[Draft--6/4/95]
AMENDED AND RESTATED DECLARATION OF TRUST
("Declaration"), dated as of [ ], 1995, by the
undersigned trustees (together with all other Persons
from time to time duly appointed and serving as
trustees in accordance with the provisions of this
Declaration, the "Trustees"), Time Warner Inc., a
Delaware corporation, as trust sponsor ("Time Warner"
or the "Sponsor"), and by the holders, from time to
time, of undivided beneficial interests in the assets
of the Trust to be issued pursuant to this
Declaration.
WHEREAS the Sponsor and the Trustees entered into a
Declaration of Trust dated as of June , 1995 (the "Original Declaration") in
order to establish a statutory business trust (the "Trust") under the Business
Trust Act (as hereinafter defined);
WHEREAS the Certificate of Trust (the "Certificate of Trust")
of the Trust was filed with the office of the Secretary of State of the State of
Delaware on June , 1995;
WHEREAS the Trustees and the Sponsor desire to continue the
Trust pursuant to the Business Trust Act for the sole purpose of, as described
more fully in Section 3.03 hereof, issuing and selling certain securities
representing undivided beneficial interests in the assets of the Trust and
investing the proceeds thereof in certain Subordinated Notes (as defined herein)
of Time Warner issued under the Indenture (as hereinafter defined); and
WHEREAS, as of the date hereof, no interests in
the Trust have been issued; and
WHEREAS all of the Trustees and the Sponsor, by this
Declaration, amend and restate each and every term and provision of the Original
Declaration.
NOW, THEREFORE, it being the intention of the parties hereto
that the Trust constitute a business trust under the Business Trust Act, that
the Original Declaration be amended and restated in its entirety as provided
herein and that this Declaration constitute the governing
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instrument of such business trust, the Trustees declare that all assets
contributed to or purchased by the Trust will be held in trust for the benefit
of the holders from time to time, of the securities representing undivided
beneficial interests in the assets of the Trust issued hereunder, subject to the
provisions of this Declaration.
ARTICLE I
Definitions
SECTION 1.01. Terms Generally. (a) The definitions in Section
1.02 shall apply equally to both the singular and plural forms of the terms
defined. Whenever the context may require any pronoun shall include the
corresponding masculine, feminine and neuter forms. The words "include",
"includes" and "including" shall be deemed to be followed by the phrase "without
limitation". All references herein to Articles, Sections, Exhibits and Annexes
shall be deemed references to Articles and Sections of, and Exhibits and Annexes
to this Declaration unless the context shall otherwise require. Except as
otherwise expressly provided herein, any reference in this Declaration to any
other document shall mean such document as amended, restated, supplemented or
otherwise modified from time to time.
(b) Capitalized terms used in this Declaration but not defined
in the preamble above have the respective meanings assigned to them in Section
1.02.
(c) A term defined anywhere in this Declaration
has the same meaning throughout.
SECTION 1.02. Definitions. As used in this
Declaration, the following terms have the meanings specified
below:
"Affiliate" has the same meaning as given to that term in Rule
405 of the Trust Securities Act or any successor rule thereunder.
"Appointment Event" means an event defined in the terms of the
Preferred Securities set forth in Exhibit B which entitles the Holders of a
Majority in Liquidation Amount of the Preferred Securities to appoint a Special
Regular Trustee.
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"Book Entry Interest" means a beneficial interest in a
Certificate registered in the name of a Clearing Agency or a nominee thereof,
ownership and transfers of which shall be maintained and made through book
entries by such Clearing Agency as described in Section 9.04.
"Business Day" means any day other than a day on which banking
institutions in New York, New York are authorized or required by law to close.
"Business Trust Act" means Chapter 38 of Title 12
of the Delaware Code, 12 Del. C. ss. 3801 et seq., as it may
be amended from time to time.
"Certificate" means a Common Security Certificate
or a Preferred Security Certificate.
"Clearing Agency" means an organization registered as a
"Clearing Agency" pursuant to Section 17A of the Exchange Act that is acting as
depository for the Preferred Securities and in whose name or in the name of a
nominee of that organization, shall be registered a Global Certificate and which
shall undertake to effect book entry transfers and pledges of the Preferred
Securities.
"Clearing Agency Participant" means a broker, dealer, bank,
other financial institution or other Person for whom from time to time the
Clearing Agency effects book entry transfers and pledges of securities deposited
with the Clearing Agency.
"Closing Date" means July , 1995.
"Code" means the Internal Revenue Code of 1986, as amended
from time to time or any successor legislation. A reference to a specific
section ((Sec.)) of the Code refers not only to such specific section but also
to any corresponding provision of any federal tax statute enacted after the date
of this Declaration, as such specific section or corresponding provision is in
effect on the date of application of the provisions of this Declaration
containing such reference.
"Commission" means the Trust Securities and
Exchange Commission.
"Common Security" has the meaning specified in
Section 7.1(b).
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"Common Security Certificate" means a definitive certificate
in fully registered form representing a Common Security substantially in the
form of Annex I to Exhibit C.
"Covered Person" means (i) any officer, director, shareholder,
partner, member, representative, employee or agent of the Trust or its
Affiliates, (ii) any officer, director, shareholder, employees, representatives
or agents of Time Warner or its Affiliates and (iii) the Holders from time to
time of the Trust Securities.
"Delaware Trustee" has the meaning set forth in
Section 5.01(a)(3).
"Distribution" means a distribution payable to Holders of
Trust Securities in accordance with Section 6.01.
"DTC" means The Depository Trust Company, the
initial Clearing Agency.
"Event of Default" in respect of the Trust Securities means an
Indenture Event of Default that has occurred and is continuing in respect of the
Subordinated Notes.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended from time to time or any successor legislation.
"Fiscal Year" has the meaning specified in
Section 11.01.
"Guarantee" means the Guarantee Agreement to be dated as of
July , 1995, of Time Warner in respect of the Preferred Securities.
"Holder" means a Person in whose name a Certificate
representing a Security is registered, such Person being a beneficial owner
within the meaning of the Business Trust Act.
"Indemnified Person" means any Trustee, any Affiliate of any
Trustee, any officers, directors, shareholders, members, partners, employees,
representatives or agents of any Trustee, or any employee or agent of the Trust
or its Affiliates.
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"Indenture" means the Indenture dated as of July [ ], 1995,
between Time Warner and the Indenture Trustee pursuant to which the Subordinated
Notes are to be
issued.
"Indenture Event of Default" means any event or condition
defined as an "Event of Default" with respect to the Subordinated Notes under
Section 6.01(a) of the Indenture that has occurred and is continuing.
"Indenture Trustee" means [ ] as trustee under the Indenture
until a successor is appointed thereunder and thereafter means such successor
trustee.
"Investment Company" means an investment company
as defined in the Investment Company Act.
"Investment Company Act" means the Investment Company Act of
1940, as amended from time to time or any successor legislation.
"Legal Action" has the meaning specified in
Section 3.06(g).
"Liquidation Amount" means, with respect to each Trust
Security, $[ ], or the issue price of such Trust Security.
"Liquidation Distribution" has the meaning set forth in
Exhibits B and C hereto establishing the terms of the Trust Securities.
"Majority in Liquidation Amount of the Trust Securities"
means, except as otherwise required by the Trust Indenture Act and except as
provided in the penultimate paragraph of paragraph 5 of Exhibit B hereto,
Holder(s) of outstanding Trust Securities voting together as a single class or,
as the context may require, Holder(s) of outstanding Preferred Securities or
Common Securities voting separately as a class, who are the record owners of a
relevant class of Trust Securities whose Liquidation Amount (including the
stated amount that would be paid on liquidation, plus accrued and unpaid
Distributions to the date upon which the voting percentages are determined)
represents more than 50% of the Liquidation Amount of all outstanding Trust
Securities of such class.
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"Ministerial Action" has the meaning set forth in the terms of
the Trust Securities as set forth in Exhibits B and C hereto.
"Paying Agent" has the meaning specified in
Section 3.08(i).
"Person" means a legal person, including any individual,
corporation, estate, partnership, joint venture, association, joint stock
company, limited liability company, trust, unincorporated association, or
government or any agency or political subdivision thereof, or any other entity
of whatever nature.
"Preferred Security" has the meaning specified in
Section 7.01(b).
"Preferred Security Beneficial Owner" means, with respect to a
Book Entry Interest, a Person who is the beneficial owner of such Book Entry
Interest, as reflected on the books of the Clearing Agency, or on the books of a
Person maintaining an account with such Clearing Agency (directly as a Clearing
Agency Participant or as an indirect participant, in each case in accordance
with the rules of such Clearing Agency).
"Preferred Security Certificate" means a definitive
certificate in fully registered form representing a Preferred Security
substantially in the form of Annex I to Exhibit B.
"Property Trustee" means the Trustee meeting the eligibility
requirements set forth in Section 5.01(c) and having the duties set forth for
the Property Trustee herein.
"Property Account" has the meaning specified in
Section 3.08(c)(i).
"Quorum" means a majority of the Regular Trustees or, if there
are only two Regular Trustees, both such Regular Trustees.
"Regular Trustee" means any Trustee other than the Property
Trustee and the Delaware Trustee.
"Related Party" means any direct or indirect
wholly owned subsidiary of Time Warner or any other Person
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which owns, directly or indirectly, 100% of the outstanding voting securities of
Time Warner.
"Resignation Request" has the meaning specified in
Section 5.02(d).
"Responsible Officer" means, with respect to the Property
Trustee, the chairman of the board of directors, the president, any
vice-president, any assistant vice-president, the secretary, any assistant
secretary, the treasurer, any assistant treasurer, any trust officer or
assistant trust officer or any other officer of the Property Trustee customarily
performing functions similar to those performed by any of the above designated
officers and also means, with respect to a particular corporate trust matter,
any other officer to whom such matter is referred because of that officer's
knowledge of and familiarity with the particular subject.
["Rule 3a-7" means Rule 3a-7 under the Investment
Company Act or any successor rule thereunder.]
"Securities Act" means the Securities Act of 1933, as amended
from time to time or any successor legislation.
"66-2/3% in Liquidation Amount of the Trust Securities" means,
except as otherwise required by the Trust Indenture Act and except as provided
in the penultimate paragraph of paragraph 5 of Exhibit B hereto, Holder(s) of
outstanding Trust Securities voting together as a single class or, as the
context may require, Holder(s) of outstanding Preferred Securities or Common
Securities, voting separately as a class, who are the record owners of a
relevant class of Trust Securities whose Liquidation Amount (including the
stated amount that would be paid on redemption, liquidation or otherwise, plus
accrued and unpaid Distributions to the date upon which the voting percentages
are determined) represents 66-2/3% or more of the Liquidation Amount of all
outstanding Trust Securities of such class.
"Special Event" has the meaning set forth in the terms of the
Trust Securities as set forth in Exhibits B and C hereto.
"Special Redemption Date" has the meaning set forth in the
terms of the Trust Securities as set forth in Exhibits B and C hereto.
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"Special Redemption Price" has the meaning set forth in the
terms of the Trust Securities as set forth in Exhibits B and C hereto.
"Special Regular Trustee" means a Regular Trustee
appointed by the Holders of a Majority in Liquidation Amount
of the Preferred Securities in accordance with
Section 5.02(a)(ii)(B).
"Sponsor" or "Time Warner" means Time Warner Inc., a Delaware
corporation, or any successor entity in a merger, in its capacity as sponsor of
the Trust.
"Subordinated Notes" means the series of Subordinated Notes
issued by Time Warner under the Indenture to the Property Trustee and entitled
the [ ]% Subordinated Notes due December 30, 1997.
"Successor Delaware Trustee" has the meaning
specified in Section 5.02(b)(ii).
"Successor Property Trustee" means a successor Trustee
possessing the qualifications to act as Property Trustee under Section 5.01(c).
"10% in Liquidation Amount of the Trust Securities" means,
except as otherwise required by the Trust Indenture Act and except as provided
in the penultimate paragraph of paragraph 5 of Exhibit B hereto, Holder(s) of
outstanding Trust Securities voting together as a single class or, as the
context may require, Holder(s) of outstanding Preferred Securities or Common
Securities, voting separately as a class, who are the record owners of a
relevant class of Trust Securities whose Liquidation Amount (including the
stated amount that would be paid on liquidation, plus accrued and unpaid
Distributions to the date upon which the voting percentages are determined)
represents 10% or more of the Liquidation Amount of all outstanding Trust
Securities of such class.
"Treasury Regulations" means the income tax regulations
including temporary and proposed regulations, promulgated under the Code by the
United States Treasury, as such regulations may be amended from time to time
(including corresponding provisions of succeeding regulations).
"Trustee" or "Trustees" means each Person who has
signed this Declaration as a trustee, so long as such Person
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shall continue in office in accordance with the terms hereof, and all other
Persons who may from time to time be duly appointed, qualified and serving as
Trustees in accordance with the provisions hereof, and references herein to a
Trustee or the Trustees shall refer to such Person or Persons solely in their
capacity as trustees hereunder.
"Trust Indenture Act" means the Trust Indenture
Act of 1939, as amended.
"Trust Securities" means the Common Securities and
the Preferred Securities.
"Underwriting Agreement" means the underwriting agreement
entered into among Time Warner, the Trust and Morgan Stanley & Co. Incorporated
with respect to, among other things, the Preferred Securities.
ARTICLE II
Trust Indenture Act
SECTION 2.01. Trust Indenture Act; Application.
(a) This Declaration is subject to the provisions of the Trust
Indenture Act that are required to be part of this Declaration and
shall, to the extent applicable, be governed by such provisions;
(b) if and to the extent that any provision of this
Declaration limits, qualifies or conflicts with the duties imposed by
ss.ss. 310 to 317, inclusive, of the Trust Indenture Act, such imposed
duties shall control;
(c) the Property Trustee shall [to the extent permitted by
applicable law and/or the rules and regulations of the Commission] be
the only Trustee which is a trustee for the purposes of the Trust
Indenture Act; and
(d) the application of the Trust Indenture Act to this
Declaration shall not affect the nature of the securities as equity
securities representing undivided beneficial interests in the assets of
the Trust.
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SECTION 2.02. Lists of Holders of Preferred Securities. (a)
Each of the Sponsor and the Regular Trustees on behalf of the Trust shall
provide the Property Trustee with such information as is required under ss.
312(a) of the Trust Indenture Act at the times and in the manner provided in ss.
312(a).
(b) The Property Trustee shall comply with its obligations
under ss.ss. 310(b), 311 and 312(b) of the Trust Indenture Act.
SECTION 2.03. Reports by the Property Trustee. Within 60 days
after [ ] of each year, the Property Trustee shall provide to the Holders of the
Trust Securities such reports as are required by ss. 313 of the Trust Indenture
Act, if any, in the form, in the manner and at the times provided by ss. 313 of
the Trust Indenture Act. The Property Trustee shall also comply with the
requirements of ss. 313(d) of the Trust Indenture Act.
SECTION 2.04. Periodic Reports to Property Trustee. Each of
the Sponsor and the Regular Trustees on behalf of the Trust shall provide to the
Property Trustee, the Commission and the Holders of the securities, as
applicable, such documents, reports and information as required by ss.
314(a)(l)-(3), if any, of the Trust Indenture Act and the compliance
certificates required by ss. 314(a)(4) and (c) of the Trust Indenture Act, any
such certificates to be provided in the form, in the manner and at the times
required by ss. 314(a)(4) and (c) of the Trust Indenture Act, provided that any
certificate to be provided pursuant to ss. 314(a)(4) of the Trust Indenture Act
shall be provided within 120 days of the end of each Fiscal Year.
SECTION 2.05. Evidence of Compliance with Conditions
Precedent. Each of the Sponsor and the Regular Trustees on behalf of the Trust
shall provide to the Property Trustee such evidence of compliance with any
conditions precedent, if any, provided for in this Declaration which relate to
any of the matters set forth in ss. 314(c) of the Trust Indenture Act. Any
certificate or opinion required to be given pursuant to ss. 314(c) shall comply
with ss. 314(e) of the Trust Indenture Act.
SECTION 2.06. Events of Default; Waiver.
(a) Subject to Section 2.06(c), Holders of Preferred
Securities may by vote of at least a Majority in Liquidation
Amount of the Preferred Securities (i) in accordance with
the terms of the Preferred Securities direct the time,
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method, and place of conducting any proceeding for any remedy available to the
Property Trustee, or exercising any trust or power conferred upon the Property
Trustee or (ii) on behalf of the Holders of all Preferred Securities waive any
past Event of Default in respect of the Preferred Securities and its
consequences, provided that if the Event of Default arises out of an Indenture
Event of Default:
(A) which is not waivable under the Indenture, the Event of
Default under this Declaration shall also be not waivable; or
(B) which requires the consent or vote of (1) holders of
Subordinated Notes representing a specified percentage greater than a
majority in principal amount of the Subordinated Notes, or (2) each
holder of Subordinated Notes, the Event of Default under this
Declaration may only be waived by, in the case of clause (A) above, the
vote of Holders of Preferred Securities representing such specified
percentage of the aggregate Liquidation Amount of the Preferred
Securities, or, in the case of clause (2) above, each Holder of
Preferred Securities.
Upon such waiver, any such default shall cease to exist, and any Event of
Default with respect to the Preferred Securities arising therefrom shall be
deemed to have been cured, for every purpose of this Declaration, but no such
waiver shall extend to any subsequent or other default or Event of Default with
respect to the Preferred Securities or impair any right consequent thereon.
(b) Subject to Section 2.06(c), Holders of Common Securities
may by vote of at least a Majority in Liquidation Amount of the Common
Securities, (i) in accordance with the terms of the Common Securities, direct
the time, method, and place of conducting any proceeding for any remedy
available to the Property Trustee, or exercising any trust or power conferred
upon the Property Trustee or (ii) on behalf of the Holders of all of the Common
Securities, waive any past Event of Default with respect to the Common
Securities and its consequences, provided that, if the Event of Default arises
out of an Indenture Event of Default:
(A) which is not waivable under the Indenture, except where
the Holders of the Common Securities are deemed to have waived such
Event of Default under the
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Declaration as provided below, the Event of Default
under this Declaration shall also not be waivable; or
(B) which requires the consent or vote of (1) holders of
Subordinated Notes representing a specified percentage greater than a
majority in principal amount of the Subordinated Notes or (2) each
holder of Subordinated Notes, except where the holders of the Common
Securities are deemed to have waived such Event of Default under this
Declaration as provided below, the Event of Default under this
Declaration may only be waived by, in the case of clause (1) above, the
vote of Holders of Common Securities representing such specified
percentage of the aggregate Liquidation Amount of the Common
Securities, or, in the case of clause (2) above, each holder of Common
Securities; and
provided, further that, each Holder of Common Securities will be deemed to have
waived any Event of Default with respect to the Common Securities and its
consequences until all Events of Default with respect to the Preferred
Securities have been cured, waived by the Holders of Preferred Securities as
provided in this Declaration or otherwise eliminated and until all Events of
Default with respect to the Preferred Securities have been so cured, waived or
otherwise eliminated, the Property Trustee will be deemed to be acting solely on
behalf of the Holders of the Preferred Securities and only the Holders of the
Preferred Securities will have the right to direct the Property Trustee in
accordance with the terms of this Declaration or the Trust Securities. In the
event that any Event of Default with respect to the Preferred Securities is
waived by the Holders of Preferred Securities as provided in this Declaration,
the Holders of Common Securities agree that such waiver shall also constitute
the waiver of such Event of Default with respect to the Common Securities for
all purposes under this Declaration without any further act, vote or consent of
the Holders of the Common Securities. Subject to the foregoing provisions of
this Section 2.06(b), upon such waiver, any such default shall cease to exist
and any Event of Default with respect to the Common Securities arising therefrom
shall be deemed to have been cured, for every purpose of this Declaration, but
no such waiver shall extend to any subsequent or other default or Event of
Default with respect to the Common Securities or impair any right consequent
thereon.
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(c) The right of any Holder of Trust Securities to receive
payment of Distributions on the Trust Securities in accordance with this
Declaration and the terms of the Trust Securities set forth in Exhibits B and C
on or after the respective payment dates therefor, or to institute suit for the
enforcement of any such payment on or after such payment dates, shall not be
impaired without the consent of each such Holder.
(d) As provided in the terms of the Trust Securities set forth
in Exhibits B and C hereto, a waiver of an Indenture Event of Default by the
Property Trustee at the written direction of the Holders of the Preferred
Securities constitutes a waiver of the corresponding Event of Default under this
Declaration in respect of the Trust Securities.
SECTION 2.07. Disclosure of Information. The disclosure of
information as to the names and addresses of the Holders of the Trust Securities
in accordance with ss. 312 of the Trust Indenture Act, regardless of the source
from which such information was derived, shall not be deemed to be a violation
of any existing law, or any law hereafter enacted which does not specifically
refer to ss. 312 of the Trust Indenture Act, nor shall the Property Trustee be
held accountable by reason of mailing any material pursuant to a request made
under ss. 312(b) of the Trust Indenture Act.
ARTICLE III
Organization
SECTION 3.01. Name. The Trust continued by this Declaration is
named "Time Warner Financing Trust" as such name may be modified from time to
time by the Regular Trustees following written notice to the Holders of Trust
Securities. The Trust's activities may be conducted under the name of the Trust
or any other name deemed advisable by the Regular Trustees.
SECTION 3.02. Office. The address of the principal office of
the Trust is c/o Time Warner Inc., 75 Rockefeller Plaza, New York, New York
10019. Upon ten days written notice to the Holders, the Regular Trustees may
change the location of the Trust's principal office. [The name of the
registered agent and office of the Trust in the State of Delaware is
[ ]. At any time,
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the Regular Trustees may designate another registered agent and/or registered
office.]
SECTION 3.03. Purpose. The exclusive purposes and functions of
the Trust are: (a) to issue and sell Trust Securities and use the proceeds from
such sale to acquire the Subordinated Notes and (b) except as otherwise limited
herein, to engage in only those other activities necessary, or incidental
thereto. The Trust shall not borrow money, issue debt or reinvest proceeds
derived from investments, pledge any of its assets or at any time, otherwise
undertake (or permit to be undertaken) any activity that would result in or
cause the Trust to be treated as anything other than a grantor trust for United
States federal income tax purposes.
SECTION 3.04. Authority. Subject to the limitations provided
in this Declaration and to the specific duties of the Property Trustee, the
Regular Trustees shall have exclusive and complete authority to carry out the
purposes of the Trust. An action taken by the Regular Trustees in accordance
with their powers shall constitute the act of and serve to bind the Trust and an
action taken by the Property Trustee in accordance with its powers shall
constitute the act of and serve to bind the Trust. In dealing with the Trustees
acting on behalf of the Trust, no Person shall be required to inquire into the
authority of the Trustees to bind the Trust. Persons dealing with the Trust are
entitled to rely conclusively on the power and authority of the Trustees as set
forth in this Declaration.
SECTION 3.05. Title to Property of the Trust. Except as
provided in Section 3.08 with respect to the Subordinated Notes and the Property
Account or unless otherwise provided in this Declaration, legal title to all
assets of the Trust shall be vested in the Trust. The Holders of Certificates
shall not have legal title to any part of the assets of the Trust, but shall
have an individual undivided beneficial interest in the assets of the Trust.
SECTION 3.06. Powers and Duties of the Regular Trustees. The
Regular Trustees shall have the exclusive power, authority and duty to cause the
Trust, and shall cause the Trust, to engage in the following activities:
(a) to issue and sell the Preferred Securities and the Common
Securities, in each case in accordance with this Declaration; provided,
however, that the Trust may
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issue no more than one series of Preferred Securities and no more than
one series of Common Securities; and, provided further, there shall be
no interests in the Trust other than the Trust Securities and the
issuance of Trust Securities shall be limited to a one-time,
simultaneous issuance of both Preferred Securities and Common
Securities;
[(b) in connection with the issuance and sale of the Preferred
Securities, at the direction of the Sponsor, to take such actions as
are set forth in Section 3.11];
(c) to acquire the Subordinated Notes with the proceeds of the
sale of the Preferred Securities and the Common Securities; provided,
however, the Regular Trustees shall cause legal title to all of the
Subordinated Notes to be vested in, and the Subordinated Notes to be
held of record in the name of, the Property Trustee for the benefit of
the Holders of the Preferred Securities and the Common Securities;
(d) to give the Sponsor and the Property Trustee prompt
written notice of the occurrence of a Special Event provided, that the
Regular Trustees shall consult with the Sponsor and the Property
Trustee before taking or refraining to take any Ministerial Action in
relation to a Special Event;
(e) to establish a record date with respect to all actions to
be taken hereunder that require a record date be established, including
for the purposes of Section 316(c) of the Trust Indenture Act and with
respect to Distributions, voting rights, redemptions, and exchanges,
and to issue relevant notices to Holders of the Preferred Securities
and Common Securities as to such actions and applicable record dates;
(f) to take all actions and perform such duties as
may be required of the Regular Trustees pursuant to the
term of the Trust Securities;
(g) to bring or defend, pay, collect, compromise, arbitrate,
resort to legal action, or otherwise adjust claims or demands of or
against the Trust ("Legal Action"), unless pursuant to Section 3.08(e),
the Property Trustee has the exclusive power to bring such Legal
Action;
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(h) to employ or otherwise engage employees and agents (who
may be designated as officers with titles) and managers, contractors,
advisors, and consultants and pay reasonable compensation for such
services;
(i) to cause the Trust to comply with the Trust's
obligations under the Trust Indenture Act;
(j) to give the certificate to the Property Trustee required
by ss. 314(a)(4) of the Trust Indenture Act which certificate may be
executed by any Regular Trustee;
(k) to incur expenses which are necessary or
incidental to carry out any of the purposes of the
Trust;
(l) to act as, or appoint another Person to act as, registrar
and transfer agent for the Trust Securities[, the Regular Trustees
hereby initially appointing the Property Trustee for such purposes];
(m) to take all actions and perform such duties as may be
required of the Regular Trustee pursuant to the terms of the Trust
Securities set forth in Exhibits B and C hereto;
(n) to execute all documents or instruments,
perform all duties and powers, and do all things for
and on behalf of the Trust in all matters necessary or
incidental to the foregoing;
(o) to take all action that may be necessary or appropriate
for the preservation and the continuation of the Trust's valid
existence, rights, franchises and privileges as a statutory business
trust under the laws of the State of Delaware and of each other
jurisdiction in which such existence is necessary to protect the
limited liability of the Holders of the Trust Securities or to enable
the Trust to effect the purposes for which the Trust has been created;
(p) to take any action, not inconsistent with this Declaration
or with applicable law, which the Regular Trustees determine in their
discretion to be reasonable and necessary or desirable in carrying out
the
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activities of the Trust as set out in this Section
3.06, in order that:
[(i) the Trust will not be deemed to be an
Investment Company required to be registered under
the Investment Company Act;
(ii) the Trust will not be classified for United States
federal income tax purposes as an association taxable as a
corporation or a partnership and will be treated as a grantor
trust for United States federal income tax purposes; and
(iii) the Trust comply with any requirements imposed by
any taxing authority on holders of instruments treated as
indebtedness for United States federal income tax purposes;]
provided that such action does not adversely affect the
interests of Holders; and
(q) to take all action necessary to cause all applicable tax
returns and tax information reports that are required to be filed with
respect to the Trust to be duly prepared and filed by the Regular
Trustees, on behalf of the Trust; and
(r) subject to the requirements of ss. 317(b) of the Trust
Indenture Act, to appoint one or more Paying Agents in addition to the
Property Trustee.
The Regular Trustees must exercise the powers set forth in
this Section 3.06 in a manner which is consistent with the purposes and
functions of the Trust set out in Section 3.03 and the Regular Trustees shall
not take any action which is inconsistent with the purposes and functions of the
Trust set forth in Section 3.03.
Subject to this Section 3.06, the Regular Trustees shall have
none of the powers nor any of the authority of the Property Trustee set forth in
Section 3.08.
SECTION 3.07. Prohibition of Actions by Trust and
Trustees. The Trust shall not, and the Trustees (including
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the Property Trustee) shall cause the Trust not to, engage in any activity other
than as required or authorized by this Declaration. In particular, the Trust
shall not and the Trustees (including the Property Trustee) shall not:
(a) invest any proceeds received by the Trust from holding the
Subordinated Notes but shall promptly distribute all such proceeds to
Holders of Trust Securities pursuant to the terms of this Declaration
and of the Trust Securities;
(b) acquire any assets other than as expressly
provided herein;
(c) possess Trust property for other than a Trust
purpose;
(d) make any loans, other than loans represented
by the Subordinated Notes;
(e) possess any power or otherwise act in such a
way as to vary the Trust assets or the terms of the
Trust Securities in any way whatsoever;
(f) issue any securities or other evidences of
beneficial ownership of, or beneficial interests in,
the Trust other than the Trust Securities;
(g) incur any indebtedness for borrowed money; or
(h) (i) direct the time, method and place of exercising any
trust or power conferred upon the Indenture Trustee with respect to the
Subordinated Notes, (ii) waive any past default that is waivable under
Section [6.06] of the Indenture, (iii) exercise any right to rescind or
annul any declaration that the principal of all of the Subordinated
Notes shall be due and payable or (iv) consent to any amendment,
modification or termination of the Indenture or the Subordinated Notes,
where such consent shall be required, unless in the case of this clause
(h) the Property Trustee shall have received an unqualified opinion of
nationally recognized independent tax counsel [recognized as expert in
such matters] to the effect that such action will not result in the
Trust being treated as an association taxable as a corporation or
partnership for United States Federal income tax purposes and that,
following such action,
19
each holder of Trust Securities will not be treated as owning an
undivided beneficial interest in the Subordinated Notes.
SECTION 3.08. Powers and Duties of the Property Trustee. (a)
The legal title to the Subordinated Notes shall be owned by and held of record
in the name of the Property Trustee in trust for the benefit of the Holders of
the Trust Securities. The right, title and interest of the Property Trustee to
the Subordinated Notes shall vest automatically in each Person who may hereafter
be appointed as Property Trustee in accordance with Article V. Such vesting and
cessation of title shall be effective whether or not conveyancing documents have
been executed and delivered.
(b) The Property Trustee shall not transfer its right, title
and interest in the Subordinated Notes to the Regular Trustees or, if the
Property Trustee does not also act as the Delaware Trustee, the Delaware
Trustee.
(c) The Property Trustee shall:
(i) establish and maintain a segregated non-interest bearing
bank account (the "Property Account") in the name of and under the
exclusive control of the Property Trustee on behalf of the Holders of
the Trust Securities and on the receipt of payments of funds made in
respect of the Subordinated Notes held by the Property Trustee, deposit
such funds into the Property Account and, without any further acts of
the Property Trustee or the Regular Trustees, promptly make payments to
the Holders of the Preferred Securities and Common Securities from the
Property Account in accordance with Section 6.01. Funds in the Property
Account shall be held uninvested, and without liability for interest
thereon, until disbursed in accordance with this Declaration. The
Property Account shall be an account which is maintained with a banking
institution whose long term unsecured indebtedness is rated by a
"nationally recognized statistical rating organization", as such term
is defined for purposes of Rule 436(g)(2) under the Trust Securities
Act, at least equal to [(but in no event less than "A" or the
equivalent)] the rating assigned to the Preferred Securities by a
nationally recognized statistical rating organization;
20
(ii) engage in such ministerial activities as shall be necessary
or appropriate to effect promptly the redemption of the Preferred
Securities and the Common Securities to the extent the Subordinated
Notes are redeemed or mature;
(iii) upon notice of distribution issued by the Regular Trustees
in accordance with the terms of the Preferred Securities and the Common
Securities, engage in such ministerial activities as shall be necessary
or appropriate to effect promptly the distribution pursuant to terms of
the Trust Securities of Subordinated Notes to Holders of Trust
Securities upon the occurrence of a Special Event; and
(iv) have the legal power to exercise all of the rights, powers
and privileges of a holder of the Subordinated Notes under the
Indenture and, if an Event of Default occurs and is continuing, the
Property Trustee, subject to Section 2.06(b), shall for the benefit of
the Holders of the Trust Securities, enforce its rights as holder of
the Subordinated Notes under the Indenture, subject to the rights of
the Holders of the Trust Securities pursuant to the terms of the Trust
Securities, this Declaration and the Trust Indenture Act.
(d) The Property Trustee shall take all actions and perform
such duties as may be specifically required of the Property Trustee pursuant to
the terms of the Trust Securities set forth in Exhibits B and C hereto.
(e) The Property Trustee shall take any Legal Action which
arises out of or in connection with an Event of Default or the Property
Trustee's duties and obligations under this Declaration or the Trust Indenture
Act.
(f) All moneys deposited in the Property Account, and all
Subordinated Notes held by the Property Trustee for the benefit of the Holders
of the Trust Securities will not be subject to any right, charge, security
interest, lien or claim of any kind in favor of, or for the benefit of, the
Property Trustee or its agents or their creditors.
(g) The Property Trustee shall, within 90 days after the
occurrence of a default with respect to the Trust Securities, transmit by mail,
first class postage prepaid, to the holders of the Trust Securities, as their
names and
21
addresses appear upon the register, notice of all defaults with respect to the
Trust Securities known to the Property Trustee, unless such defaults shall have
been cured before the giving of such notice (the term "defaults" for the
purposes of this Section 3.08(g) being hereby defined to be an Indenture Event
of Default, not including any periods of grace provided for in the Indenture and
irrespective of the giving of any notice provided therein); provided, that,
except in the case of default in the payment of the principal of (or premium, if
any) or interest on any of the Subordinated Notes, the Property Trustee shall be
protected in withholding such notice if and so long as the board of directors,
the executive committee, or a trust committee of directors and/or Responsible
Officers, of the Property Trustee in good faith determine that the withholding
of such notice is in the interests of the Holders of the Trust Securities. The
Property Trustee shall not be deemed to have knowledge of any default, except
(i) a default in the payment of principal, premium or interest on the
Subordinated Notes or (ii) any default as to which the Property Trustee shall
have received written notice or a Responsible Officer charged with the
administration of this Declaration shall have obtained written notice.
(h) The Property Trustee shall not resign as a
Trustee unless either:
(i) the Trust has been completely liquidated and the proceeds
thereof distributed to the Holders of Trust Securities pursuant to the
terms of the Trust Securities; or
(ii) a Successor Property Trustee has been appointed and
accepted that appointment in accordance with Article V.
(i) The Property Trustee shall act as paying agent in respect
of the Trust Securities and may authorize one or more Persons (each, a "Paying
Agent") to pay Distributions, redemption payments or liquidation payments on
behalf of the Trust with respect to the Preferred Securities. Any such Paying
Agent shall comply with ss. 317(b) of the Trust Indenture Act. Any Paying Agent
may be removed by the Property Trustee, after consultation with the Regular
Trustees, at any time and a successor Paying Agent or additional Paying Agents
may be appointed at any time by the Property Trustee.
22
(j) Subject to this Section 3.08, the Property Trustee shall
have none of the powers or the authority of the Regular Trustees set forth in
Section 3.06.
The Property Trustee shall exercise the powers, duties and rights set forth in
this Section 3.08 and Section 3.10 in a manner that is consistent with the
purposes and functions of the Trust set out in Section 3.03 and the Property
Trustee shall not take any action which is inconsistent with the purposes and
functions of the Trust set forth in Section 3.03.
[SECTION 3.09. Delaware Trustee. Notwithstanding any other
provision of this Declaration other than Section 5.01(a)(3), the Delaware
Trustee shall not be entitled to exercise any powers, nor shall the Delaware
Trustee have any of the duties and responsibilities of the Regular Trustees and
the Property Trustee described in this Declaration. Except as set forth in
Section 5.01(a)(3), the Delaware Trustee shall be a Trustee for the sole and
limited purpose of fulfilling the requirements of ss. 3807 of the Business Trust
Act.]
SECTION 3.10. Certain Rights and Duties of the Property
Trustee. (a) The Property Trustee, before the occurrence of an Event of Default
and after the curing of all Events of Default that may have occurred, shall
undertake to perform only such duties as are specifically set forth in this
Declaration, and no implied covenants shall be read into this Declaration
against the Property Trustee. In case an Event of Default has occurred (that has
not been cured or waived pursuant to Section 2.06), the Property Trustee shall
exercise such of the rights and powers vested in it by this Declaration, and use
the same degree of care and skill in their exercise, as a prudent person would
exercise or use under the circumstances in the conduct of his or her own
affairs.
(b) No provision of this Declaration shall be construed to
relieve the Property Trustee from liability for its own negligent action, its
own negligent failure to act or its own wilful misconduct, except that:
(i) prior to the occurrence of an Event of Default and after
the curing or waiving of all such Events of Default that may have
occurred:
23
(A) the duties and obligations of the Property
Trustee shall be determined solely by the express provisions
of this Declaration, and the Property Trustee shall not be
liable except for the performance of such duties and
obligations as are specifically set forth in this Declaration,
and no implied covenants or obligations shall be read into
this Declaration against the Property Trustee; and
(B) in the absence of bad faith on the part of the
Property Trustee, the Property Trustee may conclusively rely,
as to the truth of the statements and the correctness of the
opinions expressed therein, upon any certificates or opinions
furnished to the Property Trustee and conforming to the
requirements of this Declaration; but in the case of any such
certificates or opinions that by any provision hereof are
specifically required to be furnished to the Property Trustee,
the Property Trustee shall be under a duty to examine the same
to determine whether or not they conform to the requirements
of this Declaration;
(ii) the Property Trustee shall not be liable for any error of
judgment made in good faith by a Responsible Officer of the Property
Trustee, unless it shall be proved that the Property Trustee was
negligent in ascertaining the pertinent facts;
(iii) the Property Trustee shall not be liable with respect to any
action taken or omitted to be taken by it in good faith in accordance
with the direction of the Holders as provided herein relating to the
time, method and place of conducting any proceeding for any remedy
available to the Property Trustee hereunder or under the Indenture, or
exercising any trust or power conferred upon the Property Trustee under
this Declaration; and
(iv) no provision of this Declaration shall require the Property
Trustee to expend or risk its own funds or otherwise incur personal
financial liability in the performance of any of its duties or in the
exercise of any of its rights or powers, if it shall have reasonable
grounds for believing that the repayment of such funds or liability is
not reasonably assured to it
24
under the terms of this Declaration or adequate indemnity against such
risk or liability is not reasonably assured to it.
(c) Subject to the provisions of Section 3.10(a)
and (b):
(i) whenever in the administration of this Declaration, the
Property Trustee shall deem it desirable that a matter be proved or
established prior to taking, suffering or omitting any action
hereunder, the Property Trustee (unless other evidence is herein
specifically prescribed) may, in the absence of bad faith on its part
request and rely upon a certificate, which shall comply with the
provisions of ss. 314(e) of the Trust Indenture Act, signed by any two
of the Regular Trustees or by an authorized officer of the Sponsor, as
the case may be;
(ii) the Property Trustee (A) may consult with counsel (which
may be counsel to the Sponsor or any of its Affiliates and may include
any of its employees) selected by it in good faith and with due care
and the written advice or opinion of such counsel with respect to legal
matters shall be full and complete authorization and protection in
respect of any action taken, suffered or omitted by it hereunder in
good faith and in reliance thereon and in accordance with such advice
and opinion and (B) shall have the right at any time to seek
instructions concerning the administration of this Declaration from any
court of competent jurisdiction;
(iii) the Property Trustee may execute any of the trusts or powers
hereunder or perform any duties hereunder either directly or by or
through agents or attorneys and the Property Trustee shall not be
responsible for any misconduct or negligence on the part of any agent
or attorney appointed by it in good faith and with due care;
(iv) the Property Trustee shall be under no obligation to
exercise any of the rights or powers vested in it by this Declaration
at the request or direction of any Holders, unless such Holders shall
have offered to the Property Trustee reasonable security and indemnity
against the costs, expenses (including attorneys' fees and expenses)
and
25
liabilities that might be incurred by it in complying with such request
or direction; provided that nothing contained in this clause (iv) shall
relieve the Property Trustee of the obligation, upon the occurrence of
an Event of Default (which has not been cured or waived) to exercise
such of the rights and powers vested in it by this Declaration, and to
use the same degree of care and skill in this exercise, as a prudent
person would exercise or use under the circumstances in the conduct of
his or her own affairs; and
(v) any action taken by the Property Trustee or its agents
hereunder shall bind the Holders of the Trust Securities and the
signature of the Property Trustee or its agents alone shall be
sufficient and effective to perform any such action; and no third party
shall be required to inquire as to the authority of the Property
Trustee to so act, or as to its compliance with any of the terms and
provisions of this Declaration, both of which shall be conclusively
evidenced by the Property Trustee's or its agent's taking such action.
SECTION 3.11. Registration Statement and Related Matters. In
accordance with the Original Declaration, Time Warner and the Trustees have
authorized and directed, and hereby confirm the authorization of, Time Warner,
as the sponsor of the Trust, (a) to file with the Commission and execute, in
each case on behalf of the Trust, (i) the Registration Statement on Form S-3
(File No. 33- ) (the "1933 Act Registration Statement") including any
pre-effective or post-effective amendments to such Registration Statement,
relating to the registration under the Trust Securities Act of the Preferred
Securities of the Trust and (ii) a Registration Statement on Form 8-A or other
appropriate form (the "1934 Act Registration Statement") (including all
preeffective and post-effective amendments thereto) relating to the registration
of the Preferred Securities of the Trust under Section 12(b) of the Exchange
Act; (b) to file with the New York Stock Exchange and execute on behalf of the
Trust a listing application and all other applications, statements,
certificates, agreements and other instruments as shall be necessary or
desirable to cause the Preferred Securities to be listed on the New York Stock
Exchange; (c) to file and execute on behalf of the Trust such applications,
reports, surety bonds, irrevocable consents, appointments of attorney for
service of process and other papers and documents as shall be necessary or
26
desirable to register the Preferred Securities under the securities or "Blue
Sky" laws of such jurisdictions as Time Warner on behalf of the Trust, may deem
necessary or desirable and (d) to execute on behalf of the Trust that certain
Underwriting Agreement relating to the issuance and sale of the Preferred
Securities[, substantially in the form included as Exhibit 1 to the 1933 Act
Registration Statement]. In the event that any filing referred to in clauses
(a)-(c) above is required by the rules and regulations of the Commission, the
New York Stock Exchange or state securities or blue sky laws, to be executed on
behalf of the Trust by the Trustees, the Regular Trustees, in their capacities
as Trustees of the Trust, are hereby authorized and directed to join in any such
filing and to execute on behalf of the Trust any and all of the foregoing, it
being understood that the Property Trustee and the Delaware Trustee, in their
capacities as Trustees of the Trust, shall not be required to join in any such
filing or execute on behalf of the Trust any such document unless required by
the rules and regulations of the Commission, the New York Stock Exchange or
state securities or blue sky laws. In connection with all of the foregoing, Time
Warner and each Trustee, solely in its capacity as Trustee of the Trust, have
constituted and appointed, and hereby confirm the appointment of, [individuals],
and each of them, as his, her or its, as the case may be, true and lawful
attorneys-in-fact, and agents, with full power of substitution and
resubstitution, for Time Warner or such Trustee or in Time Warner's or such
Trustee's name, place and stead, in any and all capacities, to sign any and all
amendments (including post-effective amendments) to the 1933 Act Registration
Statement and the 1934 Act Registration Statement and to file the same, with all
exhibits thereto, and other documents in connection therewith, with the
Commission, granting unto said attorneys-in-fact and agents full power and
authority to do and perform each and every act and thing requisite and necessary
to be done in connection therewith, as fully to all intents and purposes as Time
Warner or such Trustee might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents or any of them, or their
or his or her substitute or substitutes, shall do or cause to be done by virtue
hereof.
SECTION 3.12. Filing of Amendments to Certificate of Trust.
The Certificate of Trust as filed with the Secretary of State of the State of
Delaware on June , 1995 is attached hereto as Exhibit A. On or after the date of
execution of this Declaration, the Trustees shall cause the
27
filing with the Secretary of State of the State of Delaware of such amendments
to the Certificate of Trust as the Trustees shall deem necessary or desirable.
SECTION 3.13. Execution of Documents by Regular Trustees.
Unless otherwise determined by the Regular Trustees and except as otherwise
required by the Business Trust Act with respect to the Certificate of Trust or
otherwise, a majority of, or if there are only two, both of, the Regular
Trustees are authorized to execute and deliver on behalf of the Trust any
documents which the Regular Trustees have the power and authority to execute or
deliver pursuant to this Declaration; provided that any listing application
prepared by the Sponsor referred to in Section 3.11(b) may be executed by any
Regular Trustee.
SECTION 3.14. Trustees Not Responsible for Recitals or
Issuance of Trust Securities. The recitals contained in this Declaration and the
Trust Securities shall be taken as the statements of the Sponsor and the
Trustees do not assume any responsibility for their correctness. The Trustees
make no representations as to the value or condition of the property of the
Trust or any part thereof. The Trustees make no representations as to the
validity or sufficiency of this Declaration or the Trust Securities.
SECTION 3.15. Duration of Trust. The Trust,
absent termination pursuant to the provisions of
Article VIII hereof, shall have existence until July [ ],
1998.
ARTICLE IV
Sponsor
SECTION 4.01. Purchase of Common Securities by Sponsor. The
Sponsor will purchase all the Common Securities issued by the Trust at the same
time as the Preferred Securities are sold, in an amount equal to 3% of the
capital of the Trust after giving effect to such purchase.
SECTION 4.02. Expenses. (a) The Sponsor shall
be responsible for and shall pay for all debts and
obligations (other than with respect to the Trust
Securities) and all costs and expenses of the Trust
(including costs and expenses relating to the organization
28
of the Trust, the issuance of the Preferred Securities pursuant to the offer,
the fees and expenses (including reasonable counsel fees and expenses) of the
Trustees (including any amounts payable under Article X), the costs and expenses
relating to the operation of the Trust, including without limitation, costs and
expenses of accountants, attorneys, statistical or bookkeeping services,
expenses for printing and engraving and computing or accounting equipment,
paying agent(s), registrar(s), transfer agent(s), duplicating, travel and
telephone and other telecommunications expenses and costs and expenses incurred
in connection with the disposition of Trust assets).
(b) The Sponsor will pay any and all taxes (other than United
States withholding taxes attributable to the Trust or its assets) and all
liabilities, costs and expenses with respect to such taxes of the Trust.
(c) The Sponsor's obligations under this Section 4.02 shall be
for the benefit of, and shall be enforceable by, any Person to whom any such
debts, obligations, costs, expenses and taxes are owed (a "Creditor") whether or
not such Creditor has received notice hereof. Any such Creditor may enforce the
Sponsor's obligations under this Section 4.02 directly against the Sponsor and
the Sponsor irrevocably waives any right or remedy to require that any such
Creditor take any action against the Trust or any other Person before proceeding
against the Sponsor. The Sponsor agrees to execute such additional agreements as
may be necessary or desirable in order to give full effect to the provisions of
this Section 4.02.]
SECTION 4.03. Responsibilities of the Sponsor. In connection
with the issue and sale of the Preferred Securities, the Sponsor shall have the
exclusive right and responsibility to engage in the following activities:
(a) to prepare for filing by the Trust with the Commission a
registration statement on Form S-3 in relation to the Preferred
Securities, including any amendments thereto;
(b) to determine the states in which to take appropriate
action to qualify or register for sale all or part of the Preferred
Securities and to take any and all such acts, other than actions which
must be taken
29
by the Trust, and advise the Trust of actions it must take, and prepare
for execution and filing any documents to be executed and filed by the
Trust, as the Sponsor deems necessary or advisable in order to comply
with the applicable laws of any such states;
(c) to prepare for filing by the Trust an application to the
New York Stock Exchange or any other national stock exchange or the
NASDAQ National Market for listing upon notice of issuance of any
Preferred Securities;
(d) to prepare for filing by the Trust with the Commission a
Registration Statement on Form 8-A relating to the registration of the
Preferred Securities under Section 12(b) of the Exchange Act, including
any amendments thereto; and
(e) to negotiate the terms of the Underwriting
Agreement [and Pricing Agreement] providing for the
sale of the Preferred Securities.
ARTICLE V
Trustees
SECTION 5.01. Number of Trustees; Qualifications. (a) The
number of Trustees initially shall be [five]. At any time (i) before the
issuance of the Trust Securities, the Sponsor may, by written instrument,
increase or decrease the number of, and appoint, remove and replace the,
Trustees, and (ii) after the issuance of the Trust Securities and except as
provided in subsection (E) below and Section 5.02(a)(ii)(B) with respect to the
Special Regular Trustee, the number of Trustees may be increased or decreased
solely by, and Trustees may be appointed, removed or replaced solely by, vote of
Holders of Common Securities representing a Majority in Liquidation Amount of
the Common Securities voting as a class; provided that in any case:
(A) the number of Trustees shall be at least five unless the
Trustee that acts as the Property Trustee also acts as the Delaware
Trustee, in which cases the number of Trustees shall be at least three;
30
(B) unless a Special Regular Trustee has been appointed (which
appointment shall not impair the right of the Holders of Common
Securities to increase or decrease the number of, or to appoint, remove
or replace, Trustees (other than the Special Regular Trustee) as
provided above), at least a majority of the Trustees shall at all times
be officers, directors or employees of Time Warner;
(C) if required by the Business Trust Act, one Trustee (the
"Delaware Trustee") shall be either a natural person who is a resident
of the State of Delaware or, if not a natural person, an entity that
has its principal place of business in the State of Delaware and
otherwise is permitted to act as a Trustee hereunder under the laws of
the State of Delaware, except that if the Property Trustee has its
principal place of business in the State of Delaware and otherwise is
permitted to act as a Trustee hereunder under the laws of the State of
Delaware, then the Property Trustee shall also be the Delaware Trustee
and Section 3.09 shall have no application;
(D) there shall at all times be a Property Trustee hereunder
that shall satisfy the requirements of Section 5.01(c); and
(E) the number of Trustees shall be increased automatically by
one if an Appointment Event has occurred and is continuing and the
Holders of a Majority in Liquidation Amount of the Preferred Securities
appoint a Special Regular Trustee in accordance with Section
5.02(a)(ii)(B) and the terms of the Preferred Securities.
Each Trustee shall be either a natural person at least 21 years of age or a
legal entity which shall act through one or more duly appointed representatives.
(b) The initial Regular Trustees shall be:
[Time Warner employees]
c/o Time Warner Inc.
75 Rockefeller Plaza
New York, NY 10019
31
(c) There shall at all times be one Trustee that
shall act as Property Trustee. In order to act as Property
Trustee hereunder, such Trustee shall:
(i) not be an Affiliate of the Sponsor;
(ii) be a corporation organized and doing business under the
laws of the United States of America or any State or Territory thereof
or of the District of Columbia, or a corporation or Person permitted by
the Commission to act as an institutional trustee under the Trust
Indenture Act, authorized under such laws to exercise corporate trust
powers, having a combined capital and surplus of at least $50,000,000,
and subject to supervision or examination by Federal, State,
Territorial or District of Columbia authority. If such corporation
publishes reports of condition at least annually, pursuant to law or to
the requirements of the supervising or examining authority referred to
above, then for the purposes of this Section 5.01(c)(ii), the combined
capital and surplus of such corporation shall be deemed to be its
combined capital and surplus as set forth in its most recent report of
condition so published[; and
(iii) if the Trust is excluded from the definition of an
Investment Company solely by reason of Rule 3a-7 and to the extent Rule
3a-7 requires a trustee having certain qualifications to hold title to
the "eligible assets" (as defined in Rule 3a-7) of the Trust, the
Property Trustee shall possess those qualifications].
If at any time the Property Trustee shall cease to satisfy the
requirements of clauses (i) through (iii) above, the Property Trustee shall
immediately resign in the manner and with the effect set out in Section 5.02(d).
If the Property Trustee has or shall acquire any "conflicting interest" within
the meaning of ss. 310(b) of the Trust Indenture Act, the Property Trustee and
the Holders of the Common Securities (as if such Holders were the obligor
referred to in ss. 310(b) of the Trust Indenture Act) shall in all respects
comply with the provisions of ss. 310(b) of the Trust Indenture Act. The
Guarantee shall be deemed to be specifically described in this Declaration for
the purposes of clause (i) of the first proviso contained in ss. 310(b) of the
Trust Indenture Act.
32
The initial Trustee that shall serve as the Property Trustee
is [New York Trustee], whose address is as set forth in Section 14.01(b).
(d) The initial Trustee that shall serve as the Delaware
Trustee is [Delaware Trustee], whose address is as set forth in Section
14.01(c).
(e) Any action taken by (i) Holders of Common Securities
pursuant to this Article V or (ii) Holders of Preferred Securities pursuant to
this Article V to appoint or remove a Special Regular Trustee upon the
occurrence of an Appointment Event, shall be taken at a meeting of Holders of
Common Securities or Preferred Securities, as the case may be, convened for such
purpose or by written consent as provided in Section 12.02.
(f) No amendment may be made to this Section 5.01 which would
change any rights with respect to the number, existence or appointment and
removal of Trustees (other than any Special Regular Trustee), except with the
consent of each Holder of Common Securities.
(g) No amendment may be made to this Section 5.01 or Section
5.02(a)(ii)(B), which would change the rights of Holders of Preferred Securities
to appoint, remove or replace a Special Regular Trustee except with the consent
of each Holder of Preferred Securities.
SECTION 5.02. Appointment, Removal and
Resignation of Trustees. (a) Subject to Section 5.02(b),
Trustees may be appointed or removed without cause at any
time:
(i) until the issuance of the Trust Securities, by
written instrument executed by the Sponsor; and
(ii) after the issuance of the Trust Securities,
(A) other than with respect to the Special Regular
Trustee, by vote of the Holders of a Majority in Liquidation
Amount of the Common Securities voting as a class; and
(B) if an Appointment Event has occurred and is
continuing, one additional Regular Trustee (the "Special
Regular Trustee") may be appointed, who need not be an
Affiliate of the Sponsor, by vote
33
of the Holders of a Majority in Liquidation Amount of the
Preferred Securities, voting as a class and such Special
Regular Trustee may only be removed (otherwise than by the
operation of Section 5.02(c)), by vote of the Holders of a
Majority in Liquidation Amount of the Preferred Securities
voting as a class.
(b) (i) The Trustee that acts as Property Trustee shall not be
removed in accordance with Section 5.02(a) until a Successor Property Trustee
possessing the qualifications to act as Property Trustee under Section 5.01(c)
has been appointed and has accepted such appointment by written instrument
executed by such Successor Property Trustee and delivered to the Regular
Trustees, the Sponsor and the Property Trustee being removed; and
(ii) the Trustee that acts as Delaware Trustee shall not be
removed in accordance with Section 5.02(a) until a successor Trustee
possessing the qualifications to act as Delaware Trustee under Section
5.01(a)(3) (a "Successor Delaware Trustee") has been appointed and has
accepted such appointment by written instrument executed by such
Successor Delaware Trustee and delivered to the Regular Trustees, the
Sponsor and the Delaware Trustee being removed.
(c) A Trustee appointed to office shall hold office until his
successor shall have been appointed or until his death, removal or resignation,
provided that a Special Regular Trustee shall only hold office while an
Appointment Event is continuing and shall cease to hold office immediately after
the Appointment Event pursuant to which the Special Regular Trustee was
appointed and all other Appointment Events cease to be continuing.
(d) Any Trustee may resign from office (without need for prior
or subsequent accounting) by an instrument (a "Resignation Request") in writing
signed by the Trustee and delivered to the Sponsor and the Trust, which
resignation
34
shall take effect upon such delivery or upon such later date as is specified
therein; provided, however, that:
(i) no such resignation of the Trustee that acts
as the Property Trustee shall be effective:
(A) until a Successor Property Trustee possessing the
qualifications to act as Property Trustee under Section
5.01(c) has been appointed and has accepted such appointment
by instrument executed by such Successor Property Trustee and
delivered to the Trust, the Sponsor and the resigning Property
Trustee[; or
(B) if the Trust is excluded from the definition of
an Investment Company solely by reason of Rule 3a-7, until the
assets of the Trust have been completely liquidated and the
proceeds thereof distributed to the Holders of the Trust
Securities;]
(ii) no such resignation of the Trustee that acts as the
Delaware Trustee shall be effective until a Successor Delaware Trustee
has been appointed and has accepted such appointment by instrument
executed by such Successor Delaware Trustee and delivered to the Trust,
the Sponsor and the resigning Delaware Trustee; and
(iii) no such resignation of a Special Regular Trustee shall be
effective until the 60th day following delivery of the Resignation
Request to the Sponsor and the Trust or such later date specified in
the Resignation Request during which period the Holders of the
Preferred Securities shall have the right to appoint a successor
Special Regular Trustee as provided in this Article V.
(e) If no Successor Property Trustee or Successor Delaware
Trustee shall have been appointed and accepted appointment as provided in this
Section 5.02 within 60 days after delivery to the Sponsor and the Trust of a
Resignation Request, the resigning Property Trustee or Delaware Trustee may
petition any court of competent jurisdiction for appointment of a Successor
Property Trustee or Successor Delaware Trustee. Such court may thereupon after
such notice, if any, as it may deem proper and prescribe, appoint
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a Successor Property Trustee or Successor Delaware Trustee,
as the case may be.
SECTION 5.03. Vacancies Among Trustees. If a Trustee ceases to
hold office for any reason and the number of Trustees is not reduced pursuant to
Section 5.01 or if the number of Trustees is increased pursuant to Section 5.01,
a vacancy shall occur. A resolution certifying the existence of such vacancy by
a majority of the Regular Trustees shall be conclusive evidence of the existence
of such vacancy. The vacancy shall be filled with a Trustee appointed in
accordance with the requirements of this Article V.
SECTION 5.04. Effect of Vacancies. The death, resignation,
retirement, removal, bankruptcy, dissolution, liquidation, incompetence or
incapacity to perform the duties of a Trustee, or any one of them, shall not
operate to annul the Trust. Whenever a vacancy in the number of Regular Trustees
shall occur until such vacancy is filled as provided in this Article V, the
Regular Trustees in office, regardless of their number, shall have all the
powers granted to the Regular Trustees and shall discharge all the duties
imposed upon the Regular Trustees by this Declaration.
SECTION 5.05. Meetings. Meetings of the Regular Trustees shall
be held from time to time upon the call of any Trustee. Regular meetings of the
Regular Trustees may be held at a time and place fixed by resolution of the
Regular Trustees. Notice of any in-person meetings of the Regular Trustees shall
be hand-delivered or otherwise delivered in writing (including by facsimile,
with a hard copy by overnight courier) not less than 48 hours before such
meeting. Notice of any telephonic meetings of the Regular Trustees or any
committee thereof shall be hand- delivered or otherwise delivered in writing
(including by facsimile, with a hard copy by overnight courier) not less than 24
hours before a meeting. Notices shall contain a brief statement of the time,
place and anticipated purposes of the meeting. The presence (whether in person
or by telephone) of a Regular Trustee at a meeting shall constitute a waiver of
notice of such meeting except where a Regular Trustee attends a meeting for the
express purpose of objecting to the transaction of any activity on the ground
that the meeting has not been lawfully called or convened. Unless provided
otherwise in this Declaration, any action of the Regular Trustees may be taken
at a meeting by vote of a
36
majority of the Regular Trustees present (whether in person or by telephone) and
eligible to vote with respect to such matter, provided that a Quorum is present,
or without a meeting by the unanimous written consent of the Regular Trustees.
SECTION 5.06. Delegation of Power. (a) Any Regular Trustee
may, by power of attorney consistent with applicable law, delegate to any other
natural person over the age of 21 his or her power for the purpose of executing
any documents contemplated in Section 3.11, including any registration statement
or amendment thereto or other document or schedule filed with the Commission or
making any other governmental filing.
(b) The Regular Trustees shall have power to delegate from
time to time to such of their number or to officers of the Trust the doing of
such things and the execution of such instruments either in the name of the
Trust or the names of the Regular Trustees or otherwise as the Regular Trustees
may deem expedient, to the extent such delegation is not prohibited by
applicable law or contrary to the provisions of the Trust, as set forth herein.
ARTICLE VI
Distributions
SECTION 6.01. Distributions. Holders shall receive periodic
distributions, redemption payments and liquidation distributions in accordance
with the applicable terms of the relevant Holder's Trust Securities
("Distributions"). Distributions shall be made to the Holders of Preferred
Securities and Common Securities in accordance with the terms of the Trust
Securities as set forth in Exhibits B and C hereto. If and to the extent that
Time Warner makes a payment of interest, premium and principal on the
Subordinated Notes held by the Property Trustee (the amount of any such payment
being a "Payment Amount"), the Property Trustee shall and is directed to
promptly make a Distribution of the Payment Amount to Holders in accordance with
the terms of the Trust Securities as set forth in Exhibits B and C hereto.
37
ARTICLE VII
Issuance of Trust Securities
SECTION 7.01. General Provisions Regarding Trust Securities.
(a) The Regular Trustees shall issue on behalf of the Trust securities in fully
registered form representing undivided beneficial interests in the assets of the
Trust in accordance with Section 7.01(b) and for the consideration specified in
Section 3.03.
(b) The Regular Trustees shall issue on behalf of the Trust
one class of Preferred Securities representing undivided beneficial interests in
the assets of the Trust having such terms as are set forth in Exhibit B (the
"Preferred Securities") which terms are incorporated by reference in, and made a
part of, this Declaration as if specifically set forth herein, and one class of
common securities representing undivided beneficial interests in the assets of
the Trust having such terms as are set forth in Exhibit C (the "Common
Securities") which terms are incorporated by reference in, and made a part of,
this Declaration as if specifically set forth herein. The Trust shall have no
securities or other interests in the assets of the Trust other than the
Preferred Securities and the Common Securities.
(c) The Certificates shall be signed on behalf of the Trust by
the Regular Trustees (or, if there are more than two Regular Trustees, by any
two of the Regular Trustees). Such signatures may be the manual or facsimile
signatures of the present or any future Regular Trustee. Typographical and other
minor errors or defects in any such reproduction of any such signature shall not
affect the validity of any Security. In case any Regular Trustee of the Trust
who shall have signed any of the Certificates shall cease to be such Regular
Trustee before the Certificate so signed shall be delivered by the Trust, such
Certificate nevertheless may be delivered as though the person who signed such
Certificate had not ceased to be such Regular Trustee; and any Certificate may
be signed on behalf of the Trust by such persons as, at the actual date of the
execution of such Security, shall be the Regular Trustees of the Trust, although
at the date of the execution and delivery of the Declaration any such person was
not such a Regular Trustee. Certificates shall be printed, lithographed or
engraved or may be produced in any other manner as is reasonably acceptable to
the Regular Trustees,
38
as evidenced by their execution thereof, and may have such letters, numbers or
other marks of identification or designation and such legends or endorsements as
the Regular Trustees may deem appropriate, or as may be required to comply with
any law or with any rule or regulation made pursuant thereto or with any rule or
regulation of any stock exchange on which the Trust Securities may be listed, or
to conform to usage.
(d) The consideration received by the Trust for the issuance
of the Trust Securities shall constitute a contribution to the capital of the
Trust and shall not constitute a loan to the Trust.
(e) Upon issuance of the Trust Securities as provided in this
Declaration, the Trust Securities so issued shall be deemed to be validly
issued, fully paid and nonassessable.
(f) Every Person, by virtue of having become a Holder or a
Preferred Security Beneficial Owner in accordance with the terms of this
Declaration, shall be deemed to have expressly assented and agreed to the terms
of and shall be bound by this Declaration.
(g) Upon issuance of the Trust Securities as provided in this
Declaration, the Regular Trustees on behalf of the Trust shall return to Time
Warner the $10 constituting initial trust assets as set forth in the Original
Declaration.
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ARTICLE VIII
Termination of Trust
This Declaration and the Trust shall terminate and be of no
further force or effect upon the earliest of:
(a) all the Trust Securities shall have been called for
redemption and the amounts necessary for redemption thereof (whether
cash or Exchange Property) shall have been paid to the Holders of Trust
Securities in accordance with the terms of the Trust Securities or,
with respect to any Preferred Securities, the Time Warner Exchange
Right shall have been exercised in respect thereof and payment of (i)
Exchange Property in respect of the portion of the Preferred Securities
to be exchanged for Exchange Property, (ii) cash in respect of the
portion, if any, of the Preferred Securities that are not to be
exchanged for Exchange Property and (iii) cash in an amount equal to
all accrued and unpaid distributions on such Preferred Securities to
the applicable Redemption Payment Date, shall have been made to the
holders of the Preferred Securities in accordance with the terms of the
Preferred Securities and the provisions of the Guarantee relating to
the Time Warner Exchange Right; or
(b) all the Subordinated Notes shall have been distributed to
the Holders of Trust Securities in exchange for all the Trust
Securities in accordance with the terms of the Trust Securities; or
(c) upon the expiration of the term of the Trust
as set forth in Section 3.15;
and a certificate of cancellation is filed by the Trustees with the Secretary of
State of the State of Delaware. The Trustees shall so file such a certificate as
soon as practicable after the occurrence of an event referred to in this
Article.
The provisions of Sections 3.10 and Article X shall survive
the termination of the Trust.
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ARTICLE IX
Transfer of Interests
SECTION 9.01. Transfer of Trust Securities. (a) Trust
Securities may only be transferred, in whole or in part, in accordance with the
terms and conditions set forth in this Declaration. Any transfer or purported
transfer of any Security not made in accordance with this Declaration shall be
null and void.
(b) Subject to this Article IX, Preferred
Securities shall be freely transferable.
(c) Subject to this Article IX, Time Warner and any Related
Party may only transfer Common Securities to Time Warner or a Related Party;
provided that any such transfer shall be subject to the condition that the
transferor shall have obtained (i) either a ruling from the Internal Revenue
Service or an unqualified written opinion addressed to the Trust and delivered
to the Trustees of nationally recognized independent tax counsel experienced in
such matters to the effect that such transfer will not (A) cause the Trust to be
treated as issuing a class of interests in the Trust differing from the class of
interests represented by the Common Securities originally issued to Time Warner,
(B) result in the Trust acquiring or disposing of, or being deemed to have
acquired or disposed of, an asset or (C) result in or cause the Trust to be
treated as anything other than a grantor trust for United States Federal income
tax purposes and (ii) an unqualified written opinion addressed to the Trust and
delivered to the Trustees of a nationally recognized independent counsel
experienced in such matters that such transfer will not cause the Trust to be an
Investment Company or controlled by an Investment Company.
SECTION 9.02. Transfer of Certificates. The Regular Trustees
shall provide for the registration of Certificates and of transfers of
Certificates, which will be effected without charge but only upon payment (with
such indemnity as the Regular Trustees may require) in respect of any tax or
other government charges which may be imposed in relation to it. Upon surrender
for registration of transfer of any Certificate, the Regular Trustees shall
cause one or more new Certificates to be issued in the name of the designated
transferee or transferees. Every Certificate surrendered for registration of
transfer shall be
41
accompanied by a written instrument of transfer in form satisfactory to the
Regular Trustees duly executed by the Holder or such Holder's attorney duly
authorized in writing. Each Certificate surrendered for registration of transfer
shall be canceled by the Regular Trustees. A transferee of a Certificate shall
be entitled to the rights and subject to the obligations of a Holder hereunder
upon the receipt by such transferee of a Certificate. By acceptance of a
Certificate, each transferee shall be deemed to have agreed to be bound by this
Declaration.
SECTION 9.03. Deemed Security Holders. The Trustees may treat
the Person in whose name any Certificate shall be registered on the books and
records of the Trust as the sole holder of such Certificate and of the Trust
Securities represented by such Certificate for purposes of receiving
Distributions and for all other purposes whatsoever and, accordingly, shall not
be bound to recognize any equitable or other claim to or interest in such
Certificate or in the Trust Securities represented by such Certificate on the
part of any Person, whether or not the Trustees shall have actual or other
notice thereof.
SECTION 9.04. Book-Entry Interests. The Preferred Securities
Certificates, on original issuance, will be issued in fully registered form.
With respect to any Certificates registered on the books and records of the
Trust in the name of a Clearing Agency or the nominee of a Clearing Agency:
(a) the Trust and the Trustees shall be entitled to deal with
the Clearing Agency for all purposes of this Declaration (including the
payment of Distributions on such Certificates and receiving approvals,
votes or consents hereunder) as the Preferred Security Holder and the
sole holder of such Certificates and, except as set forth herein [or in
Rule 3a-7 with respect to the Property Trustee,] shall have no
obligation to the Preferred Security Beneficial Owners;
(b) to the extent that the provisions of this Section 9.04
conflict with any other provisions of this Declaration, the provisions
of this Section 9.04 shall control; and
(c) the rights of the Preferred Security
Beneficial Owners shall be exercised only through the
42
Clearing Agency and shall be limited to those established by law and
agreements between such Preferred Security Beneficial Owners and the
Clearing Agency and/or the Clearing Agency Participants. The clearing
Agency will make book-entry transfers among Clearing Agency
Participants and receive and transmit payments of Distributions on such
Certificates to such Clearing Agency Participants.
SECTION 9.05. Notices to Holders of Certificates. Whenever a
notice or other communication to the Holders is required to be given under this
Declaration, the relevant Trustees shall give such notices and communications to
the Holders and, with respect to any Preferred Security Certificate registered
in the name of a Clearing Agency or the nominee of a Clearing Agency, the
Trustees shall, except as set forth herein or in Rule 3a-7 with respect to the
Property Trustee, have no obligations to the Preferred Security Beneficial
Owners.
SECTION 9.06. Appointment of Successor Clearing Agency. If any
Clearing Agency elects to discontinue its services as securities depositary with
respect to the Preferred Securities, the Regular Trustees may, in their sole
discretion, appoint a successor Clearing Agency with respect to the Preferred
Securities.
SECTION 9.07. Definitive Preferred Securities Certificates. If
(a) a Clearing Agency elects to discontinue its services as securities
depositary with respect to the Preferred Securities and a successor Clearing
Agency is not appointed within 90 days after such discontinuance pursuant to
Section 9.06 or (b) the Regular Trustees elect after consultation with the
Sponsor to terminate the book-entry system through the Clearing Agency with
respect to the Preferred Securities, then upon surrender of the Certificates
representing the Book Entry Interests with respect to the Preferred Securities
by the Clearing Agency, accompanied by registration instructions, the Regular
Trustees shall cause definitive Preferred Security Certificates to be delivered
to Preferred Security Beneficial Owners in accordance with the instructions of
the Clearing Agency. Neither the Trustees nor the Trust shall be liable for any
delay in delivery of such instructions and each of them may conclusively rely
on, and shall be protected in relying on, such instructions.
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SECTION 9.08. Mutilated, Destroyed, Lost or Stolen
Certificates. If (a) any mutilated Certificates should be surrendered to the
Regular Trustees or if the Regular Trustees shall receive evidence to their
satisfaction of the destruction, loss or theft of any Certificate and (b) there
shall be delivered to the Regular Trustees such security or indemnity as may be
required by them to keep each of them harmless, then in the absence of notice
that such Certificate shall have been acquired by a bona fide purchaser, any two
Regular Trustees on behalf of the Trust shall execute and deliver, in exchange
for or in lieu of any such mutilated, destroyed, lost or stolen Certificate, a
new Certificate of like denomination. In connection with the issuance of any new
Certificate under this Section 9.08, the Regular Trustees may require the
payment of a sum sufficient to cover any tax or other governmental charge that
may be imposed in connection therewith. Any duplicate Certificate issued
pursuant to this Section shall constitute conclusive evidence of an ownership
interest in the relevant securities, as if originally issued, whether or not the
lost, stolen or destroyed Certificate shall be found at any time.
44
ARTICLE X
Limitation of Liability; Indemnification
SECTION 10.01. Liability. (a) Except as
expressly set forth in this Declaration, the Guarantee and
the terms of the Trust Securities the Sponsor:
(i) shall not be personally liable for the return of any portion
of the capital contributions (or any return thereon) of the Holders of
the Trust Securities, which shall be made solely from assets of the
Trust; and
(ii) shall not be required to pay to the Trust or to any Holder
of Trust Securities any deficit upon dissolution of the Trust or
otherwise.
(b) The Holder of the Common Securities shall be liable for
all of the debts and obligations of the Trust (other than with respect to the
Trust Securities) to the extent not satisfied out of the Trust's assets.
(c) Pursuant to Section 3803(a) of the Business Trust Act, the
Holders of the Preferred Securities shall be entitled to the same limitation of
personal liability extended to stockholders of private corporations for profit
organized under the General Corporation Law of the State of Delaware.
SECTION 10.02. Exculpation. (a) No Indemnified Person shall be
liable, responsible or accountable in damages or otherwise to the Trust or any
Covered Person for any loss, damage or claim incurred by reason of any act or
omission performed or omitted by such Indemnified Person in good faith on behalf
of the Trust and in a manner such Indemnified Person reasonably believed to be
within the scope of the authority conferred on such Indemnified Person by this
Declaration or by law, except that an Indemnified Person shall be liable for any
such loss, damage or claim incurred by reason of such Indemnified Person's gross
negligence (or, in the case of the Property Trustee, negligence) or wilful
misconduct with respect to such acts or omissions.
(b) An Indemnified Person shall be fully protected in relying
in good faith upon the records of the Trust and upon such information, opinions,
reports or
45
statements presented to the Trust by any Person as to matters the Indemnified
Person reasonably believes are within such other Person's professional or expert
competence and who has been selected with reasonable care by or on behalf of the
Trust, including information, opinions, reports or statements as to the value
and amount of the assets, liabilities, profits, losses or any other facts
pertinent to the existence and amount of assets from which Distributions to
Holders of Trust Securities might properly be paid.
SECTION 10.03. Fiduciary Duty. (a) To the extent that, at law
or in equity, an Indemnified Person has duties (including fiduciary duties) and
liabilities relating thereto to the Trust or to any other Covered Person, an
Indemnified Person acting under this Declaration shall not be liable to the
Trust or to any other Covered Person for its good faith reliance on the
provisions of this Declaration. The provisions of this Declaration, to the
extent that they restrict the duties and liabilities of an Indemnified Person
otherwise existing at law or in equity (other than the Indenture Act), are
agreed by the parties hereto to replace such other duties and liabilities of
such Indemnified Person.
(b) Unless otherwise expressly provided herein:
(i) whenever a conflict of interest exists or
arises between an Indemnified Person and any Covered
Person; or
(ii) whenever this Declaration or any other agreement
contemplated herein or therein provides that an Indemnified Person
shall act in a manner that is, or provides terms that are, fair and
reasonable to the Trust or any Holder of Trust Securities,
the Indemnified Person shall resolve such conflict of interest, take such action
or provide such terms, considering in each case the relative interest of each
party (including its own interest) to such conflict, agreement, transaction or
situation and the benefits and burdens relating to such interests, any customary
or accepted industry practices, and any applicable generally accepted accounting
practices or principles. In the absence of bad faith by the Indemnified Person,
the resolution, action or term so made, taken or provided by the Indemnified
Person shall not constitute a breach of this Declaration or any
46
other agreement contemplated herein or of any duty or obligation of the
Indemnified Person at law or in equity or otherwise.
(c) Whenever in this Declaration an Indemnified
Person is permitted or required to make a decision:
(i) in its "discretion" or under a grant of similar authority,
the Indemnified Person shall be entitled to consider such interests and
factors as it desires, including its own interests, and shall have no
duty or obligation to give any consideration to any interest of or
factors affecting the Trust or any other Person; or
(ii) in its "good faith" or under another express standard,
the Indemnified Person shall act under such express standard and shall
not be subject to any other or different standard imposed by this
Declaration or by applicable law.
SECTION 10.04. Indemnification. (a) To the fullest extent
permitted by applicable law, the Sponsor shall indemnify and hold harmless each
Indemnified Person from and against any loss, damage or claim incurred by such
Indemnified Person by reason of any act or omission performed or omitted by such
Indemnified Person in good faith on behalf of the Trust and in a manner such
Indemnified Person reasonably believed to be within the scope of authority
conferred on such Indemnified Person by this Declaration, except that no
Indemnified Person shall be entitled to be indemnified in respect of any loss,
damage or claim incurred by such Indemnified Person by reason of gross
negligence (or, in the case of the Property Trustee, negligence) or wilful
misconduct with respect to such acts or omissions.
(b) To the fullest extent permitted by applicable law,
expenses (including reasonable legal fees) incurred by an Indemnified Person in
defending any claim, demand, action, suit or proceeding shall, from time to
time, be advanced by the Sponsor prior to the final disposition of such claim,
demand, action, suit or proceeding upon receipt by the Sponsor of an undertaking
by or on behalf of the Indemnified Person to repay such amount if it shall be
determined that the Indemnified Person is not entitled to be indemnified as
authorized in Section 10.04(a).
47
SECTION 10.05. Outside Businesses. Any Covered Person, the
Sponsor, the Delaware Trustee and the Property Trustee may engage in or possess
an interest in other business ventures of any nature or description,
independently or with others, similar or dissimilar to the business of the
Trust, and the Trust and the Holders of Trust Securities shall have no rights by
virtue of this Declaration in and to such independent ventures or the income or
profits derived therefrom and the pursuit of any such venture, even if
competitive with the business of the Trust, shall not be deemed wrongful or
improper. No Covered Person, the Sponsor, the Delaware Trustee or the Property
Trustee shall be obligated to present any particular investment or other
opportunity to the Trust even if such opportunity is of a character that, if
presented to the Trust, could be taken by the Trust, and any Covered Person, the
Sponsor, the Delaware Trustee and the Property Trustee shall have the right to
take for its own account (individually or as a partner or fiduciary) or to
recommend to others any such particular investment or other opportunity. Any
Covered Person, the Delaware Trustee and the Property Trustee may engage or be
interested in any financial or other transaction with the Sponsor or any
Affiliate of the Sponsor, or may act as depositary for, trustee or agent for, or
act on any committee or body of holders of securities or other obligations of
the Sponsor or its Affiliates.
ARTICLE XI
Accounting
SECTION 11.01. Fiscal Year. The fiscal year ("Fiscal Year") of
the Trust shall be the calendar year or such other year as is required by the
Code.
SECTION 11.02. Certain Accounting Matters. (a) At all times
during the existence of the Trust, the Regular Trustees shall keep, or cause to
be kept, full books of account, records and supporting documents, which shall
reflect in reasonable detail each transaction of the Trust. The books of account
shall be maintained on the accrual method of accounting, in accordance with
generally accepted accounting principles, consistently applied. The Trust shall
use the accrual method of accounting for United States Federal income tax
purposes. The books and records of the Trust, together with a copy of this
Declaration and a
48
certified copy of the Certificate of Trust, or any amendment thereto, shall at
all times be maintained at the principal office of the Trust and shall be open
for inspection for any examination by any Holder or its duly authorized
representative for any purpose reasonably related to its interest in the Trust
during normal business hours.
(b) The Regular Trustees shall, as soon as available after the
end of each Fiscal Year of the Trust, cause to be prepared and mailed to each
Holder of Trust Securities unaudited financial statements of the Trust for such
Fiscal Year, prepared in accordance with generally accepted accounting
principles; provided that, if the Trust is required to comply with the periodic
reporting requirements of Section 13(a) or 15(d) of the Exchange Act, such
financial statements for such Fiscal Year shall be examined and reported on by a
firm of independent certified public accountants selected by the Regular
Trustees (which firm may be the firm used by the Sponsor).
(c) The Regular Trustees shall cause to be prepared and mailed
to each Holder of Trust Securities an annual United States federal income tax
information statement, on such form as is required by the Code, containing such
information with regard to the Trust Securities held by each Holder as is
required by the Code and the Treasury Regulations. Notwithstanding any right
under the Code to deliver any such statement at a later date, the Regular
Trustees shall endeavor to deliver all such statements within 30 days after the
end of each Fiscal Year of the Trust.
(d) The Regular Trustees shall cause to be prepared and filed
with the appropriate taxing authority an annual United States federal income tax
return, on such form as is required by the Code, and any other annual income tax
returns required to be filed by the Regular Trustees on behalf of the Trust with
any state or local taxing authority, such returns to be filed as soon as
practicable after the end of each Fiscal Year of the Trust.
SECTION 11.03. Banking. The Trust shall maintain one or more
bank accounts in the name and for the sole benefit of the Trust; provided,
however, that all payments of funds in respect of the Subordinated Notes held by
the Property Trustee shall be made directly to the Property Account and no other
funds from the Trust shall be deposited in the Property Account. The sole
signatories for such
49
accounts shall be designated by the Regular Trustees; provided, however, that
the Property Trustee shall designate the sole signatories for the Property
Account.
SECTION 11.04. Withholding. The Trust and the Trustees shall
comply with all withholding requirements under United States Federal, state and
local law. The Trust shall request, and the Holders shall provide to the Trust,
such forms or certificates as are necessary to establish an exemption from
withholding with respect to each Holder and any representations and forms as
shall reasonably be requested by the Trust to assist it in determining the
extent of, and in fulfilling, its withholding obligations. The Trust shall file
required forms with applicable jurisdictions and, unless an exemption from
withholding is properly established by a Holder, shall remit amounts withheld
with respect to the Holder to applicable jurisdictions. To the extent that the
Trust is required to withhold and pay over any amounts to any authority with
respect to distributions or allocations to any Holder, the amount withheld shall
be deemed to be a distribution in the amount of the withholding to the Holder.
In the event of any claimed overwithholding, Holders shall be limited to an
action against the applicable jurisdiction. If the amount to be withheld was not
withheld from a Distribution, the Trust may reduce subsequent Distributions by
the amount of such withholding.
ARTICLE XII
Amendments and Meetings
SECTION 12.01. Amendments. (a) Except as otherwise provided in
this Declaration or by any applicable terms of the Trust Securities, this
Declaration may be amended by, and only by, a written instrument executed by a
majority of the Regular Trustees; provided, however, that (i) no amendment to
this Declaration shall be made unless the Regular Trustees shall have obtained
(A) either a ruling from the Internal Revenue Service or a written unqualified
opinion of nationally recognized independent tax counsel experienced in such
matters to the effect that such amendment will not cause the Trust to be
classified for United States Federal income tax purposes as an association
taxable as a corporation or a partnership and to the effect that the Trust will
continue to be treated as a grantor trust for purposes of United States federal
income taxation
50
and (B) a written unqualified opinion of nationally recognized independent
counsel experienced in such matters to the effect that such amendment will not
cause the Trust to be an Investment company which is required to be registered
under the Investment Company Act, (ii) at such time after the Trust has issued
any Trust Securities which remain outstanding, any amendment which would
adversely affect the rights, privileges or preferences of any Holder of Trust
Securities may be effected only with such additional requirements as may be set
forth in the terms of such Trust Securities, (iii) Section 4.02, Section 9.01(c)
and this Section 12.01 shall not be amended without the consent of all the
Holders of the Trust Securities, (iv) no amendment which adversely affects the
rights, powers and privileges of the Property Trustee shall be made without the
consent of the Property Trustee, (v) Article IV shall not be amended without the
consent of the Sponsor, (vi) the rights of Holders of Common Securities under
Article V to increase or decrease the number of, and to appoint, replace or
remove, Trustees (other than a Special Regular Trustee) shall not be amended
without the consent of each Holder of Common Securities and (vii) the rights of
Holders of Preferred Securities to appoint or remove a Special Regular Trustee
shall not be amended without the consent of each Holder of Preferred Securities.
(b) Notwithstanding Section 12.02(a)(ii), this Declaration may
be amended without the consent of the Holders of the Trust Securities to (i)
cure any ambiguity, (ii) correct or supplement any provision in this Declaration
that may be defective or inconsistent with any other provision of this
Declaration, (iii) add to the covenants, restrictions or obligations of the
Sponsor [and (iv) conform to any changes in Rule 3a-7 or any change in
interpretation or application of Rule 3a-7 by the Commission, which amendment
does not adversely affect the rights, preferences or privileges of the Holders.]
SECTION 12.02. Meetings of the Holders of Trust Securities;
Action by Written Consent. (a) Meetings of the Holders of Preferred Securities
and/or Common Securities may be called at any time by the Regular Trustees (or
as provided in the terms of the Trust Securities) to consider and act on any
matter on which Holders of such class of Trust Securities are entitled to act
under the terms of this Declaration, the terms of the Trust Securities or the
rules of any stock exchange on which the Preferred Securities are listed or
admitted for trading. The Regular Trustees shall
51
call a meeting of Holders of Preferred Securities or Common Securities, if
directed to do so by Holders of at least 10% in Liquidation Amount of such class
of Trust Securities. Such direction shall be given by delivering to the Regular
Trustees one or more calls in a writing stating that the signing Holders of
Trust Securities wish to call a meeting and indicating the general or specific
purpose for which the meeting is to be called. Any Holders of Trust Securities
calling a meeting shall specify in writing the Certificates held by the Holders
of Trust Securities exercising the right to call a meeting and only those
specified Certificates shall be counted for purposes of determining whether the
required percentage set forth in the second sentence of this paragraph has been
met.
(b) Except to the extent otherwise provided in the terms of
the Trust Securities, the following provision shall apply to meetings of Holders
of Trust Securities:
(i) notice of any such meeting shall be given by mail to all
the Holders of Trust Securities having a right to vote thereat not less
than seven days nor more than 60 days prior to the date of such
meeting. Whenever a vote, consent or approval of the Holders of
securities is permitted or required under this Declaration or the rules
of any stock exchange on which the Preferred Securities are listed or
admitted for trading, such vote, consent or approval may be given at a
meeting of the Holders of Trust Securities. Any action that may be
taken at a meeting of the Holders of Trust Securities may be taken
without a meeting if a consent in writing setting forth the action so
taken is signed by Holders of Trust Securities owning not less than the
minimum aggregate Liquidation Amount of Trust Securities that would be
necessary to authorize or take such action at a meeting at which all
Holders of Trust Securities having a right to vote thereon were present
and voting. Prompt notice of the taking of action without a meeting
shall be given to the Holders of Trust Securities entitled to vote who
have not consented in writing. The Regular Trustees may specify that
any written ballot submitted to the Holders of Trust Securities for the
purpose of taking any action without a meeting shall be returned to the
Trust within the time specified by the Regular Trustees;
(ii) each Holder of a Security may authorize any
Person to act for it by proxy on all matters in which a
52
Holder of a Security is entitled to participate, including waiving
notice of any meeting or voting or participating at a meeting. No proxy
shall be valid after the expiration of 11 months from the date thereof
unless otherwise provided in the proxy. Every proxy shall be revocable
at the pleasure of the Holder of the Security executing it. Except as
otherwise provided herein or in the terms of the Trust Securities, all
matters relating to the giving, voting or validity of proxies shall be
governed by the General Corporation Law of the State of Delaware
relating to proxies, and judicial interpretations thereunder, as if the
Trust were a Delaware corporation and the Holders of the Trust
Securities were stockholders of a Delaware corporation;
(iii) each meeting of the Holders of the Trust Securities shall be
conducted by the Regular Trustees or by such other Person that the
Regular Trustees may designate; and
(iv) unless otherwise provided in the Business Trust Act, this
Declaration or the rules of any stock exchange on which the Preferred
Securities are then listed or admitted for trading, the Regular
Trustees, in their sole discretion, shall establish all other
provisions relating to meetings of Holders of Trust Securities,
including notice of the time, place or purpose of any meeting at which
any matter is to be voted on by any Holders of Trust Securities, waiver
of any such notice, action by consent without a meeting, the
establishment of a record date, quorum requirements, voting in person
or by proxy or any other matter with respect to the exercise of any
such right to vote.
ARTICLE XIII
Representations and Warranties of Property Trustee
and Delaware Trustee
(a) The Trustee that acts as initial Property Trustee
represents and warrants to the Trust and to the Sponsor at the date of this
Declaration, and each Successor Property Trustee represents and warrants to the
Trust and the Sponsor at the time of the Successor Property Trustee's acceptance
of its appointment as Property Trustee that:
53
(i) The Property Trustee is a banking corporation with trust
powers, duly organized, validly existing and in good standing under the
laws of the state of its incorporation, with trust power and authority
to execute and deliver, and to carry out and perform its obligations
under the terms of, this Declaration.
(ii) The execution, delivery and performance by the Property
Trustee of this Declaration has been duly authorized by all necessary
corporate action on the part of the Property Trustee. The Declaration
has been duly executed and delivered by the Property Trustee and
constitutes a legal, valid and binding obligation of the Property
Trustee, enforceable against it in accordance with its terms, subject
to applicable bankruptcy, reorganization, moratorium, insolvency and
other similar laws affecting creditors' rights generally and to general
principles of equity and the discretion of the court (regardless of
whether the enforcement of such remedies is considered in a proceeding
in equity or at law).
(iii) The execution, delivery and performance of this Declaration
by the Property Trustee does not conflict with or constitute a breach
of the Charter or By-laws of the Property Trustee.
(iv) No consent, approval or authorization of, or registration
with or notice to, any banking authority which supervises or regulates
the Property Trustee is required for the execution, delivery or
performance by the Property Trustee of this Declaration.
(v) The Property Trustee satisfies the
qualifications set forth in Section 5.01(c).
(b) The Trustee which acts as initial Delaware Trustee
represents and warrants to the Trust and the Sponsor at the date of this
Declaration, and each Successor Delaware Trustee represents and warrants to the
Trust and the Sponsor at the time of the Successor Delaware Trustee's acceptance
of its appointment as Delaware Trustee, that:
(i) it satisfies the qualifications set forth in
Section 5.01(a)(3);
54
(ii) it has been authorized to perform its obligations under
the Certificate of Trust and the Declaration; and
(iii) the Declaration under Delaware law constitutes a legal,
valid and binding obligation of the Delaware Trustee, enforceable
against it in accordance with its terms, subject to applicable
bankruptcy, reorganization, moratorium, insolvency, and other similar
laws affecting creditors' rights generally and to general principles of
equity and the discretion of the court (regardless of whether the
enforcement of such remedies is considered in a proceeding in equity or
at law).
ARTICLE XIV
Miscellaneous
SECTION 14.01. Notices. All notices provided for in this
Declaration shall be in writing, duly signed by the party giving such notice,
and shall be delivered, telecopied or mailed by first class mail, as follows:
(a) if given to the Trust, in care of the Regular Trustees at
the Trust's mailing address set forth below (or such other address as
the Regular Trustees on behalf of the Trust may give notice of to the
Holders of the Trust Securities):
Time Warner Financing Trust
In care of Time Warner Inc.
75 Rockefeller Plaza
New York, NY 10019
Attention of [ ],
[ ] and
[ ],
Trustees
Facsimile No.: (212)
(b) if given to the Property Trustee, at the mailing address
of the Property Trustee set forth below (or such other address as the
Property Trustee may give notice of to the Holders of the Trust
Securities):
55
[New York Trustee]
[Address]
Attention of:
Facsimile No.:
(c) if given to the Delaware Trustee, at the mailing address
of the Delaware Trustee set forth below (or such other address as the
Delaware Trustee may give notice of to the Holders of the Trust
Securities):
[Delaware Trustee]
[Address]
Attention of:
Facsimile No.:
(d) if given to the Holder of the Common Securities, at the
mailing address of the Sponsor set forth below (or such other address
as the Holder of the Common Securities may give notice of to the
Trust):
Time Warner Inc.
75 Rockefeller Center
New York, NY 10019
Attention of [Corporate Secretary]
Facsimile No.: (212)
(e) if given to any other Holder, at the address
set forth on the books and records of the Trust.
A copy of any notice to the Property Trustee or the Delaware
Trustee shall also be sent to the Trust. All notices shall be deemed to have
been given when received in person, telecopied with receipt confirmed or mailed
by first class mail, postage prepaid, except that, if a notice or other document
is refused delivery or cannot be delivered because of a changed address of which
no notice was given, such notice or other document shall be deemed to have been
delivered on the date of such refusal or inability to deliver.
SECTION 14.02. Undertaking for Costs. All
parties to this Declaration agree, and each Holder of any
56
Trust Securities by his or her acceptance thereof shall be deemed to have
agreed, that any court may in its discretion require, in any suit for the
enforcement of any right or remedy under this Declaration or in any suit against
the Property Trustee for any action taken or omitted by it as Property Trustee,
the filing by any party litigant in such suit of an undertaking to pay the costs
of such suit and that such court may in its discretion assess reasonable costs,
including reasonable attorneys' fees, against any party litigant in such suit,
having due regard to the merits and good faith of the claims or defenses made by
such party litigant; but the provisions of this Section 14.02 shall not apply to
any suit instituted by the Property Trustee, to any suit instituted by any
Holder of Preferred Securities, or group of Holders of Preferred Securities,
holding more than 10% in aggregate Liquidation Amount of the outstanding
Preferred Securities, or to any suit instituted by any Holder of Preferred
Securities for the enforcement of the payment of the principal of (or premium,
if any) or interest on the Subordinated Notes, on or after the respective due
dates expressed in such Subordinated Notes.
SECTION 14.03. Governing Law. This Declaration and the rights
of the parties hereunder shall be governed by and interpreted in accordance with
the laws of the State of Delaware and all rights and remedies shall be governed
by such laws without regard to principles of conflict of laws.
SECTION 14.04. Headings. Headings contained in this
Declaration are inserted for convenience of reference only and do not affect the
interpretation of this Declaration or any provision hereof.
SECTION 14.05. Partial Enforceability. If any provision of
this Declaration, or the application of such provision to any Person or
circumstance, shall be held invalid, the remainder of this Declaration, or the
application of such provision to persons or circumstances other than those to
which it is held invalid, shall not be affected thereby.
SECTION 14.06. Counterparts. This Declaration may contain more
than one counterpart of the signature pages and this Declaration may be executed
by the affixing of the signature of the Sponsor and each of the Trustees to one
of such counterpart signature pages. All such counterpart signature pages shall
be read as though one, and they shall
57
have the same force and effect as though all the signers had signed a single
signature page.
SECTION 14.07. Intention of the Parties. It is
the intention of the parties hereto that the Trust not be
classified for United States federal income tax purposes as
an association taxable as a corporation or partnership but
that the Trust be treated as a grantor trust for United
States federal income tax purposes. The provisions of this
Declaration shall be interpreted to further this intention
of the parties.
SECTION 14.08. Successors and Assigns. Whenever in this
Declaration any of the parties hereto is named or referred to, the successors
and assigns of such party shall be deemed to be included, and all covenants and
agreements in this Declaration by the Sponsor and the Trustees shall bind and
inure to the benefit of their respective successors and assigns, whether so
expressed.
IN WITNESS WHEREOF, the undersigned has caused these presents
to be executed as of the day and year first above written.
TIME WARNER INC.,
as Sponsor,
by
-------------------------
Name:
Title:
-------------------------
as Trustee
-------------------------
as Trustee
-------------------------
as Trustee
58
[NEW YORK TRUSTEE], as
Trustee,
by
-------------------------
Name:
Title:
[DELAWARE TRUSTEE], as
Trustee,
by:
-------------------------
Name:
Title:
EXHIBIT A
CERTIFICATE OF TRUST
OF
TIME WARNER FINANCING TRUST
This Certificate of Trust of Time Warner Financing Trust (the
"Trust"), dated June 7, 1995, is being duly executed and filed by the
undersigned, as trustees, to form a business trust under the Delaware Business
Trust Act (12 Del. C. Section 3801 et seq.).
1. Name. The name of the business trust formed hereby is Time
Warner Financing Trust.
2. Delaware Trustee. The name and business address of the
trustee of the Trust with a principal place of business in the State of Delaware
is First Chicago Delaware Inc., 1201 Market Street, Suite 1401, Wilmington,
Delaware 19801.
3. Effective Date. This Certificate of Trust shall be
effective as of its filing.
IN WITNESS WHEREOF, the undersigned, being the sole trustees
of the Trust, have executed this Certificate of Trust as of the date first above
written.
THE FIRST NATIONAL BANK OF
CHICAGO, as trustee,
by
----------------------------------
Name: Steven M. Wagner
Title: Vice President
FIRST CHICAGO DELAWARE INC.,
as Delaware Trustee,
by
----------------------------------
Name: Steven M. Wagner
Title: Vice President
2
by
----------------------------------
Peter R. Haje,
as trustee
by
----------------------------------
Richard J. Bressler,
as trustee
by
----------------------------------
Thomas W. McEnerney,
as trustee
EXHIBIT B
TERMS OF
PREFERRED SECURITIES
Pursuant to Section 7.01 of the Amended and Restated
Declaration of Trust of Time Warner Financing Trust (the "Trust") dated as of [
] , 1995 (as amended from time to time, the "Declaration"), the designations,
rights, privileges, restrictions, preferences and other terms and provisions of
the Preferred Securities are set forth below (each capitalized term used but not
defined herein having the meaning set forth in the Declaration or, to the extent
not defined therein, the Guarantee):
1. Designation and Number. Preferred Securities of the Trust
with an aggregate Liquidation Amount in the assets of the Trust of ($ ) and a
Liquidation Amount in the assets of the Trust of $[ ] per Preferred Security,
are hereby designated as "$[ ] Preferred Exchangeable Redemption Cumulative
Securities". The Preferred Security Certificates evidencing the Preferred
Securities shall be substantially in the form attached hereto as Annex I, with
such changes and additions thereto or deletions therefrom as may be required by
ordinary usage, custom or practice or to conform to the rules of any stock
exchange on which the Preferred Securities are listed. The Trust will invest the
gross proceeds from the issuance of the Preferred Securities together with the
gross proceeds from the sale to Time Warner Inc. ("Time Warner") of the Common
Securities in Subordinated Notes of Time Warner having an aggregate principal
amount equal to $ , and bearing interest at an annual percentage rate of [ ]%,
which will result in the payment of interest equal to the annual Distribution
rate on the Preferred Securities and Common Securities and having payment and
redemption provisions that correspond to the payment and redemption provisions
of the Preferred Securities and Common Securities.
2. Distributions. (a) Periodic distributions payable on each
Preferred Security will be fixed at an amount per annum of $[ ] (the "Coupon
Rate") per Preferred Security. Distributions in arrears for more than one
quarter will bear interest at the rate per annum of %1/ thereof (to the extent
permitted by law), compounded quarterly. The term "Distributions" as used in
these terms
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1/ Same as interest rate on Subordinated Notes.
2
means such periodic cash distributions and any such interest payable unless
otherwise stated. A Distribution will be made by the Property Trustee only to
the extent that interest payments are made in respect of the Subordinated Notes
held by the Property Trustee. The amount of Distributions payable for any period
will be computed (i) for any full quarterly Distribution period, on the basis of
a 360-day year of twelve 30-day months, and (ii) for any period shorter than a
full quarterly Distribution period, on the basis of the actual number of days
elapsed in such a 30- day month.
(b) Distributions on the Preferred Securities will be
cumulative, will accrue from , 1995 2/ and will be payable quarterly in arrears,
on March 30, June 30, September 30 and December 30 of each year, commencing on
September 30, 1995, except as otherwise described below, but only if and to the
extent that interest payments are made in respect of the Subordinated Notes held
by the Property Trustee.
(c) Distributions on the Preferred Securities will be payable
promptly by the Property Trustee (or other Paying Agent) upon receipt of
immediately available funds to the Holders thereof as they appear on the books
and records of the Trust on the relevant record dates, which will be the March
15, June 15, September 15 and December 15 prior to the relevant Distribution
dates, which record and payment dates correspond to the record and interest
payment dates on the Subordinated Notes. Distributions payable on any Preferred
Securities that are not punctually paid on any Distribution payment date as a
result of Time Warner having failed to make the corresponding interest payment
on the Subordinated Notes will forthwith cease to be payable to the person in
whose name such Preferred Security is registered on the relevant record date,
and such defaulted Distribution will instead be payable to the person in whose
name such Preferred Security is registered on the special record date
established by the Regular Trustees, which record date shall correspond to the
special record date or other specified date determined in accordance with the
Indenture. Subject to any applicable laws and regulations and the provisions of
the Declaration, each payment in respect of the Preferred Securities will be
made as described in paragraph 9 hereof. If any date on which Distributions are
payable on the Preferred Securities is not a Business Day, then payment of
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2/ Insert date of issue.
3
the Distribution payable on such date will be made on the next succeeding day
that is a Business Day (and without any interest or other payment in respect of
any such delay), except that if such Business Day is in the next succeeding
calendar year, such payment shall be made on the immediately preceding Business
Day, in each case with the same force and effect as if made on such date.
(d) All Distributions paid with respect to the Preferred
Securities and the Common Securities will be paid Pro Rata to the Holders
thereof entitled thereto. If an Event of Default has occurred and is continuing,
the Preferred Securities shall have a priority over the Common Securities with
respect to Distributions.
(e) In the event that there is any money or other property
held by or for the Trust that is not accounted for under the Declaration, such
money or property shall be distributed Pro Rata among the Holders of the
Preferred Securities and Common Securities.
3. Liquidation Distribution Upon Dissolution. In the event of
any voluntary or involuntary liquidation, dissolution, winding-up or termination
of the Trust, the Holders of the Preferred Securities and Common Securities at
the date of the liquidation, dissolution, winding-up or termination, as the case
may be, will be entitled to receive Pro Rata solely out of the assets of the
Trust available for distribution to Holders of Preferred Securities and Common
Securities after satisfaction of liabilities to creditors (to the extent not
satisfied by Time Warner, as provided in the Declaration), an amount equal to
the aggregate of the stated Liquidation Amount of $[ ] 3/ per Preferred Security
and Common Security plus accrued and unpaid Distributions thereon to the date of
payment (such amount being the "Liquidation Distribution"), unless, in
connection with such liquidation, dissolution, winding-up or termination, and
after satisfaction of liabilities to creditors, Subordinated Notes in an
aggregate principal amount equal to the aggregate stated Liquidation Amount of
such Preferred Securities and Common Securities and bearing accrued and unpaid
interest in an amount equal to the accrued and unpaid Distributions on, such
Preferred Securities and Common Securities, shall be distributed Pro Rata to the
Holders of the Preferred Securities and Common Securities in exchange for such
Trust Securities.
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3/ Insert issue price.
4
If, upon any such dissolution, the Liquidation Distribution
can be paid only in part because the Trust has insufficient assets available to
pay in full the aggregate Liquidation Distribution, then the amounts payable
directly by the Trust on the Preferred Securities and Common Securities shall be
paid, subject to the next paragraph, on a Pro Rata basis.
Holders of Common Securities will be entitled to receive
Liquidation Distributions upon any such dissolution Pro Rata with Holders of
Preferred Securities, except that if an Event of Default has occurred and is
continuing, the Preferred Securities shall have a priority over the Common
Securities with respect to such Liquidation Distribution.
4. Redemption and Distribution of Subordinated Notes. The
Preferred Securities and Common Securities may be redeemed only if Subordinated
Notes having an aggregate principal amount equal to the aggregate Liquidation
Amount of the Preferred Securities and Common Securities are repaid, redeemed or
distributed as set forth below:
(a) Subject to the exercise by Time Warner of the Time Warner
Exchange Right with respect to the Preferred Securities, upon the
repayment of the Subordinated Notes at the maturity thereof on December
23, 1997 (the "Mandatory Redemption Date"), each of the Preferred
Securities and Common Securities then outstanding will be redeemed Pro
Rata by the Trust, in cash, at a mandatory redemption price per Trust
Security equal to (i) the lesser of (A) $54.41 and (B) an amount equal
to the Exchange Valuation Price on the Trading Day immediately
preceding December 17, 1997 of such amount of Exchange Property (which
initially consists of shares of Hasbro Common Stock) as relates to one
Trust Security at such time to and including the Mandatory Redemption
Date plus (b) an amount equal to all accrued and unpaid distributions
on such Trust Security to and including the Mandatory Redemption Date.
(b) Subject to the exercise by Time Warner of the Time Warner
Exchange Right with respect to the Preferred Securities, upon the
redemption of the Subordinated Notes prior to the maturity thereof, in
whole or in part, at any time or from time to time, the proceeds of
such redemption will be promptly applied to redeem Pro Rata Preferred
Securities and Common Securities having an aggregate Liquidation Amount
equal
5
to the aggregate principal amount of the Subordinated Notes so
redeemed, upon not less than 20 nor more than 45 Business Days' notice,
at the Call Price in effect on the date of redemption (the "Optional
Redemption Date"), plus cash in an amount equal to all accrued and
unpaid distributions on such Trust Security, whether or not declared,
for the period to and including the Optional Redemption Date. The "Call
Price" is initially equal to $[ ] per Trust Security, declining by $[ ]
on each day following the date of issue of the Trust Securities
(computed on the basis of a 360-day year of twelve 30-day months) to $[
] on October 23, 1997, and equal to $54.41 thereafter. The date of any
such redemption of Preferred Securities and Common Securities shall be
established to coincide with the redemption date of the Subordinated
Notes.
(c) If fewer than all the outstanding Preferred Securities and
Common Securities are to be so redeemed, the Preferred Securities and
the Common Securities will be redeemed Pro Rata and the Preferred
Securities to be redeemed will be redeemed as described in paragraph
4(g)(ii) below. If a partial redemption would result in the delisting
of the Preferred Securities by any national securities exchange or
other organization on which the Preferred Securities are then listed,
Time Warner pursuant to the Indenture will only redeem Subordinated
Notes in whole and, as a result, the Trust may only redeem the
Preferred Securities in whole.
(d) (i) If, at any time, a Tax Event or an Investment Company
Event (each as hereinafter defined, and each a "Special Event") shall
occur and be continuing, Time Warner may elect (A) to direct the
Regular Trustees to dissolve the Trust and cause Subordinated Notes
held by the Property Trustee having an aggregate principal amount equal
to the aggregate stated Liquidation Amount of, and accrued and unpaid
interest equal to accrued and unpaid Distributions on, and having the
same record date for payment as, the Preferred Securities and the
Common Securities, to be distributed to the Holders of the Preferred
Securities and Common Securities on a Pro Rata basis in liquidation of
such Holders' interests in the Trust, (B) to redeem the Subordinated
Notes in accordance with the Indenture and as described under paragraph
(ii) below or (C) in the case of a Tax Event, not to redeem the
Subordinated Notes but to indemnify the Trust for all taxes payable by
it as a result of such Tax Event,
6
within 90 days following the occurrence of such Special Event (the
"90-Day Period"); provided that, if and as long as at the time there is
available to the Trust the opportunity to eliminate, within the 90 Day
Period, the Special Event by taking some ministerial action, such as
filing a form or making an election, or pursuing some other similar
reasonable measure that has no adverse effect on the Trust, Time
Warner, or the Holders of the Preferred Securities (a "Ministerial
Action"), the Trust will pursue such measure in lieu of dissolution or
redemption; provided further that Time Warner shall have no right to
redeem the Subordinated Notes while the Regular Trustees on behalf of
the Trust are pursuing such Ministerial Action, provided, however, that
in the case of the occurrence of a Tax Event, as a condition of any
such dissolution and distribution, the Regular Trustees shall have
received an opinion of a nationally recognized independent tax counsel
experienced in such matters (a "No Recognition Opinion"), which opinion
may rely on any then applicable published revenue ruling of the
Internal Revenue Service, to the effect that the Holders of the
Preferred Securities will not recognize any gain or loss for United
States Federal income tax purposes as a result of the dissolution of
the Trust and distribution of Subordinated Notes; provided further,
that if dissolution of the Trust and distribution of the Subordinated
Notes to the holders of the Trust Securities would eliminate the
condition causing the Tax Event or the Investment Company Event and all
other conditions to such dissolution and distribution have been
satisfied, the Trust will not be permitted to redeem the Subordinated
Notes at the Special Redemption Price; and provided further, that Time
Warner shall not be permitted to pursue any of the above alternatives
if, after giving effect to such alternative, the condition giving rise
to such Tax Event (other than the condition described in clause (iv)
above) or Investment Company Event would not be eliminated.
(ii) Upon the occurrence and continuation of a Tax Event or an
Investment Company Event Time Warner shall have the right at any time,
upon not less than 20 nor more than 45 Business Days' notice, to redeem
the Subordinated Notes in whole (but not in part), within the 90-Day
Period, for cash, in which case the Trust shall redeem in cash Trust
Securities having an aggregate Liquidation Amount equal to the
aggregate principal amount of the Subordinated Notes so redeemed,
7
at a price per Trust Security equal to (1) the lesser of (x) $54.41 and
(y) an amount equal to the Exchange Valuation Price on the Trading Day
immediately preceding such Special Redemption Date of such amount of
Exchange Property as relates to one Trust Security at such time, plus
(2) an amount initially equal to $[ ] per Trust Security, declining by
$[ ] on each day following the issue date (computed on the basis of a
360-day year of twelve 30-day months) to $0 on October 23, 1997 and
thereafter (such price the "Special Redemption Price") plus an amount
equal to all accrued and unpaid distributions on such Trust Security to
and including the Special Redemption Date. The Common Securities will
be redeemed Pro Rata with the Preferred Securities, except if an Event
of Default under the Indenture has occurred and is continuing, the
Preferred Securities will have a priority over the Common Securities
with respect to payment of the Special Redemption Price.
(iii) "Tax Event" means that the Regular Trustees shall have
obtained an opinion of nationally recognized independent tax counsel
experienced in such matters (a "Dissolution Tax Opinion") to the effect
that on or after [ ], 1995, 4/ as a result of (A) any amendment to, or
change (including any announced prospective change) in, the laws (or
any regulations thereunder) of the United States or any political
subdivision or taxing authority thereof or therein, (B) any amendment
to, or change in, an interpretation or application of any such laws or
regulations by any legislative body, court, governmental agency or
regulatory authority (including the enactment of any legislation and
the publication of any judicial decision or regulatory determination),
(C) any interpretation or pronouncement that provides for a position
with respect to such laws or regulations that differs from the
theretofore generally accepted position or (D) any action taken by any
governmental agency or regulatory authority, which amendment or change
is enacted, promulgated, issued or announced or which interpretation or
pronouncement is issued or announced or which action is taken, in each
case on or after [ ], 1995, 5/ there is more than an
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4 Insert date of prospectus.
5 Insert date of prospectus.
8
insubstantial risk that (1) the Trust is, or will be within 90 days of
the date thereof, subject to United States Federal income tax with
respect to income accrued or received on the Subordinated Notes, (2)
more than [75]% of the interest payable by Time Warner to the Trust on
the Subordinated Notes is not, or within 90 days of the date thereof
will not be, deductible by Time Warner for United States Federal income
tax purposes, (3) the Trust is, or will be within 90 days of the date
thereof, subject to more than a de minimis amount of taxes, duties or
other governmental charges or (4) as a result of the issuance of the
Preferred Securities and/or the Subordinated Notes Time Warner would be
treated as having disposed of the Hasbro Common Stock owned by it for
United States Federal income tax purposes.
(iv) "Investment Company Event" means that the Regular
Trustees shall have received an opinion of nationally recognized
independent counsel experienced in practice under the Investment
Company Act that, as a result of the occurrence of a change in law or
regulation or a written change in interpretation or application of law
or regulation by any legislative body, court, governmental agency or
regulatory authority (a "Change in 1940 Act Law"), there is more than
an insubstantial risk that the Trust is or will be considered an
Investment Company which is required to be registered under the
Investment Company Act, which Change in 1940 Act Law becomes effective
on or after [ ], 1995. 6/
(v) On the date fixed for any distribution of Subordinated
Notes, upon dissolution of the Trust, (i) the Preferred Securities will
no longer be deemed to be outstanding, (ii) neither the Trust nor Time
Warner shall have any further obligation to the holders of the
Preferred Securities with respect to the Preferred Securities or under
the Guarantee, (iii) the Depositary or its nominee, as the record
holder of the Preferred Securities, will receive a registered global
certificate or certificates representing the Subordinated Notes to be
delivered upon such distribution and (iv) certificates representing
Preferred Securities will be deemed to represent beneficial interests
in the Subordinated Notes having
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6/ Insert date of prospectus.
9
an aggregate principal amount equal to the aggregate stated Liquidation
Amount of, and bearing accrued and unpaid interest equal to accrued and
unpaid Distributions on, such Preferred Securities until such
certificates are presented to Time Warner or its agent for transfer or
reissuance.
(e) The Trust may not redeem fewer than all the outstanding
Preferred Securities on any Optional Redemption Date (it being
understood that at any other time the Preferred Securities may be
redeemed only in whole unless all accrued and unpaid Distributions have
been or are concurrently being paid on all Preferred Securities for all
quarterly Distribution periods terminating on or prior to the
applicable Optional Redemption Date.
(f) If Subordinated Notes are distributed to Holders of the
Preferred Securities, Time Warner, pursuant to the terms of the
Indenture, will use its best efforts to have the Subordinated Notes
listed on the New York Stock Exchange or on such other exchange as the
Preferred Securities were listed immediately prior to the distribution
of the Subordinated Notes.
(g) (i) Notice of any redemption of, or notice of distribution
of Subordinated Notes in exchange for, the Preferred Securities and
Common Securities (a "Redemption/ Distribution Notice") will be given
by the Regular Trustees on behalf of the Trust by mail to each Holder
of Preferred Securities and Common Securities to be redeemed or
exchanged not less than 20 nor more than 45 Business Days prior to the
date fixed for redemption or exchange thereof. For purposes of the
calculation of the date of redemption or exchange and the dates on
which notices are given pursuant to this paragraph (g)(i), a
Redemption/Distribution Notice shall be deemed to be given on the day
such notice is first mailed by first- class mail, postage prepaid, to
Holders of Preferred Securities and Common Securities. Each Redemption/
Distribution Notice shall be addressed to the Holders of Preferred
Securities and Common Securities at the address of each such Holder
appearing in the books and records of the Trust. No defect in the
Redemption/ Distribution Notice or in the mailing of either thereof
with respect to any Holder shall affect the validity of the redemption
or exchange proceedings with respect to any other Holder.
10
(ii) In the event that fewer than all the outstanding
Preferred Securities are to be redeemed, the Preferred Securities to be
redeemed will be redeemed Pro Rata from each Holder of Preferred
Securities [and, in respect of Preferred Securities registered in the
name of and held of record by DTC (or successor Clearing Agency) Pro
Rata from each Clearing Agency Participant (subject to adjustment to
eliminate fractional Preferred Securities)].
(iii) Payment of the Redemption Payment Amount in respect of
each Preferred Security, together with any accrued and unpaid
distributions thereon, is conditioned upon delivery or book-entry
transfer of such Preferred Security (together with necessary
endorsements) to the Property Trustee at any time (whether prior to, on
or after the relevant Redemption Payment Date) after the
Redemption/Distribution Notice is given (to the extent such notice is
required). Payment of the Redemption Payment Amount, together with any
accrued and unpaid distributions on each Preferred Security, will be
made by the delivery of cash no later than the applicable Redemption
Payment Date with respect to such Preferred Security or, if later, the
time of delivery or transfer of such Preferred Security.
(iv) If the Trust gives a Redemption/ Distribution Notice in
respect of a redemption of Preferred Securities as provided in this
paragraph 4 (which notice will be irrevocable), unless Time Warner
shall have exercised the Time Warner Exchange Right, then immediately
prior to the close of business on the redemption date, so long as Time
Warner has paid to the Property Trustee in immediately available funds
a sufficient amount of cash in connection with the related redemption
or maturity of the Subordinated Notes, Distributions will cease to
accrue on the Preferred Securities called for redemption, such
Preferred Securities will no longer be deemed to be outstanding and all
rights of Holders of such Preferred Securities so called for redemption
will cease, except the right of the Holders of such Preferred
Securities to receive the Redemption Price, but without interest on
such Redemption Price. Neither the Trustees nor the Trust shall be
required to register or cause to be registered the transfer of any
Preferred Securities which have been so called for redemption. If any
date fixed for redemption of Preferred Securities is not a
11
Business Day, then payment of the Redemption Price payable on such date
will be made on the next succeeding day that is a Business Day (and
without any interest or other payment in respect of any such delay)
except that, if such Business Day falls in the next calendar year, such
payment will be made on the immediately preceding Business Day, in each
case with the same force and effect as if made on such date fixed for
redemption. If payment of the Redemption Price in respect of Preferred
Securities is improperly withheld or refused and not paid either by the
Property Trustee or by Time Warner pursuant to the Preferred Securities
Guarantee, Distributions on such Preferred Securities will continue to
accrue, from the original redemption date to the date of payment, in
which case the actual payment date will be considered the date fixed
for redemption for purposes of calculating the Redemption Price.
(v) Redemption/Distribution Notices shall be sent
by the Regular Trustees on behalf of the Trust to the
Holders of the Preferred Securities.
(vi) Upon the date of dissolution of the Trust and
distribution of Subordinated Notes as a result of the occurrence of a
Special Event, Preferred Security Certificates shall be deemed to
represent beneficial interests in the Subordinated Notes so
distributed, and the Preferred Securities will no longer be deemed
outstanding and may be canceled by the Regular Trustees. The
Subordinated Notes so distributed shall have an aggregate principal
amount equal to the aggregate Liquidation Amount of the Preferred
Securities so distributed.
(vii) Subject to the foregoing and applicable law (including,
without limitation, United States Federal securities laws), Time Warner
or any of its affiliates may at any time and from time to time purchase
outstanding Preferred Securities by tender, in the open market or by
private agreement.
5. Voting Rights. (a) Except as provided under paragraph 5(b)
below and as otherwise required by law and the Declaration, the Holders of the
Preferred Securities will have no voting rights.
(b) (i) If (A) the Trust (1) fails to pay Distributions in
full on the Preferred Securities and such
12
failure continues unremedied for 60 days or (2) fails to pay the Redemption
Payment Amount of any PERCS to be redeemed on the applicable Redemption Payment
Date; or (ii) an Event of Default occurs and is continuing (each an "Appointment
Event"), then the Holders of the Preferred Securities, acting as a single class,
will be entitled by the vote of Holders of Preferred Securities representing a
Majority in Liquidation Amount of the Preferred Securities to appoint a Special
Regular Trustee in accordance with Section 5.02(a)(ii)(B) of the Declaration.
Any Holder of Preferred Securities (other than the Sponsor or any Affiliate of
the Sponsor) will have the right to nominate any Person to be appointed as
Special Regular Trustee. Not later than 30 days after such right to appoint a
Special Regular Trustee arises, the Regular Trustees will convene a meeting for
the purpose of appointing a Special Regular Trustee. If the Regular Trustees
fail to convene such meeting within such 30-day period, the Holders of Preferred
Securities representing not less than 10% in Liquidation Amount of the
outstanding Preferred Securities will be entitled to convene such meeting in
accordance with Section 12.02 of the Declaration. The record date for such
meeting will be the close of business on the Business Day next preceding the day
on which notice of the meeting is sent to Holders of Preferred Securities. The
provisions of the Declaration relating to the convening and conduct of the
meetings of the Holders will apply with respect to any such meeting. If, at any
such meeting, Holders of less than a Majority in Liquidation Amount of Preferred
Securities entitled to vote for the appointment of a Special Regular Trustee
vote for such appointment, no Special Regular Trustee shall be appointed. Any
Special Regular Trustee may be removed without cause at any time by the Holders
of Preferred Securities representing a Majority in Liquidation Amount of the
Preferred Securities in accordance with Section 5.02(a)(ii)(B) of the
Declaration. The Holders of 10% in Liquidation Amount of the Preferred
Securities will be entitled to convene such a meeting to remove the Special
Regular Trustee in accordance with Section 12.02 of the Declaration. The record
date for such meeting will be the close of business on the Business Day next
preceding the day on which notice of the meeting is sent to Holders of Preferred
Securities. Any Special Regular Trustee appointed shall cease to be a Special
Regular Trustee as provided in Section 5.02(c) of the Declaration.
Notwithstanding the appointment of any such Special Regular Trustee, Time Warner
shall retain all its rights under the Indenture.
13
(ii) If any proposed amendment to the Declaration provides
for, or the Regular Trustees otherwise propose to effect (A) any action that
would adversely affect the powers, preferences or special rights of the Trust
Securities, whether by way of amendment to the Declaration or otherwise, or (B)
the dissolution, winding-up or termination of the Trust, other than in
connection with the distribution of Subordinated Notes held by the Property
Trustee, upon the occurrence of a Special Event or in connection with the
redemption of Preferred Securities as a consequence of a redemption of
Subordinated Notes, then the Holders of outstanding Trust Securities will be
entitled to vote on such amendment or proposal as a class and such amendment or
proposal shall not be effective except with the approval of the Holders of Trust
Securities representing 66- 2/3% in Liquidation Amount of Trust Securities
affected thereby; provided, however, (1) if any amendment or proposal referred
to in clause (A) above would adversely affect only the Preferred Securities or
the Common Securities, then only the affected class will be entitled to vote on
such amendment or proposal and such amendment or proposal shall not be effective
except with the approval of 66-2/3% in Liquidation Amount of such class of Trust
Securities, (2) the rights of Holders of Preferred Securities under Article V of
the Declaration to appoint and remove a Special Regular Trustee shall not be
amended without the consent of each Holder of Preferred Securities, and (3)
amendments to the Declaration shall be subject to such further requirements as
are set forth in Sections 12.01 and 12.02 of the Declaration.
(iii) In the event the consent of the Property Trustee, as the
holder of the Subordinated Notes, is required under the Indenture with respect
to any amendment, modification or termination of the Indenture or the
Subordinated Notes, the Property Trustee shall request the written direction of
the Holders of the Trust Securities with respect to such amendment, modification
or termination. The Property Trustee shall vote with respect to such amendment,
modification or termination as directed by a Majority in Liquidation Amount of
the Trust Securities voting together as a single class; provided that where such
amendment, modification or termination of the Indenture requires the consent or
vote of (A) holders of Subordinated Notes representing a specified percentage
greater than a majority in principal amount of the Subordinated Notes or (B)
each holder of Subordinated Notes, the Property Trustee may only vote with
respect to that amendment, modification or termination as directed by, in the
case of clause (A)
PAGE>
14
above, the vote of Holders of Trust Securities representing such specified
percentage of the aggregate Liquidation Amount of the Trust Securities, or, in
the case of clause (B) above, each Holder of Trust Securities; and provided
further that the Property Trustee shall be under no obligation to take any
action in accordance with the directions of the Holders of Trust Securities
unless the Property Trustee shall have received, at the expense of the Sponsor,
an opinion of nationally recognized independent tax counsel recognized as expert
in such matters to the effect that such action will not result in the Trust
being treated as an association taxable as a corporation or a partnership for
United States Federal income tax purposes and that, following such action, each
holder of Trust Securities will be treated as owning an undivided beneficial
interest in the Subordinated Notes.
(iv) Subject to Section 2.06 of the Declaration, and the
provisions of this and the next succeeding paragraph, the Holders of a Majority
in Liquidation Amount of the Preferred Securities, voting separately as a class,
shall have the right to (A) on behalf of all Holders of Preferred Securities,
waive any past default that is waivable under the Declaration (subject to, and
in accordance with the Declaration) and (B) direct the time, method, and place
of conducting any proceeding for any remedy available to the Property Trustee,
or to direct the exercise of any trust or power conferred upon the Property
Trustee under the Declaration, including the right to direct the Property
Trustee, as the holder of the Subordinated Notes, to (1) direct the time, method
and place of conducting any proceeding for any remedy available to the Indenture
Trustee, or exercising any trust or power conferred on the Indenture Trustee
with respect to the Subordinated Notes, (2) waive any past default that is
waivable under Section 6.06 of the Indenture or (3) exercise any right to
rescind or annul a declaration that the principal of all the Subordinated Notes
shall be due and payable; provided that where the taking of any action under the
Indenture requires the consent or vote of (x) holders of Subordinated Notes
representing a specified percentage greater than a majority in principal amount
of the Subordinated Notes or (y) each holder of Subordinated Notes, the Property
Trustee may only take such action if directed by, in the case of clause (x)
above, the vote of Holders of Preferred Securities representing such specified
percentage of the aggregate Liquidation Amount of the Preferred Securities, or,
in the case of clause (y) above, each Holder of Preferred Securities. The
Property Trustee shall not
15
revoke any action previously authorized or approved by a vote of the Holders of
the Preferred Securities. Other than with respect to directing the time, method
and place of conducting any proceeding for any remedy available to the Property
Trustee or the Indenture Trustee as set forth above, the Property Trustee shall
be under no obligation to take any of the foregoing actions at the direction of
the Holders of Preferred Securities unless the Property Trustee shall have
received, at the expense of the Sponsor, an opinion of nationally recognized
independent tax counsel recognized as expert in such matters to the effect that
such action will not result in the Trust being treated as an association taxable
as a corporation or a partnership for United States Federal income tax purposes
and that, following such action, each holder of Trust Securities will be treated
as owning an undivided beneficial interest in the Subordinated Notes. If the
Property Trustee fails to enforce its rights under the Declaration (including
its rights, powers and privileges as a holder of the Subordinated Notes under
the Indenture), any Holder of Preferred Securities may, after a period of 30
days has elapsed from such Holder's written request to the Property Trustee to
enforce such rights, institute a legal proceeding directly against Time Warner
to enforce the Property Trustee's rights under the Declaration, without first
instituting a legal proceeding against the Property Trustee or any other Person.
(v) A waiver of an Indenture Event of Default by the Property
Trustee at the direction of the Holders of the Preferred Securities will
constitute a waiver of the corresponding Event of Default under the Declaration
in respect of the Trust Securities.
(vi) Any required approval or direction of Holders of
Preferred Securities may be given at a separate meeting of Holders of Preferred
Securities convened for such purpose, at a meeting of all of the Holders of
Trust Securities or pursuant to written consent. The Regular Trustees will cause
a notice of any meeting at which Holders of Preferred Securities are entitled to
vote, or of any matter upon which action by written consent of such Holders is
to be taken, to be mailed to each Holder of record of Preferred Securities. Each
such notice will include a statement setting forth (A) the date of such meeting
or the date by which such action is to be taken, (B) a description of any
resolution proposed for adoption at such meeting on which such Holders are
entitled to vote or of such matter
16
upon which written consent is sought and (C) instructions for the delivery of
proxies or consents.
(vii) No vote or consent of the Holders of Preferred
Securities will be required for (A) the Trust to redeem and cancel Preferred
Securities in accordance with the Declaration and (B) Time Warner to exercise
the Time Warner Exchange Right.
(viii) Notwithstanding that Holders of Preferred Securities
are entitled to vote or consent under any of the circumstances described above,
any of the Preferred Securities at such time that are owned by Time Warner or by
any entity directly or indirectly controlling or controlled by or under direct
or indirect common control with Time Warner shall not be entitled to vote or
consent and shall, for purposes of such vote or consent, be treated as if they
were not outstanding.
(ix) Except as provided in this paragraph 5, Holders of the
Preferred Securities will have no rights to increase or decrease the number of
Trustees or to appoint, remove or replace a Trustee, which voting rights are
vested solely in the Holders of the Common Securities.
6. Pro Rata Treatment. A reference in these terms of the
Preferred Securities to any payment, distribution or treatment as being "Pro
Rata" shall mean pro rata to each Holder of Trust Securities according to the
aggregate Liquidation Amount of the Trust Securities held by the relevant Holder
in relation to the aggregate Liquidation Amount of all Trust Securities
outstanding unless, in relation to a payment, an Event of Default has occurred
and is continuing, in which case any funds available to make such payment shall
be paid first to each Holder of the Preferred Securities pro rata according to
the aggregate Liquidation Amount of Preferred Securities held by the relevant
Holder relative to the aggregate Liquidation Amount of all Preferred Securities
outstanding, and only after satisfaction of all amounts owed to the Holders of
the Preferred Securities, to each Holder of Common Securities pro rata according
to the aggregate Liquidation Amount of Common Securities held by the relevant
Holder relative to the aggregate Liquidation Amount of all Common Securities
outstanding.
7. Ranking. The Preferred Securities rank pari passu and
payment thereon will be made Pro Rata with, the Common Securities except that
where an Event of Default
17
occurs and is continuing, the rights of Holders of Preferred Securities to
payment in respect of Distributions and payments upon liquidation, redemption or
otherwise rank in priority to the rights of holders of the Common Securities.
8. Mergers, Consolidations or Amalgamations. The Trust may not
consolidate, amalgamate, merge with or into, or be replaced by, or convey,
transfer or lease its properties and assets to, any corporation or other body.
9. Transfer, Exchange, Method of Payments. Payment of
Distributions and payments on redemption of the Preferred Securities will be
payable, the transfer of the Preferred Securities will be registrable, and
Preferred Securities will be exchangeable for Preferred Securities of other
denominations of a like aggregate Liquidation Amount, at the principal corporate
trust office of the Property Trustee in The City of New York; provided that
payment of Distributions may be made at the option of the Regular Trustees on
behalf of the Trust by check mailed to the address of the persons entitled
thereto and that the payment on redemption of any Preferred Security will be
made only upon surrender of such Preferred Security to the Property Trustee.
10. Acceptance of Indenture and Preferred Guarantee. Each
Holder of Preferred Securities, by the acceptance thereof, agrees to the
provisions of (i) the Preferred Guarantee, including the subordination
provisions therein and (ii) the Indenture and the Subordinated Notes, including
the subordination provisions of the Indenture.
11. No Preemptive Rights. The Holders of Preferred Securities
shall have no preemptive rights to subscribe to any additional Preferred
Securities or Common Securities.
12. Miscellaneous. These terms shall constitute a part of the
Declaration. The Trust will provide a copy of the Declaration, the Guarantee and
the Indenture to a Holder without charge on written request to the Trust at its
principal place of business.
13. Time Warner Exchange Right. The Holders of Preferred
Securities acknowledge the rights of Time Warner in connection with the Time
Warner Exchange Right as set forth in the Guarantee.
Annex I
Certificate Number Number of Preferred Securities
B-1
CUSIP NO. [ ]
Certificate Evidencing Preferred Securities
of
Time Warner Financing Trust
$[ ] Preferred Exchangeable
Redemption Cumulative Securities
Time Warner Financing Trust, a statutory business trust formed
under the laws of the State of Delaware (the "Trust"), hereby certifies that
(the "Holder") is the registered owner of ( ) preferred securities of the Trust
representing undivided beneficial interests in the assets of the Trust
designated the $[ ] Preferred Exchangeable Redemption Cumulative Securities (the
"Preferred Securities"). The Preferred Securities are transferable on the books
and records of the Trust, in person or by a duly authorized attorney, upon
surrender of this certificate duly endorsed and in proper form for transfer. The
designations, rights, privileges, restrictions, preferences and other terms and
provisions of the Preferred Securities are set forth in, and this certificate
and the Preferred Securities represented hereby are issued and shall in all
respects be subject to the terms and provisions of, the Amended and Restated
Declaration of Trust of the Trust dated as of , 1995, as the same may be amended
from time to time (the "Declaration") including the designation of the terms of
Preferred Securities as set forth in Exhibit B thereto. The Preferred Securities
and the Common Securities issued by the Trust pursuant to the Declaration
represent undivided beneficial interests in the assets of the Trust, including
the Subordinated Notes (as defined in the Declaration) issued by Time Warner
Inc., a Delaware corporation ("Time Warner"), to the Trust pursuant to the
Indenture referred to in the Declaration. The Holder is entitled to the benefits
of the Guarantee Agreement of Time Warner dated as of , 1995 (the "Guarantee")
to the extent provided therein. The Trust will furnish a copy of the
Declaration, the Guarantee and the Indenture to the Holder without charge upon
written request to the Trust at its principal place of business or registered
office.
2
The Holder of this Certificate, by accepting this Certificate,
is deemed to have (i) agreed to the terms of the Indenture and the Subordinated
Notes, including that the Subordinated Notes are (a) subordinate and junior in
right of payment to all Senior [Indebtedness] (as defined in the Indenture) as
and to the extent provided in the Indenture [and pari passu in right of payment
with Time Warner's outstanding 8-3/4% Convertible Subordinated Debentures due
2015] and (ii) agreed to the terms of the Guarantee, including that the
Guarantee is (a) subordinate and junior in right of payment to all other
liabilities of Time Warner, including the Subordinated Notes, except those made
pari passu or subordinate by their terms, (b) pari passu with the most senior
preferred stock issued from time to time, by Time Warner and any guarantee now
or hereafter entered into by Time Warner in respect of any such preferred stock
and (c) senior to all common stock now or hereafter issued by Time Warner and to
any guarantee now or hereafter entered into by Time Warner in respect of any of
its common stock.
Upon receipt of this certificate, the Holder is bound by the
Declaration and is entitled to the benefits thereunder.
IN WITNESS WHEREOF, the Trustees of the Trust have executed
this certificate this day of , 1995.
TIME WARNER FINANCING TRUST,
by
________________________, as trustee
Name:
Title: Trustee
by
________________________, as trustee
Name:
Title: Trustee
3
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned assigns and transfers this Preferred
Security to:
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Insert assignee's social security or tax identification number)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Insert address and zip code of assignee)
and irrevocably appoints
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
agent to transfer this Preferred Security Certificate on the
books of the Trust. The agent may substitute another to act
for him or her.
Date: ______________________
Signature: _________________
(Sign exactly as your name appears on the other side of this
Preferred Security Certificate)
EXHIBIT C
TERMS OF
COMMON SECURITIES
Pursuant to Section 7.01 of the Amended and Restated
Declaration of Trust of Time Warner Financing Trust (the "Trust") dated as of
[July] , 1995 (as amended from time to time, the "Declaration"), the
designations, rights, privileges, restrictions, preferences and other terms and
provisions of the Common Securities are set forth below (each capitalized term
used but not defined herein having the meaning set forth in the Declaration):
SECTION 1. Designation and Number. Common Securities of the
Trust with an aggregate Liquidation Amount in the assets of the Trust of ($ )
and a Liquidation Amount in the assets of the Trust of $[ ] per Common Security,
are hereby designated as "$[ ] Common Securities". The Common Security
Certificates evidencing the Common Securities shall be substantially in the form
attached hereto as Annex I, with such changes and additions thereto or deletions
therefrom as may be required by ordinary usage, custom or practice. The Common
Securities are to be issued and sold to Time Warner Inc. ("Time Warner") in
consideration of $[ ] in cash. The Trust will invest the gross proceeds from the
issuance of the Common Securities together with the gross proceeds from the
issuance of the Preferred Securities in Subordinated Notes of Time Warner having
an aggregate principal amount equal to $[ ], and bearing interest at an annual
percentage rate equal to the annual distribution rate on the Preferred
Securities and Common Securities and having payment and redemption provisions
that correspond to the payment and redemption provisions of the Preferred
Securities and Common Securities.
SECTION 2. Distributions. (a) Periodic distributions payable
on each Common Security will be fixed at a rate per annum of $[ ] (the "Coupon
Rate") per Common Security. Distributions in arrears for more than one quarter
will bear interest at the rate per annum of % thereof (to the extent permitted
by applicable law), compounded quarterly. The term "Distributions" as used in
these terms means such periodic cash distributions and any such interest payable
unless otherwise stated. A Distribution will be made by the Property Trustee
only to the extent that interest payments are made in respect of the
Subordinated Notes held by the Property Trustee. The amount of Distributions
payable for any period will be computed
2
(i) for any full quarterly Distribution period, on the basis of a 360-day year
of twelve 30-day months, and for any period shorter than a full quarterly
Distribution period, on the basis of the actual number of days elapsed in such a
30- day month.
(b) Distributions on the Common Securities will be cumulative,
will accrue from the first day following [ ], 1995, 1/ and will be payable
quarterly in arrears, on March 30, June 30, September 30 and December 30 of each
year, commencing on September 30, 1995, except as otherwise described below, but
only if and to the extent that interest payments are made in respect of the
Subordinated Notes held by the Property Trustee.
(c) Distributions on the Common Securities will be payable
promptly by the Property Trustee (or other Paying Agent) upon receipt of
immediately available funds to the Holders thereof as they appear on the books
and records of the Trust on the relevant record dates which will be the March
15, June 15, September 15 and December 15 prior to the relevant Distribution
dates which record and payment dates correspond to the record and interest
payment dates on the Subordinated Notes. Distributions payable on any Common
Securities that are not punctually paid on any Distribution date as a result of
Time Warner having failed to make the corresponding interest payment on the
Subordinated Notes will forthwith cease to be payable to the person in whose
name such Common Security is registered on the relevant record date, and such
defaulted Distribution will instead be payable to the person in whose name such
Common Security is registered on the special record date established by the
Regular Trustees, which record date shall correspond to the special record date
or other specified date determined in accordance with the Indenture. Subject to
any applicable laws and regulations and the provisions of the Declaration, each
payment in respect of the Common Securities will be made as described in
paragraph 9 hereof. If any date on which Distributions are payable on the Common
Securities is not a Business Day, then payment of the Distribution payable on
such date will be made on the next succeeding day that is a Business Day (and
without any interest or other payment in respect of any such delay), except that
if such Business Day is in the next succeeding calendar year, such payment shall
- --------
1/ Insert date of issue.
3
be made on the immediately preceding Business Day, in each case with the same
force and effect as if made on such date.
(d) All Distributions paid with respect to the Common
Securities and the Preferred Securities will be paid Pro Rata to the Holders
thereof entitled thereto. If an Event of Default has occurred and is continuing,
the Preferred Securities shall have a priority over the Common Securities with
respect to Distributions.
(e) In the event that there is any money or other property
held by or for the Trust that is not accounted for under the Declaration, such
money or property shall be distributed Pro Rata among the Holders of the
Preferred Securities and Common Securities.
3. Liquidation Distribution Upon Dissolution. In the event of
any voluntary or involuntary liquidation, dissolution, winding-up or termination
of the Trust, the Holders of the Preferred Securities and Common Securities at
the date of the liquidation, dissolution, winding-up or termination, as the case
may be, will be entitled to receive Pro Rata solely out of the assets of the
Trust available for distribution to Holders of Preferred Securities and Common
Securities, after satisfaction of liabilities to creditors (to the extent not
satisfied by Time Warner, as provided in the Declaration), an amount equal to
the aggregate of the stated Liquidation Amount of $[ ] 2/ per Preferred Security
and Common Security plus accrued and unpaid Distributions thereon to the date of
payment (such amount being the "Liquidation Distribution"), unless, in
connection with such liquidation, dissolution, winding-up or termination, and
after satisfaction of liabilities to creditors, Subordinated Notes in an
aggregate principal amount equal to the aggregate stated Liquidation Amount of
such Preferred Securities and Common Securities bearing accrued and unpaid
interest in an amount equal to the accrued and unpaid Distributions on, such
Preferred Securities and Common Securities, shall be distributed pro rata to the
Holders of the Preferred Securities and Common Securities in exchange for such
Securities.
If, upon any such dissolution, the Liquidation Distribution
can be paid only in part because the Trust has insufficient assets available to
pay in full the aggregate
- --------
2/ Insert issue price.
4
Liquidation Distribution, then the amounts payable directly by the Trust on the
Preferred Securities and Common Securities shall be paid, subject to the next
paragraph, on a pro rata basis.
Holders of Common Securities will be entitled to receive
Liquidation Distributions upon any such dissolution Pro Rata with Holders of
Preferred Securities, except that if an Event of Default has occurred and is
continuing, the Preferred Securities shall have a priority over the Common
Securities with respect to such Liquidation Distribution.
SECTION 4. Redemption and Distribution of Subordinated Notes.
The Preferred Securities and Common Securities may only be redeemed if
Subordinated Notes having an aggregate principal amount equal to the aggregate
Liquidation Amount of the Preferred Securities and Common Securities are repaid,
redeemed or distributed as set forth below:
(a) Subject to the exercise by Time Warner of the Time Warner
Exchange Right with respect to the Preferred Securities, upon the repayment of
the Subordinated Notes at the maturity thereof on December 30, 1997 (the
"Mandatory Redemption Date"), each of the Common Securities and Preferred
Securities then outstanding will be redeemed Pro Rata by the Trust, in cash, at
a mandatory redemption price per Trust Security equal to (i) the lesser of (A)
$54.41 and (B) an amount equal to the Exchange Valuation Price on the Trading
Day immediately preceding December 17, 1997 of such amount of Exchange Property
(which initially consists of shares of Hasbro Common Stock) as relates to one
[Trust Security] at such time to and including the Mandatory Redemption Date
plus (b) an amount equal to all accrued and unpaid distributions on such Trust
Security to and including the Mandatory Redemption Date.
(b) Subject to the exercise by Time Warner of the Time Warner
Exchange Right with respect to the Preferred Securities, upon the redemption of
the Subordinated Notes prior to the maturity thereof, in whole or in part, at
any time or from time to time, the proceeds of such redemption will be promptly
applied to redeem Pro Rata Common Securities and Preferred Securities having an
aggregate Liquidation Amount equal to the aggregate principal amount of the
Subordinated Notes so redeemed, upon not less than 20 nor more than 45 Business
Days' notice, at the Call Price in effect on the date of redemption (the
"Optional
5
Redemption Date"), plus cash in an amount equal to all accrued and unpaid
distributions on such Trust Security, whether or not declared, for the period to
and including the Optional Redemption Date. The "Call Price" is initially equal
to $[ ] per Trust Security, declining by $[ ] on each day following the date of
issue of the Trust Securities (computed on the basis of a 360-day year of twelve
30-day months) to $[ ] on October 30, 1997, and equal to $54.41 thereafter. The
date of any such redemption of Common Securities and Preferred Securities shall
be established to coincide with the redemption date of the Subordinated Notes.
(c) If fewer than all the outstanding Common Securities and
Preferred Securities are to be so redeemed, the Common Securities and Preferred
Securities will be redeemed Pro Rata and the Common Securities to be redeemed
will be redeemed as described in paragraph 4(f)(ii) below. If a partial
redemption would result in the delisting of the Preferred Securities by any
national securities exchange or other organization on which the Preferred
Securities are then listed, Time Warner pursuant to the Indenture will only
redeem Subordinated Notes in whole and, as a result, the Trust may only redeem
the Common Securities in whole.
(d) (i) If, at any time, a Tax Event or an Investment Company
Event (each as hereinafter defined, and each a "Special Event") shall occur and
be continuing, Time Warner may elect (A) to redeem the Subordinated Notes in
accordance with the Indenture and as described under paragraph (ii) below, (B)
in the case of a Tax Event, not to redeem the Subordinated Notes but to
indemnify the Trust for all taxes payable by it as a result of such Tax Event,
or (C) to direct the Regular Trustees to dissolve the Trust and, after
satisfaction of creditors, cause Subordinated Notes held by the Property Trustee
having an aggregate principal amount equal to the aggregate stated Liquidation
Amount of, and accrued and unpaid interest equal to accrued and unpaid
Distributions on, and having the same record date for payment as, the Common
Securities and Preferred Securities, to be distributed to the Holders of the
Common Securities and Preferred Securities on a Pro Rata basis in liquidation of
such Holders' interests in the Trust, within 90 days following the occurrence of
such Special Event (the "90-Day Period"); provided, however, that in the case of
the occurrence of a Tax Event, as a condition of any such dissolution and
distribution, the Regular Trustees shall have received an opinion of a
nationally recognized
6
independent tax counsel experienced in such matters (a "No Recognition
Opinion"), which opinion may rely on any then applicable published revenue
ruling of the Internal Revenue Service, to the effect that the Holders of the
Preferred Securities will not recognize any gain or loss for United States
Federal income tax purposes as a result of the dissolution of the Trust and
distribution of Subordinated Notes; provided further that, if and as long as at
the time there is available to the Trust the opportunity to eliminate, within
the 90 Day Period, the Special Event by taking some ministerial action, such as
filing a form or making an election, or pursuing some other similar reasonable
measure that has no adverse effect on the Trust, Time Warner, or the Holders of
the Preferred Securities (a "Ministerial Action"), the Trust will pursue such
measure in lieu of dissolution or redemption; and provided further still that
Time Warner shall have no right to redeem the Subordinated Notes while the
Regular Trustees on behalf of the Trust are pursuing such Ministerial Action.
(ii) [If in the case of the occurrence of a Tax Event, (A) the
Regular Trustees have received an opinion (a "Redemption Tax Opinion")
of nationally recognized independent tax counsel experienced in such
matters that, as a result of a Tax Event, there is more than an
insubstantial risk that Time Warner would be precluded from deducting
the interest on the Subordinated Notes for United States Federal income
tax purposes even if the Subordinated Notes were distributed to the
Holders of Common Securities and Preferred Securities in liquidation of
such Holders' interest in the Trust as described in this paragraph 4(d)
or (B) the Regular Trustees shall have been informed by such tax
counsel that a No Recognition Opinion cannot be delivered to the
Trust,] upon the occurrence and continuation of a Tax Event or an
Investment Company Event Time Warner shall have the right at any time,
upon not less than 20 nor more than 45 Business Days' notice, to redeem
the Subordinated Notes in whole (but not in part), within the 90-Day
Period, for cash, in which case the Trust shall redeem in cash Trust
Securities having an aggregate Liquidation Amount equal to the
aggregate principal amount of the Subordinated Notes so redeemed, at a
price per Trust Security equal to (1) the lesser of (x) $54.41 and (y)
an amount equal to the Exchange Valuation Price on the Trading Day
immediately preceding such Special Redemption Date of such amount
7
of Exchange Property as relates to one Trust Security at such time,
plus (2) an amount initially equal to $[ ] per Trust Security,
declining by $[ ] on each day following the issue date (computed on the
basis of a 360-day year of twelve 30-day months) to $0 on October 30,
1997 and thereafter (such price the "Special Redemption Price") plus an
amount equal to all accrued and unpaid distributions on such Trust
Security to and including the Special Redemption Date. The Common
Securities will be redeemed Pro Rata with the Preferred Securities,
except if an Event of Default under the Indenture has occurred and is
continuing, the Preferred Securities will have a priority over the
Common Securities with respect to payment of the Special Redemption
Price.
(iii) "Tax Event" means that the Regular Trustees shall have
obtained an opinion of nationally recognized independent tax counsel
experienced in such matters (a "Dissolution Tax Opinion") to the effect
that on or after July [ ], 1995, 3/ as a result of (A) any amendment
to, or change (including any announced prospective change) in, the laws
(or any regulations thereunder) of the United States or any political
subdivision or taxing authority thereof or therein, (B) any amendment
to, or change in, an interpretation or application of any such laws or
regulations by any legislative body, court, governmental agency or
regulatory authority (including the enactment of any legislation and
the publication of any judicial decision or regulatory determination),
(C) any interpretation or pronouncement that provides for a position
with respect to such laws or regulations that differs from the
theretofore generally accepted position or (D) any action taken by any
governmental agency or regulatory authority, which amendment or change
is enacted, promulgated, issued or announced or which interpretation or
pronouncement is issued or announced or which action is taken, in each
case on or after July [ ], 1995, 4/ there is more than an insubstantial
risk that (1) the Trust is, or will be within 90 days of the date
thereof, subject to United States Federal income tax with respect to
income
- --------
3/ Insert date of prospectus.
4/ Insert date of prospectus.
8
accrued or received on the Subordinated Notes, (2) interest payable by
Time Warner to the Trust on the Subordinated Notes is not, or within 90
days of the date thereof will not be, deductible by Time Warner for
United States Federal income tax purposes, (3) the Trust is, or will be
within 90 days of the date thereof, subject to more than a de minimis
amount of taxes, duties or other governmental charges or (4) as a
result of the issuance of the Preferred Securities and/or the
Subordinated Notes Time Warner would be treated as having disposed of
the Hasbro Common Stock owned by it for United States Federal income
tax purposes.
(a) (iv) "Investment Company Event" means that the Regular
Trustees shall have received an opinion of nationally recognized
independent counsel experienced in practice under the Investment
Company Act that, as a result of the occurrence of a change in law or
regulation or a written change in interpretation or application of law
or regulation by any legislative body, court, governmental agency or
regulatory authority (a "Change in 1940 Act Law"), there is more than
an insubstantial risk that the Trust is or will be considered an
Investment Company which is required to be registered under the
Investment Company Act, which Change in 1940 Act Law becomes effective
on or after July [ ], 1995. 5/
(v) On the date fixed for any distribution of Subordinated
Notes, upon dissolution of the Trust, (i) the Common Securities will no
longer be deemed to be outstanding, (ii) the Trust shall not have any
further obligation to the holders of the Common Securities with respect
to the Common Securities and (iii) certificates representing Common
Securities will be deemed to represent beneficial interests in the
Subordinated Notes having an aggregate principal amount equal to the
aggregate stated Liquidation Amount of, and bearing accrued and unpaid
interest equal to accrued and unpaid Distributions on, such Common
Securities until such certificates are presented to Time Warner or its
agent for transfer or reissuance.
- --------
5/ Insert date of prospectus.
9
(e) The Trust may not redeem fewer than all the outstanding
Common securities unless all accrued and unpaid Distributions have been or are
concurrently being paid on all Common Securities for all quarterly Distribution
periods terminating on or prior to the date of redemption.
(f) (i) Notice of any redemption of, or notice of distribution
of Subordinated Notes in exchange for, the Preferred Securities and Common
Securities (a "Redemption/Distribution Notice") will be given by the Regular
Trustees on behalf of the Trust by mail to each Holder of Preferred Securities
and Common Securities to be redeemed or exchanged not less than 20 nor more than
45 Business Days prior to the date fixed for redemption or exchange thereof. For
purposes of the calculation of the date of redemption or exchange and the dates
on which notices are given pursuant to this paragraph (f)(i), a
Redemption/Distribution Notice shall be deemed to be given on the day such
notice is first mailed by first-class mail, postage prepaid, to Holders of
Preferred Securities and Common Securities. Each Redemption/Distribution Notice
shall be addressed to the Holders of Preferred Securities and Common Securities
at the address of each such Holder appearing in the books and records of the
Trust. No defect in the Redemption/Distribution Notice or in the mailing of
either thereof with respect to any Holder shall affect the validity of the
redemption or exchange proceedings with respect to any other Holder.
(ii) In the event that fewer than all the outstanding Common
Securities are to be redeemed, the Common Securities to be redeemed will be
redeemed pro rata from each Holder of Common Securities (subject to adjustment
to eliminate fractional Common Securities).
(iii) Payment of the Redemption Payment Amount in respect of
each Common Security, together with any accrued and unpaid distributions
thereon, is conditioned upon delivery or book-entry transfer of such Common
Security (together with necessary endorsements) to the Property Trustee at any
time (whether prior to, on or after the relevant Redemption Payment Date) after
the Redemption/Distribution Notice is given (to the extent such notice is
required). Payment of the Redemption Payment Amount, together with any accrued
and unpaid distributions on each Common Security, will be made by the delivery
of cash no later than the applicable Redemption Payment Date
10
with respect to such Common Security or, if later, the time of delivery or
transfer of such Common Security.
(iv) If the Trust gives a Redemption/Distribution Notice in
respect of a redemption of Common Securities as provided in this paragraph 4
(which notice will be irrevocable) then immediately prior to the close of
business on the redemption date, provided that Time Warner has paid to the
Property Trustee in immediately available funds a sufficient amount of cash in
connection with the related redemption or maturity of the Subordinated Notes,
Distributions will cease to accrue on the Common Securities called for
redemption, such Common Securities will no longer be deemed to be outstanding
and all rights of Holders of such Common Securities so called for redemption
will cease, except the right of the Holders of such Common Securities to receive
the Redemption Price, but without interest on such Redemption Price. Neither the
Trustees nor the Trust shall be required to register or cause to be registered
the transfer of any Common Securities which have been so called for redemption.
If any date fixed for redemption of Common Securities is not a Business Day,
then payment of the Redemption Price payable on such date will be made on the
next succeeding day that is a Business Day (and without any interest or other
payment in respect of any such delay) except that, if such Business Day falls in
the next calendar year, such payment will be made on the immediately preceding
Business Day, in each case with the same force and effect as if made on such
date fixed for redemption. If payment of the Redemption Price in respect of
Common Securities is improperly withheld or refused and not paid by the Property
Trustee, Distributions on such Common securities will continue to accrue, from
the original redemption date to the date of payment, in which case the actual
payment date will be considered the date fixed for redemption for purposes of
calculating the Redemption Price.
(v) Redemption/Distribution Notices shall be sent by the
Regular Trustees on behalf of the Trust to the Holders of the Common Securities.
(vi) Upon the date of dissolution of the Trust and
distribution of Subordinated Notes as a result of the occurrence of a Special
Event, Common Security Certificates shall be deemed to represent beneficial
interests in the Subordinated Notes so distributed, and the Common Securities
will no longer be deemed outstanding and may be canceled by the Regular
Trustees. The Subordinated Notes so distributed
11
shall have an aggregate principal amount equal to the aggregate Liquidation
Amount of the Common Securities so distributed.
SECTION 5. Voting Rights. (a) Except as provided under
paragraph 5(b) below and as otherwise required by law and the Declaration, the
Holders of the Common Securities will have no voting rights.
(b) (i) Except as provided in the Declaration with respect to
a Special Regular Trustee, Holders of Common Securities have the sole right
under the Declaration to increase or decrease the number of Trustees, and to
appoint, remove or replace a Trustee, any such increase, decrease, appointment,
removal or replacement to be approved by Holders of Common Securities
representing a Majority in Liquidation Amount of the Common Securities.
(ii) If any proposed amendment to the Declaration provides
for, or the Regular Trustees otherwise propose to effect (A) any action that
would adversely affect the powers, preferences or special rights of the Trust
Securities, whether by way of amendment to the Declaration or otherwise, or (B)
the liquidation, dissolution, winding-up or termination of the Trust, other than
in connection with the distribution of Subordinated Notes held by the Property
Trustee, upon the occurrence of a Special Event or in connection with the
redemption of Common Securities as a consequence of a redemption of Subordinated
Notes, then the Holders of outstanding Trust Securities will be entitled to vote
on such amendment or proposal as a class and such amendment or proposal shall
not be effective except with the approval of the Holders of Trust Securities
representing 66-2/3% in Liquidation Amount of such securities affected thereby;
provided, however, (1) if any amendment or proposal referred to in clause (A)
above would adversely affect only the Preferred Securities or the Common
Securities, then only the affected class will be entitled to vote on such
amendment or proposal and such amendment or proposal shall not be effective
except with the approval of 66-2/3% in Liquidation Amount of such class of Trust
Securities, (2) the rights of Holders of Common Securities under Article V of
the Declaration to increase or decrease the number of, and to appoint, replace
or remove, Trustees (other than a Special Regular Trustee) shall not be amended
without the consent of each Holder of Common Securities and (3) amendments to
the Declaration shall be subject to such
12
further requirements as are set forth in Sections 12.01 and 12.02 of the
Declaration.
(iii) In the event the consent of the Property Trustee as the
holder of the Subordinated Notes, is required under the Indenture with respect
to any amendment, modification or termination of the Indenture or the
Subordinated Notes, the Property Trustee shall request the written direction of
the Holders of the Trust Securities with respect to such amendment, modification
or termination. The Property Trustee shall vote with respect to such amendment,
modification or termination as directed by a Majority in Liquidation Amount of
the Trust Securities voting together as a single class; provided that where such
amendment, modification or termination of the InDenture requires the consent or
vote of (1) holders of Subordinated Notes representing a specified percentage
greater than a majority in principal amount of the Subordinated Notes or (2)
each holder of Subordinated Notes, the Property Trustee may only vote with
respect to that amendment, modification or termination as directed by, in the
case of clause (1) above, the vote of Holders of Trust Securities representing
such specified percentage of the aggregate Liquidation Amount of the Trust
Securities, or, in the case of clause (2) above, each Holder of Trust
Securities; and provided further, that the Property Trustee shall be under no
obligation to take any action in accordance with the directions of the Holders
of the Trust Securities unless the Property Trustee shall have received, at the
expense of the sponsor, an opinion of nationally recognized independent tax
counsel recognized as an expert in such matters to the effect that such action
will not result in the Trust being treated as an association taxable as a
corporation or a partnership for United States Federal income tax purposes and
that, following such action, each holder of Trust Securities will be treated as
owning an undivided beneficial interest in the Subordinated Notes.
(iv) Subject to Section 2.06 of the Declaration, and the
provisions of this and the next succeeding paragraph, the Holders of a Majority
in Liquidation Amount of the Common Securities, voting separately as a class,
shall have the right to (A) on behalf of all Holders of Common Securities, waive
any past default that is waivable under the Declaration (subject to, and in
accordance with the Declaration) and (B) direct the time, method, and place of
conducting any proceeding for any remedy available to the Property Trustee, or
to direct the exercise of any trust or
13
power conferred upon the Property Trustee under the Declaration, including the
right to direct the Property Trustee, as holder of the Subordinated Notes, to
(1) direct the time, method and place of conducting any proceeding for any
remedy available to the Indenture Trustee, or exercising any trust or power
conferred on the Indenture Trustee with respect to the Subordinated Notes, (2)
waive any past default and its consequences that is waivable under Section 6.06
of the Indenture, or (3) exercise any right to rescind or annul a declaration
that the Principal of all the Subordinated Notes shall be due and payable;
provided that where the taking of any action under the Indenture requires the
consent or vote of (x) holders of Subordinated Notes representing a specified
percentage greater than a majority in principal amount of the Subordinated Notes
or (y) each holder of Subordinated Notes, the Property Trustee may only take
such action if directed by, in the case of clause (x) above, the vote of Holders
of Common Securities representing such specified percentage of the aggregate
Liquidation Amount of the Common Securities, or, in the case of clause (y)
above, each Holder of Common Securities. Pursuant to this paragraph, the
Property Trustee shall not revoke, or take any action inconsistent with, any
action previously authorized or approved by a vote of the Holders of the
Preferred Securities, and shall not take any action in accordance with the
direction of the Holders of the Common Securities under this paragraph if the
action is prejudicial to the Holders of Preferred Securities. Other than with
respect to directing the time, method and place of conducting any proceeding for
any remedy available to the Property Trustee or the Indenture Trustee as set
forth above, the Property Trustee shall be under no obligation to take any of
the foregoing actions at the direction of the Holders of Common Securities
unless the Properties Trustee shall have received, at the expense of the
Sponsor, an opinion of nationally recognized independent tax counsel recognized
as expert in such matters to the effect that such action will not result in the
Trust being treated as an association taxable as a corporation or a partnership
for United States Federal income tax purposes and that, following such action,
each holder of Trust Securities will be treated as owning an undivided
beneficial interest in the Subordinated Notes.
(c) (i) Notwithstanding any other provision of these terms,
each Holder of Common Securities will be deemed to have waived any Event of
Default with respect to the Common Securities and its consequences until Events
of
14
Default with respect to the Preferred Securities have been cured, waived by the
Holders of Preferred Securities as provided in the Declaration or otherwise
eliminated, and until all Events of Default with respect to the Preferred
Securities have been so cured, waived by the Holders of Preferred Securities or
otherwise eliminated, the Property Trustee will be deemed to be acting solely on
behalf of the Holders of Preferred Securities and only the Holders of the
Preferred Securities will have the right to direct the Property Trustee in
accordance with the terms of the Declaration or of the Securities. In the event
that any Event of Default with respect to the Preferred Securities is waived by
the Holders of Preferred Securities as provided in the Declaration, the Holders
of Common Securities agree that such waiver shall also constitute the waiver of
such Event of Default with respect to the Common Securities for all purposes
under the Declaration without any further act, vote or consent of the Holders of
the Common Securities.
(ii) A waiver of an Indenture Event of Default by the Property
Trustee at the direction of the Holders of the Preferred Securities will
constitute a waiver of the corresponding Event of Default under the Declaration
in respect of the Trust Securities.
(d) Any required approval of Holders of Common Securities may
be given at a separate meeting of Holders of Common Securities convened for such
purpose, at a meeting of all of the Holders of Trust Securities or pursuant to
written consent. The Regular Trustees will cause a notice of any meeting at
which Holders of Common Securities are entitled to vote, or of any matter upon
which action by written consent of such Holders is to be taken, to be mailed to
each Holder of record of Common Securities. Each such notice will include a
statement setting forth (i) the date of such meeting or the date by which such
action is to be taken, (ii) a description of any resolution proposed for
adoption at such meeting on which such Holders are entitled to vote or of such
matter upon which written consent is sought and (iii) instructions for the
delivery of proxies or consents.
(e) No vote or consent of the Holders of Common Securities
will be required for the Trust to redeem and cancel Common Securities in
accordance with the Declaration.
6. Pro Rata Treatment. A reference in these terms of the
Common Securities to any payment, distribution
15
or treatment as being "pro rata" shall mean pro rata to each Holder of Trust
Securities according to the aggregate Liquidation Amount of the Trust Securities
held by the relevant Holder in relation to the aggregate Liquidation Amount of
all Trust Securities outstanding unless, in relation to a payment, an Event of
Default has occurred and is continuing, in which case any funds available to
make such payment shall be paid first to each Holder of the Preferred Securities
pro rata according to the aggregate Liquidation Amount of Preferred Securities
held by the relevant Holder relative to the aggregate Liquidation Amount of all
Preferred Securities outstanding, and only after satisfaction of all amounts
owed to the Holders of the Preferred Securities, to each Holder of Common
Securities pro rata according to the aggregate Liquidation Amount of Common
Securities held by the relevant Holder relative to the aggregate Liquidation
Amount of all Common Securities outstanding.
7. Ranking. The Common Securities rank pari passu with the
Preferred Securities except that where an Event of Default occurs and is
continuing, the rights of Holders of Common Securities to payment in respect of
Distributions and payments upon liquidation, redemption or otherwise are
subordinate to the rights of Holders the Preferred Securities.
8. Mergers, Consolidations or Amalgamations. The Trust may not
consolidate, amalgamate, merge with or into, or be replaced by, or convey,
transfer or lease its properties and assets to, any corporation or other body.
9. Transfers, Exchanges, Method of Payments. Payment of
Distributions and payments on redemption of the Common Securities will be
payable, the transfer of the Common Securities will be registrable, and Common
Securities will be exchangeable for Common Securities of other denominations of
a like aggregate Liquidation Amount, at the principal corporate trust office of
the Property Trustee in The City of New York; provided that payment of
Distributions may be made at the option of the Regular Trustees on behalf of the
Trust by check mailed to the address of the persons entitled thereto and that
the payment on redemption of any Common Security will be made only upon
surrender of such Common Security to the Property Trustee. Notwithstanding the
foregoing, transfers of Common Securities are subject to conditions set forth in
Section 9.01(c) of the Declaration.
16
10. Acceptance of Indenture. Each Holder of Common Securities,
by the acceptance thereof, agrees to the provisions of the Indenture and the
Subordinated Notes, including the subordination provisions thereof.
11. No Preemptive Rights. The Holders of Common Securities
shall have no preemptive rights to subscribe to any additional Common Securities
or Preferred Securities.
12. Miscellaneous. These terms shall constitute a part of the
Declaration. The Trust will provide a copy of the Declaration and the Indenture
to a Holder without charge on written request to the Trust at its principal
place of business.
[CS&M Draft--6/4/95]
Annex I
TRANSFER OF THIS CERTIFICATE
IS SUBJECT TO THE CONDITIONS
SET FORTH IN THE DECLARATION
REFERRED TO BELOW
Certificate Number Number of Common Securities
C - 1
Certificate Evidencing Common Securities
of
Time Warner Financing Trust
$[ ] Common Securities
Time Warner Financing Trust, a statutory business
trust formed under the laws of the State of Delaware (the
"Trust"), hereby certifies that Time Warner Inc. (the
"Holder") is the registered owner of ( ) common
securities of the Trust representing undivided beneficial
interests in the assets of the Trust designated the $[ ]
Common Securities (the "Common Securities"). The Common
Securities are transferable on the b30ks and records of the
Trust, in person or by a duly authorized attorney, upon
surrender of this certificate duly endorsed and in proper
form for transfer and satisfaction of the other conditions
set forth in the Declaration (as defined below) including,
without limitation Section 9.01(c) thereof. The
designations, rights, privileges, restrictions, preferences
and other terms and provisions of the Common Securities are
set forth in, and this certificate and the Common Securities
represented hereby are issued and shall in all respects be
subject to the terms and provisions of, the Amended and
Restated Declaration of Trust of the Trust dated as of
, 1995, as the same may be amended from time to
time (the "Declaration") including the designation of the
terms of Common Securities as set forth in Exhibit C
thereto. The Common Securities and the Preferred Securities
issued by the Trust pursuant to the Declaration represent
undivided beneficial interests in the assets of the Trust,
including the Subordinated Notes (as defined in the
Declaration) issued by Time Warner Inc., a Delaware
corporation, to the Trust pursuant to the Indenture referred
2
to in the Declaration. The Trust will furnish a copy of the
Declaration and the Indenture to the Holder without charge
upon written request to the Trust at its principal place of
business or registered office.
The Holder of this Certificate, by accepting this
Certificate, is deemed to have agreed to the terms of the
Indenture and the Subordinated Notes, including that the
Subordinated Notes are subordinate and junior in right of
payment to all Senior [Indebtedness] (as defined in the
Indenture) as and to the extent provided in the Indenture
[and pari passu in right of payment with Time Warner's
outstanding 8-3/4% Convertible Subordinated Debentures due
2015].
Upon receipt of this certificate, the Holder is
bound by the Declaration and is entitled to the benefits
thereunder.
IN WITNESS WHEREOF, the Trustees of the Trust have
executed this certificate this day of
1995.
TIME WARNER FINANCING TRUST
By , as trustee
------------
Name:
Title: Trustee
By , as trustee
-------------
Name:
Title: Trustee
3
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned assigns and transfer
this Common Security Certificate to:
---------------------------------------------------------
---------------------------------------------------------
---------------------------------------------------------
(Insert assignee's social security or tax identification number)
---------------------------------------------------------
---------------------------------------------------------
(Insert address and zip code of assignee)
and irrevocably appoints
---------------------------------------------------------
---------------------------------------------------------
------------------------------------------------ agent to
transfer this Common Security Certificate on the books of
the Trust. The agent may substitute another to act for him
or her.
Date:
--------------------
Signature:
------------------------
(Sign exactly as your name appears on the other side of this Common
Security Certificate)