INC.
THE CORPORATION WILL FURNISH TO ANY STOCKHOLDER UPON REQUEST AND WITHOUT CHARGE,
A FULL STATEMENT OF THE DESIGNATION, PREFERENCES AND RELATIVE, PARTICIPATING,
OPTIONAL AND/OR OTHER SPECIAL RIGHTS OF EACH CLASS OF CAPITAL STOCK OR SERIES
THEREOF AUTHORIZED TO BE ISSUED AND THE QUALIFICATIONS, LIMITATIONS OR
RESTRICTIONS OF SUCH PREFERENCES AND/OR RIGHTS, SO FAR AS THE SAME HAVE BEEN
FIXED, AND THE AUTHORITY OF THE BOARD OF DIRECTORS TO DESIGNATE AND FIX THE
RELATIVE RIGHTS, PREFERENCES AND LIMITATIONS OF SERIES OF PREFERRED STOCK. SUCH
REQUEST MAY BE MADE EITHER TO THE CORPORATION OR TO THE TRANSFER AGENT.
The following abbreviations, when used in the inscription on the face of this
certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM - as tenants in common
TEN ENT - as tenants by the entireties
JT TEN - as joint tenants with right of survivorship and not as tenants in
common.
UNIF GIFT MIN ACT - ____________________Custodian____________________
(Cust) (Minor)
under Uniform Gifts to Minors Act
---------------------
(State)
Additional abbreviations may also be used though not in the above list.
For value received _____ hereby sell, assign and transfer unto
PLEASE INSERT SOCIAL SECURITY OR
OTHER IDENTIFYING NUMBER OF
ASSIGNEE________________________________________________________________________
- --------------------------------------------------------------------------------
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING POSTAL ZIP CODE, OF
ASSIGNEE)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
__________________________________________________________________________Shares
of the capital stock represented by the within Certificate, and do hereby
irrevocably constitute and appoint______________________________________Attorney
to transfer the said stock on the books of the within-named Corporation with
full power of substitution in the premises.
Dated _______________________________
--------------------------------------------------------------------
NOTICE: THE SIGNATURE TO THIS ASSIGNMENT MUST CORRESPOND WITH THE
NAME AS WRITTEN UPON THE FACE OF THE CERTIFICATE IN EVERY PARTICULAR
WITHOUT ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATEVER.
<PAGE>
<PAGE>
SPECIMEN STOCK CERTIFICATE
SERIES L SERIES L
EXCHANGEABLE PREFERRED EXCHANGEABLE PREFERRED
NUMBER SHARES
NLG
- ------ ------
Unless this certificate is presented by an authorized
representative of The Depository Trust Company, a New York
corporation ("DTC"), to the Corporation or its agent for
registration of transfer, exchange or payment, and any
certificate issued is registered in the name of Cede & Co.
or in such other name as is requested by an authorized
representative of DTC (and any payment is made to Cede & Co.
or to such other entity as is requested by an authorized
representative of DTC), ANY TRANSFER, PLEDGE OR OTHER USE
HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS
WRONGFUL in as much as the registered owner hereof, Cede &
Co., has an interest herein. Unless and until it is
exchanged in whole or in part for Preferred Stock in
definitive registered form, this certificate may not be
transferred except as a whole by DTC to a nominee of DTC or
by a nominee of DTC to DTC or another nominee of DTC or by
DTC or any such nominee to a successor Depository or a
nominee of such successor Depository.
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE
SECURITIES LAWS. NEITHER THIS SECURITY NOR ANY INTEREST OR
PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED,
TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN
THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION
IS EXEMPT FROM, OR NOT SUBJECT TO, REGISTRATION.
THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES
TO OFFER, SELL OR OTHERWISE TRANSFER SUCH SECURITY, PRIOR TO
THE DATE (THE "RESALE REGISTRATION TERMINATION DATE") WHICH
IS THREE YEARS AFTER THE LATER OF THE ORIGINAL ISSUE DATE
HEREOF AND THE LAST DATE ON WHICH THE CORPORATION OR AN
AFFILIATE OF THE CORPORATION WAS THE OWNER OF THIS SECURITY
(OR ANY PREDECESSOR OF SUCH SECURITY), ONLY (A) TO THE
CORPORATION, (B) PURSUANT TO A REGISTRATION STATEMENT THAT
HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C)
FOR SO LONG AS THE SECURITIES ARE ELIGIBLE FOR RESALE
PURSUANT TO RULE 144A, TO A PERSON IT REASONABLY BELIEVES IS
A "QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A
UNDER THE SECURITIES ACT THAT PURCHASES FOR ITS OWN ACCOUNT
OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO
WHOM NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN
RELIANCE ON RULE 144A, (D) PURSUANT TO OFFERS AND SALES TO
NON-U.S. PERSONS THAT OCCUR OUTSIDE THE UNITED STATES IN
ACCORDANCE WITH REGULATION S UNDER THE SECURITIES ACT, (E)
TO AN INSTITUTIONAL ACCREDITED INVESTOR WITHIN THE MEANING
OF SUBPARAGRAPHS (A)(1), (2), (3) OR (7) OF RULE 501 UNDER
THE SECURITIES ACT THAT IS ACQUIRING THE SECURITY FOR ITS
OWN ACCOUNT, OR FOR THE ACCOUNT OF SUCH AN INSTITUTIONAL
ACCREDITED INVESTOR, IN EACH CASE HAVING AN AGGREGATE
LIQUIDATION PREFERENCE OF NOT LESS THAN $250,000, FOR
INVESTMENT PURPOSES AND NOT WITH A VIEW TO, OR FOR OFFER OR
SALE IN CONNECTION WITH, ANY DISTRIBUTION IN VIOLATION OF
THE SECURITIES ACT, OR (F) PURSUANT TO ANOTHER AVAILABLE
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT, PROVIDED THAT AN INITIAL INVESTOR THAT IS AN
INSTITUTIONAL "ACCREDITED INVESTOR" PURCHASING AS DESCRIBED
IN CLAUSE (E) ABOVE SHALL NOT BE PERMITTED TO TRANSFER THIS
SECURITY TO AN INSTITUTIONAL "ACCREDITED INVESTOR" WITHIN
THE MEANING OF SUBPARAGRAPHS (A)(1), (2), (3) OR (7) OF RULE
501 UNDER THE SECURITIES ACT; AND SUBJECT TO THE
CORPORATION'S RIGHT PRIOR TO ANY SUCH OFFER, SALE OR
TRANSFER PURSUANT TO CLAUSE (D), (E) OR (F) TO REQUIRE THE
DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION AND/OR
OTHER INFORMATION SATISFACTORY TO IT, AND IN THE CASE OF ANY
OF THE FOREGOING CLAUSES (A)-(F), A CERTIFICATE OF TRANSFER
IN THE FORM APPEARING ON THE OTHER SIDE OF THIS SECURITY IS
COMPLETED AND DELIVERED BY THE TRANSFEROR TO THE
CORPORATION. THIS LEGEND WILL BE REMOVED UPON THE REQUEST OF
THE HOLDER AFTER THE RESALE RESTRICTION TERMINATION DATE.
TIME WARNER INC.
THIS CERTIFICATE IS TRANSFERABLE IN NEW YORK, NEW YORK
INCORPORATED UNDER THE LAWS SEE REVERSE FOR CERTAIN DEFINITIONS
OF THE STATE OF DELAWARE CUSIP__________________
This Certifies that ____________________________________________________________
<PAGE>
<PAGE>
2
is the owner of ________________________________________________________________
FULLY PAID AND NON-ASSESSABLE SHARES OF SERIES L EXCHANGEABLE PREFERRED STOCK
OF THE PAR VALUE OF $1.00 PER SHARE OF TIME WARNER INC.,
transferable on the books of the Corporation by said owner in person or by a
duly authorized attorney upon surrender of this certificate properly endorsed.
This certificate and the shares represented hereby are issued and shall be held
subject to all the provisions of the Certificate of Incorporation and By-Laws of
the Corporation, as amended, to which reference is hereby made with the same
effect as if it were herein set forth in full. A copy of said Certificate of
Incorporation and By-Laws, as amended, is on file in the office of the Transfer
Agent of the Corporation. This certificate is not valid until countersigned by
the Transfer Agent and registered by the Registrar.
In Witness Whereof the Corporation has caused this certificate to be signed by
its proper officers and its corporate seal to be hereunto affixed.
Dated ____________________________________
COUNTERSIGNED AND REGISTERED: TIME WARNER INC. CORPORATE SEAL
DELAWARE 1983
CHEMICAL MELLON SHAREHOLDER SERVICES, L.L.C.
TRANSFER AGENT AND REGISTRAR
BY __________________________________________
AUTHORIZED OFFICER
/s/ Gerald M. Levin
- -------------------------------------------------
Chairman of the Board and Chief Executive Officer
/s/ Peter R. Haje
- -------------------------------------------------
Secretary
<PAGE>
<PAGE>
3
TIME WARNER INC.
THE CORPORATION WILL FURNISH TO ANY STOCKHOLDER UPON REQUEST AND WITHOUT CHARGE,
A FULL STATEMENT OF THE DESIGNATION, PREFERENCES AND RELATIVE, PARTICIPATING,
OPTIONAL AND/OR OTHER SPECIAL RIGHTS OF EACH CLASS OF CAPITAL STOCK OR SERIES
THEREOF AUTHORIZED TO BE ISSUED AND THE QUALIFICATIONS, LIMITATIONS OR
RESTRICTIONS OF SUCH PREFERENCES AND/OR RIGHTS, SO FAR AS THE SAME HAVE BEEN
FIXED, AND THE AUTHORITY OF THE BOARD OF DIRECTORS TO DESIGNATE AND FIX THE
RELATIVE RIGHTS, PREFERENCES AND LIMITATIONS OF SERIES OF PREFERRED STOCK. SUCH
REQUEST MAY BE MADE EITHER TO THE CORPORATION OR TO THE TRANSFER AGENT.
The following abbreviations, when used in the inscription on the face of this
certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM - as tenants in common
TEN ENT - as tenants by the entireties
JT TEN - as joint tenants with right of survivorship and not as tenants in
common.
UNIF GIFT MIN ACT - ____________________Custodian____________________
(Cust) (Minor)
under Uniform Gifts to Minors Act
---------------------
(State)
Additional abbreviations may be used though not i the above list.
For value received _____ hereby sell, assign and transfer unto
PLEASE INSERT SOCIAL SECURITY OR
OTHER IDENTIFYING NUMBER OF
ASSIGNEE________________________________________________________________________
- --------------------------------------------------------------------------------
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING POSTAL ZIP CODE, OF
ASSIGNEE)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
__________________________________________________________________________Shares
of the capital stock represented by the within Certificate, and do hereby
irrevocably constitute and appoint______________________________________Attorney
to transfer the said stock on the books of the within-named Corporation with
full power of substitution in the premises.
Dated __________________________________
--------------------------------------------------------------------
NOTICE: THE SIGNATURE TO THIS ASSIGNMENT MUST CORRESPOND WITH THE
NAME AS WRITTEN UPON THE FACE OF THE CERTIFICATE IN EVERY PARTICULAR
WITHOUT ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATEVER.
<PAGE>
<PAGE>
SPECIMEN STOCK CERTIFICATE
SERIES L SERIES L
EXCHANGEABLE PREFERRED EXCHANGEABLE PREFERRED
NUMBER SHARES
NLS
- ------ ------
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE
SECURITIES LAWS. NEITHER THIS SECURITY NOR ANY INTEREST OR
PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED,
TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN
THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION
IS EXEMPT FROM, OR NOT SUBJECT TO, REGISTRATION.
THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES
TO OFFER, SELL OR OTHERWISE TRANSFER SUCH SECURITY, PRIOR TO
THE DATE (THE "RESALE REGISTRATION TERMINATION DATE") WHICH
IS THREE YEARS AFTER THE LATER OF THE ORIGINAL ISSUE DATE
HEREOF AND THE LAST DATE ON WHICH THE CORPORATION OR AN
AFFILIATE OF THE CORPORATION WAS THE OWNER OF THIS SECURITY
(OR ANY PREDECESSOR OF SUCH SECURITY), ONLY (A) TO THE
CORPORATION, (B) PURSUANT TO A REGISTRATION STATEMENT THAT
HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C)
FOR SO LONG AS THE SECURITIES ARE ELIGIBLE FOR RESALE
PURSUANT TO RULE 144A, TO A PERSON IT REASONABLY BELIEVES IS
A "QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A
UNDER THE SECURITIES ACT THAT PURCHASES FOR ITS OWN ACCOUNT
OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO
WHOM NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN
RELIANCE ON RULE 144A, (D) PURSUANT TO OFFERS AND SALES TO
NON-U.S. PERSONS THAT OCCUR OUTSIDE THE UNITED STATES IN
ACCORDANCE WITH REGULATION S UNDER THE SECURITIES ACT, (E)
TO AN INSTITUTIONAL ACCREDITED INVESTOR WITHIN THE MEANING
OF SUBPARAGRAPHS (A)(1), (2), (3) OR (7) OF RULE 501 UNDER
THE SECURITIES ACT THAT IS ACQUIRING THE SECURITY FOR ITS
OWN ACCOUNT, OR FOR THE ACCOUNT OF SUCH AN INSTITUTIONAL
ACCREDITED INVESTOR, IN EACH CASE HAVING AN AGGREGATE
LIQUIDATION PREFERENCE OF NOT LESS THAN $250,000, FOR
INVESTMENT PURPOSES AND NOT WITH A VIEW TO, OR FOR OFFER OR
SALE IN CONNECTION WITH, ANY DISTRIBUTION IN VIOLATION OF
THE SECURITIES ACT, OR (F) PURSUANT TO ANOTHER AVAILABLE
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT, PROVIDED THAT AN INITIAL INVESTOR THAT IS AN
INSTITUTIONAL "ACCREDITED INVESTOR" PURCHASING AS DESCRIBED
IN CLAUSE (E) ABOVE SHALL NOT BE PERMITTED TO TRANSFER THIS
SECURITY TO AN INSTITUTIONAL "ACCREDITED INVESTOR" WITHIN
THE MEANING OF SUBPARAGRAPHS (A)(1), (2), (3) OR (7) OF RULE
501 UNDER THE SECURITIES ACT; AND SUBJECT TO THE
CORPORATION'S RIGHT PRIOR TO ANY SUCH OFFER, SALE OR
TRANSFER PURSUANT TO CLAUSE (D), (E) OR (F) TO REQUIRE THE
DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION AND/OR
OTHER INFORMATION SATISFACTORY TO IT, AND IN THE CASE OF ANY
OF THE FOREGOING CLAUSES (A)-(F), A CERTIFICATE OF TRANSFER
IN THE FORM APPEARING ON THE OTHER SIDE OF THIS SECURITY IS
COMPLETED AND DELIVERED BY THE TRANSFEROR TO THE
CORPORATION. THIS LEGEND WILL BE REMOVED UPON THE REQUEST OF
THE HOLDER AFTER THE RESALE RESTRICTION TERMINATION DATE.
TIME WARNER INC.
THIS CERTIFICATE IS TRANSFERABLE IN NEW YORK, NEW YORK
INCORPORATED UNDER THE LAWS SEE REVERSE FOR CERTAIN DEFINITIONS
OF THE STATE OF DELAWARE CUSIP _________________
This Certifies that ____________________________________________________________
is the owner of ________________________________________________________________
<PAGE>
<PAGE>
2
FULLY PAID AND NON-ASSESSABLE SHARES OF SERIES L EXCHANGEABLE PREFERRED STOCK
OF THE PAR VALUE OF $1.00 PER SHARE OF TIME WARNER INC.,
transferable on the books of the Corporation by said owner in person or by a
duly authorized attorney upon surrender of this certificate properly endorsed.
This certificate and the shares represented hereby are issued and shall be held
subject to all the provisions of the Certificate of Incorporation and By-Laws of
the Corporation, as amended, to which reference is hereby made with the same
effect as if it were herein set forth in full. A copy of said Certificate of
Incorporation and By-Laws, as amended, is on file in the office of the Transfer
Agent of the Corporation. This certificate is not valid until countersigned by
the Transfer Agent and registered by the Registrar.
In Witness Whereof the Corporation has caused this certificate to be signed by
its proper officers and its corporate seal to be hereunto affixed.
Dated _______________________________
COUNTERSIGNED AND REGISTERED: TIME WARNER INC. CORPORATE SEAL
DELAWARE 1983
CHEMICAL MELLON SHAREHOLDER SERVICES, L.L.C.
TRANSFER AGENT AND REGISTRAR
BY__________________________________________________
AUTHORIZED OFFICER
/s/ Gerald M. Levin
- ----------------------------------------------------
Chairman of the Board and Chief Executive Officer
/s/ Peter R. Haje
- ----------------------------------------------------
Secretary
<PAGE>
<PAGE>
3
TIME WARNER INC.
THE CORPORATION WILL FURNISH TO ANY STOCKHOLDER UPON REQUEST AND WITHOUT CHARGE,
A FULL STATEMENT OF THE DESIGNATION, PREFERENCES AND RELATIVE, PARTICIPATING,
OPTIONAL AND/OR OTHER SPECIAL RIGHTS OF EACH CLASS OF CAPITAL STOCK OR SERIES
THEREOF AUTHORIZED TO BE ISSUED AND THE QUALIFICATIONS, LIMITATIONS OR
RESTRICTIONS OF SUCH PREFERENCES AND/OR RIGHTS, SO FAR AS THE SAME HAVE BEEN
FIXED, AND THE AUTHORITY OF THE BOARD OF DIRECTORS TO DESIGNATE AND FIX THE
RELATIVE RIGHTS, PREFERENCES AND LIMITATIONS OF SERIES OF PREFERRED STOCK. SUCH
REQUEST MAY BE MADE EITHER TO THE CORPORATION OR TO THE TRANSFER AGENT.
The following abbreviations, when used in the inscription on the face of this
certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM - as tenants in common
TEN ENT - as tenants by the entireties
JT TEN - as joint tenants with right of survivorship and not as tenants in
common
UNIF GIFT MIN ACT - ____________________Custodian____________________
(Cust) (Minor)
under Uniform Gifts to Minors Act
---------------------
(State)
Additional abbreviations may also be used though not in the above list.
For value received _____ hereby sell, assign and transfer unto
PLEASE INSERT SOCIAL SECURITY OR
OTHER IDENTIFYING NUMBER OF
ASSIGNEE________________________________________________________________________
- --------------------------------------------------------------------------------
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING POSTAL ZIP CODE, OF
ASSIGNEE)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
__________________________________________________________________________Shares
of the capital stock represented by the within Certificate, and do hereby
irrevocably constitute and appoint______________________________________Attorney
to transfer the said stock on the books of the within-named Corporation with
full power of substitution in the premises.
Dated____________________________________
--------------------------------------------------------------------
NOTICE: THE SIGNATURE TO THIS ASSIGNMENT MUST CORRESPOND WITH THE
NAME AS WRITTEN UPON THE FACE OF THE CERTIFICATE IN EVERY PARTICULAR
WITHOUT ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATEVER.
<PAGE>
<PAGE>
May 22, 1996
Time Warner Inc.
75 Rockefeller Plaza
New York, NY 10019
Ladies & Gentlemen:
In connection with the Registration Statement on Form S-4 (the
"Registration Statement") filed by Time Warner Inc., a Delaware corporation (the
"Company"), with the Securities and Exchange Commission on May 22, 1996 pursuant
to the Securities Act of 1933, as amended (the "Act"), and the rules and
regulations thereunder, we have been requested to render our opinion as to the
legality of the securities being registered thereunder. The Registration
Statement relates to: (i) shares (the "Series M Preferred Shares") of the
Company's 10 1/4% Series M Exchangeable Preferred Stock, par value $1.00 per
share (the "Series M Preferred Stock"); (ii) shares (the "Series L Preferred
Shares") of the Company's 10 1/4% Series L Exchangeable Preferred Stock, par
value $1.00 per share (the "Series L Preferred Stock"), which are issuable in
certain circumstances in exchange for the Series M Preferred Shares; and (iii)
the Company's 10 1/4% Senior Subordinated Debentures due 2011 (the
"Debentures"), which are issuable in certain circumstances in exchange for the
Series L Preferred Shares pursuant to an indenture (the "Indenture"), between
the Company and a trustee (the "Trustee"). The Series M Preferred Stock, the
Series L Preferred Stock and the Debentures are herein collectively referred to
as the "Securities." Capitalized terms used herein and not
<PAGE>
<PAGE>
Time Warner Inc. 2
otherwise defined herein shall have the respective meanings ascribed thereto in
the Registration Statement.
In connection with this opinion, we have examined originals,
or copies certified or otherwise identified to our satisfaction, of (i) the form
of Certificate of Designation of the Series M Preferred Stock (the "Series M
Certificate of Designation"); (ii) the form of Certificate of Designation of the
Series L Preferred Stock annexed as Exhibit A to the Series M Certificate of
Designation (the "Series L Certificate of Designation"); (iii) the form of the
Indenture annexed as Exhibit 4.2 to the April 11, 1996 8-K; (iv) the Certificate
of Incorporation and the By-Laws of the Company, each as amended to date; and
(v) records of certain of the Company's proceedings relating to, among other
things, the issuance and sale of the Securities. In addition, we have made such
other examinations of law and facts as we considered necessary in order to form
a basis for the opinions hereunder expressed.
In our examination of the aforesaid documents, we have
assumed, without independent investigation, the genuineness of all signatures,
the enforceability of the documents against each party thereto other than the
Company, the authenticity of all documents submitted to us as originals, the
conformity to the original documents of all documents submitted to us as
certified, photostatic, reproduced or conformed copies of validly existing
agreements or other documents, the authenticity of all such latter documents and
the legal capacity of all individuals who have executed any of such documents.
The opinions set forth herein assume that the Company takes no corporate action
following the date hereof inconsistent with its obligations under the
Registration Rights Agreement or the Securities.
In expressing the opinions set forth herein, we have relied
upon the factual matters provided to us by officers of the Company and upon
certificates of public officials.
Based upon the foregoing, and subject to the assumptions,
exceptions and qualifications set forth herein, we are of the opinion that:
(1) The Series M Preferred Shares have been duly authorized
and, assuming the Series M Certificate of Designation is duly filed with the
Secretary of State of the State of Delaware, when the Series M Preferred Shares
are issued and delivered in accordance with the terms of the Series M
Certificate of Designation, the Registration Rights Agreement and the
Registration Statement, the Series M Preferred Shares will be legally issued,
fully paid and non-assessable.
<PAGE>
<PAGE>
Time Warner Inc. 3
(2) The Series L Preferred Shares have been duly authorized
and, assuming the Series L Certificate of Designation is duly filed with the
Secretary of State of the State of Delaware, when the Series L Preferred Shares
are issued and delivered in accordance with the terms of the Series L
Certificate of Designation, the Series M Certificate of Designation, the
Registration Rights Agreement and the Registration Statement, the Series L
Preferred Shares will be legally issued, fully paid and non-assessable.
(3) The Indenture and the Debentures have been duly authorized
by the Company. When the Indenture is duly authorized, executed and delivered by
the Company and the Trustee and the Debentures are duly issued, authenticated
and delivered in accordance with the terms of the Indenture, the Debentures will
constitute valid and legally binding obligations of the Company, enforceable
against the Company in accordance with their terms, except as enforcement may be
limited by bankruptcy, insolvency, reorganization, fraudulent conveyance or
transfer, moratorium, and similar laws affecting creditors' rights generally and
by general principles of equity (regardless whether enforcement is considered in
the proceeding in equity or at law).
The foregoing opinion is limited to the federal laws of the
United States, the laws of the State of New York and the General Corporation Law
of the State of Delaware. Our opinion is rendered only with respect to the laws,
and the rules, regulations and orders thereunder, which are currently in effect.
Please be advised that no member of this firm is admitted to practice law in the
State of Delaware.
We hereby consent to the filing of this opinion as an exhibit
to the Registration Statement and to the reference to us under the heading
"Legal Opinion" in the Prospectus. In giving such consent, we do not thereby
admit that we are in the category of persons whose consent is required under
Section 7 of the Act.
Very truly yours,
PAUL, WEISS, RIFKIND, WHARTON & GARRISON
<PAGE>
<PAGE>
EXHIBIT 12.1
TIME WARNER
RATIO OF EARNINGS TO FIXED CHARGES
(IN MILLIONS, EXCEPT RATIOS)
<TABLE>
<CAPTION>
PRO FORMA
---------------------------------------------------
THREE MONTHS ENDED YEAR ENDED
MARCH 31, 1996 DECEMBER 31, 1995
------------------------ ------------------------
(1) (2) (1) (2)
COMPANY COMPANY COMPANY COMPANY
PRE-TBS(a) POST-TBS(a) PRE-TBS(a) POST-TBS(a)
---------- ----------- ---------- -----------
<S> <C> <C> <C> <C>
EARNINGS:
Net income (loss) before income taxes
and extraordinary item $(81) $(144) $ (169) $ (234)
Interest expense 240 291 982 1,196
Amortization of capitalized interest -- 4 4 15
Portion of rents representative of an
interest factor 14 22 60 91
Preferred stock dividend requirements
of majority-owned subs 18 18 67 67
Adjustment for partially owned
subsidiaries and 50% owned companies 148 148 649 649
Undistributed losses of less than 50%
owned companies 18 9 117 104
--- --- ----- -----
Total earnings $357 $ 348 $1,710 $1,888
--- --- ----- -----
--- --- ----- -----
Fixed Charges:
Interest expense $240 $ 291 $ 982 $ 1,196
Capitalized interest 1 5 6 21
Portion of rents representative of an
interest factor 14 22 60 91
Preferred stock dividend requirements
of majority-owned subs 18 18 67 67
Adjustment for partially owned
subsidiaries and 50% owned companies 153 153 655 655
--- --- ----- -----
Total fixed charges $426 $ 489 $1,770 $2,030
--- --- ----- -----
--- --- ----- -----
Ratio of earnings to fixed charges
(deficiency in the coverage of fixed
charges by earnings before fixed
charges) $(69) $(141) $ (60) $ (142)
--- --- ----- -----
--- --- ----- -----
<CAPTION>
HISTORICAL
---------------------------------------------------------
THREE MONTHS
ENDED
MARCH 31, YEARS ENDED DECEMBER 31,
------------ ------------------------------------------
1996 1995 1995 1994 1993 1992 1991
------ ---- ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
EARNINGS:
Net income (loss) before income taxes
and extraordinary item $ (88) $(15) $ 2 $ 89 $ 81 $ 320 $ 52
Interest expense 247 210 877 769 698 729 912
Amortization of capitalized interest -- -- 2 2 -- 19 23
Portion of rents representative of an
interest factor 14 13 57 52 54 85 78
Preferred stock dividend requirements
of majority-owned subs 18 -- 11 -- -- -- --
Adjustment for partially owned
subsidiaries and 50% owned companies 148 180 691 665 663 97 73
Undistributed losses of less than 50%
owned companies 18 17 117 82 47 56 56
------ ---- ------ ------ ------ ------ ------
Total earnings $ 357 $405 $1,757 $1,659 $1,543 $1,306 $1,194
------ ---- ------ ------ ------ ------ ------
------ ---- ------ ------ ------ ------ ------
Fixed Charges:
Interest expense $ 247 $210 $ 877 $ 769 $ 698 $ 729 $ 912
Capitalized interest 1 -- 4 2 -- 15 17
Portion of rents representative of an
interest factor 14 13 57 52 54 85 78
Preferred stock dividend requirements
of majority-owned subs 18 -- 11 -- -- -- --
Adjustment for partially owned
subsidiaries and 50% owned companies 153 180 697 668 664 81 45
------ ---- ------ ------ ------ ------ ------
Total fixed charges $ 433 $403 $1,646 $1,491 $1,416 $ 910 $1,052
------ ---- ------ ------ ------ ------ ------
------ ---- ------ ------ ------ ------ ------
Ratio of earnings to fixed charges
(deficiency in the coverage of fixed
charges by earnings before fixed
charges) $ (76) 1.0x 1.1x 1.1x 1.1x 1.4x 1.1x
------ ---- ------ ------ ------ ------ ------
------ ---- ------ ------ ------ ------ ------
</TABLE>
(a) The pro forma ratio of earnings to fixed charges of the Company for the
three months ended March 31, 1996 gives effect in column (1) to the 1996
Convertible Debt Refinancing and in column (2) to such transaction and the TBS
Transaction, in each case as if the transactions occurred at the beginning of
such period. The pro forma ratio of earnings to fixed charges of the Company for
the year ended December 31, 1995 gives effect in column (1) to the
ITOCHU/Toshiba Transaction, the Cable Transactions, the Debt Refinancings and
the Asset Sale Transactions and in column (2) to each of such transactions and
the TBS Transaction, in each case as if the transactions occurred at the
beginning of such period.
<PAGE>
<PAGE>
EXHIBIT 12.2
TIME WARNER
RATIO OF EARNINGS TO FIXED CHARGES AND PREFERRED STOCK DIVIDENDS
(IN MILLIONS, EXCEPT RATIOS)
<TABLE>
<CAPTION>
PRO FORMA
------------------------------------------------
THREE MONTHS ENDED YEAR ENDED
MARCH 31, 1996 DECEMBER 31, 1995
----------------------- -----------------------
(1) (2) (1) (2)
COMPANY COMPANY COMPANY COMPANY
PRE-TBS(a) POST-TBS(a) PRE-TBS(a) POST-TBS(a)
---------- ----------- ---------- -----------
<S> <C> <C> <C> <C>
Earnings:
Net income (loss) before income taxes and
extraordinary item $(81) $(144) $ (169) $ (234)
Interest expense 240 291 982 1,196
Amortization of capitalized interest -- 4 4 15
Portion of rents representative of an interest
factor 14 21 60 91
Preferred stock dividend requirements of majority-
owned subs 18 18 67 67
Adjustment for partially owned subsidiaries and
50% owned companies 149 149 649 649
Undistributed losses of less than 50% owned
companies 15 6 117 104
---- ----- ------ -------
Total earnings $355 $ 345 $1,710 $ 1,888
---- ----- ------ -------
---- ----- ------ -------
Fixed Charges:
Interest expense $240 $ 291 $ 982 $ 1,196
Capitalized interest 1 5 6 21
Portion of rents representative of an interest
factor 14 21 60 91
Preferred stock dividend requirements of majority-
owned subs 18 18 67 67
Adjustment for partially owned subsidiaries and
50% owned companies 153 153 655 655
Pretax income necessary to cover preferred stock
dividend requirements 55 55 198 198
---- ----- ------ -------
Total combined fixed charges and preferred
stock dividends $481 $ 543 $1,968 $ 2,228
---- ----- ------ -------
---- ----- ------ -------
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) $(126) $(198) $ (258) $ (340)
----- ----- ---------- -----------
----- ----- ---------- -----------
<CAPTION>
HISTORICAL
-----------------------------------------------------
THREE MONTHS
ENDED
MARCH 31, YEARS ENDED DECEMBER 31,
------------ ---------------------------------------
1996 1995 1995 1994 1993 1992 1991
------ ---- ------ ------ ------ ------ -------
<S> <C> <C> <C> <C> <C> <C> <C>
Earnings:
Net income (loss) before income taxes and
extraordinary item $ (88) $(15) $ 2 $ 89 $ 81 $ 320 $ 52
Interest expense 247 210 877 769 698 729 912
Amortization of capitalized interest -- -- 2 2 -- 19 23
Portion of rents representative of an interest
factor 14 13 57 52 54 85 78
Preferred stock dividend requirements of majority-
owned subs 18 -- 11 -- -- -- --
Adjustment for partially owned subsidiaries and
50% owned companies 148 180 691 665 663 97 73
Undistributed losses of less than 50% owned
companies 18 17 117 82 47 56 56
------ ---- ------ ------ ------ ------ -------
Total earnings $ 357 $405 $1,757 $1,659 $1,543 $1,306 $ 1,194
------ ---- ------ ------ ------ ------ -------
------ ---- ------ ------ ------ ------ -------
Fixed Charges:
Interest expense $ 247 $210 $ 877 $ 769 $ 698 $ 729 $ 912
Capitalized interest 1 -- 4 2 -- 15 17
Portion of rents representative of an interest
factor 14 13 57 52 54 85 78
Preferred stock dividend requirements of majority-
owned subs 18 -- 11 -- -- -- --
Adjustment for partially owned subsidiaries and
50% owned companies 153 180 697 668 664 81 45
Pretax income necessary to cover preferred stock
dividend requirements 55 5 72 20 218 905 1,382
------ ---- ------ ------ ------ ------ -------
Total combined fixed charges and preferred
stock dividends $ 488 $408 $1,718 $1,511 $1,634 $1,815 $ 2,434
------ ---- ------ ------ ------ ------ -------
------ ---- ------ ------ ------ ------ -------
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) $ (131) $ (3) 1.0x 1.1x (91) $ (509) $(1,240)
------ ---- ------ ------ ------ ------ -------
------ ---- ------ ------ ------ ------ -------
</TABLE>
- ------------
(a) The pro forma ratio of earnings to fixed charges and preferred stock
dividends of the Company for the three months ended March 31, 1996 gives effect
in column (1) to the 1996 Convertible Debt Refinancing and in column (2) to such
transaction and the TBS Transaction, in each case as if the transactions
occurred at the beginning of such period. The pro forma ratio of earnings to
fixed charges of the Company for the year ended December 31, 1995 gives effect
in column (1) to the ITOCHU/Toshiba Transaction, the Cable Transactions, the
Debt Refinancings and the Asset Sale Transactions and in column (2) to each of
such transactions and the TBS Transaction, in each case as if the transactions
occurred at the beginning of such period.
<PAGE>
<PAGE>
EXHIBIT 12.3
TWE
RATIO OF EARNINGS TO FIXED CHARGES
(IN MILLIONS, EXCEPT RATIOS)
<TABLE>
<CAPTION>
HISTORICAL
----------------------------------------------------
THREE
PRO FORMA MONTHS
YEAR ENDED
ENDED MARCH 31, YEAR ENDED DECEMBER 31,
DECEMBER 31, ----------- ---------------------------------------
1995 1996 1995 1995 1994 1993 1992 1991
------------ ----- ---- ------ ------ ------ ------ -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Earnings:
Net income before income taxes and extraordinary item $ 255 $ 112 $ 15 $ 183 $ 201 $ 272 $ 210 $ 132
Interest expense 528 122 150 571 563 573 436 479
Amortization of capitalized interest 33 8 7 33 25 19 18 22
Portion of rents representative of an interest factor 58 15 13 58 47 39 33 27
Adjustment for partially owned subsidiaries and 50% owned
companies 221 65 7 175 24 22 80 30
Undistributed losses of less than 50% owned companies 64 5 8 76 58 14 40 58
------ ----- ---- ------ ------ ------ ------ -------
Total earnings $1,159 $ 327 $200 $1,096 $ 918 $ 939 $ 817 $ 748
------ ----- ---- ------ ------ ------ ------ -------
------ ----- ---- ------ ------ ------ ------ -------
Fixed Charges:
Interest expense $ 528 $ 122 $150 $ 571 $ 563 $ 573 $ 436 $ 479
Capitalized interest 33 8 7 33 25 20 15 17
Portion of rents representative of an interest factor 58 15 13 58 47 39 33 27
Adjustment for partially owned subsidiaries and 50% owned
companies 34 7 7 27 24 22 80 31
------ ----- ---- ------ ------ ------ ------ -------
Total fixed charges $ 653 $ 152 $177 $ 689 $ 659 $ 654 $ 564 $ 554
------ ----- ---- ------ ------ ------ ------ -------
------ ----- ---- ------ ------ ------ ------ -------
Ratio of earnings to fixed charges 1.8x 2.2x 1.1x 1.6x 1.4x 1.4x 1.4x 1.4x
------ ----- ---- ------ ------ ------ ------ -------
------ ----- ---- ------ ------ ------ ------ -------
</TABLE>
<PAGE>
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the references to our firm under the caption 'Experts' in the
Registration Statement (Form S-4) and related Prospectus of Time Warner Inc.
('Time Warner') for the registration of 10 1/4% Series M Exchangeable Preferred
Stock ('Series M Preferred Stock'), 10 1/4% Series L Exchangeable Preferred
Stock and 10 1/4% Senior Subordinated Debentures due 2011, and for the exchange
of all outstanding shares of 10 1/4% Series K Exchangeable Preferred Stock for
shares of Series M Preferred Stock and to the incorporation by reference therein
of (i) our reports dated February 6, 1996, with respect to the consolidated
financial statements and schedules of Time Warner and Time Warner Entertainment
Company, L.P., and our report dated March 3, 1995 with respect to the combined
financial statements of the Time Warner Service Partnerships, incorporated by
reference from Time Warner's Annual Report on Form 10-K for the year ended
December 31, 1995, and (ii) our report dated March 8, 1996, with respect to the
consolidated financial statements and schedule of Cablevision Industries
Corporation and Subsidiaries, and our reports dated July 28, 1995, with respect
to the financial statements of Newhouse Broadcasting Cable Division of Newhouse
Broadcasting Corporation and Subsidiaries and Vision Cable Division of Vision
Cable Communications, Inc. and Subsidiaries, incorporated by reference from Time
Warner's Current Report on Form 8-K dated May 15, 1996, filed with the
Securities and Exchange Commission.
ERNST & YOUNG LLP
New York, New York
May 21, 1996
<PAGE>
<PAGE>
EXHIBIT 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectus
constituting part of this Registration Statement on Form S-4 of Time Warner Inc.
of our report dated February 5, 1996, which appears on page 53 of Turner
Broadcasting System, Inc.'s 1995 Annual Report 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, 1995, which is incorporated by
reference in the Current Report on Form 8-K of Time Warner Inc. dated May 15,
1996, which is incorporated by reference in the Prospectus. We also consent to
the reference to us under the heading Experts in such Prospectus.
PRICE WATERHOUSE LLP
Atlanta, Georgia
May 21, 1996
<PAGE>
<PAGE>
EXHIBIT 23.4
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-4 for Time Warner Inc.
ARTHUR ANDERSEN LLP
Stamford, Connecticut
May 21, 1996
<PAGE>
<PAGE>
EXHIBIT 23.5
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Registration Statement of
Time Warner Inc. on Form S-4 dated May 22, 1996 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 15, 1996
and to the reference to us under the heading "Experts" in the Prospectus, which
is part of such Registration Statement.
DELOITTE & TOUCHE LLP
Houston, Texas
May 21, 1996
<PAGE>
<PAGE>
EXHIBIT 23.6
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectus
constituting part of this Registration Statement on Form S-4 of Time Warner
Inc., relating to the exchange of Series K Preferred Stock for Series M
Preferred Stock, 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.
PRICE WATERHOUSE LLP
Denver, Colorado
May 21, 1996
<PAGE>
<PAGE>
Exhibit 24.1
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each of the undersigned
officers and directors of TIME WARNER INC., a Delaware corporation (the
"Corporation"), hereby constitutes and appoints RICHARD J. BRESSLER, PETER R.
HAJE, JOHN A. LABARCA, GERALD M. LEVIN, PHILIP R. LOCHNER, JR. AND RICHARD D.
PARSONS, and each of them, his or her true and lawful attorneys-in-fact and
agents with full power to act without the others, for him or her and in his or
her name, place and stead, in any and all capacities, to sign a Registration
Statement on Form S-4 or other appropriate form and any and all amendments to
any such Registration Statement (including post-effective amendments) to be
filed by the Corporation with the Securities and Exchange Commission pursuant to
the Securities Act of 1933, as amended (the "Securities Act"), in connection
with the registration under the provisions of the Securities Act of (a) (i)
1,600,000 shares of the Corporation's 10 1/4% Series M Exchangeable Preferred
Stock, par value $1.00 per share (the "Series M Preferred Stock"), issuable in
exchange for outstanding shares of the Corporation's 10 1/4% Series K
Exchangeable Preferred Stock, (ii) additional shares of Series M Preferred Stock
issuable in exchange for shares of Series K Preferred Stock issued as dividends
on the shares of Series K Preferred Stock and (iii) additional shares of Series
M Preferred Stock issuable as dividends payable on shares of Series M Preferred
Stock, (b) an indeterminate number of shares of 10 1/4% Series L Preferred
Stock, par value $1.00 per share (the "Series L Preferred Stock"), issuable in
exchange for shares of Series M Preferred Stock and as dividends payable on
shares of Series L Preferred Stock, and (c) an indeterminate principal amount of
10 1/4% Senior Subordinated Debentures due 2011 issuable in exchange for shares
of Series L Preferred Stock and as interest payable on such debentures, with
power where appropriate to affix thereto the corporate seal of the Corporation
and to attest said seal, and to file such Registration Statement, including a
form of prospectus, and any and all amendments and post-effective amendments to
such Registration Statement, with all exhibits thereto, and any and all
documents in connection therewith, with the Securities and Exchange Commission,
hereby granting unto said attorneys-in-fact and agents, and each of them, full
power and authority to do and perform any and all acts and things requisite and
necessary to be done in and about the premises, as fully to all intents and
purposes as he or she might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents, or any of them, may
lawfully do or cause to be done by virtue hereof.
<PAGE>
<PAGE>
2
IN WITNESS WHEREOF, each of the undersigned has hereunto set
his or her name as of the 16th day of May, 1996.
(i) Principal Executive Officers:
/s/ Gerald M. Levin /s/ Richard D. Parsons
- --------------------------------------- -----------------------------------
Gerald M. Levin Richard D. Parsons
Director, Chairman of the Board Director and President
and Chief Executive Officer
(ii) Principal Financial Officer: (iii) Principal Accounting Officer:
/s/ Richard J. Bressler /s/ John A. LaBarca
- --------------------------------------- -----------------------------------
Richard J. Bressler, John A. LaBarca,
Senior Vice President and Vice President and Controller
Chief Financial Officer
(iv): Directors:
/s/ Merv Adelson /s/ Michael A. Miles
- --------------------------------------- -----------------------------------
Merv Adelson, Michael A. Miles,
Director Director
/s/ Carla A. Hills /s/ J. Richard Munro
- --------------------------------------- -----------------------------------
Carla A. Hills, J. Richard Munro,
Director Director
/s/ Lawrence B. Buttenwieser /s/ Donald S. Perkins
- --------------------------------------- -----------------------------------
Lawrence B. Buttenwieser, Donald S. Perkins,
Director Director
/s/ David T. Kearns /s/ Raymond S. Troubh
- --------------------------------------- -----------------------------------
David T. Kearns, Raymond S. Troubh,
Director Director
/s/ Beverly Sills Greenough /s/ Francis T. Vincent, Jr.
- --------------------------------------- -----------------------------------
Beverly Sills Greenough, Francis T. Vincent, Jr.,
Director Director
/s/ Reuben Mark
- ---------------------------------------
Reuben Mark,
Director
<PAGE>
<PAGE>
REGISTRATION RIGHTS AGREEMENT
Dated April 11, 1996
among
TIME WARNER INC.
and
BEAR, STEARNS & CO. INC.
and
MORGAN STANLEY & CO. INCORPORATED
<PAGE>
<PAGE>
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (the "Agreement") is made and
entered into April 11, 1996, among TIME WARNER INC., a Delaware corporation (the
"Company"), BEAR, STEARNS & CO. INC. and MORGAN STANLEY & CO. INCORPORATED (each
a "Purchaser" and collectively the "Purchasers").
This Agreement is made pursuant to the Purchase Agreement, dated as of
April 2, 1996, among the Company and the Purchasers (the "Purchase Agreement"),
which provides for the sale by the Company to the Purchasers of 1,500,000 shares
of 10 1/4% Series K Exchangeable Preferred Stock (together with (i) any such
shares sold pursuant to the option provided to the Purchasers in Section 2 of
the Purchase Agreement and (ii) any such shares issued in satisfaction of
dividends thereon, the "Series K Preferred Shares"). In order to induce the
Purchasers to enter into the Purchase Agreement, the Company has agreed to
provide to the Purchasers and their direct and indirect transferees the
registration rights set forth in this Agreement. The execution of this Agreement
is a condition to the closing under the Purchase Agreement.
In consideration of the foregoing, the parties hereto agree as
follows:
1. Definitions.
As used in this Agreement, the following capitalized defined terms
shall have the following meanings:
"1933 Act" shall mean the Securities Act of 1933, as amended from time
to time.
"1934 Act" shall mean the Securities Exchange Act of 1934, as amended
from time to time.
"Closing Time" shall mean the Closing Time as defined in the Purchase
Agreement.
"Company" shall have the meaning set forth in the preamble and shall
also include the Company's successors; provided, however, that such term
shall refer to New Time Warner upon consummation of the TBS Transaction,
but only to the extent that New Time Warner is the issuer of the
Securities.
"Exchange Offer" shall mean the exchange offer by the Obligor of
Exchange Securities for Registrable Securities pursuant to Section 2(a)
hereof.
<PAGE>
<PAGE>
2
"Exchange Offer Registration" shall mean a registration under the 1933
Act effected pursuant to an Exchange Offer Registration Statement.
"Exchange Offer Registration Statement" shall mean an exchange offer
registration statement on Form S-4 (or, if applicable, on another
appropriate form) and all amendments and supplements to such registration
statement, in each case including the Prospectus contained therein, all
exhibits thereto and all material incorporated by reference therein.
"Exchange Securities" (i) shall mean the 10 1/4% Series M Exchangeable
Preferred Stock of the Company containing terms identical to the Series K
Preferred Shares (except that dividends thereon shall accumulate from the
last date on which dividends were paid on the Series K Preferred Shares or,
if no such dividends have been paid, from April 11, 1996, and except that
such Exchange Securities shall bear no legend with respect to, and shall be
free from, restrictions on transfer), to be offered to Holders of Series K
Preferred Shares in exchange for Series K Preferred Shares pursuant to the
Exchange Offer, or (ii) if the shares of 10 1/4% Series L Exchangeable
Preferred Stock of the Company (together with any such shares issued in
satisfaction of dividends thereon, the "Series L Preferred Shares") have
been issued prior to the consummation of the Exchange Offer hereunder,
shall mean shares of exchangeable preferred stock of the Company containing
terms identical to the Series L Preferred Shares (except that dividends
thereon shall accumulate from the last date on which dividends were paid on
the Series K Preferred Shares or on Series L Preferred Shares, whichever is
later or, if no such dividends have been paid, from the date on which the
Series L Preferred Shares are issued, and except that such Exchange
Securities shall bear no legend with respect to, and shall be free from,
restrictions on transfer), to be offered to Holders of Series L Preferred
Shares in exchange for Series L Preferred Shares pursuant to the Exchange
Offer, or (iii) if the 10 1/4% Senior Subordinated Debentures due 2011 of
the Company (together with any such debentures issued in satisfaction of
interest thereon, the "Senior Subordinated Debentures") have been issued
prior to the consummation of the Exchange Offer hereunder, shall mean
senior subordinated debentures of the Company containing terms identical to
the Senior Subordinated Debentures (except that interest thereon shall
accrue from the last date on which (x) interest was paid on the Senior
Subordinated Debentures or (y) if no such interest has been paid, from the
date on which the Senior Subordinated Debentures are issued, and except
that such Exchange Securities shall bear no legend with respect to, and
shall be free from, restrictions on transfer), to be offered to Holders of
Senior Subordinated Debentures in exchange for Senior Subordinated
Debentures pursuant to the Exchange Offer.
<PAGE>
<PAGE>
3
"Holder" shall mean any Purchaser, for so long as it owns any
Registrable Securities, and each of its successors, assigns and direct and
indirect transferees who become registered owners of Registrable
Securities.
"Indenture" shall mean the Indenture relating to the Senior
Subordinated Debentures, between the Company and a trustee to be designated
by the Company, as supplemented by the First Supplemental Indenture thereto
between the Company and a trustee to be designated by the Company, and as
the same may be amended from time to time in accordance with the terms
thereof.
"Majority Holders" shall mean the Holders of a majority of the
aggregate liquidation preference or principal amount, as the case may be,
of outstanding Registrable Securities.
"New Time Warner" shall mean Holdco as defined in the Amended and
Restated Merger Agreement dated as of September 22, 1995 among the Company,
certain of its subsidiaries and Turner Broadcasting System, Inc.
"Obligor" shall mean and refer to the Company, provided, however, that
such term shall refer to New Time Warner upon consummation of the TBS
Transaction, but only to the extent that New Time Warner is the issuer of
the Securities.
"Person" shall mean an individual, partnership, corporation, trust or
unincorporated organization, or a government or agency or political
subdivision thereof.
"Prospectus" shall mean the prospectus included in a Registration
Statement, including any preliminary prospectus, and any such prospectus as
amended or supplemented by any prospectus supplement, including a
prospectus supplement with respect to the terms of the offering of any
portion of the Registrable Securities covered by a Shelf Registration
Statement, and by all other amendments and supplements to a prospectus,
including post-effective amendments, and in each case including all
material incorporated by reference therein.
"Purchase Agreement" shall have the meaning set forth in the preamble.
"Purchaser" shall have the meaning set forth in the preamble.
"Registrable Securities" shall mean the Securities; provided, however,
that the Securities shall cease to be Registrable Securities when (i) a
Registration Statement with respect to such Securities shall have been
declared effective under the 1933 Act and such Securities shall have been
disposed of pursuant to such Registration
<PAGE>
<PAGE>
4
Statement, (ii) such Securities have been sold to the public pursuant to
Rule 144(k) (or any similar provision then in force, but not Rule 144A)
under the 1933 Act, (iii) such Securities shall have ceased to be
outstanding or (iv) upon the consummation of the Exchange Offer but only
with respect to Securities held by a Holder that is eligible to receive
freely tradeable Exchange Securities in connection with the Exchange Offer.
"Registration Expenses" shall mean any and all expenses incident to
performance of or compliance by the Company with this Agreement, including
without limitation: (i) all SEC, stock exchange or National Association of
Securities Dealers, Inc. registration and filing fees, (ii) all fees and
expenses incurred in connection with compliance with state securities or
blue sky laws (including reasonable fees and disbursements of counsel for
any underwriters or Holders in connection with blue sky qualification of
any of the Exchange Securities or Registrable Securities), (iii) all
expenses of any Persons in preparing or assisting in preparing, word
processing, printing and distributing any Registration Statement, any
Prospectus, any amendments or supplements thereto, any underwriting
agreements, securities sales agreements and other documents relating to the
performance of and compliance with this Agreement, (iv) all rating agency
fees and (v) the fees and disbursements of counsel for the Company and of
the independent public accountants of the Company, including the expenses
of any special audits or "cold comfort" letters required by or incident to
such performance and compliance, but excluding fees of counsel to the
underwriters or the Holders and underwriting discounts and commissions and
transfer taxes, if any, relating to the sale or disposition of Registrable
Securities by a Holder; provided, however, that the Company will pay the
reasonable fees and disbursements of one counsel for the Purchasers and
Holders with respect to all Shelf Registration Statements.
"Registration Statement" shall mean any registration statement of the
Obligor which covers any of the Exchange Securities or Registrable
Securities pursuant to the provisions of this Agreement and all amendments
and supplements to any such Registration Statement, including
post-effective amendments, in each case including the Prospectus contained
therein, all exhibits thereto and all material incorporated by reference
therein.
"SEC" shall mean the Securities and Exchange Commission.
"Securities" shall mean the Series K Preferred Shares, or, if issued,
the Series L Preferred Shares or the Senior Subordinated Debentures,
provided, however, that such term shall refer to the substantially
equivalent securities to be issued by New Time Warner upon consummation of
the TBS Transaction as more fully described in the Offering Memorandum of
the Company dated April 2, 1996.
<PAGE>
<PAGE>
5
"Shelf Registration" shall mean a registration effected pursuant to a
Shelf Registration Statement.
"Shelf Registration Statement" shall mean a "shelf" registration
statement of the Obligor which covers Registrable Securities on an
appropriate form under Rule 415 under the 1933 Act, or any similar rule
that may be adopted by the SEC, and all amendments and supplements to such
registration statement, including post-effective amendments, in each case
including the Prospectus contained therein, all exhibits thereto and all
material incorporated by reference therein; and, in the event that the
Obligor is not eligible to file a "shelf" registration statement under Rule
415 to register Registrable Securities held by any Holder who is ineligible
to receive freely tradeable Exchange Securities in the Exchange Offer,
"Shelf Registration Statement" shall mean any Registration Statement with
respect to such Registrable Securities on an appropriate form, including an
Exchange Offer Registration Statement.
"Trustee" shall mean the trustee with respect to the Senior
Subordinated Debentures under the Indenture.
2. Registration Under the 1933 Act.
(a) Exchange Offer Registration. To the extent not prohibited by any
applicable law or applicable interpretation of the Staff of the SEC, the Obligor
shall use its best efforts to cause to be filed with the SEC within 45 days
after the date hereof the Exchange Offer Registration Statement covering the
offer by the Obligor to the Holders to exchange Registrable Securities (other
than Registrable Securities held by any affiliate of the Obligor or by a
Purchaser or other distribution participant constituting an unsold allotment)
for Exchange Securities, and shall use its best efforts to have such Exchange
Offer Registration Statement declared effective by the SEC within 180 days after
the date hereof and to have such Exchange Offer Registration Statement remain
effective until the closing of the Exchange Offer. The Obligor shall commence
the Exchange Offer promptly after the Exchange Offer Registration Statement has
been declared effective by the SEC by mailing the related exchange offer
Prospectus and accompanying documents to each Holder stating, in addition to
such other disclosures as are required by applicable law:
(i) that the Exchange Offer is being made pursuant to this
Registration Rights Agreement and that all Registrable Securities validly
tendered will be accepted for exchange;
(ii) the date of acceptance for exchange (which shall be a period of
at least 60 days from the date such notice is mailed, or longer if required
by applicable law) (the "Exchange Date");
<PAGE>
<PAGE>
6
(iii) that any Registrable Security not tendered will remain
outstanding and continue to accrue dividends or interest, as the case may
be, but will not retain any rights under this Registration Rights
Agreement;
(iv) that Holders electing to have a Registrable Security exchanged
pursuant to the Exchange Offer will be required to surrender such
Registrable Security, together with the enclosed letters of transmittal, to
the institution and at the address (located in the Borough of Manhattan,
The City of New York) specified in the notice prior to the close of
business on the Exchange Date; and
(v) that Holders will be entitled to withdraw their election, not
later than the close of business on the Exchange Date, by sending to the
institution and at the address (located in the Borough of Manhattan, The
City of New York) specified in the notice a telegram, telex, facsimile
transmission or letter setting forth the name of such Holder, the aggregate
liquidation preference or principal amount, as the case may be, of
Registrable Securities delivered for exchange and a statement that such
Holder is withdrawing his election to have such Registrable Securities
exchanged.
As soon as practicable after the Exchange Date, the Obligor shall:
(i) accept for exchange Registrable Securities or portions thereof
tendered and not validly withdrawn pursuant to the Exchange Offer; and
(ii) deliver, or cause to be delivered, to the Transfer Agent or the
Trustee, as the case may be, for cancellation all Registrable Securities or
portions thereof so accepted for exchange by the Obligor and issue, and
cause the Transfer Agent or the Trustee, as the case may be, to promptly
authenticate and mail to each Holder, a new Exchange Security, as the case
may be, equal in principal amount or liquidation preference, as the case
may be, to the principal amount or liquidation preference, as the case may
be, of the Registrable Securities surrendered by such Holder.
The Obligor shall use its best efforts to complete the Exchange Offer
as provided above and shall comply with the applicable requirements of the 1933
Act, the 1934 Act and other applicable laws in connection with the Exchange
Offer. The Exchange Offer shall not be subject to any conditions, other than
that (i) the Exchange Offer does not violate applicable law or any applicable
interpretation of the Staff of the SEC and (ii) there is no injunction, order or
decree issued by any court or any governmental agency that would prohibit,
prevent or otherwise materially impair the ability of the Company to proceed
with the Exchange Offer. The Obligor shall inform the Purchasers of the names
and addresses of the Holders to whom the Exchange Offer is made, and the
Purchasers shall have the right to contact such Holders and otherwise facilitate
the tender of Registrable Securities in the Exchange Offer.
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7
For a period of 90 days after the Exchange Date, the Obligor shall
also use its best efforts to make available a prospectus meeting the
requirements of the 1933 Act which may be the Prospectus contained in the
Exchange Offer Registration Statement or the Prospectus contained in a Shelf
Registration Statement, as such Registration Statements may be amended or
supplemented from time to time, to holders which are broker-dealers (and which
identify themselves as such) in connection with resales of Exchange Securities
received in exchange for Registrable Securities, where such Registrable
Securities were acquired by such broker-dealers as a result of market-making or
other trading activities; provided that each holder which is a broker-dealer
agrees that, upon receipt of notice from the Company of the occurrence of any
event which makes any statement in the Prospectus untrue in any material respect
or which requires the making of any changes in the Prospectus in order to make
the statements therein not misleading (which notice the Company agrees to
deliver promptly to such broker-dealer), such broker-dealer will suspend use of
the Prospectus until the Company has amended or supplemented the Prospectus to
correct such misstatement or omission and has furnished copies of the amended or
supplemented Prospectus to such broker-dealer. If the Company shall give any
such notice to suspend the use of the Prospectus, it shall extend the 90-day
period referred to above by the number of days during the period from and
including the date of the giving of such notice to and including the date when
broker-dealers shall have received copies of the supplemented or amended
Prospectus necessary to permit resales of the Exchange Securities.
In the event that, at the Exchange Date, any of the Purchasers shall
not have sold all of the Registrable Securities initially purchased from the
Company by such Purchasers to unaffiliated investors, upon such Purchasers'
request (made within 10 days after the Exchange Date), the Company will use its
best efforts to file promptly, or if so requested by the Purchasers, on a later
date (which date shall not exceed the date that is six months after the Exchange
Date), a Shelf Registration Statement or a post-effective amendment to the
Exchange Offer Registration Statement, if acceptable to the SEC, to register all
such Registrable Securities for all such Purchasers. The Company will keep such
Shelf Registration Statement or other Registration Statement effective and make
available to such Purchasers a Prospectus meeting the requirements of the 1933
Act for a period of 120 days, provided that each Purchaser agrees that, upon
receipt of notice from the Company of the happening of any event which makes any
statement in the Prospectus untrue in any material respect or which requires the
making of any changes in the Prospectus in order to make the statements therein
not misleading (which notice the Company agrees to deliver promptly to such
Purchasers), such Purchasers will suspend use of the Prospectus until the
Company has amended or supplemented the Prospectus to correct such misstatement
or omission and has furnished copies of the amended or supplemented Prospectus
to such Purchasers. If the Company shall give any such notice to suspend the use
of the Prospectus, it shall extend the 120-day period referred to above by the
number of days during the period from and including the date of the giving of
such notice to and including the date when
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8
Purchasers shall have received copies of the supplemented or amended Prospectus
necessary to permit sales of their Securities.
(b) Shelf Registration. In the event that the Obligor determines that
the Exchange Offer Registration provided in Section 2(a) above is not available
or may not be consummated because it would violate applicable law or the
applicable interpretations of the Staff of the SEC, or in the event the Exchange
Offer is not for any other reason consummated within 240 days from the date
hereof, the Obligor shall use its best efforts to cause to be filed as soon as
practicable after such determination or date, as the case may be, a Shelf
Registration Statement providing for the sale by all Holders of all of the
Registrable Securities (including sales or resales by broker-dealers of
Registrable Securities acquired by such broker-dealers as a result of
market-making or other trading activities, and sales or resales by the
Purchasers of Registrable Securities initially purchased from the Company by
such Purchasers and not previously sold to unaffiliated investors) and to have
such Shelf Registration Statement declared effective by the SEC. The Obligor
agrees to use its best efforts to keep the Shelf Registration Statement
continuously effective until the third anniversary of the date such Shelf
Registration Statement is declared effective by the SEC or such shorter period
which will terminate when all of the Registrable Securities covered by the Shelf
Registration Statement have been sold pursuant to the Shelf Registration
Statement. The Obligor further agrees, if necessary, to supplement or amend the
Shelf Registration Statement, if required by the rules, regulations or
instructions applicable to the registration form used by the Obligor for such
Shelf Registration Statement or by the 1933 Act or by any other rules and
regulations thereunder for shelf registration, and the Obligor agrees to furnish
to the Holders of Registrable Securities copies of any such supplement or
amendment promptly after its being used or filed with the SEC.
(c) Expenses. The Obligor shall pay all Registration Expenses in
connection with the registration pursuant to Section 2(a) or Section 2(b),
except that the Purchasers shall pay any registration fee required in connection
with the registration of Registrable Securities which constitute an unsold
allotment, and except that each Holder shall pay all underwriting discounts and
commissions and transfer taxes, if any, relating to the sale or disposition of
such Holder's Registrable Securities pursuant to a Shelf Registration Statement,
and each Holder shall pay all expenses of its counsel; provided, however, that
the Company will pay the reasonable fees and disbursements of one counsel for
the Purchasers and Holders with respect to all Shelf Registration Statements.
(d) Effective Registration Statement. An Exchange Offer Registration
Statement pursuant to Section 2(a) hereof or a Shelf Registration Statement
pursuant to Section 2(b) hereof will not be deemed to have become effective
unless it has been declared effective by the SEC; provided, however, that, if,
after it has been declared effective, the offering of Registrable Securities
pursuant to a Shelf Registration Statement is interfered with by any stop order,
injunction or other order or requirement of the SEC or any other
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9
governmental agency or court, such Registration Statement will be deemed not to
have become effective during the period of such interference until the offering
of Registrable Securities pursuant to such Registration Statement may legally
resume. In the event that the Exchange Offer is not consummated or a Shelf
Registration Statement is not declared effective by the SEC within 240 days from
the date hereof, the annual dividend or interest rate, as the case may be, on
the Securities will immediately increase by .50 percent per annum until such
date as the Exchange Offer is consummated or a Shelf Registration Statement is
declared effective by the SEC; provided, however, that if the Company had also
failed to file with the SEC the Exchange Offer Registration Statement within 45
days from the date hereof, the annual dividend or interest rate, as the case may
be, on the Securities will increase by 1.00% (instead of .50%) until such date
as the Exchange Offer is consummated or a Shelf Registration Statement is
declared effective by the SEC. Upon the consummation of the Exchange Offer or
the effectiveness of a Shelf Registration Statement, as the case may be, the
annual dividend or interest rate, as the case may be, borne by the Securities
will be reduced to the original dividend or interest rate, as the case may be.
3. Registration Procedures.
In connection with the obligations of the Obligor with respect to the
Registration Statements pursuant to Sections 2(a) and 2(b) hereof, the Obligor
shall:
(a) prepare and file with the SEC a Registration Statement on the
appropriate form under the 1933 Act, which form shall (x) be selected by
the Obligor, (y) in the case of a Shelf Registration, be available for the
sale of the Registrable Securities by the applicable selling Holders under
Section 2(a) or Section 2(b), as the case may be, and (z) comply as to form
in all material respects with the requirements of the applicable form and
include all financial statements required by the SEC to be filed therewith
and use its best efforts to cause such Registration Statement to become
effective and remain effective in accordance with Section 2 hereof;
(b) prepare and file with the SEC such amendments and post-effective
amendments to each Registration Statement as may be necessary to keep such
Registration Statement effective for the applicable period, cause each
Prospectus to be supplemented by any required prospectus supplement and, as
so supplemented, to be filed pursuant to Rule 424 under the 1933 Act;
(c) in the case of a Shelf Registration, furnish to the applicable
selling Holders of Registrable Securities under Section 2(a) or Section
2(b), as the case may be, and to the underwriters of an underwritten
offering of Registrable Securities, if any, without charge, as many copies
of each Prospectus, including each preliminary Prospectus, and any
amendment or supplement thereto and such other documents as
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10
each such Holder or underwriter may reasonably request, in order to
facilitate the public sale or other disposition of the Registrable
Securities;
(d) use its best efforts to register or qualify the Registrable
Securities under all applicable state securities or "blue sky" laws of such
jurisdictions as any Holder of Registrable Securities covered by a
Registration Statement shall reasonably request in writing by the time the
applicable Registration Statement is declared effective by the SEC, and do
any and all other acts and things which may be reasonably necessary or
advisable to enable such Holder to consummate the disposition in each such
jurisdiction of such Registrable Securities owned by such Holder; provided,
however, that the Company shall not be required to (i) qualify as a foreign
partnership, or corporation, as the case may be, or as a dealer in
securities in any jurisdiction where it would not otherwise be required to
qualify but for this Section 3(d), (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;
(e) in the case of a Shelf Registration, notify the applicable selling
Holders of Registrable Securities promptly and, if requested by such
Holder, confirm such advice in writing (i) when a Registration Statement
has become effective and when any post-effective amendments and supplements
thereto become effective, (ii) of any request by the SEC or any state
securities authority for amendments and supplements to a Registration
Statement and Prospectus or for additional information after the
Registration Statement has become effective, (iii) of the issuance by the
SEC or any state securities authority of any stop order suspending the
effectiveness of a Registration Statement or the initiation of any formal
proceedings for that purpose, (iv) if, between the effective date of a
Registration Statement and the closing of any sale of Registrable
Securities covered thereby, the representations and warranties of the
Company contained in any underwriting agreement, securities sales agreement
or other similar agreement, if any, in each case relating to the offering
or the registration thereof, cease to be true and correct in all material
respects or if the Obligor receives any notification with respect to the
suspension of the qualification of the Registrable Securities for sale in
any jurisdiction or the initiation of any proceeding for such purpose and
(v) of the happening of any event during the period a Shelf Registration
Statement is effective which makes any statement made in such Shelf
Registration Statement or the related Prospectus untrue in any material
respect or which requires the making of any changes in such Registration
Statement or Prospectus in order to make the statements therein not
misleading;
(f) make every reasonable effort to obtain the withdrawal of any order
suspending the effectiveness of a Registration Statement at the earliest
possible moment;
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11
(g) in the case of a Shelf Registration (other than a Shelf
Registration to permit Holders which are broker-dealers to deliver a
Prospectus in connection with any resale of Exchange Securities), furnish
to each Holder of Registrable Securities, without charge, at least one
conformed copy of each Registration Statement and any post-effective
amendment thereto (without documents incorporated therein by reference or
exhibits thereto, unless requested);
(h) in the case of a Shelf Registration (other than a Shelf
Registration to permit Holders which are broker-dealers to deliver a
Prospectus in connection with any resale of Exchange Securities), or a
post-effective amendment to an Exchange Offer Registration Statement or
other Registration Statement covering a sale by the Purchasers of any
unsold allotment, cooperate with the selling Holders of Registrable
Securities to facilitate the timely preparation, exchange and delivery of
certificates representing Registrable Securities to be sold and not bearing
any legends with respect to transfer restrictions and enable such
Registrable Securities to be in such denominations (consistent with the
provisions of the Indenture or applicable Certificate of Designation, as
the case may be) and registered in such names as the selling Holders may
reasonably request at least two business days prior to the closing of any
sale of Registrable Securities;
(i) in the case of a Shelf Registration, upon the occurrence of any
event contemplated by Section 3(e)(v) hereof, use its best efforts to
prepare a supplement or post-effective amendment to a Registration
Statement or the related Prospectus or any document incorporated therein by
reference or file any other required document so that, as thereafter
delivered to the purchasers of the Registrable Securities, such Prospectus
will not contain any untrue statement of a material fact or omit to state a
material fact necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading; provided that the
Obligor shall not be required to amend or supplement the Shelf Registration
Statement, any related Prospectus or any document incorporated therein by
reference in the event that, and for so long as, (A) an event occurs and is
continuing as a result of which the Shelf Registration Statement, any
related Prospectus or any document incorporated therein by reference as
then amended or supplemented would, in the Obligor's good faith judgment,
contain an untrue statement of a material fact or omit to state a material
fact necessary in order to make the statements therein not misleading in
light of the circumstances under which they are made, and (B) the Obligor
determines in its good faith judgment that the disclosure of such event at
such time would materially adversely affect the interests of the Obligor.
The Obligor agrees to notify you to suspend use of the Prospectus as
promptly as practicable after the occurrence of such an event, and you
hereby agree to suspend use of the Prospectus until the Obligor has amended
or supplemented the Prospectus to correct such misstatement or omission. At
such time as such public disclosure is otherwise made or the Obligor
determines in
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12
its good faith judgment that the disclosure in the Prospectus of an event
described above would no longer materially adversely affect the Obligor or
its equityholders or that such disclosure is not necessary, the Obligor
agrees promptly to notify you of such determination, to amend or supplement
the Prospectus if necessary to correct any untrue statement or omission
therein and to furnish you such numbers of copies of the Prospectus as so
amended or supplemented as you may reasonably request;
(j) in the case of a Shelf Registration, or a post-effective amendment
to an Exchange Offer Registration Statement or other Registration Statement
covering a sale by the Purchasers of any unsold allotment, (x) a reasonable
time prior to the filing in the case of any Registration Statement, any
Prospectus, any amendment to a Registration Statement or amendment or
supplement to a Prospectus or upon filing in the case of any document which
is to be incorporated by reference into a Registration Statement or a
Prospectus after initial filing of a Registration Statement, provide copies
of such document to the Purchasers on behalf of the Holders or to the
Purchasers on their own behalf, as the case may be, and make such of the
representatives of the Obligor as shall be reasonably requested by the
Holders of Registrable Securities in the case of a Shelf Registration
pursuant to Section 2(b), or the Purchasers on behalf of the Holders or to
the Purchasers on their own behalf, as the case may be, available for
discussion of such document and (y) use its best efforts to provide the
Purchasers, if the Purchasers so request, with a "comfort letter" from
Ernst and Young (or such other independent auditors of the Company at such
time) and other appropriate accountants, dated the effective date of any
Shelf Registration Statement or of any post-effective amendment (other than
an Exchange Offer Registration Statement) covering such matters and in such
form as is consistent with market practice with respect to underwriters'
"comfort letters" at such time;
(k) obtain a CUSIP number and, if applicable, a CINS number for all
Exchange Securities, or Registrable Securities, as the case may be, not
later than the effective date of a Registration Statement; and
(l) prior to the issuance of the Senior Subordinated Debentures, cause
the Indenture to be qualified under the Trust Indenture Act of 1939, as
amended (the "TIA"), in connection with the registration of the Exchange
Securities, or Registrable Securities, as the case may be, cooperate with
the Trustee and the Holders to effect such changes to the Indenture as may
be required for the Indenture to be so qualified in accordance with the
terms of the TIA and execute, and use its best efforts to cause the Trustee
to execute, all document as may be required to effect such changes and all
other forms and documents required to be filed with the SEC to enable the
Indenture to be so qualified in a timely manner.
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13
In the case of a Shelf Registration Statement, the Obligor may (as a
condition to such Holder's participation in the Shelf Registration) require each
Holder of Registrable Securities to furnish to the Obligor such information
regarding the Holder and the proposed distribution by such Holder of such
Registrable Securities as the Obligor may from time to time reasonably request
in writing.
In the case of a Shelf Registration Statement, each Holder (as a
condition to such Holder's participation in such Shelf Registration) agrees
that, upon receipt of any notice from the Obligor of the happening of any event
of the kind described in Section 3(e)(v) hereof, such Holder will forthwith
discontinue disposition of Registrable Securities pursuant to a Registration
Statement until such Holder's receipt of the copies of the supplemented or
amended Prospectus contemplated by Section 3(i) hereof, and, if so directed by
the Obligor, such Holder will deliver to the Obligor (at its expense) all copies
in its possession, other than permanent file copies then in such Holder's
possession, of the Prospectus covering such Registrable Securities current at
the time of receipt of such notice. If the Obligor shall give any such notice to
suspend the disposition of Registrable Securities pursuant to a Registration
Statement, the Obligor shall extend the period during which the Registration
Statement shall be maintained effective pursuant to this Agreement by the number
of days during the period from and including the date of the giving of such
notice to and including the date when the Holders shall have received copies of
the supplemented or amended Prospectus necessary to resume such dispositions.
4. Indemnification; Contribution.
(a) The Company shall indemnify and hold harmless each of the
Purchasers, each Holder and each Person, if any, who controls any Holder within
the meaning of Section 15 of the 1933 Act as follows:
(i) against any and all loss, liability, claim, damage and expense
whatsoever, as incurred, arising out of any untrue statement or alleged
untrue statement of a material fact contained in any Registration Statement
(or any amendment thereto) pursuant to which Exchange Securities or
Registrable Securities were registered under the 1933 Act, including all
documents incorporated therein by reference, or by the omission or alleged
omission therefrom of a material fact required to be stated therein or
necessary to make the statements therein not misleading or arising out of
any untrue statement or alleged untrue statement of a material fact
contained in any Prospectus (or any amendment or supplement thereto) or the
omission or alleged omission therefrom of a material fact necessary in
order to make the statements therein, in the light of the circumstances
under which they were made, not misleading (other than in connection with a
settlement described in Section 4(a)(ii) below);
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14
(ii) against any and all loss, liability, claim, damage and expense
whatsoever, as incurred, to the extent of the aggregate amount paid in
settlement of any litigation, or investigation or proceeding by any
governmental agency or body, commenced or threatened, or of any claim
whatsoever based upon any such untrue statement or omission, or any such
alleged untrue statement or omission, if such settlement is effected with
the written consent of the Company; and
(iii) against any and all expenses whatsoever, as incurred (including,
subject to the provisions of subsection (c), reasonable fees and
disbursements of counsel chosen by any Holder or any underwriter),
reasonably incurred in investigating, preparing or defending against any
litigation, or investigation or proceeding by any governmental agency or
body, commenced or threatened, or any claim whatsoever based upon any such
untrue statement or omission, or any such alleged untrue statement or
omission, to the extent that any such expenses are not paid under
subparagraph (i) or subparagraph (ii) above;
provided, however, that the Company shall not be liable in any such case to the
extent that any such loss, claim, damage, liability or expense arises out of or
is based upon any untrue statement or omission or alleged untrue statement or
omission made in reliance upon and in conformity with written information
furnished to the Company by the Purchasers, such Holder or underwriter expressly
for use in the Registration Statement (or any amendment thereto) or any
Prospectus (or any amendment or supplement thereto).
(b) The Purchasers and (as a condition to such Holder's participation
in such registration) each Holder severally agrees to indemnify and hold
harmless the Company, the Purchasers, each underwriter and the other selling
Holders, and each of their respective directors and officers (including each
officer of the Company (and any guarantor of the Securities or the Registrable
Securities) who signed the Registration Statement), and each Person, if any, who
controls the Company, the Purchasers, any underwriter or any other selling
Holder within the meaning of Section 15 of the 1933 Act against any and all
loss, liability, claim, damage and expense described in the indemnity contained
in Section 4(a) hereof, as incurred, but only with respect to untrue statements
or omissions, or alleged untrue statements or omissions, made in any
Registration Statement (or any amendment thereto) or any Prospectus (or any
amendment or supplement thereto) in reliance upon and in conformity with written
information furnished to the Company by the Purchasers or such selling Holder
expressly for use in such Registration Statement (or any amendment thereto) or
such Prospectus (or any amendment or supplement thereto).
(c) Each indemnified party shall give reasonably prompt notice to each
indemnifying party of any action or proceeding commenced against it in respect
of which indemnity may be sought hereunder, but failure so to notify an
indemnifying party shall not relieve it from any liability which it may have
otherwise than under this indemnity
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15
agreement. An indemnifying party may participate at its own expense in the
defense of such action. In no event shall the indemnifying parties be liable for
the fees and expenses of more than one counsel for all indemnified parties in
connection with any one action or separate but similar or related actions in the
same jurisdiction arising out of the same general allegations or circumstances.
(d) In order to provide for just and equitable contribution in
circumstances in which the indemnity agreement provided for in this Section 4 is
for any reason held to be unenforceable although applicable in accordance with
its terms, the Company, the Purchasers and the Holders shall contribute to the
aggregate losses, liabilities, claims, damages and expenses of the nature
contemplated by such indemnity agreement incurred by the Company, the Purchasers
and the Holders; provided, however, that no person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the 1933 Act) shall be
entitled to contribution from any Person who was not guilty of such fraudulent
misrepresentation. As between the Company, the Purchasers and the Holders, such
parties shall contribute to the aggregate losses, liabilities, claims, damages
and expenses of the nature contemplated by such indemnity agreement in such
proportion as shall be appropriate to reflect (i) the relative benefits received
by the Company on the one hand and the Purchasers and the Holders on the other
hand, from the offering of the Exchange Securities or Registrable Securities
included in such offering and (ii) the relative fault of the Company on the one
hand and the Purchasers and the Holders on the other, with respect to the
statements or omissions which resulted in such loss, liability, claim, damage or
expense, or action in respect thereof, as well as any other relevant equitable
considerations. The Company, the Purchasers and the Holders of the Registrable
Securities agree that it would not be just and equitable if contribution
pursuant to this Section 4 were to be determined by pro rata allocation or by
any other method of allocation which does not take into account the relevant
equitable considerations. For purposes of this Section 4, each Person, if any,
who controls the Purchasers or a Holder within the meaning of Section 15 of the
1933 Act shall have the same rights to contribution as the Purchasers or such
Holder, and each director of the Company, each officer of the Obligor who signed
a Registration Statement, and each Person, if any, who controls the Company
within the meaning of Section 15 of the 1933 Act shall have the same rights to
contribution as the Company.
5. Miscellaneous.
(a) No Inconsistent Agreements. The Company has not entered into nor
will the Company on or after the date of this Agreement enter into any agreement
which is inconsistent with the rights granted to the Holders of Registrable
Securities in this Agreement or otherwise conflicts with the provisions hereof.
The rights granted to the Holders hereunder do not in any way conflict with and
are not inconsistent with the rights granted to the holders of the Company's
other issued and outstanding securities under any such agreements.
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16
(b) Amendments and Waivers. The provisions of this Agreement,
excluding the provisions of this sentence, may not be amended, modified or
supplemented, and waivers or consents to departures from the provisions hereof
may not be given unless the Company has obtained the written consent of Holders
of at least a majority in aggregate principal amount of the outstanding
Registrable Securities affected by such amendment, modification, supplement,
waiver or departure; provided, however, that no amendment, modification or
supplement or waiver or consents to the departure with respect to the provisions
of Section 4 hereof shall be effective as against any Holder of Registrable
Securities unless consented to in writing by such Holder of Registrable
Securities.
(c) Notices. All notices and other communications provided for or
permitted hereunder shall be made in writing by hand-delivery, registered
first-class mail, telex, telecopier, or any courier guaranteeing overnight
delivery (i) if to a Holder, at the most current address given by such Holder to
the Company by means of a notice given in accordance with the provisions of this
Section 5(c), which address initially is, with respect to the Purchasers, the
address set forth in the Purchase Agreement; and (ii) if to the Company,
initially at the Company's address set forth in the Purchase Agreement and
thereafter at such other address, notice of which is given in accordance with
the provisions of this Section 5(c).
All such notices and communications shall be deemed to have been duly
given: at the time delivered by hand, if personally delivered; five business
days after being deposited in the mail, postage prepaid, if mailed; when
answered back, if telexed; when receipt is acknowledged, if telecopied; and on
the next business day if timely delivered to an air courier guaranteeing
overnight delivery.
Copies of all such notices, demands, or other communications shall be
concurrently delivered by the person giving the same to the Trustee or the
Transfer Agent, as the case may be.
(d) Successors and Assigns. This Agreement shall inure to the benefit
of and be binding upon the successors, assigns and transferees of each of the
parties, including, without limitation and without the need for an express
assignment, subsequent Holders; provided that nothing herein shall be deemed to
permit any assignment, transfer or other disposition of Registrable Securities
in violation of the terms of the Purchase Agreement. If any transferee of any
Holder shall acquire Registrable Securities, in any manner, whether by operation
of law or otherwise, such Registrable Securities shall be held subject to all of
the terms of this Agreement, and by taking and holding such Registrable
Securities such Person shall be conclusively deemed to have agreed to be bound
by and to perform all of the terms and provisions of this Agreement and such
Person shall be entitled to receive the benefits hereof.
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17
(e) Third Party Beneficiary. The Purchasers shall be third party
beneficiaries to the agreements made hereunder between the Company, on the one
hand, and the Holders, on the other hand, and shall have the right to enforce
such agreements directly to the extent they deem such enforcement necessary or
advisable to protect their rights or the rights of Holders hereunder.
(f) Counterparts. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
(g) Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
(h) Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of New York.
(i) Severability. In the event that any one or more of the provisions
contained herein, or the application thereof in any circumstance, is held
invalid, illegal or unenforceable, the validity, legality and enforceability of
any such provision in every other respect and of the remaining provisions
contained herein shall not be affected or impaired thereby.
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18
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
TIME WARNER INC.
By ______________________________
Name:
Title:
Confirmed and accepted as of
the date first above
written:
BEAR, STEARNS & CO. INC.
MORGAN STANLEY & CO. INCORPORATED
By: Bear, Stearns & Co. Inc.
By ___________________________
Name:
Title:
<PAGE>
<PAGE>
Exhibit 99.2
LETTER OF TRANSMITTAL
TIME WARNER INC.
Offer to Exchange its
10 1/4% Series M Exchangeable Preferred Stock
(the "Series M Preferred Stock")
which have been registered under the Securities Act of 1933
for any and all of its outstanding
10 1/4% Series K Exchangeable Preferred Stock
(the "Series K Preferred Stock")
Pursuant to the Prospectus, dated ______ __, 1996
- -----------------------------------------------------------------------------
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME,
ON , 1996 OR SUCH LATER DATE AND TIME TO WHICH THE EXCHANGE OFFER
MAY BE EXTENDED (THE "EXPIRATION DATE"). TENDERS MAY BE WITHDRAWN PRIOR TO
THE EXPIRATION DATE.
- -----------------------------------------------------------------------------
To: CHEMICAL MELLON SHAREHOLDER SERVICES, L.L.C., Exchange Agent
By Mail: By Hand or Overnight Delivery:
Attention:
Attention:
By Facsimile:
Confirm by Telephone:
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET FORTH
ABOVE OR TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE OTHER THAN AS SET FORTH
ABOVE DOES NOT CONSTITUTE A VALID DELIVERY.
PLEASE READ THIS ENTIRE LETTER OF TRANSMITTAL
CAREFULLY BEFORE COMPLETING ANY BOX BELOW
------------------------------------
<PAGE>
<PAGE>
2
List below the shares of Series K Preferred Stock to which this Letter
of Transmittal relates. If the space provided below is inadequate, certificate
numbers and number of shares of Series K Preferred Stock represented thereby
should be listed on a separate signed schedule affixed hereto.
<TABLE>
<CAPTION>
Description of Shares of Series K Preferred Stock (1) (2) (3)
Number
of Shares of
Number Series K
of Shares of Preferred Stock
Name(s) and Address(es) of Registered Holder(s) Certificate Series K Tendered
(Please fill in, if blank) Number(s)*/ Preferred Stock (if less than all)**/
<S> <C> <C> <C>
</TABLE>
*/ Need not be completed by book-entry holders.
**/ Unless otherwise indicated, the holder will be deemed to have tendered
the full number of shares represented by such certificates of Series K
Preferred Stock.
<PAGE>
<PAGE>
3
The undersigned acknowledges that he or she has received and reviewed
the Prospectus, dated ______________, 1996 (the "Prospectus"), of Time Warner
Inc., a Delaware corporation (the "Company"), and this Letter of Transmittal
(the "Letter"), which together constitute the Company's offer (the "Exchange
Offer") to exchange shares of 10 1/4% Exchangeable Series M Preferred Stock (the
"Series M Preferred Stock") of the Company for any and all shares of the
Company's issued and outstanding 10 1/4% Exchangeable Series K Preferred Stock
(the "Series K Preferred Stock"), respectively, from the holders thereof.
The undersigned has completed the appropriate boxes above and below and
signed this letter to indicate the action the undersigned desires to take with
respect to the Exchange Offer.
This Letter is to be used either if certificates representing shares of
Series K Preferred Stock are to be forwarded herewith or if delivery of shares
of Series K Preferred Stock is to be made by book-entry transfer to an account
maintained by the Exchange Agent at The Depository Trust Company, pursuant to
the procedures set forth in "The Exchange Offer--Procedures for Tendering Series
K Preferred Stock" in the Prospectus. Delivery of this Letter and any other
required documents should be made to the Exchange Agent. Delivery of documents
to a book-entry transfer facility does not constitute delivery to the Exchange
Agent.
Holders whose shares of Series K Preferred Stock are not immediately
available or who cannot deliver their shares of Series K Preferred Stock and all
other documents required hereby to the Exchange Agent on or prior to the
Expiration Date must tender their shares of Series K Preferred Stock according
to the guaranteed delivery procedure set forth in the Prospectus under the
caption "The Exchange Offer--Procedures for Tendering Series K Preferred Stock."
See Instruction 1.
[ ] CHECK HERE IF SHARES OF SERIES K PREFERRED STOCK ARE BEING DELIVERED BY
BOOK-ENTRY TRANSFER MADE TO AN ACCOUNT MAINTAINED BY THE EXCHANGE
AGENT WITH A BOOK-ENTRY TRANSFER FACILITY AND COMPLETE THE FOLLOWING:
Name of Tendering Institution ___________________[ ]The Depository Trust Company
Account Number _________________________________________________________________
Transaction Code Number_________________________________________________________
[ ] CHECK HERE IF SHARES OF SERIES K PREFERRED STOCK ARE BEING DELIVERED
PURSUANT TO A NOTICE OF GUARANTEED DELIVERY AND COMPLETE THE FOLLOWING:
Name of Registered Holder(s) ___________________________________________________
Name of Eligible Institution that Guaranteed Delivery __________________________
If delivered by book-entry transfer:
Name of Tendering Institution __________________________________________________
Account Number _________________________________________________________________
Transaction Code Number ________________________________________________________
[ ] CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10 ADDITIONAL
COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS
THERETO.
Name ___________________________________________________________________________
Address ________________________________________________________________________
________________________________________________________________________
<PAGE>
<PAGE>
4
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
Ladies and Gentlemen:
Upon the terms and subject to the conditions of the Exchange Offer, the
undersigned hereby tenders to the Company the number of shares of Series K
Preferred Stock indicated above. Subject to, and effective upon, the acceptance
for exchange of the shares of Series K Preferred Stock tendered hereby, the
undersigned hereby sells, assigns and transfers to, or upon the order of, the
Company all right, title and interest in and to such shares of Series K
Preferred Stock as are being tendered hereby.
The undersigned hereby represents and warrants that the undersigned has
full power and authority to tender, sell, assign and transfer the shares of
Series K Preferred Stock tendered hereby and that the Company will acquire good
and unencumbered title thereto, free and clear of all liens, restrictions,
charges and encumbrances and not subject to any adverse claim when the same are
accepted by the Company. The undersigned will, upon request, execute and deliver
any additional documents deemed by the Company or the Exchange Agent to be
necessary or desirable to complete the sale, assignment and transfer of the
shares of Series K Preferred Stock tendered hereby.
The undersigned also acknowledges that this Exchange Offer is being
made in reliance on the Company's belief, based on no-action letters issued by
the staff of the Securities and Exchange Commission (the "SEC") to third
parties, that the shares of Series M Preferred Stock issued in exchange for the
shares of Series K Preferred Stock pursuant to the Exchange Offer may be offered
for resale, resold and otherwise transferred by holders thereof (other than (i)
a broker-dealer who purchases such shares of Series M Preferred Stock directly
from the Company to resell pursuant to Rule 144A or any other exemption under
the Securities Act of 1933, as amended (the "Securities Act"), or (ii) a person
that is an "affiliate" of the Company within the meaning of Rule 405 under the
Securities Act) without compliance with the registration and prospectus delivery
provisions of the Securities Act provided that such shares of Series M Preferred
Stock are acquired in the ordinary course of such holders' business and such
holders have no arrangement with any person to participate in the distribution
of such shares of Series M Preferred Stock. If the undersigned is not a
broker-dealer or is a broker-dealer but will not receive shares of Series M
Preferred Stock for its own account in exchange for shares of Series K Preferred
Stock, the undersigned represents that (i) the shares of Series M Preferred
Stock acquired pursuant to the Exchange Offer are being obtained in the ordinary
course of such holder's business, (ii) such holder has no arrangements with any
person to participate in the distribution of such shares of Series M Preferred
Stock, and (iii) such holder is not an "affiliate" of the Company, as defined in
Rule 405 under the Securities Act or, if such holder is an affiliate, that such
holder will comply with the registration and prospectus delivery requirements of
the Securities Act to the extent applicable. If the undersigned is a
broker-dealer that will receive shares of Series M Preferred Stock for its own
account in exchange for shares of Series K Preferred Stock that were acquired as
a result of market-making activities or other trading activities, it
acknowledges that it will deliver a prospectus in connection with any resale of
such shares of Series M Preferred Stock; however, by so acknowledging and by
delivering a prospectus, the undersigned will not be deemed to admit that it is
an "underwriter" within the meaning of the Securities Act.
By acceptance of the Exchange Offer, each broker-dealer that receives
shares of Series M Preferred Stock pursuant to the Exchange Offer hereby
acknowledges and agrees that, upon receipt of notice by the Company of the
happening of any event which makes any statement in the Prospectus untrue in any
material respect or which requires the making of any changes in the Prospectus
in order to make the statements therein not misleading (which notice the Company
agrees to deliver promptly to such broker-dealer), such broker-dealer will
suspend use of the Prospectus until the Company has amended or supplemented the
Prospectus to correct such misstatement or omission and has furnished copies of
the amended or supplemented prospectus to such broker-dealer.
The undersigned, if a California resident, hereby further represents
and warrants that the undersigned (or the beneficial owner of the shares of
Series K Preferred Stock tendered hereby, if not the undersigned) (i) is a bank,
savings and loan association, trust company, insurance company, investment
company registered under the Investment Company Act of 1940, pension or
profit-sharing trust (other than a pension or profit-sharing trust of the
Company, a self-employed individual retirement plan, or individual retirement
account), or a corporation which has a net worth on a consolidated basis
according to its most recent audited financial statements of not less than
$14,000,000, and (ii) is acquiring the shares of Series M Preferred Stock for
its own account for investment purposes (or for the account of the beneficial
owner of such shares of Series M Preferred Stock for investment purposes).
<PAGE>
<PAGE>
5
All authority conferred or agreed to be conferred in this Letter and
every obligation of the undersigned hereunder shall be binding upon the
successors, assigns, heirs, executors, administrators, trustees in bankruptcy
and legal representatives of the undersigned and shall not be affected by, and
shall survive, the death or incapacity of the undersigned. This tender may be
withdrawn only in accordance with the procedures set forth in the instructions
contained in this Letter.
The undersigned understands that tenders of the shares of Series K
Preferred Stock pursuant to any one of the procedures described under "The
Exchange Offer--Procedures for Tendering Series K Preferred Stock" in the
Prospectus and in the instructions hereto will constitute a binding agreement
between the undersigned and the Company in accordance with the terms and subject
to the conditions of the Exchange Offer.
The undersigned recognizes that, under certain circumstances set forth
in the Prospectus under "The Exchange Offer--Certain Conditions to the Exchange
Offer," the Company may not be required to accept for exchange any of the shares
of Series K Preferred Stock tendered. Shares of Series K Preferred Stock not
accepted for exchange or withdrawn will be returned to the undersigned at the
address set forth below unless otherwise indicated under "Special Delivery
Instructions" below.
Unless otherwise indicated herein in the box entitled "Special Issuance
Instructions" below, the undersigned hereby requests that the shares of Series M
Preferred Stock (and, if applicable, substitute certificates representing shares
of Series K Preferred Stock for any shares of Series K Preferred Stock not
exchanged) be issued in the name of the undersigned. Similarly, unless otherwise
indicated under the box entitled "Special Delivery Instructions" below, the
undersigned hereby requests that the shares of Series M Preferred Stock (and, if
applicable, substitute certificates representing shares of Series K Preferred
Stock for any shares of Series K Preferred Stock not exchanged) be sent to the
undersigned at the address shown above in the box entitled "Description of
Shares of Series K Preferred Stock."
THE UNDERSIGNED, BY COMPLETING THE BOX ENTITLED "DESCRIPTION OF SHARES
OF SERIES K PREFERRED STOCK" ABOVE AND SIGNING THIS LETTER AND DELIVERING SUCH
SHARES AND THIS LETTER, WILL BE DEEMED TO HAVE TENDERED THE SHARES OF SERIES K
PREFERRED STOCK AS SET FORTH IN SUCH BOX ABOVE.
<PAGE>
<PAGE>
6
PLEASE SIGN HERE
(TO BE COMPLETED BY ALL TENDERING HOLDERS)
(Complete Accompanying Substitute Form W-9)
X ....................................... ..................................
X ....................................... ..................................
Signature(s) of Owner(s) Date
Area Code and Telephone Number .....................
If a holder is tendering any shares of Series K Preferred Stock, this Letter
must be signed by the registered holder(s) as the name(s) appear(s) on the
certificate(s) for the shares of Series K Preferred Stock or by any person(s)
authorized to become registered holder(s) by endorsements and documents
transmitted herewith. If signature is by a trustee, executor, administrator,
guardian, attorney-in-fact, officer of a corporation or other person acting in a
fiduciary or representative capacity, please indicate such capacity below. See
Instruction 3.
Name(s): .....................................................................
.....................................................................
(Please Type or Print)
Capacity: ......................................................................
Address: ......................................................................
......................................................................
(Include Zip Code)
SIGNATURE GUARANTEE
(If required by Instruction 3)
Signature(s) Guaranteed by
an Eligible Institution:........................................................
(Authorized Signature)
................................................................................
(Title)
................................................................................
(Name of Firm)
Dated:..........................................................................
<PAGE>
<PAGE>
7
SPECIAL ISSUANCE INSTRUCTIONS
(See Instructions 3 and 4)
To be completed ONLY if shares of
Series M Preferred Stock (and if
applicable shares of Series K Preferred
Stock not exchanged) are to be
issued in the name of and sent to
someone other than the person or persons
whose signature(s) appear on this Letter
above.
Issue shares of Series M Preferred Stock
(and if applicable shares of Series K
Preferred Stock not exchanged) to:
Name(s):................................
(Please Type or Print)
................................
(Please Type or Print)
Address:................................
................................
(Include Zip Code)
(Complete Substitute Form W-9)
SPECIAL DELIVERY INSTRUCTIONS
(See Instructions 3 and 4)
To be completed ONLY if shares of
Series M Preferred Stock (and if
applicable shares of Series K Preferred
Stock not exchanged) are to be sent to
someone other than the person or persons
whose signature(s) appear(s) on this
Letter above or to such person or
persons at an address other than shown
in the box entitled "Description of
Shares of Series K Preferred Stock" on
this Letter above.
Mail shares of Series M Preferred Stock
(and if applicable shares of Series K
Preferred Stock not exchanged) to:
Name(s):................................
(Please Type or Print)
................................
(Please Type or Print)
Address:................................
................................
(Include Zip Code)
IMPORTANT: UNLESS GUARANTEED DELIVERY PROCEDURES ARE COMPLIED WITH,
THIS LETTER OR A FACSIMILE HEREOF (TOGETHER WITH THE CERTIFICATE(S) FOR SHARES
OF SERIES K PREFERRED STOCK OR A CONFIRMATION OF BOOK-ENTRY TRANSFER OF SHARES
OF SERIES K PREFERRED STOCK AND ALL OTHER REQUIRED DOCUMENTS) MUST BE RECEIVED
BY THE EXCHANGE AGENT PRIOR TO THE EXPIRATION DATE.
<PAGE>
<PAGE>
8
INSTRUCTIONS
Forming Part of the Terms and Conditions of the Exchange Offer
1. Delivery of this Letter and Shares of Series K Preferred Stock; Guaranteed
Delivery Procedure
This Letter is to be used to forward, and must accompany, all shares of
Series K Preferred Stock tendered pursuant to the Exchange Offer. Certificates
representing the shares of Series K Preferred Stock in proper form for transfer
(or a confirmation of book-entry transfer of such shares of Series K Preferred
Stock into the Exchange Agent's account at the book-entry transfer facility) as
well as a properly completed and duly executed copy of this Letter and all other
documents required by this Letter, must be received by the Exchange Agent at its
address set forth herein on or before the Expiration Date.
The method of delivery of this Letter, the shares of Series K Preferred
Stock and all other required documents is at the election and risk of the
tendering holders. Delivery will be deemed made only when actually received or
confirmed by the Exchange Agent. If such delivery is by mail, it is recommended
that registered mail properly insured, with return receipt requested, be used.
In all cases, sufficient time should be allowed to permit timely delivery.
If a holder desires to tender shares of Series K Preferred Stock and
the certificates representing such holder's shares of Series K Preferred Stock
are not immediately available or time will not permit such holder's Letter of
Transmittal, certificates representing shares of Series K Preferred Stock (or a
confirmation of book-entry transfer of shares of Series K Preferred Stock into
the Exchange Agent's account at the book-entry transfer facility) or other
required documents to reach the Exchange Agent on or before the Expiration Date,
such holder may nevertheless tender shares of Series K Preferred Stock if:
(a) such tender is made by or through an Eligible Institution
(as defined below);
(b) on or prior to the Expiration Date, the Exchange Agent has
received a telegram, facsimile or letter from such Eligible Institution
setting forth the name and address of the holder of such shares of
Series K Preferred Stock and the number of shares of Series K Preferred
Stock tendered and stating that the tender is being made thereby and
guaranteeing that, within three business days after the Expiration
Date, a duly executed Letter of Transmittal, or facsimile thereof,
together with the shares of Series K Preferred Stock (or a confirmation
of book-entry transfer of such shares of Series K Preferred Stock into
the Exchange Agent's account at the book-entry transfer facility), and
any other documents required by this Letter and the instructions
hereto, will be deposited by such Eligible Institution with the
Exchange Agent; and
(c) this Letter, or a facsimile hereof, and shares of Series K
Preferred Stock in proper form for transfer (or a confirmation of
book-entry transfer of such Shares of Series K Preferred Stock into the
Exchange Agent's account at the book-entry transfer facility) and all
other required documents are received by the Exchange Agent within
three business days after the Expiration Date.
See "The Exchange Offer" in the Prospectus.
2. Withdrawals
Any holder who has tendered shares of Series K Preferred Stock may
withdraw the tender by delivering written notice of withdrawal to the Exchange
Agent prior to the Expiration Date. For a withdrawal to be effective, a written
notice of withdrawal must be received by the Exchange Agent at its address set
forth herein. Any such notice of withdrawal must (i) specify the name of the
person having tendered the shares of Series K Preferred Stock to be withdrawn
(the "Depositor"), (ii) identify the shares of Series K Preferred Stock to be
withdrawn (including the certificate number or numbers, and number of shares of
Series K Preferred Stock), (iii) be signed by the holder in the same manner as
the original signature on this Letter by which such shares of Series K Preferred
Stock were tendered or as otherwise
<PAGE>
<PAGE>
9
set forth in Instruction 3 below (including any required signature guarantees),
or be accompanied by documents of transfer sufficient to have the Transfer Agent
(as defined in the Prospectus) register the transfer of such shares of Series K
Preferred Stock into the name of the person withdrawing the tender and (iv)
specify the name in which any such shares of Series K Preferred Stock are to be
registered, if different from that of the Depositor. If shares of Series K
Preferred Stock have been tendered pursuant to the procedure for book-entry
transfer, any notice of withdrawal must specify the name and number of the
account at the book-entry transfer facility to be credited with the withdrawn
shares of Series K Preferred Stock or otherwise comply with the book-entry
transfer facility's procedures. See "The Exchange Offer--Withdrawal Rights" in
the Prospectus.
3. Signatures on this Letter; Bond Powers and Endorsements; Guarantee of
Signatures
If this Letter is signed by the registered holder of the shares of
Series K Preferred Stock tendered hereby, the signature must correspond exactly
with the name as written on the face of the certificates without any change
whatsoever.
If any tendered shares of Series K Preferred Stock are owned of record
by two or more joint owners, all such owners must sign this Letter.
If any tendered shares of Series K Preferred Stock are registered in
different names on several certificates, it will be necessary to complete, sign
and submit as many separate copies of this Letter as there are different
registrations of certificates.
If this Letter or any shares of Series K Preferred Stock or powers of
attorney are signed by trustees, executors, administrators, guardians,
attorneys-in-fact, officers of corporations or others acting in a fiduciary or
representative capacity, such persons should indicate when signing, and unless
waived by the Company, proper evidence satisfactory to the Company of their
authority so to act must be submitted.
The signatures on this Letter or a notice of withdrawal, as the case
may be, must be guaranteed unless the shares of Series K Preferred Stock
surrendered for exchange pursuant thereto are tendered (i) by a registered
holder of the shares of Series K Preferred Stock who has not completed the box
entitled "Special Issuance Instructions" or "Special Delivery Instructions" in
this Letter or (ii) for the account of an Eligible Institution. In the event
that the signatures in this Letter or a notice of withdrawal, as the case may
be, are required to be guaranteed, such guarantees must be by a firm which is a
member of a registered national securities exchange or a member of the National
Association of Securities Dealers, Inc., or by a commercial bank or trust
company having an office or correspondent in the United States (collectively,
"Eligible Institutions"). If shares of Series K Preferred Stock are registered
in the name of a person other than the signer of this Letter, the shares of
Series K Preferred Stock surrendered for exchange must be endorsed by, or be
accompanied by a written instrument or instruments of transfer or exchange, in
satisfactory form as determined by the Company in its sole discretion, duly
executed by the registered holder with the signature thereon guaranteed by an
Eligible Institution.
4. Special Issuance and Delivery Instructions
Tendering holders of shares of Series K Preferred Stock should indicate
in the applicable box the name and address to which shares of Series M Preferred
Stock issued pursuant to the Exchange Offer are to be issued or sent, if
different from the name or address of the person signing this Letter. In the
case of issuance in a different name, the employer identification or social
security number of the person named must also be indicated. If no such
instructions are given, any shares of Series M Preferred Stock will be issued in
the name of, and delivered to, the name or address of the person signing this
Letter and any shares of Series K Preferred Stock not accepted for exchange will
be returned to the name or address of the person signing his Letter.
<PAGE>
<PAGE>
10
5. Backup Federal Income Tax Withholding and Substitute Form W-9
Under the federal income tax laws, payments that may be made by the
Company on account of shares of Series M Preferred Stock issued pursuant to the
Exchange Offer may be subject to backup withholding at the rate of 31%. In order
to avoid such backup withholding, each tendering holder should complete and sign
the Substitute Form W-9 included in this Letter and either (a) provide the
correct taxpayer identification number ("TIN") and certify, under penalties of
perjury, that the TIN provided is correct and that (i) the holder has not been
notified by the Internal Revenue Service (the "IRS") that the holder is subject
to backup withholding as a result of failure to report all interest or dividends
or (ii) the IRS has notified the holder that the holder is no longer subject to
backup withholding; or (b) provide an adequate basis for exemption. If the
tendering holder has not been issued a TIN and has applied for one, or intends
to apply for one in the near future, such holder should write "Applied For" in
the space provided for the TIN in Part I of the Substitute Form W-9, sign and
date the Substitute Form W-9 and sign the Certificate of Payee Awaiting Taxpayer
Identification Number. If "Applied For" is written in Part I, the Company (or
the Transfer Agent for the shares of Series M Preferred Stock) shall retain 31%
of payments made to the tendering holder during the sixty (60) day period
following the date of the Substitute Form W-9. If the holder furnishes the
Exchange Agent or the Company with its TIN within sixty (60) days after the date
of the Substitute Form W-9, the Company (or the Paying Agent) shall remit such
amounts retained during the sixty (60) day period to the holder and no further
amounts shall be retained or withheld from payments made to the holder
thereafter. If, however, the holder has not provided the Exchange Agent or the
Company with its TIN within such sixty (60) day period, the Company (or the
Paying Agent) shall remit such previously retained amounts to the IRS as backup
withholding. In general, if a holder is an individual, the taxpayer
identification number is the Social Security number of such individual. If the
Exchange Agent or the Company is not provided with the correct taxpayer
identification number, the holder may be subject to a $50 penalty imposed by the
IRS. Certain holders (including, among others, all corporations and certain
foreign individuals) are not subject to these backup withholding and reporting
requirements. In order for a foreign individual to qualify as an exempt
recipient, such holder must submit a statement (generally, IRS Form W-8), signed
under penalties of perjury, attesting to that individual's exempt status. Such
statements can be obtained from the Exchange Agent. For further information
concerning backup withholding and instructions for completing the Substitute
Form W-9 (including how to obtain a taxpayer identification number if you do not
have one and how to complete the Substitute Form W-9 if shares of Series K
Preferred Stock are registered in more than one name), consult the enclosed
Guidelines for Certification of Taxpayer Identification Number on Substitute
Form W-9.
Failure to complete the Substitute Form W-9 will not, by itself, cause
shares of Series K Preferred Stock to be deemed invalidly tendered, but may
require the Company (or the Paying Agent) to withhold 31% of the amount of any
payments made on account of the shares of Series M Preferred Stock. Backup
withholding is not an additional federal income tax. Rather, the federal income
tax liability of a person subject to backup withholding will be reduced by the
amount of tax withheld. If withholding results in an overpayment of taxes, a
refund may be obtained.
6. Transfer Taxes
The Company will pay all transfer taxes, if any, applicable to the
transfer of shares of Series K Preferred Stock to it or its order pursuant to
the Exchange Offer. If, however, shares of Series M Preferred Stock and/or
substitute shares of Series K Preferred Stock not exchanged are to be delivered
to, or are to be registered or issued in the name of, any person other than the
registered holder of the shares of Series K Preferred Stock tendered hereby, or
if tendered shares of Series K Preferred Stock are registered in the name of any
person other than the person signing this Letter, or if a transfer tax is
imposed for any reason other than the transfer of shares of Series K Preferred
Stock to the Company or its order pursuant to the Exchange Offer, the amount of
any such transfer taxes (whether imposed on the registered holder or any other
persons) will be payable by the tendering holder. If satisfactory evidence of
payment of such taxes or exemption therefrom is not submitted herewith, the
amount of such transfer taxes will be billed directly to such tendering holder.
Except as provided in this Instruction 6, it will not be necessary for
transfer tax stamps to be affixed to the shares of Series K Preferred Stock
specified in this Letter.
<PAGE>
<PAGE>
11
7. Waiver of Conditions
The Company reserves the absolute right to waive satisfaction of any or
all conditions enumerated in the Prospectus.
8. No Conditional Tenders
No alternative, conditional, irregular or contingent tenders will be
accepted. All tendering holders of shares of Series K Preferred Stock, by
execution of this Letter, shall waive any right to receive notice of the
acceptance of their shares of Series K Preferred Stock for exchange.
Neither the Company nor any other person is obligated to give notice of
defects or irregularities in any tender, nor shall any of them incur any
liability for failure to give any such notice.
9. Inadequate Space
If the space provided herein is inadequate, the number of shares of
Series K Preferred Stock being tendered and the certificate number or numbers
(if available) should be listed on a separate schedule attached hereto and
separately signed by all parties required to sign this Letter.
10. Mutilated, Lost, Stolen or Destroyed Shares of Series K Preferred Stock
Any holder whose certificates representing shares of Series K Preferred
Stock have been mutilated, lost, stolen or destroyed should contact the Exchange
Agent at the address indicated above for further instructions.
11. Requests for Assistance or Additional Copies
Questions relating to the procedure for tendering, as well as requests
for additional copies of the Prospectus and this Letter, may be directed to the
Exchange Agent at the address and telephone number indicated above.
<PAGE>
<PAGE>
12
TO BE COMPLETED BY ALL TENDERING HOLDERS
(See Instruction 5)
PAYER'S NAME: TIME WARNER ENTERTAINMENT COMPANY, L.P.
<TABLE>
<S> <C> <C>
SUBSTITUTE Part I--Taxpayer Identification Number
Form W-9 ______________________________
Department of the Treasury Enter your taxpayer identification number in Social Security Number
Internal Revenue Service the appropriate box. For most individuals,
this is your social security number. If you OR
do not have a number, see how to obtain a
"TIN" in the enclosed Guidelines. ______________________________
Employer Identification Number
NOTE: If the account is in more than one
name, see the chart on page 2 of the
enclosed Guidelines to determine what number
to give.
Part II--For Payees Exempt From Backup Withholding (see enclosed Guidelines)
Payer's Request for Taxpayer CERTIFICATION--UNDER THE PENALTIES OF PERJURY, I CERTIFY THAT:
Identification Number (TIN) (1) the number shown on this form is my correct Taxpayer Identification Number (or I am
and Certification waiting for a number to be issued to me), and
(2) I am not subject to backup withholding either because I have not been notified by the
Internal Revenue Service (the "IRS") that I am subject to backup withholding as a result
of a failure to report all interest or dividends or the IRS has notified me that I am no
longer subject to backup withholding.
SIGNATURE______________________________________ DATE____________________
</TABLE>
Certification Guidelines -- You must cross out item (2) of the above
certification if you have been notified by the IRS that you are subject to
backup withholding because of underreporting of interest or dividends on your
tax return. However, if after being notified by the IRS that you were subject to
backup withholding you received another notification from the IRS that you are
no longer subject to backup withholding, do not cross out item (2).
CERTIFICATION OF PAYEE AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify, under penalties of perjury, that a Taxpayer Identification
Number has not been issued to me, and that I mailed or delivered an application
to receive a Taxpayer Identification Number to the appropriate Internal Revenue
Service Center or Social Security Administration Office (or I intend to mail or
deliver an application in the near future). I understand that if I do not
provide a Taxpayer Identification Number to the payer, 31 percent of all
payments made to me on account of the shares of Series M Preferred Stock shall
be retained until I provide a Taxpayer Identification Number to the payer and
that, if I do not provide my Taxpayer Identification Number within sixty (60)
days, such retained amounts shall be remitted to the Internal Revenue Service as
backup withholding and 31 percent of all reportable payments made to me
thereafter will be withheld and remitted to the Internal Revenue Service until I
provide a Taxpayer Identification Number.
SIGNATURE__________________________________ DATE_________________________
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING
OF 31% OF ANY PAYMENTS MADE TO YOU ON ACCOUNT OF THE SHARES OF SERIES M
PREFERRED STOCK. PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION
OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL
DETAILS.
<PAGE>
<PAGE>
13
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
Guidelines for Determining the Proper Identification Number to Give the
Payer.--Social Security numbers have nine digits separated by two hyphens: i.e.,
000-00-0000. Employer identification numbers have nine digits separated by only
one hyphen: i.e., 00-0000000. The table below will help determine the number to
give the payer.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------
Give the
For this type of account: SOCIAL SECURITY
number of--
- ------------------------------------------------------------------
<S> <C>
1. An individual's account The individual
2. Two or more individuals The actual owner of the
(joint account) account or, if combined
funds, any one of the
individuals(1)/
3. Husband and wife (joint The actual owner of the
account) account or, if joint funds,
either person(1)/
4. Custodian account of a The minor(2)/
minor (Uniform Gift to
Minors Act)
5. Adult and minor (joint The adult or, if the minor is
account) the only contributor, the
minor(1)/
6. Account in the name of The ward, minor, or
guardian or committee for a incompetent person(3)/
designated ward, minor, or
incompetent person
7. a. The usual revocable The grantor-trustee(1)/
savings trust account
(grantor is also trustee)
b. So-called trust account The actual owner(1)/
that is not a legal or
valid trust under State
law
8. Sole proprietorship account The owner(4)/
- ---------------------------------------------------------------
<CAPTION>
- ---------------------------------------------------------------
Give the EMPLOYER
For this type of account: IDENTIFICATION
number of--
- ---------------------------------------------------------------
<S> <C>
9. A valid trust, estate or The Legal entity (Do not
pension trust furnish the identifying number
of the personal representative
or trustee unless the legal
entity itself is not designated
in the account title.)(5)/
10. Corporate account The corporation
11. Religious, charitable, or The organization
educational organization
account
12. Partnership account held The partnership
in the name of the
business
13. Association, club, or The organization
other tax-exempt
organization
14. A broker or registered The broker or nominee
nominee
15. Account with the The public entity
Department of
Agriculture in the name
of a public entity (such as
a State or local
government, school
district, or prison) that
receives agricultural
program payments
16. Sole proprietorship The owner(4)/
account
- ---------------------------------------------------------------
</TABLE>
(1)/ List first and circle the name of the person whose number you furnish.
(2)/ Circle the minor's name and furnish the minor's social security number.
(3)/ Circle the ward's, minor's or incompetent person's name and furnish such
person's social security number.
(4)/ Show the name of the owner. See item 8 or 16. You may also enter your
business name.
(5)/ List first and circle the name of the legal trust, estate, or pension
trust.
Note: If no name is circled when there is more than one name, the number will be
considered to be that of the first name listed.
<PAGE>
<PAGE>
14
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
Obtaining a Number
If you don't have a taxpayer identification number or you don't know your
number, obtain Form SS-5, Application for a Social Security Number Card, or Form
SS-4, Application for Employer Identification Number, at the local office of the
Social Security Administration or the Internal Revenue Service and apply for
a number.
Payees Exempt from Backup Withholding
Payees specifically exempted from backup withholding on ALL payments include the
following:
A corporation.
A financial institution.
An organization exempt from tax under section 501(a), or an individual
retirement plan.
The United States or any agency or instrumentality thereof.
A State, the District of Columbia, a possession of the United States, or
any subdivision or instrumentality thereof.
A foreign government, a political subdivision of a foreign government, or
any agency or instrumentality thereof.
An international organization or any agency, or instrumentality thereof.
A registered dealer in securities or commodities registered in the U.S. or
a possession of the U.S.
A real estate investment trust.
A common trust fund operated by a bank under section 584(a).
An exempt charitable remainder trust, or a non-exempt trust described in
section 4947(a)(1).
An entity registered at all times under the Investment Company Act of 1940.
A foreign central bank of issue.
Payments of dividends and patronage dividends not generally subject to backup
withholding include the following:
Payment to nonresident aliens subject to withholding under section 1441.
Payments to partnerships not engaged in a trade or business in the U.S. and
which have at least one nonresident partner.
Payments of patronage dividends where the amount received is not paid in
money.
Payments made by certain foreign organizations.
Payments made to a nominee.
Payments of interest not generally subject to backup with holding include the
following:
Payments of interest on obligations issued by individuals.
Note: You may be subject to backup withholding if this interest is $500 or more
and is paid in the course of the payer's trade or business and you have not
provided your correct taxpayer identification number to the payer.
Payments of tax-exempt interest (including exempt-interest dividends under
section 852).
Payments described in section 6049(b)(5) to nonresident aliens.
Payments on tax-free covenant bonds under section 1451.
Payments made by certain foreign organizations.
Payments made to a nominee.
Exempt payees described above should file Form W-9 to avoid possible erroneous
backup withholding. FILE THIS FORM WITH THE PAYER. FURNISH YOUR TAXPAYER
IDENTIFICATION NUMBER, WRITE "EXEMPT" ON THE FACE OF THE FORM, AND RETURN IT TO
THE PAYER. IF THE PAYMENTS ARE INTEREST, DIVIDENDS, OR PATRONAGE DIVIDENDS, ALSO
SIGN AND DATE THE FORM.
Certain payments other than interest, dividends, and patronage dividends that
are not subject to information reporting are also not subject to backup
withholding. For details, see the regulations under sections 6041, 6041A(a),
6045, and 6050A.
Privacy Act Notice.--Section 6109 requires most recipients of dividend,
interest, or other payments to give taxpayer identification numbers to payers
who must report the payments to the IRS. The IRS uses the numbers for
identification purposes. Payers must be given the numbers whether or not
recipients are required to file tax returns. Payers must generally withhold 31%
of taxable interest, dividend, and certain other payments to a payee who does
not furnish a taxpayer identification number to a payer. Certain penalties may
also apply.
Penalties
(1) Penalty for Failure to Furnish Taxpayer Identification Number.--If you fail
to furnish your taxpayer identification number to a payer, you are subject to a
penalty of $50 for each such failure unless your failure is due to reasonable
cause and not to willful neglect.
(2) Civil Penalty for False Information With Respect to Withholding.--If you
make a false statement with no reasonable basis which results in no imposition
of backup withholding, you are subject to a penalty of $500.
(3) Criminal Penalty for Falsifying Information.-- Falsifying certifications or
affirmations may subject you to criminal penalties including fines and/or
imprisonment.
FOR ADDITIONAL INFORMATION CONTACT YOUR TAX CONSULTANT OR THE INTERNAL REVENUE
SERVICE
<PAGE>
<PAGE>
Exhibit 99.3
NOTICE OF GUARANTEED DELIVERY
for Tender of
10 1/4% Series K Exchangeable Preferred Stock
(the "Series K Preferred Stock")
of
TIME WARNER INC.
This form, or one substantially equivalent hereto, must be used to
tender shares of Series K Preferred Stock pursuant to the Exchange Offer
described in the Prospectus dated ___________ __, 1996 (the "Prospectus") of
Time Warner Inc., a Delaware corporation (the "Company"), if a holder of shares
of Series K Preferred Stock cannot deliver a Letter of Transmittal to the
Exchange Agent listed below (the "Exchange Agent") or cannot either deliver the
certificates representing the shares of Series K Preferred Stock to be tendered
or complete the procedure for book-entry transfer at or prior to 5:00 P.M., New
York City time, on ___________________, 1996 or such later date and time to
which the Exchange Offer may be extended (the "Expiration Date"). This form, or
one substantially equivalent hereto, must be delivered by hand or sent by
telegram, facsimile transmission or mail to the Exchange Agent, and must be
received by the Exchange Agent on or prior to the Expiration Date. See "The
Exchange Offer--Procedure for Tendering Series K Preferred Stock" in the
Prospectus. Capitalized terms used herein and not defined herein shall have the
meanings ascribed thereto in the Prospectus.
To: Chemical Mellon Shareholder Services, L.L.C., Exchange Agent
By Mail: By Hand or Overnight Delivery:
Attention: Attention:
By Facsimile:
Confirm by Telephone:
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE
OR TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE OTHER THAN AS SET FORTH ABOVE DOES
NOT CONSTITUTE A VALID DELIVERY.
<PAGE>
<PAGE>
Ladies and Gentlemen:
The undersigned hereby represents that he or she is the holder of the
shares of Series K Preferred Stock indicated below and that the Letter of
Transmittal cannot be delivered to the Exchange Agent and/or either the
certificates representing such shares of Series K Preferred Stock cannot be
delivered to the Exchange Agent or the procedure for book-entry transfer cannot
be completed on or before the Expiration Date. The undersigned hereby tenders
the shares of Series K Preferred Stock indicated below pursuant to the
guaranteed delivery procedures set forth in the Prospectus and the Letter of
Transmittal, receipt of which is hereby acknowledged.
Name(s) of Tendering Holder(s):
------------------------------------------------
Please Type or Print
- --------------------------------------------------------------------------------
Signatures
Address(es):
--------------------------------------------------------------------
- --------------------------------------------------------------------------------
Telephone Number(s):
------------------------------------------------------------
Name(s) in which shares of Series K Preferred Stock are registered:
-------------
Certificate No(s). Number of Shares
(if available)*/ Tendered
---------------- -----------------
- ------------------------------------ -----------------------------------
- ------------------------------------ -----------------------------------
- ------------------------------------ -----------------------------------
- ------------------------------------ -----------------------------------
- ------------------------------------ -----------------------------------
- --------------
*/ Need not be completed by book-entry holders.
<PAGE>
<PAGE>
GUARANTEE OF DELIVERY
(Not to be used for signature guarantee)
The undersigned, a member firm of a registered national securities
exchange or of the National Association of Securities Dealers, Inc. or a
commercial bank or trust company having an office or a correspondent in the
United States, hereby guarantees that the undersigned will deliver to the
Exchange Agent the certificates representing the shares of Series K Preferred
Stock being tendered hereby in proper form for transfer (or a confirmation of
book-entry transfer of such shares of Series K Preferred Stock into the Exchange
Agent's account at the book-entry transfer facility), with any required
signature guarantees and any other required documents, all within three business
days after the Expiration Date.
- ----------------------------------- ---------------------------------------
Firm Authorized Signature
- ----------------------------------- Name:
Address ----------------------------------
Please Type or Print
- ----------------------------------- Title:
Zip Code ---------------------------------
- ----------------------------------- Dated: , 1996
Telephone No. --------------------------
The institution that completes this form must communicate the guarantee
to the Exchange Agent and must deliver the certificates representing any shares
of Series K Preferred Stock (or a confirmation of book-entry transfer of such
shares of Series K Preferred Stock into the Exchange Agent's account at the
book-entry transfer facility) and the Letter of Transmittal to the Exchange
Agent within the time period shown herein. Failure to do so could result in a
financial loss to such institution.
<PAGE>
Exhibit 99.4
EXCHANGE AGENCY AGREEMENT
__________, 1996
[Chemical]
Ladies and Gentlemen:
Time Warner Inc., a Delaware corporation (the "Company"),
intends to make an offer (the "Exchange Offer") to exchange its Series M
Exchangeable Preferred Stock, par value $1.00 per share (the "Series M Preferred
Stock"), for its outstanding Series K Preferred Stock, par value $1.00 per share
(the "Series K Preferred Stock"). The terms and conditions of the Exchange Offer
as currently contemplated are set forth in a prospectus, dated ____________,
1996 (the "Prospectus"), distributed to all record holders of the Series K
Preferred Stock. The Series K Preferred Stock and the Series M Preferred Stock
are collectively referred to herein as the "Preferred Stock."
The Company hereby appoints [Chemical] to act as exchange
agent (the "Exchange Agent") in connection with the Exchange Offer. References
hereinafter to "you" shall refer to [Chemical].
The Exchange Offer is expected to be commenced by the Company
on or about _______________, 1996. The Letter of Transmittal accompanying the
Prospectus is to be used by the holders of the Series K Preferred Stock to
accept the Exchange Offer, and contains instructions with respect to the
delivery of certificates representing the shares of Series K Preferred Stock
tendered.
The Exchange Offer shall expire at 5:00 P.M., New York City
time, on the 60th day following its commencement or on such later date or time
to which the Company may extend the Exchange Offer (the "Expiration Date").
Subject to the terms and conditions set forth in the Prospectus, the Company
expressly reserves the right to extend the Exchange Offer from time to time and
may extend the Exchange Offer by giving oral (confirmed in writing) or written
notice to you before 9:00 A.M., New York City time, on the business day
following the previously scheduled Expiration Date.
<PAGE>
<PAGE>
2
In carrying out your duties as Exchange Agent, you are to act
in accordance with the following instructions:
1. You will perform such duties and only such duties as are
specifically set forth in the section of the Prospectus captioned "The Exchange
Offer" or as specifically set forth herein; provided, however, that in no way
will your general duty to act in good faith be discharged by the foregoing.
2. You are to examine each of the Letters of Transmittal and
certificates representing shares of Series K Preferred Stock and any other
documents delivered or mailed to you by or for holders of the Series K Preferred
Stock to ascertain whether: (i) the Letters of Transmittal and any such other
documents are duly executed and properly completed in accordance with the
instructions set forth therein and (ii) the shares of Series K Preferred Stock
have otherwise been properly tendered. In each case where the Letter of
Transmittal or any other document has been improperly completed or executed or
any of the certificates representing shares of Series K Preferred Stock are not
in proper form for transfer or some other irregularity in connection with the
acceptance of the Exchange Offer exists, you will endeavor to inform the
presenters of the need for fulfillment of all requirements and to take any other
action as may be necessary or advisable to cause such irregularity to be
corrected.
3. With the approval of the President, Senior Vice President,
Executive Vice President, or any Vice President of the Company, or of counsel to
the Company (such approval, if given orally, to be confirmed in writing) or any
other party designated by such an officer, you are authorized to waive any
irregularities in connection with any tender of shares of Series K Preferred
Stock pursuant to the Exchange Offer.
4. Tenders of shares of Series K Preferred Stock may be made
only as set forth in the Letter of Transmittal and in the section of the
Prospectus captioned "The Exchange Offer -- Procedures for Tendering Series K
Preferred Stock," and shares of Series K Preferred Stock shall be considered
properly tendered to you only when tendered in accordance with the procedures
set forth therein.
Notwithstanding the provisions of this paragraph 4, shares of
Series K Preferred Stock that the President, Senior Vice President, Executive
Vice President, or any Vice President of the Company shall approve as having
been properly tendered shall be considered to be properly tendered.
5. You shall advise the Company with respect to any shares of
Series K Preferred Stock received subsequent to the Expiration Date and accept
its instructions with respect to disposition of such shares of Series K
Preferred Stock.
<PAGE>
<PAGE>
3
6. You shall accept tenders:
(a) in cases where the shares of Series K Preferred Stock
are registered in two or more names only if signed by all named holders;
(b) in cases where the signing person (as indicated on the
Letter of Transmittal) is acting in a fiduciary or a representative capacity
only when proper evidence of his or her authority so to act is submitted; and
(c) from persons other than the registered holder of
shares of Series K Preferred Stock provided that customary transfer
requirements, including payment of any applicable transfer taxes, have been
satisfied.
You shall accept partial tenders of shares of Series K
Preferred Stock where so indicated and as permitted in the Letter of Transmittal
and deliver certificates representing shares of Series K Preferred Stock to the
transfer agent for split-up and return any untendered shares of Series K
Preferred Stock to the holder (or such other person as may be designated in the
Letter of Transmittal) as promptly as practicable.
7. The Company will exchange shares of Series K Preferred
Stock duly tendered for shares of Series M Preferred Stock on the terms and
subject to the conditions set forth in the Prospectus and the Letter of
Transmittal. Delivery of shares of Series M Preferred Stock will be made on
behalf of the Company by you at the rate of one share of Series M Preferred
Stock for each share of Series K Preferred Stock tendered as soon as practicable
after notice (such notice if given orally, to be confirmed in writing) of
acceptance of said shares of Series K Preferred Stock by the Company; provided,
however, that in all cases, shares of Series K Preferred Stock tendered pursuant
to the Exchange Offer will be exchanged only after timely receipt by you of
certificates representing such shares of Series K Preferred Stock, a properly
completed and duly executed Letter of Transmittal (or facsimile thereof) with
any required signature guarantees and any other required documents. Unless
otherwise instructed by the Company, you shall issue only whole shares of Series
M Preferred Stock.
8. Tenders pursuant to the Exchange Offer are irrevocable,
except that, subject to the terms and upon the conditions set forth in the
Prospectus and the Letter of Transmittal, shares of Series K Preferred Stock
tendered pursuant to the Exchange Offer may be withdrawn at any time prior to
the Expiration Date.
9. The Company shall not be required to exchange any shares of
Series K Preferred Stock tendered if any of the conditions set forth in the
Exchange Offer are not met. Notice of any decision by the Company not to
exchange any shares of Series K Preferred Stock tendered shall be given (and
confirmed in writing) by the Company to you.
<PAGE>
<PAGE>
4
10. If, pursuant to the Exchange Offer, the Company does not
accept for exchange all or part of the shares of Series K Preferred Stock
tendered because of an invalid tender, the occurrence of certain other events
set forth in the Prospectus under the caption "The Exchange Offer -- Certain
Conditions to the Exchange Offer" or otherwise, you shall as soon as practicable
after the expiration or termination of the Exchange Offer return those
certificates representing unaccepted shares of Series K Preferred Stock (or
effect appropriate book-entry transfer), together with any related required
documents and the Letters of Transmittal relating thereto that are in your
possession, to the persons who deposited them.
11. All certificates representing reissued shares of Series K
Preferred Stock, unaccepted shares of Series K Preferred Stock or shares of
Series M Preferred Stock shall be forwarded by (a) first-class certified mail,
return receipt requested under a blanket surety bond protecting you and the
Company from loss or liability arising out of the non-receipt or non-delivery of
such certificates or (b) by registered mail insured separately for the
replacement value of each of such certificates.
12. You are not authorized to pay or offer to pay any
concessions, commissions or solicitation fees to any broker, dealer, bank or
other persons or to engage or utilize any person to solicit tenders.
13. As Exchange Agent hereunder you:
(a) shall have no duties or obligations other than those
specifically set forth herein or as may be subsequently agreed to in writing by
you and the Company;
(b) will be regarded as making no representations and
having no responsibilities as to the validity, sufficiency, value or genuineness
of any of the certificates or the shares of Series K Preferred Stock represented
thereby deposited with you pursuant to the Exchange Offer, and will not be
required to and will make no representation as to the validity, value or
genuineness of the Exchange Offer; provided, however, that in no way will your
general duty to act in good faith be discharged by the foregoing;
(c) shall not be obligated to take any legal action
hereunder which might in your reasonable judgment involve any expense or
liability, unless you shall have been furnished with reasonable indemnity;
(d) may reasonably rely on and shall be protected in
acting in reliance upon any certificate, instrument, opinion, notice, letter,
telegram or other document or security delivered to you and reasonably believed
by you to be genuine and to have been signed by the proper party or parties;
<PAGE>
<PAGE>
5
(e) may reasonably act upon any tender, statement,
request, comment, agreement or other instrument whatsoever not only as to its
due execution and validity and effectiveness of its provisions, but also as to
the truth and accuracy of any information contained therein, which you shall in
good faith believe to be genuine or to have been signed or represented by a
proper person or persons;
(f) may rely on and shall be protected in acting upon
written or oral instructions from any officer of the Company;
(g) may consult with your counsel with respect to any
questions relating to your duties and responsibilities and the written opinion
of such counsel shall be full and complete authorization and protection in
respect of any action taken, suffered or omitted to be taken by you hereunder in
good faith and in accordance with the written opinion of such counsel; and
(h) shall not advise any person tendering shares of Series
K Preferred Stock pursuant to the Exchange Offer as to the wisdom of making such
tender or as to the market value or decline or appreciation in market value of
any shares of Series K Preferred Stock.
14. You shall take such action as may from time to time be
requested by the Company (and such other action as you may reasonably deem
appropriate) to furnish copies of the Prospectus, Letter of Transmittal and the
Notice of Guaranteed Delivery or such other forms as may be approved from time
to time by the Company, to all persons requesting such documents and to accept
and comply with telephone requests for information relating to the Exchange
Offer, provided that such information shall relate only to the procedures for
accepting (or withdrawing from) the Exchange Offer. The Company will furnish you
with copies of such documents at your request.
15. You shall advise by cable, telex, facsimile transmission
or telephone, and promptly thereafter confirm in writing to the Company and such
other person or persons as it may request, daily (and more frequently during the
week immediately preceding the Expiration Date and if otherwise requested) up to
and including the Expiration Date, as to the number of shares of Series K
Preferred Stock that have been tendered pursuant to the Exchange Offer and the
items received by you pursuant to this Agreement, separately reporting and
giving cumulative totals as to items properly received and items improperly
received. In addition, you will also inform, and cooperate in making available
to, the Company or any such other person or persons upon oral request made from
time to time prior to the Expiration Date such other information as it or he
reasonably requests. Such cooperation shall include, without limitation, the
granting by you to the Company and such person as the Company may request of
access to those persons on your staff who are responsible for receiving tenders,
in order to ensure that immediately prior to the Expiration Date the Company
shall have received information in sufficient detail to
<PAGE>
<PAGE>
6
enable it to decide whether to extend the Exchange Offer. You shall prepare a
final list of all persons whose tenders were accepted, the aggregate number of
shares of Series K Preferred Stock tendered, the aggregate number of shares of
Series K Preferred Stock accepted and deliver said list to the Company.
16. Letters of Transmittal and Notices of Guaranteed Delivery
shall be stamped by you as to the date and the time of receipt thereof and shall
be preserved by you for a period of time at least equal to the period of time
you preserve other records pertaining to the transfer of securities. You shall
dispose of unused Letters of Transmittal and other surplus materials by
returning them to the Company.
17. You hereby expressly waive any lien, encumbrance or right
of set-off whatsoever that you may have with respect to funds deposited with you
for the payment of transfer taxes by reasons of amounts, if any, borrowed by the
Company, or any of its subsidiaries or affiliates pursuant to any loan or credit
agreement with you or for compensation owed to you hereunder.
18. For services rendered as Exchange Agent hereunder, you
shall be entitled to such compensation as set forth on Schedule I attached
hereto.
19. You hereby acknowledge receipt of the Prospectus and the
Letter of Transmittal and further acknowledge that you have examined each of
them. Any inconsistency between this Agreement, on the one hand, and the
Prospectus and the Letter of Transmittal (as they may be amended from time to
time), on the other hand, shall be resolved in favor of the latter two
documents, except with respect to the duties, liabilities and indemnification of
you as Exchange Agent which shall be controlled by this Agreement.
20. The Company covenants and agrees to indemnify and hold you
in your capacity as Exchange Agent hereunder harmless against any loss,
liability, cost or expense, including reasonable attorneys' fees arising out of
or in connection with any act, omission, delay or refusal made by you in
reasonable reliance upon any signature, endorsement, assignment, certificate,
order, request, notice, instruction or other instrument or document reasonably
believed by you to be valid, genuine and sufficient and in accepting any tender
or effecting any transfer of shares of Series K Preferred Stock reasonably
believed by you in good faith to be authorized, and in delaying or refusing in
good faith to accept any tenders or effect any transfer of shares of Series K
Preferred Stock; provided, however, that the Company shall not be liable for
indemnification or otherwise for any loss, liability, cost or expense to the
extent arising out of your gross negligence, willful misconduct or bad faith. In
no case shall the Company be liable under this indemnity with respect to any
claim against you unless the Company shall be notified by you, by letter or
cable or by telex confirmed by letter, of the written assertion of a claim
against you or of any other action commenced against you, promptly after you
shall have received any such written assertion or shall have been served with a
summons in connection therewith.
<PAGE>
<PAGE>
7
In addition, the Company shall not be liable for any loss, liability, cost or
expense resulting from a settlement entered into without its consent. The
Company shall be entitled to participate at its own expense in the defense of
any such claim or other action, and, if the Company so elects, the Company shall
assume the defense of any suit brought to enforce any such claim. In the event
that the Company shall assume the defense of any such suit, the Company shall
not be liable for the fees and expenses of any additional counsel thereafter
retained by you, so long as the Company shall retain counsel reasonably
satisfactory to you to defend such suit.
21. You shall arrange to comply with all requirements under
the tax laws of the United States, including those relating to missing Tax
Identification Numbers, and shall file any appropriate reports with the Internal
Revenue Service. The Company understands that you are required to deduct 31% on
payments to holders who have not supplied their correct Taxpayer Identification
Number or required certification. Such funds will be turned over to the Internal
Revenue Service.
22. You shall deliver or cause to be delivered, in a timely
manner to each governmental authority to which any transfer taxes are payable in
respect of the exchange of shares of Series K Preferred Stock, your check in the
amount of all transfer taxes so payable, and the Company shall reimburse you for
the amount of any and all transfer taxes payable in respect of the exchange of
shares of Series K Preferred Stock; provided, however, that you shall reimburse
the Company for amounts refunded to you in respect of your payment of any such
transfer taxes, at such time as such refund is received by you.
23. This Agreement and your appointment as Exchange Agent
hereunder shall be construed and enforced in accordance with the laws of the
State of New York applicable to agreements made and to be performed entirely
within such state, and shall inure to the benefit of, and the obligations
created hereby shall be binding upon, the successors and assigns of each of the
parties hereto. This Agreement may not be modified orally.
24. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original and all of which
taken together shall constitute one and the same agreement.
25. In case any provision of this Agreement shall be invalid,
illegal or unenforceable, the validity, legality and enforceability of the
remaining provisions shall not in any way be affected or impaired thereby.
26. This Agreement shall not be deemed or construed to be
modified, amended, rescinded, cancelled or waived, in whole or in part, except
by a written instrument signed by a duly authorized representative of the party
to be charged.
<PAGE>
<PAGE>
8
27. Unless otherwise provided herein, all notices, requests
and other communications to any party hereunder shall be in writing (including
telecopy or similar writing) and shall be given to such party, addressed to it,
at its address or telecopy number set forth below:
If to the Company:
Time Warner Inc.
75 Rockefeller Plaza
New York, New York 10019
Facsimile: (212) 956-7281
Attention: General Counsel
If to the Exchange Agent:
[Chemical]
28. Unless terminated earlier by the parties hereto, this
Agreement shall terminate 90 days following the Expiration Date. Upon any
termination of this Agreement, you shall promptly deliver to the Company any
certificates, funds or property then held by you as Exchange Agent under this
Agreement.
29. This Agreement shall be binding and effective as of the
date hereof.
<PAGE>
<PAGE>
9
Please acknowledge receipt of this Agreement and confirm the
arrangements herein provided by signing and returning the enclosed copy.
TIME WARNER INC.
By:___________________________
Name:
Title:
Accepted as of the date first above written.
[CHEMICAL]
By:________________________
Name:
Title:
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