Exhibit 4.1
SECOND SUPPLEMENTAL INDENTURE (this
"Second Supplemental Indenture") dated as of
October 10, 1996, among TIME WARNER INC., a
Delaware corporation (the "Company"), TW INC.,
a Delaware corporation (the "Guarantor"), and
THE CHASE MANHATTAN BANK (formerly known
as Chemical Bank), a New York banking corporation,
as trustee (the "Trustee").
WHEREAS the Company has executed and delivered to the
Trustee an Indenture (the "Senior Indenture"), dated as of
January 15, 1993, providing for the issuance and sale by the
Company from time to time of its senior debt securities (the
"Securities"), which term shall include any Securities issued
under the Senior Indenture after the date hereof;
WHEREAS the Company proposes in and by this Second
Supplemental Indenture to supplement and amend the Senior
Indenture in certain respects as it applies to Securities issued
thereunder;
WHEREAS pursuant to an Amended and Restated Agreement
and Plan of Merger, dated as of September 22, 1995, as amended,
among the Guarantor, the Company, Turner Broadcasting System,
Inc. ("TBS"), Time Warner Acquisition Corp. and TW Acquisition
Corp., the Company and TBS will each merge with wholly owned
subsidiaries of the Guarantor (the "Mergers");
WHEREAS Section 901(5) of the Senior Indenture permits
the Company, when authorized by a resolution of the Board of
Directors of the Company, and the Trustee, at any time and from
time to time, to enter into one or more indentures supplemental
to the Senior Indenture, in form satisfactory to the Trustee, for
the purpose of adding to the rights of the Holders of the
Securities;
WHEREAS the Guarantor desires to unconditionally and
irrevocably guarantee the full and punctual payment of principal
of and interest on the Securities when due, whether at maturity,
by acceleration, by redemption or otherwise, and all other
monetary obligations of the Company under the Senior Indenture
(including obligations to the Trustee) and the Securities, and
the full and punctual performance within applicable grace periods
of all other
obligations of the Company under the Senior Indenture and the
Securities;
WHEREAS the Guarantor desires to execute and deliver
this Second Supplemental Indenture in accordance with Article
Twelve of the First Supplemental Indenture dated as of June 15,
1993 (the "LYONs Supplemental Indenture"), between the Company
and the Trustee, pursuant to which the Company issued Liquid
Yield Option Notes due 2013 ("LYONs"), to provide, among other
things, that common stock of the Guarantor shall be deliverable
upon conversion of the LYONs and may be deliverable upon
redemption of the LYONs; and
WHEREAS the Company and the Guarantor have requested
that the Trustee execute and deliver this Second Supplemental
Indenture and all requirements necessary to make this Second
Supplemental Indenture a valid instrument in accordance with its
terms and to make the guarantee provided for herein the valid
obligation of the Guarantor, and the execution and delivery of
this Second Supplemental Indenture has been duly authorized in
all respects.
NOW THEREFORE, the Company, the Guarantor and the
Trustee hereby agree that the following Sections of this Second
Supplemental Indenture supplement the Senior Indenture and the
LYONs Supplemental Indenture, as applicable, with respect to
Securities issued thereunder:
SECTION 1. Definitions. (a) Capitalized terms used
herein and not defined herein have the meanings ascribed to such
terms in the Senior Indenture and the LYONs Indenture.
(b) Article One, Section 101, of the Senior Indenture
and the LYONs Supplemental Indenture is hereby supplemented,
solely with respect to the LYONs, to amend the definition of
"Common Stock" to read in its entirety as follows:
"Common Stock" means the common stock, par value
$.01 per share, of the Guarantor.
SECTION 2. The Guarantee. (a) The Guarantor
irrevocably and unconditionally guarantees (the "Guarantee"), to
each Holder of Securities (including each
Holder of Securities issued under the Senior Indenture after the
date of this Second Supplemental Indenture) and to the Trustee
and its successors and assigns, (i) the full and punctual payment
of principal of and interest on the Securities when due, whether
at maturity, by acceleration, by redemption or otherwise, and all
other monetary obligations of the Company under the Senior
Indenture (including obligations to the Trustee) and the
Securities and (ii) the full and punctual performance within
applicable grace periods of all other obligations of the Company
under the Senior Indenture and the Securities.
(b) The Guarantor further agrees that the Guarantee
constitutes a guarantee of payment, performance and compliance
and not merely of collection.
(c) The obligation of the Guarantor to make any
payment hereunder may be satisfied by causing the Company to make
such payment.
(d) The Guarantor also agrees to pay any and all costs
and expenses (including reasonable attorneys' fees) incurred by
the Trustee or any Holder of Securities in enforcing any of their
respective rights under the Guarantee.
SECTION 3. Amendments to the LYONs Supplemental
Indenture. (a) Paragraph (d)(vi) of Section 1110 of Article
Eleven of the Senior Indenture is hereby amended, solely with
respect to the LYONs Supplemental Indenture and the LYONs, to
read in its entirety as follows:
"(iv) the receipt by the Trustee of an
Officers' Certificate and an Opinion of Counsel each
stating that the terms of the delivery of the Common
Stock are in conformity with this Indenture and that
the shares of Common Stock to be issued by the
Guarantor in payment of the Purchase Price in respect
of LYONs have been duly authorized and, when issued and
delivered pursuant to the terms of this Indenture in
payment of the Purchase Price in respect of the LYONs,
will be validly issued, fully paid and nonassessable
and shall be free of any preemptive rights and any lien
or adverse claim (provided that such Opinion of Counsel
may state that, insofar as it relates to the absence of
such preemptive rights, liens and adverse claims, it is
given upon the best knowledge of such counsel), and, in
the case of such Officers' Certificate, that conditions
(i), (ii) and (iii) above have been satisfied and, in the
case of such Opinion of Counsel, that the
conditions set forth in clauses (ii) and (iii) above
have been satisfied."
(b) Paragraph (f) of Section 1110 of Article Eleven of
the Senior Indenture is hereby amended, solely with respect to
the LYONs Supplemental Indenture and the LYONs, to read in its
entirety as follows:
"(f) Covenants of the Guarantor. The
Guarantor hereby warrants that all shares of Common
Stock delivered in payment, in whole or in part, of the
Purchase Price upon purchase of a LYON pursuant to this
Section 1110 shall be newly issued shares or treasury
shares, shall be duly and validly issued, fully paid
and nonassessable and shall be free from preemptive
rights and free of any lien or adverse claim.
The Guarantor shall use its best efforts to
list or cause to have quoted any shares of Common Stock
to be issued pursuant to this Section 1110 on the
principal national securities exchange or over-the-counter
or other domestic market on which any other
shares of the Common Stock are then listed or quoted.
The Guarantor will promptly inform the Trustee in
writing of any such listing."
(c) Article Twelve of the Senior Indenture is hereby
amended, solely with respect to the LYONs Supplemental Indenture
and the LYONs, to read in its entirety as follows:
"ARTICLE VIII
Conversion
Article Twelve of the Senior Indenture is
hereby amended, solely with respect to a series of
Securities that consists of LYONs, to delete Sections
1201 through 1212 and to add in their place the
following Sections 1201 through 1219:
Section 1201. Conversion Privilege. A
Holder of a LYON may convert such LYON into Common
Stock at any time during the period stated in paragraph
7 of the LYONs. The number of shares of Common Stock
issuable upon conversion of a LYON per $1,000 of
Principal Amount at Maturity thereof (the "Conversion
Rate") shall be that set forth in paragraph 7 of the
LYONs as the same may have been adjusted (i) for events
occurring prior to the effective time of the Mergers,
with respect to the common stock of the Company into
which the LYONs were convertible prior to such
effective time and (ii) for events occurring after the
effective time of the Mergers, with respect to the
Common Stock as set forth herein.
A Holder may convert a portion of the
Principal Amount of a LYON if the portion is $1,000 or
an integral multiple of $1,000. Provisions of this
Indenture that apply to conversion of all of a LYON
also apply to conversion of a portion of a LYON.
LYONs in respect of which a Purchase Notice
or Change in Control Purchase Notice, as the case may
be, has been given by the Holder thereof may not be
converted pursuant to this Article Twelve on or after
the date of the delivery of such Purchase Notice or
Change in Control Purchase Notice, as the case may be,
unless such Purchase Notice or Change in Control
Purchase Notice, as the case may be, has first been
validly withdrawn and, in any event, the right to
convert a LYON pursuant to this Article Twelve lapses,
upon purchase of such LYON by the Company (including
pursuant to any purchase or redemption pursuant to
Article Eleven).
Section 1202. Conversion Procedure. (a) To
convert a LYON a Holder must satisfy the requirements
in paragraph 7 of the LYONs. The date on which the
Holder satisfies all those requirements is the
conversion date (the "Conversion Date"). The Company
shall deliver to the Holder no later than the seventh
Business Day following the Conversion Date, through the
Conversion Agent, a certificate for the number of
shares of Common Stock issuable upon the conversion and
cash in lieu of any fractional share determined
pursuant to Section 1203.
Delivery of such certificate and delivery of
any check for any cash in lieu of fractional interests
therein may be delayed for a reasonable time at the
request of the Company in order to effectuate the
calculation of adjustments of the Conversion Rate
pursuant to this Article Twelve. If, between any
Conversion Date and the related date of delivery of
shares of Common Stock, such shares shall cease to have
any or certain rights, the Holder entitled to receive
such shares shall be entitled only to receive such
shares as so modified and any proceeds received thereon
on or after such Conversion Date, and the Company, the
Trustee and the Conversion Agent shall not be otherwise
liable with respect to the modification, from such
Conversion Date to the date of such delivery, of such
shares of Common Stock.
The Person entitled to receive Common Stock
issuable upon conversion shall be treated as a
stockholder of record of the Guarantor on and after the
Conversion Date; provided, however, that no surrender
of a LYON on any date when the stock transfer books of
the Guarantor shall be closed shall be effective to
constitute the Person or Persons entitled to receive
the shares of Common Stock upon such conversion as the
record holder or holders of such shares of Common Stock
on such date, but such surrender shall be effective to
constitute the Person or Persons entitled to receive
such shares of Common Stock as the record holder or
holders thereof for all purposes at the close of
business on the next succeeding day on which such stock
transfer books are open; provided, further, however,
that such conversion shall be at the Conversion Rate in
effect on the date that such LYON shall have been
surrendered for conversion, as if the stock transfer
books of the Guarantor had not been closed. Upon
conversion of a LYON, such Person shall no longer be a
Holder of such LYON.
No payment or adjustment will be made for
dividends on, or other distributions with respect to,
any Common Stock except as provided in this Article
Twelve. On conversion of a LYON, that portion of
accrued OID attributable to the period from the Issue
Date of the LYON through the Conversion Date with
respect to the converted LYON shall not be cancelled,
extinguished or forfeited, but rather shall be deemed
to be paid in full to the Holder thereof through
delivery of the Common Stock (together with the cash
payment, if any, in lieu of fractional shares) in
exchange for the LYON being converted pursuant to the
provisions hereof.
If the Holder converts more than one LYON at
the same time, the number of shares of Common Stock
issuable upon the conversion shall be computed based on
the total Principal Amount at Maturity of the LYONs
converted.
Upon surrender of a LYON that is converted in
part, the Company shall execute, and the Trustee shall
authenticate and deliver to the Holder, a new LYON in
an authorized denomination equal in Principal Amount at
Maturity to the unconverted portion of the LYON
surrendered.
If the last day on which a LYON may be
converted is not a Business Day in a place where the
Conversion Agent is located, the LYON may be
surrendered to such Conversion Agent on the next
succeeding day that is a Business Day.
(b) Notwithstanding anything to the contrary
contained herein, in the event the Company shall have
rescinded a redemption of LYONs pursuant to Section
1109 hereof, any Holder of LYONs that shall have
surrendered LYONs for conversion following the day on
which notice of the subsequently rescinded redemption
shall have been given but prior to the date of the
mailing of the notice of rescission required by Section
1109 hereof (a "Converting Holder") may rescind the
conversion of such LYONs surrendered for conversion by
(i) properly completing a form prescribed by the
Company and mailed to Holders of LYONs (including
Converting Holders) with the Company's notice of
rescission, which form shall provide for the
certification by any Converting Holder rescinding a
conversion on behalf of any beneficial owner (within
the meaning of Rule 13d-3 under the Exchange Act) of
LYONs that the beneficial ownership (within the meaning
of such Rule) of such LYONs shall not have changed from
the date on which such LYONs were surrendered for
conversion to the date of such certification and (ii)
delivering such form to the Company no later than the
close of business on that date which is fifteen Trading
Days following the date of the mailing of the Company's
notice of rescission. The delivery of such form by a
Converting Holder shall be accompanied by (x) any
certificates representing shares of Common Stock issued
to such Converting Holder upon a conversion of LYONs
that shall be rescinded by the proper delivery of such
form (the "Surrendered Common Stock"), (y) any
securities, evidences of indebtedness or assets (other
than cash) distributed by the Guarantor to such
Converting Holder by reason of such Converting Holder
being a record holder of Surrendered Common Stock and
(z) payment in New York Clearing House funds or other
funds acceptable to the Company of an amount equal to
the sum of (I) any cash such Converting Holder may have
received in lieu of the issuance of fractional
Surrendered Common Stock and (II) any cash paid or
payable by the Guarantor to such Converting Holder by
reason of such Converting Holder being a record holder
of Surrendered Common Stock. Upon receipt by the
Company of any such form properly completed by a
Converting Holder and any certificates, securities,
evidences of indebtedness, assets or cash payments
required to be returned by such Converting Holder to
the Company as set forth above, the Guarantor shall
instruct the transfer agent or agents for shares of
Common Stock or other securities to cancel any
certificates representing Surrendered Common Stock
(which Surrendered Common Stock shall be deposited in
the treasury of the Guarantor) and the Company shall
instruct the Security Registrar to reissue certificates
representing LYONs to such Converting Holder (which
LYONs shall be deemed to have been Outstanding at all
times during the period following their surrender for
conversion). The Company shall, as promptly as
practicable, and in no event more than five Trading
Days following the receipt of any such properly
completed form and any such certificates, securities,
evidences of indebtedness, assets or cash payments
required to be so returned, pay to the Holder of LYONs
surrendered to the Company pursuant to a rescinded
conversion or as otherwise directed by such Holder any
interest paid or other payment made to Holders of LYONs
during the period from the time such LYONs shall have
been surrendered for conversion to the rescission of
such conversion. All questions as to the validity,
form, eligibility (including time of receipt) and
acceptance of any form submitted to the Company to
rescind the conversion of LYONs, including questions as
to the proper completion or execution of any such form
or any certification contained therein, shall be
resolved by the Company, whose determination shall be
final and binding.
Section 1203. Fractional Shares. The
Guarantor will not deliver a fractional share of Common
Stock upon conversion of a LYON. Instead, the Company
will deliver cash for the current market value of the
fractional share. The current market value of a
fractional share shall be determined to the nearest
1/1,000th of a share by multiplying the Sale Price on
the last Trading Day prior to the Conversion Date of a
full share by the fractional amount and rounding the
product to the nearest whole cent.
Section 1204. Taxes on Conversion. If a
Holder converts a LYON, the Company shall pay any
documentary, stamp or similar issue or transfer tax due
on the issue of shares of Common Stock upon such
conversion. However, the Holder shall pay any such tax
which is due because the Holder requests the shares to
be issued in a name other than the Holder's name. The
Conversion Agent may refuse to deliver the certificates
representing the Common Stock being issued in a name
other than the Holder's name until the Conversion Agent
receives a sum sufficient to pay any tax which will be
due because the shares are to be issued in a name other
than the Holder's name. Nothing herein shall preclude
any tax withholding required by law or regulations.
Section 1205. Guarantor to Provide Stock.
The Guarantor shall, from time to time as may be
necessary, reserve out of its authorized but unissued
Common Stock a sufficient number of shares of Common
Stock to permit the conversion of the LYONs for shares
of Common Stock.
All shares of Common Stock delivered upon
conversion of the LYONs shall be newly issued shares or
treasury shares, shall be duly and validly issued and
fully paid and nonassessable and shall be free from
preemptive rights and free of any lien or adverse
claim.
The Guarantor will endeavor promptly to
comply with all Federal and state securities laws
regulating the offer and delivery of shares of Common
Stock upon conversion of LYONs, if any, and will list
or cause to have quoted such shares of Common Stock on
each national securities exchange or in the over-the-counter
market or such other market on which the Common
Stock is then listed or quoted. The Guarantor will
promptly inform the Trustee of any such listing.
Section 1206. Adjustment for Change in
Capital Stock. If, after the Issue Date, the
Guarantor:
(1) pays a dividend or makes a distribution
on its Common Stock in shares of its Common Stock;
(2) subdivides its outstanding shares of
Common Stock into a greater number of shares;
(3) combines its outstanding shares of Common
Stock into a smaller number of shares;
(4) pays a dividend or makes a distribution
on its Common Stock in shares of its Capital Stock
(other than Common Stock or rights, warrants or
options for its Capital Stock); or
(5) issues by reclassification of its Common
Stock any shares of its Capital Stock (other than
rights, warrants or options for its Capital
Stock),
then the conversion privilege and the Conversion Rate
in effect immediately prior to such action shall be
adjusted so that the Holder of a LYON thereafter
converted may receive the number of shares or other
units of Capital Stock of the Guarantor which such
Holder would have owned immediately following such
action if such Holder had converted the LYON
immediately prior to such action.
The adjustment shall become effective
retroactively immediately after the record date in the
case of a dividend or distribution and immediately
after the effective date in the case of a subdivision,
combination or reclassification.
If after an adjustment a Holder of a LYON
upon conversion of such LYON may receive shares or
other units of two or more classes or series of Capital
Stock of the Guarantor, the Conversion Rate shall
thereafter be subject to adjustment upon the occurrence
of an action taken with respect to any such class or
series of Capital Stock as is contemplated by this
Article Twelve with respect to the Common Stock, on
terms comparable to those applicable to Common Stock in
this Article Twelve. For the purposes of this Section
1206, each Holder shall be deemed to have failed to
exercise any right to elect the kind or amount of
securities receivable upon the payment of any such
dividend, subdivision, combination, conversion or
reclassification (provided that if the kind or amount
of securities receivable upon such dividend,
subdivision, combination, conversion or
reclassification is not the same for each nonelecting
share or other unit, then the kind and amount of
property receivable upon such dividend, subdivision,
combination, conversion, reclassification,
consolidation, merger or share exchange for each
nonelecting share shall be deemed to be the kind and
amount so receivable per share or other unit by a
plurality of the nonelecting shares or other units).
Section 1207. Adjustment for Rights Issue.
If the Guarantor distributes any rights, warrants or
options to all holders of its Common Stock (excluding
dividends for which adjustment is made pursuant to
Section 1206) entitling them, for a period expiring
within 60 days after the record date for such
distribution, to purchase shares of Common Stock at a
price per share less than the Sale Price as of the Time
of Determination, the Conversion Rate shall be adjusted
in accordance with the formula:
(O + N)
R' = R x O + (N x P)
M
where:
R' = the adjusted Conversion Rate.
R = the current Conversion Rate.
O = the number of shares of Common Stock
outstanding on the record date for the
distribution to which this Section 1207 is
being applied.
N = the number of additional shares of Common
Stock offered pursuant to such distribution.
P = the offering price per share of such
additional shares.
M = the Average Sale Price, minus, in the case of
(i) a distribution to which Section 1206(4)
applies or (ii) a distribution to which
Section 1208 applies, for which, in each
case, (x) the record date shall occur on or
before the record date for the distribution
to which this Section 1207 applies and (y)
the Ex-Dividend Time shall occur on or after
the date of the Time of Determination for the
distribution to which this Section 1207
applies, the fair market value (on the record
date for the distribution to which this
Section 1207 applies) of:
(1) the Capital Stock of the
Guarantor distributed in respect of each
share of Common Stock in such
Section 1206(4) distribution, and
(2) the assets of the Guarantor or
debt securities or any rights, warrants
or options to purchase securities of the
Guarantor distributed in respect of each
share of Common Stock in such
Section 1208 distribution.
The Board of Directors of the Guarantor shall determine
fair market values for the purposes of this Section 1207.
The adjustment shall become effective
immediately after the record date for the determination
of shareholders entitled to receive the rights,
warrants or options to which this Section 1207 applies.
If all the shares of Common Stock subject to such
rights, warrants or options have not been issued when
such rights, warrants or options expire, then the
Conversion Rate shall promptly be readjusted to the
Conversion Rate which would then be in effect had the
adjustment upon the issuance of such rights, warrants
or options been made on the basis of the actual number
of shares of Common Stock issued upon the exercise of
such rights, warrants or options.
No adjustment shall be made under this
Section 1207 if the application of the formula stated
above in this Section 1207 would result in a value of
R' that is equal to or less than the value of R.
Section 1208. Adjustment for Other
Distributions. If the Guarantor distributes to all
holders of its Common Stock any of its assets or debt
securities or any rights, warrants or options to
purchase securities of the Guarantor (including
securities or cash, but excluding (i) distributions of
Capital Stock referred to in Section 1206 and
distributions of rights, warrants or options referred
to in Section 1207 and (ii) cash dividends and
distributions, if any, paid from time to time by the
Guarantor that do not constitute Extraordinary Cash
Dividends), the Conversion Rate shall be adjusted,
subject to the provisions of the last paragraph of this
Section 1208, in accordance with the formula:
M
R' = R x M-F
where:
R' = the adjusted Conversion Rate.
R = the current Conversion Rate.
M = the Average Sale Price, minus, in the case of
a distribution to which Section 1206(4)
applies for which (i) the record date shall
occur on or before the record date for the
distribution to which this Section 1208
applies and (ii) the Ex-Dividend Time shall
occur on or after the date of the Time of
Determination for the distribution to which
this Section 1208 applies, the fair market
value (on the record date for the
distribution to which this Section 1208
applies) of any Capital Stock of the
Guarantor distributed in respect of each
share of Common Stock in such Section 1206(4)
distribution.
F = the fair market value (on the record date for
the distribution to which this Section 1208
applies) of the assets, securities, rights,
warrants or options to be distributed in
respect of each share of Common Stock in the
distribution to which this Section 1208 is
being applied (including, in the case of cash
dividends or other cash distributions giving
rise to an adjustment, all such cash
distributed concurrently).
The Board of Directors of the Guarantor shall determine
fair market values for the purpose of this Section
1208.
The adjustment shall become effective
immediately after the record date for the determination
of shareholders entitled to receive the distribution to
which this Section 1208 applies.
For purposes of this Section 1208, the term
"Extraordinary Cash Dividend" shall mean any cash
dividend with respect to the Common Stock the amount of
which, together with the aggregate amount of such cash
dividends on the Common Stock to be aggregated with
such cash dividend in accordance with the provisions of
this paragraph, equals or exceeds the threshold
percentages set forth in item (a) or (b) below:
(a) If, upon the date prior to the Ex-
Dividend Time with respect to a cash dividend on
the Common Stock, the aggregate amount of such
cash dividend together with the amounts of all
cash dividends on Common Stock with Ex-Dividend
Times occurring in the 85 consecutive day period
ending on the date prior to the Ex-Dividend Time
with respect to the cash dividend to which this
provision is being applied equals or exceeds on a
per share basis 12.5% of the average of the Sale
Prices during the period beginning on the date
after the first such Ex-Dividend Time in such
period and ending on the date prior to the Ex-
Dividend Time with respect to the cash dividend to
which this provision is being applied (except that
if no other cash dividend has had an Ex-Dividend
Time occurring in such period, the period for
calculating the average of the Sale Prices shall
be the period commencing 85 days prior to the date
prior to the Ex-Dividend Time with respect to the
cash dividend to which this provision is being
applied), such cash dividend together with each
other cash dividend with an Ex-Dividend Time
occurring in such 85 day period shall be deemed to
be an Extraordinary Cash Dividend and for purposes
of applying the formula set forth above in this
Section 1208, the value of "F" shall be equal to
(w) the aggregate amount of such cash dividend
together with the amounts of the other cash
dividends with Ex-Dividend Times occurring in such
period minus (x) the aggregate amount of such
other cash dividends with Ex-Dividend Times
occurring in such period for which a prior
adjustment in the Conversion Rate was previously
made under this Section 1208.
(b) If, upon the date prior to the Ex-
Dividend Time with respect to a cash dividend on
the Common Stock, the aggregate amount of such
cash dividend together with the amounts of all
cash dividends on Common Stock with Ex-Dividend
Times occurring in the 365 consecutive day period
ending on the date prior to the Ex-Dividend Time
with respect to the cash dividend to which this
provision is being applied equals or exceeds on a
per share basis 25% of the average of the Sale
Prices during the period beginning on the date
after the first such Ex-Dividend Time in such
period and ending on the date prior to the Ex-
Dividend Time with respect to the cash dividend to
which this provision is being applied (except that
if no other cash dividend has had an Ex-Dividend
Time occurring in such period, the period for
calculating the average of the Quoted Prices shall
be the period commencing 365 days prior to the
date prior to the Ex-Dividend Time with respect to
the cash dividend to which this provision is being
applied), such cash dividend together with each
other cash dividend with an Ex-Dividend Time
occurring in such 365-day period shall be deemed
to be an Extraordinary Cash Dividend and for
purposes of applying the formula set forth above
in this Section 1208, the value of "F" shall be
equal to (y) the aggregate amount of such cash
dividend together with the amounts of the other
cash dividends with Ex-Dividend Times occurring in
such period minus (z) the aggregate amount of such
other cash dividends with Ex-Dividend Times
occurring in such period for which a prior
adjustment in the Conversion Rate was previously
made under this Section 1208.
In making the determinations required by
items (a) and (b) above, the amount of cash
dividends paid on a per share basis and the
average of the Sale Prices, in each case during
the period specified in item (a) or (b) above, as
applicable, shall be appropriately adjusted to
reflect the occurrence during such period of any
event described in Section 1206.
In the event that, with respect to any
distribution to which this Section 1208 would otherwise
apply, "M" minus "F" as defined in the above formula is
less than $1.00 or "F" is equal to or greater than "M",
then the adjustment provided by this Section 1208 shall
not be made and in lieu thereof the provisions of
Section 1214 shall apply to such distribution.
Section 1209. When Adjustment May Be
Deferred. No adjustment in the Conversion Rate need be
made unless the adjustment would require an increase or
decrease of at least 1% (e.g., if the Conversion Rate
is 4, an increase or decrease of .04 (1% of 4)) in the
Conversion Rate. Any adjustments that are not made
shall be carried forward and taken into account in any
subsequent adjustment.
All calculations under this Article Twelve
shall be made to the nearest cent or to the nearest
1/1,000th of a share, as the case may be, with one-half
of a cent and 5/10,000ths of a share being rounded
upwards.
Section 1210. When No Adjustment Required.
No adjustment need be made for a transaction referred
to in Section 1206, 1207, 1208 or 1214 if Holders are
to participate in the transaction on a basis and with
notice that the Board of Directors of the Guarantor
determines to be fair and appropriate in light of the
basis and notice on which holders of Common Stock
participate in the transaction. Such participation by
Holders may include participation upon conversion
provided that an adjustment shall be made at such time
as the Holders are no longer entitled to participate.
No adjustment need be made for rights to
purchase Common Stock pursuant to a Guarantor plan for
reinvestment of dividends or interest.
No adjustment need be made for a change in
the par value or no par value of the Common Stock.
To the extent the LYONs become convertible
into cash pursuant to the terms of Section 1208 or
1214, no adjustment need be made thereafter as to the
cash. Interest will not accrue on the cash.
Notwithstanding any provision to the contrary
in this Indenture, no adjustment shall be made in the
Conversion Rate to the extent, but only to the extent,
such adjustment results in the following quotient being
less than the par value of the Common Stock: (i) the
Issue Price plus accrued Original Issue Discount as of
the date such adjustment would otherwise be effective
divided by (ii) the Conversion Rate as so adjusted.
Section 1211. Notice of Adjustment.
Whenever the Conversion Rate is adjusted, the Guarantor
shall file with the Trustee and the Conversion Agent a
notice of such adjustment and a certificate from the
Guarantor's independent public accountants briefly
stating the facts requiring the adjustment and the
manner of computing it. The Conversion Agent will
promptly mail such notice to Holders of LYONs at the
Company's expense. The certificate shall be conclusive
evidence that the adjustment is correct. Neither the
Trustee nor any Conversion Agent shall be under any
duty or responsibility with respect to any such
certificate except to exhibit the same to any Holder
desiring inspection thereof.
Section 1212. Voluntary Increase. The
Company from time to time may increase the Conversion
Rate by any amount and for any period of time (provided
that such period is not less than 20 Business Days).
Whenever the Conversion Rate is increased, the Company
shall mail to Holders and file with the Trustee and the
Conversion Agent a notice of the increase. The Company
shall mail the notice at least 15 days before the date
the increased Conversion Rate takes effect. The notice
shall state the increased Conversion Rate and the
period it will be in effect.
A voluntary increase of the Conversion Rate
does not change or adjust the Conversion Rate otherwise
in effect for purposes of Section 1206, 1207 or 1208.
Section 1213. Notice of Certain
Transactions. If:
(1) the Company or the Guarantor takes any
action that would require an adjustment in the
Conversion Rate pursuant to Section 1206, 1207 or
1208 (unless no adjustment is to occur pursuant to
Section 1210); or
(2) the Company or the Guarantor takes any
action that would require a supplemental indenture
pursuant to Section 1214; or
(3) there is a liquidation or dissolution of
the Company or the Guarantor;
then the Company shall mail to Holders and file with
the Trustee and the Conversion Agent a notice stating
the proposed record date for a dividend or distribution
or the proposed effective date of a subdivision,
combination, reclassification, consolidation, merger,
binding share exchange, transfer, liquidation or
dissolution. The Company shall file and mail the
notice at least 15 days before such date. Failure to
file or mail the notice or any defect in it shall not
affect the validity of the transaction.
Section 1214. Reorganization of Guarantor;
Special Distributions. If the Guarantor is a party to
a transaction subject to Section 801 (other than a sale
of all or substantially all of the assets of the
Guarantor in a transaction in which the holders of
Common Stock immediately prior to such transaction do
not receive securities, cash or other assets of the
Guarantor or of any other person) or a merger or
binding share exchange which reclassifies or changes
its outstanding Common Stock, the Person obligated to
deliver securities, cash or other assets upon
conversion of LYONs shall enter into a supplemental
indenture. If the issuer of securities deliverable
upon conversion of LYONs is an Affiliate of the
successor Guarantor, that issuer shall join in the
supplemental indenture.
The supplemental indenture referred to above
shall provide that the Holder of a LYON may convert it
into the kind and amount of securities, cash or other
assets which such Holder would have received
immediately after the consolidation, merger, binding
share exchange or transfer if such Holder had converted
the LYON immediately before the effective date of the
transaction, assuming (to the extent applicable) that
such Holder (i) was not a constituent person or an
Affiliate of a constituent person to such transaction;
(ii) made no election with respect thereto; and (iii)
was treated alike with the plurality of non-electing
Holders. The supplemental indenture referred to above
shall provide for adjustments which shall be as nearly
equivalent as may be practical to the adjustments
provided for in this Article Twelve. The successor to
the Guarantor shall mail to Holders a notice briefly
describing the supplemental indenture.
If this Section applies, neither Section 1206
nor 1207 applies.
If the Guarantor makes a distribution to all
holders of its Common Stock of any of its assets, or
debt securities or any rights, warrants or options to
purchase securities of the Guarantor that, but for the
provisions of the last paragraph of Section 1208, would
otherwise result in an adjustment in the Conversion
Rate pursuant to the provisions of Section 1208, then,
from and after the record date for determining the
holders of Common Stock entitled to receive the
distribution, a Holder that converts a LYON in
accordance with the provisions of this Indenture shall
upon such conversion be entitled to receive in addition
to the shares of Common Stock into which the LYON is
convertible, the kind and amount of securities, cash or
other assets comprising the distribution that such
Holder would have received if such Holder had converted
the LYON immediately prior to the record date for
determining the holders of Common Stock entitled to
receive the distribution.
Section 1215. Guarantor Determination Final.
Any determination that the Guarantor or the Board of
Directors of the Guarantor makes pursuant to this
Article Twelve is conclusive.
Section 1216. Trustee's Adjustment
Disclaimer. The Trustee has no duty to determine when
an adjustment under this Article Twelve should be made,
how it should be made or what it should be. The
Trustee has no duty to determine whether a supplemental
indenture under Section 1214 need be entered into or
whether any provisions of any supplemental indenture
are correct. The Trustee shall not be accountable for
and makes no representation as to the validity or value
of any securities or assets issued upon conversion of
LYONs. The Trustee shall not be responsible for either
the Company's or the Guarantor's failure to comply with
this Article Twelve. Each Conversion Agent (other than
the Company or the Guarantor or an Affiliate of the
Company or the Guarantor) shall have the same
protection under this Section 1216 as the Trustee.
Section 1217. Simultaneous Adjustments. If
this Article Twelve requires adjustments to the
Conversion Rate under more than one of Section 1206(4),
1207 or 1208, and the record dates for the
distributions giving rise to such adjustments shall
occur on the same date, then such adjustments shall be
made by applying, first, the provisions of Section
1206, second, the provisions of Section 1208 and,
third, the provisions of Section 1207.
Section 1218. Successive Adjustments. After
an adjustment to the Conversion Rate under this Article
Twelve, any subsequent event requiring an adjustment
under this Article Twelve shall cause an adjustment to
the Conversion Rate as so adjusted.
Section 1219. Cancellation of Security.
Upon receipt by the Trustee of LYONs delivered to the
Conversion Agent for conversion under this Article
Twelve, the Trustee shall cancel and dispose of the
same as provided in Section 309."
SECTION 4. Conversion Rate. The Guarantor and the
Company hereby represent that no adjustment to the Conversion
Rate is required under Article Twelve as a result of the Merger.
SECTION 5. Reports. The Guarantor shall file with the
Trustee, and transmit to Holders, such information, documents and
other reports, and such summaries thereof, as may be required
pursuant to the Trust Indenture Act at the
times and in the manner provided pursuant to such Act; provided
that any such information, documents or reports required to be
filed with the Commission pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 shall be filed with the Trustee
within 15 days after the same is so required to be filed with the
Commission.
SECTION 6. This Second Supplemental Indenture. This
Second Supplemental Indenture shall be construed as supplemental
to the Senior Indenture and shall form a part of it, and the
Senior Indenture is hereby incorporated by reference herein and
each is hereby ratified, approved and confirmed.
SECTION 7. GOVERNING LAW. THIS SECOND SUPPLEMENTAL
INDENTURE SHALL BE GOVERNED AND CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF NEW YORK.
SECTION 8. Counterparts. This Second Supplemental
Indenture may be executed in two or more counterparts, each of
which shall constitute an original, but all of which when taken
together shall constitute but one instrument.
SECTION 9. Headings. The headings of this Second
Supplemental Indenture are for reference only and shall not limit
or otherwise affect the meaning hereof.
SECTION 10. Trustee Not Responsible for Recitals. The
recitals herein contained are made by the Company and the
Guarantor, and not by the Trustee, and the Trustee assumes no
responsibility for the correctness thereof. The Trustee shall
have no responsibility whatsoever for or in respect of the
validity or sufficiency of this Second Supplemental Indenture.
SECTION 11. Separability. In case any one or more of
the provisions contained in this Second Supplemental Indenture or
in the Securities shall for any reason be held to be invalid,
illegal or unenforceable in any respect, such invalidity,
illegality or unenforceability shall not affect any other
provisions of this Second Supplemental Indenture or of the
Securities, but this Second Supplemental Indenture and the
Securities shall be construed as if such invalid or illegal or
unenforceable provision had never been contained herein or
therein.
IN WITNESS WHEREOF, the parties hereto have caused this
Second Supplemental Indenture to be duly executed by their
respective authorized officers as of the date first written above.
TIME WARNER INC.,
by
Name: Thomas W. McEnerney
Title: Vice President
TW INC.,
by
Name: Thomas W. McEnerney
Title: Vice President
THE CHASE MANHATTAN BANK,
as Trustee,
by
Name: Richard Lorenzen
Title: Senior Trust Officer