EXHIBIT 4.7
AMENDED AND RESTATED DECLARATION OF TRUST (the
"Declaration"), dated as of [ ], 1995, by the
undersigned trustees (together with all other Persons from time
to time duly appointed and serving as trustees in accordance with
the provisions of this Declaration, the "Trustees"), Time Warner
Inc., a Delaware corporation, as trust sponsor ("Time Warner" or
the "Sponsor"), and by the holders, from time to time, of
undivided beneficial interests in the assets of the Trust to be
issued pursuant to this Declaration.
WHEREAS the Sponsor and the Trustees entered into a Declaration of
Trust dated as of August 2, 1995 (the "Original Declaration") in order to
establish a statutory business trust (the "Trust") under the Business Trust Act
(as hereinafter defined);
WHEREAS the Certificate of Trust (the "Certificate of Trust") of the
Trust was filed with the office of the Secretary of State of the State of
Delaware on August 2, 1995;
WHEREAS the Trustees and the Sponsor desire to continue the Trust
pursuant to the Business Trust Act for the sole purpose of, as described more
fully in Section 3.03 hereof, issuing and selling certain securities
representing undivided beneficial interests in the assets of the Trust and
investing the proceeds thereof in certain Subordinated Debentures (as defined
herein) of Time Warner issued under the Indenture (as defined herein) and to
engage pursuant to the terms hereof in only those other activities necessary or
incidental thereto; and
WHEREAS, as of the date hereof, no interests in the Trust have been
issued; and
WHEREAS all of the Trustees and the Sponsor, by this Declaration,
amend and restate each and every term and provision of the Original Declaration.
NOW, THEREFORE, it being the intention of the parties hereto to
continue the Trust as a business trust under the Business Trust Act, that the
Original Declaration
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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
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SECTION 1.01. Terms Generally. (a) The definitions in Section 1.02
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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
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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
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liquidation amount of the Preferred Securities to appoint a Special Regular
Trustee.
"Book Entry Interest" means a beneficial interest in a Certificate
registered in the name of a Clearing Agency or a nominee thereof, ownership and
transfers of which shall be maintained and made through book entries by such
Clearing Agency as described in Section 9.04.
"Business Day" means any day other than a Saturday, Sunday or any
other day on which banking institutions in New York, New York, are permitted or
required by any applicable law to close.
"Business Trust Act" means Chapter 38 of Title 12 of the Delaware
Code, 12 Del. C. (S)(S) 3801 et seq., as it may be amended from time to time.
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"Certificate" means a Common Security Certificate or a Preferred
Security Certificate.
"Clearing Agency" means an organization registered as a "Clearing
Agency" pursuant to Section 17A of the Exchange Act that is acting as depositary
for the Preferred Securities and in whose name or in the name of a nominee of
that organization shall be registered a Global Certificate and which shall
undertake to effect book entry transfers and pledges of the Preferred
Securities.
"Clearing Agency Participant" means a broker, dealer, bank, other
financial institution or other Person for whom from time to time the Clearing
Agency effects book entry transfers and pledges of securities deposited with the
Clearing Agency.
"Closing Date" means [ ], 1995.
"Code" means the Internal Revenue Code of 1986, as amended from time
to time or any successor legislation. A reference to a specific section
((Sec.)) of the Code refers not only to such specific section but also to any
corresponding provision of any federal tax statute enacted after the date of
this Declaration, as such specific section or corresponding provision is in
effect on the date of application of the provisions of this Declaration
containing such reference.
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"Commission" means the Securities and Exchange Commission.
"Common Security" has the meaning specified in Section 7.01(b).
"Common Security Certificate" means a definitive certificate in fully
registered form representing a Common Security substantially in the form of
Annex I to Exhibit C.
"Covered Person" means (i) any officer, director, shareholder,
partner, member, representative, employee or agent of the Trust or its
Affiliates, (ii) any officer, director, shareholder, employee, representative or
agent of Time Warner or its Affiliates and (iii) the Holders from time to time
of the Trust Securities.
"Delaware Trustee" has the meaning set forth in Section 5.01(a)(C).
"DTC" means The Depository Trust Company, the initial Clearing Agency.
"Event of Default" in respect of the Trust Securities means an
Indenture Event of Default that has occurred and is continuing in respect of the
Subordinated Debentures.
"Exchange Act" means the Securities Exchange Act of 1934, as amended
from time to time or any successor legislation.
"Fiscal Year" has the meaning specified in Section 11.01.
"Global Certificate", when used with respect to any Preferred
Security, means a Preferred Security executed by the Trust and delivered to the
Clearing Agency or pursuant to the Clearing Agency's instruction, all in
accordance with this Declaration, which shall be registered in the name of the
Clearing Agency or its nominee and which shall represent all of the outstanding
Preferred Securities.
"Guarantee" means the Guarantee Agreement to be dated as of [ ],
1995, of Time Warner in respect of the Preferred Securities.
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"Holder" means a Person in whose name a Certificate representing a
Trust Security is registered, such Person being a beneficial owner within the
meaning of the Business Trust Act.
"Indemnified Person" means any Trustee, any Affiliate of any Trustee,
any officer, director, shareholder, member, partner, employee, representative or
agent of any Trustee, or any employee or agent of the Trust or its Affiliates.
"Indenture" means the Indenture dated as of [ ], 1995,
between Time Warner and the Indenture Trustee and any indenture supplemental
thereto pursuant to which the Subordinated Debentures are to be issued.
"Indenture Event of Default" means any event or condition defined as
an "Event of Default" with respect to the Subordinated Debentures under Section
5.01 of the Indenture that has occurred and is continuing.
"Indenture Trustee" means [Chemical Bank] as trustee under the
Indenture until a successor is appointed thereunder and thereafter means such
successor trustee.
"Investment Company" means an investment company as defined in the
Investment Company Act.
"Investment Company Act" means the Investment Company Act of 1940, as
amended from time to time or any successor legislation.
"Legal Action" has the meaning specified in Section 3.06(e).
"Liquidation Distribution" has the meaning set forth in Exhibits B and
C hereto establishing the terms of the Trust Securities.
"Majority in aggregate liquidation amount of the Trust Securities"
means, except as otherwise required by the Trust Indenture Act and except as
provided in the penultimate paragraph of Section 5 of Exhibit B hereto,
Holder(s) of outstanding Trust Securities voting together as a single class or,
as the context may require, Holder(s) of outstanding Preferred Securities or
Common Securities voting separately as a class, who are the record owners of an
aggregate liquidation amount representing more than 50% of
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the aggregate liquidation amount of all outstanding Trust Securities of such
class.
"Ministerial Action" has the meaning set forth in the terms of the
Trust Securities as set forth in Exhibits B and C hereto.
"Paying Agent" has the meaning specified in Section 3.08(i).
"Payment Amount" has the meaning set forth in Section 6.01.
"Payments" has the meaning set forth in Section 6.01.
"PERCS" means the $1.24 Preferred Exchangeable Redemption Cumulative
Securities issued by Time Warner.
"Person" means a legal person, including any individual, corporation,
estate, partnership, joint venture, association, joint stock company, limited
liability company, trust, unincorporated association, or government or any
agency or political subdivision thereof, or any other entity of whatever nature.
"Preferred Security" has the meaning specified in Section 7.01(b).
"Preferred Security Beneficial Owner" means, with respect to a Book
Entry Interest, a Person who is the beneficial owner of such Book Entry
Interest, as reflected on the books of the Clearing Agency, or on the books of a
Person maintaining an account with such Clearing Agency (directly as a Clearing
Agency Participant or as an indirect participant, in each case in accordance
with the rules of such Clearing Agency).
"Preferred Security Certificate" means a definitive certificate in
fully registered form representing a Preferred Security substantially in the
form of Annex I to Exhibit B.
"Property Account" has the meaning specified in Section 3.08(c)(i).
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"Property Trustee" means the Trustee meeting the eligibility
requirements set forth in Section 5.01(c) and having the duties set forth for
the Property Trustee herein.
"Quorum" means a majority of the Regular Trustees or, if there are
only two Regular Trustees, both such Regular Trustees.
"Regular Trustee" means any Trustee other than the Property Trustee
and the Delaware Trustee.
"Related Party" means any direct or indirect wholly owned subsidiary
of Time Warner or any other Person which owns, directly or indirectly, 100% of
the outstanding voting securities of Time Warner.
"Resignation Request" has the meaning specified in Section 5.02(d).
"Responsible Officer" means, with respect to the Property Trustee, the
chairman of the board of directors, any vice chairman, the president, any
executive vice president, any senior vice president, any vice-president, any
assistant vice president, the secretary, any assistant secretary, the treasurer,
any assistant treasurer, any trust officer or assistant trust officer or any
other officer of the Property Trustee customarily performing functions similar
to those performed by any of the above designated officers and also means, with
respect to a particular corporate trust matter, any other officer to whom such
matter is referred because of that officer's knowledge of and familiarity with
the particular subject.
"Rule 3a-5" means Rule 3a-5 under the Investment Company Act or any
successor rule thereunder.
"Securities Act" means the Securities Act of 1933, as amended from
time to time, or any successor legislation.
"Special Event" has the meaning set forth in the terms of the Trust
Securities as set forth in Exhibits B and C hereto.
"Special Redemption Date" has the meaning set forth in the terms of
the Trust Securities as set forth in Exhibits B and C hereto.
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"Special Redemption Price" has the meaning set forth in the terms of
the Trust Securities as set forth in Exhibits B and C hereto.
"Special Regular Trustee" means a Regular Trustee appointed by the
Holders of a Majority in aggregate liquidation amount of the Preferred
Securities in accordance with Section 5.02(a)(ii)(B).
"Sponsor" or "Time Warner" means Time Warner Inc., a Delaware
corporation, or any successor entity, in its capacity as sponsor of the Trust.
"Subordinated Debentures" means the series of Subordinated Debentures
issued by Time Warner under the Indenture to the Property Trustee and entitled
the [ ]% Subordinated Debentures due 2025.
"Successor Delaware Trustee" has the meaning specified in Section
5.02(b)(ii).
"Successor Property Trustee" means a successor Trustee possessing the
qualifications to act as Property Trustee set forth in Section 5.01(c).
"10% in aggregate liquidation amount of the Trust Securities" means,
except as otherwise required by the Trust Indenture Act and except as provided
in the penultimate paragraph of paragraph 5 of Exhibit B hereto, Holder(s) of
outstanding Trust Securities voting together as a single class or, as the
context may require, Holder(s) of outstanding Preferred Securities or Common
Securities, voting separately as a class, who are the record owners of an
aggregate liquidation amount representing 10% or more of the aggregate
liquidation amount of all outstanding Trust Securities of such class.
"Treasury Regulations" means the income tax regulations, including
temporary and proposed regulations, promulgated under the Code by the United
States Treasury, as such regulations may be amended from time to time (including
corresponding provisions of succeeding regulations).
"Trustee" or "Trustees" means each Person who has signed this
Declaration as a trustee, so long as such Person shall continue in office in
accordance with the terms hereof, and all other Persons who may from time to
time be duly appointed, qualified and serving as Trustees in
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accordance with the provisions hereof, and references herein to a Trustee or the
Trustees shall refer to such Person or Persons solely in their capacity as
trustees hereunder.
"Trust Indenture Act" means the Trust Indenture Act of 1939, as
amended.
"Trust Securities" means the Common Securities and the Preferred
Securities.
"Underwriting Agreement" means the underwriting agreement dated [
], 1995, among Time Warner, the Trust and Merrill Lynch, Pierce, Fenner & Smith
Incorporated, Morgan Stanley & Co. Incorporated and Bear, Stearns & Co. Inc. as
co-representatives of the several underwriters named therein, with respect to,
among other things, the Preferred Securities.
ARTICLE II
Trust Indenture Act
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SECTION 2.01. Trust Indenture Act; Application.
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(a) This Declaration is subject to the provisions of the Trust
Indenture Act that are required to be part of this Declaration and shall,
to the extent applicable, be governed by such provisions;
(b) if and to the extent that any provision of this Declaration
limits, qualifies or conflicts with the duties imposed by (S)(S) 310 to
317, inclusive, of the Trust Indenture Act, such imposed duties shall
control;
(c) the Property Trustee shall be the only Trustee which is a trustee
for the purposes of the Trust Indenture Act; and
(d) the application of the Trust Indenture Act to this Declaration
shall not affect the nature of the Trust Securities as equity securities
representing undivided beneficial interests in the assets of the Trust.
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SECTION 2.02. Lists of Holders of Preferred Securities. (a) Each of
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the Sponsor and the Regular Trustees on behalf of the Trust shall provide the
Property Trustee with such information as is required under (S) 312(a) of the
Trust Indenture Act at the times and in the manner provided in (S) 312(a).
(b) The Property Trustee shall comply with its obligations under
(S)(S) 310(b), 311 and 312(b) of the Trust Indenture Act.
SECTION 2.03. Reports by the Property Trustee. Within 60 days after
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May 15 of each year, the Property Trustee shall provide to the Holders of the
Trust Securities such reports as are required by (S) 313 of the Trust Indenture
Act, if any, in the form, in the manner and at the times provided by (S) 313 of
the Trust Indenture Act. The Property Trustee shall also comply with the
requirements of (S) 313(d) of the Trust Indenture Act.
SECTION 2.04. Periodic Reports to Property Trustee. Each of the
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Sponsor and the Regular Trustees on behalf of the Trust shall provide to the
Property Trustee, the Commission and the Holders of the Trust Securities, as
applicable, such documents, reports and information as required by (S)
314(a)(l)-(3), if any, of the Trust Indenture Act and the compliance
certificates required by (S) 314(a)(4) and (c) of the Trust Indenture Act, any
such certificates to be provided in the form, in the manner and at the times
required by (S) 314(a)(4) and (c) of the Trust Indenture Act; provided that any
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certificate to be provided pursuant to (S) 314(a)(4) of the Trust Indenture Act
shall be provided within 120 days of the end of each Fiscal Year.
SECTION 2.05. Evidence of Compliance with Conditions Precedent. Each
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of the Sponsor and the Regular Trustees on behalf of the Trust shall provide to
the Property Trustee such evidence of compliance with any conditions precedent,
if any, provided for in this Declaration which relate to any of the matters set
forth in (S) 314(c) of the Trust Indenture Act. Any certificate or opinion
required to be given pursuant to (S) 314(c) shall comply with (S) 314(e) of the
Trust Indenture Act.
SECTION 2.06. Events of Default; Waiver. (a) Subject to Section
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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
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accordance with the terms of the Preferred Securities as set forth in Exhibit B
hereto, direct the time, method, and place of conducting any proceeding for any
remedy available to the Property Trustee, or exercising any trust or power
conferred upon the Property Trustee hereunder or (ii) on behalf of the Holders
of all Preferred Securities waive any past Event of Default in respect of the
Preferred Securities and its consequences, provided that if the Event of Default
arises out of an Indenture Event of Default:
(A) which is not waivable under the Indenture, the Event of Default
under this Declaration shall also be not waivable; or
(B) which requires the consent or vote of (1) holders of Subordinated
Debentures representing a specified percentage greater than a majority in
principal amount of the Subordinated Debentures, or (2) each holder of
Subordinated Debentures, the Event of Default under this Declaration may
only be waived by, in the case of clause (1) above, the vote of Holders of
Preferred Securities representing such specified percentage of the
aggregate liquidation amount of the Preferred Securities, or, in the case
of clause (2) above, each Holder of Preferred Securities.
Upon such waiver, any such default shall cease to exist, and any Event of
Default with respect to the Preferred Securities arising therefrom shall be
deemed to have been cured, for every purpose of this Declaration, but no such
waiver shall extend to any subsequent or other default or Event of Default with
respect to the Preferred Securities or impair any right consequent thereon.
(b) Subject to Section 2.06(c), Holders of Common Securities may by
vote of at least a Majority in aggregate liquidation amount of the Common
Securities, (i) in accordance with the terms of the Common Securities as set
forth in Exhibit C hereto, direct the time, method, and place of conducting any
proceeding for any remedy available to the Property Trustee, or exercising any
trust or power conferred upon the Property Trustee hereunder or (ii) on behalf
of the Holders of all of the Common Securities, waive any past Event of Default
with respect to the Common Securities and its consequences, provided that, if
the Event of Default arises out of an Indenture Event of Default:
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(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
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waived any Event of Default with respect to the Common Securities and its
consequences until all Events of Default with respect to the Preferred
Securities have been cured, waived by the Holders of Preferred Securities as
provided in this Declaration or otherwise eliminated and until all Events of
Default with respect to the Preferred Securities have been so cured, waived or
otherwise eliminated, the Property Trustee will be deemed to be acting solely on
behalf of the Holders of the Preferred Securities and only the Holders of the
Preferred Securities will have the right to direct the Property Trustee in
accordance with the terms of this Declaration or the Trust Securities. In the
event that any Event of Default with respect to the Preferred Securities is
waived by the Holders of Preferred Securities as provided in this Declaration,
the Holders of Common Securities agree that such waiver shall also constitute
the waiver of such Event of Default with respect to the Common Securities for
all purposes under this Declaration without any further act, vote or consent of
the Holders of the Common Securities. Subject to the foregoing provisions of
this Section 2.06(b), upon such waiver, any such default shall cease to exist
and any Event of Default with respect to the Common Securities arising therefrom
shall be deemed to have been cured, for every purpose of this Declaration, but
no such waiver shall extend to any subsequent or other default or Event of
Default with respect
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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
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information as to the names and addresses of the Holders of the Trust Securities
in accordance with (S) 312 of the Trust Indenture Act, regardless of the source
from which such information was derived, shall not be deemed to be a violation
of any existing law, or any law hereafter enacted which does not specifically
refer to (S) 312 of the Trust Indenture Act, nor shall the Property Trustee be
held accountable by reason of mailing any material pursuant to a request made
under (S) 312(b) of the Trust Indenture Act.
ARTICLE III
Organization
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SECTION 3.01. Name. The Trust is named "Time Warner Capital [I]" as
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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
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Trust is c/o Time Warner Inc., 75 Rockefeller Plaza, New York, New York 10019.
Upon ten days written notice to the Holders, the Regular Trustees may change the
location of the Trust's principal office.
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SECTION 3.03. Purpose. The exclusive purposes and functions of the
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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
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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
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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
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Trustees shall have the exclusive power, authority and duty to cause the Trust,
and shall cause the Trust, to engage in the following activities:
(a) to issue and sell the Preferred Securities and the Common
Securities, in each case in accordance with this Declaration; provided,
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however, that the Trust may issue no more than one series of Preferred
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Securities and no more than one series of Common Securities; and provided
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further, there shall be no interests in the Trust other than the Trust
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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,
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however, the Regular Trustees shall cause legal title to all of the
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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
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with the Sponsor and the Property Trustee before taking or refraining to
take any Ministerial Action in relation to a Special Event;
(d) to establish a record date with respect to all actions to be taken
hereunder that require a record date be established, including for the
purposes of (S) 316(c) of the Trust Indenture Act and with respect to
Payments, voting rights, redemptions, and exchanges, and to issue relevant
notices to Holders of the Preferred Securities and Common Securities as to
such actions and applicable record dates;
(e) to bring or defend, pay, collect, compromise, arbitrate, resort to
legal action, or otherwise adjust claims or demands of or against the Trust
("Legal Action"), unless pursuant to Section 3.08(e), the Property Trustee
has the exclusive power to bring such Legal Action;
(f) to employ or otherwise engage employees and agents (who may be
designated as officers with titles) and managers, contractors, advisors,
and consultants and pay reasonable compensation for such services;
(g) to cause the Trust to comply with the Trust's obligations under
the Trust Indenture Act;
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(h) to give the certificate to the Property Trustee required by (S)
314(a)(4) of the Trust Indenture Act, which certificate may be executed by
any Regular Trustee;
(i) to incur expenses which are necessary or incidental to carrying
out any of the purposes of the Trust;
(j) to act as, or appoint another Person to act as, registrar and
transfer agent for the Trust Securities, the Regular Trustees hereby
initially appointing the Property Trustee for such purposes;
(k) to take all actions and perform such duties as may be required of
the Regular Trustees pursuant to the terms of the Trust Securities set
forth in Exhibits B and C hereto;
(l) to execute all documents or instruments, perform all duties and
powers, and do all things for and on behalf of the Trust in all matters
necessary or incidental to the activities set forth in this section 3.06;
(m) to take all action that may be necessary or appropriate for the
preservation and the continuation of the Trust's valid existence, rights,
franchises and privileges as a statutory business trust under the laws of
the State of Delaware and of each other jurisdiction in which such
existence is necessary to protect the limited liability of the Holders of
the Trust Securities or to enable the Trust to effect the purposes for
which the Trust has been created;
(n) to take any action, not inconsistent with this Declaration or with
applicable law, which the Regular Trustees determine in their discretion to
be reasonable and necessary or desirable in carrying out the activities of
the Trust as set out in this Section 3.06, in order that:
(i) the Trust will not be deemed to be an Investment Company
required to be registered under the Investment Company Act;
(ii) the Trust will not be classified for United States Federal
income tax purposes as an
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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
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Holders;
(o) to take all action necessary to cause all applicable tax returns
and tax information reports that are required to be filed with respect to
the Trust to be duly prepared and filed by the Regular Trustees, on behalf
of the Trust; and
(p) subject to the requirements of (S)317(b) of the Trust Indenture
Act, to appoint one or more Paying Agents in addition to the Property
Trustee.
The Regular Trustees must exercise the powers set forth in this
Section 3.06 in a manner which is consistent with the purposes and functions of
the Trust set out in Section 3.03 and the Regular Trustees shall not take any
action which is inconsistent with the purposes and functions of the Trust set
forth in Section 3.03; and
Subject to this Section 3.06, the Regular Trustees shall have none of
the powers nor any of the authority of the Property Trustee set forth in Section
3.08.
SECTION 3.07. Prohibition of Actions by Trust and Trustees. The
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Trust shall not, and the Trustees (including the Property Trustee) shall cause
the Trust not to, engage in any activity other than as required or authorized by
this Declaration. In particular, the Trust shall not and the Trustees
(including the Property Trustee) shall cause the Trust not to:
(a) invest any proceeds received by the Trust from holding the
Subordinated Debentures but shall promptly distribute all such proceeds to
Holders of Trust Securities pursuant to the terms of this Declaration and
of the Trust Securities;
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(b) acquire any assets other than as expressly provided herein;
(c) possess Trust property for other than a Trust purpose;
(d) make any loans, other than loans represented by the Subordinated
Debentures;
(e) possess any power or otherwise act in such a way as to vary the
Trust assets or the terms of the Trust Securities in any way whatsoever;
(f) issue any securities or other evidences of beneficial ownership
of, or beneficial interests in, the Trust other than the Trust Securities;
(g) incur any indebtedness for borrowed money;
(h) except as contemplated by Section 2.06, (i) direct the time,
method and place of exercising any trust or power conferred upon the
Indenture Trustee with respect to the Subordinated Debentures, (ii) waive
any past default that is waivable under Section 5.13 of the Indenture,
(iii) exercise any right to rescind or annul any declaration that the
Subordinated Debentures shall be due and payable or (iv) consent to any
amendment, modification or termination of the Indenture or the Subordinated
Debentures, where such consent shall be required, unless the Property
Trustee shall have received an unqualified opinion of nationally recognized
independent tax counsel experienced in such matters to the effect that such
action will not result in the Trust being treated as an association taxable
as a corporation or partnership for United States Federal income tax
purposes and that, following such action, each Holder of Trust Securities
will be treated for United States Federal income tax purposes as owning an
undivided beneficial interest in the Subordinated Debentures; or
(i) consolidate, amalgamate, merge with or into, or be replaced by, or
convey, transfer or lease its properties and assets to, any corporation or
other body.
SECTION 3.08. Powers and Duties of the Property Trustee. (a) The
------------------------------------------
legal title to the Subordinated
19
Debentures shall be owned by and held of record in the name of the Property
Trustee in trust for the benefit of the Trust and the Holders of the Trust
Securities. The right, title and interest of the Property Trustee to the
Subordinated Debentures shall vest automatically in each Person who may
hereafter be appointed as Property Trustee in accordance with Article V. Such
vesting and cessation of title shall be effective whether or not conveyancing
documents have been executed and delivered.
(b) The Property Trustee shall not transfer its right, title and
interest in the Subordinated Debentures to the Regular Trustees or, if the
Property Trustee does not also act as the Delaware Trustee, the Delaware
Trustee.
(c) The Property Trustee shall:
(i) establish and maintain a segregated non-interest bearing bank
account (the "Property Account") in the name of and under the exclusive
control of the Property Trustee on behalf of the Trust and the Holders of
the Trust Securities and on the receipt of payments of funds made in
respect of the Subordinated Debentures held by the Property Trustee,
deposit such funds into the Property Account and, without any further acts
of the Property Trustee or the Regular Trustees, promptly make payments to
the Holders of the Preferred Securities and Common Securities from the
Property Account in accordance with Section 6.01. Funds in the Property
Account shall be held uninvested, and without liability for interest
thereon, until disbursed in accordance with this Declaration. The Property
Account shall be an account which is maintained with a banking institution
whose long term unsecured indebtedness is rated by a "nationally recognized
statistical rating organization", as such term is defined for purposes of
Rule 436(g)(2) under the Securities Act, at least equal to (but in no event
less than "A" or the equivalent) the rating assigned to the Preferred
Securities by a nationally recognized statistical rating organization;
(ii) engage in such ministerial activities as shall be necessary or
appropriate to effect promptly the redemption of the Preferred Securities
and the Common Securities to the extent the Subordinated Debentures are
redeemed or mature;
20
(iii) upon notice of distribution issued by the Regular Trustees in
accordance with the terms of the Preferred Securities and the Common
Securities, engage in such ministerial activities as shall be necessary or
appropriate to effect promptly the distribution pursuant to terms of the
Trust Securities of Subordinated Debentures to Holders of Trust Securities
upon the occurrence of a Special Event; and
(iv) have the legal power to exercise all of the rights, powers and
privileges of a holder of the Subordinated Debentures under the Indenture
and, if an Event of Default occurs and is continuing, the Property Trustee,
subject to Section 2.06, shall for the benefit of the Holders of the Trust
Securities, enforce its rights as holder of the Subordinated Debentures
under the Indenture, subject to the rights of the Holders of the Trust
Securities pursuant to the terms of the Trust Securities, this Declaration,
the Business Trust Act and the Trust Indenture Act.
(d) The Property Trustee shall take all actions and perform such
duties as may be specifically required of the Property Trustee pursuant to the
terms of the Trust Securities set forth in Exhibits B and C hereto.
(e) Subject to Section 2.06, the Property Trustee shall take any Legal
Action which arises out of or in connection with an Event of Default or the
Property Trustee's duties and obligations under this Declaration, the Business
Trust Act or the Trust Indenture Act.
(f) All moneys deposited in the Property Account, and all Subordinated
Debentures held by the Property Trustee for the benefit of the Trust and the
Holders of the Trust Securities, will not be subject to any right, charge,
security interest, lien or claim of any kind in favor of, or for the benefit of,
the Property Trustee or its agents or their creditors.
(g) The Property Trustee shall, within 90 days after the occurrence of
a default with respect to the Trust Securities, transmit by mail, first class
postage prepaid, to the Holders of the Trust Securities, as their names and
addresses appear upon the register, notice of all defaults with respect to the
Trust Securities known to the Property Trustee, unless such defaults shall have
been cured before the giving of such notice (the term "defaults" for the
21
purposes of this Section 3.08(g) being hereby defined to be an Indenture Event
of Default, not including any periods of grace provided for in the Indenture and
irrespective of the giving of any notice provided therein); provided, that,
--------
except in the case of default in the payment of the principal amount or any
redemption price or interest on any of the Subordinated Debentures, the Property
Trustee shall be protected in withholding such notice if and so long as the
board of directors, the executive committee, or a trust committee of directors
and/or Responsible Officers, of the Property Trustee in good faith determine
that the withholding of such notice is in the interests of the Holders of the
Trust Securities. The Property Trustee shall not be deemed to have knowledge of
any default, except (i) a default in the payment of principal or any redemption
price or interest on the Subordinated Debentures or (ii) any default as to which
the Property Trustee shall have received written notice or a Responsible Officer
charged with the administration of this Declaration shall have obtained written
notice.
(h) The Property Trustee shall continue to serve as Property Trustee
unless either:
(i) the Trust has been completely liquidated and the proceeds thereof
distributed to the Holders of Trust Securities pursuant to the terms of the
Trust Securities; or
(ii) a Successor Property Trustee has been appointed and accepted that
appointment in accordance with Article V.
(i) The Property Trustee shall act as paying agent in respect of the
Trust Securities and may authorize one or more Persons (each, a "Paying Agent")
to make Payments on behalf of the Trust with respect to the Trust Securities.
Any such Paying Agent shall comply with (S) 317(b) of the Trust Indenture Act.
Any Paying Agent may be removed by the Property Trustee, after consultation with
the Regular Trustees, at any time and a successor Paying Agent or additional
Paying Agents may be appointed at any time by the Property Trustee.
(j) Subject to this Section 3.08, the Property Trustee shall have
none of the powers or the authority of the Regular Trustees set forth in Section
3.06.
22
The Property Trustee shall exercise the powers, duties and rights set forth in
this Section 3.08 and Section 3.10 in a manner that is consistent with the
purposes and functions of the Trust set out in Section 3.03 and the Property
Trustee shall not take any action which is inconsistent with the purposes and
functions of the Trust set forth in Section 3.03.
SECTION 3.09. Delaware Trustee. Notwithstanding any other provision
-----------------
of this Declaration other than Section 5.01(a)(C), the Delaware Trustee shall
not be entitled to exercise any powers, nor shall the Delaware Trustee have any
of the duties and responsibilities of the Regular Trustees and the Property
Trustee described in this Declaration. Except as set forth in Section
5.01(a)(C), the Delaware Trustee shall be a Trustee for the sole and limited
purpose of fulfilling the requirements of (S) 3807 of the Business Trust Act.
SECTION 3.10. Certain Rights and Duties of the Property Trustee.
--------------------------------------------------
(a) The Property Trustee, before the occurrence of an Event of Default and after
the curing or waiving of all Events of Default that may have occurred, shall
undertake to perform only such duties as are specifically set forth in this
Declaration, and no implied covenants shall be read into this Declaration
against the Property Trustee. In case an Event of Default has occurred (that has
not been cured or waived pursuant to Section 2.06), the Property Trustee shall
exercise such of the rights and powers vested in it by this Declaration, and use
the same degree of care and skill in their exercise, as a prudent person would
exercise or use under the circumstances in the conduct of his or her own
affairs.
(b) No provision of this Declaration shall be construed to relieve the
Property Trustee from liability for its own negligent action, its own negligent
failure to act or its own wilful misconduct, except that:
(i) prior to the occurrence of an Event of Default and after the
curing or waiving of all Events of Default that may have occurred:
(A) the duties and obligations of the Property Trustee shall be
determined solely by the express provisions of this Declaration, and
the Property Trustee shall not be liable except for the performance of
such duties and obligations as
23
are specifically set forth in this Declaration, and no implied
covenants or obligations shall be read into this Declaration against
the Property Trustee; and
(B) in the absence of bad faith on the part of the Property
Trustee, the Property Trustee may conclusively rely, as to the truth
of the statements and the correctness of the opinions expressed
therein, upon any certificates or opinions furnished to the Property
Trustee and conforming to the requirements of this Declaration; but in
the case of any such certificates or opinions that by any provision
hereof are specifically required to be furnished to the Property
Trustee, the Property Trustee shall be under a duty to examine the
same to determine whether or not they conform to the requirements of
this Declaration;
(ii) the Property Trustee shall not be liable for any error of
judgment made in good faith by a Responsible Officer of the Property
Trustee, unless it shall be proved that the Property Trustee was negligent
in ascertaining the pertinent facts;
(iii) the Property Trustee shall not be liable with respect to any
action taken or omitted to be taken by it in good faith in accordance with
the direction of the Holders as provided herein relating to the time,
method and place of conducting any proceeding for any remedy available to
the Property Trustee hereunder or under the Indenture, or exercising any
trust or power conferred upon the Property Trustee under this Declaration;
and
(iv) no provision of this Declaration shall require the Property
Trustee to expend or risk its own funds or otherwise incur personal
financial liability in the performance of any of its duties or in the
exercise of any of its rights or powers, if it shall have reasonable
grounds for believing that the repayment of such funds or liability is not
reasonably assured to it under the terms of this Declaration or adequate
indemnity against such risk or liability is not reasonably assured to it.
24
(c) Subject to the provisions of Section 3.10(a)
and (b):
(i) whenever in the administration of this Declaration, the Property
Trustee shall deem it desirable that a matter be proved or established
prior to taking, suffering or omitting any action hereunder, the Property
Trustee (unless other evidence is herein specifically prescribed) may, in
the absence of bad faith on its part request and rely upon a certificate,
which shall comply with the provisions of (S) 314(e) of the Trust Indenture
Act, signed by any two of the Regular Trustees or by an authorized officer
of the Sponsor, as the case may be;
(ii) the Property Trustee (A) may consult with counsel (which may be
counsel to the Sponsor or any of its Affiliates and may include any of its
employees) selected by it in good faith and with due care and the written
advice or opinion of such counsel with respect to legal matters shall be
full and complete authorization and protection in respect of any action
taken, suffered or omitted by it hereunder in good faith and in reliance
thereon and in accordance with such advice and opinion and (B) shall have
the right at any time to seek instructions concerning the administration of
this Declaration from any court of competent jurisdiction;
(iii) the Property Trustee may execute any of the trusts or powers
hereunder or perform any duties hereunder either directly or by or through
agents or attorneys and the Property Trustee shall not be responsible for
any misconduct or negligence on the part of any agent or attorney appointed
by it in good faith and with due care;
(iv) the Property Trustee shall be under no obligation to exercise any
of the rights or powers vested in it by this Declaration at the request or
direction of any Holders, unless such Holders shall have offered to the
Property Trustee reasonable security and indemnity against the costs,
expenses (including attorneys' fees and expenses) and liabilities that
might be incurred by it in complying with such request or direction;
provided that nothing contained in this clause (iv) shall relieve the
--------
Property Trustee of the obligation, upon the occurrence
25
of an Event of Default (which has not been cured or waived) to exercise
such of the rights and powers vested in it by this Declaration, and to use
the same degree of care and skill in their exercise, as a prudent person
would exercise or use under the circumstances in the conduct of his or her
own affairs; and
(v) any action taken by the Property Trustee or its agents hereunder
shall bind the Trust and the Holders of the Trust Securities and the
signature of the Property Trustee or its agents alone shall be sufficient
and effective to perform any such action; and no third party shall be
required to inquire as to the authority of the Property Trustee to so act,
or as to its compliance with any of the terms and provisions of this
Declaration, both of which shall be conclusively evidenced by the Property
Trustee's or its agent's taking such action.
SECTION 3.11. Registration Statement and Related Matters. In
-------------------------------------------
accordance with the Original Declaration, Time Warner and the Trustees have
authorized and directed, and hereby confirm the authorization of, Time Warner,
as the sponsor of the Trust, (a) to file with the Commission and execute, in
each case on behalf of the Trust, (i) the Registration Statement on Form S-3
(File Nos. 33-[ ] and 33-[ ] )(the "1933 Act Registration Statement")
including any pre-effective or post-effective amendments to such Registration
Statement, relating to the registration under the Securities Act of the
Preferred Securities of the Trust and (ii) a Registration Statement on Form 8-A
or other appropriate form (the "1934 Act Registration Statement") (including all
pre-effective and post-effective amendments thereto) relating to the
registration of the Preferred Securities of the Trust under Section 12(b) of the
Exchange Act; (b) to file with the New York Stock Exchange or any other national
securities exchange and execute on behalf of the Trust a listing application and
all other applications, statements, certificates, agreements and other
instruments as shall be necessary or desirable to cause the Preferred Securities
to be listed on the New York Stock Exchange or such other national securities
exchange; (c) to file and execute on behalf of the Trust such applications,
reports, surety bonds, irrevocable consents, appointments of attorney for
service of process and other papers and documents as shall be necessary or
desirable to register the Preferred Securities under the securities or "Blue
Sky" laws of such
26
jurisdictions as Time Warner on behalf of the Trust may deem necessary or
desirable and (d) to execute on behalf of the Trust the Underwriting Agreement,
substantially in the form included as Exhibit 1 to the 1933 Act Registration
Statement with such changes thereto as may be approved by the authorized officer
of the Sponsor executing the same, such approval to be evidenced by such
officer's execution thereof. In the event that any filing referred to in
clauses (a)-(c) above is required by the rules and regulations of the
Commission, the New York Stock Exchange or state securities or blue sky laws, to
be executed on behalf of the Trust by the Trustees, the Regular Trustees, in
their capacities as Trustees of the Trust, are hereby authorized and directed to
join in any such filing and to execute on behalf of the Trust any and all of the
foregoing, it being understood that the Property Trustee and the Delaware
Trustee, in their capacities as Trustees of the Trust, shall not be required to
join in any such filing or execute on behalf of the Trust any such document
unless required by the rules and regulations of the Commission, the New York
Stock Exchange or state securities or blue sky laws. In connection with all of
the foregoing, Time Warner and each Trustee, solely in its capacity as Trustee
of the Trust, have constituted and appointed, and hereby confirm the appointment
of, Gerald M. Levin, Richard D. Parsons, Richard J. Bressler, Peter R. Haje and
Philip R. Lochner, and each of them, as his, her or its, as the case may be,
true and lawful attorneys-in-fact, and agents, with full power of substitution
and resubstitution, for Time Warner or such Trustee or in Time Warner's or such
Trustee's name, place and stead, in any and all capacities, to sign any and all
amendments (including post-effective amendments) to the 1933 Act Registration
Statement and the 1934 Act Registration Statement and to file the same, with all
exhibits thereto, and other documents in connection therewith, with the
Commission, and to execute and file with the New York Stock Exchange or any
other national securities exchange a listing application and all other
applications and documents as shall be necessary or desirable in connection
therewith, granting unto said attorneys-in-fact and agents full power and
authority to do and perform each and every act and thing requisite and necessary
to be done in connection therewith, as fully to all intents and purposes as Time
Warner or such Trustee might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents or any of them, or their
or his or her substitute or substitutes, shall do or cause to be done by virtue
hereof.
27
SECTION 3.12. Filing of Amendments to Certificate of Trust. The
---------------------------------------------
Certificate of Trust is attached hereto as Exhibit A. On or after the date of
execution of this Declaration, the Trustees shall cause the filing with the
Secretary of State of the State of Delaware of such amendments to the
Certificate of Trust as the Trustees shall deem necessary or desirable.
SECTION 3.13. Execution of Documents by Regular Trustees. Unless
-------------------------------------------
otherwise determined by the Regular Trustees and except as otherwise required by
the Business Trust Act with respect to the Certificate of Trust or otherwise, a
majority of, or if there are only two, both of, the Regular Trustees are
authorized to execute and deliver on behalf of the Trust any documents which the
Regular Trustees have the power and authority to execute or deliver pursuant to
this Declaration; provided that any listing application prepared by the Sponsor
--------
referred to in Section 3.11(b) may be executed by any Regular Trustee.
SECTION 3.14. Trustees Not Responsible for Recitals or Issuance of
----------------------------------------------------
Trust Securities. The recitals contained in this Declaration and the Trust
- -----------------
Securities shall be taken as the statements of the Sponsor and the Trustees do
not assume any responsibility for their correctness. The Trustees make no
representations as to the value or condition of the property of the Trust or any
part thereof. The Trustees make no representations as to the validity or
sufficiency of this Declaration or the Trust Securities.
SECTION 3.15. Duration of Trust. The Trust, absent termination
------------------
pursuant to the provisions of Article VIII hereof, shall have existence for 55
years from the Closing Date.
ARTICLE IV
Sponsor
-------
SECTION 4.01. Purchase of Common Securities by Sponsor. The Sponsor
-----------------------------------------
will purchase all the Common Securities issued by the Trust at the same time as
the Preferred Securities are sold, in an amount approximately equal to 3% of the
capital of the Trust after giving effect to such purchase.
28
SECTION 4.02. Expenses. (a) The Sponsor, in its capacity as Sponsor
---------
and not as a Holder, shall be responsible for and shall pay for all debts and
obligations (other than with respect to the Trust Securities) and all costs and
expenses of the Trust (including costs and expenses relating to the organization
of the Trust, the issuance of the Preferred Securities, the fees and expenses
(including reasonable counsel fees and expenses) of the Trustees (including any
amounts payable under Article X) and the costs and expenses relating to the
operation of the Trust, including costs and expenses of accountants, attorneys,
statistical or bookkeeping services, expenses for printing and engraving and
computing or accounting equipment, paying agent(s), registrar(s), transfer
agent(s), duplicating, travel and telephone and other telecommunications
expenses and costs and expenses incurred in connection with the disposition of
Trust assets).
(b) The Sponsor, in its capacity as Sponsor and not as a Holder, will
pay any and all taxes and all liabilities, costs and expenses with respect to
such taxes of the Trust.
(c) The Sponsor's obligations under this Section 4.02 shall be for the
benefit of, and shall be enforceable by, any Person to whom any such debts,
obligations, costs, expenses and taxes are owed (a "Creditor") whether or not
such Creditor has received notice hereof. Any such Creditor and the Property
Trustee may enforce the Sponsor's obligations under this Section 4.02 directly
against the Sponsor and the Sponsor irrevocably waives any right or remedy to
require that any such Creditor or the Property Trustee take any action against
the Trust or any other Person before proceeding against the Sponsor. The
Sponsor agrees to execute such additional agreements as may be necessary or
desirable in order to give full effect to the provisions of this Section 4.02.
ARTICLE V
Trustees
--------
SECTION 5.01. Number of Trustees; Qualifications. (a) The number of
-----------------------------------
Trustees initially shall be five. At any time (i) before the issuance of the
Trust Securities, the Sponsor may, by written instrument, increase or decrease
the number of, and appoint, remove and replace the,
29
Trustees, and (ii) after the issuance of the Trust Securities and except as
provided in subsection (E) below and Section 5.02(a)(ii)(B) with respect to the
Special Regular Trustee, the number of Trustees may be increased or decreased
solely by, and Trustees may be appointed, removed or replaced solely by, vote of
Holders of Common Securities representing a Majority in aggregate liquidation
amount of the Common Securities voting as a class; provided that in any case:
--------
(A) the number of Trustees shall be at least five unless the Trustee
that acts as the Property Trustee also acts as the Delaware Trustee, in
which case the number of Trustees shall be at least four;
(B) unless a Special Regular Trustee has been appointed (which
appointment shall not impair the right of the Holders of Common Securities
to increase or decrease the number of, or to appoint, remove or replace,
Trustees (other than the Special Regular Trustee) as provided above), at
least a majority of the Trustees shall at all times be officers, directors
or employees of Time Warner;
(C) if required by the Business Trust Act, one Trustee (the "Delaware
Trustee") shall be either a natural person who is a resident of the State
of Delaware or, if not a natural person, an entity that has its principal
place of business in the State of Delaware and otherwise is permitted to
act as a Delaware Trustee hereunder under the laws of the State of
Delaware, except that if the Property Trustee has its principal place of
business in the State of Delaware and otherwise is permitted to act as a
Trustee hereunder under the laws of the State of Delaware, then the
Property Trustee shall also be the Delaware Trustee and Section 3.09 shall
have no application;
(D) there shall at all times be a Property Trustee; and
(E) the number of Trustees shall be increased automatically by one if
an Appointment Event has occurred and is continuing and the Holders of a
Majority in aggregate liquidation amount of the Preferred Securities
appoint a Special Regular Trustee in accordance with Section 5.02(a)(ii)(B)
and the terms
30
of the Preferred Securities as set forth in Exhibit B hereto.
Each Trustee shall be either a natural person at least 21 years of age or a
legal entity which shall act through one or more duly appointed representatives.
(b) The initial Regular Trustees shall be:
John A. LaBarca
Philip R. Lochner, Jr.
Thomas W. McEnerney
c/o Time Warner Inc.
75 Rockefeller Plaza
New York, NY 10019
(c) There shall at all times be one Trustee that shall act as Property
Trustee. In order to act as Property Trustee hereunder, such Trustee shall:
(i) not be an Affiliate of the Sponsor; and
(ii) be a corporation organized and doing business under the laws of
the United States of America or any State or Territory thereof or of the
District of Columbia, or a corporation or Person permitted by the
Commission to act as an institutional trustee under the Trust Indenture
Act, authorized under such laws to exercise corporate trust powers, having
a combined capital and surplus of at least $50,000,000, and subject to
supervision or examination by Federal, State, Territorial or District of
Columbia authority. If such corporation publishes reports of condition at
least annually, pursuant to law or to the requirements of the supervising
or examining authority referred to above, then for the purposes of this
Section 5.01(c)(ii), the combined capital and surplus of such corporation
shall be deemed to be its combined capital and surplus as set forth in its
most recent report of condition so published.
If at any time the Property Trustee shall cease to satisfy any of the
requirements of clauses (i) and (ii) above, the Property Trustee shall
immediately resign in the manner and with the effect set out in Section 5.02(d).
If the Property Trustee has or shall acquire any "conflicting interest" within
the meaning of (S) 310(b) of the Trust Indenture Act, the Property Trustee and
the Holders of the
31
Common Securities (as if such Holders were the obligor referred to in (S) 310(b)
of the Trust Indenture Act) shall in all respects comply with the provisions of
(S) 310(b) of the Trust Indenture Act. The Guarantee shall be deemed to be
specifically described in this Declaration for the purposes of clause (i) of the
first proviso contained in (S) 310(b) of the Trust Indenture Act.
The initial Trustee that shall serve as the Property Trustee is The
First National Bank of Chicago whose address is as set forth in Section
14.01(b).
(d) The initial Trustee that shall serve as the Delaware Trustee is
First Chicago Delaware Inc. whose address is as set forth in Section 14.01(c).
(e) Any action taken by (i) Holders of Common Securities pursuant to
this Article V or (ii) Holders of Preferred Securities pursuant to this Article
V to appoint or remove a Special Regular Trustee upon the occurrence of an
Appointment Event, shall be taken at a meeting of Holders of Common Securities
or Preferred Securities, as the case may be, convened for such purpose or by
written consent as provided in Section 12.02.
(f) No amendment may be made to this Section 5.01 which would change
any rights with respect to the number, existence or appointment and removal of
Trustees (other than any Special Regular Trustee), except with the consent of
each Holder of Common Securities.
(g) No amendment may be made to this Section 5.01 or Section
5.02(a)(ii)(B), which would change the rights of Holders of Preferred Securities
to appoint, remove or replace a Special Regular Trustee except with the consent
of each Holder of Preferred Securities.
SECTION 5.02. Appointment, Removal and Resignation of Trustees. (a)
-------------------------------------------------
Subject to Section 5.02(b), Trustees may be appointed or removed without cause
at any time:
(i) until the issuance of the Trust Securities, by written instrument
executed by the Sponsor; and
(ii) after the issuance of the Trust Securities,
32
(A) other than with respect to the Special Regular Trustee, by
vote of the Holders of a Majority in aggregate liquidation amount of
the Common Securities voting as a class; and
(B) if an Appointment Event has occurred and is continuing, one
additional Regular Trustee (the "Special Regular Trustee") may be
appointed, who shall not be an Affiliate of the Sponsor, by vote of
the Holders of a Majority in aggregate liquidation amount of the
Preferred Securities, voting as a class and such Special Regular
Trustee may only be removed (otherwise than by the operation of
Section 5.02(c)), by vote of the Holders of a Majority in aggregate
liquidation amount of the Preferred Securities voting as a class.
(b) (i) The Trustee that acts as Property Trustee shall not be
removed in accordance with Section 5.02(a) until a Successor Property
Trustee has been appointed and has accepted such appointment by written
instrument executed by such Successor Property Trustee and delivered to the
Regular Trustees, the Sponsor and the Property Trustee being removed; and
(ii) the Trustee that acts as Delaware Trustee shall not be removed in
accordance with Section 5.02(a) until a successor Trustee possessing the
qualifications to act as Delaware Trustee under Section 5.01(a)(C) (a
"Successor Delaware Trustee") has been appointed and has accepted such
appointment by written instrument executed by such Successor Delaware
Trustee and delivered to the Regular Trustees, the Sponsor and the Delaware
Trustee being removed.
(c) A Trustee appointed to office shall hold office until such
Trustee's successor shall have been appointed or until such Trustee's death,
removal or resignation, provided that a Special Regular Trustee shall only hold
--------
office while an Appointment Event is continuing and shall cease to hold office
immediately after the Appointment Event pursuant to which the Special Regular
Trustee was appointed and all other Appointment Events cease to be continuing.
(d) Any Trustee may resign from office (without need for prior or
subsequent accounting) by an instrument (a
33
"Resignation Request") in writing signed by the Trustee and delivered to the
Sponsor and the Trust, which resignation shall take effect upon such delivery or
upon such later date as is specified therein; provided, however, that:
-------- -------
(i) no such resignation of the Trustee that acts as the Property
Trustee shall be effective until a Successor Property Trustee possessing
the qualifications to act as Property Trustee under Section 5.01(c) has
been appointed and has accepted such appointment by instrument executed by
such Successor Property Trustee and delivered to the Trust, the Sponsor and
the resigning Property Trustee;
(ii) no such resignation of the Trustee that acts as the Delaware
Trustee shall be effective until a Successor Delaware Trustee has been
appointed and has accepted such appointment by instrument executed by such
Successor Delaware Trustee and delivered to the Trust, the Sponsor and the
resigning Delaware Trustee; and
(iii) no such resignation of a Special Regular Trustee shall be
effective until the 60th day following delivery of the Resignation Request
to the Sponsor and the Trust or such later date specified in the
Resignation Request during which period the Holders of the Preferred
Securities shall have the right to appoint a successor Special Regular
Trustee as provided in this Article V.
(e) If no Successor Property Trustee or Successor Delaware Trustee
shall have been appointed and accepted appointment as provided in this Section
5.02 within 60 days after delivery to the Sponsor and the Trust of a Resignation
Request, the resigning Property Trustee or Delaware Trustee, as the case may be,
may petition any court of competent jurisdiction for appointment of a Successor
Property Trustee or Successor Delaware Trustee. Such court may thereupon after
such notice, if any, as it may deem proper and prescribe, appoint a Successor
Property Trustee or Successor Delaware Trustee, as the case may be.
SECTION 5.03. Vacancies Among Trustees. If a Trustee ceases to hold
-------------------------
office for any reason and the number of Trustees is not reduced pursuant to
Section 5.01 or if the number of Trustees is increased pursuant to Section 5.01,
a vacancy shall occur. A resolution certifying the existence of such vacancy by
a majority of the Regular Trustees shall be conclusive evidence of the
34
existence of such vacancy. The vacancy shall be filled with a Trustee appointed
in accordance with the requirements of this Article V.
SECTION 5.04. Effect of Vacancies. The death, resignation,
--------------------
retirement, removal, bankruptcy, dissolution, liquidation, incompetence or
incapacity to perform the duties of a Trustee, or any one of them, shall not
operate to annul the Trust. Whenever a vacancy in the number of Regular
Trustees shall occur until such vacancy is filled as provided in this Article V,
the Regular Trustees in office, regardless of their number, shall have all the
powers granted to the Regular Trustees and shall discharge all the duties
imposed upon the Regular Trustees by this Declaration.
SECTION 5.05. Meetings. Meetings of the Regular Trustees shall be
---------
held from time to time upon the call of any Trustee. Regular meetings of the
Regular Trustees may be held at a time and place fixed by resolution of the
Regular Trustees. Notice of any in-person meeting of the Regular Trustees shall
be hand-delivered or otherwise delivered in writing (including by facsimile) not
less than 24 hours before such meeting. Notice of any telephonic meeting of the
Regular Trustees or any committee thereof shall be hand-delivered or otherwise
delivered in writing (including by facsimile) not less than 24 hours before such
meeting. Notices shall contain a brief statement of the time, place and
anticipated purposes of the meeting. The presence (whether in person or by
telephone) of a Regular Trustee at a meeting shall constitute a waiver of notice
of such meeting except where a Regular Trustee attends a meeting for the express
purpose of objecting to the transaction of any activity on the ground that the
meeting has not been lawfully called or convened. Unless provided otherwise in
this Declaration, any action of the Regular Trustees may be taken at a meeting
by vote of a majority of the Regular Trustees present (whether in person or by
telephone) and eligible to vote with respect to such matter, provided that a
Quorum is present, or without a meeting by the unanimous written consent of the
Regular Trustees.
SECTION 5.06. Delegation of Power. (a) Any Regular Trustee may, by
--------------------
power of attorney consistent with applicable law, delegate to any other natural
person over the age of 21 his or her power for the purpose of executing
35
any documents contemplated in Section 3.11, including any registration statement
or amendment thereto or other document or schedule filed with the Commission, or
making any other governmental filing.
(b) The Regular Trustees shall have power to delegate from time to
time to such of their number or to officers of the Trust the doing of such
things and the execution of such instruments either in the name of the Trust or
the names of the Regular Trustees or otherwise as the Regular Trustees may deem
expedient, to the extent such delegation is not prohibited by applicable law or
contrary to the provisions of the Trust, as set forth herein.
ARTICLE VI
Payments
--------
SECTION 6.01. Payments. Holders shall receive periodic
---------
distributions, redemption payments and liquidation distributions in accordance
with the terms of the Trust Securities ("Payments"). Payments shall be made to
the Holders of Preferred Securities and Common Securities in accordance with the
terms of the Trust Securities as set forth in Exhibits B and C hereto. If and
to the extent that Time Warner makes a payment of interest or principal on the
Subordinated Debentures held by the Property Trustee (the amount of any such
payment being a "Payment Amount"), the Property Trustee shall and is directed to
promptly make a Distribution of the Payment Amount to Holders in accordance with
the terms of the Trust Securities as set forth in Exhibits B and C hereto.
ARTICLE VII
Issuance of Trust Securities
----------------------------
SECTION 7.01. General Provisions Regarding Trust Securities. (a)
----------------------------------------------
The Regular Trustees shall issue on behalf of the Trust securities in fully
registered form representing undivided beneficial interests in the assets of the
Trust in accordance with Section 7.01(b).
(b) The Regular Trustees shall issue on behalf of the Trust one class
of preferred securities representing undivided beneficial interests in the
assets of the Trust
36
having such terms as are set forth in Exhibit B (the "Preferred Securities"),
which terms are incorporated by reference in, and made a part of, this
Declaration as if specifically set forth herein, and one class of common
securities representing undivided beneficial interests in the assets of the
Trust having such terms as are set forth in Exhibit C (the "Common Securities"),
which terms are incorporated by reference in, and made a part of, this
Declaration as if specifically set forth herein. The Trust shall issue no
securities or other interests in the assets of the Trust other than the
Preferred Securities and the Common Securities.
(c) The Certificates shall be signed on behalf of the Trust by the
Regular Trustees (or, if there are more than two Regular Trustees, by any two of
the Regular Trustees). Such signatures may be the manual or facsimile
signatures of the present or any future Regular Trustee. Typographical and
other minor errors or defects in any such reproduction of any such signature
shall not affect the validity of any Certificate. In case any Regular Trustee
of the Trust who shall have signed any of the Certificates shall cease to be a
Regular Trustee before the Certificate so signed shall be delivered by the
Trust, such Certificate nevertheless may be delivered as though the person who
signed such Certificate had not ceased to be a Regular Trustee; and any
Certificate may be signed on behalf of the Trust by such persons as, at the
actual date of the execution of such Certificate, shall be the Regular Trustees
of the Trust, although at the date of the execution and delivery of the
Declaration any such person was not such a Regular Trustee. Certificates shall
be printed, lithographed or engraved or may be produced in any other manner as
is reasonably acceptable to the Regular Trustees, as evidenced by their
execution thereof, and may have such letters, numbers or other marks of
identification or designation and such legends or endorsements as the Regular
Trustees may deem appropriate, or as may be required to comply with any law or
with any rule or regulation made pursuant thereto or with any rule or regulation
of any stock exchange on which the Trust Securities may be listed or of any
Clearing Agency in which the Trust Securities have been accepted for trading, or
to conform to usage.
(d) The consideration received by the Trust for the issuance of the
Trust Securities shall constitute a contribution to the capital of the Trust and
shall not constitute a loan to the Trust.
37
(e) Upon issuance of the Trust Securities as provided in this
Declaration, the Trust Securities so issued shall be deemed to be validly
issued, fully paid and nonassessable.
(f) Every Person, by virtue of having become a Holder or a Preferred
Security Beneficial Owner in accordance with the terms of this Declaration,
shall be deemed to have expressly assented and agreed to the terms of and shall
be bound by this Declaration.
(g) Upon issuance of the Trust Securities as provided in this
Declaration, the Regular Trustees on behalf of the Trust shall return to Time
Warner the $10 constituting initial trust assets as set forth in the Original
Declaration.
ARTICLE VIII
Termination of Trust
--------------------
SECTION 8.01. Termination of Trust. This Declaration and the Trust
---------------------
shall terminate and be of no further force or effect upon the earliest of:
(a) when all the Trust Securities shall have been called for
redemption and the amounts necessary for redemption thereof, including any
accrued and unpaid Payments thereon to the applicable date of redemption,
shall have been paid to the Holders of the Trust Securities in accordance
with the terms of the Trust Securities;
(b) when all the Subordinated Debentures shall have been distributed
to the Holders of Trust Securities in exchange for all the Trust Securities
in accordance with the terms of the Trust Securities;
(c) upon the expiration of the term of the Trust as set forth in
Section 3.15; or
(d) if Time Warner shall direct the Trustees to terminate the Trust,
provided that Time Warner shall be the holder at such time of all the
--------
outstanding Preferred Securities;
38
and a certificate of cancellation is filed by the Trustees with the Secretary of
State of the State of Delaware. The Trustees shall so file such a certificate
as soon as practicable after the occurrence of an event referred to in this
Article VIII.
The provisions of Section 3.10 and Article X shall survive the
termination of the Trust.
ARTICLE IX
Transfer of Interests
---------------------
SECTION 9.01. Transfer of Trust Securities. (a) Trust Securities
----------------------------
may only be transferred, in whole or in part, in accordance with the terms and
conditions set forth in this Declaration. Any transfer or purported transfer of
any Trust Security not made in accordance with this Declaration shall be null
and void.
(b) Subject to this Article IX, Preferred Securities shall be freely
transferable.
(c) Subject to this Article IX, Time Warner and any Related Party may
only transfer Common Securities to Time Warner or a Related Party; provided that
--------
any such transfer shall be subject to the condition that the transferor shall
have obtained (i) either a ruling from the Internal Revenue Service or an
unqualified written opinion addressed to the Trust and delivered to the Trustees
of nationally recognized independent tax counsel experienced in such matters to
the effect that such transfer will not (A) cause the Trust to be treated as
issuing a class of interests in the Trust differing from the class of interests
represented by the Common Securities originally issued to Time Warner, (B)
result in the Trust acquiring or disposing of, or being deemed to have acquired
or disposed of, an asset or (C) result in or cause the Trust to be treated as an
association taxable as a corporation or partnership for United States Federal
income tax purposes or as anything other than a grantor trust for United States
Federal income tax purposes and (ii) an unqualified written opinion addressed to
the Trust and delivered to the Trustees of a nationally recognized independent
counsel experienced in such matters that such transfer will not cause the Trust
to be an Investment Company or controlled by an Investment Company.
39
SECTION 9.02. Transfer of Certificates. The Regular Trustees shall
-------------------------
provide for the registration of Certificates and of transfers of Certificates,
which will be effected without charge but only upon payment (with such indemnity
as the Regular Trustees may require) in respect of any tax or other government
charges which may be imposed in relation to such transfers. Upon surrender for
registration of transfer of any Certificate, the Regular Trustees shall cause
one or more new Certificates to be issued in the name of the designated
transferee or transferees. Every Certificate surrendered for registration of
transfer shall be accompanied by a written instrument of transfer in form
satisfactory to the Regular Trustees duly executed by the Holder or such
Holder's attorney duly authorized in writing. Each Certificate surrendered for
registration of transfer shall be canceled by the Regular Trustees. A
transferee of a Certificate shall be entitled to the rights and subject to the
obligations of a Holder hereunder upon the receipt by such transferee of a
Certificate. By acceptance of a Certificate, each transferee shall be deemed to
have agreed to be bound by this Declaration.
SECTION 9.03. Deemed Security Holders. The Trustees may treat the
------------------------
Person in whose name any Certificate shall be registered on the books and
records of the Trust as the sole holder of such Certificate and of the Trust
Securities represented by such Certificate for purposes of receiving Payments
and for all other purposes whatsoever and, accordingly, shall not be bound to
recognize any equitable or other claim to or interest in such Certificate or in
the Trust Securities represented by such Certificate on the part of any Person,
whether or not the Trustees shall have actual or other notice thereof.
SECTION 9.04. Book-Entry Interests. The Preferred Securities
---------------------
Certificates, on original issuance, will be issued in fully registered form.
With respect to any Certificates registered on the books and records of the
Trust in the name of a Clearing Agency or the nominee of a Clearing Agency:
(a) the Trust and the Trustees shall be entitled to deal with the
Clearing Agency for all purposes of this Declaration (including the making
of Payments on such Certificates and receiving approvals, votes or consents
hereunder) as the Preferred Security Holder and the sole holder of such
Certificates and, except as
40
set forth herein, shall have no obligation to the Preferred Security
Beneficial Owners;
(b) to the extent that the provisions of this Section 9.04 conflict
with any other provisions of this Declaration, the provisions of this
Section 9.04 shall control; and
(c) the rights of the Preferred Security Beneficial Owners shall be
exercised only through the Clearing Agency and shall be limited to those
established by law and agreements between such Preferred Security
Beneficial Owners and the Clearing Agency and/or the Clearing Agency
Participants. The Clearing Agency will make book-entry transfers among
Clearing Agency Participants and receive and transmit Payments on such
Certificates to such Clearing Agency Participants.
SECTION 9.05. Notices to Holders of Certificates. Whenever a notice
-----------------------------------
or other communication to the Holders is required to be given under this
Declaration, the relevant Trustees shall give such notices and communications to
the Holders and, with respect to any Preferred Security Certificate registered
in the name of a Clearing Agency or the nominee of a Clearing Agency, the
Trustees shall, except as set forth herein with respect to the Property Trustee,
have no obligations to the Preferred Security Beneficial Owners.
SECTION 9.06. Appointment of Successor Clearing Agency. If any
-----------------------------------------
Clearing Agency elects to discontinue its services as securities depositary with
respect to the Preferred Securities, the Regular Trustees may, in their sole
discretion, appoint a successor Clearing Agency with respect to the Preferred
Securities.
SECTION 9.07. Definitive Preferred Securities Certificates. If (a) a
---------------------------------------------
Clearing Agency elects to discontinue its services as securities depositary with
respect to the Preferred Securities and a successor Clearing Agency is not
appointed within 90 days after such discontinuance pursuant to Section 9.06 or
(b) the Regular Trustees elect after consultation with the Sponsor to terminate
the book-entry system through the Clearing Agency with respect to the Preferred
Securities, then upon surrender of the Certificates representing the Book Entry
Interests with respect to the Preferred Securities by the
41
Clearing Agency, accompanied by registration instructions, the Regular Trustees
shall cause definitive Preferred Security Certificates to be delivered to
Preferred Security Beneficial Owners in accordance with the instructions of the
Clearing Agency. Neither the Trustees nor the Trust shall be liable for any
delay in delivery of such instructions and each of them may conclusively rely
on, and shall be protected in relying on, such instructions.
SECTION 9.08. Mutilated, Destroyed, Lost or Stolen Certificates. If
--------------------------------------------------
(a) any mutilated Certificates should be surrendered to the Regular Trustees or
if the Regular Trustees shall receive evidence to their satisfaction of the
destruction, loss or theft of any Certificate and (b) there shall be delivered
to the Regular Trustees such security or indemnity as may be required by them to
keep each of them harmless, then in the absence of notice that such Certificate
shall have been acquired by a bona fide purchaser, any two Regular Trustees on
behalf of the Trust shall execute and deliver, in exchange for or in lieu of any
such mutilated, destroyed, lost or stolen Certificate, a new Certificate of like
denomination. In connection with the issuance of any new Certificate under this
Section 9.08, the Regular Trustees may require the payment of a sum sufficient
to cover any tax or other governmental charge that may be imposed in connection
therewith. The Property Trustee, as registrar and paying agent for the Regular
Trustees in accordance with Section 3.06(j), shall have the right and obligation
to perform any task of the Regular Trustees under this Section 9.08. Any
duplicate Certificate issued pursuant to this Section shall constitute
conclusive evidence of an ownership interest in the relevant securities, as if
originally issued, whether or not the lost, stolen or destroyed Certificate
shall be found at any time.
ARTICLE X
Limitation of Liability; Indemnification
----------------------------------------
SECTION 10.01. Liability. (a) Except as expressly set forth in this
----------
Declaration, the Guarantee and the terms of the Trust Securities as set forth in
Exhibits B and C hereto, the Sponsor:
(i) shall not be personally liable for the return of any portion of
the capital contributions of the
42
Holders of the Trust Securities, which shall be made solely from assets of
the Trust; and
(ii) shall not be required to pay to the Trust or to any Holder of
Trust Securities any deficit upon dissolution of the Trust or otherwise.
(b) Pursuant to Section 3803(a) of the Business Trust Act, the
Holders of the Trust Securities shall be entitled to the same limitation of
personal liability extended to stockholders of private corporations for profit
organized under the General Corporation Law of the State of Delaware.
SECTION 10.02. Exculpation. (a) No Indemnified Person shall be
------------
liable, responsible or accountable in damages or otherwise to the Trust or any
Covered Person for any loss, damage or claim incurred by reason of any act or
omission performed or omitted by such Indemnified Person in good faith on behalf
of the Trust and in a manner such Indemnified Person reasonably believed to be
within the scope of the authority conferred on such Indemnified Person by this
Declaration or by law, except that an Indemnified Person shall be liable for any
such loss, damage or claim incurred by reason of such Indemnified Person's gross
negligence (or, in the case of the Property Trustee, except as otherwise set
forth in Section 3.10 hereof) or wilful misconduct with respect to such acts or
omissions.
(b) An Indemnified Person shall be fully protected in relying in good
faith upon the records of the Trust and upon such information, opinions, reports
or statements presented to the Trust by any Person as to matters the Indemnified
Person reasonably believes are within such other Person's professional or expert
competence and who has been selected with reasonable care by or on behalf of the
Trust, including information, opinions, reports or statements as to the value
and amount of the assets, liabilities, profits, losses or any other facts
pertinent to the existence and amount of assets from which Payments to Holders
of Trust Securities might properly be paid.
SECTION 10.03. Indemnification. (a) To the fullest extent permitted
----------------
by applicable law, the Sponsor shall indemnify and hold harmless each
Indemnified Person from and against any loss, damage or claim incurred by such
Indemnified Person by reason of any act or omission
43
performed or omitted by such Indemnified Person in good faith on behalf of the
Trust and in a manner such Indemnified Person reasonably believed to be within
the scope of authority conferred on such Indemnified Person by this Declaration,
except that no Indemnified Person shall be entitled to be indemnified in respect
of any loss, damage or claim incurred by such Indemnified Person by reason of
gross negligence (or, in the case of the Property Trustee, except as otherwise
set forth in Section 3.10 hereof) or wilful misconduct with respect to such acts
or omissions.
(b) To the fullest extent permitted by applicable law, expenses
(including reasonable legal fees) incurred by an Indemnified Person in defending
any claim, demand, action, suit or proceeding shall, from time to time, be
advanced by the Sponsor prior to the final disposition of such claim, demand,
action, suit or proceeding upon receipt by the Sponsor of an undertaking by or
on behalf of the Indemnified Person to repay such amount if it shall be
determined that the Indemnified Person is not entitled to be indemnified as
authorized in Section 10.03(a).
SECTION 10.04. Outside Businesses. Any Covered Person, the Sponsor,
-------------------
the Delaware Trustee and the Property Trustee may engage in or possess an
interest in other business ventures of any nature or description, independently
or with others, similar or dissimilar to the business of the Trust, and the
Trust and the Holders of Trust Securities shall have no rights by virtue of this
Declaration in and to such independent ventures or the income or profits derived
therefrom and the pursuit of any such venture, even if competitive with the
business of the Trust, shall not be deemed wrongful or improper. No Covered
Person, the Sponsor, the Delaware Trustee or the Property Trustee shall be
obligated to present any particular investment or other opportunity to the Trust
even if such opportunity is of a character that, if presented to the Trust,
could be taken by the Trust, and any Covered Person, the Sponsor, the Delaware
Trustee and the Property Trustee shall have the right to take for its own
account (individually or as a partner or fiduciary) or to recommend to others
any such particular investment or other opportunity. Any Covered Person, the
Delaware Trustee and the Property Trustee may engage or be interested in any
financial or other transaction with the Sponsor or any Affiliate of the Sponsor,
or may act as depositary for, trustee or agent for, or act on any committee or
body of
44
holders of securities or other obligations of the Sponsor or its Affiliates.
ARTICLE XI
Accounting
----------
SECTION 11.01. Fiscal Year. The fiscal year ("Fiscal Year") of the
-----------
Trust shall be the calendar year or such other year as is required by the Code.
SECTION 11.02. Certain Accounting Matters. (a) At all times during
--------------------------
the existence of the Trust, the Regular Trustees shall keep, or cause to be
kept, full books of account, records and supporting documents, which shall
reflect in reasonable detail each transaction of the Trust. The books of
account shall be maintained on the accrual method of accounting, in accordance
with generally accepted accounting principles, consistently applied. The Trust
shall use the accrual method of accounting for United States Federal income tax
purposes. The books and records of the Trust, together with a copy of this
Declaration and a certified copy of the Certificate of Trust, or any amendment
thereto, shall at all times be maintained at the principal office of the Trust
and shall be open for inspection and examination by any Holder or its duly
authorized representative for any purpose reasonably related to its interest in
the Trust during normal business hours.
(b) The Regular Trustees shall, as soon as available after the end of
each Fiscal Year of the Trust, cause to be prepared and mailed to each Holder of
Trust Securities unaudited financial statements of the Trust for such Fiscal
Year, prepared in accordance with generally accepted accounting principles;
provided that, if the Trust is required to comply with the periodic reporting
- --------
requirements of Section 13(a) or 15(d) of the Exchange Act, such financial
statements for such Fiscal Year shall be examined and reported on by a firm of
independent certified public accountants selected by the Regular Trustees (which
firm may be the firm used by the Sponsor).
(c) The Regular Trustees shall cause to be prepared and mailed to each
Holder of Trust Securities an annual United States Federal income tax
information statement, on such form as is required by the Code, containing such
information with regard to the Trust
45
Securities held by each Holder as is required by the Code and the Treasury
Regulations. Notwithstanding any right under the Code to deliver any such
statement at a later date, the Regular Trustees shall endeavor to deliver all
such statements within 30 days after the end of each Fiscal Year of the Trust.
(d) The Regular Trustees shall cause to be prepared and filed with the
appropriate taxing authority an annual United States Federal income tax return,
on such form as is required by the Code, and any other annual income tax returns
required to be filed by the Regular Trustees on behalf of the Trust with any
state or local taxing authority, such returns to be filed as soon as practicable
after the end of each Fiscal Year of the Trust.
SECTION 11.03. Banking. The Trust may maintain one or more bank
--------
accounts in the name and for the sole benefit of the Trust; provided, however,
-------- -------
that all payments of funds in respect of the Subordinated Debentures held by the
Property Trustee shall be made directly to the Property Account and no other
funds from the Trust shall be deposited in the Property Account. The sole
signatories for such accounts shall be designated by the Regular Trustees;
provided, however, that the Property Trustee shall designate the sole
- -------- -------
signatories for the Property Account.
SECTION 11.04. Withholding. The Trust and the Trustees shall comply
------------
with all withholding requirements under United States Federal, state and local
law. The Trust shall request, and the Holders shall provide to the Trust, such
forms or certificates as are necessary to establish an exemption from
withholding with respect to each Holder and any representations and forms as
shall reasonably be requested by the Trust to assist it in determining the
extent of, and in fulfilling, its withholding obligations. The Trust shall file
required forms with applicable jurisdictions and, unless an exemption from
withholding is properly established by a Holder, shall remit amounts withheld
with respect to the Holder to the applicable jurisdiction. To the extent that
the Trust is required to withhold and pay over any amounts to any authority with
respect to distributions or allocations to any Holder, the amount withheld shall
be deemed to be a distribution in the amount of the withholding to the Holder.
In the event of any claimed overwithholding, Holders shall be limited to an
action against the applicable jurisdiction. If the amount to be withheld was
not withheld from a Distribution, the
46
Trust may reduce subsequent Payments by the amount of such withholding.
ARTICLE XII
Amendments and Meetings
-----------------------
SECTION 12.01. Amendments. (a) Except as otherwise provided in this
-----------
Declaration or by any applicable terms of the Trust Securities, this Declaration
may be amended by, and only by, a written instrument executed by a majority of
the Regular Trustees; provided, however, that (i) no amendment to this
-------- -------
Declaration shall be made unless the Regular Trustees shall have obtained (A) a
written unqualified opinion of nationally recognized independent tax counsel
experienced in such matters to the effect that such amendment will not result in
the Trust being treated as an association taxable as a corporation or a
partnership for United States Federal income tax purposes and that, following
such action, each holder of Trust Securities will be treated as owning an
undivided beneficial interest in the Subordinated Debentures and (B) a written
unqualified opinion of nationally recognized independent counsel experienced in
such matters to the effect that such amendment will not cause the Trust to be an
Investment Company that is required to be registered under the Investment
Company Act, (ii) at such time after the Trust has issued any Trust Securities
which remain outstanding, any amendment which would adversely affect the rights,
privileges or preferences of any Holder of Trust Securities may be effected only
with such additional requirements as may be set forth in the terms of such Trust
Securities, (iii) Section 4.02, Section 9.01(c) and this Section 12.01 shall not
be amended without the consent of all the Holders of the Trust Securities, (iv)
no amendment which adversely affects the rights, powers and privileges of the
Property Trustee shall be made without the consent of the Property Trustee, (v)
Article IV shall not be amended without the consent of the Sponsor, (vi) the
rights of Holders of Common Securities under Article V to increase or decrease
the number of, and to appoint, replace or remove, Trustees (other than a Special
Regular Trustee) shall not be amended without the consent of each Holder of
Common Securities and (vii) the rights of Holders of Preferred Securities to
appoint or remove a Special Regular Trustee shall not be amended without the
consent of each Holder of Preferred Securities.
47
(b) Subject to Section 12.01(a)(i), this Declaration may be amended
without the consent of the Holders of the Trust Securities to (i) cure any
ambiguity, (ii) correct or supplement any provision in this Declaration that may
be defective or inconsistent with any other provision of this Declaration, (iii)
add to the covenants, restrictions or obligations of the Sponsor and (iv)
conform to any changes in Rule 3a-5 or any change in interpretation or
application of Rule 3a-5 by the Commission, which amendment does not adversely
affect the rights, preferences or privileges of the Holders.
SECTION 12.02. Meetings of the Holders of Trust Securities; Action by
------------------------------------------------------
Written Consent. (a) Meetings of the Holders of Preferred Securities and/or
- ----------------
Common Securities may be called at any time by the Regular Trustees (or as
provided in the terms of the Trust Securities) to consider and act on any matter
on which Holders of such class of Trust Securities are entitled to act under the
terms of this Declaration, the terms of the Trust Securities or the rules of any
stock exchange or other self-regulatory organization (including the Nasdaq Stock
Market) on which the Preferred Securities are listed or admitted for trading.
The Regular Trustees shall call a meeting of Holders of Preferred Securities or
Common Securities if directed to do so by Holders of at least 10% in aggregate
liquidation amount of such class of Trust Securities. Such direction shall be
given by delivering to the Regular Trustees one or more written notifications
stating that the signing Holders of Trust Securities wish to call a meeting and
indicating the general or specific purpose for which the meeting is to be
called. Any Holders of Trust Securities calling a meeting shall specify in
writing the Certificates held by the Holders of Trust Securities exercising the
right to call a meeting and only those specified Certificates shall be counted
for purposes of determining whether the required percentage set forth in the
second sentence of this paragraph has been met.
(b) Except to the extent otherwise provided in the terms of the Trust
Securities, the following provision shall apply to meetings of Holders of Trust
Securities:
(i) notice of any such meeting shall be given by mail to all the
Holders of Trust Securities having a right to vote thereat not less than
seven days nor more than 60 days prior to the date of such meeting.
Whenever a vote, consent or approval of the Holders of
48
securities is permitted or required under this Declaration or the rules of
any stock exchange or other self-regulatory organization (including the
Nasdaq Stock Market) on which the Preferred Securities are listed or
admitted for trading, such vote, consent or approval may be given at a
meeting of the Holders of Trust Securities. Any action that may be taken
at a meeting of the Holders of Trust Securities may be taken without a
meeting if a consent in writing setting forth the action so taken is signed
by Holders of Trust Securities owning not less than the minimum aggregate
liquidation amount of Trust Securities that would be necessary to authorize
or take such action at a meeting at which all Holders of Trust Securities
having a right to vote thereon were present and voting. Prompt notice of
the taking of action without a meeting shall be given to the Holders of
Trust Securities entitled to vote who have not consented in writing. The
Regular Trustees may specify that any written ballot submitted to the
Holders of Trust Securities for the purpose of taking any action without a
meeting shall be returned to the Trust within the time specified by the
Regular Trustees;
(ii) each Holder of a Trust Security may authorize any Person to act
for it by proxy on all matters in which a Holder of a Trust Security is
entitled to participate, including waiving notice of any meeting or voting
or participating at a meeting. No proxy shall be valid after the
expiration of 11 months from the date thereof unless otherwise provided in
the proxy. Every proxy shall be revocable at the pleasure of the Holder of
the Trust Security executing it. Except as otherwise provided herein or in
the terms of the Trust Securities, all matters relating to the giving,
voting or validity of proxies shall be governed by the General Corporation
Law of the State of Delaware relating to proxies, and judicial
interpretations thereunder, as if the Trust were a Delaware corporation and
the Holders of the Trust Securities were stockholders of a Delaware
corporation;
(iii) each meeting of the Holders of the Trust Securities shall be
conducted by the Regular Trustees or by such other Person that the Regular
Trustees may designate; and
49
(iv) unless otherwise provided in the Business Trust Act, this
Declaration or the rules of any stock exchange or other self-regulatory
organization (including the Nasdaq Stock Market) on which the Preferred
Securities are then listed or admitted for trading, the Regular Trustees,
in their sole discretion, shall establish all other provisions relating to
meetings of Holders of Trust Securities, including notice of the time,
place or purpose of any meeting at which any matter is to be voted on by
any Holders of Trust Securities, waiver of any such notice, action by
consent without a meeting, the establishment of a record date, quorum
requirements, voting in person or by proxy or any other matter with respect
to the exercise of any such right to vote.
ARTICLE XIII
Representations and Warranties of Property Trustee
--------------------------------------------------
and Delaware Trustee
--------------------
SECTION 13.01. Representations and Warranties of Property Trustee and
------------------------------------------------------
Delaware Trustee. (a) The Trustee that acts as initial Property Trustee
- -----------------
represents and warrants to the Trust and to the Sponsor at the date of this
Declaration, and each Successor Property Trustee represents and warrants to the
Trust and the Sponsor at the time of the Successor Property Trustee's acceptance
of its appointment as Property Trustee that:
(i) The Property Trustee is a banking association with trust powers,
duly organized, validly existing and in good standing under the laws of the
United States, or any State therein, with trust power and authority to
execute and deliver, and to carry out and perform its obligations under the
terms of, this Declaration.
(ii) The execution, delivery and performance by the Property Trustee
of this Declaration has been duly authorized by all necessary corporate
action on the part of the Property Trustee. The Declaration has been duly
executed and delivered by the Property Trustee and constitutes a legal,
valid and binding obligation of the Property Trustee, enforceable against
it in accordance with its terms, subject to applicable bankruptcy,
reorganization, moratorium, insolvency and other similar laws affecting
creditors' rights
50
generally and to general principles of equity and the discretion of the
court (regardless of whether the enforcement of such remedies is considered
in a proceeding in equity or at law).
(iii) The execution, delivery and performance of this Declaration by
the Property Trustee does not conflict with or constitute a breach of any
of the terms or provisions of or constitute a default under (i) the
Articles of Association or By-laws of the Property Trustee or any other
agreement or instrument to which the Property Trustee is a party or by
which it may be bound, (ii) any existing applicable law, rule or regulation
or (iii) any judgment, order or decree of any government, governmental
instrumentality or court having jurisdiction over the Property Trustee.
(iv) No consent, approval or authorization of, or registration with
or notice to, any banking authority which supervises or regulates the
Property Trustee is required for the execution, delivery or performance by
the Property Trustee of this Declaration.
(v) The Property Trustee satisfies the qualifications set forth in
Section 5.01(c).
(b) The Trustee which acts as initial Delaware Trustee represents and
warrants to the Trust and the Sponsor at the date of this Declaration, and each
Successor Delaware Trustee represents and warrants to the Trust and the Sponsor
at the time of the Successor Delaware Trustee's acceptance of its appointment as
Delaware Trustee, that:
(i) it satisfies the qualifications set forth in Section 5.01(a)(C);
(ii) it has been authorized to perform its obligations under the
Certificate of Trust and the Declaration; and
(iii) the Declaration under Delaware law constitutes a legal, valid
and binding obligation of the Delaware Trustee, enforceable against it in
accordance with its terms, subject to applicable bankruptcy,
reorganization, moratorium, insolvency, and other similar laws affecting
creditors' rights generally and to general principles of equity and the
discretion of the court (regardless of whether the
51
enforcement of such remedies is considered in a proceeding in equity or at
law).
ARTICLE XIV
Miscellaneous
-------------
SECTION 14.01. Notices. All notices provided for in this Declaration
--------
shall be in writing, duly signed by the party giving such notice, and shall be
delivered, telecopied or mailed by first class mail, as follows:
(a) if given to the Trust, in care of the Regular Trustees at the
Trust's mailing address set forth below (or such other address as the
Regular Trustees on behalf of the Trust may give notice of to the Holders
of the Trust Securities):
Time Warner Capital [I]
In care of Time Warner Inc.
75 Rockefeller Plaza
New York, NY 10019
Attention of John A. LaBarca,
Philip R. Lochner, Jr. and
Thomas W. McEnerney,
Trustees
Facsimile No.: (212) 333-3987
(b) if given to the Property Trustee, at the mailing address of the
Property Trustee set forth below (or such other address as the Property
Trustee may give notice of to the Holders of the Trust Securities):
The First National Bank of Chicago
Corporate Trust Services Division
One First National Plaza, Suite 0126
Chicago, Illinois 60670-0126
Attention of: Melissa G. Weisman
Facsimile No.: (212) 373-1383
52
(c) if given to the Delaware Trustee, at the mailing address of the
Delaware Trustee set forth below (or such other address as the Delaware
Trustee may give notice of to the Holders of the Trust Securities):
First Chicago Delaware Inc.
1201 Market Street
Wilmington, Delaware 19801
Facsimile No.: (302) 594-8622
(d) if given to the Holder of the Common Securities, at the mailing
address of the Sponsor set forth below (or such other address as the Holder
of the Common Securities may give notice of to the Trust):
Time Warner Inc.
75 Rockefeller Center
New York, NY 10019
Attention of General Counsel
Facsimile No.: (212) 956-7281
(e) if given to any other Holder, at the address set forth on the
books and records of the Trust.
A copy of any notice to the Property Trustee or the Delaware Trustee
shall also be sent to the Trust. Except as otherwise provided in the terms of
the Trust Securities, all notices shall be deemed to have been given when
received in person, telecopied with receipt confirmed or three Business Days
after mailed by first class mail, postage prepaid, except that, if a notice or
other document is refused delivery or cannot be delivered because of a changed
address of which no notice was given, such notice or other document shall be
deemed to have been delivered on the date of such refusal or inability to
deliver.
SECTION 14.02. Undertaking for Costs. All parties to this
----------------------
Declaration agree, and each Holder of any Trust Securities by his or her
acceptance thereof shall be deemed to have agreed, that any court may in its
discretion require, in any suit for the enforcement of any right or remedy under
this Declaration or in any suit against the Property Trustee for any action
taken or omitted by it as Property Trustee, the filing by any party litigant in
such suit of an undertaking to pay the costs of such suit and
53
that such court may in its discretion assess reasonable costs, including
reasonable attorneys' fees, against any party litigant in such suit, having due
regard to the merits and good faith of the claims or defenses made by such party
litigant; but the provisions of this Section 14.02 shall not apply to any suit
instituted by the Property Trustee, to any suit instituted by any Holder or
group of Holders of Preferred Securities holding more than 10% in aggregate
liquidation amount of the outstanding Preferred Securities, or to any suit
instituted by any Holder of Preferred Securities for the enforcement of the
payment of principal or any redemption price or interest on the Subordinated
Debentures, on or after the respective due dates expressed in such Subordinated
Debentures.
SECTION 14.03. Governing Law. This Declaration and the rights of the
--------------
parties hereunder shall be governed by and interpreted in accordance with the
laws of the State of Delaware and all rights and remedies shall be governed by
such laws without regard to principles of conflict of laws.
SECTION 14.04. Headings. Headings contained in this Declaration are
---------
inserted for convenience of reference only and do not affect the interpretation
of this Declaration or any provision hereof.
SECTION 14.05. Partial Enforceability. If any provision of this
-----------------------
Declaration, or the application of such provision to any Person or circumstance,
shall be held invalid, the remainder of this Declaration, or the application of
such provision to persons or circumstances other than those to which it is held
invalid, shall not be affected thereby.
SECTION 14.06. Counterparts. This Declaration may contain more than
-------------
one counterpart of the signature pages and this Declaration may be executed by
the affixing of the signature of the Sponsor and each of the Trustees to one of
such counterpart signature pages. All such counterpart signature pages shall be
read as though one, and they shall have the same force and effect as though all
the signers had signed a single signature page.
SECTION 14.07. Intention of the Parties. (a) It is the intention of
------------------------
the parties hereto that the Trust not be classified for United States Federal
income tax purposes as an association taxable as a corporation or partnership
but that the Trust be treated as a grantor trust for United
54
States Federal income tax purposes. The provisions of this Declaration shall be
interpreted to further this intention of the parties.
(b) The Trust, the Trustees, Time Warner and each Holder of a Trust
Security, by his or her acceptance thereof, agree to treat the Subordinated
Debentures as debt instruments for United States Federal, state and local income
and franchise tax purposes and shall not take any contrary position before any
taxing authority or on any tax return.
SECTION 14.08. Successors and Assigns. Whenever in this Declaration
-----------------------
any of the parties hereto is named or referred to, the successors and assigns of
such party shall be deemed to be included, and all covenants and agreements
55
in this Declaration by the Sponsor and the Trustees shall bind and inure to the
benefit of their respective successors and assigns, whether so expressed.
IN WITNESS WHEREOF, the undersigned has caused these presents to be
executed as of the day and year first above written.
TIME WARNER INC.,
as Sponsor,
by
__________________________
Name:
Title:
by
__________________________
John A. LaBarca,
as Trustee
by
__________________________
Philip R. Lochner, Jr.,
as Trustee
by
__________________________
Thomas W. McEnerney,
as Trustee
56
THE FIRST NATIONAL BANK OF
CHICAGO, as Trustee,
by
__________________________
Name: Melissa G. Weisman
Title: Assistant Vice
President
FIRST CHICAGO DELAWARE INC.,
as Delaware Trustee,
by
__________________________
Name: Melissa G. Weisman
Title: Assistant Vice
President
CERTIFICATE OF TRUST OF TIME WARNER CAPITAL I
This Certificate of Trust of Time Warner Capital I (the "Trust"), dated
August 2, 1995, is being duly executed and filed by the undersigned, as
trustee, to form a business trust under the Delaware Business Trust Act (12
Del. C. Section 3801 et seq.).
1. NAME. The name of the business trust formed hereby is Time Warner Capital
I.
2. DELAWARE TRUSTEE. The name and business address of the trustee of the
Trust with a principal place of business in the State of Delaware is First
Chicago Delaware Inc., 1201 Market Street, Suite 1401, Wilmington, Delaware
19801.
3. EFFECTIVE DATE. This Certificate of Trust shall be effective as of its
filing.
IN WITNESS WHEREOF, the undersigned, being the sole trustees of the Trust,
have executed this Certificate of Trust as of the date first above written.
THE FIRST NATIONAL BANK OF CHICAGO,
as trustee,
By ____________________________
Name:Melissa G. Weisman
Title:Assistant Vice President
FIRST CHICAGO DELAWARE INC as
Delaware Trustee
By ____________________________
Name:Melissa G. Weisman
Title:Assistant Vice President
By ____________________________
John A. LaBarca, as trustee
By ____________________________
Philip R. Lochner, Jr. as
trustee
By ____________________________
Thomas W. McEnerney, as trustee
EXHIBIT B
TERMS OF
PREFERRED SECURITIES
Pursuant to Section 7.01 of the Amended and Restated Declaration of Trust
of Time Warner Capital I (the "Trust") dated as of [ ], 1995 (as amended
from time to time, the "Declaration"), the designations, rights, privileges,
restrictions, preferences and other terms and provisions of the Preferred
Securities are set forth below (each capitalized term used but not defined
herein having the meaning set forth in the Declaration or, to the extent not
defined therein, the Guarantee Agreement dated as of [ ], 1995 (as
amended from time to time, the "Guarantee") executed by Time Warner Inc. ("Time
Warner") on behalf of the holders of the Preferred Securities):
1. Designation and Number. Preferred Securities of the Trust with an
-----------------------
aggregate liquidation amount in the assets of the Trust of
($ ) and a liquidation amount in the assets of the Trust of $25 per
Preferred Security, are hereby designated as "[ ]% Preferred Trust Securities".
The Preferred Security Certificates evidencing the Preferred Securities shall be
substantially in the form attached hereto as Annex I, with such changes and
additions thereto or deletions therefrom as may be required by ordinary usage,
custom or practice or to conform to the rules of any stock exchange on which the
Preferred Securities are listed or to the rules of any Clearing Agency in which
the Preferred Securities have been accepted for trading. The Trust will invest
the gross proceeds from the issuance of the Preferred Securities together with
the gross proceeds from the sale to Time Warner of the Common Securities in
Subordinated Debentures of Time Warner having an aggregate principal amount
equal to $ , and bearing interest at an annual percentage rate of
[ ]%, which will result in the payment of interest equal to the annual
Distribution rate on the Preferred Securities and Common Securities and having
payment and redemption provisions that correspond to the payment and redemption
provisions of the Preferred Securities and Common Securities.
2. Distributions. (a) Periodic distributions payable on each Preferred
--------------
Security will be fixed at a rate per annum of %[ ] (the "Coupon Rate") of
the aggregate liquidation amount of $25 per Preferred Security, such rate being
the rate of interest payable on the Subordinated
2
Debentures to be held by the Property Trustee. Distributions in arrears beyond
the first date such Distributions are payable (or would be payable in not for
any Extension Period (as hereinafter defined) or default by Time Warner on the
Subordinated Debentures) will bear interest thereon at the Coupon Rate (to the
extent permitted by law), compounded quarterly. The term "Distributions" as
used in these terms means such periodic cash distributions and any such interest
payable unless otherwise stated. A Distribution will be made by the Property
Trustee only to the extent that interest payments are made in respect of the
Subordinated Debentures held by the Property Trustee. The amount of
Distributions (or amounts equal to accrued and unpaid Distributions) payable for
any period will be computed (i) for any full quarterly Distribution period, on
the basis of a 360-day year of twelve 30-day months and will include the first
day but exclude the last day of such period, and (ii) for any period shorter
than a full quarterly Distribution period, on the basis of a 360-day year of
twelve 30-day months and on the basis of the actual number of days elapsed in
any such 30-day month and will include the first day but exclude the last day of
such period.
(b) Distributions on the Preferred Securities will be cumulative, will
accrue from and including [ ], 1995 and will be payable quarterly in
arrears, on [March 30, June 30, September 30 and December 30] of each year,
commencing on, but excluding [ ], 1995, except as otherwise described
below, but only if and to the extent that interest payments are made in respect
of the Subordinated Debentures held by the Property Trustee. Time Warner, as
issuer of the Subordinated Debentures, has the right under the Indenture to
defer payments of interest by extending the interest payment period from time to
time on the Subordinated Debentures for a period not exceeding 20 consecutive
quarters (each an "Extension Period") and, during such Extension Period,
Distributions will also be deferred. Despite such deferral, quarterly
Distributions will continue to accrue with interest thereon (to the extent
permitted by applicable law) at the Coupon Rate compounded quarterly during any
such Extension Period. In the event that Time Warner exercises its rights to
commence any Extension Period or an extension period or other deferral of
interest feature under any debt security of Time Warner that ranks pari passu
with the Subordinated Debentures, then (a) Time Warner shall not declare or pay
dividends on, make distributions with respect to, or redeem, purchase or
3
acquire, or make a liquidation payment with respect to, any of its capital stock
and (b) Time Warner shall not make any payment of interest, principal or
premium, if any, on or repay, repurchase or redeem the Subordinated Debentures
or any debt securities issued by Time Warner that rank pari passu with or junior
to the Subordinated Debentures; provided, however, that the foregoing
-------- -------
restrictions do not apply (i) to any interest or dividend payment by Time Warner
where the interest or dividend is paid by way of the issuance of securities that
rank junior to the Subordinated Debentures, (ii) any payments of interest,
principal or premium, if any, on, or repayment, repurchase or redemption of,
Time Warner's 4% Subordinated Notes due December 23, 1995 and (iii) any payments
or distributions with respect to, or redemptions, purchases or acquisitions of,
or any payments in liquidation of, the $1.24% Preferred Exchangeable Redemption
Cumulative Securities issued by Time Warner (the "PERCS") (including any of the
foregoing with respect to the guarantee agreement entered into by Time Warner
for the benefit of the holders of the PERCS). Prior to the termination of any
such Extension Period, Time Warner may further extend such Extension Period;
provided that such Extension Period together with all such previous and further
- --------
extensions thereof may not exceed 20 consecutive quarters. Upon the termination
of any Extension Period, payments of accrued Distributions will be payable to
Holders as they appear on the books and records of the Trust on the first record
date for the first payment date after the end of the Extension Period. Upon the
termination of any Extension Period and the payment of all amounts then due,
Time Warner may commence a new Extension Period, subject to the above
requirements.
(c) Distributions on the Preferred Securities will be payable promptly by
the Property Trustee (or other Paying Agent) upon receipt of immediately
available funds to the Holders thereof as they appear on the books and records
of the Trust on the relevant record dates. While the Preferred Securities
remain in book-entry only form, the relevant record dates shall be one Business
Day prior to the
4
relevant payment dates which payment dates correspond to the interest payment
dates on the Subordinated Debentures. Subject to any applicable laws and
regulations and the provisions of the Declaration, each such payment in respect
of the Preferred Securities will be made as described under the heading
"Description of the Preferred Securities--Book-Entry Only Issuance--The
Depository Trust Company" in the Prospectus Supplement dated ________, 1995, to
the Prospectus dated ______, 1995 (together the "Prospectus"), of the Trust
included in the Registration Statement on Form S-3 of the Sponsor, the Trust and
certain other business trusts.
If the Preferred Securities shall not continue to remain in book-entry only
form, the relevant record dates for the Preferred Securities shall conform to
the rules of any securities exchange on which the securities are listed and, if
none, shall be selected by the Regular Trustees, which dates shall be at least
one Business Day but less than 60 Business Days before the relevant payment
dates, which payment dates correspond to the interest payment dates on the
Subordinated Debentures. Distributions payable on any Preferred Securities that
are not punctually paid on any Distribution payment date as a result of Time
Warner having failed to make the corresponding interest payment on the
Subordinated Debentures will forthwith cease to be payable to the person in
whose name such Preferred Security is registered on the relevant record date,
and such defaulted Distribution will instead be payable to the person in whose
name such Preferred Security is registered on the special record date
established by the Regular Trustees, which record date shall correspond to the
special record date or other specified date determined in accordance with the
Indenture. Subject to any applicable laws and regulations and the provisions of
the Declaration, each payment in respect of the Preferred Securities will be
made as described in paragraph 9 hereof. If any date on which Distributions are
payable on the Preferred Securities is not a Business Day, then payment of the
Distribution payable on such date will be made on the next succeeding day that
is a Business Day (and without any interest or other payment in respect of any
such delay), except that if such Business Day is in the next succeeding calendar
year, such payment shall be made on the immediately preceding Business Day, in
each case with the same force and effect as if made on such date.
(d) All Distributions paid with respect to the Preferred Securities and
the Common Securities will be paid
5
on a Pro Rata Basis (as defined herein) to the Holders thereof entitled thereto.
(e) In the event that there is any money or other property held by or for
the Trust that is not accounted for under the Declaration or these terms of the
Preferred Securities or the terms of the Common Securities, such money or
property shall be distributed on a Pro Rata Basis among the Holders of the
Preferred Securities and Common Securities.
3. Liquidation Distribution Upon Dissolution. In the event of any
------------------------------------------
voluntary or involuntary liquidation, dissolution, winding-up or termination of
the Trust (each a "Liquidation Event") whether voluntary or involuntary, the
Holders of the Trust Securities on the date of such Liquidation Event will be
entitled to be paid on a Pro Rata Basis out of the assets of the Trust an amount
equal to (a) $25 per Trust Security plus (b) the amount of accrued and unpaid
Distributions thereon to, but excluding, the date of payment (such amount being
the "Liquidation Distribution") in connection with such Liquidation Event,
unless Subordinated Debentures in an aggregate principal amount equal to the
aggregate liquidation amount of, and bearing accrued and unpaid interest in an
amount equal to the accrued and unpaid Distributions on, the Trust Securities
have been distributed on a Pro Rata Basis (determined without regard to the
proviso in the definition of such term) to the Holders of the Trust Securities
in exchange for such Trust Securities. In the event that the assets of the
Trust exceed the amount necessary to pay to all Holders of the Trust Securities
the full amount of the Liquidation Distribution, such excess will be paid to the
Holders of the Trust Securities on a Pro Rata Basis (determined without regard
to the proviso in the definition of such term).
4. Redemption and Distribution of Subordinated Debentures. The Trust
-------------------------------------------------------
Securities may be redeemed only if Subordinated Debentures having an aggregate
principal amount equal to the aggregate liquidation amount of, and accrued and
unpaid interest equal to accrued and unpaid
6
Distributions on, the Trust Securities are repaid, redeemed or distributed as
set forth below:
(a) Upon the repayment of the Subordinated Debentures in whole or in part,
whether at maturity or upon redemption, the proceeds from such repayment or
payment shall be simultaneously applied to redeem Trust Securities having an
aggregate liquidation amount equal to the aggregate principal amount of the
Subordinated Debentures so repaid or redeemed at a redemption price equal to the
liquidation amount per Trust Security (the "Redemption Price") plus an amount
equal to all accrued and unpaid Distributions thereon to but excluding the date
of the redemption, payable in cash. Holders will be given not less than 20 nor
more than 45 Business Days notice of such redemption.
(b) If fewer than all the outstanding Trust Securities are to be so
redeemed, the Trust Securities will be redeemed on a Pro Rata Basis and the
Preferred Securities to be redeemed will be redeemed as described in para-graph
4(f)(ii) below. If a partial redemption would result in the delisting of the
Preferred Securities by any national securities exchange or other automated
inter-dealer quotation system, (including the Nasdaq Stock Market) on which the
Preferred Securities are then listed, Time Warner pursuant to the Indenture will
only redeem the Subordinated Debentures in whole and, as a result, the Trust may
only redeem the Preferred Securities in whole.
(c)(i) If, at any time, a Tax Event or an Investment Company
Event (each as hereinafter defined, and each a "Special Event") shall occur
and be continuing, the Regular Trustees shall notify Time Warner thereof
and Time Warner shall elect to either: (A) direct the Regular Trustees to
dissolve the Trust and cause Subordinated Debentures having an aggregate
principal amount equal to the aggregate liquidation amount of, and accrued
and unpaid interest equal to accrued and unpaid Distributions on, and
having the same record dates for payment as, the Trust Securities
outstanding at such time, to be distributed to the Holders of the Trust
Securities on a Pro Rata Basis (determined without regard to the proviso in
the definition of such term) in liquidation of such Holders' interests in
the Trust, within 90 days following the occurrence of such Special Event;
provided, however, that in the case of the occurrence
-------- -------
7
of a Tax Event, as a condition of any such dissolution and distribution,
the Regular Trustees shall have received an opinion of nationally
recognized independent tax counsel experienced in such matters (a "No
Recognition Opinion"), which opinion may rely on any then applicable
published revenue ruling of the Internal Revenue Service, to the effect
that the Holders of the Preferred Securities will not recognize any gain or
loss for United States Federal income tax purposes as a result of the
dissolution of the Trust and distribution of Subordinated Debentures; (B)
redeem the Subordinated Debentures in whole (and not in part), upon not
less than 20 nor more than 45 Business Days' notice, within 90 days
following the occurrence of such Special Event, in which case the Trust
shall redeem in cash on a Pro Rata Basis Trust Securities having an
aggregate liquidation amount equal to the principal amount of, and accrued
and unpaid distributions equal to the accrued and unpaid interest on, the
Subordinated Debentures so redeemed, at a price per Trust Security of (1)
$25, plus (2) an amount equal to all accrued and unpaid distributions on
such Trust Security to but excluding the date of such redemption (the
"Special Redemption Date") or (C) in the case of a Tax Event, allow the
Subordinated Debentures and the Trust Securities to remain outstanding and
indemnify the Trust for all taxes payable by it as a result of such Tax
Event; provided that, if at the time there is available to the Trust the
--------
opportunity to eliminate, within 90 days following the occurrence of such
Special Event (the "90-Day Period"), the Special Event by taking some
ministerial action, such as filing a form or making an election, or
pursuing some other similar reasonable measure that has no adverse effect
on the Trust, Time Warner or the Holders of the Trust Securities (a
"Ministerial Action"), the Trust will pursue such measure in lieu of
dissolution or redemption; provided further, that Time Warner shall have no
----------------
right to redeem the Subordinated Debentures or to direct the Regular
Trustees to dissolve the Trust while the Regular Trustees are pursuing such
Ministerial Action unless the Special Event shall not have been so
eliminated by the 85th day following the occurrence thereof, in which case
Time Warner shall be permitted to so direct the Regular Trustees or to
provide notice to the Holders of the redemption of the Subordinated
Debentures; and provided further, that if dissolution of the Trust and
----------------
distribution of
8
the Subordinated Debentures to the holders of the Trust Securities would
eliminate the condition causing the Special Event and all other conditions
to such dissolution and distribution have been satisfied, Time Warner will
not be permitted to redeem the Subordinated Debentures.
(ii) "Tax Event" means that the Regular Trustees shall have obtained
an opinion of nationally recognized independent tax counsel experienced in
such matters (a "Dissolution Tax Opinion") to the effect that on or after
[ ], 1995,/1/ as a result of (A) any amendment to, or change (includ-
ing any announced prospective change) in, the laws (or any regulations
thereunder) of the United States or any political subdivision or taxing
authority thereof or therein, (B) any amendment to, or change in, an
interpretation or application of any such laws or regulations by any
legislative body, court, governmental agency or regulatory authority
(including the enactment of any legislation and the publication of any
judicial decision or regulatory determination), (C) any interpretation or
pronouncement that provides for a position with respect to such laws or
regulations that differs from the theretofore generally accepted position
or (D) any action taken by any governmental agency or regulatory authority,
which amendment or change is enacted, promulgated, issued or announced or
which interpretation or pronouncement is issued or announced or which
action is taken, in each case on or after [ ], 1995,/2/ there is
more than an insubstantial risk that at such time or within 90 days of the
date thereof (1) the Trust is, or would be, subject to United States
Federal income tax with respect to income accrued or received on the
Subordinated Debentures, (2) the interest payable by Time Warner to the
Trust on the Subordinated Debentures is not, or would be, deductible by
Time Warner for United States Federal income tax purposes or (3) the Trust
is, or would not be, subject to more than a de minimis amount of other
-- -------
taxes, duties, assessments or other governmental charges.
- ---------------
/1/ Insert date of prospectus.
/2/ Insert date of prospectus.
9
(iv) "Investment Company Event" means that the Regular Trustees shall
have received an opinion of nationally recognized independent counsel
experienced in such matters that, as a result of the occurrence of a change
in law or regulation or a written change in interpretation or application
of law or regulation by any legislative body, court, governmental agency or
regulatory authority (a "Change in 1940 Act Law"), there is more than an
insubstantial risk that the Trust is or will be considered an Investment
Company that is required to be registered under the Investment Company Act,
which Change in 1940 Act Law becomes effective on or after [ ],
1995./3/
(v) On the date fixed for any distribution of Subordinated
Debentures, upon dissolution of the Trust, (i) the Preferred Securities
will no longer be deemed to be outstanding, (ii) neither the Trust nor Time
Warner shall have any further obligation to the Holders of the Preferred
Securities with respect to the Preferred Securities or under the Guarantee,
(iii) the Clearing Agency or its nominee, as the record holder of the
Preferred Securities, will receive a registered global certificate or
certificates representing the Subordinated Debentures to be delivered upon
such distribution and (iv) any certificates representing Preferred
Securities not held by the Clearing Agency or its nominee will be deemed to
represent Subordinated Debentures having an aggregate principal amount
equal to the aggregate liquidation amount of, and bearing accrued and
unpaid interest equal to accrued and unpaid Distributions on, such
Preferred Securities until such certificates are presented to Time Warner
or its agent for transfer or reissuance.
(d) The Trust may not redeem fewer than all the outstanding Preferred
Securities unless all accrued and unpaid Distributions have been or are
concurrently being paid on all Preferred Securities for all quarterly
Distribution periods terminating on or prior to the date of redemption.
(e) If Subordinated Debentures are distributed to Holders of the
Preferred Securities, Time Warner, pursuant to the terms of the Indenture, will
use its best efforts to
- ---------------
/3/Insert date of prospectus.
10
have the Subordinated Debentures listed on the New York Stock Exchange or on
such other exchange or self-regulatory organization (including the Nasdaq Stock
Market) as the Preferred Securities were listed immediately prior to the
distribution of the Subordinated Debentures.
(f) (i) Notice of any redemption (other than mandatory redemption)
of, or notice of distribution of Subordinated Debentures in exchange for,
the Preferred Securities and Common Securities (a "Redemption/ Distribution
Notice") will be given by the Regular Trustees on behalf of the Trust by
mail to each Holder of Preferred Securities and Common Securities to be
redeemed or exchanged not less than 20 nor more than 45 Business Days prior
to the date fixed for redemption or distribution thereof. For purposes of
the calculation of the date of redemption or exchange and the dates on
which notices are given pursuant to this paragraph (f)(i), a
Redemption/Distribution Notice shall be deemed to be given on the day such
notice is first mailed by first-class mail, postage prepaid, to Holders of
Preferred Securities and Common Securities. Each Redemption/Distribution
Notice shall be addressed to the Holders of Preferred Securities and Common
Securities at the address of each such Holder appearing in the books and
records of the Trust. Such Redemption/Distribution Notice shall set forth
the aggregate liquidation amount of Trust Securities to be redeemed, the
date of such redemption or such distribution and in the case of a Special
Event, a brief description thereof. No defect in the
Redemption/Distribution Notice or in the mailing of either thereof with
respect to any Holder shall affect the validity of the redemption or
exchange proceedings with respect to any other Holder.
(ii) In the event that fewer than all the outstanding Preferred
Securities are to be redeemed, the Preferred Securities to be redeemed will
be redeemed on a Pro Rata Basis from each Holder of Preferred Securities,
and, in the event Preferred Securities are held in book-entry only form by
the Clearing Agency or its nominee (or any successor Clearing Agency or its
nominee), the Clearing Agency will reduce on a Pro Rata Basis the amount of
the interest of each Clearing Agency Participant in the Preferred
Securities to be redeemed; provided that if, as a result of such
--------
redemption, Clearing Agency Participants would hold
11
fractional interests in the Preferred Securities, the Clearing Agency will
adjust the amount of the interest of each clearing Agency Participant to be
redeemed to avoid such fractional interests.
(iii) Payment of the Redemption Price in respect of each Preferred
Security, together with any accrued and unpaid Distributions thereon, is
conditioned upon delivery or book-entry transfer of such Preferred Security
(together with necessary endorsements) to the Property Trustee at any time
(whether prior to, on or after the relevant date of redemption) after the
Redemption/Distribution Notice is given (to the extent such notice is
required). Payment of the Redemption Price, together with any accrued and
unpaid distributions on each Preferred Security, will be made by the
delivery of cash no later than the applicable date of redemption with
respect to such Preferred Security or, if later, the time of delivery or
transfer of such Preferred Security.
(iv) If the Trust gives a Redemption/ Distribution Notice in respect
of a redemption of Preferred Securities as provided in this paragraph 4
(which notice will be irrevocable), then immediately prior to the close of
business on the redemption date, so long as Time Warner has paid to the
Property Trustee in immediately available funds a sufficient amount of cash
in connection with the related redemption or maturity of the Subordinated
Debentures, Distributions will cease to accrue on the Preferred Securities
called for redemption, such Preferred Securities will no longer be deemed
to be outstanding and all rights of Holders of such Preferred Securities so
called for redemption will cease, except the right of the Holders of such
Preferred Securities to receive the Redemption Price, together with any
accrued and unpaid Distributions on the Preferred Securities being
redeemed, but without interest on such amount. Neither the Trustees nor
the Trust shall be required to register or cause to be registered the
transfer of any Preferred Securities which have been so called for
redemption. If any date fixed for redemption of Preferred Securities is
not a Business Day, then payment of the Redemption Price payable on such
date, together with any accrued and unpaid Distributions to such date, will
be made on the next succeeding day that is a Business Day (and without any
interest or other
12
payment in respect of any such delay) except that, if such Business Day
falls in the next calendar year, such payment will be made on the
immediately preceding Business Day, in each case with the same force and
effect as if made on such date fixed for redemption. If payment of the
Redemption Price in respect of Preferred Securities, together with any
accrued and unpaid Distributions on such Preferred Securities, is
improperly withheld or refused and not paid either by the Property Trustee
or by Time Warner pursuant to the Guarantee, Distributions on such
Preferred Securities will continue to accrue, from the original redemption
date to the date of payment, in which case the actual payment date will be
considered the date fixed for redemption for purposes of calculating the
Redemption Price and the amount of any such accrued and unpaid
distributions.
(v) Upon the date of dissolution of the Trust and distribution of
Subordinated Debentures as a result of the occurrence of a Special Event,
Preferred Security Certificates shall be deemed to the Subordinated
Debentures so distributed to the Holders of Preferred Securities, and the
Preferred Securities will no longer be deemed outstanding and may be
canceled by the Regular Trustees. The Subordinated Debentures so
distributed shall have an aggregate principal amount equal to the aggregate
liquidation amount of the Preferred Securities in respect of which the
Subordinated Debentures shall have been so distributed.
(vi) Subject to the foregoing and applicable law (including, without
limitation, United States Federal securities laws), Time Warner or any of
its affiliates may at any time and from time to time purchase outstanding
Preferred Securities by tender, in the open market or by private agreement.
Any such Preferred Securities purchased by Time Warner shall be surrendered
to the Trust for cancellation.
5. Voting Rights. (a) Except as provided under paragraph 5(b) below
--------------
and as otherwise required by law and the Declaration, the Holders of the
Preferred Securities will have no voting rights.
(b) (i) If (A) the Trust (1) fails to pay Distributions in full on
the Preferred Securities and
13
such failure continues unremedied for 6 consecutive quarterly Distribution
periods (2) fails to pay the Redemption Price of any Preferred Securities
to be redeemed on the applicable redemption date; or (B) an Event of
Default occurs and is continuing (each an "Appointment Event"), then the
Holders of the Preferred Securities, acting as a single class, will be
entitled by the vote of Holders of Preferred Securities representing a
Majority in aggregate liquidation amount of the Preferred Securities to
appoint a Special Regular Trustee in accordance with Section 5.02(a)(ii)(B)
of the Declaration. Any Holder of Preferred Securities (other than the
Sponsor or any Affiliate of the Sponsor) will have the right to nominate
any Person to be appointed as Special Regular Trustee. For purposes of
determining whether the Trust has failed to make Distributions in full for
6 consecutive quarterly Distribution periods, Distributions shall be deemed
to remain in arrears, notwithstanding any payments in respect thereof,
until full cumulative Distributions have been or contemporaneously are paid
with respect to all quarterly Distribution periods terminating on or prior
to the date of payment of such cumulative Distributions. Not later than 30
days after such right to appoint a Special Regular Trustee arises, the
Regular Trustees will convene a meeting of the Holders of the Preferred
Securities for the purpose of appointing a Special Regular Trustee. If the
Regular Trustees fail to convene such meeting within such 30-day period,
the Holders of Preferred Securities representing not less than 10% in
aggregate liquidation amount of the outstanding Preferred Securities will
be entitled to convene such meeting in accordance with Section 12.02 of the
Declaration. The record date for such meeting will be the close of business
on the Business Day next preceding the day on which notice of the meeting
is sent to Holders of Preferred Securities. The provisions of the
Declaration relating to the convening and conduct of the meetings of the
Holders will apply with respect to any such meeting. If, at any such
meeting, Holders of less than a Majority in aggregate liquidation amount of
Preferred Securities entitled to vote for the appointment of a Special
Regular Trustee vote for such appointment, no Special Regular Trustee shall
be appointed.
14
Any Special Regular Trustee may be removed without cause at any time
by the Holders of Preferred Securities representing a Majority in aggregate
liquidation amount of the Preferred Securities in accordance with Section
5.02(a)(ii)(B) of the Declaration. The Holders of 10% in aggregate
liquidation amount of the Preferred Securities will be entitled to convene
such a meeting to remove the Special Regular Trustee in accordance with
Section 12.02 of the Declaration. The record date for such meeting will be
the close of business on the Business Day next preceding the day on which
notice of the meeting is sent to Holders of Preferred Securities. Any
Special Regular Trustee appointed shall cease to be a Special Regular
Trustee as provided in Section 5.02(c) of the Declaration. Notwithstanding
the appointment of any such Special Regular Trustee, Time Warner shall
retain all its rights under the Indenture, including the right to extend
the interest payment period on the Subordinated Debentures.
(ii) If any proposed amendment to the Declaration provides for, or
the Regular Trustees otherwise propose to effect (A) any action that would
adversely affect the powers, preferences or special rights of the Trust
Securities, whether by way of amendment to the Declaration or otherwise, or
(B) the liquidation, dissolution, winding-up or termination of the Trust,
other than in connection with the distribution of Subordinated Debentures
held by the Property Trustee, upon the occurrence of a Special Event or in
connection with the redemption of Preferred Securities as a consequence of
a redemption of Subordinated Debentures, then the Holders of outstanding
Trust Securities will be entitled to vote on such amendment or proposal as
a class and such amendment or proposal shall not be effective except with
the approval of the Holders of Trust Securities representing a Majority in
aggregate liquidation amount of Trust Securities affected thereby;
provided, however, (1) if any amendment or proposal referred to in clause
-------- -------
(A) above would adversely affect only the Preferred Securities or the
Common Securities, then only the affected class will be entitled to vote on
such amendment or proposal and such amendment or proposal shall not be
effective except with the approval of a Majority in aggregate liquidation
amount of such class of Trust Securities, (2) the rights of Holders of
Preferred Securities under
15
Article V of the Declaration to appoint and remove a Special Regular
Trustee shall not be amended without the consent of each Holder of
Preferred Securities, and (3) amendments to the Declaration shall be
subject to such further requirements as are set forth in Sections 12.01 and
12.02 of the Declaration.
(iii) In the event the consent of the Property Trustee, as the holder
of the Subordinated Debentures, is required under the Indenture with
respect to any amendment, modification or termination of the Indenture or
the Subordinated Debentures, the Property Trustee shall request the written
direction of the Holders of the Trust Securities with respect to such
amendment, modification or termination. The Property Trustee shall vote
with respect to such amendment, modification or termination as directed by
a Majority in aggregate liquidation amount of the Trust Securities voting
together as a single class; provided that where such amendment,
--------
modification or termination of the Indenture or the Subordinated Debentures
requires the consent or vote of (A) holders of Subordinated Debentures
representing a specified percentage greater than a majority in principal
amount of the Subordinated Debentures or (B) each holder of Subordinated
Debentures, the Property Trustee may only vote with respect to that
amendment, modification or termination as directed by, in the case of
clause (A) above, the vote of Holders of Trust Securities representing such
specified percentage of the aggregate liquidation amount of the Trust
Securities, or, in the case of clause (B) above, each Holder of Trust
Securities; and provided further that the Property Trustee shall not take
----------------
any action in accordance with the directions of the Holders of Trust
Securities unless the Property Trustee shall have received, at the expense
of the Sponsor, an opinion of nationally recognized independent tax counsel
experienced in such matters to the effect that, as a result of such action,
Time Warner Capital will not fail to be classified as a grantor trust for
United States Federal income tax purposes.
(iv) Subject to Section 2.06 of the Declaration, and the provisions
of this and the next succeeding paragraph, the Holders of a Majority in
aggregate liquidation amount of the Preferred Securities, voting separately
as a class, shall have the right to (A) on
16
behalf of all Holders of Preferred Securities, waive any past default that
is waivable under the Declaration (subject to, and in accordance with the
Declaration) and (B) direct the time, method, and place of conducting any
proceeding for any remedy available to the Property Trustee, or to direct
the exercise of any trust or power conferred upon the Property Trustee
under the Declaration, including the right to direct the Property Trustee,
as the holder of the Subordinated Debentures, to (1) direct the time,
method and place of conducting any proceeding for any remedy available to
the Indenture Trustee, or exercising any trust or power conferred on the
Indenture Trustee with respect to the Subordinated Debentures, (2) waive
any past default that is waivable under Section 5.13 of the Indenture or
(3) exercise any right to rescind or annul a declaration that the principal
of all the Subordinated Debentures shall be due and payable; provided that
--------
where the taking of any action under the Indenture requires the consent or
vote of (x) holders of Subordinated Debentures representing a specified
percentage greater than a majority in principal amount of the Subordinated
Debentures or (y) each holder of Subordinated Debentures, the Property
Trustee may only take such action if directed by, in the case of clause (x)
above, the vote of Holders of Preferred Securities representing such
specified percentage of the aggregate liquidation amount of the Preferred
Securities, or, in the case of clause (y) above, each Holder of Preferred
Securities. The Property Trustee shall not revoke any action previously
authorized or approved by a vote of the Holders of the Preferred
Securities. The Property Trustee shall not take any of the foregoing
actions at the direction of the Holders of Preferred Securities unless the
Property Trustee shall have received, at the expense of the Sponsor, an
opinion of nationally recognized independent tax counsel experienced in
such matters to the effect that, as a result of such action, Time Warner
Capital will not fail to be classified as a grantor trust for United States
Federal income tax purposes. If the Property Trustee fails to enforce its
rights under the Declaration (including its rights, powers and privileges
as a holder of the Subordinated Debentures under the Indenture), any Holder
of Preferred Securities may, after a period of 30 days has elapsed from
such Holder's written request to the Property Trustee to enforce such
rights, institute a legal
17
proceeding directly against Time Warner to enforce the Property Trustee's
rights under the Declaration, without first instituting a legal proceeding
against the Property Trustee or any other Person.
(v) A waiver of an Indenture Event of Default by the Property Trustee
at the direction of the Holders of the Preferred Securities will constitute a
waiver of the corresponding Event of Default under the Declaration in respect of
the Trust Securities.
(vi) Any required approval or direction of Holders of Preferred
Securities may be given at a separate meeting of Holders of Preferred Securities
convened for such purpose, at a meeting of all of the Holders of Trust
Securities or pursuant to written consent. The Regular Trustees will cause a
notice of any meeting at which Holders of Preferred Securities are entitled to
vote, or of any matter upon which action by written consent of such Holders is
to be taken, to be mailed to each Holder of record of Preferred Securities.
Each such notice will include a statement setting forth (A) the date of such
meeting or the date by which such action is to be taken, (B) a description of
any resolution proposed for adoption at such meeting on which such Holders are
entitled to vote or of such matter upon which written consent is sought and (C)
instructions for the delivery of proxies or consents.
(vii) No vote or consent of the Holders of Preferred Securities will
be required for the Trust to redeem and cancel Preferred Securities in
accordance with the Declaration.
(viii) Notwithstanding that Holders of Preferred Securities are
entitled to vote or consent under any of the circumstances described above, any
of the Preferred Securities at such time that are owned by Time Warner or by any
entity directly or indirectly controlling or controlled by or under direct or
indirect common control with Time Warner shall not be entitled to vote or
consent and shall, for purposes of such vote or consent, be treated as if they
were not outstanding.
(ix) Except as provided in this paragraph 5, Holders of the Preferred
Securities will have no rights to increase or decrease the number of Trustees or
to appoint, remove or replace a Trustee, which voting rights are vested solely
in the Holders of the Common Securities.
18
6. Pro Rata Treatment. A reference in these terms of the Preferred
-------------------
Securities to any payment, distribution or treatment as being made on a "Pro
Rata Basis" shall mean, with respect to such payment, distribution or treatment,
pro rata to each Holder of Trust Securities according to the aggregate
liquidation amount of the Trust Securities held by such Holder in relation to
the aggregate liquidation amount of all Trust Securities outstanding; provided,
--------
however, that if the assets of the Trust are insufficient to make such payment
- -------
in full as a result of a default with respect to the Subordinated Debentures,
any funds available to make such payment shall be paid (i) first to each Holder
of the Preferred Securities pro rata according to the aggregate liquidation
amount of Preferred Securities held by such Holder in relation to the aggregate
liquidation amount of all Preferred Securities outstanding up to an aggregate
amount equal to the amount then owed to the Holders of the Preferred Securities,
and (ii) only after satisfaction of all amounts owed to the Holders of the
Preferred Securities, to each Holder of Common Securities pro rata according to
the aggregate liquidation amount of Common Securities held by such Holder in
relation to the aggregate liquidation amount of all Common Securities
outstanding.
7. Ranking. The Preferred Securities rank pari passu, and payments
-------- ---- -----
will be made thereon on a Pro Rata Basis, with the Common Securities, except
that if, as a result of an Event of Default with respect to the Subordinated
Debentures, the assets of the Trust are insufficient to make payments of
Distributions or payments upon liquidation, redemption of the Trust Securities
or otherwise, the rights of Holders of the Common Securities to receive such
payments will be subordinated to the rights of the Holders of the Preferred
Securities.
8. Mergers, Consolidations or Amalgamations. The Trust may not
-----------------------------------------
consolidate, amalgamate, merge with or into, or be replaced by, or convey,
transfer or lease its properties and assets to, any corporation or other body.
9. Transfer, Exchange, Method of Payments. Payment of Distributions
---------------------------------------
and payments on redemption of the Preferred Securities or on dissolution of the
Trust will be payable, the transfer of the Preferred Securities will be
registrable, and Preferred Securities will be exchangeable for Preferred
Securities of other denominations of a like aggregate liquidation amount, at the
principal corporate
19
trust office of the Property Trustee in The City of New York; provided that
--------
payment of Distributions may be made at the option of the Regular Trustees on
behalf of the Trust by check mailed to the address of the persons entitled
thereto and that the payment on redemption of any Preferred Security or on
dissolution of the Trust will be made only upon surrender of such Preferred
Security to the Property Trustee.
10. Acceptance of Indenture and Guarantee and Certain Other Matters.
----------------------------------------------------------------
Each Holder of Preferred Securities, by the acceptance thereof, agrees (a) to
the provisions of (i) the Guarantee, including the subordination provisions
therein and (ii) the Indenture and the Subordinated Debentures, including the
subordination provisions of the Indenture and (b) to treat the Subordinated
Debentures as debt instruments for United States Federal, state and local income
and franchise tax purposes and not to take any contrary position before any
taxing authority or on any tax return.
11. No Preemptive Rights. The Holders of Preferred Securities shall
---------------------
have no preemptive rights to subscribe to any additional Preferred Securities or
Common Securities.
12. Miscellaneous. These terms shall constitute a part of the
--------------
Declaration. The Regular Trustees will provide a copy of the Declaration, the
Guarantee and the Indenture to a Holder without charge on written request to the
Trust at its principal place of business.
Annex I
Certificate Number Number of Preferred Securities
B-1
CUSIP NO. [ ]
Certificate Evidencing Preferred Securities
of
Time Warner Capital I
[ ]% Preferred Trust Securities
Time Warner Financing Trust, a statutory business trust formed under
the laws of the State of Delaware (the "Trust"), hereby certifies that
(the "Holder") is the registered owner of ( ) preferred securities
of the Trust representing undivided beneficial interests in the assets of the
Trust designated the [ ]% Preferred Trust Securities (the "Preferred
Securities"). The Preferred Securities are transferable on the books and
records of the Trust, in person or by a duly authorized attorney, upon surrender
of this certificate duly endorsed and in proper form for transfer. The
designations, rights, privileges, restrictions, preferences and other terms and
provisions of the Preferred Securities are set forth in, and this certificate
and the Preferred Securities represented hereby are issued and shall in all
respects be subject to the terms and provisions of, the Amended and Restated
Declaration of Trust of the Trust dated as of , 1995, as the same may
be amended from time to time (the "Declaration") including the designation of
the terms of Preferred Securities as set forth in Exhibit B thereto. The
Preferred Securities and the Common Securities issued by the Trust pursuant to
the Declaration represent undivided beneficial interests in the assets of the
Trust, including the Subordinated Debentures (as defined in the Declaration)
issued by Time Warner Inc., a Delaware corporation ("Time Warner"), to the Trust
pursuant to the Indenture referred to in the Declaration. The Holder is
entitled to the benefits of the Guarantee Agreement of Time Warner dated as of
, 1995 (the "Guarantee") to the extent provided therein. The Regular Trustees
will furnish a copy of the Declaration, the Guarantee and the Indenture to the
Holder without charge upon written request to the Trust at its principal place
of business or registered office.
2
The Holder of this Certificate, by accepting this Certificate, is
deemed to have (i) agreed to the terms of the Indenture and the Subordinated
Debentures, including that the Subordinated Debentures are (a) subordinate and
junior in right of payment to all Senior Indebtedness (as defined in the
Indenture, which term includes Time Warner's outstanding 8-3/4% Convertible
Subordinated Debentures due 2015) as and to the extent provided in the Indenture
and (ii) agreed to the terms of the Guarantee, including that the Guarantee is
(a) subordinate and junior in right of payment to all other liabilities of Time
Warner, including the Subordinated Debentures, except those made pari passu or
---- -----
subordinate by their terms, (b) pari passu with the most senior preferred stock
---- -----
issued from time to time, by Time Warner and any guarantee now or hereafter
entered into by Time Warner in respect of any such preferred stock and (c)
senior to all common stock now or hereafter issued by Time Warner and to any
guarantee now or hereafter entered into by Time Warner in respect of any of its
common stock.
Upon receipt of this certificate, the Holder is bound by the
Declaration and is entitled to the benefits thereunder.
IN WITNESS WHEREOF, Trustees of the Trust have executed this
certificate this day of , 1995.
TIME WARNER CAPITAL I,
by
________________________, as trustee
Name:
Title: Trustee
by
________________________, as trustee
Name:
Title: Trustee
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 [ ], 1995 (as
amended from time to time, the "Declaration"), the designations, rights,
privileges, restrictions, preferences and other terms and provisions of the
Common Securities are set forth below (each capitalized term used but not
defined herein having the meaning set forth in the Declaration):
1. Designation and Number. Common Securities of the Trust with an
-----------------------
aggregate liquidation amount in the assets of the Trust of ($ )
and a aggregate liquidation amount in the assets of the Trust of $[ ] per
Common Security, are hereby designated as "[ ]% Common Securities". The Common
Security Certificates evidencing the Common Securities shall be substantially in
the form attached hereto as Annex I, with such changes and additions thereto or
deletions therefrom as may be required by ordinary usage, custom or practice.
The Common Securities are to be issued and sold to Time Warner Inc. ("Time
Warner") in consideration of $[ ] in cash. The Trust will invest the gross
proceeds from the issuance of the Common Securities together with the gross
proceeds from the issuance of the Preferred Securities in Subordinated
Debentures of Time Warner having an aggregate principal amount equal to $[
], and bearing interest at an annual percentage rate equal to the annual
distribution rate on the Preferred Securities and Common Securities and having
payment and redemption provisions that correspond to the payment and redemption
provisions of the Preferred Securities and Common Securities.
2. Distributions. (a) Periodic distributions payable on each Common
--------------
Security will be fixed at a rate per annum of [ ]% (the "Coupon Rate") of the
aggregate liquidation amount of $25 per Common Security, such rate being the
rate of interest payable on the Subordinated Debentures to be held by the
Property Trustee. Distributions in arrears beyond the first date such
Distributions are payable (or would be payable if not for any Extension Period
(as hereinafter defined) or default by Time Warner on the Subordinated
Debentures) will bear interest thereon at the Coupon Rate (to the extent
permitted by applicable law), compounded quarterly. The term "Distributions" as
used in these terms means such periodic
2
cash distributions and any such interest payable unless otherwise stated. A
Distribution will be made by the Property Trustee only to the extent that
interest payments are made in respect of the Subordinated Debentures held by the
Property Trustee. The amount of Distributions (or amounts equal to accrued and
unpaid Distributions) payable for any period will be computed (i) for any full
quarterly Distribution period, on the basis of a 360-day year of twelve 30-day
months and will include the first day but exclude the last day of such period,
and (ii) for any period shorter than a full quarterly Distribution period, on
the basis of a 360-day year of twelve 30-day months and on the basis of the
actual number of days elapsed in any such 30-day month and will include the
first day but exclude the last day of such period.
(b) Distributions on the Common Securities will be cumulative, will
accrue from and including [date of issue], 1995, and will be payable quarterly
in arrears, on [March 30, June 30, September 30 and December 30] of each year,
commencing on, but excluding [ ], 1995, except as otherwise described
below, but only if and to the extent that interest payments are made in respect
of the Subordinated Debentures held by the Property Trustee. Time Warner, as
issuer of the Subordinated Debentures, has the right under the Indenture to
defer payments of interest by extending the interest payment period from time to
time on the Subordinated Debentures for a period not exceeding 20 consecutive
quarters (each an "Extension Period") and, during such Extension Period,
Distributions will also be deferred. Despite such deferral, quarterly
Distributions will continue to accrue with interest thereon (to the extent
permitted by applicable law) at the Coupon Rate compounded quarterly during any
such Extension Period. In the event that Time Warner exercises its rights to
commence any Extension Period or an extension period or other deferral of
interest feature under any debt security of Time Warner that ranks pari passu
with the Subordinated Debentures, then (a) Time Warner shall not declare or pay
dividends on, make distributions with respect to, or redeem, purchase or
acquire, or make a liquidation payment with respect to, any of its capital stock
and (b) Time Warner shall not make any payment of interest, principal or
premium, if any, on or repay, repurchase or redeem the Subordinated Debentures
or any debt securities issued by Time Warner that rank pari passu with or junior
to the Subordinated Debentures; provided, however, that the foregoing
-------- -------
restrictions do not apply (i) to any interest or dividend payment by Time
3
Warner where the interest or dividend is paid by way of the issuance of
securities that rank junior to the Subordinated Debentures, (ii) any payments of
interest, principal or premium, if any, on, or repayment, repurchase or
redemption of, Time Warner's 4% Subordinated Notes due December 23, 1995 and
(iii) any payments or distributions with respect to, or redemptions, purchases
or acquisitions of, or any payments in liquidation of, the $1.24 Preferred
Exchangeable Redemption Securities (the "PERCS") issued by Time Warner
(including any of the foregoing with respect to the guarantee agreement entered
into by Time Warner for the benefit of the holders of the PERCS). Prior to the
termination of any such Extension Period, Time Warner may further extend such
Extension Period; provided that such Extension Period together with all such
--------
previous and further extensions thereof may not exceed 20 consecutive quarters.
Upon the termination of any Extension Period, payments of accrued Distributions
will be payable to Holders as they appear on the books and records of the Trust
on the first record date for the first payment date after the end of the
Extension Period. Upon the termination of any Extension Period and the payment
of all amounts then due, Time Warner may commence a new Extension Period,
subject to the above requirements.
(c) Distributions on the Common Securities will be payable promptly
by the Property Trustee (or other Paying Agent) upon receipt of immediately
available funds to the Holders thereof as they appear on the books and records
of the Trust on the relevant record dates. While the Preferred Securities
remain in book-entry only form, the relevant record dates shall be one Business
Day prior to the relevant payment dates which payment dates correspond to the
interest payment dates on the Subordinated Debentures.
If the Preferred Securities shall not continue to remain in book-entry
only form, the relevant record dates for the Preferred Securities shall conform
to the rules of any securities exchange on which the securities are listed and,
if none, shall be selected by the Regular Trustees, which dates shall be at
least one Business Day but less than 60 Business Days before the relevant
payment dates, which payment dates correspond to the interest payment dates on
the Subordinated Debentures. Distributions payable on any Common Securities
that are not punctually paid on any Distribution date as a result of Time Warner
having failed to make the corresponding interest payment on the Subordinated
Debentures will forthwith cease to be payable
4
to the person in whose name such Common Security is registered on the relevant
record date, and such defaulted Distribution will instead be payable to the
person in whose name such Common Security is registered on the special record
date established by the Regular Trustees, which record date shall correspond to
the special record date or other specified date determined in accordance with
the Indenture. Subject to any applicable laws and regulations and the
provisions of the Declaration, each payment in respect of the Common Securities
will be made as described in paragraph 9 hereof. If any date on which
Distributions are payable on the Common Securities is not a Business Day, then
payment of the Distribution payable on such date will be made on the next
succeeding day that is a Business Day (and without any interest or other payment
in respect of any such delay), except that if such Business Day is in the next
succeeding calendar year, such payment shall be made on the immediately
preceding Business Day, in each case with the same force and effect as if made
on such date.
(d) All Distributions paid with respect to the Common Securities and
the Preferred Securities will be paid on a Pro Rata Basis to the Holders thereof
entitled thereto.
(e) In the event that there is any money or other property held by or
for the Trust that is not accounted for under the Declaration or the terms of
the Preferred Securities or these terms of the Common Securities, such money or
property shall be distributed on a Pro Rata Basis among the Holders of the
Preferred Securities and Common Securities.
3. Liquidation Distribution Upon Dissolution. In the event of any
------------------------------------------
voluntary or involuntary liquidation, dissolution, winding-up or termination of
the Trust (each a "Liquidation Event") whether voluntary or involuntary, the
Holders of the Trust Securities on the date of such Liquidation Event will be
entitled to be paid on a Pro Rata Basis out of the assets of the Trust an amount
equal to (a) $25 per Trust Security plus (b) the amount of accrued and unpaid
Distributions thereon to, but excluding, the date of payment (such amount being
the "Liquidation Distribution") in connection with such Liquidation Event unless
Subordinated Debentures in an aggregate principal amount equal to the aggregate
liquidation amount of, and bearing accrued and unpaid interest in an amount
equal to the accrued and unpaid Distributions on, the Trust Securities have been
distributed on a Pro Rata Basis
5
(determined without regard to the proviso in the definition of such term) to the
Holders of the Trust Securities in exchange for such Trust Securities. In
addition, in the event that the assets of the Trust exceed the amount necessary
to pay to all holders of the Trust Securities the full amount of the Liquidation
Distribution, such excess will be paid to the holders of the Trust Securities on
a Pro Rata Basis (determined without regard to the proviso in the definition of
such term).
4. Redemption and Distribution of Subordinated Debentures. The
-------------------------------------------------------
Trust Securities may be redeemed only if Subordinated Debentures having an
aggregate principal amount equal to the aggregate liquidation amount of, and
accrued and unpaid interest equal to accrued and unpaid distributions on, the
Trust Securities are repaid, redeemed or distributed as set forth below:
(a) Upon the repayment of the Subordinated Debentures in whole or in
part, whether at maturity or upon redemption, the proceeds from such repayment
or payment shall be simultaneously applied to redeem Trust Securities having an
aggregate liquidation amount equal to the aggregate principal amount of the
Subordinated Debentures so repaid or redeemed at a redemption price equal to the
liquidation amount per Security (the "Redemption Price") plus an amount equal to
all accrued and unpaid Distributions thereon to but excluding the date of the
redemption, payable in cash. Holders will be given not less than 20 nor more
than 45 Business Days notice of such redemption.
(b) If fewer than all the outstanding Trust Securities are to be so
redeemed, the Trust Securities will be redeemed on a Pro Rata Basis and the
Common Securities to be redeemed will be redeemed as described in paragraph
4(e)(ii) below. If a partial redemption would result in the delisting of the
Preferred Securities by any national securities exchange or other automated
inter-dealer quotation system (including the Nasdaq Stock Market) on which the
Preferred Securities are then listed, Time Warner pursuant to the Indenture will
only redeem the Subordinated Debentures in whole and, as a result, the Trust may
only redeem the Common Securities in whole.
(c)(i) If, at any time, a Tax Event or an Investment Company Event
(each as hereinafter defined, and each a "Special Event") shall occur and be
continuing, the
6
Regular Trustees shall notify Time Warner thereof and Time Warner shall elect to
either: (A) direct the Regular Trustees to dissolve the Trust and cause
Subordinated Debentures having an aggregate principal amount equal to the
aggregate liquidation amount of, and accrued and unpaid interest equal to
accrued and unpaid Distributions on, and having the same record dates for
payment as, the Trust Securities outstanding at such time, to be distributed to
the Holders of the Trust Securities on a Pro Rata Basis (determined without
regard to the proviso in the definition of such term) in liquidation of such
Holders' interests in the Trust, within 90 days following the occurrence of such
Special Event; provided, however, that in the case of the occurrence of a Tax
-------- -------
Event, as a condition of any such dissolution and distribution, the Regular
Trustees shall have received an opinion of nationally recognized independent tax
counsel experienced in such matters (a "No Recognition Opinion"), which opinion
may rely on any then applicable published revenue ruling of the Internal Revenue
Service, to the effect that the Holders of the Preferred Securities will not
recognize any gain or loss for United States Federal income tax purposes as a
result of the dissolution of the Trust and distribution of Subordinated
Debentures; (B) redeem the Subordinated Debentures in whole (and not in part),
upon not less than 20 nor more than 45 Business Days' notice, within 90 days
following the occurrence of such Special Event, in which case the Trust shall
redeem in cash on a Pro Rata Basis Trust Securities having an aggregate
liquidation amount equal to the principal amount of, and accrued and unpaid
distributions equal to the accrued and unpaid interest on, the Subordinated
Debentures so redeemed, at a price per Trust Security of (1) $25, plus (2) an
amount equal to all accrued and unpaid distributions on such Trust Security to
but excluding the date of such redemption (the "Special Redemption Date") or (C)
in the case of a Tax Event, allow the Subordinated Debentures and the Trust
Securities to remain outstanding and indemnify the Trust for all taxes payable
by it as a result of such Tax Event; provided that, if at the time there is
--------
available to the Trust the opportunity to eliminate, within 90 days following
the occurrence of such Special Event (the "90-Day Period"), the Special Event by
taking some ministerial action, such as filing a form or making an election, or
pursuing some other similar reasonable measure that has no adverse effect on the
Trust, Time Warner or the Holders of the Trust Securities (a "Ministerial
Action"), the Trust will pursue such measure in lieu of dissolution or
redemption; provided further, that
----------------
7
Time Warner shall have no right to redeem the Subordinated Debentures or to
direct the Regular Trustees to dissolve the Trust while the Regular Trustees are
pursuing such Ministerial Action unless the Special Event shall not have been so
eliminated by the 85th day following the occurrence thereof, in which case Time
Warner shall be permitted to so direct the Regular Trustees or to provide notice
to the Holders of the redemption of the Subordinated Debentures; and provided
--------
further, that if dissolution of the Trust and distribution of the Subordinated
- -------
Debentures to the holders of the Trust Securities would eliminate the condition
causing the Special Event and all other conditions to such dissolution and
distribution have been satisfied, Time Warner will not be permitted to redeem
the Subordinated Debentures.
(ii) "Tax Event" means that the Regular Trustees shall have obtained
an opinion of nationally recognized independent tax counsel experienced in
such matters (a "Dissolution Tax Opinion") to the effect that on or after
July [ ], 1995,/1/as a result of (A) any amendment to, or change
(including any announced prospective change) in, the laws (or any
regulations thereunder) of the United States or any political subdivision
or taxing authority thereof or therein, (B) any amendment to, or change in,
an interpretation or application of any such laws or regulations by any
legislative body, court, governmental agency or regulatory authority
(including the enactment of any legislation and the publication of any
judicial decision or regulatory determination), (C) any interpretation or
pronouncement that provides for a position with respect to such laws or
regulations that differs from the theretofore generally accepted position
or (D) any action taken by any governmental agency or regulatory authority,
which amendment or change is enacted, promulgated, issued or announced or
which interpretation or pronouncement is issued or announced or which
action is taken, in each case on or after [ ], 1995,/2/ there is
more than an insubstantial risk that at such time or within 90 days of the
date thereof (1) the Trust is, or would be, subject to United States
Federal income tax with
- ---------------
/1/ Insert date of prospectus.
/2/ Insert date of prospectus.
8
respect to income accrued or received on the Subordinated Debentures, (2)
the interest payable by Time Warner to the Trust on the Subordinated
Debentures is not, or would not be, deductible by Time Warner for United
States Federal income tax purposes or (3) the Trust is, or would be,
subject to more than a de minimis amount of other taxes, duties,
-- -------
assessments or other governmental charges.
(iv) "Investment Company Event" means that the Regular Trustees shall
have received an opinion of nationally recognized independent counsel
experienced in such matters that, as a result of the occurrence of a change
in law or regulation or a written change in interpretation or application
of law or regulation by any legislative body, court, governmental agency or
regulatory authority (a "Change in 1940 Act Law"), there is more than an
insubstantial risk that the Trust is or will be considered an Investment
Company that is required to be registered under the Investment Company Act,
which Change in 1940 Act Law becomes effective on or after July [ ],
1995./3/
(v) On the date fixed for any distribution of Subordinated
Debentures, upon dissolution of the Trust, (i) the Common Securities will
no longer be deemed to be outstanding, (ii) the Trust shall not have any
further obligation to the holders of the Common Securities with respect to
the Common Securities and (iii) certificates representing Common Securities
will be deemed to represent the Subordinated Debentures having an aggregate
principal amount equal to the aggregate liquidation amount of, and bearing
accrued and unpaid interest equal to accrued and unpaid Distributions on,
such Common Securities until such certificates are presented to Time Warner
or its agent for transfer or reissuance.
(d) The Trust may not redeem fewer than all the outstanding Common
Securities unless all accrued and unpaid Distributions have been or are
concurrently being paid on all Common Securities for all quarterly Distribution
periods terminating on or prior to the date of redemption.
- ---------------
/3/Insert date of prospectus.
9
(e) (i) Notice of any redemption (other than a mandatory redemption)
of, or notice of distribution of Subordinated Debentures in exchange for,
the Preferred Securities and Common Securities (a "Redemption/Distribution
Notice") will be given by the Regular Trustees on behalf of the Trust by
mail to each Holder of Preferred Securities and Common Securities to be
redeemed or exchanged not less than 20 nor more than 45 Business Days prior
to the date fixed for redemption or distribution thereof. For purposes of
the calculation of the date of redemption or exchange and the dates on
which notices are given pursuant to this paragraph (e)(i), a
Redemption/Distribution Notice shall be deemed to be given on the day such
notice is first mailed by first-class mail, postage prepaid, to Holders of
Preferred Securities and Common Securities. Each Redemption/Distribution
Notice shall be addressed to the Holders of Preferred Securities and Common
Securities at the address of each such Holder appearing in the books and
records of the Trust. Such Redemption/Distribution Notice shall set forth
the aggregate liquidation amount of Trust Securities to be redeemed, the
date of such redemption or such distribution and, in the case of a Special
Event, a brief description thereof. No defect in the Redemption/
Distribution Notice or in the mailing of either thereof with respect to any
Holder shall affect the validity of the redemption or exchange proceedings
with respect to any other Holder.
(ii) In the event that fewer than all the outstanding Common
Securities are to be redeemed, the Common Securities to be redeemed will be
redeemed on a Pro Rata Basis from each Holder of Common Securities, and, in
the event Common Securities are held in book-entry only form by the
Clearing Agency or its nominee (or any successor Clearing Agency or its
nominee), the Clearing Agency will reduce on a Pro Rata Basis the amount of
the interest of each Clearing Agency Participant in the Common Securities
to be redeemed; provided that if, as a result of such redemption, Clearing
--------
Agency Participants would hold fractional interests in the Preferred
Securities, the Clearing Agency will adjust the amount of the interest of
each clearing Agency Participant to be redeemed to avoid such fractional
interests.
10
(iii) Payment of the Redemption Price in respect of each Common
Security, together with any accrued and unpaid Distributions thereon, is
conditioned upon delivery or book-entry transfer of such Common Security
(together with necessary endorsements) to the Property Trustee at any time
(whether prior to, on or after the relevant date of redemption) after the
Redemption/Distribution Notice is given (to the extent such notice is
required). Payment of the Redemption Price, together with any accrued and
unpaid Distributions on each Common Security, will be made by the delivery
of cash no later than the applicable date of redemption with respect to
such Common Security or, if later, the time of delivery or transfer of such
Common Security.
(iv) If the Trust gives a Redemption/Distribution Notice in
respect of a redemption of Common Securities as provided in this paragraph
4 (which notice will be irrevocable) then immediately prior to the close of
business on the redemption date, provided that Time Warner has paid to the
--------
Property Trustee in immediately available funds a sufficient amount of cash
in connection with the related redemption or maturity of the Subordinated
Debentures, Distributions will cease to accrue on the Common Securities
called for redemption, such Common Securities will no longer be deemed to
be outstanding and all rights of Holders of such Common Securities so
called for redemption will cease, except the right of the Holders of such
Common Securities to receive the Redemption Price, together with any
accrued and unpaid Distributions on the Common Securities being redeemed,
but without interest on such amount. Neither the Trustees nor the Trust
shall be required to register or cause to be registered the transfer of any
Common Securities which have been so called for redemption. If any date
fixed for redemption of Common Securities is not a Business Day, then
payment of the Redemption Price payable on such date, together with any
accrued and unpaid Distributions to such date, will be made on the next
succeeding day that is a Business Day (and without any interest or other
payment in respect of any such delay) except that, if such Business Day
falls in the next calendar year, such payment will be made on the
immediately preceding Business Day, in each case with the same force and
effect as if made on such date fixed for redemption. If payment of the
Redemption
11
Price in respect of Common Securities, together with any accrued and unpaid
Distributions on such Common Securities, is improperly withheld or refused
and not paid by the Property Trustee, Distributions on such Common
Securities will continue to accrue, from the original redemption date to
the date of payment, in which case the actual payment date will be
considered the date fixed for redemption for purposes of calculating the
Redemption Price and the amount of any such accrued and unpaid
Distributions.
(v) Upon the date of dissolution of the Trust and distribution
of Subordinated Debentures to the Holders of the Trust Securities as a
result of the occurrence of a Special Event, Common Security Certificates
shall be deemed to represent the Subordinated Debentures so distributed to
the Holders of Trust Securities, and the Common Securities will no longer
be deemed outstanding and may be canceled by the Regular Trustees. The
Subordinated Debentures so distributed shall have an aggregate principal
amount equal to the aggregate liquidation amount of the Common Securities
in respect of which the Subordinated Debentures shall have been so
distributed.
5. Voting Rights. (a) Except as provided under paragraph 5(b) below
--------------
and as otherwise required by law and the Declaration, the Holders of the Common
Securities will have no voting rights.
(b) (i) Except as provided in the Declaration with respect to a
Special Regular Trustee, Holders of Common Securities have the sole right under
the Declaration to increase or decrease the number of Trustees, and to appoint,
remove or replace a Trustee, any such increase, decrease, appointment, removal
or replacement to be approved by Holders of Common Securities representing a
Majority in aggregate liquidation amount of the Common Securities.
(ii) If any proposed amendment to the Declaration provides for, or
the Regular Trustees otherwise propose to effect (A) any action that would
adversely affect the powers, preferences or special rights of the Trust
Securities, whether by way of amendment to the Declaration or otherwise, or (B)
the liquidation, dissolution, winding-up or termination of the Trust, other than
in connection with the distribution of Subordinated Debentures held by the
Property Trustee, upon the occurrence of a Special Event or
12
in connection with the redemption of Common Securities as a consequence of a
redemption of Subordinated Debentures, then the Holders of outstanding Trust
Securities will be entitled to vote on such amendment or proposal as a class and
such amendment or proposal shall not be effective except with the approval of
the Holders of Trust Securities representing a Majority in aggregate liquidation
amount of such securities affected thereby; provided, however, (1) if any
-------- -------
amendment or proposal referred to in clause (A) above would adversely affect
only the Preferred Securities or the Common Securities, then only the affected
class will be entitled to vote on such amendment or proposal and such amendment
or proposal shall not be effective except with the approval of a Majority in
aggregate liquidation amount of such class of Trust Securities, (2) the rights
of Holders of Common Securities under Article V of the Declaration to increase
or decrease the number of, and to appoint, replace or remove, Trustees (other
than a Special Regular Trustee) shall not be amended without the consent of each
Holder of Common Securities and (3) amendments to the Declaration shall be
subject to such further requirements as are set forth in Sections 12.01 and
12.02 of the Declaration.
(iii) In the event the consent of the Property Trustee as the holder
of the Subordinated Debentures, is required under the Indenture with respect to
any amendment, modification or termination of the Indenture or the Subordinated
Debentures, the Property Trustee shall request the written direction of the
Holders of the Trust Securities with respect to such amendment, modification or
termination. The Property Trustee shall vote with respect to such amendment,
modification or termination as directed by a Majority in aggregate liquidation
amount of the Trust Securities voting together as a single class; provided that
--------
where such amendment, modification or termination of the Indenture or the
Subordinated Debentures requires the consent or vote of (1) holders of
Subordinated Debentures representing a specified percentage greater than a
majority in principal amount of the Subordinated Debentures or (2) each holder
of Subordinated Debentures, the Property Trustee may only vote with respect to
that amendment, modification or termination as directed by, in the case of
clause (1) above, the vote of Holders of Trust Securities representing such
specified percentage of the aggregate liquidation amount of the Trust
Securities, or, in the case of clause (2) above, each Holder of Trust
Securities; and provided further, that the Property Trustee shall not take any
----------------
action in accordance with the directions of the Holders
13
of the Trust Securities unless the Property Trustee shall have received, at the
expense of the Sponsor, an opinion of nationally recognized independent tax
counsel experienced in such matters to the effect that, as a result of such
action, Time Warner Capital will not fail to be classified as a grantor trust
for United States Federal income tax purposes.
(iv) Subject to Section 2.06 of the Declaration, and the provisions
of this and the next succeeding paragraph, the Holders of a Majority in
aggregate liquidation amount of the Common Securities, voting separately as a
class, shall have the right to (A) on behalf of all Holders of Common
Securities, waive any past default that is waivable under the Declaration
(subject to, and in accordance with the Declaration) and (B) direct the time,
method, and place of conducting any proceeding for any remedy available to the
Property Trustee, or to direct the exercise of any trust or power conferred upon
the Property Trustee under the Declaration, including the right to direct the
Property Trustee, as holder of the Subordinated Debentures, to (1) direct the
time, method and place of conducting any proceeding for any remedy available to
the Indenture Trustee, or exercising any trust or power conferred on the
Indenture Trustee with respect to the Subordinated Debentures, (2) waive any
past default and its consequences that is waivable under Section 5.13 of the
Indenture, or (3) exercise any right to rescind or annul a declaration that the
principal of all the Subordinated Debentures shall be due and payable; provided
--------
that where the taking of any action under the Indenture requires the consent or
vote of (x) holders of Subordinated Debentures representing a specified
percentage greater than a majority in principal amount of the Subordinated
Debentures or (y) each holder of Subordinated Debentures, the Property Trustee
may only take such action if directed by, in the case of clause (x) above, the
vote of Holders of Common Securities representing such specified percentage of
the aggregate liquidation amount of the Common Securities, or, in the case of
clause (y) above, each Holder of Common Securities. Pursuant to this paragraph,
the Property Trustee shall not revoke, or take any action inconsistent with, any
action previously authorized or approved by a vote of the Holders of the
Preferred Securities, and shall not take any action in accordance with the
direction of the Holders of the Common Securities under this paragraph if the
action is prejudicial to the Holders of Preferred Securities. The Property
Trustee shall not take any of the
14
foregoing actions at the direction of the Holders of Common Securities unless
the Property Trustee shall have received, at the expense of the Sponsor, an
opinion of nationally recognized independent tax counsel experienced in such
matters to the effect that, as a result of such action, Time Warner Capital will
not fail to be classified as a grantor trust for United States Federal income
tax purposes.
(c) (i) Notwithstanding any other provision of these terms, each
Holder of Common Securities will be deemed to have waived any Event of Default
with respect to the Common Securities and its consequences until Events of
Default with respect to the Preferred Securities have been cured, waived by the
Holders of Preferred Securities as provided in the Declaration or otherwise
eliminated, and until all Events of Default with respect to the Preferred
Securities have been so cured, waived by the Holders of Preferred Securities or
otherwise eliminated, the Property Trustee will be deemed to be acting solely on
behalf of the Holders of Preferred Securities and only the Holders of the
Preferred Securities will have the right to direct the Property Trustee in
accordance with the terms of the Declaration or of the Trust Securities. In the
event that any Event of Default with respect to the Preferred Securities is
waived by the Holders of Preferred Securities as provided in the Declaration,
the Holders of Common Securities agree that such waiver shall also constitute
the waiver of such Event of Default with respect to the Common Securities for
all purposes under the Declaration without any further act, vote or consent of
the Holders of the Common Securities.
(ii) A waiver of an Indenture Event of Default by the Property
Trustee at the direction of the Holders of the Preferred Securities will
constitute a waiver of the corresponding Event of Default under the Declaration
in respect of the Trust Securities.
(d) Any required approval of Holders of Common Securities may be
given at a separate meeting of Holders of Common Securities convened for such
purpose, at a meeting of all of the Holders of Trust Securities or pursuant to
written consent. The Regular Trustees will cause a notice of any meeting at
which Holders of Common Securities are entitled to vote, or of any matter upon
which action by written consent of such Holders is to be taken, to be mailed to
each Holder of record of Common Securities. Each such
15
notice will include a statement setting forth (i) the date of such meeting or
the date by which such action is to be taken, (ii) a description of any
resolution proposed for adoption at such meeting on which such Holders are
entitled to vote or of such matter upon which written consent is sought and
(iii) instructions for the delivery of proxies or consents.
(e) No vote or consent of the Holders of Common Securities will be
required for the Trust to redeem and cancel Common Securities in accordance with
the Declaration.
6. Pro Rata Treatment. A reference in these terms of the Common
-------------------
Securities to any payment, distribution or treatment as being made on a "Pro
Rata Basis" shall mean, with respect to such payment, distribution or treatment,
pro rata to each Holder of Trust Securities according to the aggregate
liquidation amount of the Trust Securities held by such Holder in relation to
the aggregate liquidation amount of all Trust Securities outstanding; provided,
--------
however, that if the assets of the Trust are insufficient to make such payment
- -------
in full as a result of a default with respect to the Subordinated Debentures,
any funds available to make such payment shall be paid (a) first to each Holder
of the Preferred Securities pro rata according to the aggregate liquidation
amount of Preferred Securities held by such Holder in relation to the aggregate
liquidation amount of all Preferred Securities outstanding up to an aggregate
amount equal to the amount then owed to the Holders of the Preferred Securities,
and (b) only after satisfaction of all amounts owed to the Holders of the
Preferred Securities, to each Holder of Common Securities pro rata according to
the aggregate liquidation amount of Common Securities held by such Holder in
relation to the aggregate liquidation amount of all Common Securities
outstanding.
7. Ranking. The Common Securities rank pari passu, and payments will
-------- ---- -----
be made thereon on a Pro Rata Basis with, the Preferred Securities, except that
if, as a result of an Event of Default with respect to the Subordinated
Debentures, the assets of the Trust are insufficient to make payments of
Distributions or payments upon liquidation, redemption of the Trust Securities
or otherwise, the rights of Holders of the Common Securities to receive such
payments will be subordinated to the rights of the Holders of the Preferred
Securities.
16
8. Mergers, Consolidations or Amalgamations. The Trust may not
-----------------------------------------
consolidate, amalgamate, merge with or into, or be replaced by, or convey,
transfer or lease its properties and assets to, any corporation or other body.
9. Transfers, Exchanges, Method of Payments. Payment of
-----------------------------------------
Distributions and payments on redemption of the Common Securities or on
dissolution of the Trust will be payable, the transfer of the Common Securities
will be registrable, and Common Securities will be exchangeable for Common
Securities of other denominations of a like aggregate liquidation amount, at the
principal corporate trust office of the Property Trustee in The City of New
York; provided that payment of Distributions may be made at the option of the
Regular Trustees on behalf of the Trust by check mailed to the address of the
persons entitled thereto and that the payment on redemption of any Common
Security or on dissolution of the Trust will be made only upon surrender of such
Common Security to the Property Trustee. Notwithstanding the foregoing,
transfers of Common Securities are subject to conditions set forth in Section
9.01(c) of the Declaration.
10. Acceptance of Indenture and Certain Other Matters. Each Holder
--------------------------------------------------
of Common Securities, by the acceptance thereof, agrees (a) to the provisions of
the Indenture and the Subordinated Debentures, including the subordination
provisions thereof and (b) to treat the Subordinated Debentures as debt
instruments for United States Federal, state and local income and franchise tax
purposes and not to take any contrary position before any taxing authority or on
any tax return.
11. No Preemptive Rights. The Holders of Common Securities shall
---------------------
have no preemptive rights to subscribe to any additional Common Securities or
Preferred Securities.
12. Miscellaneous. These terms shall constitute a part of the
--------------
Declaration. The Regular Trustees will provide a copy of the Declaration and
the Indenture to a Holder without charge on written request to the Trust at its
principal place of business.
Annex I
TRANSFER OF THIS CERTIFICATE
IS SUBJECT TO THE CONDITIONS
SET FORTH IN THE DECLARATION
REFERRED TO BELOW
Certificate Number Number of Common Securities
C-1
Certificate Evidencing Common Securities
of
Time Warner Capital I
[ ]% Common Securities
Time Warner Capital I, a statutory business trust formed under the
laws of the State of Delaware (the "Trust"), hereby certifies that [
] (the "Holder") is the registered owner of ( ) common securities of
the Trust representing undivided beneficial interests in the assets of the Trust
designated the [ ]% Common Securities (the "Common Securities"). The Common
Securities are transferable on the books and records of the Trust, in person or
by a duly authorized attorney, upon surrender of this certificate duly endorsed
and in proper form for transfer and satisfaction of the other conditions set
forth in the Declaration (as defined below) including, without limitation
Section 9.01(c) thereof. The designations, rights, privileges, restrictions,
preferences and other terms and provisions of the Common Securities are set
forth in, and this certificate and the Common Securities represented hereby are
issued and shall in all respects be subject to the terms and provisions of, the
Amended and Restated Declaration of Trust of the Trust dated as of [
], 1995, as the same may be amended from time to time (the "Declaration")
including the designation of the terms of Common Securities as set forth in
Exhibit C thereto. The Common Securities and the Preferred Securities issued by
the Trust pursuant to the Declaration represent undivided beneficial interests
in the assets of the Trust, including the Subordinated Debentures (as defined in
the Declaration) issued by Time Warner Inc., a Delaware corporation, to the
Trust pursuant to the Indenture referred
2
to in the Declaration. The Regular Trustees will furnish a copy of the
Declaration and the Indenture to the Holder without charge upon written request
to the Trust at its principal place of business or registered office.
The Holder of this Certificate, by accepting this Certificate, is
deemed to have agreed to the terms of the Indenture and the Subordinated
Debentures, including that the Subordinated Debentures are subordinate and
junior in right of payment to all Senior Indebtedness (as defined in the
Indenture, which term includes Time Warner's outstanding 8-3/4% Convertible
Subordinated Debentures due 2015) as and to the extent provided in the
Indenture.
Upon receipt of this certificate, the Holder is bound by the
Declaration and is entitled to the benefits thereunder.
IN WITNESS WHEREOF, Trustees of the Trust have executed this
certificate this day of , 1995.
TIME WARNER CAPITAL I,
By ___________________, as trustee
Name:
Title: Trustee
By ____________________, as trustee
Name:
Title: Trustee
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)