- --------------------------------------------------------------------------------
AMENDED AND RESTATED DECLARATION OF TRUST
between
TIME WARNER INC.,
THE TRUSTEES
and
HOLDERS
Dated as of December 5, 1995
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
Page
----
ARTICLE I
Definitions
-----------
SECTION 1.01. Terms Generally............................. 2
SECTION 1.02. Definitions................................. 2
ARTICLE II
Trust Indenture Act
-------------------
SECTION 2.01. Trust Indenture Act; Application........................ 9
SECTION 2.02. Lists of Holders of Preferred Securities................ 10
SECTION 2.03. Reports by the Property Trustee......................... 10
SECTION 2.04. Periodic Reports to Property Trustee.................... 10
SECTION 2.05. Evidence of Compliance with Conditions Precedent........ 10
SECTION 2.06. Events of Default; Waiver............................... 11
SECTION 2.07. Disclosure of Information............................... 13
ARTICLE III
Organization
------------
SECTION 3.01. Name.................................................... 13
SECTION 3.02. Office.................................................. 13
SECTION 3.03. Purpose................................................. 14
SECTION 3.04. Authority............................................... 14
SECTION 3.05. Title to Property of the Trust.......................... 14
SECTION 3.06. Powers and Duties of the Regular Trustees............... 14
SECTION 3.07. Prohibition of Actions by Trust and Trustees............ 17
SECTION 3.08. Powers and Duties of the Property Trustee............... 19
SECTION 3.09. Delaware Trustee........................................ 22
SECTION 3.10. Certain Rights and Duties of the Property Trustee....... 22
SECTION 3.11. Registration Statement and Related Matters.............. 25
SECTION 3.12. Filing of Amendments to Certificate of Trust............ 27
SECTION 3.13. Execution of Documents by Regular Trustees.............. 27
SECTION 3.14. Trustees Not Responsible for Recitals or Issuance of
Trust Securities...................................... 27
SECTION 3.15. Duration of Trust....................................... 27
ARTICLE IV
Sponsor
-------
SECTION 4.01. Purchase of Common Securities by Sponsor................ 28
SECTION 4.02. Expenses................................................ 28
ARTICLE V
Trustees
--------
SECTION 5.01. Number of Trustees; Qualifications...................... 29
SECTION 5.02. Appointment, Removal and Resignation of Trustees........ 32
SECTION 5.03. Vacancies Among Trustees................................ 34
SECTION 5.04. Effect of Vacancies..................................... 34
SECTION 5.05. Meetings................................................ 34
SECTION 5.06. Delegation of Power..................................... 35
ARTICLE VI
Payments
--------
SECTION 6.01. Payments................................................. 35
ARTICLE VII
Issuance of Trust Securities
----------------------------
SECTION 7.01. General Provisions Regarding Trust Securities........... 36
ARTICLE VIII
Termination of Trust
--------------------
SECTION 8.01. Termination of Trust.................................... 37
ARTICLE IX
Transfer of Interests
---------------------
SECTION 9.01. Transfer of Trust Securities............................ 38
SECTION 9.02. Transfer of Certificates................................ 39
SECTION 9.03. Deemed Security Holders................................. 39
SECTION 9.04. Book-Entry Interests.................................... 40
SECTION 9.05. Notices to Holders of Certificates...................... 40
SECTION 9.06. Appointment of Successor Clearing Agency................ 40
SECTION 9.07. Definitive Preferred Securities Certificates............ 41
SECTION 9.08. Mutilated, Destroyed, Lost or Stolen Certificates....... 41
ARTICLE X
Limitation of Liability; Indemnification
----------------------------------------
SECTION 10.01. Liability............................................... 42
SECTION 10.02. Exculpation............................................. 42
SECTiON 10.03. Indemnification......................................... 43
SECTION 10.04. Outside Businesses...................................... 43
ARTICLE XI
Accounting
----------
SECTION 11.01. Fiscal Year............................................. 44
SECTION 11.02. Certain Accounting Matters.............................. 44
SECTION 11.03. Banking................................................. 45
SECTION 11.04. Withholding............................................. 45
ARTICLE XII
Amendments and Meetings
-----------------------
SECTION 12.01. Amendments.............................................. 46
SECTION 12.02. Meetings of the Holders of Trust Securities; Action
by Written Consent.................................... 47
ARTICLE XIII
Representations and Warranties of Property Trustee
--------------------------------------------------
and Delaware Trustee
--------------------
SECTION 13.01. Representations and Warranties of Property Trustee and
Delaware Trustee...................................... 49
ARTICLE XIV
Miscellaneous
-------------
SECTION 14.01. Notices................................................. 51
SECTION 14.02. Undertaking for Costs................................... 53
SECTION 14.03. Governing Law........................................... 53
SECTION 14.04. Headings................................................ 53
SECTION 14.05. Partial Enforceability.................................. 53
SECTION 14.06. Counterparts............................................ 54
SECTION 14.07. Intention of the Parties................................ 54
SECTION 14.08. Successors and Assigns.................................. 54
Exhibits
- --------
Exhibit A Certificate of Trust of Time Warner Capital I
Exhibit B Terms of Preferred Security
Exhibit C Terms of Common Securities
AMENDED AND RESTATED DECLARATION OF TRUST (the "Declaration"),
dated as of December 5, 1995, by the undersigned trustees (together
with all other Persons from time to time duly appointed and serving as
trustees in accordance with the provisions of this Declaration, the
"Trustees"), Time Warner Inc., a Delaware corporation, as trust
sponsor ("Time Warner" or the "Sponsor"), and by the holders, from
time to time, of undivided beneficial interests in the assets of the
Trust to be issued pursuant to this Declaration.
WHEREAS the Sponsor and the Trustees entered into a Declaration of Trust
dated as of August 2, 1995 (the "Original Declaration") in order to establish a
statutory business trust (the "Trust") under the Business Trust Act (as
hereinafter defined);
WHEREAS the Certificate of Trust (the "Certificate of Trust") of the Trust
was filed with the office of the Secretary of State of the State of Delaware on
August 2, 1995;
WHEREAS the Trustees and the Sponsor desire to continue the Trust pursuant
to the Business Trust Act for the sole purpose of, as described more fully in
Section 3.03 hereof, issuing and selling certain securities representing
undivided beneficial interests in the assets of the Trust and investing the
proceeds thereof in certain Subordinated Debentures (as defined herein) of Time
Warner issued under the Indenture (as defined herein) and to engage pursuant to
the terms hereof in only those other activities necessary or incidental thereto;
and
WHEREAS, as of the date hereof, no interests in the Trust have been issued;
and
WHEREAS all of the Trustees and the Sponsor, by this Declaration, amend and
restate each and every term and provision of the Original Declaration.
NOW, THEREFORE, it being the intention of the parties hereto to continue
the Trust as a business trust under the Business Trust Act, that the Original
Declaration
2
be amended and restated in its entirety as provided herein and that this
Declaration constitute the governing instrument of such business trust, the
Trustees declare that all assets contributed to or purchased by the Trust will
be held in trust for the benefit of the holders, from time to time, of the
securities representing undivided beneficial interests in the assets of the
Trust issued hereunder, subject to the provisions of this Declaration.
ARTICLE I
Definitions
SECTION 1.01. Terms Generally. (a) The definitions in Section 1.02 shall
apply equally to both the singular and plural forms of the terms defined.
Whenever the context may require any pronoun shall include the corresponding
masculine, feminine and neuter forms. The words "include", "includes" and
"including" shall be deemed to be followed by the phrase "without limitation".
All references herein to Articles, Sections, Exhibits and Annexes shall be
deemed references to Articles and Sections of, and Exhibits and Annexes to, this
Declaration unless the context shall otherwise require. Except as otherwise
expressly provided herein, any reference in this Declaration to any other
document shall mean such document as amended, restated, supplemented or
otherwise modified from time to time.
(b) Capitalized terms used in this Declaration but not defined in the
preamble above have the respective meanings assigned to them in Section 1.02.
(c) A term defined anywhere in this Declaration has the same meaning
throughout.
SECTION 1.02. Definitions. As used in this Declaration, the following terms
have the meanings specified below:
"Affiliate" has the same meaning as given to that term in Rule 405 of the
Trust Indenture Act or any successor rule thereunder.
"Appointment Event" means an event defined in the terms of the Preferred
Securities set forth in Exhibit B which entitles the Holders of a Majority in
aggregate
3
liquidation amount of the Preferred Securities to appoint a
Special Regular Trustee.
"Book Entry Interest" means a beneficial interest in a Certificate
registered in the name of a Clearing Agency or a nominee thereof, ownership and
transfers of which shall be maintained and made through book entries by such
Clearing Agency as described in Section 9.04.
"Business Day" means any day other than a Saturday, Sunday or any other day
on which banking institutions in New York, New York, are permitted or required
by any applicable law to close.
"Business Trust Act" means Chapter 38 of Title 12 of the Delaware Code, 12
Del. C. ss.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 depositary for the
Preferred Securities and in whose name or in the name of a nominee of that
organization shall be registered a Global Certificate and which shall undertake
to effect book entry transfers and pledges of the Preferred Securities.
"Clearing Agency Participant" means a broker, dealer, bank, other financial
institution or other Person for whom from time to time the Clearing Agency
effects book entry transfers and pledges of securities deposited with the
Clearing Agency.
"Closing Date" means December 5, 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.
4
"Commission" means the Securities and Exchange Commission.
"Common Security" has the meaning specified in Section 7.01(b).
"Common Security Certificate" means a definitive certificate in fully
registered form representing a Common Security substantially in the form of
Annex I to Exhibit C.
"Covered Person" means (i) any officer, director, shareholder, partner,
member, representative, employee or agent of the Trust or its Affiliates, (ii)
any officer, director, shareholder, employee, representative or agent of Time
Warner or its Affiliates and (iii) the Holders from time to time of the Trust
Securities.
"Delaware Trustee" has the meaning set forth in Section 5.01(a)(C).
"DTC" means The Depository Trust Company, the initial Clearing Agency.
"Event of Default" in respect of the Trust Securities means an Indenture
Event of Default that has occurred and is continuing in respect of the
Subordinated Debentures.
"Exchange Act" means the Securities Exchange Act of 1934, as amended from
time to time or any successor legislation.
"Fiscal Year" has the meaning specified in Section 11.01.
"Global Certificate", when used with respect to any Preferred Security,
means a Preferred Security executed by the Trust and delivered to the Clearing
Agency or pursuant to the Clearing Agency's instruction, all in accordance with
this Declaration, which shall be registered in the name of the Clearing Agency
or its nominee and which shall represent all of the outstanding Preferred
Securities.
"Guarantee" means the Guarantee Agreement dated as of December 5, 1995, of
Time Warner in respect of the Preferred Securities.
5
"Holder" means a Person in whose name a Certificate representing a Trust
Security is registered, such Person being a beneficial owner within the meaning
of the Business Trust Act.
"Indemnified Person" means any Trustee, any Affiliate of any Trustee, any
officer, director, shareholder, member, partner, employee, representative or
agent of any Trustee, or any employee or agent of the Trust or its Affiliates.
"Indenture" means the Indenture dated as of December 5, 1995, between Time
Warner and the Indenture Trustee and any indenture supplemental thereto pursuant
to which the Subordinated Debentures are to be issued.
"Indenture Event of Default" means any event or condition defined as an
"Event of Default" with respect to the Subordinated Debentures under Section
5.01 of the Indenture that has occurred and is continuing.
"Indenture Trustee" means Chemical Bank as trustee under the Indenture
until a successor is appointed thereunder and thereafter means such successor
trustee.
"Investment Company" means an investment company as defined in the
Investment Company Act.
"Investment Company Act" means the Investment Company Act of 1940, as
amended from time to time or any successor legislation.
"Legal Action" has the meaning specified in Section 3.06(e).
"Liquidation Distribution" has the meaning set forth in Exhibits B and C
hereto establishing the terms of the Trust Securities.
"Majority in aggregate liquidation amount of the Trust Securities" means,
except as otherwise required by the Trust Indenture Act and except as provided
in the penultimate paragraph of Section 5 of Exhibit B hereto, Holder(s) of
outstanding Trust Securities voting together as a single class or, as the
context may require, Holder(s) of outstanding Preferred Securities or Common
Securities voting separately as a class, who are the record owners of an
aggregate liquidation amount representing more than 50% of
6
the aggregate liquidation amount of all outstanding Trust Securities of such
class.
"Ministerial Action" has the meaning set forth in the terms of the Trust
Securities as set forth in Exhibits B and C hereto.
"Paying Agent" has the meaning specified in Section 3.08(i).
"Payment Amount" has the meaning set forth in Section 6.01.
"Payments" has the meaning set forth in Section 6.01.
"PERCS" means the $1.24 Preferred Exchangeable Redemption Cumulative
Securities issued by Time Warner Financing Trust.
"Person" means a legal person, including any individual, corporation,
estate, partnership, joint venture, association, joint stock company, limited
liability company, trust, unincorporated association, or government or any
agency or political subdivision thereof, or any other entity of whatever nature.
"Preferred Security" has the meaning specified in Section 7.01(b).
"Preferred Security Beneficial Owner" means, with respect to a Book Entry
Interest, a Person who is the beneficial owner of such Book Entry Interest, as
reflected on the books of the Clearing Agency, or on the books of a Person
maintaining an account with such Clearing Agency (directly as a Clearing Agency
Participant or as an indirect participant, in each case in accordance with the
rules of such Clearing Agency).
"Preferred Security Certificate" means a definitive certificate in fully
registered form representing a Preferred Security substantially in the form of
Annex I to Exhibit B.
"Property Account" has the meaning specified in Section 3.08(c)(i).
7
"Property Trustee" means the Trustee meeting the eligibility requirements
set forth in Section 5.01(c) and having the duties set forth for the Property
Trustee herein.
"Quorum" means a majority of the Regular Trustees or, if there are only two
Regular Trustees, both such Regular Trustees.
"Redemption Price" has the meaning set forth in the terms of the Trust
Securities as set forth in Exhibits B and C hereto.
"Regular Trustee" means any Trustee other than the Property Trustee and the
Delaware Trustee.
"Related Party" means any direct or indirect wholly owned subsidiary of
Time Warner or any other Person which owns, directly or indirectly, 100% of the
outstanding voting securities of Time Warner.
"Resignation Request" has the meaning specified in Section 5.02(d).
"Responsible Officer" means, with respect to the Property Trustee, the
chairman of the board of directors, any vice chairman, the president, any
executive vice president, any senior vice president, any vice-president, any
assistant vice president, the secretary, any assistant secretary, the treasurer,
any assistant treasurer, any trust officer or assistant trust officer or any
other officer of the Property Trustee customarily performing functions similar
to those performed by any of the above designated officers and also means, with
respect to a particular corporate trust matter, any other officer to whom such
matter is referred because of that officer's knowledge of and familiarity with
the particular subject.
"Rule 3a-5" means Rule 3a-5 under the Investment Company Act or any
successor rule thereunder.
"Securities Act" means the Securities Act of 1933, as amended from time to
time, or any successor legislation.
"Special Event" has the meaning set forth in the terms of the Trust
Securities as set forth in Exhibits B and C hereto.
8
"Special Redemption Date" has the meaning set forth in the terms of the
Trust Securities as set forth in Exhibits B and C hereto.
"Special Redemption Price" has the meaning set forth in the terms of the
Trust Securities as set forth in Exhibits B and C hereto.
"Special Regular Trustee" means a Regular Trustee appointed by the Holders
of a Majority in aggregate liquidation amount of the Preferred Securities in
accordance with Section 5.02(a)(ii)(B).
"Sponsor" or "Time Warner" means Time Warner Inc., a Delaware corporation,
or any successor entity, in its capacity as sponsor of the Trust.
"Subordinated Debentures" means the series of Subordinated Debentures
issued by Time Warner under the Indenture to the Property Trustee and entitled
the 8-7/8% Subordinated Debentures due December 31, 2025.
"Successor Delaware Trustee" has the meaning specified in Section
5.02(b)(ii).
"Successor Property Trustee" means a successor Trustee possessing the
qualifications to act as Property Trustee set forth in Section 5.01(c).
"10% in aggregate liquidation amount of the Trust Securities" means, except
as otherwise required by the Trust Indenture Act and except as provided in the
penultimate paragraph of paragraph 5 of Exhibit B hereto, Holder(s) of
outstanding Trust Securities voting together as a single class or, as the
context may require, Holder(s) of outstanding Preferred Securities or Common
Securities, voting separately as a class, who are the record owners of an
aggregate liquidation amount representing 10% or more of the aggregate
liquidation amount of all outstanding Trust Securities of such class.
"Treasury Regulations" means the income tax regulations, including
temporary and proposed regulations, promulgated under the Code by the United
States Treasury, as such regulations may be amended from time to time (including
corresponding provisions of succeeding regulations).
9
"Trustee" or "Trustees" means each Person who has signed this Declaration
as a trustee, so long as such Person shall continue in office in accordance with
the terms hereof, and all other Persons who may from time to time be duly
appointed, qualified and serving as Trustees in accordance with the provisions
hereof, and references herein to a Trustee or the Trustees shall refer to such
Person or Persons solely in their capacity as trustees hereunder.
"Trust Indenture Act" means the Trust Indenture Act of 1939, as amended.
"Trust Securities" means the Common Securities and the Preferred
Securities.
"Underwriting Agreement" means the underwriting agreement dated November
30, 1995, among Time Warner, the Trust and Merrill Lynch, Pierce, Fenner & Smith
Incorporated, Morgan Stanley & Co. Incorporated and Bear, Stearns & Co. Inc. as
co-representatives of the several underwriters named therein, with respect to,
among other things, the Preferred Securities.
ARTICLE II
Trust Indenture Act
SECTION 2.01. Trust Indenture Act; Application.
(a) This Declaration is subject to the provisions of the Trust Indenture
Act that are required to be part of this Declaration and shall, to the extent
applicable, be governed by such provisions;
(b) if and to the extent that any provision of this Declaration limits,
qualifies or conflicts with the duties imposed by ss.ss. 310 to 317, inclusive,
of the Trust Indenture Act, such imposed duties shall control;
(c) the Property Trustee shall be the only Trustee which is a trustee for
the purposes of the Trust Indenture Act; and
(d) the application of the Trust Indenture Act to this Declaration shall
not affect the nature of the Trust Securities as equity securities representing
10
undivided beneficial interests in the assets of the Trust.
SECTION 2.02. Lists of Holders of Preferred Securities. (a) Each of the
Sponsor and the Regular Trustees on behalf of the Trust shall provide the
Property Trustee with such information as is required under 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 May 15
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 Trust 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.
11
SECTION 2.06. Events of Default; Waiver. (a) Subject to Section 2.06(c),
Holders of Preferred Securities may by vote of at least a Majority in aggregate
liquidation amount of the Preferred Securities (i) in accordance with the terms
of the Preferred Securities as set forth in Exhibit B hereto, direct the time,
method, and place of conducting any proceeding for any remedy available to the
Property Trustee, or exercising any trust or power conferred upon the Property
Trustee hereunder or (ii) on behalf of the Holders of all Preferred Securities
waive any past Event of Default in respect of the Preferred Securities and its
consequences, provided that if the Event of Default arises out of an Indenture
Event of Default:
(A) which is not waivable under the Indenture, the Event of Default
under this Declaration shall also be not waivable; or
(B) which requires the consent or vote of (1) holders of Subordinated
Debentures representing a specified percentage greater than a majority in
principal amount of the Subordinated Debentures, or (2) each holder of
Subordinated Debentures, the Event of Default under this Declaration may
only be waived by, in the case of clause (1) above, the vote of Holders of
Preferred Securities representing such specified percentage of the
aggregate liquidation amount of the Preferred Securities, or, in the case
of clause (2) above, each Holder of Preferred Securities.
Upon such waiver, any such default shall cease to exist, and any Event of
Default with respect to the Preferred Securities arising therefrom shall be
deemed to have been cured, for every purpose of this Declaration, but no such
waiver shall extend to any subsequent or other default or Event of Default with
respect to the Preferred Securities or impair any right consequent thereon.
(b) Subject to Section 2.06(c), Holders of Common Securities may by vote of
at least a Majority in aggregate liquidation amount of the Common Securities,
(i) in accordance with the terms of the Common Securities as set forth in
Exhibit C hereto, direct the time, method, and place of conducting any
proceeding for any remedy available to the Property Trustee, or exercising any
trust or power conferred upon the Property Trustee hereunder or (ii) on behalf
of the Holders of all of the Common Securities, waive any past Event of Default
with respect to the Common
12
Securities and its consequences, provided that, if the Event of Default arises
out of an Indenture Event of Default:
(A) which is not waivable under the Indenture, except where the
Holders of the Common Securities are deemed to have waived such Event of
Default under the Declaration as provided below, the Event of Default under
this Declaration shall also not be waivable; or
(B) which requires the consent or vote of (1) holders of Subordinated
Debentures representing a specified percentage greater than a majority in
principal amount of the Subordinated Debentures or (2) each holder of
Subordinated Debentures, except where the holders of the Common Securities
are deemed to have waived such Event of Default under this Declaration as
provided below, the Event of Default under this Declaration may only be
waived by, in the case of clause (1) above, the vote of Holders of Common
Securities representing such specified percentage of the aggregate
liquidation amount of the Common Securities, or, in the case of clause (2)
above, each Holder of Common Securities; and
provided further that each Holder of Common Securities will be deemed to have
waived any Event of Default with respect to the Common Securities and its
consequences until all Events of Default with respect to the Preferred
Securities have been cured, waived by the Holders of Preferred Securities as
provided in this Declaration or otherwise eliminated and until all Events of
Default with respect to the Preferred Securities have been so cured, waived or
otherwise eliminated, the Property Trustee will be deemed to be acting solely on
behalf of the Holders of the Preferred Securities and only the Holders of the
Preferred Securities will have the right to direct the Property Trustee in
accordance with the terms of this Declaration or the Trust Securities. In the
event that any Event of Default with respect to the Preferred Securities is
waived by the Holders of Preferred Securities as provided in this Declaration,
the Holders of Common Securities agree that such waiver shall also constitute
the waiver of such Event of Default with respect to the Common Securities for
all purposes under this Declaration without any further act, vote or consent of
the Holders of the Common Securities. Subject to the foregoing provisions of
this Section 2.06(b), upon such waiver, any such default shall cease to exist
and any Event of Default with respect to the Common Securities arising therefrom
13
shall be deemed to have been cured, for every purpose of this Declaration, but
no such waiver shall extend to any subsequent or other default or Event of
Default with respect to the Common Securities or impair any right consequent
thereon.
(c) The right of any Holder of Trust Securities to receive Payments on the
Trust Securities in accordance with this Declaration and the terms of the Trust
Securities set forth in Exhibits B and C on or after the respective payment
dates therefor, or to institute suit for the enforcement of any such payment on
or after such payment dates, shall not be impaired without the consent of each
such Holder.
(d) As provided in the terms of the Trust Securities set forth in Exhibits
B and C hereto, a waiver of an Indenture Event of Default by the Property
Trustee at the written direction of the Holders of the Preferred Securities
constitutes a waiver of the corresponding Event of Default under this
Declaration in respect of the Trust Securities.
SECTION 2.07. Disclosure of Information. The disclosure of information as
to the names and addresses of the Holders of the Trust Securities in accordance
with 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 is named "Time Warner Capital I" as such name
may be modified from time to time by the Regular Trustees following written
notice to the Holders of Trust Securities. The Trust's activities may be
conducted under the name of the Trust or any other name deemed advisable by the
Regular Trustees.
SECTION 3.02. Office. The address of the principal office of the Trust is
c/o Time Warner Inc., 75 Rockefeller Plaza, New York, New York 10019. Upon ten
14
days written notice to the Holders, the Regular Trustees may change the location
of the Trust's principal office.
SECTION 3.03. Purpose. The exclusive purposes and functions of the Trust
are: (a) to issue and sell Trust Securities and use the proceeds from such sale
to acquire the Subordinated Debentures and (b) except as otherwise limited
herein, to engage in only those other activities necessary or incidental
thereto. The Trust shall not borrow money, issue debt or reinvest proceeds
derived from investments, pledge any of its assets or at any time otherwise
undertake (or permit to be undertaken) any activity that would result in or
cause the Trust to be treated as an association taxable as a corporation or
partnership for United States Federal income tax purposes or as anything other
than a grantor trust for United States Federal income tax purposes.
SECTION 3.04. Authority. Subject to the limitations provided in this
Declaration and to the specific duties of the Property Trustee, the Regular
Trustees shall have exclusive and complete authority to carry out the purposes
of the Trust. An action taken by the Regular Trustees in accordance with their
powers shall constitute the act of and serve to bind the Trust and an action
taken by the Property Trustee in accordance with its powers shall constitute the
act of and serve to bind the Trust. In dealing with the Trustees acting on
behalf of the Trust, no Person shall be required to inquire into the authority
of the Trustees to bind the Trust. Persons dealing with the Trust are entitled
to rely conclusively on the power and authority of the Trustees as set forth in
this Declaration.
SECTION 3.05. Title to Property of the Trust. Except as provided in Section
3.08 with respect to the Subordinated Debentures and the Property Account or
unless otherwise provided in this Declaration, legal title to all assets of the
Trust shall be vested in the Trust. The Holders of Trust Securities shall not
have legal title to any part of the assets of the Trust, but shall have an
undivided beneficial interest in the assets of the Trust.
SECTION 3.06. Powers and Duties of the Regular Trustees. The Regular
Trustees shall have the exclusive
15
power, authority and duty to cause the Trust, and shall cause the Trust, to
engage in the following activities:
(a) to issue and sell the Preferred Securities and the Common
Securities, in each case in accordance with this Declaration; provided,
however, that the Trust may issue no more than one series of Preferred
Securities and no more than one series of Common Securities; and provided
further, there shall be no interests in the Trust other than the Trust
Securities and the issuance of Trust Securities shall be limited to a
one-time, simultaneous issuance of both Preferred Securities and Common
Securities;
(b) to acquire the Subordinated Debentures with the proceeds of the
sale of the Preferred Securities and the Common Securities; provided,
however, the Regular Trustees shall cause legal title to all of the
Subordinated Debentures to be vested in, and the Subordinated Debentures to
be held of record in the name of, the Property Trustee for the benefit of
the Holders of the Preferred Securities and the Common Securities;
(c) to give the Sponsor and the Property Trustee prompt written notice
of the occurrence of any Special Event and to take any Ministerial Actions
in connection therewith; provided, that the Regular Trustees shall consult
with the Sponsor and the Property Trustee before taking or refraining to
take any Ministerial Action in relation to a Special Event;
(d) to establish a record date with respect to all actions to be taken
hereunder that require a record date be established, including for the
purposes of ss. 316(c) of the Trust Indenture Act and with respect to
Payments, voting rights, redemptions, and exchanges, and to issue relevant
notices to Holders of the Preferred Securities and Common Securities as to
such actions and applicable record dates;
(e) to bring or defend, pay, collect, compromise, arbitrate, resort to
legal action, or otherwise adjust claims or demands of or against the Trust
("Legal Action"), unless pursuant to Section 3.08(e), the Property Trustee
has the exclusive power to bring such Legal Action;
16
(f) to employ or otherwise engage employees and agents (who may be
designated as officers with titles) and managers, contractors, advisors,
and consultants and pay reasonable compensation for such services;
(g) to cause the Trust to comply with the Trust's obligations under
the Trust Indenture Act;
(h) to give the certificate to the Property Trustee required by ss.
314(a)(4) of the Trust Indenture Act, which certificate may be executed by
any Regular Trustee;
(i) to incur expenses which are necessary or incidental to carrying
out any of the purposes of the Trust;
(j) to act as, or appoint another Person to act as, registrar and
transfer agent for the Trust Securities, the Regular Trustees hereby
initially appointing the Property Trustee for such purposes;
(k) to take all actions and perform such duties as may be required of
the Regular Trustees pursuant to the terms of the Trust Securities set
forth in Exhibits B and C hereto;
(l) to execute all documents or instruments, perform all duties and
powers, and do all things for and on behalf of the Trust in all matters
necessary or incidental to the activities set forth in this section 3.06;
(m) to take all action that may be necessary or appropriate for the
preservation and the continuation of the Trust's valid existence, rights,
franchises and privileges as a statutory business trust under the laws of
the State of Delaware and of each other jurisdiction in which such
existence is necessary to protect the limited liability of the Holders of
the Trust Securities or to enable the Trust to effect the purposes for
which the Trust has been created;
(n) to take any action, not inconsistent with this Declaration or with
applicable law, which the Regular Trustees determine in their discretion to
be reasonable and necessary or desirable in carrying out the
17
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;
(o) to take all action necessary to cause all applicable tax returns
and tax information reports that are required to be filed with respect to
the Trust to be duly prepared and filed by the Regular Trustees, on behalf
of the Trust; and
(p) subject to the requirements of 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; and
Subject to this Section 3.06, the Regular Trustees shall have none of the
powers nor any of the authority of the Property Trustee set forth in Section
3.08.
SECTION 3.07. Prohibition of Actions by Trust and Trustees. The Trust shall
not, and the Trustees (including the Property Trustee) shall cause the Trust not
to, engage in any activity other than as required or authorized by this
18
Declaration. In particular, the Trust shall not and the Trustees (including the
Property Trustee) shall cause the Trust not to:
(a) invest any proceeds received by the Trust from holding the
Subordinated Debentures but shall promptly distribute all such proceeds to
Holders of Trust Securities pursuant to the terms of this Declaration and
of the Trust Securities;
(b) acquire any assets other than as expressly provided herein;
(c) possess Trust property for other than a Trust purpose;
(d) make any loans, other than loans represented by the Subordinated
Debentures;
(e) possess any power or otherwise act in such a way as to vary the
Trust assets or the terms of the Trust Securities in any way whatsoever;
(f) issue any securities or other evidences of beneficial ownership
of, or beneficial interests in, the Trust other than the Trust Securities;
(g) incur any indebtedness for borrowed money;
(h) except as contemplated by Section 2.06, (i) direct the time,
method and place of exercising any trust or power conferred upon the
Indenture Trustee with respect to the Subordinated Debentures, (ii) waive
any past default that is waivable under Section 5.13 of the Indenture,
(iii) exercise any right to rescind or annul any declaration that the
Subordinated Debentures shall be due and payable or (iv) consent to any
amendment, modification or termination of the Indenture or the Subordinated
Debentures, where such consent shall be required, unless the Property
Trustee shall have received an unqualified opinion of nationally recognized
independent tax counsel experienced in such matters to the effect that such
action will not result in the Trust being treated as an association taxable
as a corporation or partnership for United States Federal income tax
purposes and that, following such action, each Holder of Trust Securities
will be treated for United States Federal income tax purposes as owning an
19
undivided beneficial interest in the Subordinated Debentures; or
(i) consolidate, amalgamate, merge with or into, or be
replaced by, or convey, transfer or lease its properties and assets to,
any corporation or other body.
SECTION 3.08. Powers and Duties of the Property Trustee. (a) The legal
title to the Subordinated Debentures shall be owned by and held of record in the
name of the Property Trustee in trust for the benefit of the Trust and the
Holders of the Trust Securities. The right, title and interest of the Property
Trustee to the Subordinated Debentures shall vest automatically in each Person
who may hereafter be appointed as Property Trustee in accordance with Article V.
Such vesting and cessation of title shall be effective whether or not
conveyancing documents have been executed and delivered.
(b) The Property Trustee shall not transfer its right, title and interest
in the Subordinated Debentures to the Regular Trustees or, if the Property
Trustee does not also act as the Delaware Trustee, the Delaware Trustee.
(c) The Property Trustee shall:
(i) establish and maintain a segregated non-interest bearing bank
account (the "Property Account") in the name of and under the exclusive
control of the Property Trustee on behalf of the Trust and the Holders of
the Trust Securities and on the receipt of payments of funds made in
respect of the Subordinated Debentures held by the Property Trustee,
deposit such funds into the Property Account and, without any further acts
of the Property Trustee or the Regular Trustees, promptly make payments to
the Holders of the Preferred Securities and Common Securities from the
Property Account in accordance with Section 6.01. Funds in the Property
Account shall be held uninvested, and without liability for interest
thereon, until disbursed in accordance with this Declaration. The Property
Account shall be an account which is maintained with a banking institution
whose long term unsecured indebtedness is rated by a "nationally recognized
statistical rating organization", as such term is defined for purposes of
Rule 436(g)(2) under the Securities Act, at least equal to (but in no event
20
less than "A" or the equivalent) the rating assigned to the Preferred
Securities by a nationally recognized statistical rating organization;
(ii) engage in such ministerial activities as shall be necessary or
appropriate to effect promptly the redemption of the Preferred Securities
and the Common Securities to the extent the Subordinated Debentures are
redeemed or mature;
(iii) upon notice of distribution issued by the Regular Trustees in
accordance with the terms of the Preferred Securities and the Common
Securities, engage in such ministerial activities as shall be necessary or
appropriate to effect promptly the distribution pursuant to terms of the
Trust Securities of Subordinated Debentures to Holders of Trust Securities
upon the occurrence of a Special Event; and
(iv) have the legal power to exercise all of the rights, powers and
privileges of a holder of the Subordinated Debentures under the Indenture
and, if an Event of Default occurs and is continuing, the Property Trustee,
subject to Section 2.06, shall for the benefit of the Holders of the Trust
Securities, enforce its rights as holder of the Subordinated Debentures
under the Indenture, subject to the rights of the Holders of the Trust
Securities pursuant to the terms of the Trust Securities, this Declaration,
the Business Trust Act and the Trust Indenture Act.
(d) The Property Trustee shall take all actions and perform such duties as
may be specifically required of the Property Trustee pursuant to the terms of
the Trust Securities set forth in Exhibits B and C hereto.
(e) Subject to Section 2.06, the Property Trustee shall take any Legal
Action which arises out of or in connection with an Event of Default or the
Property Trustee's duties and obligations under this Declaration, the Business
Trust Act or the Trust Indenture Act.
(f) All moneys deposited in the Property Account, and all Subordinated
Debentures held by the Property Trustee for the benefit of the Trust and the
Holders of the Trust Securities, will not be subject to any right, charge,
security interest, lien or claim of any kind in favor of, or
21
for the benefit of, the Property Trustee or its agents or their creditors.
(g) The Property Trustee shall, within 90 days after the occurrence of a
default with respect to the Trust Securities, transmit by mail, first class
postage prepaid, to the Holders of the Trust Securities, as their names and
addresses appear upon the register, notice of all defaults with respect to the
Trust Securities known to the Property Trustee, unless such defaults shall have
been cured before the giving of such notice (the term "defaults" for the
purposes of this Section 3.08(g) being hereby defined to be an Indenture Event
of Default, not including any periods of grace provided for in the Indenture and
irrespective of the giving of any notice provided therein); provided, that,
except in the case of default in the payment of the principal amount or any
redemption price or interest on any of the Subordinated Debentures, the Property
Trustee shall be protected in withholding such notice if and so long as the
board of directors, the executive committee, or a trust committee of directors
and/or Responsible Officers, of the Property Trustee in good faith determine
that the withholding of such notice is in the interests of the Holders of the
Trust Securities. The Property Trustee shall not be deemed to have knowledge of
any default, except (i) a default in the payment of principal or any redemption
price or interest on the Subordinated Debentures or (ii) any default as to which
the Property Trustee shall have received written notice or a Responsible Officer
charged with the administration of this Declaration shall have obtained written
notice.
(h) The Property Trustee shall continue to serve as Property Trustee unless
either:
(i) the Trust has been completely liquidated and the proceeds thereof
distributed to the Holders of Trust Securities pursuant to the terms of the
Trust Securities; or
(ii) a Successor Property Trustee has been appointed and accepted that
appointment in accordance with Article V.
(i) The Property Trustee shall act as paying agent in respect of the Trust
Securities and may authorize one or more Persons (each, a "Paying Agent") to
make Payments on behalf of the Trust with respect to the Trust Securities.
22
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.
(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)(C), the Delaware Trustee shall not be
entitled to exercise any powers, nor shall the Delaware Trustee have any of the
duties and responsibilities of the Regular Trustees and the Property Trustee
described in this Declaration. Except as set forth in Section 5.01(a)(C), the
Delaware Trustee shall be a Trustee for the sole and limited purpose of
fulfilling the requirements of 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 or waiving of all Events of Default that may have occurred, shall
undertake to perform only such duties as are specifically set forth in this
Declaration, and no implied covenants shall be read into this Declaration
against the Property Trustee. In case an Event of Default has occurred (that has
not been cured or waived pursuant to Section 2.06), the Property Trustee shall
exercise such of the rights and powers vested in it by this Declaration, and use
the same degree of care and skill in their exercise, as a prudent person would
exercise or use under the circumstances in the conduct of his or her own
affairs.
(b) No provision of this Declaration shall be construed to relieve the
Property Trustee from liability for
23
its own negligent action, its own negligent failure to act or its own wilful
misconduct, except that:
(i) prior to the occurrence of an Event of Default and after the
curing or waiving of all Events of Default that may have occurred:
(A) the duties and obligations of the Property Trustee shall be
determined solely by the express provisions of this Declaration, and
the Property Trustee shall not be liable except for the performance of
such duties and obligations as 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
24
(iv) no provision of this Declaration shall require the Property
Trustee to expend or risk its own funds or otherwise incur personal
financial liability in the performance of any of its duties or in the
exercise of any of its rights or powers, if it shall have reasonable
grounds for believing that the repayment of such funds or liability is not
reasonably assured to it under the terms of this Declaration or adequate
indemnity against such risk or liability is not reasonably assured to it.
(c) Subject to the provisions of Section 3.10(a) and (b):
(i) whenever in the administration of this Declaration, the Property
Trustee shall deem it desirable that a matter be proved or established
prior 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;
25
(iv) the Property Trustee shall be under no obligation to exercise any
of the rights or powers vested in it by this Declaration at the request or
direction of any Holders, unless such Holders shall have offered to the
Property Trustee reasonable security and indemnity against the costs,
expenses (including attorneys' fees and expenses) and liabilities that
might be incurred by it in complying with such request or direction;
provided that nothing contained in this clause (iv) shall relieve the
Property Trustee of the obligation, upon the occurrence of an Event of
Default (which has not been cured or waived) to exercise such of the rights
and powers vested in it by this Declaration, and to use the same degree of
care and skill in their exercise, as a prudent person would exercise or use
under the circumstances in the conduct of his or her own affairs; and
(v) any action taken by the Property Trustee or its agents hereunder
shall bind the Trust and the Holders of the Trust Securities and the
signature of the Property Trustee or its agents alone shall be sufficient
and effective to perform any such action; and no third party shall be
required to inquire as to the authority of the Property Trustee to so act,
or as to its compliance with any of the terms and provisions of this
Declaration, both of which shall be conclusively evidenced by the Property
Trustee's or its agent's taking such action.
SECTION 3.11. Registration Statement and Related Matters. In accordance
with the Original Declaration, Time Warner and the Trustees have authorized and
directed, and hereby confirm the authorization of, Time Warner, as the sponsor
of the Trust, (a) to file with the Commission and execute, in each case on
behalf of the Trust, (i) the Registration Statement on Form S-3 (File Nos.
33-61523, 33- 61523-01, 33-61523-02 and 33-61523-03)(the "1933 Act Registration
Statement") including any pre-effective or post-effective amendments to such
Registration Statement, relating to the registration under the Securities Act of
the Preferred Securities of the Trust and (ii) a Registration Statement on Form
8-A or other appropriate form (the "1934 Act Registration Statement") (including
all pre-effective and post-effective amendments thereto) relating to the
registration of the Preferred Securities of the Trust under Section 12(b) of the
Exchange Act; (b) to file with the New
26
York Stock Exchange or any other national securities exchange and execute on
behalf of the Trust a listing application and all other applications,
statements, certificates, agreements and other instruments as shall be necessary
or desirable to cause the Preferred Securities to be listed on the New York
Stock Exchange or such other national securities exchange; (c) to file and
execute on behalf of the Trust such applications, reports, surety bonds,
irrevocable consents, appointments of attorney for service of process and other
papers and documents as shall be necessary or desirable to register the
Preferred Securities under the securities or "Blue Sky" laws of such
jurisdictions as Time Warner on behalf of the Trust may deem necessary or
desirable and (d) to execute on behalf of the Trust the Underwriting Agreement,
substantially in the form included as Exhibit 1 to the 1933 Act Registration
Statement with such changes thereto as may be approved by the authorized officer
of the Sponsor executing the same, such approval to be evidenced by such
officer's execution thereof. In the event that any filing referred to in clauses
(a)-(c) above is required by the rules and regulations of the Commission, the
New York Stock Exchange or state securities or blue sky laws, to be executed on
behalf of the Trust by the Trustees, the Regular Trustees, in their capacities
as Trustees of the Trust, are hereby authorized and directed to join in any such
filing and to execute on behalf of the Trust any and all of the foregoing, it
being understood that the Property Trustee and the Delaware Trustee, in their
capacities as Trustees of the Trust, shall not be required to join in any such
filing or execute on behalf of the Trust any such document unless required by
the rules and regulations of the Commission, the New York Stock Exchange or
state securities or blue sky laws. In connection with all of the foregoing, Time
Warner and each Trustee, solely in its capacity as Trustee of the Trust, have
constituted and appointed, and hereby confirm the appointment of, Gerald M.
Levin, Richard D. Parsons, Richard J. Bressler, Peter R. Haje and Philip R.
Lochner, and each of them, as his, her or its, as the case may be, true and
lawful attorneys-in-fact, and agents, with full power of substitution and
resubstitution, for Time Warner or such Trustee or in Time Warner's or such
Trustee's name, place and stead, in any and all capacities, to sign any and all
amendments (including post-effective amendments) to the 1933 Act Registration
Statement and the 1934 Act Registration Statement and to file the same, with all
exhibits thereto, and other documents in connection therewith, with the
Commission, and to execute and file with
27
the New York Stock Exchange or any other national securities exchange a listing
application and all other applications and documents as shall be necessary or
desirable in connection therewith, granting unto said attorneys-in-fact and
agents full power and authority to do and perform each and every act and thing
requisite and necessary to be done in connection therewith, as fully to all
intents and purposes as Time Warner or such Trustee might or could do in person,
hereby ratifying and confirming all that said attorneys-in-fact and agents or
any of them, or their or his or her substitute or substitutes, shall do or cause
to be done by virtue hereof.
SECTION 3.12. Filing of Amendments to Certificate of Trust. The Certificate
of Trust is attached hereto as Exhibit A. On or after the date of execution of
this Declaration, the Trustees shall cause the filing with the Secretary of
State of the State of Delaware of such amendments to the Certificate of Trust as
the Trustees shall deem necessary or desirable.
SECTION 3.13. Execution of Documents by Regular Trustees. Unless otherwise
determined by the Regular Trustees and except as otherwise required by the
Business Trust Act with respect to the Certificate of Trust or otherwise, a
majority of, or if there are only two, both of, the Regular Trustees are
authorized to execute and deliver on behalf of the Trust any documents which the
Regular Trustees have the power and authority to execute or deliver pursuant to
this Declaration; provided that any listing application prepared by the Sponsor
referred to in Section 3.11(b) may be executed by any Regular Trustee.
SECTION 3.14. Trustees Not Responsible for Recitals or Issuance of Trust
Securities. The recitals contained in this Declaration and the Trust Securities
shall be taken as the statements of the Sponsor and the Trustees do not assume
any responsibility for their correctness. The Trustees make no representations
as to the value or condition of the property of the Trust or any part thereof.
The Trustees make no representations as to the validity or sufficiency of this
Declaration or the Trust Securities.
SECTION 3.15. Duration of Trust. The Trust, absent termination pursuant to
the provisions of Article VIII hereof, shall have existence for 55 years from
the Closing Date.
28
ARTICLE IV
Sponsor
SECTION 4.01. Purchase of Common Securities by Sponsor. The Sponsor will
purchase all the Common Securities issued by the Trust at the same time as the
Preferred Securities are sold, in an amount approximately equal to 3% of the
capital of the Trust after giving effect to such purchase.
SECTION 4.02. Expenses. (a) The Sponsor, in its capacity as Sponsor and not
as a Holder, shall be responsible for and shall pay for all debts and
obligations (other than with respect to the Trust Securities) and all costs and
expenses of the Trust (including costs and expenses relating to the organization
of the Trust, the issuance of the Preferred Securities, the fees and expenses
(including reasonable counsel fees and expenses) of the Trustees (including any
amounts payable under Article X) and the costs and expenses relating to the
operation of the Trust, including costs and expenses of accountants, attorneys,
statistical or bookkeeping services, expenses for printing and engraving and
computing or accounting equipment, paying agent(s), registrar(s), transfer
agent(s), duplicating, travel and telephone and other telecommunications
expenses and costs and expenses incurred in connection with the disposition of
Trust assets).
(b) The Sponsor, in its capacity as Sponsor and not as a Holder, will pay
any and all taxes and all liabilities, costs and expenses with respect to such
taxes of the Trust.
(c) The Sponsor's obligations under this Section 4.02 shall be for the
benefit of, and shall be enforceable by, any Person to whom any such debts,
obligations, costs, expenses and taxes are owed (a "Creditor") whether or not
such Creditor has received notice hereof. Any such Creditor and the Property
Trustee may enforce the Sponsor's obligations under this Section 4.02 directly
against the Sponsor and the Sponsor irrevocably waives any right or remedy to
require that any such Creditor or the Property Trustee take any action against
the Trust or any other Person before proceeding against the Sponsor. The Sponsor
agrees to execute such additional agreements as may be necessary or desirable in
order to give full effect to the provisions of this Section 4.02.
29
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 aggregate liquidation amount of the
Common Securities voting as a class; provided that in any case:
(A) the number of Trustees shall be at least five unless the Trustee
that acts as the Property Trustee also acts as the Delaware Trustee, in
which case the number of Trustees shall be at least four;
(B) unless a Special Regular Trustee has been appointed (which
appointment shall not impair the right of the Holders of Common Securities
to increase or decrease the number of, or to appoint, remove or replace,
Trustees (other than the Special Regular Trustee) as provided above), at
least a majority of the Trustees shall at all times be officers, directors
or employees of Time Warner;
(C) if required by the Business Trust Act, one Trustee (the "Delaware
Trustee") shall be either a natural person who is a resident of the State
of Delaware or, if not a natural person, an entity that has its principal
place of business in the State of Delaware and otherwise is permitted to
act as a Delaware Trustee hereunder under the laws of the State of
Delaware, except that if the Property Trustee has its principal place of
business in the State of Delaware and otherwise is permitted to act as a
Delaware 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;
30
(D) there shall at all times be a Property Trustee; and
(E) the number of Trustees shall be increased automatically by one if
an Appointment Event has occurred and is continuing and the Holders of a
Majority in aggregate liquidation amount of the Preferred Securities
appoint a Special Regular Trustee in accordance with Section 5.02(a)(ii)(B)
and the terms of the Preferred Securities as set forth in Exhibit B hereto.
Each Trustee shall be either a natural person at least 21 years of age or a
legal entity which shall act through one or more duly appointed representatives.
(b) The initial Regular Trustees shall be:
John A. LaBarca
Philip R. Lochner, Jr.
Thomas W. McEnerney
c/o Time Warner Inc.
75 Rockefeller Plaza
New York, NY 10019
(c) There shall at all times be one Trustee that
shall act as Property Trustee. In order to act as Property
Trustee hereunder, such Trustee shall:
(i) not be an Affiliate of the Sponsor; and
(ii) be a corporation organized and doing business under the laws of
the United States of America or any State or Territory thereof or of the
District of Columbia, or a corporation or Person permitted by the
Commission to act as an institutional trustee under the Trust Indenture
Act, authorized under such laws to exercise corporate trust powers, having
a combined capital and surplus of at least $50,000,000, and subject to
supervision or examination by Federal, State, Territorial or District of
Columbia authority. If such corporation publishes reports of condition at
least annually, pursuant to law or to the requirements of the supervising
or examining authority referred to above, then for the purposes of this
Section 5.01(c)(ii), the combined capital and surplus of such corporation
shall be deemed to be its combined capital
31
and surplus as set forth in its most recent report of condition so
published.
If at any time the Property Trustee shall cease to satisfy any of the
requirements of clauses (i) and (ii) above, the Property Trustee shall
immediately resign in the manner and with the effect set out in Section 5.02(d).
If the Property Trustee has or shall acquire any "conflicting interest" within
the meaning of 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.
The initial Trustee that shall serve as the Property Trustee is The First
National Bank of Chicago whose address is as set forth in Section 14.01(b).
(d) The initial Trustee that shall serve as the Delaware Trustee is First
Chicago Delaware Inc. whose address is as set forth in Section 14.01(c).
(e) Any action taken by (i) Holders of Common Securities pursuant to this
Article V or (ii) Holders of Preferred Securities pursuant to this Article V to
appoint or remove a Special Regular Trustee upon the occurrence of an
Appointment Event, shall be taken at a meeting of Holders of Common Securities
or Preferred Securities, as the case may be, convened for such purpose or by
written consent as provided in Section 12.02.
(f) No amendment may be made to this Section 5.01 which would change any
rights with respect to the number, existence or appointment and removal of
Trustees (other than any Special Regular Trustee), except with the consent of
each Holder of Common Securities.
(g) No amendment may be made to this Section 5.01 or Section
5.02(a)(ii)(B), which would change the rights of Holders of Preferred Securities
to appoint, remove or replace a Special Regular Trustee except with the consent
of each Holder of Preferred Securities.
32
SECTION 5.02. Appointment, Removal and Resignation of Trustees. (a) Subject
to Section 5.02(b), Trustees may be appointed or removed without cause at any
time:
(i) until the issuance of the Trust Securities, by written instrument
executed by the Sponsor; and
(ii) after the issuance of the Trust Securities,
(A) other than with respect to the Special Regular Trustee, by
vote of the Holders of a Majority in aggregate liquidation amount of
the Common Securities voting as a class; and
(B) if an Appointment Event has occurred and is continuing, one
additional Regular Trustee (the "Special Regular Trustee") may be
appointed, who shall not be an Affiliate of the Sponsor, by vote of
the Holders of a Majority in aggregate liquidation amount of the
Preferred Securities, voting as a class and such Special Regular
Trustee may only be removed (otherwise than by the operation of
Section 5.02(c)), by vote of the Holders of a Majority in aggregate
liquidation amount of the Preferred Securities voting as a class.
(b) (i) The Trustee that acts as Property Trustee shall not be removed
in accordance with Section 5.02(a) until a Successor Property Trustee has
been appointed and has accepted such appointment by written instrument
executed by such Successor Property Trustee and delivered to the Regular
Trustees, the Sponsor and the Property Trustee being removed; and
(ii) the Trustee that acts as Delaware Trustee shall not be removed in
accordance with Section 5.02(a) until a successor Trustee possessing the
qualifications to act as Delaware Trustee under Section 5.01(a)(C) (a
"Successor Delaware Trustee") has been appointed and has accepted such
appointment by written instrument executed by such Successor Delaware
Trustee and delivered to the Regular Trustees, the Sponsor and the Delaware
Trustee being removed.
(c) A Trustee appointed to office shall hold office until such
Trustee's successor shall have been
33
appointed or until such Trustee's death, removal or resignation, provided that a
Special Regular Trustee shall only hold office while an Appointment Event is
continuing and shall cease to hold office immediately after the Appointment
Event pursuant to which the Special Regular Trustee was appointed and all other
Appointment Events cease to be continuing.
(d) Any Trustee may resign from office (without need for prior or
subsequent accounting) by an instrument (a "Resignation Request") in writing
signed by the Trustee and delivered to the Sponsor and the Trust, which
resignation shall take effect upon such delivery or upon such later date as is
specified therein; provided, however, that:
(i) no such resignation of the Trustee that acts as the Property
Trustee shall be effective until a Successor Property Trustee possessing
the qualifications to a ct as Property Trustee under Section 5.01(c) has
been appointed and has accepted such appointment by instrument executed by
such Successor Property Trustee and delivered to the Trust, the Sponsor and
the resigning Property Trustee;
(ii) no such resignation of the Trustee that acts as the Delaware
Trustee shall be effective until a Successor Delaware Trustee has been
appointed and has accepted such appointment by instrument executed by such
Successor Delaware Trustee and delivered to the Trust, the Sponsor and the
resigning Delaware Trustee; and
(iii) no such resignation of a Special Regular Trustee shall be
effective until the 60th day following delivery of the Resignation Request
to the Sponsor and the Trust or such later date specified in the
Resignation Request during which period the Holders of the Preferred
Securities shall have the right to appoint a successor Special Regular
Trustee as provided in this Article V.
(e) If no Successor Property Trustee or Successor Delaware Trustee shall
have been appointed and accepted appointment as provided in this Section 5.02
within 60 days after delivery to the Sponsor and the Trust of a Resignation
Request, the resigning Property Trustee or Delaware Trustee, as the case may be,
may petition any court of competent jurisdiction for appointment of a Successor
Property Trustee
34
or Successor Delaware Trustee. Such court may thereupon after such notice, if
any, as it may deem proper and prescribe, appoint a Successor Property Trustee
or Successor Delaware Trustee, as the case may be.
SECTION 5.03. Vacancies Among Trustees. If a Trustee ceases to hold office
for any reason and the number of Trustees is not reduced pursuant to Section
5.01 or if the number of Trustees is increased pursuant to Section 5.01, a
vacancy shall occur. A resolution certifying the existence of such vacancy by a
majority of the Regular Trustees shall be conclusive evidence of the existence
of such vacancy. The vacancy shall be filled with a Trustee appointed in
accordance with the requirements of this Article V.
SECTION 5.04. Effect of Vacancies. The death, resignation, retirement,
removal, bankruptcy, dissolution, liquidation, incompetence or incapacity to
perform the duties of a Trustee, or any one of them, shall not operate to annul
the Trust. Whenever a vacancy in the number of Regular Trustees shall occur
until such vacancy is filled as provided in this Article V, the Regular Trustees
in office, regardless of their number, shall have all the powers granted to the
Regular Trustees and shall discharge all the duties imposed upon the Regular
Trustees by this Declaration.
SECTION 5.05. Meetings. Meetings of the Regular Trustees shall be held from
time to time upon the call of any Trustee. Regular meetings of the Regular
Trustees may be held at a time and place fixed by resolution of the Regular
Trustees. Notice of any in-person meeting of the Regular Trustees shall be
hand-delivered or otherwise delivered in writing (including by facsimile) not
less than 24 hours before such meeting. Notice of any telephonic meeting of the
Regular Trustees or any committee thereof shall be hand-delivered or otherwise
delivered in writing (including by facsimile) not less than 24 hours before such
meeting. Notices shall contain a brief statement of the time, place and
anticipated purposes of the meeting. The presence (whether in person or by
telephone) of a Regular Trustee at a meeting shall constitute a waiver of notice
of such meeting except where a Regular Trustee attends a meeting for the express
purpose of objecting to the transaction of any activity on the ground that the
meeting has not been lawfully called or convened. Unless provided otherwise in
this Declaration, any action of the Regular
35
Trustees may be taken at a meeting by vote of a majority of the Regular Trustees
present (whether in person or by telephone) and eligible to vote with respect to
such matter, provided that a Quorum is present, or without a meeting by the
unanimous written consent of the Regular Trustees.
SECTION 5.06. Delegation of Power. (a) Any Regular Trustee may, by power of
attorney consistent with applicable law, delegate to any other natural person
over the age of 21 his or her power for the purpose of executing any documents
contemplated in Section 3.11, including any registration statement or amendment
thereto or other document or schedule filed with the Commission, or making any
other governmental filing.
(b) The Regular Trustees shall have power to delegate from time to time to
such of their number or to officers of the Trust the doing of such things and
the execution of such instruments either in the name of the Trust or the names
of the Regular Trustees or otherwise as the Regular Trustees may deem expedient,
to the extent such delegation is not prohibited by applicable law or contrary to
the provisions of the Trust, as set forth herein.
ARTICLE VI
Payments
SECTION 6.01. Payments. Holders shall receive periodic distributions,
redemption payments and liquidation distributions in accordance with the terms
of the Trust Securities ("Payments"). Payments shall be made to the Holders of
Preferred Securities and Common Securities in accordance with the terms of the
Trust Securities as set forth in Exhibits B and C hereto. If and to the extent
that Time Warner makes a payment of interest or principal on the Subordinated
Debentures held by the Property Trustee (the amount of any such payment being a
"Payment Amount"), the Property Trustee shall and is directed to promptly make a
distribution of the Payment Amount to Holders in accordance with the terms of
the Trust Securities as set forth in Exhibits B and C hereto.
36
ARTICLE VII
Issuance of Trust Securities
SECTION 7.01. General Provisions Regarding Trust Securities. (a) The
Regular Trustees shall issue on behalf of the Trust securities in fully
registered form representing undivided beneficial interests in the assets of the
Trust in accordance with Section 7.01(b).
(b) The Regular Trustees shall issue on behalf of the Trust one class of
preferred securities representing undivided beneficial interests in the assets
of the Trust having such terms as are set forth in Exhibit B (the "Preferred
Securities"), which terms are incorporated by reference in, and made a part of,
this Declaration as if specifically set forth herein, and one class of common
securities representing undivided beneficial interests in the assets of the
Trust having such terms as are set forth in Exhibit C (the "Common Securities"),
which terms are incorporated by reference in, and made a part of, this
Declaration as if specifically set forth herein. The Trust shall issue no
securities or other interests in the assets of the Trust other than the
Preferred Securities and the Common Securities.
(c) The Certificates shall be signed on behalf of the Trust by the Regular
Trustees (or, if there are more than two Regular Trustees, by any two of the
Regular Trustees). Such signatures may be the manual or facsimile signatures of
the present or any future Regular Trustee. Typographical and other minor errors
or defects in any such reproduction of any such signature shall not affect the
validity of any Certificate. In case any Regular Trustee of the Trust who shall
have signed any of the Certificates shall cease to be a Regular Trustee before
the Certificate so signed shall be delivered by the Trust, such Certificate
nevertheless may be delivered as though the person who signed such Certificate
had not ceased to be a Regular Trustee; and any Certificate may be signed on
behalf of the Trust by such persons as, at the actual date of the execution of
such Certificate, shall be the Regular Trustees of the Trust, although at the
date of the execution and delivery of the Declaration any such person was not
such a Regular Trustee. Certificates shall be printed, lithographed or engraved
or may be produced in any other manner as is reasonably acceptable to the
Regular Trustees, as evidenced by their execution thereof, and may have such
37
letters, numbers or other marks of identification or designation and such
legends or endorsements as the Regular Trustees may deem appropriate, or as may
be required to comply with any law or with any rule or regulation made pursuant
thereto or with any rule or regulation of any stock exchange on which the Trust
Securities may be listed or of any Clearing Agency in which the Trust Securities
have been accepted for trading, or to conform to usage.
(d) The consideration received by the Trust for the issuance of the Trust
Securities shall constitute a contribution to the capital of the Trust and shall
not constitute a loan to the Trust.
(e) Upon issuance of the Trust Securities as provided in this Declaration,
the Trust Securities so issued shall be deemed to be validly issued, fully paid
and nonassessable.
(f) Every Person, by virtue of having become a Holder or a Preferred
Security Beneficial Owner in accordance with the terms of this Declaration,
shall be deemed to have expressly assented and agreed to the terms of and shall
be bound by this Declaration.
(g) Upon issuance of the Trust Securities as provided in this Declaration,
the Regular Trustees on behalf of the Trust shall return to Time Warner the $10
constituting initial trust assets as set forth in the Original Declaration.
ARTICLE VIII
Termination of Trust
SECTION 8.01. Termination of Trust. This Declaration and the Trust shall
terminate and be of no further force or effect upon the earliest of:
(a) when all the Trust Securities shall have been called for
redemption and the amounts necessary for redemption thereof, including any
accrued and unpaid Payments thereon to the applicable date of redemption,
shall have been paid to the Holders of the Trust Securities in accordance
with the terms of the Trust Securities;
38
(b) when all the Subordinated Debentures shall have been distributed
to the Holders of Trust Securities in exchange for all the Trust Securities
in accordance with the terms of the Trust Securities;
(c) upon the expiration of the term of the Trust as set forth in
Section 3.15; or
(d) if Time Warner shall direct the Trustees to terminate the Trust,
provided that Time Warner shall be the holder at such time of all the
outstanding Preferred Securities;
and a certificate of cancellation is filed by the Trustees with the Secretary of
State of the State of Delaware. The Trustees shall so file such a certificate as
soon as practicable after the occurrence of an event referred to in this Article
VIII.
The provisions of Section 3.10 and Article X shall survive the termination
of the Trust.
ARTICLE IX
Transfer of Interests
SECTION 9.01. Transfer of Trust Securities. (a) Trust Securities may only
be transferred, in whole or in part, in accordance with the terms and conditions
set forth in this Declaration. Any transfer or purported transfer of any Trust
Security not made in accordance with this Declaration shall be null and void.
(b) Subject to this Article IX, Preferred Securities shall be freely
transferable.
(c) Subject to this Article IX, Time Warner and any Related Party may only
transfer Common Securities to Time Warner or a Related Party; provided that any
such transfer shall be subject to the condition that the transferor shall have
obtained (i) either a ruling from the Internal Revenue Service or an unqualified
written opinion addressed to the Trust and delivered to the Trustees of
nationally recognized independent tax counsel experienced in such matters to the
effect that such transfer will not (A) cause the Trust to be treated as issuing
a class of interests in the Trust differing from the class of interests
39
represented by the Common Securities originally issued to Time Warner, (B)
result in the Trust acquiring or disposing of, or being deemed to have acquired
or disposed of, an asset or (C) result in or cause the Trust to be treated as an
association taxable as a corporation or partnership for United States Federal
income tax purposes or as anything other than a grantor trust for United States
Federal income tax purposes and (ii) an unqualified written opinion addressed to
the Trust and delivered to the Trustees of a nationally recognized independent
counsel experienced in such matters that such transfer will not cause the Trust
to be an Investment Company or controlled by an Investment Company.
SECTION 9.02. Transfer of Certificates. The Regular Trustees shall provide
for the registration of Certificates and of transfers of Certificates, which
will be effected without charge but only upon payment (with such indemnity as
the Regular Trustees may require) in respect of any tax or other government
charges which may be imposed in relation to such transfers. Upon surrender for
registration of transfer of any Certificate, the Regular Trustees shall cause
one or more new Certificates to be issued in the name of the designated
transferee or transferees. Every Certificate surrendered for registration of
transfer shall be accompanied by a written instrument of transfer in form
satisfactory to the Regular Trustees duly executed by the Holder or such
Holder's attorney duly authorized in writing. Each Certificate surrendered for
registration of transfer shall be canceled by the Regular Trustees. A transferee
of a Certificate shall be entitled to the rights and subject to the obligations
of a Holder hereunder upon the receipt by such transferee of a Certificate. By
acceptance of a Certificate, each transferee shall be deemed to have agreed to
be bound by this Declaration.
SECTION 9.03. Deemed Security Holders. The Trustees may treat the Person in
whose name any Certificate shall be registered on the books and records of the
Trust as the sole holder of such Certificate and of the Trust Securities
represented by such Certificate for purposes of receiving Payments and for all
other purposes whatsoever and, accordingly, shall not be bound to recognize any
equitable or other claim to or interest in such Certificate or in the Trust
Securities represented by such Certificate on the part of any Person, whether or
not the Trustees shall have actual or other notice thereof.
40
SECTION 9.04. Book-Entry Interests. The Preferred Securities Certificates,
on original issuance, will be issued in fully registered form. With respect to
any Certificates registered on the books and records of the Trust in the name of
a Clearing Agency or the nominee of a Clearing Agency:
(a) the Trust and the Trustees shall be entitled to deal with the
Clearing Agency for all purposes of this Declaration (including the making
of Payments on such Certificates and receiving approvals, votes or consents
hereunder) as the Preferred Security Holder and the sole holder of such
Certificates and, except as set forth herein, shall have no obligation to
the Preferred Security Beneficial Owners;
(b) to the extent that the provisions of this Section 9.04 conflict
with any other provisions of this Declaration, the provisions of this
Section 9.04 shall control; and
(c) the rights of the Preferred Security Beneficial Owners shall be
exercised only through the Clearing Agency and shall be limited to those
established by law and agreements between such Preferred Security
Beneficial Owners and the Clearing Agency and/or the Clearing Agency
Participants. The Clearing Agency will make book-entry transfers among
Clearing Agency Participants and receive and transmit Payments on such
Certificates to such Clearing Agency Participants.
SECTION 9.05. Notices to Holders of Certificates. Whenever a notice or
other communication to the Holders is required to be given under this
Declaration, the relevant Trustees shall give such notices and communications to
the Holders and, with respect to any Preferred Security Certificate registered
in the name of a Clearing Agency or the nominee of a Clearing Agency, the
Trustees shall, except as set forth herein with respect to the Property Trustee,
have no obligations to the Preferred Security Beneficial Owners.
SECTION 9.06. Appointment of Successor Clearing Agency. If any Clearing
Agency elects to discontinue its services as securities depositary with respect
to the Preferred Securities, the Regular Trustees may, in their
41
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.
SECTION 9.08. Mutilated, Destroyed, Lost or Stolen Certificates. If (a) any
mutilated Certificates should be surrendered to the Regular Trustees or if the
Regular Trustees shall receive evidence to their satisfaction of the
destruction, loss or theft of any Certificate and (b) there shall be delivered
to the Regular Trustees such security or indemnity as may be required by them to
keep each of them harmless, then in the absence of notice that such Certificate
shall have been acquired by a bona fide purchaser, any two Regular Trustees on
behalf of the Trust shall execute and deliver, in exchange for or in lieu of any
such mutilated, destroyed, lost or stolen Certificate, a new Certificate of like
denomination. In connection with the issuance of any new Certificate under this
Section 9.08, the Regular Trustees may require the payment of a sum sufficient
to cover any tax or other governmental charge that may be imposed in connection
therewith. The Property Trustee, as registrar and paying agent for the Regular
Trustees in accordance with Section 3.06(j), shall have the right and obligation
to perform any task of the Regular Trustees under this Section 9.08. Any
duplicate Certificate issued pursuant to this Section shall constitute
conclusive evidence of an ownership interest in the relevant securities, as if
originally issued, whether or
42
not the lost, stolen or destroyed Certificate shall be found
at any time.
ARTICLE X
Limitation of Liability; Indemnification
SECTION 10.01. Liability. (a) Except as expressly set forth in this
Declaration, the Guarantee and the terms of the Trust Securities as set forth in
Exhibits B and C hereto, the Sponsor:
(i) shall not be personally liable for the return of any portion of
the capital contributions of the Holders of the Trust Securities, which
shall be made solely from assets of the Trust; and
(ii) shall not be required to pay to the Trust or to any Holder of
Trust Securities any deficit upon dissolution of the Trust or otherwise.
(b) Pursuant to Section 3803(a) of the Business Trust Act, the Holders of
the Trust Securities shall be entitled to the same limitation of personal
liability extended to stockholders of private corporations for profit organized
under the General Corporation Law of the State of Delaware.
SECTION 10.02. Exculpation. (a) No Indemnified Person shall be liable,
responsible or accountable in damages or otherwise to the Trust or any Covered
Person for any loss, damage or claim incurred by reason of any act or omission
performed or omitted by such Indemnified Person in good faith on behalf of the
Trust and in a manner such Indemnified Person reasonably believed to be within
the scope of the authority conferred on such Indemnified Person by this
Declaration or by law, except that an Indemnified Person shall be liable for any
such loss, damage or claim incurred by reason of such Indemnified Person's gross
negligence (or, in the case of the Property Trustee, except as otherwise set
forth in Section 3.10 hereof) or wilful misconduct with respect to such acts or
omissions.
(b) An Indemnified Person shall be fully protected in relying in good faith
upon the records of the Trust and upon such information, opinions, reports or
statements presented to the Trust by any Person as to
43
matters the Indemnified Person reasonably believes are within such other
Person's professional or expert competence and who has been selected with
reasonable care by or on behalf of the Trust, including information, opinions,
reports or statements as to the value and amount of the assets, liabilities,
profits, losses or any other facts pertinent to the existence and amount of
assets from which Payments to Holders of Trust Securities might properly be
paid.
SECTION 10.03. Indemnification. (a) To the fullest extent permitted by
applicable law, the Sponsor shall indemnify and hold harmless each Indemnified
Person from and against any loss, damage or claim incurred by such Indemnified
Person by reason of any act or omission performed or omitted by such Indemnified
Person in good faith on behalf of the Trust and in a manner such Indemnified
Person reasonably believed to be within the scope of authority conferred on such
Indemnified Person by this Declaration, except that no Indemnified Person shall
be entitled to be indemnified in respect of any loss, damage or claim incurred
by such Indemnified Person by reason of gross negligence (or, in the case of the
Property Trustee, except as otherwise set forth in Section 3.10 hereof) or
wilful misconduct with respect to such acts or omissions.
(b) To the fullest extent permitted by applicable law, expenses (including
reasonable legal fees) incurred by an Indemnified Person in defending any claim,
demand, action, suit or proceeding shall, from time to time, be advanced by the
Sponsor prior to the final disposition of such claim, demand, action, suit or
proceeding upon receipt by the Sponsor of an undertaking by or on behalf of the
Indemnified Person to repay such amount if it shall be determined that the
Indemnified Person is not entitled to be indemnified as authorized in Section
10.03(a).
SECTION 10.04. Outside Businesses. Any Covered Person, the Sponsor, the
Delaware Trustee and the Property Trustee may engage in or possess an interest
in other business ventures of any nature or description, independently or with
others, similar or dissimilar to the business of the Trust, and the Trust and
the Holders of Trust Securities shall have no rights by virtue of this
Declaration in and to such independent ventures or the income or profits derived
therefrom and the pursuit of any such venture, even if competitive with the
business of the Trust, shall not be deemed wrongful or improper. No Covered
44
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
certified copy of the Certificate of Trust, or any amendment thereto, shall at
all times be maintained at the principal office of the Trust and shall be open
for inspection and examination by any Holder or its duly authorized
representative for any purpose reasonably related to its interest in the Trust
during normal business hours.
(b) The Regular Trustees shall, as soon as available after the end of each
Fiscal Year of the Trust, cause to be prepared and mailed to each Holder of
Trust Securities unaudited financial statements of the Trust for
45
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 may maintain one or more bank accounts in
the name and for the sole benefit of the Trust; provided, however, that all
payments of funds in respect of the Subordinated Debentures held by the Property
Trustee shall be made directly to the Property Account and no other funds from
the Trust shall be deposited in the Property Account. The sole signatories for
such accounts shall be designated by the Regular Trustees; provided, however,
that the Property Trustee shall designate the sole signatories for the Property
Account.
SECTION 11.04. Withholding. The Trust and the Trustees shall comply with
all withholding requirements under United States Federal, state and local law.
The Trust shall request, and the Holders shall provide to the Trust, such forms
or certificates as are necessary to establish an exemption from withholding with
respect to each Holder and any representations and forms as shall reasonably be
46
requested by the Trust to assist it in determining the extent of, and in
fulfilling, its withholding obligations. The Trust shall file required forms
with applicable jurisdictions and, unless an exemption from withholding is
properly established by a Holder, shall remit amounts withheld with respect to
the Holder to the applicable jurisdiction. To the extent that the Trust is
required to withhold and pay over any amounts to any authority with respect to
distributions or allocations to any Holder, the amount withheld shall be deemed
to be a distribution in the amount of the withholding to the Holder. In the
event of any claimed overwithholding, Holders shall be limited to an action
against the applicable jurisdiction. If the amount to be withheld was not
withheld from a distribution, the Trust may reduce subsequent Payments by the
amount of such withholding.
ARTICLE XII
Amendments and Meetings
SECTION 12.01. Amendments. (a) Except as otherwise provided in this
Declaration or by any applicable terms of the Trust Securities, this Declaration
may be amended by, and only by, a written instrument executed by a majority of
the Regular Trustees; provided, however, that (i) no amendment to this
Declaration shall be made unless the Regular Trustees shall have obtained (A) a
written unqualified opinion of nationally recognized independent tax counsel
experienced in such matters to the effect that such amendment will not result in
the Trust being treated as an association taxable as a corporation or a
partnership for United States Federal income tax purposes and that, following
such action, each holder of Trust Securities will be treated as owning for
United States Federal income tax purposes an undivided beneficial interest in
the Subordinated Debentures and (B) a written unqualified opinion of nationally
recognized independent counsel experienced in such matters to the effect that
such amendment will not cause the Trust to be an Investment Company that is
required to be registered under the 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,
47
(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) Subject to Section 12.01(a)(i), this Declaration may be amended without
the consent of the Holders of the Trust Securities to (i) cure any ambiguity,
(ii) correct or supplement any provision in this Declaration that may be
defective or inconsistent with any other provision of this Declaration, (iii)
add to the covenants, restrictions or obligations of the Sponsor and (iv)
conform to any changes in Rule 3a-5 or any change in interpretation or
application of Rule 3a-5 by the Commission, which amendment does not adversely
affect the rights, preferences or privileges of the Holders.
SECTION 12.02. Meetings of the Holders of Trust Securities; Action by
Written Consent. (a) Meetings of the Holders of Preferred Securities and/or
Common Securities may be called at any time by the Regular Trustees (or as
provided in the terms of the Trust Securities) to consider and act on any matter
on which Holders of such class of Trust Securities are entitled to act under the
terms of this Declaration, the terms of the Trust Securities or the rules of any
stock exchange or other self-regulatory organization (including the Nasdaq Stock
Market) on which the Preferred Securities are listed or admitted for trading.
The Regular Trustees shall call a meeting of Holders of Preferred Securities or
Common Securities if directed to do so by Holders of at least 10% in aggregate
liquidation amount of such class of Trust Securities. Such direction shall be
given by delivering to the Regular Trustees one or more written notifications
stating that the signing Holders of Trust Securities wish to call a meeting and
indicating the general or specific purpose for which the meeting is to be
called. Any Holders of Trust Securities calling a meeting
48
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 or other self-regulatory organization (including the Nasdaq Stock
Market) on which the Preferred Securities are listed or admitted for
trading, such vote, consent or approval may be given at a meeting of the
Holders of Trust Securities. Any action that may be taken at a meeting of
the Holders of Trust Securities may be taken without a meeting if a consent
in writing setting forth the action so taken is signed by Holders of Trust
Securities owning not less than the minimum aggregate liquidation amount of
Trust Securities that would be necessary to authorize or take such action
at a meeting at which all Holders of Trust Securities having a right to
vote thereon were present and voting. Prompt notice of the taking of action
without a meeting shall be given to the Holders of Trust Securities
entitled to vote who have not consented in writing. The Regular Trustees
may specify that any written ballot submitted to the Holders of Trust
Securities for the purpose of taking any action without a meeting shall be
returned to the Trust within the time specified by the Regular Trustees;
(ii) each Holder of a Trust Security may authorize any Person to act
for it by proxy on all matters in which a Holder of a Trust Security is
entitled to participate, including waiving notice of any meeting or voting
or participating at a meeting. No proxy shall be valid after the expiration
of 11 months from the date thereof unless otherwise provided in the proxy.
Every proxy shall be revocable at the pleasure of the
49
Holder of the Trust Security executing it. Except as otherwise
provided herein or in the terms of the Trust Securities, all matters
relating to the giving, voting or validity of proxies shall be governed by
the General Corporation Law of the State of Delaware relating to proxies,
and judicial interpretations thereunder, as if the Trust were a Delaware
corporation and the Holders of the Trust Securities were stockholders of a
Delaware corporation;
(iii) each meeting of the Holders of the Trust Securities shall be
conducted by the Regular Trustees or by such other Person that the Regular
Trustees may designate; and
(iv) unless otherwise provided in the Business Trust Act, this
Declaration or the rules of any stock exchange or other self-regulatory
organization (including the Nasdaq Stock Market) on which the Preferred
Securities are then listed or admitted for trading, the Regular Trustees,
in their sole discretion, shall establish all other provisions relating to
meetings of Holders of Trust Securities, including notice of the time,
place or purpose of any meeting at which any matter is to be voted on by
any Holders of Trust Securities, waiver of any such notice, action by
consent without a meeting, the establishment of a record date, quorum
requirements, voting in person or by proxy or any other matter with respect
to the exercise of any such right to vote.
ARTICLE XIII
Representations and Warranties of Property Trustee
and Delaware Trustee
SECTION 13.01. Representations and Warranties of Property Trustee and
Delaware Trustee. (a) The Trustee that acts as initial Property Trustee
represents and warrants to the Trust and to the Sponsor at the date of this
Declaration, and each Successor Property Trustee represents and warrants to the
Trust and the Sponsor at the time of the Successor Property Trustee's acceptance
of its appointment as Property Trustee that:
(i) The Property Trustee is a banking association with trust powers,
duly organized, validly existing and
50
in good standing under the laws of the United States, or any State
therein, with trust power and authority to execute and deliver, and to
carry out and perform its obligations under the terms of, this Declaration.
(ii) The execution, delivery and performance by the Property Trustee
of this Declaration has been duly authorized by all necessary corporate
action on the part of the Property Trustee. The Declaration has been duly
executed and delivered by the Property Trustee and constitutes a legal,
valid and binding obligation of the Property Trustee, enforceable against
it in accordance with its terms, subject to applicable bankruptcy,
reorganization, moratorium, insolvency and other similar laws affecting
creditors' rights generally and to general principles of equity and the
discretion of the court (regardless of whether the enforcement of such
remedies is considered in a proceeding in equity or at law).
(iii) The execution, delivery and performance of this Declaration by
the Property Trustee does not conflict with or constitute a breach of any
of the terms or provisions of or constitute a default under (i) the
Articles of Association or By-laws of the Property Trustee or any other
agreement or instrument to which the Property Trustee is a party or by
which it may be bound, (ii) any existing applicable law, rule or regulation
or (iii) any judgment, order or decree of any government, governmental
instrumentality or court having jurisdiction over the Property Trustee.
(iv) No consent, approval or authorization of, or registration with or
notice to, any banking authority which supervises or regulates the Property
Trustee is required for the execution, delivery or performance by the
Property Trustee of this Declaration.
(v) The Property Trustee satisfies the qualifications set forth in
Section 5.01(c).
(b) The Trustee which acts as initial Delaware Trustee represents and
warrants to the Trust and the Sponsor at the date of this Declaration, and each
Successor Delaware Trustee represents and warrants to the Trust and the Sponsor
at the time of the Successor Delaware Trustee's acceptance of its appointment as
Delaware Trustee, that:
51
(i) it satisfies the qualifications set forth in Section 5.01(a)(C);
(ii) it has been authorized to perform its obligations under the
Certificate of Trust and the Declaration; and
(iii) the Declaration under Delaware law constitutes a legal, valid
and binding obligation of the Delaware Trustee, enforceable against it in
accordance with its terms, subject to applicable bankruptcy,
reorganization, moratorium, insolvency, and other similar laws affecting
creditors' rights generally and to general principles of equity and the
discretion of the court (regardless of whether the enforcement of such
remedies is considered in a proceeding in equity or at law).
ARTICLE XIV
Miscellaneous
SECTION 14.01. Notices. All notices provided for in this Declaration shall
be in writing, duly signed by the party giving such notice, and shall be
delivered, telecopied or mailed by first class mail, as follows:
(a) if given to the Trust, in care of the Regular Trustees at the
Trust's mailing address set forth below (or such other address as the
Regular Trustees on behalf of the Trust may give notice of to the Holders
of the Trust Securities):
Time Warner Capital I
In care of Time Warner Inc.
75 Rockefeller Plaza
New York, NY 10019
Attention of John A. LaBarca,
Philip R. Lochner, Jr. and
Thomas W. McEnerney,
Trustees
Facsimile No.: (212) 333-3987
52
(b) if given to the Property Trustee, at the mailing address of the
Property Trustee set forth below (or such other address as the Property
Trustee may give notice of to the Holders of the Trust Securities):
The First National Bank of Chicago
Corporate Trust Services Division
One First National Plaza, Suite 0126
Chicago, Illinois 60670-0126
Attention of: Melissa G. Weisman
Facsimile No.: (212) 373-1383
(c) if given to the Delaware Trustee, at the mailing address of the
Delaware Trustee set forth below (or such other address as the Delaware
Trustee may give notice of to the Holders of the Trust Securities):
First Chicago Delaware Inc.
1201 Market Street, Suite 1401
Wilmington, Delaware 19801
Facsimile No.: (302) 594-8622
(d) if given to the Holder of the Common Securities, at the mailing
address of the Sponsor set forth below (or such other address as the Holder
of the Common Securities may give notice of to the Trust):
Time Warner Inc.
75 Rockefeller Center
New York, NY 10019
Attention of General Counsel
Facsimile No.: (212) 956-7281
(e) if given to any other Holder, at the address set forth on the
books and records of the Trust.
A copy of any notice to the Property Trustee or the Delaware Trustee shall
also be sent to the Trust. Except as otherwise provided in the terms of the
Trust Securities, all notices shall be deemed to have been given when received
in person, telecopied with receipt confirmed or three Business Days after mailed
by first class mail, postage prepaid, except that, if a notice or other document
53
is refused delivery or cannot be delivered because of a changed address of which
no notice was given, such notice or other document shall be deemed to have been
delivered on the date of such refusal or inability to deliver.
SECTION 14.02. Undertaking for Costs. All parties to this Declaration
agree, and each Holder of any Trust Securities by his or her acceptance thereof
shall be deemed to have agreed, that any court may in its discretion require, in
any suit for the enforcement of any right or remedy under this Declaration or in
any suit against the Property Trustee for any action taken or omitted by it as
Property Trustee, the filing by any party litigant in such suit of an
undertaking to pay the costs of such suit and that such court may in its
discretion assess reasonable costs, including reasonable attorneys' fees,
against any party litigant in such suit, having due regard to the merits and
good faith of the claims or defenses made by such party litigant; but the
provisions of this Section 14.02 shall not apply to any suit instituted by the
Property Trustee, to any suit instituted by any Holder or group of Holders of
Preferred Securities holding more than 10% in aggregate liquidation amount of
the outstanding Preferred Securities, or to any suit instituted by any Holder of
Preferred Securities for the enforcement of the payment of principal or any
redemption price or interest on the Subordinated Debentures, on or after the
respective due dates expressed in such Subordinated Debentures.
SECTION 14.03. Governing Law. This Declaration and the rights of the
parties hereunder shall be governed by and interpreted in accordance with the
laws of the State of Delaware and all rights and remedies shall be governed by
such laws without regard to principles of conflict of laws.
SECTION 14.04. Headings. Headings contained in this Declaration are
inserted for convenience of reference only and do not affect the interpretation
of this Declaration or any provision hereof.
SECTION 14.05. Partial Enforceability. If any provision of this
Declaration, or the application of such provision to any Person or circumstance,
shall be held invalid, the remainder of this Declaration, or the application of
such provision to persons or circumstances other than those to which it is held
invalid, shall not be affected thereby.
54
SECTION 14.06. Counterparts. This Declaration may contain more than one
counterpart of the signature pages and this Declaration may be executed by the
affixing of the signature of the Sponsor and each of the Trustees to one of such
counterpart signature pages. All such counterpart signature pages shall be read
as though one, and they shall have the same force and effect as though all the
signers had signed a single signature page.
SECTION 14.07. Intention of the Parties. (a) It is the intention of the
parties hereto that the Trust not be classified for United States Federal income
tax purposes as an association taxable as a corporation or partnership but that
the Trust be treated as a grantor trust for United States Federal income tax
purposes. The provisions of this Declaration shall be interpreted to further
this intention of the parties.
(b) The Trust, the Trustees, Time Warner and each Holder of a Trust
Security, by his or her acceptance thereof, agree to treat the Subordinated
Debentures as debt instruments for United States Federal, state and local income
and franchise tax purposes and shall not take any contrary position before any
taxing authority or on any tax return.
SECTION 14.08. Successors and Assigns. Whenever in this Declaration any of
the parties hereto is named or referred to, the successors and assigns of such
party shall be deemed to be included, and all covenants and agreements 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.
55
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: Thomas W. McEnerney
Title: Vice President
by
--------------------------
John A. LaBarca,
as Trustee
by
--------------------------
Philip R. Lochner, Jr.,
as Trustee
by
--------------------------
Thomas W. McEnerney,
as Trustee
THE FIRST NATIONAL BANK OF
CHICAGO, as Trustee,
by
--------------------------
Name: Melissa G. Weisman
Title: Assistant Vice
President
FIRST CHICAGO DELAWARE INC.,
as Delaware Trustee,
by
--------------------------
Name: Melissa G. Weisman
Title: Assistant Vice
President
CERTIFICATE OF TRUST
OF
TIME WARNER CAPITAL I
This Certificate of Trust of Time Warner Capital I (the "Trust"), dated
August 2, 1995, is being duly executed and filed by the undersigned, as
trustees, to form a business trust under the Delaware Business Trust Act (12
Del. C. Section 3801 et seq.).
1. Name. The name of the business trust formed hereby is Time Warner
Capital I.
2. Delaware Trustee. The name and business address of the trustee of the
Trust with a principal place of business in the State of Delaware is First
Chicago Delaware Inc., 1201 Market Street, Suite 1401, Wilmington, Delaware
19801.
3. Effective Date. This Certificate of Trust shall be effective as of its
filing.
IN WITNESS WHEREOF, the undersigned, being the sole trustees of the Trust,
have executed this Certificate of Trust as of the date first above written.
THE FIRST NATIONAL BANK OF
CHICAGO, as trustee,
by
-------------------------
Name: Melissa G. Weisman
Title: Assistant Vice
President
FIRST CHICAGO DELAWARE INC., as
Delaware Trustee,
by
-------------------------
Name: Melissa G.Weisman
Title: Assistant Vice
President
2
by
-------------------------
John A. LaBarca,
as trustee
by
-------------------------
Philip R. Lochner, Jr.,
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 Capital I (the "Trust") dated as of December 5, 1995 (as amended
from time to time, the "Declaration"), the designations, rights, privileges,
restrictions, preferences and other terms and provisions of the Preferred
Securities are set forth below (each capitalized term used but not defined
herein having the meaning set forth in the Declaration or, to the extent not
defined therein, the Guarantee Agreement dated as of December 5, 1995 (as
amended from time to time, the "Guarantee") executed by Time Warner Inc. ("Time
Warner") on behalf of the Holders of the Preferred Securities):
1. Designation and Number. Preferred Securities of the Trust with an
aggregate liquidation amount in the assets of the Trust of Five Hundred
Seventy-Five Million Dollars ($575,000,000) and a liquidation amount in the
assets of the Trust of $25 per Preferred Security, are hereby designated as
"8-7/8% Preferred Trust Securities". The Preferred Security Certificates
evidencing the Preferred Securities shall be substantially in the form attached
hereto as Annex I, with such changes and additions thereto or deletions
therefrom as may be required by ordinary usage, custom or practice or to conform
to the rules of any stock exchange on which the Preferred Securities are listed
or to the rules of any Clearing Agency in which the Preferred Securities have
been accepted for trading. The Trust will invest the gross proceeds from the
issuance of the Preferred Securities together with the gross proceeds from the
sale to Time Warner of the Common Securities in Subordinated Debentures of Time
Warner having an aggregate principal amount equal to $592,783,525, and bearing
interest at an annual percentage rate of 8-7/8%, which will result in the
payment of interest equal to the annual Distribution rate on the Preferred
Securities and Common Securities and having payment and redemption provisions
that correspond to the payment and redemption provisions of the Preferred
Securities and Common Securities.
2. Distributions. (a) Periodic distributions payable on each Preferred
Security will be fixed at a rate per annum of 8-7/8% (the "Coupon Rate") of the
aggregate liquidation amount of $25 per Preferred Security, such rate being the
rate of interest payable on the Subordinated
2
Debentures to be held by the Property Trustee. Distributions in arrears beyond
the first date such Distributions are payable (or would be payable in not for
any Extension Period (as hereinafter defined) or default by Time Warner on the
Subordinated Debentures) will bear interest thereon at the Coupon Rate (to the
extent permitted by law), compounded quarterly. The term "Distributions" as used
in these terms means such periodic cash distributions and any such interest
payable unless otherwise stated. A Distribution will be made by the Property
Trustee only to the extent that interest payments are made in respect of the
Subordinated Debentures held by the Property Trustee. The amount of
Distributions (or amounts equal to accrued and unpaid Distributions) payable for
any period will be computed (i) for any full quarterly Distribution period, on
the basis of a 360-day year of twelve 30-day months and will include the first
day but exclude the last day of such period, and (ii) for any period shorter
than a full quarterly Distribution period, on the basis of a 360-day year of
twelve 30-day months and on the basis of the actual number of days elapsed in
any such 30-day month and will include the first day but exclude the last day of
such period.
(b) Distributions on the Preferred Securities will be cumulative, will
accrue from and including December 5, 1995, and will be payable quarterly in
arrears, on March 31, June 30, September 30 and December 31 of each year,
commencing on December 31, 1995, except as otherwise described below, but only
if and to the extent that interest payments are made in respect of the
Subordinated Debentures held by the Property Trustee. Time Warner, as issuer of
the Subordinated Debentures, has the right under the Indenture to defer payments
of interest by extending the interest payment period from time to time on the
Subordinated Debentures for a period not exceeding 20 consecutive quarters (each
an "Extension Period") and, during such Extension Period, Distributions will
also be deferred. Despite such deferral, quarterly Distributions will continue
to accrue with interest thereon (to the extent permitted by applicable law) at
the Coupon Rate compounded quarterly during any such Extension Period. In the
event that Time Warner exercises its rights to commence any Extension Period or
an extension period or other deferral of interest feature under any debt
security of Time Warner that ranks pari passu with the Subordinated Debentures,
then (a) Time Warner shall not declare or pay dividends on, make distributions
with respect to, or redeem, purchase or acquire, or make a
3
liquidation payment with respect to, any of its capital stock and (b) Time
Warner shall not make any payment of interest, principal or premium, if any, on
or repay, repurchase or redeem the Subordinated Debentures or any debt
securities issued by Time Warner that rank pari passu with or junior to the
Subordinated Debentures; provided, however, that the foregoing restrictions do
not apply (i) to any interest or dividend payment by Time Warner where the
interest or dividend is paid by way of the issuance of securities that rank
junior to the Subordinated Debentures, (ii) any payments of interest, principal
or premium, if any, on, or repayment, repurchase or redemption of, Time Warner's
4% Subordinated Notes due December 23, 1995 and (iii) any payments or
distributions with respect to, or redemptions, purchases or acquisitions of, or
any payments in liquidation of, the $1.24% Preferred Exchangeable Redemption
Cumulative Securities issued by Time Warner Financing Trust (the "PERCS")
(including any of the foregoing with respect to the guarantee agreement entered
into by Time Warner for the benefit of the holders of the PERCS). Prior to the
termination of any such Extension Period, Time Warner may further extend such
Extension Period; provided that such Extension Period together with all such
previous and further extensions thereof may not exceed 20 consecutive quarters.
Upon the termination of any Extension Period, payments of accrued Distributions
will be payable to Holders as they appear on the books and records of the Trust
on the record date for the first payment date after the end of the Extension
Period. Upon the termination of any Extension Period and the payment of all
amounts then due, Time Warner may commence a new Extension Period, subject to
the above requirements. The Regular Trustees shall give notice to the Holders of
any Extension Period upon their receipt of notice thereof from Time Warner.
(c) Distributions on the Preferred Securities will be payable promptly by
the Property Trustee (or other Paying Agent) upon receipt of immediately
available funds to the Holders thereof as they appear on the books and records
of the Trust on the relevant record dates. While the Preferred Securities remain
in book-entry only form, the relevant record dates shall be one Business Day
prior to the relevant payment dates which payment dates correspond to the
interest payment dates on the Subordinated Debentures. Subject to any applicable
laws and regulations and the provisions of the Declaration, each such payment in
respect of the Preferred Securities will be made as described under the heading
"Description of the Preferred Securities--Book-
4
Entry Only Issuance--The Depository Trust Company" in the Prospectus Supplement
dated November 30, 1995, to the Prospectus dated November 8, 1995 (together the
"Prospectus"), of the Trust included in the Registration Statement on Form S-3
of the Sponsor, the Trust and certain other business trusts.
If the Preferred Securities shall not continue to remain in book-entry only
form, the relevant record dates for the Preferred Securities shall conform to
the rules of any securities exchange on which the securities are listed and, if
none, shall be selected by the Regular Trustees, which dates shall be at least
one Business Day but less than 60 Business Days before the relevant payment
dates, which payment dates correspond to the interest payment dates on the
Subordinated Debentures. Distributions payable on any Preferred Securities that
are not punctually paid on any Distribution payment date as a result of Time
Warner having failed to make the corresponding interest payment on the
Subordinated Debentures will forthwith cease to be payable to the person in
whose name such Preferred Security is registered on the relevant record date,
and such defaulted Distribution will instead be payable to the person in whose
name such Preferred Security is registered on the special record date
established by the Regular Trustees, which record date shall correspond to the
special record date or other specified date determined in accordance with the
Indenture. Subject to any applicable laws and regulations and the provisions of
the Declaration, each payment in respect of the Preferred Securities will be
made as described in paragraph 9 hereof. If any date on which Distributions are
payable on the Preferred Securities is not a Business Day, then payment of the
Distribution payable on such date will be made on the next succeeding day that
is a Business Day (and without any interest or other payment in respect of any
such delay), except that if such Business Day is in the next succeeding calendar
year, such payment shall be made on the immediately preceding Business Day, in
each case with the same force and effect as if made on such date.
(d) All Distributions paid with respect to the Preferred Securities and the
Common Securities will be paid on a Pro Rata Basis (as defined herein) to the
Holders thereof entitled thereto.
(e) In the event that there is any money or other property held by or for
the Trust that is not accounted for under the Declaration or these terms of the
Preferred
5
Securities or the terms of the Common Securities, such money or property
shall be distributed on a Pro Rata Basis among the Holders of the Preferred
Securities and Common Securities.
3. Liquidation Distribution Upon Dissolution. In the event of any
liquidation, dissolution, winding-up or termination of the Trust (each a
"Liquidation Event") whether voluntary or involuntary, the Holders of the Trust
Securities on the date of such Liquidation Event will be entitled to be paid on
a Pro Rata Basis out of the assets of the Trust an amount equal to (a) $25 per
Trust Security plus (b) the amount of accrued and unpaid Distributions thereon
to, but excluding, the date of payment (such amount being the "Liquidation
Distribution") in connection with such Liquidation Event, unless Subordinated
Debentures in an aggregate principal amount equal to the aggregate liquidation
amount of, and bearing accrued and unpaid interest in an amount equal to the
accrued and unpaid Distributions on, the Trust Securities have been distributed
on a Pro Rata Basis (determined without regard to the proviso in the definition
of such term) to the Holders of the Trust Securities in exchange for such Trust
Securities. In the event that the assets of the Trust exceed the amount
necessary to pay to all Holders of the Trust Securities the full amount of the
Liquidation Distribution, such excess will be paid to the Holders of the Trust
Securities on a Pro Rata Basis (determined without regard to the proviso in the
definition of such term).
4. Redemption and Distribution of Subordinated Debentures. The Trust
Securities may be redeemed only if Subordinated Debentures having an aggregate
principal amount equal to the aggregate liquidation amount of, and accrued and
unpaid interest equal to accrued and unpaid Distributions on, the Trust
Securities are repaid, redeemed or distributed as set forth below:
(a) Upon the repayment of the Subordinated Debentures in whole or in part,
whether at maturity or upon redemption, the proceeds from such repayment or
payment shall be simultaneously applied to redeem Trust Securities having an
aggregate liquidation amount equal to the aggregate principal amount of the
Subordinated Debentures so repaid or redeemed at a redemption price equal to the
liquidation amount per Trust Security (the "Redemption Price") plus an amount
equal to all accrued and unpaid Distributions thereon to but excluding the date
of the
6
redemption, payable in cash. Holders will be given not less than 20 nor more
than 45 Business Days notice of such redemption.
(b) If fewer than all the outstanding Trust Securities are to be so
redeemed, the Trust Securities will be redeemed on a Pro Rata Basis and the
Preferred Securities to be redeemed will be redeemed as described in 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 automated
inter-dealer quotation system, (including the Nasdaq Stock Market) on which the
Preferred Securities are then listed, Time Warner pursuant to the Indenture will
only redeem the Subordinated Debentures in whole and, as a result, the Trust may
only redeem the Preferred Securities in whole.
(c)(i) If, at any time, a Tax Event or an Investment Company Event
(each as hereinafter defined, and each a "Special Event") shall occur and
be continuing, the Regular Trustees shall notify Time Warner thereof and
Time Warner shall elect to either: (A) direct the Regular Trustees to
dissolve the Trust and cause Subordinated Debentures having an aggregate
principal amount equal to the aggregate liquidation amount of, and accrued
and unpaid interest equal to accrued and unpaid Distributions on, and
having the same record dates for payment as, the Trust Securities
outstanding at such time, to be distributed to the Holders of the Trust
Securities on a Pro Rata Basis (determined without regard to the proviso in
the definition of such term) in liquidation of such Holders' interests in
the Trust, within 90 days following the occurrence of such Special Event;
provided, however, that in the case of the occurrence of a Tax Event, as a
condition of any such dissolution and distribution, the Regular Trustees
shall have received an opinion of nationally recognized independent tax
counsel experienced in such matters (a "No Recognition Opinion"), which
opinion may rely on any then applicable published revenue ruling of the
Internal Revenue Service, to the effect that the Holders of the Preferred
Securities will not recognize any gain or loss for United States Federal
income tax purposes as a result of the dissolution of the Trust and
distribution of Subordinated Debentures; (B) redeem the Subordinated
Debentures in whole (and not in part), upon not less than 20 nor more than
45 Business Days'
7
notice, within 90 days following the occurrence of such Special Event,
in which case the Trust shall redeem in cash on a Pro Rata Basis Trust
Securities having an aggregate liquidation amount equal to the principal
amount of, and accrued and unpaid distributions equal to the accrued and
unpaid interest on, the Subordinated Debentures so redeemed, at a price per
Trust Security of (1) $25, plus (2) an amount equal to all accrued and
unpaid distributions on such Trust Security to but excluding the date of
such redemption (the "Special Redemption Date") or (C) in the case of a Tax
Event, allow the Subordinated Debentures and the Trust Securities to remain
outstanding and indemnify the Trust for all taxes payable by it as a result
of such Tax Event; provided that, if at the time there is available to the
Trust the opportunity to eliminate, within 90 days following the occurrence
of such Special Event (the "90-Day Period"), the Special Event by taking
some ministerial action, such as filing a form or making an election, or
pursuing some other similar reasonable measure that has no adverse effect
on the Trust, Time Warner or the Holders of the Trust Securities (a
"Ministerial Action"), the Trust will pursue such measure in lieu of
dissolution or redemption; provided further, that Time Warner shall have no
right to redeem the Subordinated Debentures or to direct the Regular
Trustees to dissolve the Trust while the Regular Trustees are pursuing such
Ministerial Action unless the Special Event shall not have been so
eliminated by the 85th day following the occurrence thereof, in which case
Time Warner shall be permitted to so direct the Regular Trustees or to
provide notice to the Holders of the redemption of the Subordinated
Debentures; and provided further, that if dissolution of the Trust and
distribution of the Subordinated Debentures to the Holders of the Trust
Securities would eliminate the condition causing the Special Event and all
other conditions to such dissolution and distribution have been satisfied,
Time Warner will not be permitted to redeem the Subordinated Debentures.
(ii) "Tax Event" means that the Regular Trustees shall have obtained
an opinion of nationally recognized independent tax counsel experienced in
such matters (a "Dissolution Tax Opinion") to the effect that on or after
November 30, 1995, as a result of (A) any amendment to, or change
(including any announced
8
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 November 30, 1995, there is more than an insubstantial risk
that at such time or within 90 days of the date thereof (1) the Trust is,
or would be, subject to United States Federal income tax with respect to
income accrued or received on the Subordinated Debentures, (2) the interest
payable by Time Warner to the Trust on the Subordinated Debentures is not,
or would not be, deductible by Time Warner for United States Federal income
tax purposes or (3) the Trust is, or would be, subject to more than a de
minimis amount of other taxes, duties, assessments or other governmental
charges.
(iv) "Investment Company Event" means that the Regular Trustees shall
have received an opinion of nationally recognized independent counsel
experienced in such matters that, as a result of the occurrence of a change
in law or regulation or a written change in interpretation or application
of law or regulation by any legislative body, court, governmental agency or
regulatory authority (a "Change in 1940 Act Law"), there is more than an
insubstantial risk that the Trust is or will be considered an Investment
Company that is required to be registered under the Investment Company Act,
which Change in 1940 Act Law becomes effective on or after November 30,
1995.
(v) On the date fixed for any distribution of Subordinated Debentures,
upon dissolution of the Trust, (i) the Preferred Securities will no longer
be deemed to be outstanding, (ii) neither the Trust nor Time
9
Warner shall have any further obligation to the Holders of the
Preferred Securities with respect to the Preferred Securities or under the
Guarantee, (iii) the Clearing Agency or its nominee, as the record holder
of the Preferred Securities, will receive a registered global certificate
or certificates representing the Subordinated Debentures to be delivered
upon such distribution and (iv) any certificates representing Preferred
Securities not held by the Clearing Agency or its nominee will be deemed to
represent Subordinated Debentures having an aggregate principal amount
equal to the aggregate liquidation amount of, and bearing accrued and
unpaid interest equal to accrued and unpaid Distributions on, such
Preferred Securities until such certificates are presented to Time Warner
or its agent for transfer or reissuance.
(d) The Trust may not redeem fewer than all the outstanding Preferred
Securities unless all accrued and unpaid Distributions have been or are
concurrently being paid on all Preferred Securities for all quarterly
Distribution periods terminating on or prior to the date of redemption.
(e) If Subordinated Debentures are distributed to Holders of the Preferred
Securities, Time Warner, pursuant to the terms of the Indenture, will use its
best efforts to have the Subordinated Debentures listed on the New York Stock
Exchange or on such other exchange or self-regulatory organization (including
the Nasdaq Stock Market) as the Preferred Securities were listed immediately
prior to the distribution of the Subordinated Debentures.
(f) (i) Notice of any redemption (other than mandatory redemption) of,
or notice of distribution of Subordinated Debentures in exchange for, the
Preferred Securities and Common Securities (a "Redemption/ Distribution
Notice") will be given by the Regular Trustees on behalf of the Trust by
mail to each Holder of Preferred Securities and Common Securities to be
redeemed or exchanged not less than 20 nor more than 45 Business Days prior
to the date fixed for redemption or distribution thereof. For purposes of
the calculation of the date of redemption or exchange and the dates on
which notices are given pursuant to this paragraph (f)(i), a
Redemption/Distribution Notice shall be deemed to be given on the day such
notice is first mailed by first-class mail, postage prepaid, to
10
Holders of Preferred Securities and Common Securities. Each
Redemption/Distribution Notice shall be addressed to the Holders of
Preferred Securities and Common Securities at the address of each such
Holder appearing in the books and records of the Trust. Such
Redemption/Distribution Notice shall set forth the aggregate liquidation
amount of Trust Securities to be redeemed, the date of such redemption or
such distribution and in the case of a Special Event, a brief description
thereof. No defect in the Redemption/Distribution Notice or in the mailing
of either thereof with respect to any Holder shall affect the validity of
the redemption or exchange proceedings with respect to any other Holder.
(ii) In the event that fewer than all the outstanding Preferred
Securities are to be redeemed, the Preferred Securities to be redeemed will
be redeemed on a Pro Rata Basis from each Holder of Preferred Securities,
and, in the event Preferred Securities are held in book-entry only form by
the Clearing Agency or its nominee (or any successor Clearing Agency or its
nominee), the Clearing Agency will reduce on a Pro Rata Basis the amount of
the interest of each Clearing Agency Participant in the Preferred
Securities to be redeemed; provided that if, as a result of such
redemption, Clearing Agency Participants would hold fractional interests in
the Preferred Securities, the Clearing Agency will adjust the amount of the
interest of each clearing Agency Participant to be redeemed to avoid such
fractional interests.
(iii) Payment of the Redemption Price in respect of each Preferred
Security, together with any accrued and unpaid Distributions thereon, is
conditioned upon delivery or book-entry transfer of such Preferred Security
(together with necessary endorsements) to the Property Trustee at any time
(whether prior to, on or after the relevant date of redemption) after the
Redemption/Distribution Notice is given (to the extent such notice is
required). Payment of the Redemption Price, together with any accrued and
unpaid distributions on each Preferred Security, will be made by the
delivery of cash no later than the applicable date of redemption with
respect to such Preferred Security or, if later, the time of delivery or
transfer of such Preferred Security.
11
(iv) If the Trust gives a Redemption/Distribution Notice in respect of
a redemption of Preferred Securities as provided in this paragraph 4 (which
notice will be irrevocable), then immediately prior to the close of
business on the redemption date, so long as Time Warner has paid to the
Property Trustee in immediately available funds a sufficient amount of cash
in connection with the related redemption or maturity of the Subordinated
Debentures, Distributions will cease to accrue on the Preferred Securities
called for redemption, such Preferred Securities will no longer be deemed
to be outstanding and all rights of Holders of such Preferred Securities so
called for redemption will cease, except the right of the Holders of such
Preferred Securities to receive the Redemption Price, together with any
accrued and unpaid Distributions on the Preferred Securities being
redeemed, but without interest on such amount. Neither the Trustees nor the
Trust shall be required to register or cause to be registered the transfer
of any Preferred Securities which have been so called for redemption. If
any date fixed for redemption of Preferred Securities is not a Business
Day, then payment of the Redemption Price payable on such date, together
with any accrued and unpaid Distributions to such date, will be made on the
next succeeding day that is a Business Day (and without any interest or
other payment in respect of any such delay) except that, if such Business
Day falls in the next calendar year, such payment will be made on the
immediately preceding Business Day, in each case with the same force and
effect as if made on such date fixed for redemption. If payment of the
Redemption Price in respect of Preferred Securities, together with any
accrued and unpaid Distributions on such Preferred Securities, is
improperly withheld or refused and not paid either by the Property Trustee
or by Time Warner pursuant to the Guarantee, Distributions on such
Preferred Securities will continue to accrue, from the original redemption
date to the date of payment, in which case the actual payment date will be
considered the date fixed for redemption for purposes of calculating the
Redemption Price and the amount of any such accrued and unpaid
distributions.
(v) Upon the date of dissolution of the Trust and distribution of
Subordinated Debentures to the Holders of the Trust Securities as a result
of the occurrence of a Special Event, Preferred Security Certificates
12
shall be deemed to represent the Subordinated Debentures so
distributed to the Holders of Preferred Securities, and the Preferred
Securities will no longer be deemed outstanding and may be canceled by the
Regular Trustees. The Subordinated Debentures so distributed shall have an
aggregate principal amount equal to the aggregate liquidation amount of the
Preferred Securities in respect of which the Subordinated Debentures shall
have been so distributed.
(vi) Subject to the foregoing and applicable law (including, without
limitation, United States Federal securities laws), Time Warner or any of
its affiliates may at any time and from time to time purchase outstanding
Preferred Securities by tender, in the open market or by private agreement.
Any such Preferred Securities purchased by Time Warner shall be surrendered
to the Trust for cancellation.
5. Voting Rights. (a) Except as provided under paragraph 5(b) below and as
otherwise required by law and the Declaration, the Holders of the Preferred
Securities will have no voting rights.
(b) (i) If (A) the Trust (1) fails to pay Distributions in full on the
Preferred Securities and such failure continues unremedied for 6
consecutive quarterly Distribution periods (2) fails to pay the Redemption
Price of any Preferred Securities to be redeemed on the applicable
redemption date; or (B) an Event of Default occurs and is continuing (each
an "Appointment Event"), then the Holders of the Preferred Securities,
acting as a single class, will be entitled by the vote of Holders of
Preferred Securities representing a Majority in aggregate liquidation
amount of the Preferred Securities to appoint a Special Regular Trustee in
accordance with Section 5.02(a)(ii)(B) of the Declaration. Any Holder of
Preferred Securities (other than the Sponsor or any Affiliate of the
Sponsor) will have the right to nominate any Person to be appointed as
Special Regular Trustee. For purposes of determining whether the Trust has
failed to make Distributions in full for 6 consecutive quarterly
Distribution periods, Distributions shall be deemed to remain in arrears,
notwithstanding any payments in respect thereof, until full cumulative
Distributions have been or contemporaneously are paid with respect to all
13
quarterly Distribution periods terminating on or prior to the date of
payment of such cumulative Distributions. Not later than 30 days after such
right to appoint a Special Regular Trustee arises, the Regular Trustees
will convene a meeting of the Holders of the Preferred Securities for the
purpose of appointing a Special Regular Trustee. If the Regular Trustees
fail to convene such meeting within such 30- day period, the Holders of
Preferred Securities representing not less than 10% in aggregate
liquidation amount of the outstanding Preferred Securities will be entitled
to convene such meeting in accordance with Section 12.02 of the
Declaration. The record date for such meeting will be the close of business
on the Business Day next preceding the day on which notice of the meeting
is sent to Holders of Preferred Securities. The provisions of the
Declaration relating to the convening and conduct of the meetings of the
Holders will apply with respect to any such meeting. If, at any such
meeting, Holders of less than a Majority in aggregate liquidation amount of
Preferred Securities entitled to vote for the appointment of a Special
Regular Trustee vote for such appointment, no Special Regular Trustee shall
be appointed.
Any Special Regular Trustee may be removed without cause at any time
by the Holders of Preferred Securities representing a Majority in aggregate
liquidation amount of the Preferred Securities in accordance with Section
5.02(a)(ii)(B) of the Declaration. The Holders of 10% in aggregate
liquidation amount of the Preferred Securities will be entitled to convene
such a meeting to remove the Special Regular Trustee in accordance with
Section 12.02 of the Declaration. The record date for such meeting will be
the close of business on the Business Day next preceding the day on which
notice of the meeting is sent to Holders of Preferred Securities. Any
Special Regular Trustee appointed shall cease to be a Special Regular
Trustee as provided in Section 5.02(c) of the Declaration. Notwithstanding
the appointment of any such Special Regular Trustee, Time Warner shall
retain all its rights under the Indenture, including the right to extend
the interest payment period on the Subordinated Debentures.
(ii) If any proposed amendment to the Declaration provides for, or the
Regular Trustees otherwise propose
14
to effect (A) any action that would adversely affect the powers,
preferences or special rights of the Trust Securities, whether by way of
amendment to the Declaration or otherwise, or (B) the liquidation,
dissolution, winding-up or termination of the Trust, other than in
connection with the distribution of Subordinated Debentures held by the
Property Trustee, upon the occurrence of a Special Event or in connection
with the redemption of Preferred Securities as a consequence of a
redemption of Subordinated Debentures, then the Holders of outstanding
Trust Securities will be entitled to vote on such amendment or proposal as
a class and such amendment or proposal shall not be effective except with
the approval of the Holders of Trust Securities representing a Majority in
aggregate liquidation amount of such securities affected thereby; provided,
however, (1) if any amendment or proposal referred to in clause (A) above
would adversely affect only the Preferred Securities or the Common
Securities, then only the affected class will be entitled to vote on such
amendment or proposal and such amendment or proposal shall not be effective
except with the approval of a Majority in aggregate liquidation amount of
such class of Trust Securities, (2) the rights of Holders of Preferred
Securities under Article V of the Declaration to appoint and remove a
Special Regular Trustee shall not be amended without the consent of each
Holder of Preferred Securities, and (3) amendments to the Declaration shall
be subject to such further requirements as are set forth in Sections 12.01
and 12.02 of the Declaration.
(iii) In the event the consent of the Property Trustee, as the holder
of the Subordinated Debentures, is required under the Indenture with
respect to any amendment, modification or termination of the Indenture or
the Subordinated Debentures, the Property Trustee shall request the written
direction of the Holders of the Trust Securities with respect to such
amendment, modification or termination. The Property Trustee shall vote
with respect to such amendment, modification or termination as directed by
a Majority in aggregate liquidation amount of the Trust Securities voting
together as a single class; provided that where such amendment,
modification or termination of the Indenture or the Subordinated Debentures
requires the consent or vote of (A) holders of Subordinated Debentures
representing a specified percentage greater than a
15
majority in principal amount of the Subordinated Debentures or (B)
each holder of Subordinated Debentures, the Property Trustee may only vote
with respect to that amendment, modification or termination as directed by,
in the case of clause (A) above, the vote of Holders of Trust Securities
representing such specified percentage of the aggregate liquidation amount
of the Trust Securities, or, in the case of clause (B) above, each Holder
of Trust Securities; and provided further that the Property Trustee shall
not take any action in accordance with the directions of the Holders of
Trust Securities unless the Property Trustee shall have received, at the
expense of the Sponsor, an opinion of nationally recognized independent tax
counsel experienced in such matters to the effect that, as a result of such
action, Time Warner Capital will not fail to be classified as a grantor
trust for United States Federal income tax purposes.
(iv) Subject to Section 2.06 of the Declaration, and the provisions of
this and the next succeeding paragraph, the Holders of a Majority in
aggregate liquidation amount of the Preferred Securities, voting separately
as a class, shall have the right to (A) on behalf of all Holders of
Preferred Securities, waive any past default that is waivable under the
Declaration (subject to, and in accordance with the Declaration) and (B)
direct the time, method, and place of conducting any proceeding for any
remedy available to the Property Trustee, or to direct the exercise of any
trust or power conferred upon the Property Trustee under the Declaration,
including the right to direct the Property Trustee, as the holder of the
Subordinated Debentures, to (1) direct the time, method and place of
conducting any proceeding for any remedy available to the Indenture
Trustee, or exercising any trust or power conferred on the Indenture
Trustee with respect to the Subordinated Debentures, (2) waive any past
default that is waivable under Section 5.13 of the Indenture or (3)
exercise any right to rescind or annul a declaration that the principal of
all the Subordinated Debentures shall be due and payable; provided that
where the taking of any action under the Indenture requires the consent or
vote of (x) holders of Subordinated Debentures representing a specified
percentage greater than a majority in principal amount of the Subordinated
Debentures or (y) each holder of
16
Subordinated Debentures, the Property Trustee may only take such
action if directed by, in the case of clause (x) above, the vote of Holders
of Preferred Securities representing such specified percentage of the
aggregate liquidation amount of the Preferred Securities, or, in the case
of clause (y) above, each Holder of Preferred Securities. The Property
Trustee shall not revoke any action previously authorized or approved by a
vote of the Holders of the Preferred Securities. The Property Trustee shall
not take any of the foregoing actions at the direction of the Holders of
Preferred Securities unless the Property Trustee shall have received, at
the expense of the Sponsor, an opinion of nationally recognized independent
tax counsel experienced in such matters to the effect that, as a result of
such action, Time Warner Capital will not fail to be classified as a
grantor trust for United States Federal income tax purposes. If the
Property Trustee fails to enforce its rights under the Declaration
(including its rights, powers and privileges as a holder of the
Subordinated Debentures under the Indenture), any Holder of Preferred
Securities may, after a period of 30 days has elapsed from such Holder's
written request to the Property Trustee to enforce such rights, institute a
legal 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
17
of any resolution proposed for adoption at such meeting on which such
Holders are entitled to vote or of such matter upon which written consent
is sought and (C) instructions for the delivery of proxies or consents.
(vii) No vote or consent of the Holders of Preferred Securities will
be required for the Trust to redeem and cancel Preferred Securities in
accordance with the Declaration.
(viii) Notwithstanding that Holders of Preferred Securities are
entitled to vote or consent under any of the circumstances described above,
any of the Preferred Securities at such time that are owned by Time Warner
or by any entity directly or indirectly controlling or controlled by or
under direct or indirect common control with Time Warner shall not be
entitled to vote or consent and shall, for purposes of such vote or
consent, be treated as if they were not outstanding.
(ix) Except as provided in this paragraph 5, Holders of the Preferred
Securities will have no rights to increase or decrease the number of
Trustees or to appoint, remove or replace a Trustee, which voting rights
are vested solely in the Holders of the Common Securities.
6. Pro Rata Treatment. A reference in these terms of the Preferred
Securities to any payment, distribution or treatment as being made on a "Pro
Rata Basis" shall mean, with respect to such payment, distribution or treatment,
pro rata to each Holder of Trust Securities according to the aggregate
liquidation amount of the Trust Securities held by such Holder in relation to
the aggregate liquidation amount of all Trust Securities outstanding; provided,
however, that if the assets of the Trust are insufficient to make such payment
in full as a result of a default with respect to the Subordinated Debentures,
any funds available to make such payment shall be paid (i) first to each Holder
of the Preferred Securities pro rata according to the aggregate liquidation
amount of Preferred Securities held by such Holder in relation to the aggregate
liquidation amount of all Preferred Securities outstanding up to an aggregate
amount equal to the amount then owed to the Holders of the Preferred Securities,
and (ii) only after satisfaction of all amounts owed to the Holders of the
Preferred Securities, to each Holder of Common Securities pro rata according to
the aggregate liquidation amount of Common Securities held by such Holder
18
in relation to the aggregate liquidation amount of all Common Securities
outstanding.
7. Ranking. The Preferred Securities rank pari passu, and payments will be
made thereon on a Pro Rata Basis, with the Common Securities, except that if, as
a result of an Event of Default with respect to the Subordinated Debentures, the
assets of the Trust are insufficient to make payments of Distributions or
payments upon liquidation, redemption of the Trust Securities or otherwise, the
rights of Holders of the Common Securities to receive such payments will be
subordinated to the rights of the Holders of the Preferred Securities.
8. Mergers, Consolidations or Amalgamations. The Trust may not consolidate,
amalgamate, merge with or into, or be replaced by, or convey, transfer or lease
its properties and assets to, any corporation or other body.
9. Transfer, Exchange, Method of Payments. Payment of Distributions and
payments on redemption of the Preferred Securities or on dissolution of the
Trust will be payable, the transfer of the Preferred Securities will be
registrable, and Preferred Securities will be exchangeable for Preferred
Securities of other denominations of a like aggregate liquidation amount, at the
principal corporate trust office of the Property Trustee in The City of New
York; provided that payment of Distributions may be made at the option of the
Regular Trustees on behalf of the Trust by check mailed to the address of the
persons entitled thereto and that the payment on redemption of any Preferred
Security or on dissolution of the Trust will be made only upon surrender of such
Preferred Security to the Property Trustee.
10. Acceptance of Indenture and Guarantee and Certain Other Matters. Each
Holder of Preferred Securities, by the acceptance thereof, agrees (a) to the
provisions of (i) the Guarantee, including the subordination provisions therein
and (ii) the Indenture and the Subordinated Debentures, including the
subordination provisions of the Indenture and (b) to treat the Subordinated
Debentures as debt instruments for United States Federal, state and local income
and franchise tax purposes and not to take any contrary position before any
taxing authority or on any tax return.
19
11. No Preemptive Rights. The Holders of Preferred Securities shall have no
preemptive rights to subscribe to any additional Preferred Securities or Common
Securities.
12. Miscellaneous. These terms shall constitute a part of the Declaration.
The Regular Trustees will provide a copy of the Declaration, the Guarantee and
the Indenture to a Holder without charge on written request to the Trust at its
principal place of business.
Annex I
Certificate Number Number of Preferred Securities
B-1
CUSIP NO. 88731G204
Certificate Evidencing Preferred Securities
of
Time Warner Capital I
8-7/8% Preferred Trust Securities
Time Warner Capital I, a statutory business trust formed under the laws of
the State of Delaware (the "Trust"), hereby certifies that
(the "Holder") is the registered owner of ( )
preferred securities of the Trust representing undivided beneficial interests in
the assets of the Trust designated the 8-7/8% Preferred Trust Securities (the
"Preferred Securities"). The Preferred Securities are transferable on the books
and records of the Trust, in person or by a duly authorized attorney, upon
surrender of this certificate duly endorsed and in proper form for transfer. The
designations, rights, privileges, restrictions, preferences and other terms and
provisions of the Preferred Securities are set forth in, and this certificate
and the Preferred Securities represented hereby are issued and shall in all
respects be subject to the terms and provisions of, the Amended and Restated
Declaration of Trust of the Trust dated as of December 5, 1995, as the same may
be amended from time to time (the "Declaration") including the designation of
the terms of Preferred Securities as set forth in Exhibit B thereto. The
Preferred Securities and the Common Securities issued by the Trust pursuant to
the Declaration represent undivided beneficial interests in the assets of the
Trust, including the Subordinated Debentures (as defined in the Declaration)
issued by Time Warner Inc., a Delaware corporation ("Time Warner"), to the Trust
pursuant to the Indenture referred to in the Declaration. The Holder is entitled
to the benefits of the Guarantee Agreement of Time Warner dated as of December
5, 1995 (the "Guarantee") to the extent provided therein. The Regular Trustees
will furnish a copy of the Declaration, the Guarantee and the Indenture to the
Holder without charge upon written request to the Trust at its principal place
of business or registered office. Terms used herein and not defined herein have
the meanings ascribed to such terms in the Declaration.
2
The Holder of this Certificate, by accepting this Certificate, is deemed to
have (i) agreed to the terms of the Indenture and the Subordinated Debentures,
including that the Subordinated Debentures are (a) subordinate and junior in
right of payment to all Senior Indebtedness (as defined in the Indenture, which
term includes Time Warner's outstanding 8-3/4% Convertible Subordinated
Debentures due 2015) as and to the extent provided in the Indenture and (ii)
agreed to the terms of the Guarantee, including that the Guarantee is (a)
subordinate and junior in right of payment to all other liabilities of Time
Warner, (b) pari passu with the guarantee delivered by Time Warner in connection
with the PERCS, (c) pari passu with the most senior preferred or preference
stock now or hereafter issued by Time Warner and with any guarantee now or
hereafter entered into by Time Warner in respect of any preferred or preference
stock of any affiliate of Time Warner and (d) senior to Time Warner's common
stock.
Upon receipt of this certificate, the Holder is bound by the Declaration
and is entitled to the benefits thereunder.
IN WITNESS WHEREOF, Trustees of the Trust have executed this certificate
this fifth day of December, 1995.
TIME WARNER CAPITAL I,
by
------------------------
Name: Thomas W. McEnerney
Title: Trustee
by
------------------------
Name: John A. LaBarca
Title: Trustee
by
------------------------
Name: Philip R. Lochner, Jr.
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 Capital I (the "Trust") dated as of December 5, 1995 (as amended
from time to time, the "Declaration"), the designations, rights, privileges,
restrictions, preferences and other terms and provisions of the Common
Securities are set forth below (each capitalized term used but not defined
herein having the meaning set forth in the Declaration):
1. Designation and Number. Common Securities of the Trust with an aggregate
liquidation amount in the assets of the Trust of Seventeen Million, Seven
Hundred Eighty- Three Thousand, Five Hundred Twenty-Five ($17,783,525) and a
aggregate liquidation amount in the assets of the Trust of $25 per Common
Security, are hereby designated as "8-7/8% 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 $17,783,525 in cash. The Trust will invest the
gross proceeds from the issuance of the Common Securities together with the
gross proceeds from the issuance of the Preferred Securities in Subordinated
Debentures of Time Warner having an aggregate principal amount equal to
$592,783,525, and bearing interest at an annual percentage rate equal to the
annual distribution rate on the Preferred Securities and Common Securities and
having payment and redemption provisions that correspond to the payment and
redemption provisions of the Preferred Securities and Common Securities.
2. Distributions. (a) Periodic distributions payable on each Common
Security will be fixed at a rate per annum of 8-7/8% (the "Coupon Rate") of the
aggregate liquidation amount of $25 per Common Security, such rate being the
rate of interest payable on the Subordinated Debentures to be held by the
Property Trustee. Distributions in arrears beyond the first date such
Distributions are payable (or would be payable if not for any Extension Period
(as hereinafter defined) or default by Time Warner on the Subordinated
Debentures) will bear interest thereon at the Coupon Rate (to the extent
permitted by law), compounded quarterly. The term "Distributions" as
2
used in these terms means such periodic cash distributions and any such interest
payable unless otherwise stated. A Distribution will be made by the Property
Trustee only to the extent that interest payments are made in respect of the
Subordinated Debentures held by the Property Trustee. The amount of
Distributions (or amounts equal to accrued and unpaid Distributions) payable for
any period will be computed (i) for any full quarterly Distribution period, on
the basis of a 360-day year of twelve 30-day months and will include the first
day but exclude the last day of such period, and (ii) for any period shorter
than a full quarterly Distribution period, on the basis of a 360-day year of
twelve 30-day months and on the basis of the actual number of days elapsed in
any such 30-day month and will include the first day but exclude the last day of
such period.
(b) Distributions on the Common Securities will be cumulative, will accrue
from and including December 5, 1995, and will be payable quarterly in arrears,
on March 31, June 30, September 30 and December 31 of each year, commencing on
December 31, 1995, except as otherwise described below, but only if and to the
extent that interest payments are made in respect of the Subordinated Debentures
held by the Property Trustee. Time Warner, as issuer of the Subordinated
Debentures, has the right under the Indenture to defer payments of interest by
extending the interest payment period from time to time on the Subordinated
Debentures for a period not exceeding 20 consecutive quarters (each an
"Extension Period") and, during such Extension Period, Distributions will also
be deferred. Despite such deferral, quarterly Distributions will continue to
accrue with interest thereon (to the extent permitted by applicable law) at the
Coupon Rate compounded quarterly during any such Extension Period. In the event
that Time Warner exercises its rights to commence any Extension Period or an
extension period or other deferral of interest feature under any debt security
of Time Warner that ranks pari passu with the Subordinated Debentures, then (a)
Time Warner shall not declare or pay dividends on, make distributions with
respect to, or redeem, purchase or acquire, or make a liquidation payment with
respect to, any of its capital stock and (b) Time Warner shall not make any
payment of interest, principal or premium, if any, on or repay, repurchase or
redeem the Subordinated Debentures or any debt securities issued by Time Warner
that rank pari passu with or junior to the Subordinated Debentures; provided,
however, that the foregoing restrictions do not apply (i) to any
3
interest or dividend payment by Time Warner where the interest or dividend is
paid by way of the issuance of securities that rank junior to the Subordinated
Debentures, (ii) any payments of interest, principal or premium, if any, on, or
repayment, repurchase or redemption of, Time Warner's 4% Subordinated Notes due
December 23, 1995 and (iii) any payments or distributions with respect to, or
redemptions, purchases or acquisitions of, or any payments in liquidation of,
the $1.24 Preferred Exchangeable Redemption Cumulative Securities issued by Time
Warner Financing Trust (the "PERCS") (including any of the foregoing with
respect to the guarantee agreement entered into by Time Warner for the benefit
of the holders of the PERCS). Prior to the termination of any such Extension
Period, Time Warner may further extend such Extension Period; provided that such
Extension Period together with all such previous and further extensions thereof
may not exceed 20 consecutive quarters. Upon the termination of any Extension
Period, payments of accrued Distributions will be payable to Holders as they
appear on the books and records of the Trust on the record date for the first
payment date after the end of the Extension Period. Upon the termination of any
Extension Period and the payment of all amounts then due, Time Warner may
commence a new Extension Period, subject to the above requirements.
(c) Distributions on the Common Securities will be payable promptly by the
Property Trustee (or other Paying Agent) upon receipt of immediately available
funds to the Holders thereof as they appear on the books and records of the
Trust on the relevant record dates. While the Preferred Securities remain in
book-entry only form, the relevant record dates shall be one Business Day prior
to the relevant payment dates which payment dates correspond to the interest
payment dates on the Subordinated Debentures.
If the Preferred Securities shall not continue to remain in book-entry only
form, the relevant record dates for the Preferred Securities shall conform to
the rules of any securities exchange on which the securities are listed and, if
none, shall be selected by the Regular Trustees, which dates shall be at least
one Business Day but less than 60 Business Days before the relevant payment
dates, which payment dates correspond to the interest payment dates on the
Subordinated Debentures. Distributions payable on any Common Securities that are
not punctually paid on any Distribution payment date as a result of Time Warner
having failed to make the corresponding interest payment on the
4
Subordinated Debentures will forthwith cease to be payable to the person in
whose name such Common Security is registered on the relevant record date, and
such defaulted Distribution will instead be payable to the person in whose name
such Common Security is registered on the special record date established by the
Regular Trustees, which record date shall correspond to the special record date
or other specified date determined in accordance with the Indenture. Subject to
any applicable laws and regulations and the provisions of the Declaration, each
payment in respect of the Common Securities will be made as described in
paragraph 9 hereof. If any date on which Distributions are payable on the Common
Securities is not a Business Day, then payment of the Distribution payable on
such date will be made on the next succeeding day that is a Business Day (and
without any interest or other payment in respect of any such delay), except that
if such Business Day is in the next succeeding calendar year, such payment shall
be made on the immediately preceding Business Day, in each case with the same
force and effect as if made on such date.
(d) All Distributions paid with respect to the Common Securities and the
Preferred Securities will be paid on a Pro Rata Basis (as defined herein) to the
Holders thereof entitled thereto.
(e) In the event that there is any money or other property held by or for
the Trust that is not accounted for under the Declaration or the terms of the
Preferred Securities or these terms of the Common Securities, such money or
property shall be distributed on a Pro Rata Basis among the Holders of the
Preferred Securities and Common Securities.
3. Liquidation Distribution Upon Dissolution. In the event of any
liquidation, dissolution, winding-up or termination of the Trust (each a
"Liquidation Event") whether voluntary or involuntary, the Holders of the Trust
Securities on the date of such Liquidation Event will be entitled to be paid on
a Pro Rata Basis out of the assets of the Trust an amount equal to (a) $25 per
Trust Security plus (b) the amount of accrued and unpaid Distributions thereon
to, but excluding, the date of payment (such amount being the "Liquidation
Distribution") in connection with such Liquidation Event unless Subordinated
Debentures in an aggregate principal amount equal to the aggregate liquidation
amount of, and bearing accrued and unpaid interest in an amount equal to the
accrued and unpaid
5
Distributions on, the Trust Securities have been distributed on a Pro Rata Basis
(determined without regard to the proviso in the definition of such term) to the
Holders of the Trust Securities in exchange for such Trust Securities. In
addition, in the event that the assets of the Trust exceed the amount necessary
to pay to all Holders of the Trust Securities the full amount of the Liquidation
Distribution, such excess will be paid to the Holders of the Trust Securities on
a Pro Rata Basis (determined without regard to the proviso in the definition of
such term).
4. Redemption and Distribution of Subordinated Debentures. The Trust
Securities may be redeemed only if Subordinated Debentures having an aggregate
principal amount equal to the aggregate liquidation amount of, and accrued and
unpaid interest equal to accrued and unpaid distributions on, the Trust
Securities are repaid, redeemed or distributed as set forth below:
(a) Upon the repayment of the Subordinated Debentures in whole or in part,
whether at maturity or upon redemption, the proceeds from such repayment or
payment shall be simultaneously applied to redeem Trust Securities having an
aggregate liquidation amount equal to the aggregate principal amount of the
Subordinated Debentures so repaid or redeemed at a redemption price equal to the
liquidation amount per Trust Security (the "Redemption Price") plus an amount
equal to all accrued and unpaid Distributions thereon to but excluding the date
of the redemption, payable in cash. Holders will be given not less than 20 nor
more than 45 Business Days notice of such redemption.
(b) If fewer than all the outstanding Trust Securities are to be so
redeemed, the Trust Securities will be redeemed on a Pro Rata Basis and the
Common Securities to be redeemed will be redeemed as described in paragraph
4(e)(ii) below. If a partial redemption would result in the delisting of the
Preferred Securities by any national securities exchange or other automated
inter-dealer quotation system (including the Nasdaq Stock Market) on which the
Preferred Securities are then listed, Time Warner pursuant to the Indenture will
only redeem the Subordinated Debentures in whole and, as a result, the Trust may
only redeem the Common Securities in whole.
6
(c)(i) If, at any time, a Tax Event or an Investment Company Event (each as
hereinafter defined, and each a "Special Event") shall occur and be continuing,
the Regular Trustees shall notify Time Warner thereof and Time Warner shall
elect to either: (A) direct the Regular Trustees to dissolve the Trust and cause
Subordinated Debentures having an aggregate principal amount equal to the
aggregate liquidation amount of, and accrued and unpaid interest equal to
accrued and unpaid Distributions on, and having the same record dates for
payment as, the Trust Securities outstanding at such time, to be distributed to
the Holders of the Trust Securities on a Pro Rata Basis (determined without
regard to the proviso in the definition of such term) in liquidation of such
Holders' interests in the Trust, within 90 days following the occurrence of such
Special Event; provided, however, that in the case of the occurrence of a Tax
Event, as a condition of any such dissolution and distribution, the Regular
Trustees shall have received an opinion of nationally recognized independent tax
counsel experienced in such matters (a "No Recognition Opinion"), which opinion
may rely on any then applicable published revenue ruling of the Internal Revenue
Service, to the effect that the Holders of the Preferred Securities will not
recognize any gain or loss for United States Federal income tax purposes as a
result of the dissolution of the Trust and distribution of Subordinated
Debentures; (B) redeem the Subordinated Debentures in whole (and not in part),
upon not less than 20 nor more than 45 Business Days' notice, within 90 days
following the occurrence of such Special Event, in which case the Trust shall
redeem in cash on a Pro Rata Basis Trust Securities having an aggregate
liquidation amount equal to the principal amount of, and accrued and unpaid
distributions equal to the accrued and unpaid interest on, the Subordinated
Debentures so redeemed, at a price per Trust Security of (1) $25, plus (2) an
amount equal to all accrued and unpaid distributions on such Trust Security to
but excluding the date of such redemption (the "Special Redemption Date") or (C)
in the case of a Tax Event, allow the Subordinated Debentures and the Trust
Securities to remain outstanding and indemnify the Trust for all taxes payable
by it as a result of such Tax Event; provided that, if at the time there is
available to the Trust the opportunity to eliminate, within 90 days following
the occurrence of such Special Event (the "90-Day Period"), the Special Event by
taking some ministerial action, such as filing a form or making an election, or
pursuing some other similar reasonable measure that has no adverse effect on the
7
Trust, Time Warner or the Holders of the Trust Securities (a "Ministerial
Action"), the Trust will pursue such measure in lieu of dissolution or
redemption; provided further, that Time Warner shall have no right to redeem the
Subordinated Debentures or to direct the Regular Trustees to dissolve the Trust
while the Regular Trustees are pursuing such Ministerial Action unless the
Special Event shall not have been so eliminated by the 85th day following the
occurrence thereof, in which case Time Warner shall be permitted to so direct
the Regular Trustees or to provide notice to the Holders of the redemption of
the Subordinated Debentures; and provided further, that if dissolution of the
Trust and distribution of the Subordinated Debentures to the Holders of the
Trust Securities would eliminate the condition causing the Special Event and all
other conditions to such dissolution and distribution have been satisfied, Time
Warner will not be permitted to redeem the Subordinated Debentures.
(ii) "Tax Event" means that the Regular Trustees shall have obtained
an opinion of nationally recognized independent tax counsel experienced in
such matters (a "Dissolution Tax Opinion") to the effect that on or after
November 30, 1995, 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 November 30, 1995, there is more
than an insubstantial risk that at such time or within 90 days of the date
thereof (1) the Trust is, or would be, subject to United States Federal
income tax with respect to income accrued or received on the Subordinated
Debentures, (2) the interest payable by
8
Time Warner to the Trust on the Subordinated Debentures is not, or
would not be, deductible by Time Warner for United States Federal income
tax purposes or (3) the Trust is, or would be, subject to more than a de
minimis amount of other taxes, duties, assessments or other governmental
charges.
(iv) "Investment Company Event" means that the Regular Trustees shall
have received an opinion of nationally recognized independent counsel
experienced in such matters that, as a result of the occurrence of a change
in law or regulation or a written change in interpretation or application
of law or regulation by any legislative body, court, governmental agency or
regulatory authority (a "Change in 1940 Act Law"), there is more than an
insubstantial risk that the Trust is or will be considered an Investment
Company that is required to be registered under the Investment Company Act,
which Change in 1940 Act Law becomes effective on or after November 30,
1995.
(v) On the date fixed for any distribution of Subordinated Debentures,
upon dissolution of the Trust, (i) the Common Securities will no longer be
deemed to be outstanding, (ii) the Trust shall not have any further
obligation to the Holders of the Common Securities with respect to the
Common Securities and (iii) certificates representing Common Securities
will be deemed to represent the Subordinated Debentures having an aggregate
principal amount equal to the aggregate liquidation amount of, and bearing
accrued and unpaid interest equal to accrued and unpaid Distributions on,
such Common Securities until such certificates are presented to Time Warner
or its agent for transfer or reissuance.
(d) The Trust may not redeem fewer than all the outstanding Common
Securities unless all accrued and unpaid Distributions have been or are
concurrently being paid on all Common Securities for all quarterly Distribution
periods terminating on or prior to the date of redemption.
(e) (i) Notice of any redemption (other than a mandatory redemption)
of, or notice of distribution of Subordinated Debentures in exchange for,
the Preferred Securities and Common Securities (a "Redemption/Distribution
Notice") will be given by the Regular Trustees on behalf of the Trust by
mail to each
9
Holder of Preferred Securities and Common Securities to be redeemed or
exchanged not less than 20 nor more than 45 Business Days prior to the date
fixed for redemption or distribution thereof. For purposes of the
calculation of the date of redemption or exchange and the dates on which
notices are given pursuant to this paragraph (e)(i), a
Redemption/Distribution Notice shall be deemed to be given on the day such
notice is first mailed by first-class mail, postage prepaid, to Holders of
Preferred Securities and Common Securities. Each Redemption/Distribution
Notice shall be addressed to the Holders of Preferred Securities and Common
Securities at the address of each such Holder appearing in the books and
records of the Trust. Such Redemption/Distribution Notice shall set forth
the aggregate liquidation amount of Trust Securities to be redeemed, the
date of such redemption or such distribution and, in the case of a Special
Event, a brief description thereof. No defect in the Redemption/
Distribution Notice or in the mailing of either thereof with respect to any
Holder shall affect the validity of the redemption or exchange proceedings
with respect to any other Holder.
(ii) In the event that fewer than all the outstanding Common
Securities are to be redeemed, the Common Securities to be redeemed will be
redeemed on a Pro Rata Basis from each Holder of Common Securities, and, in
the event Common Securities are held in book-entry only form by the
Clearing Agency or its nominee (or any successor Clearing Agency or its
nominee), the Clearing Agency will reduce on a Pro Rata Basis the amount of
the interest of each Clearing Agency Participant in the Common Securities
to be redeemed; provided that if, as a result of such redemption, Clearing
Agency Participants would hold fractional interests in the Preferred
Securities, the Clearing Agency will adjust the amount of the interest of
each clearing Agency Participant to be redeemed to avoid such fractional
interests.
(iii) Payment of the Redemption Price in respect of each Common
Security, together with any accrued and unpaid Distributions thereon, is
conditioned upon delivery or book-entry transfer of such Common Security
(together with necessary endorsements) to the Property Trustee at any time
(whether prior to, on or after the relevant date of redemption) after the
10
Redemption/Distribution Notice is given (to the extent such notice is
required). Payment of the Redemption Price, together with any accrued and
unpaid Distributions on each Common Security, will be made by the delivery
of cash no later than the applicable date of redemption with respect to
such Common Security or, if later, the time of delivery or transfer of such
Common Security.
(iv) If the Trust gives a Redemption/Distribution Notice in respect of
a redemption of Common Securities as provided in this paragraph 4 (which
notice will be irrevocable), then immediately prior to the close of
business on the redemption date, so long as Time Warner has paid to the
Property Trustee in immediately available funds a sufficient amount of cash
in connection with the related redemption or maturity of the Subordinated
Debentures, Distributions will cease to accrue on the Common Securities
called for redemption, such Common Securities will no longer be deemed to
be outstanding and all rights of Holders of such Common Securities so
called for redemption will cease, except the right of the Holders of such
Common Securities to receive the Redemption Price, together with any
accrued and unpaid Distributions on the Common Securities being redeemed,
but without interest on such amount. Neither the Trustees nor the Trust
shall be required to register or cause to be registered the transfer of any
Common Securities which have been so called for redemption. If any date
fixed for redemption of Common Securities is not a Business Day, then
payment of the Redemption Price payable on such date, together with any
accrued and unpaid Distributions to such date, will be made on the next
succeeding day that is a Business Day (and without any interest or other
payment in respect of any such delay) except that, if such Business Day
falls in the next calendar year, such payment will be made on the
immediately preceding Business Day, in each case with the same force and
effect as if made on such date fixed for redemption. If payment of the
Redemption Price in respect of Common Securities, together with any accrued
and unpaid Distributions on such Common Securities, is improperly withheld
or refused and not paid by the Property Trustee, Distributions on such
Common Securities will continue to accrue, from the original redemption
date to the date of payment, in which case the actual payment date will be
considered the date
11
fixed for redemption for purposes of calculating the Redemption Price
and the amount of any such accrued and unpaid Distributions.
(v) Upon the date of dissolution of the Trust and distribution of
Subordinated Debentures to the Holders of the Trust Securities as a result
of the occurrence of a Special Event, Common Security Certificates shall be
deemed to represent the Subordinated Debentures so distributed to the
Holders of Trust Securities, and the Common Securities will no longer be
deemed outstanding and may be canceled by the Regular Trustees. The
Subordinated Debentures so distributed shall have an aggregate principal
amount equal to the aggregate liquidation amount of the Common Securities
in respect of which the Subordinated Debentures shall have been so
distributed.
5. Voting Rights. (a) Except as provided under paragraph 5(b) below and as
otherwise required by law and the Declaration, the Holders of the Common
Securities will have no voting rights.
(b) (i) Except as provided in the Declaration with respect to a Special
Regular Trustee, Holders of Common Securities have the sole right under the
Declaration to increase or decrease the number of Trustees, and to appoint,
remove or replace a Trustee, any such increase, decrease, appointment, removal
or replacement to be approved by Holders of Common Securities representing a
Majority in aggregate liquidation amount of the Common Securities.
(ii) If any proposed amendment to the Declaration provides for, or the
Regular Trustees otherwise propose to effect (A) any action that would adversely
affect the powers, preferences or special rights of the Trust Securities,
whether by way of amendment to the Declaration or otherwise, or (B) the
liquidation, dissolution, winding-up or termination of the Trust, other than in
connection with the distribution of Subordinated Debentures held by the Property
Trustee, upon the occurrence of a Special Event or in connection with the
redemption of Common Securities as a consequence of a redemption of Subordinated
Debentures, then the Holders of outstanding Trust Securities will be entitled to
vote on such amendment or proposal as a class and such amendment or proposal
shall not be effective except with the approval of the Holders of Trust
Securities representing a Majority in aggregate liquidation amount of such
securities
12
affected thereby; provided, however, (1) if any amendment or proposal referred
to in clause (A) above would adversely affect only the Preferred Securities or
the Common Securities, then only the affected class will be entitled to vote on
such amendment or proposal and such amendment or proposal shall not be effective
except with the approval of a Majority in aggregate liquidation amount of such
class of Trust Securities, (2) the rights of Holders of Common Securities under
Article V of the Declaration to increase or decrease the number of, and to
appoint, replace or remove, Trustees (other than a Special Regular Trustee)
shall not be amended without the consent of each Holder of Common Securities and
(3) amendments to the Declaration shall be subject to such further requirements
as are set forth in Sections 12.01 and 12.02 of the Declaration.
(iii) In the event the consent of the Property Trustee as the holder of the
Subordinated Debentures, is required under the Indenture with respect to any
amendment, modification or termination of the Indenture or the Subordinated
Debentures, the Property Trustee shall request the written direction of the
Holders of the Trust Securities with respect to such amendment, modification or
termination. The Property Trustee shall vote with respect to such amendment,
modification or termination as directed by a Majority in aggregate liquidation
amount of the Trust Securities voting together as a single class; provided that
where such amendment, modification or termination of the Indenture or the
Subordinated Debentures requires the consent or vote of (1) holders of
Subordinated Debentures representing a specified percentage greater than a
majority in principal amount of the Subordinated Debentures or (2) each holder
of Subordinated Debentures, the Property Trustee may only vote with respect to
that amendment, modification or termination as directed by, in the case of
clause (1) above, the vote of Holders of Trust Securities representing such
specified percentage of the aggregate liquidation amount of the Trust
Securities, or, in the case of clause (2) above, each Holder of Trust
Securities; and provided further, that the Property Trustee shall not take any
action in accordance with the directions of the Holders of the Trust Securities
unless the Property Trustee shall have received, at the expense of the Sponsor,
an opinion of nationally recognized independent tax counsel experienced in such
matters to the effect that, as a result of such action, Time Warner Capital will
not fail to be classified as a grantor trust for United States Federal income
tax purposes.
13
(iv) Subject to Section 2.06 of the Declaration, and the provisions of this
and the next succeeding paragraph, the Holders of a Majority in aggregate
liquidation amount of the Common Securities, voting separately as a class, shall
have the right to (A) on behalf of all Holders of Common Securities, waive any
past default that is waivable under the Declaration (subject to, and in
accordance with the Declaration) and (B) direct the time, method, and place of
conducting any proceeding for any remedy available to the Property Trustee, or
to direct the exercise of any trust or power conferred upon the Property Trustee
under the Declaration, including the right to direct the Property Trustee, as
holder of the Subordinated Debentures, to (1) direct the time, method and place
of conducting any proceeding for any remedy available to the Indenture Trustee,
or exercising any trust or power conferred on the Indenture Trustee with respect
to the Subordinated Debentures, (2) waive any past default and its consequences
that is waivable under Section 5.13 of the Indenture, or (3) exercise any right
to rescind or annul a declaration that the principal of all the Subordinated
Debentures shall be due and payable; provided that where the taking of any
action under the Indenture requires the consent or vote of (x) holders of
Subordinated Debentures representing a specified percentage greater than a
majority in principal amount of the Subordinated Debentures or (y) each holder
of Subordinated Debentures, the Property Trustee may only take such action if
directed by, in the case of clause (x) above, the vote of Holders of Common
Securities representing such specified percentage of the aggregate liquidation
amount of the Common Securities, or, in the case of clause (y) above, each
Holder of Common Securities. Pursuant to this paragraph, the Property Trustee
shall not revoke, or take any action inconsistent with, any action previously
authorized or approved by a vote of the Holders of the Preferred Securities, and
shall not take any action in accordance with the direction of the Holders of the
Common Securities under this paragraph if the action is prejudicial to the
Holders of Preferred Securities. The Property Trustee shall not take any of the
foregoing actions at the direction of the Holders of Common Securities unless
the Property Trustee shall have received, at the expense of the Sponsor, an
opinion of nationally recognized independent tax counsel experienced in such
matters to the effect that, as a result of such action, Time Warner Capital will
not fail to be classified as a grantor trust for United States Federal income
tax purposes.
14
(c) (i) Notwithstanding any other provision of these terms, each Holder of
Common Securities will be deemed to have waived any Event of Default with
respect to the Common Securities and its consequences until Events of Default
with respect to the Preferred Securities have been cured, waived by the Holders
of Preferred Securities as provided in the Declaration or otherwise eliminated,
and until all Events of Default with respect to the Preferred Securities have
been so cured, waived by the Holders of Preferred Securities or otherwise
eliminated, the Property Trustee will be deemed to be acting solely on behalf of
the Holders of Preferred Securities and only the Holders of the Preferred
Securities will have the right to direct the Property Trustee in accordance with
the terms of the Declaration or of the Trust Securities. In the event that any
Event of Default with respect to the Preferred Securities is waived by the
Holders of Preferred Securities as provided in the Declaration, the Holders of
Common Securities agree that such waiver shall also constitute the waiver of
such Event of Default with respect to the Common Securities for all purposes
under the Declaration without any further act, vote or consent of the Holders of
the Common Securities.
(ii) A waiver of an Indenture Event of Default by the Property Trustee at
the direction of the Holders of the Preferred Securities will constitute a
waiver of the corresponding Event of Default under the Declaration in respect of
the Trust Securities.
(d) Any required approval of Holders of Common Securities may be given at a
separate meeting of Holders of Common Securities convened for such purpose, at a
meeting of all of the Holders of Trust Securities or pursuant to written
consent. The Regular Trustees will cause a notice of any meeting at which
Holders of Common Securities are entitled to vote, or of any matter upon which
action by written consent of such Holders is to be taken, to be mailed to each
Holder of record of Common Securities. Each such 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.
15
(e) No vote or consent of the Holders of Common Securities will be required
for the Trust to redeem and cancel Common Securities in accordance with the
Declaration.
6. Pro Rata Treatment. A reference in these terms of the Common Securities
to any payment, distribution or treatment as being made on a "Pro Rata Basis"
shall mean, with respect to such payment, distribution or treatment, pro rata to
each Holder of Trust Securities according to the aggregate liquidation amount of
the Trust Securities held by such Holder in relation to the aggregate
liquidation amount of all Trust Securities outstanding; provided, however, that
if the assets of the Trust are insufficient to make such payment in full as a
result of a default with respect to the Subordinated Debentures, any funds
available to make such payment shall be paid (a) first to each Holder of the
Preferred Securities pro rata according to the aggregate liquidation amount of
Preferred Securities held by such Holder in relation to the aggregate
liquidation amount of all Preferred Securities outstanding up to an aggregate
amount equal to the amount then owed to the Holders of the Preferred Securities,
and (b) only after satisfaction of all amounts owed to the Holders of the
Preferred Securities, to each Holder of Common Securities pro rata according to
the aggregate liquidation amount of Common Securities held by such Holder in
relation to the aggregate liquidation amount of all Common Securities
outstanding.
7. Ranking. The Common Securities rank pari passu, and payments will be
made thereon on a Pro Rata Basis with, the Preferred Securities, except that if,
as a result of an Event of Default with respect to the Subordinated Debentures,
the assets of the Trust are insufficient to make payments of Distributions or
payments upon liquidation, redemption of the Trust Securities or otherwise, the
rights of Holders of the Common Securities to receive such payments will be
subordinated to the rights of the Holders of the Preferred Securities.
8. Mergers, Consolidations or Amalgamations. The Trust may not consolidate,
amalgamate, merge with or into, or be replaced by, or convey, transfer or lease
its properties and assets to, any corporation or other body.
9. Transfers, Exchanges, Method of Payments. Payment of Distributions and
payments on redemption of the Common Securities or on dissolution of the Trust
will be payable, the transfer of the Common Securities will be
16
registrable, and Common Securities will be exchangeable for Common Securities of
other denominations of a like aggregate liquidation amount, at the principal
corporate trust office of the Property Trustee in The City of New York; provided
that payment of Distributions may be made at the option of the Regular Trustees
on behalf of the Trust by check mailed to the address of the persons entitled
thereto and that the payment on redemption of any Common Security or on
dissolution of the Trust will be made only upon surrender of such Common
Security to the Property Trustee. Notwithstanding the foregoing, transfers of
Common Securities are subject to conditions set forth in Section 9.01(c) of the
Declaration.
10. Acceptance of Indenture and Certain Other Matters. Each Holder of
Common Securities, by the acceptance thereof, agrees (a) to the provisions of
the Indenture and the Subordinated Debentures, including the subordination
provisions thereof and (b) to treat the Subordinated Debentures as debt
instruments for United States Federal, state and local income and franchise tax
purposes and not to take any contrary position before any taxing authority or on
any tax return.
11. No Preemptive Rights. The Holders of Common Securities shall have no
preemptive rights to subscribe to any additional Common Securities or Preferred
Securities.
12. Miscellaneous. These terms shall constitute a part of the Declaration.
The Regular Trustees will provide a copy of the Declaration and the Indenture to
a Holder without charge on written request to the Trust at its principal place
of business.
Annex I
TRANSFER OF THIS CERTIFICATE
IS SUBJECT TO THE CONDITIONS
SET FORTH IN THE DECLARATION
REFERRED TO BELOW
Certificate Number Number of Common Securities
C-1
Certificate Evidencing Common Securities
of
Time Warner Capital I
8-7/8% Common Securities
Time Warner Capital I, a statutory business trust formed under the laws of
the State of Delaware (the "Trust"), hereby certifies that (the "Holder") is the
registered owner of ( ) common securities of the Trust representing undivided
beneficial interests in the assets of the Trust designated the 8-7/8% Common
Securities (the "Common Securities"). The Common Securities are transferable on
the books and records of the Trust, in person or by a duly authorized attorney,
upon surrender of this certificate duly endorsed and in proper form for transfer
and satisfaction of the other conditions set forth in the Declaration (as
defined below) including, without limitation Section 9.01(c) thereof. The
designations, rights, privileges, restrictions, preferences and other terms and
provisions of the Common Securities are set forth in, and this certificate and
the Common Securities represented hereby are issued and shall in all respects be
subject to the terms and provisions of, the Amended and Restated Declaration of
Trust of the Trust dated as of December 5, 1995, as the same may be amended from
time to time (the "Declaration") including the designation of the terms of
Common Securities as set forth in Exhibit C thereto. The Common Securities and
the Preferred Securities issued by the Trust pursuant to the Declaration
represent undivided beneficial interests in the assets of the Trust, including
the Subordinated Debentures (as defined in the Declaration) issued by Time
Warner Inc., a Delaware corporation, to the Trust pursuant to the Indenture
referred
2
to in the Declaration. The Regular Trustees will furnish a copy of the
Declaration and the Indenture to the Holder without charge upon written request
to the Trust at its principal place of business or registered office.
The Holder of this Certificate, by accepting this Certificate, is deemed to
have agreed to the terms of the Indenture and the Subordinated Debentures,
including that the Subordinated Debentures are subordinate and junior in right
of payment to all Senior Indebtedness (as defined in the Indenture, which term
includes Time Warner's outstanding 8-3/4% Convertible Subordinated Debentures
due 2015) as and to the extent provided in the Indenture.
Upon receipt of this certificate, the Holder is bound by the Declaration
and is entitled to the benefits thereunder.
IN WITNESS WHEREOF, Trustees of the Trust have executed this certificate
this fifth day of December, 1995.
TIME WARNER CAPITAL I,
by
-----------------------------------
Name: Thomas W. McEnerney
Title: Trustee
by
-----------------------------------
Name: John A. LaBarca
Title: Trustee
by
-----------------------------------
Name: Philip R. Lochner, Jr.
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)