SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported):
September 6, 1996
TIME WARNER INC.
(Exact name of registrant as specified in its charter)
Delaware 1-8637 13-1388520
(State or other jurisdiction (Commission (I.R.S. Employer
of incorporation) File Number) Identification No.)
75 Rockefeller Plaza, New York, NY 10019
(Address of principal executive offices) (zip code)
(212) 484-8000
(Registrant's telephone number, including area code)
Not Applicable
(Former name or former address, if changed since last report)
Item 5. Other Events.
Amendments to TBS Transaction.
As previously reported, Time Warner Inc. ("Time Warner"),
TW Inc., a Delaware corporation and currently a wholly owned
subsidiary of Time Warner ("New Time Warner"), Time Warner
Acquisition Corp., a Delaware corporation and a wholly owned
subsidiary of New Time Warner ("Delaware Sub"), TW Acquisition
Corp., a Georgia corporation and a wholly owned subsidiary of
New Time Warner ("Georgia Sub"), and Turner Broadcasting
System, Inc. ("TBS") have entered into an Amended and Restated
Agreement and Plan of Merger (the "Merger Agreement") dated as
of September 22, 1995, pursuant to which (a) Delaware Sub will
be merged (the "Time Warner Merger") into Time Warner, (b)
each outstanding share of Common Stock, par value $1.00 per
share, of Time Warner, other than shares held directly or
indirectly by Time Warner, will be converted into one share of
Common Stock, par value $.01 per share, of New Time Warner
("New Time Warner Common Stock"), (c) each outstanding share
of each series of preferred stock of Time Warner, other than
shares held directly or indirectly by Time Warner and shares
with respect to which appraisal rights are properly exercised,
will be converted into one share of a substantially identical
series of preferred stock of New Time Warner, (d) Georgia Sub
will be merged (the "TBS Merger", and together with the Time
Warner Merger, the "Holding Company Transaction") into TBS,
(e) each outstanding share of Class A Common Stock, par value
$.0625 per share, of TBS ("TBS Class A Common Stock") and
Class B Common Stock, par value $.0625 per share, of TBS ("TBS
Class B Common Stock"), other than shares held directly or
indirectly by Time Warner or New Time Warner or in the
treasury of TBS and shares with respect to which dissenters'
rights are properly exercised, will be converted into 0.75 of
a share of New Time Warner Common Stock, (f) each outstanding
share of Class C Preferred Stock, par value $.125 per share,
of TBS ("TBS Class C Preferred Stock"), other than shares held
directly or indirectly by Time Warner or New Time Warner or in
the treasury of TBS and shares with respect to which
dissenters' rights are properly exercised, will be converted
into 4.80 shares of New Time Warner Common Stock, (g) each of
Time Warner and TBS will become a wholly owned subsidiary of
New Time Warner and (h) New Time Warner will be renamed "Time
Warner Inc." A copy of the Merger Agreement is attached as
Exhibit 2(a) to Time Warner's Current Report on Form 8-K dated
December 1, 1995, and incorporated herein by reference.
The Holding Company Transaction was subject to extensive
scrutiny by the staff of the Federal Trade Commission (the
"FTC") and, in order to eliminate concerns raised by the staff
of the FTC regarding possible competitive effects of the
Holding Company Transaction, Time Warner, TBS, Tele-
Communications, Inc. ("TCI"), and Liberty Media Corporation
("LMC"), a wholly owned subsidiary of TCI, have executed the
Agreement Containing Consent Order (together with the Interim
Agreement contemplated thereby, the "FTC Consent Decree")
dated August 14, 1996, and have submitted the FTC Consent
Decree to the commissioners of the FTC. The FTC commissioners
have not yet initially accepted the FTC Consent Decree, which
requires that certain changes be made to the terms of the
Holding Company Transaction and related transactions. The
obligations of Time Warner, TBS and TCI to consummate the
Holding Company Transaction are conditioned upon such initial
acceptance. In response to the FTC Consent Decree, Time
Warner, New Time Warner, Delaware Sub, Georgia Sub and TBS
have entered into Amendment No. 1, dated as of August 8, 1996,
to the Merger Agreement. A copy of such Amendment No. 1 is
attached as Exhibit 2(a) hereto and incorporated herein by
reference. The Merger Agreement, as amended by such Amendment
No. 1, is referred to herein as the "Amended Merger
Agreement". A copy of the FTC Consent Decree is attached as
Exhibit 2(b) hereto and incorporated herein by reference.
Time Warner has entered into a Shareholders' Agreement
dated as of September 22, 1995 (the "Shareholders'
Agreement"), with R. E. Turner ("Turner") and certain
associates and affiliates of Turner (together with Turner, the
"Turner Shareholders"), a copy of which is attached as Exhibit
10(a) to Time Warner's Current Report on Form 8-K dated
September 22, 1995, and incorporated herein by reference. In
August 1996, Time Warner and New Time Warner entered into a
Second Amended and Restated LMC Agreement dated as of
September 22, 1995, with LMC and certain direct and indirect
wholly owned subsidiaries of LMC (the "Second Amended and
Restated LMC Agreement"), a copy of which is attached as
Exhibit 10(a) hereto and incorporated herein by reference.
Pursuant to the Shareholders' Agreement, the Turner
Shareholders have agreed to vote all their TBS shares in favor
of the approval of the TBS Merger and each of the other
transactions contemplated by the Amended Merger Agreement and
in favor of the approval and adoption of the Amended Merger
Agreement. In addition, pursuant to the Amended Merger
Agreement and the Shareholders' Agreement, New Time Warner and
the Turner Shareholders have agreed that, upon consummation of
the Holding Company Transaction, New Time Warner and the
Turner Shareholders will enter into Investors' Agreements and
a Registration Rights Agreement (the forms of which are
attached as Exhibits C-1 and C-2 and B, respectively, to the
Merger Agreement and incorporated herein by reference),
pursuant to which (a) Turner will, subject to certain
conditions, be entitled to designate two people for election
to the Board of Directors of New Time Warner, (b) certain of
the Turner Shareholders will be subject to certain
restrictions on transfer of New Time Warner Common Stock and
certain restrictions on other activities relating to New Time
Warner and (c) New Time Warner will grant to the Turner
Shareholders rights to require the registration of sales of
shares of New Time Warner Common Stock received in the TBS
Merger under the Securities Act of 1933, as amended (the
"Securities Act").
Pursuant to the Second Amended and Restated LMC
Agreement, LMC and certain of its subsidiaries have agreed,
subject to certain conditions, to vote all their TBS shares in
favor of the approval of the TBS Merger and each of the other
transactions contemplated by the Amended Merger Agreement and
in favor of the approval and adoption of the Amended Merger
Agreement. Time Warner has agreed with LMC that Time Warner
will terminate the Amended Merger Agreement and abandon the
Holding Company Transaction under certain circumstances,
including (a) the imposition by any regulatory authority of
certain restrictions or burdens on LMC and its affiliates as a
condition to approval of the Holding Company Transaction and
related transactions (other than the FTC Consent Decree) and
(b) if New Time Warner adopts a stockholder rights agreement
and such agreement differs from the Time Warner stockholder
rights agreement in any material respect except as set forth
in Exhibit F to the Second Amended and Restated LMC Agreement,
which is incorporated herein by reference.
In addition, the Second Amended and Restated LMC
Agreement contemplates that substantially all the shares of
New Time Warner Common Stock issued in the TBS Merger to LMC
and its affiliates will be exchanged for shares of a series of
common stock of New Time Warner ("LMCN-V Common Stock")
economically equivalent to the New Time Warner Common Stock at
a ratio of one share of New Time Warner Common Stock for each
share of LMCN-V Common Stock. The terms of the LMCN-V Common
Stock are set forth in the form of certificate of designation
for such security, which is attached as Exhibit A to the
Second Amended and Restated LMC Agreement and incorporated
herein by reference. The LMCN-V Common Stock is the economic
equivalent of the New Time Warner Common Stock, with identical
rights, except it carries only 1/100th of a vote per share
with respect to the election of directors, is not entitled to
vote with respect to any other matter (with limited
exceptions) and may not be redeemed by New Time Warner
pursuant to Section 5 of Article IV of the proposed Restated
Certificate of Incorporation of New Time Warner (which will be
substantially identical to Section 5 of Article IV of the
Restated Certificate of Incorporation of Time Warner, as
amended to date). Subject to the FTC Consent Decree, the
LMCN-V Common Stock is convertible at the option of the holder
thereof into New Time Warner Common Stock on a one-for-one
basis and is mandatorily convertible upon transfer.
Pursuant to the Second Amended and Restated LMC
Agreement, if the Holding Company Transaction is consummated,
New Time Warner or TBS, on the one hand, and LMC or one of its
subsidiaries, on the other hand, will enter into certain other
agreements, and additional agreements between TBS and LMC will
take effect. These agreements include:
(a) a Stockholders' Agreement among New Time Warner,
the Turner Shareholders, LMC and certain subsidiaries of
LMC, pursuant to which Turner and the Turner-related
stockholders, on the one hand, and LMC and the
LMC-related stockholders, on the other hand, grant first
to the other group and then to New Time Warner a right of
first refusal with respect to dispositions of voting
securities of New Time Warner (the form of the
Stockholders' Agreement is attached as Exhibit B to the
Second Amended and Restated LMC Agreement and
incorporated herein by reference);
(b) an SSSI Agreement, pursuant to which (i) New
Time Warner will issue to Southern Satellite Systems,
Inc. ("SSSI"), a wholly owned subsidiary of LMC,
4,166,667 shares of LMCN- V Common Stock and SSSI will
grant to New Time Warner an option (the "SSSI Option") to
cause to become effective a distribution contract (the
"Distribution Contract") pursuant to which SSSI will
provide uplinking and distribution services for WTBS in
the event WTBS acquires national broadcast rights to all
of its programming and becomes a copyright-paid cable
television programming service, enabling WTBS to charge a
subscription fee to cable operators and to sell local
advertising time without any obligation on the part of
the cable operators to make cable compulsory license
payments under the Copyright Act (the "WTBS Conversion"),
and (ii) New Time Warner will issue to LMC 833,333 shares
of LMCN-V Common Stock and will pay to LMC an additional
approximately $67 million (payable, at New Time Warner's
option, in cash or additional shares of LMCN-V Common
Stock) and LMC will agree not to compete with the
business of SSSI (the form of the SSSI Agreement is
attached as Exhibit D to the Second Amended and Restated
LMC Agreement and incorporated herein by reference);
(c) a Program Agreement between TCI and TBS relating
to the mandatory carriage after the consummation of the
Mergers by TCI-affiliated cable systems of WTBS (after
the WTBS Conversion) and Headline News, rebates available
to TCI-affiliated cable systems for carriage of TBS
programming services (conditional upon TCI remaining one
of the two largest domestic distributors of TBS
programming services), incentive payments in 1999 and
2003 for TCI to remain one of the two largest domestic
distributors of TBS programming services, and other
related matters;
(d) an LMC Registration Rights Agreement, pursuant
to which New Time Warner will grant to LMC rights to
require the registration under the Securities Act of
sales of New Time Warner Common Stock received in the TBS
Merger or pursuant to the SSSI Agreement, or upon
conversion of LMCN-V Common Stock so received (the form
of the LMC Registration Rights Agreement is attached as
Exhibit E to the Second Amended and Restated LMC
Agreement and incorporated herein by reference);
(e) a SportSouth Stock Purchase Agreement, pursuant
to which TBS has agreed to sell its interest in the
SportSouth Network, a regional sports cable network, to
LMC for an amount currently estimated at approximately
$65 million;
(f) a Sunshine Option Agreement, pursuant to which
Time Warner Entertainment Company, L.P. ("TWE"), will
grant to LMC an option to purchase the interests of TWE
and certain of its affiliates in the Sunshine Network, a
Florida-based sports cable network, for $14 million; and
(g) Pay-Per-View Output Agreements between certain
TBS subsidiaries, on the one hand, and certain affiliates
of TCI, on the other hand, providing for the licensing of
all motion pictures theatrically released during the term
of the agreement by the TBS motion picture studios for
exhibition, on a non-exclusive basis, on pay-per-view
services owned by such TCI affiliates.
Pursuant to the Second Amended and Restated LMC
Agreement, New Time Warner has agreed that, under certain
circumstances, if LMC or any of its controlled affiliates
(and, for so long as LMC is a controlled affiliate of TCI, TCI
and each controlled affiliate of TCI) and certain permitted
transferees of the LMCN-V Common Stock issued pursuant to the
Second Amended and Restated LMC Agreement is required as a
result of certain actions taken by New Time Warner (including
certain actions amending any New Time Warner Stockholder
Rights Agreement) to dispose of shares of New Time Warner or
suffer certain other adverse consequences by reason of
continued ownership of shares of New Time Warner, New Time
Warner will indemnify such person for certain income tax
liabilities incurred in the disposition of shares of New Time
Warner.
In connection with the execution of Amendment No. 1 to
the Merger Agreement and the Second Amended and Restated LMC
Agreement, Time Warner, TBS, TCI and LMC agreed to eliminate
the following agreements:
(a) the Voting Trust, under which New Time Warner
Common Stock held by LMC would have been placed in a
voting trust and would have been voted by Gerald M.
Levin, Chairman and Chief Executive Officer of Time
Warner;
(b) Time Warner's option to acquire the interest of
LMC in TBS prior to the consummation of the Holding
Company Transaction;
(c) the Option Agreement, pursuant to which New Time
Warner would have been granted an option to purchase
SSSI; and
(d) the Program Services Agreement and the Carriage
Agreement, relating to the mandatory carriage by
TCI-affiliated cable systems of TBS programming services.
The Holding Company Transaction remains subject to the
approval of the stockholders of Time Warner, the approval of
the shareholders of TBS, initial acceptance of the FTC Consent
Decree and all necessary approvals of the Federal
Communications Commission. Time Warner currently expects that
the Holding Company Transaction will be consummated early in
the fourth quarter of 1996.
FTC Consent Decree.
The material provisions of the FTC Consent Decree are
described below. All these provisions will terminate on the
tenth anniversary of final acceptance thereof by the FTC and
apply only in the United States.
TCI/LMC Equity Interest in New Time Warner. TCI and its
affiliates will not be permitted to hold voting securities of New
Time Warner (other than securities, such as LMCN-V Common Stock,
that have limited voting rights). In addition, TCI and its
affiliates will not be permitted to hold more than the lesser of
(a) 9.2% of the outstanding New Time Warner Common Stock
(calculated on a fully diluted basis) and (b) 12.4% of the
outstanding common stock of New Time Warner (calculated on an
actual oustanding basis), without the prior approval of the FTC.
TCI will be required under the FTC Consent Decree to use its
best efforts to obtain a ruling (the "Letter Ruling") from the
Internal Revenue Service to the effect that a distribution by TCI
of all the stock of SSSI, which at the time of such distribution
will hold, directly and indirectly, substantially all of TCI's
interest in New Time Warner arising out of consummation of the
Mergers, to holders of the Liberty Media Group Common Stock
issued by TCI would be a non-taxable transaction under Section
355 of the Internal Revenue Code. If the Letter Ruling is
obtained, TCI will implement such distribution within 30 days
after making regulatory filings. If such distribution takes
place, Mr. Robert Magness, Dr. John C. Malone and Kearns-Tribune
Corporation (together, the "TCI Control Shareholders") will
exchange all of the shares of SSSI they receive in such
distribution for a convertible preferred security of SSSI that
will have limited voting rights in SSSI. TCI's officers,
directors and employees (including the TCI Control Shareholders)
will be prohibited from communicating with the management of
SSSI, except on those limited matters on which the TCI Control
Shareholders are entitled to vote. Following such distribution,
SSSI will be prohibited from holding more than 14.99% of the
outstanding New Time Warner Common Stock (calculated on a fully
diluted basis), and from holding New Time Warner securities with
voting rights (other than securities, such as LMCN-V Common
Stock, that have limited voting rights). The restrictions
described in the immediately preceding sentence will terminate if
the TCI Control Shareholders hold no more than 0.1% of the
ownership interest and the voting power of SSSI or if the TCI
Control Shareholders hold no more than 0.1% of the ownership
interest and the voting power of both of TCI and LMC. Following
such distribution, TCI will not be permitted to purchase more
than the lesser of (a) an additional 1% of the New Time Warner
Common Stock (calculated on a fully diluted basis) and (b) 1.35%
of the outstanding common stock of New Time Warner (calculated on
an actual outstanding basis), without the prior approval of the
FTC.
Program Carriage Agreements. Prior to six months after
the consummation of the Holding Company Transaction, New Time
Warner and TCI will not be permitted to enter into any new
agreement providing for the mandatory analog carriage by TCI
cable systems on their analog tiers of any video programming
service offered by TBS (other than WTBS (after the WTBS
Conversion) and Headline News), and any such mandatory
carriage agreement entered into thereafter will be limited in
effective duration to five years.
Anti-bundling Provision. New Time Warner will not be
permitted to condition the availability or terms of providing
its HBO video programming service to any multi-channel video
programming distributor ("MVPD") on whether that MVPD or any
other MVPD agrees to carry any national video programming
service offered by TBS. New Time Warner will not be permitted
to condition the availability or terms of providing CNN, TNT
or WTBS to any MVPD on whether that MVPD or any other MVPD
agrees to carry any national video programming service offered
by TWE.
Price Discrimination Provision. New Time Warner will be
prohibited from discriminating, in certain respects, against
MVPDs having geographical overlap with New Time Warner's cable
systems in the terms upon which TBS programming services are
made available to such MVPDs in the relevant geographical
overlap area.
Programming Foreclosure Provision. New Time Warner will
be prohibited generally from requiring a financial interest in
any national video programming service as a condition for
carriage or otherwise improperly discriminating against
unaffiliated national video programming vendors in the
provision of access to New Time Warner's cable systems.
New Time Warner will be required to collect, on a
quarterly basis, certain information relating to the terms
under which New Time Warner cable systems carry national video
programming services, including information relating to
pricing, commitments, if any, to a roll-out schedule and
penetration rates. This information is to be provided to each
member of the Management Committee of TWE on a quarterly
basis.
By February 1, 1997, New Time Warner will be required to
enter into a programming service agreement with at least one
nationally significant advertising-supported news and
informational national video programming service not
affiliated with New Time Warner. Under the terms of the FTC
Consent Decree, New Time Warner will be required to carry such
national video programming service in accordance with a
roll-out schedule incorporated in the FTC Consent Decree.
To the extent applicable to New Time Warner, the
foregoing provisions are generally consistent with existing
legal requirements or Time Warner's existing business
practices and will not impose undue financial burdens on New
Time Warner and, accordingly, Time Warner does not believe
that these provisions will have an adverse effect on the
businesses of Time Warner and TBS following consummation of
the Holding Company Transaction.
If the FTC does not initially accept the FTC Consent
Decree, the FTC may seek to enjoin the consummation of the
Transaction. If the FTC does initially accept the FTC Consent
Decree, the FTC will publish the FTC Consent Decree for public
comment for a period of 60 days. If the FTC does not finally
accept the FTC Consent Decree after the period for public
comment, the FTC could take such action under the antitrust
laws as it deems necessary or desirable in the public
interest, including seeking the divestiture of substantial
assets of TBS or its subsidiaries or of Time Warner or its
subsidiaries. If the FTC does finally accept the FTC Consent
Decree, the FTC Consent Decree will terminate on the tenth
anniversary of such final acceptance.
Item 7. Financial Statements and Exhibits.
(c) Exhibits:
(i) Exhibit 2(a): Amendment No. 1 dated as of August 8,
1996, to the Amended and Restated Agreement and Plan of
Merger dated as of September 22, 1995, among Time Warner
Inc., TW Inc., Time Warner Acquisition Corp., TW
Acquisition Corp., and Turner Broadcasting System, Inc.
(ii) Exhibit 2(b): Agreement Containing Consent Order
dated August 14, 1996, among Time Warner Inc., Turner
Broadcasting System, Inc., Tele-Communications, Inc.,
Liberty Media Corporation and the Federal Trade
Commission.
(iii) Exhibit 10(a): Second Amended and Restated LMC
Agreement dated as of September 22, 1995, among Time
Warner Inc., TW Inc., Liberty Media Corporation, TCI
Turner Preferred, Inc., Communication Capital Corp. and
United Cable Turner Investment, Inc.
SIGNATURE
Pursuant to the requirements of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly
authorized, in the City of New York, State of New York, on
September 6, 1996.
TIME WARNER INC.,
By:
------------------------
Name: Peter R. Haje
Title: Executive Vice President
EXHIBIT INDEX
Sequential
Exhibit No. Description of Exhibit Page Number
2(a) Amendment No. 1 dated as of
August 8, 1996, to the Amended
and Restated Agreement and
Plan of Merger dated as of
September 22, 1995, among Time
Warner Inc., TW Inc., Time
Warner Acquisition Corp., TW
Acquisition Corp. and Turner
Broadcasting System, Inc.
2(b) Agreement Containing Consent
Order dated August 14, 1996,
among Time Warner Inc., Turner
Broadcasting System, Inc.,
Tele-Communications, Inc.,
Liberty Media Corporation and
the Federal Trade Commission.
10(a) Second Amended and Restated
LMC Agreement dated as of
September 22, 1995, among Time
Warner Inc., TW Inc., Liberty
Media Corporation, TCI Turner
Preferred, Inc., Communication
Capital Corp. and United Cable
Turner Investment, Inc.