00-24
Federal Communications Commission
Washington, DC 20554
FCC 394
Approved By OMB
3060-0573
APPLICATION FOR FRANCHISE AUTHORITY
CONSENT TO ASSIGNMENT OR TRANSFER OF CONTROL
OF CABLE TELEVISION FRANCHISE
FOR FRANCHISE AUTHORITY USE ONLY
SECTION I. GENERAL INFORMATION
: 1. Community Unit Identification Number:
DATE:
02/11/2000
2. Application f~r:
,i
Assignment of Franchise
FL0492
n
i~ Transfer of Control
3. Franchising Authority: Clearwater, Cit
4. Identify community where the system/franchise that is the subject of the assignment or transfer of control is located:
Clearwater, City
5. Date system was acquired or (for system's constructed by the transferor/assignor) the date on
which service was provided to the first subscriber in the-franchise area:
No longer applicable
6. Proposed effective date of closing of the transaction assigning or transferring ownership of the
system to transferee/assignee:
As soon as practicable
7. Attach as an Exhibit a schedule of any and all additional information or material filed with this
application that is identified in the franchise as required to be provided to the franchising
authority when requesting its approval of the type of transaction that is the subject of this
application.
Exhibit No.
PART I - TRANSFEROR/ASSIGNOR
1. Indicate the name, mailing address, and telephone number of the transferor/assignor.
Legal name of Transferor/Assignor (if individual, list last name first)
Time Warner Inc.
Assumed name used for doing business (if any)
c/o Time Warner Cable
Mailing street address or P.O. Box
State
! ZIP Code I Telephone No. (include area code)
CT
06904-2210 (203) 328-0600
2.(a) Attach as an Exhibit a copy of the contract or agreement that provides for the assignment or
transfer of control (including any exhibits or schedules thereto necessary in order to understand the
terms thereof). If there is only an oral agreement, reduce the terms to writing and attach.
(Confidential trade, business, pricing or marketing information, or other information not otherwise
publicly available, may be redacted).
Exhibit No.
2
(b) Does the contract submitted in response to (a) above embody the full and complete agreement
between the transferor/assignor and the transferee/assignee?
If No, explain in an Exhibit.
I X I Yes [J No
Exhibit No.
N/A
FCC 394 (Page 1)
September 1996
PART II - TRANSFEREE/ASSIGNEE
1. (a) Indicate the name, mailing address, and telephone number of the transferee/assignee.
Legal name ofTransferee/Assignee (if individual, list last name first)
AOL Time Warner Inc.
Assumed name used for doing business (if any)
C/O Time Warner Cable
Mailing street address or P.O. Box
290 Harbor Drive
City State ZI P Code Telephone No. (include area code)
Stamford CT 06902 (203) 328-0600
(b) Indicate the name, mailing address, and telephone number of person to contact, if other than transferee/assignee.
Name of contact person (list last name first)
Jeff McQuinn President
Firm or company name (if any)
Time Warner Communications - Tampa Bay Division
Mailing street address or P.O. Box
2600 McCormick Drive, Suite 255
City State ZIP Code Telephone No. (include area code)
Clearwater FL 33759 (727) 791-7730
(c) Attach as an Exhibit the name, mailing address, and telephone number of each additional person Exhibit No.
who should be contacted, if any. N/A
(d) Indicate the address where the system's records will be maintained.
Street Address
2600 McCormick Drive, Suite 255
City State ZI P Code
Clearwater FL 33759
2. Indicate on an attached exhibit any plans to change the current terms and conditions of service I
and operations of the system as a consequence of the transaction for which approval is sought. Exhibit No.
3
FCC 394 (Page 2) September 1996
SECTION II. TRANSFEREE'S/ASSIGNEE'S LEGAL QUALIFICATIONS
1. Transferee/Assignee is:
IX] Corporation
a. Jurisdiction of incorporation: d. Name and address of registered agent in
Delaware jurisdiction:
b. Date of incorporation: CT Corporation
Februarv 7 2000 111 8th Ave., 13th Floor
c. For profit or not-for-profit:
For Drafit New York NY 10011
o Limited Partnership
a. Jurisdiction in which formed: c. Name and address of registered agent in
jurisdiction:
b. Date of formation:
o
o
o
General Partnership
a. Jurisdiction whose laws govern formation:
b. Date of formation:
Individual
Other. Describe in an Exhibit.
Exhibit No.
N/A
2. List the transferee/assignee, and, if the transferee/assignee is not a natural person, each of its officers, directors, stockholders
beneficially holding more than 5% of the outstanding voting shares, general partners, and limited partners holding an equity interest
of more than 5%. Use only one column for each individual or entity. Attach additional pages if necessary. (Read carefully _ the
lettered items below refer to corresponding lines in the following table.)
(a) Name, residence, occupation or principal business, and principal place of business. (If other than an individual, also show name,
address and citizenship of natural person authorized to vote the voting securities of the applicant that it holds.) List the applicant
first, officers, next, then directors and, thereafter, remaining stockholders and/or partners.
(b) Citizenship.
(c) Relationship to the transferee/assignee (e.g., officer, director, etc.).
(d) Number of shares or nature of partnership interest.
(e) Number of votes.
(f) Percentage of votes.
(a) (See Attachment 1)
(b)
(c)
(d)
(e)
(f)
FCC 394 (Page 3)
September 1996
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3, If the applicant is a corporation or a limited partnership, is the transferee/assignee formed under the ~ Yes D No
laws of, or duly qualified to transact business in, the State or other jurisdiction in which the system
operates?
If the answer is No, explain in an Exhibit. Exhibit No.
4
4, Has the transferee/assignee had any interest in or in connection with an applicant which has been D Yes ~ No
dismissed or denied by any franchise authority?
If the answer is Yes. describe circumstances in an Exhibit. Exhibit No.
5
5. Has an adverse finding been made or an adverse final action been taken by any court or Ii] Yes D No
administrative body with respect to the transferee/assignee in a civil. criminal or administrative
proceeding, brought under the provisions of any law or regulation related to the following: any
felony; revocation, suspension or involuntary transfer of any authorization (including cable
franchises) to provide video programming services; mass media related antitrust or unfair
competition; fraudulent statements to another government unit; or employment discrimination?
If the answer is Yes, attach as an Exhibit a full description of the persons and matter(s) involved. Exhibit No.
including an identification of any court or administrative body and any proceeding (by dates and file 6
numbers, if applicable), and the disposition of such proceeding.
6. Are there any documents, instruments, contracts or understandings relating to ownership or future D Yes ~ No
ownership rights with respect to any attributable interest as described in Question 2 (including, but
not limited to, non-voting stock interests, beneficial stock ownership interests, options. warrants,
debentu res)? I I
Exhibit No.
If Yes, provide particulars in an Exhibit.
7. Do documents, instruments, agreements or understandings for the pledge of stock of the [i] Yes D No
transferee/assignee. as security for loans or contractual performance, provide that: (a) voting rights
will remain with the applicant, even in the event of default on the obligation; (b) in the event of
default, there will be either a private or public sale of the stock; and (c) prior to the exercise of any
ownership rights by a purchaser at a sale described in (b), any prior consent of the FCC and/or of the
franchising authority, if required pursuant to federal, state or local law or pursuant to the terms of
the franchise agreement will be obtained?
If No, attach as an Exhibit a full explanation. Exhibit No. 1
7
SECTION III. TRANSFEREE'S/ASSIGNEE'S FINANCIAL QUALIFICATIONS
1. The transferee/assignee certifies that it has sufficient net liquid assets on hand or available from Ii] Yes D No
committed resources to consummate the transaction and operate the facilities for three months.
2, Attach as an Exhibit the most recent financial statements, prepared in accordance with generally Exhibit No.
accepted accounting principles, including a balance sheet and income statement for at least one full 8
year, for the transferee/assignee or parent entity that has been prepared in the ordinary course of
business, if any such financial statements are routinely prepared. Such statements, if not otherwise
publicly available, may be marked CONFIDENTIAL and will be maintained as confidential by the
franchise authority and its agents to the extent permissible under local law.
SECTION IV. TRANSFEREE'S/ASSIGNEE'S TECHNICAL QUALIFICATIONS
Set forth in an Exhibit a narrative account of the transferee's/assignee's technical qualifications, experience Exhibit No.
and expertise regarding cable television systems, including. but not limited to. summary information about 9
appropriate management personnel that will be involved in the system's management and operations. The
transferee/assignee may, but need not. list a representative sample of cable systems currently or formerly
owned or operated.
FCC 394 (Page 4) September 1996
SECTION V - CERTIFICATIONS
Part I - Transferor/Assignor
All the statements made in the application and attached exhibits are considered material representations. and all the Exhibits
are a material part hereof and are incorporated herein as if set out in full in the application.
Signature
I CERTIFY that the statements in this application are true,
complete and correct to the best of my knowledge and belief and
are made in good faith.
Date
WILLFUL FALSE STATEMENTS MADE ON THIS FORM ARE
PUNISHABLE BY FINE AND/OR IMPRISONMENT. U.S. CODE, Print full name
TITLE 18. SECTION 1001. Spencer Hays
ChO a~::~::,~ classmeation: 0
General Partner
O Corporate Officer D
X Other. Explain:
(Indicate Title)
Vice President and Deputy General Counsel
Part II - Transferee/Assignee
All the statements made in the application and attached Exhibits are considered material representations. and all the Exhibits
are a material part hereof and are incorporated herein as if set out in full in the application.
The transferee/assignee certifies that he/she:
(a) Has a current copy of the FCC's Rules governing cable television systems.
(b) Has a current copy of the franchise that is the subject of this application, and of any applicable state laws or local
ordinances and related regulations.
(c) Will use its best efforts to comply with the terms of the franchise and applicable state laws or local ordinances and related
regulations. and to effect changes. as promptly as practicable. in the operation system. if any changes are necessary to cure
any violations thereof or defaults thereunder presently in effect or ongoing.
I CERTIFY that the statements in this application are true,
complete and correct to the best of my knowledge and belief and
are made in good faith.
s_~
Date
WILLFUL FALSE STATEMENTS MADE ON THIS FORM ARE
PUNISHABLE BY FINE AND/OR IMPRISONMENT. U.S. CODE, Print full name
TITLE 18, SECTION 1001. Thomas McEnerney
Check appropriate classification:
D Individual D
General Partner
~ Corporate Officer
~ (Indicate Title)
Vice President
D Other. Explain:
FCC 394 (Page 5)
September 1996
EXHIBIT 1
The applicable cable franchise does not specify any additional information or material that is
required to be provided to the franchising authority in connection with a transfer of control of the
franchise.
EXHIBIT 2
Attached hereto isthe Agreement and Plan of Merger ("Agreement") between America
Online, Inc, and Time Warner Inc., dated as of January 10,2000, including all associated exhibits.
The Agreement and exhibits embody the full and complete agreement between America Online,
Inc. and Time Warner Inc. with respect to their pending merger, and thus all documents necessary
in order to understand the terms of this transaction are being provided. Various schedules
referenced in the Agreement contain confidential trade, business, pricing or marketing
information, or other information not publicly available, and are not necessary in order to
understand the terms of this transaction, are thus are not required to be included. Nevertheless,
such documents are available for inspection by appropriate franchising authority officials at any
mutually convenient time and in a manner that ensures protection of confidentiality, by contacting
the individual listed in Part II, Section I, Question l(b) of this Form.
Pursuant to the Agreement, America Online, Inc. and Time Warner Inc, will each merge
into wholly-owned subsidiaries of a new Delaware corporation, AOL Time Warner Inc. Thus, as
a result of this merger of equals, AOL Time Warner Inc. will become the new ultimate parent of
both America Online, Inc. and Time Warner Inc. The Time Warner related entity that holds the
cable franchise for your community will remain in existence and will continue to be the franchise
holder and operator of your system, just as before.
EXECUTION COpy
AGREEMENT AND PLAN OF MERGER
DATED AS OF JANUARY 10,2000
BETWEEN
AMERICA ONLINE, INC.
AND
TIME WARNER INC.
00376~-~087-0226?-~J18ECH9-~GA
Exhibit
Exhibit A
Exhibit B
Exhibit C
Exhibit D-1
Exhibit D-2
Exhibit 6.11
Exhibit 7.2(c)(1)
Exhibit 7.2(c)(2)
Exhibit 7.2(c)(3)
LIST OF EXHIBITS
Title
Stock Option Agreement for Time Warner
Stock Option Agreement for America Online
Voting Agreement
Form of Restated Certificate of Incorporation of Holdco
Form of Bylaws of Hold co
Form of Affiliate Agreement
Form of Hold co Representations Letters
Form of America Online Representations Letter
Form of Time Warner Representations Letter
co~~ec'-C:Ci-~22E9-Ac:e~C~9-~GA
VI
AGREEMENT AND PLAN OF MERGER, dated as of January 10, 2000 (this
"Agreement"), between AMERICA ONLINE, INC., a Delaware corporation ("America Online"),
and TIME WARNER INC., a Delaware corporalion ("Time Warner").
WII~ESSEIH:
WHEREAS, the Boards of Directors of Time Warner and America Online deem it
advisable and in the best interests of each corporation and its respective stockholders that Time
Warner and America Online engage in a business combination in a merger of equals in order to
advance the long-term strategic business interests of Time Warner and America Online;
WHEREAS, the combination of Time Warner and America Online shall be effected
by the terms of this Agreement through the Mergers (as defined in Section 2.I(b));
WHEREAS, in furtherance thereof, the Board of Directors of each of Time Warner
and America Online have approved the applicable Merger, upon the terms and subject to the
conditions set forth in this Agreement, pursuant to which each share of capital stock of Time Warner
and each share of capital stock of America Online issued and outstanding immediately prior to the
Effective Time (as defmed in Section 2.3) will be converted into the right to receive shares of capital
stock of Hold co (as defined in Section 1.1) as set forth herein;
WHEREAS, (i) as a condition and inducement to America Online's willingness to
enter into this Agreement and the America Online Stock Option Agreement referred to below,
America Online and Time Warner are entering into a Stock Option Agreement dated as of the date
hereof in the form of Exhibit A (the "Time Warner Stock Option Agreement") pursuant to which
Time Warner is granting to America Online an option to purchase shares of the common stock, par
value $0.01 per share, of Time Warner ("Time Warner Common Stock") and (ii) as a condition and
inducement to Time Warner's willingness to enter into this Agreement and the Time Warner Stock
Option Agreement, Time Warner and America Online are entering into a Stock Option Agreement
dated as of the date hereof in the form of Exhibit B (the "America Online Stock Option Agreement"
and, together with the Time Warner Stock Option Agreement, the "Stock Option Agreements"),
pursuant to which America Online is granting to Time Warner an option to purchase shares of the
common stock, par value $0.0 I per share, of America Online ("America Online Common Stock");
WHEREAS, as a condition and inducement to America Online's willingness to enter
into this Agreement and the America Online Stock Option Agreement, America Online and certain
stockholders of Time Warner (the "Designated Stockholders") are entering into an agreement dated
as of the date hereof in the form of Exhibit C (the "Voting Agreement") pursuant to which the
OS3~3~-0007-C2269-~C~8~:~9-~GA
Designated Stockholders have agreed, among other things, to vote their shares of Time Warner
Common Stock in favor of the adoption of this Agreement; and
WHEREAS, for Federal income tax purposes, it is intended that the Mergers shall
qualify as exchanges within the meaning of Section 351 of the Internal Revenue Code of 1986, as
amended (the "Code"), and as reorganizations within the meaning of Section 368(a) of the Code ani
the regulations promulgated thereunder.
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth in this Agreement and in the Stock
Option Agreements, and intending to be legally bound hereby and thereby, the parties hereto agree
as follows:
ARTICLE I
FORMATION OF HOLDING COMPANY AND SUBSIDIARIES
1.1 Organization of Holdco. As promptly as practicable following the
execution of this agreement and receipt of any required approvals, Time Warner and America
Online shall cause a new corporation ("Holdco") to be organized under the laws of the State of
Delaware. The certificate of incorporation and bylaws of Holdco shall initially be as agreed
upon by Time Warner and America Online. The authorized capital stock of Holdco shall initially
consist of 100 shares of common stock, par value $0.01 per share (the "Holdco Common
Stock"), of which one share shall be issued to Time Warner and one share shall be issued to
America Online. Time Warner and America Online shall take, and shall cause Holdco to take,
all requisite action to cause the certificate of incorporation of Holdco to be in the form of Exhibit
D-l (the "Holdco Charter") and the bylaws of Holdco to be in the form of Exhibit D-2 (the
"Holdco Bylaws"), in each case, at the Effective Time.
1.2 Directors and Officers of Hold co. Prior to the Effective Time, the
directors and officers of Holdco shall consist of equal numbers of representatives of America
Online and Time Warner and shall initially be as designated and elected by Time Warner and
America Online. Time Warner and America Online shall take all requisite action to cause the
directors and officers of Holdco as of the Effective Time to be as provided in Section 6.2. Each
such director and officer shall remain in office until his or her successors are elected in
accordance with Schedule 6.2(a) and the Holdco Bylaws.
1.3 Organization of Merger Subsidiaries. As promptly as practicable
following the execution of this Agreement, Holdco shall cause to be organized for the sole
purpose of effectuating the Mergers contemplated herein:
00372J-OOQ7-02269-A018SCH9-XGA
2
(a) a corporation organized under the laws of the State of Delaware ("Time
Warner Mereer Sub"); the certificate of incorporation and bylaws of Time Warner Merger Sub
shall be in such forms as shall be determined by Holdco as soon as practicable following the
execution of this Agreement and the authorized capital stock of Time Warner Merger Sub shall
initially consist of 100 shares of common stock, par value $0.01 per share, all of which shares
shall be issued to Holdco at a price of $1.00 per share; and
(b) a corporation organized under the laws of the State of Delaware
("America Online Mereer Sub" and, together with Time Warner Merger Sub, the "Mereer
Subsidiaries"); the certificate of incorporation and bylaws of America Online Merger Sub shall
be in such forms as shall be determined by Holdco as soon as practicable following the execution
of this Agreement; and the authorized capital stock of America Online Merger Sub shall initially
consist of 100 shares of common stock, par value $0.01 per share, all of which shares shall be
issued to Holdco at a price of $1.00 per share.
1.4 Actions of Directors and Officers. As promptly as practicable following
the execution of this Agreement, Time Warner and America Online shall take all requisite action
to designate the directors and officers of Holdco and each of the Merger Subsidiaries and to take
such steps as may be necessary or appropriate to complete the organization of Hold co and the
Merger Subsidiaries. Time Warner and America Online shall cause the directors of Hold co to
ratify and approve this Agreement, and the directors of the Merger Subsidiaries to ratify and
approve this Agreement.
1.5 Actions of Time Warner and America Online. As promptly as
practicable following the execution of this Agreement, Time Warner and America Online, as the
holders of all the outstanding shares of Hold co Common Stock, shall adopt this Agreement and
shall cause Holdco, as the sole stockholder of each of the Merger Subsidiaries, to adopt this
Agreement. Each of Time Warner and America Online shall cause Holdco, and Holdco shall
cause the Merger Subsidiaries, to perform their respective obligations under this Agreement. As
promptly as practicable after the date hereof the parties shall cause this Agreement to be
amended to add Holdco and the Merger Subsidiaries as parties hereto and each Merger
Subsidiary shall become a constituent corporation in its respective Merger.
ARTICLE II
THE MERGERS; CERTAIN RELA TED MATTERS
2.1 The Mereers. Upon the terms and subject to the conditions set forth in
this Agreement, and in accordance with the Delaware General Corporation Law (the "DGCL"),
except as set forth on Schedule 2.1:
00372C-0007-02269-AC18EC~9-~GA
3
(a) Time Warner Merger Sub shall be merged with and into Time Warner
(the "Time Warner Merger"). Time Warner shall be the surviving corporation in the Time
Warner Merger and shall continue its corporate existence under the laws of the State of
Delaware. As a result of the Time Warner Merger, Time Warner shall become a wholly owned
subsidiary of Hold co.
(b) America Online Merger Sub shall be merged with and into America
Online (the "America Online Merger"). America Online shall be the surviving corporation in the
America Online Merger and shall continue its corporate existence under the laws of the State of
Delaware. As a result of the America Online Merger, America Online shall become a wholly
owned subsidiary of Hold co. The Time Warner Merger and the America Online Merger are
together referred to herein as the "Mergers".
2.2 Closing. Upon the terms and subject to the conditions set forth in
Article VII and the termination rights set forth in Article VIII, the closing of the Mergers (the
"Closing") will take place on the first Business Day after the satisfaction or waiver (subject to
applicable law) of the conditions (excluding conditions that, by their nature, cannot be satisfied
until the Closing Date (as defined below)) set forth in Article VII, unless this Agreement has
been theretofore terminated pursuant to its terms or unless another time or date is agreed to in
writing by the parties hereto (the actual time and date of the Closing being referred to herein as
the "Closing Date"). The Closing shall be held at the offices of Simpson Thacher & Bartlett, 425
Lexington Avenue, New York, New York, 10017, unless another place is agreed to in writing by
the parties hereto.
2.3 Effective Time. As soon as practicable following the satisfaction or
waiver (subject to applicable law) ofthe conditions set forth in Article VII, at the Closing the
parties shall file the Certificates of Merger (as defined below) with the Secretary of State of the
State of Delaware in such form as is required by and executed and acknowledged in accordance
with the relevant provisions of the DGCL and make all other filings or recordings required under
the DGCL. The Mergers shall become effective at (i) the date and time both of the certificate of
merger relating to the Time Warner Merger (the "Time Warner Certificate of Merger") and the
certificate of merger relating to the America Online Merger (the "America Online Certificate of
Merger" and, together with the Time Warner Certificate of Merger, the "Certificates of Merger")
are duly filed with the Secretary of State of the State of Delaware or (ii) such subsequent time as
America Online and Time Warner shall agree and as shall be specified in the Certificates of
Merger; provided that both Mergers shall become effective at the same time (such time as the
Mergers become effective being the "Effective Time").
2.4 Effects of the Mergers. At and after the Effective Time, the Mergers
will have the effects set forth in the DGCL.
CO 37 S C-CQ07 - 022 6 9-.;0 18E:CH 9-~:GA
4
2.5 Charters and Bylaws.
(a) Certificates of IncOI:poration. The Restated Certificate of Incorporation
of Time Warner, as in effect immediately prior to the Effective Time, shall be the certificate of
incorporation of the surviving corporation in the Time Warner Merger. The Restated Certificate
of Incorporation of America Online, as in effect immediately prior to the Effective Time, shall be
the certificate of incorporation of the surviving corporation in the America Online Merger.
(b) Bylaws. The bylaws of Time Warner, as in effect immediately prior to
the Effective Time, shall be the bylaws of the surviving corporation in the Time Warner Merger.
The bylaws of America Online, as in effect immediately prior to the Effective Time, shall be the
bylaws of the surviving corporation in the America Online Merger.
2.6 Officers and Directors. The officers and directors of Time Warner
Merger Sub immediately prior to the Effective Time shall be the officers and directors of the
surviving corporation in the Time Warner Merger. The officers and directors of America Online
Merger Sub immediately prior to the Effective Time shall be the officers and directors of the
surviving corporation in the America Online Merger.
2.7 Effect on Time Warner Capital Stock. As of the Effective Time, by
virtue of the Time Warner Merger and without any action on the part of the holder of any shares
of Time Warner Capital Stock (as defined in Section 2.7(c)) or any shares of capital stock of
Time Warner Merger Sub:
(a) Capital Stock of Time Warner Merger Sub. Each issued and
outstanding share of common stock, par value $0.01 per share, of Time Warner Merger Sub shall
be converted into the right to receive one fully paid and nonassessable share of common stock,
par value $.01 per share, of the surviving corporation in the Time Warner Merger.
(b) Cancellation ofTreasul)' Stock. Subject to Section 3.5, each share of
Time Warner Capital Stock issued and owned or held by Time Warner at the Effective Time
shall, by virtue of the Time Warner Merger, cease to be outstanding and shall be canceled and
retired, and no consideration shall be delivered in exchange therefor.
(c) Conversion of Time Warner Capital Stock. Subject to Section 3.5, each
issued and outstanding share of Time Warner Capital Stock (other than shares to be canceled in
accordance with Section 2.7(b) and other than shares subject to Section 2.10) shall be converted
into the right to receive fully paid and nonassessable shares of Hold co Capital Stock (as defined
below) in accordance with the following table:
003730-0C07-02269-~O:6EC~9-~GA
5
Each Share of the Specified
Class or Series of Time Warner Capital Stock
Time Warner Common Stock .............
Time Warner Series LMCN-V Common. .. ..
Stock, par value $0.01 per share
("Time Warner Series LMCN-V
Common Stock")
Time Warner Series LMC Common. . . . ... .
Stock, par value $0.01 per share
("Time Warner Series LMC Common
Stock")
Time Warner Series E Convertible .........
Preferred Stock,
par value $0.10 per share
("Time Warner Series E Preferred
Stock")
Q037SJ-CC07-C2269-AO:E~C~9-~GA
Number and Class or Series of Shares of
Holdco Capital Stock Into Which Converted
1.5 shares (as the same may be adjusted
according to Section 2.9, the "Exchange
Ratio") of Holdco Common Stock
1.5 shares of Series LMCN-V Common
Stock, par value $0.01 per share, of Hold co
("Holdco Series LMCN-V Common Stock");
provided that the "Formula Number" (as
defined in the Certificate of Designations for
the Time Warner Series LMCN-V Common
Stock (the "Series LMCN- V Certificate")) in
effect immediately prior to the Effective Time
shall be the Formula Number for the Holdco
Series LMCN-V Common Stock issued
pursuant to the Mergers and no adjustment to
the Formula Number or conversion rights of
such stock shall be made pursuant to the
terms of the Series LMCN-V Certificate,
including Section 3.6 thereof
1.5 shares of Series LMC Common Stock, par
value $0.01 per share, of Hold co ("Holdco
Series LMC Common Stock"); provided that
the "Formula Number" (as defined in the
Certificate of Designations for the Time
Warner Series LMC Common Stock (the
"Series LMC Certificate")) in effect
immediately prior to the Effective Time shall
be the Formula Number for the Holdco Series
LMC Common Stock issued pursuant to the
Mergers and no adjustment to the Formula
Number or conversion rights of such stock
shall be made pursuant to the terms of the
Series LMC Certificate, including Section 3.6
thereof
One share of Series E Convertible Preferred
Stock, par value $0.10 per share, of Holdco
("Holdco Series E Preferred Stock")
6
Each Share of the Specified
Class or Series of Time Warner Capital Stock
Time Warner Series F Convertible .........
Preferred Stock,
par value $0.10 per share
("Time Warner Series F Preferred
Stock")
Time Warner Series I Convertible. . . . . . . . . .
Preferred Stock,
par value $0.10 per share
("Time Warner Series F Preferred
Stock")
Time Warner Series J Convertible. . . . . . . . . .
Preferred Stock,
par value $0.10 per share ("Time
Warner Series J Preferred Stock" and
together, with Time Warner Series E
Preferred Stock, Time Warner Series F
Preferred Stock and Time Warner
Series I Preferred Stock, the "Time
Warner Preferred Stock")
Number and Class or Series of Shares of
Holdco Capital Stock Into Which Converted
One share of Series F Convertible Preferred
Stock, par value $0.10 per share, of Hold co
("Holdco Series F Preferred Stock")
One share of Series I Convertible Preferred
Stock, par value $0.10 per share, of Holdco
("Holdco Series I Preferred Stock")
One share of Series J Convertible Preferred
Stock, par value $0.10 per share, of Hold co
("Holdco Series J Preferred Stock" and,
together with Holdco Common Stock, Holdco
Series LMCN-V Common Stock, Holdco
Series LMC Common Stock, Holdco Series E
Preferred Stock, Holdco Series F Preferred
Stock and Holdco Series I Preferred Stock,
the "Holdco Capital Stock")
The Time Warner Series LMCN-V Common Stock and the Time Warner Series
LMC Common Stock are referred to herein collectively as the "Time Warner Series Common
Stock." The Time Warner Common Stock, the Time Warner Series Common Stock and the
Time Warner Preferred Stock are referred to herein collectively as the "Time Warner Capital
Stock." The shares of Holdco Capital Stock into which shares of Time Warner Capital Stock are
converted pursuant to the foregoing are referred to herein collectively as the "Time Warner
Merger Consideration."
As a result of the Time Warner Merger and without any action on the part of the
holders thereof, at the Effective Time, all shares of Time Warner Capital Stock shall cease to be
outstanding and shall be canceled and retired and shall cease to exist, and each holder of a
certificate which immediately prior to the Effective Time represented any such shares of Time
Warner Capital Stock (such certificate or other evidence of ownership, a "Time Warner
Certificate") shall thereafter cease to have any rights with respect to such shares of Time Warner
Capital Stock, except the right (subject to Section 2.10) to receive the applicable Time Warner
Merger Consideration with respect thereto and any cash in lieu of fractional shares of applicable
Holdco Capital Stock with respect thereto to be issued in consideration therefor and any
8C378C-C007-02269-~o:aEC~9-MGA
7
dividends or other distributions to which holders of Time Warner Capital Stock become entitled
all in accordance with Article III upon the surrender of such Time Warner Certificate.
2.8 Time Warner Stock Options and Other Equity-Based Awards.
(a) Each Time Warner Stock Option (as defined in Section 4.2(b)) granted
prior to the Effective Time and which remains outstanding immediately prior to the Effective
Time shall cease to represent a right to acquire shares of Time Warner Common Stock and shall
be converted (each, as so converted, a "Time Warner Converted Option"), at the Effective Time,
into an option to acquire, on the same terms and conditions as were applicable under the Time
Warner Stock Option (but taking into account any changes thereto, including the acceleration
thereof, provided for in the Time Warner Stock Option Plans (as defined in Section 4.2(b)), in
any award agreement or in such option by reason of this Agreement or the transactions
contemplated hereby), that number of shares of Hold co Common Stock determined by
multiplying the number of shares of Time Warner Common Stock subject to such Time Warner
Stock Option by the Exchange Ratio, rounded, if necessary, to the nearest whole share of Hold co
Common Stock, at a price per share (rounded to the nearest one-hundredth of a cent) equal to the
per share exercise price specified in such Time Warner Stock Option divided by the Exchange
Ratio; provided, however, that in the case of any Time Warner Stock Option to which Section
421 of the Code applies by reason of its qualification under Section 422 of the Code, the option
price, the number of shares subject to such option and the terms and conditions of exercise of
such option shall be determined in a manner consistent with the requirements of Section 424(a)
of the Code.
(b) Each restricted share of Time Warner Common Stock granted pursuant
to the Time Warner Stock Option Plans (each such share, a "Time Warner Restricted Share" and,
together with each other Time Warner Restricted Share outstanding as of the date hereof and all
other restricted shares granted by Time Warner after the date hereof in accordance with the Time
Warner Stock Option Plans and Section 5.2, the "Time Warner Restricted Shares") which is
outstanding immediately prior to the Effective Time shall vest and become free of restrictions to
the extent provided by the terms thereof. Each award of Time Warner Restricted Shares shall be
converted, as of the Effective Time, into that number of shares of Holdco Common Stock
determined by multiplying the number of shares subject to the award by the Exchange Ratio; and
the aggregate number of shares of Holdco Common Stock as so determined shall be delivered to
the respective holders of Time Warner Restricted Shares as soon as practicable following the
Effective Time. America Online acknowledges that the acceleration of vesting as a result of the
Time Warner Merger of all Time Warner Stock Options outstanding as of January 9, 2000 in
accordance with their terms shall not constitute a Material Adverse Effect on Time Warner.
(c) As soon as practicable after the Effective Time, Holdco shall deliver to
the holders of Time Warner Stock Options appropriate notices setting forth such holders' rights
pursuant to the respective Time Warner Stock Option Plans and agreements evidencing the
grants of such Time Warner Stock Options (including that, in connection with the Time Warner
OC3-:2-0007-C2269-~Ol8~CH9-~GA
8
Merger and to the extent provided by the terms of the Time Warner Stock Option Plans, the Time
Warner Stock Options have become fully vested and exercisable) and stating that such Time
Warner Stock Options and agreements shall be assumed by Holdco and shall continue in effect
on the same terms and conditions (subject to the adjustments required by this Section 2.8 after
giving effect to the Time Warner Merger and the terms of the Time Warner Stock Option Plans).
To the extent permitted by law, Holdco shall comply with the terms of the Time Warner Stock
Option Plans and shall take such reasonable steps as are necessary or required by, and subject to
the provisions of, such Time Warner Stock Option Plans, to have the Time Warner Stock
Options which qualified as incentive stock options prior to the Effective Time continue to qualify
as incentive stock options of Hold co after the Effective Time.
(d) Prior to the Effective Time, Holdco shall take all necessary action to
assume as of the Effective Time all obligations undertaken by, or on behalf of Holdco under this
Section 2.8 and to adopt at the Effective Time the Time Warner Stock Option Plans and each
Time Warner Converted Option, and to take all other actions called for by this Section 2.8,
including the reservation, issuance and listing of a number of shares of Hold co Common Stock at
least equal to the number of shares of Hold co Common Stock that will be subject to Time
Warner Converted Options. No later than the Effective Time, Holdco shall file a registration
statement on Form S-8 (or any successor or, including if Form S-8 is not available, other
appropriate forms) with respect to the shares of Hold co Common Stock subject to such options
or restricted shares and shall maintain the effectiveness of such registration statement or
registration statements (and maintain the current status of the prospectus or prospectuses
contained therein) for so long as such options or restricted shares remain outstanding.
2.9 Certain Adjustments. If, between the date of this Agreement and the
Effective Time (and as permitted by Sections 5.1 and 5.2), the outstanding shares of America
Online Common Stock or the outstanding shares of Time Warner Common Stock or Time
Warner Series Common Stock shall have been increased, decreased, changed into or exchanged
for a different number of shares or different class, in each case, by reason of any reclassification,
recapitalization, stock split, split-up, combination or exchange of shares or a stock dividend or
dividend payable in any other securities shall be declared with a record date within such period,
or any similar event shall have occurred, the applicable Merger Consideration (as defmed in
Section 2.11(c)) shall be appropriately adjusted to provide to the holders of Time Warner
Common Stock, Time Warner Series Common Stock and America Online Common Stock the
same economic effect as contemplated by this Agreement prior to such event.
2.10 Time Warner Appraisal Ri~hts. (a) Notwithstanding anything in this
Agreement to the contrary and unless provided for by applicable law, shares of Time Warner
Series Common Stock and Time Warner Preferred Stock that are issued and outstanding
immediately prior to the Effective Time and that are owned by stockholders who have properly
perfected their rights of appraisal within the meaning of Section 262 of the DGCL (the "Time
Warner Dissenting Shares") shall not be converted into the right to receive the applicable Time
Warner Merger Consideration with respect thereto, unless and until such stockholders shall have
003750-0007-02269-A018ECH9-MGA
9
failed to perfect their right of appraisal under applicable law, but, instead, the holders thereof
shall be entitled to payment of the appraised value of such Time Warner Dissenting Shares in
accordance with Section 262 of the DGCL. If any such holder shall have failed to perfect or
shall have effectively withdrawn or lost such right of appraisal, each share of Time Warner
Series Common Stock and Time Warner Preferred Stock held by such stockholder shall
thereupon be deemed to have been converted into the right to receive and become exchangeable
for, at the Effective Time, the applicable Time Warner Merger Consideration with respect
thereto, in the manner provided for in Section 2.7.
(b) Time Warner shall give America Online (i) prompt notice of any
demands for appraisal filed pursuant to Section 262 ofthe DGCL received by Time Warner,
withdrawals of such objections and any other instruments served or delivered in connection with
such demands pursuant to the DGCL and received by Time Warner and (B) the opportunity to
participate in all negotiations and proceedings with respect to demands under the DGCL
consistent with the obligations of Time Warner thereunder. Time Warner shall not, except with
the prior written consent of America Online, (x) make any payment with respect to any such
demand, (y) offer to settle or settle any such demand or (z) waive any failure to timely deliver a
written demand for appraisal or timely take any other action to perfect appraisal rights in
accordance with the DGCL.
2.11 Effect on America Online Common Stock. As of the Effective Time, by
virtue of the America Online Merger and without any action on the part of the holder of any
shares of America Online Common Stock or any shares of capital stock of America Online
Merger Sub:
(a) Capital Stock of America Online Merger Sub. Each issued and
outstanding share of common stock, par value $0.01 per share, of America Online Merger Sub
shall be converted into the right to receive one fully paid and nonassessable share of common
stock, par value $0.01 per share, of the surviving corporation in the America Online Merger.
(b) Cancellation ofTreasUI)' Stock. Subject to Section 3.5, each share of
America Online Common Stock issued and owned or held by America Online at the Effective
Time shall, by virtue of the America Online Merger, cease to be outstanding and shall be
canceled and retired, and no consideration shall be delivered in exchange therefor.
(c) Conversion of America Online Common Stock. Subject to Section 3.5,
each issued and outstanding share of America Online Common Stock (other than shares to be
canceled in accordance with Section 2.11 (b)) shall be converted into the right to receive one fully
paid and nonassessable share of Holdco Common Stock (the "America Online Mereer
Consideration" and, together with the Time Warner Merger Consideration, the "Merier
Consideration").
0037eO-0007-02269-A01B~CH9-MGA
10
As a result of the America Online Merger and without any action on the part of
the holders thereof, at the Effective Time, all shares of America Online Common Stock shall
cease to be outstanding and shall be canceled and retired and shall cease to exist, and each holder
of a certificate which immediately prior to the Effective Time represented any such shares of
America Online Common Stock (an "America Online Certificate" and, together with the Time
Warner Certificates, the "Certificates") shall thereafter cease to have any rights with respect to
such shares of America Online Common Stock, except the right to receive the America Online
Merger Consideration to be issued in consideration therefor and any dividends or other
distributions to which holders of America Online Common Stock become entitled all in
accordance with Article III upon the surrender of such America Online Certificate.
2.12 America Online Stock Options and Other Equity-Based Awards.
(a) Each America Online Stock Option (as defmed in Section 4. 1 (b))
granted prior to the Effective Time and which remains outstanding immediately prior to the
Effective Time shall cease to represent a right to acquire shares of America Online Common
Stock and shall be converted (each, as so converted, an "America Online Converted Option"), at
the Effective Time, into an option to acquire, on the same terms and conditions as were
applicable under the America Online Stock Option (but taking into account any changes thereto,
including the acceleration thereof, provided for in the America Online Stock Option Plans (as
defined in Section 4. 1 (b)), in any award agreement or in such option by reason of this Agreement
or the transactions contemplated hereby), that number of shares of Hold co Common Stock equal
to the number of shares of America Online Common Stock subject to such America Online Stock
Option, at a price per share equal to the per share exercise price specified in such America Online
Stock Option; provided, however, that in the case of any America Online Stock Option to which
Section 421 of the Code applies by reason of its qualification under Section 422 of the Code, the
option price, the number of shares subject to such option and the terms and conditions of exercise
of such option shall be determined in a manner consistent with the requirements of Section
424(a) of the Code.
(b) Each restricted share of America Online Common Stock granted
pursuant to the America Online Stock Option Plans (each such share, an "America Online
Restricted Share" and, together with each other America Online Restricted Share outstanding as
of the date hereof and all other restricted shares granted by America Online after the date hereof
in accordance with the America Online Stock Option Plans and Section 5.1, the "America Online
Restricted Shares") which is outstanding immediately prior to the Effective Time shall vest and
become free of restrictions to the extent provided by the terms thereof. Each America Online
Restricted Share shall be converted, as of the Effective Time, into a share of Holdco Common
Stock; and such shares of Hold co Common Stock shall be delivered to the respective holders of
the America Online Restricted Shares as soon as practicable following the Effective Time. Time
Warner acknowledges that the acceleration of vesting as a result of the America Online Merger
of all America Online Stock Options outstanding as ofthe date hereof in accordance with their
terms shall not constitute a Material Adverse Effect on America Online.
003'8C-0007-02269-A018EC~9-~GA
11
(c) As soon as practicable after the Effective Time, Holdco shall deliver to
the holders of America Online Stock Options appropriate notices setting forth such holders'
rights pursuant to the respective America Online Stock Option Plans and agreements evidencing
the grants of such America Online Stock Options (including that, in connection with the America
Online Merger and to the extent provided by the terms of the America Online Stock Option
Plans, the America Online Stock Options have become fully vested) and stating that such
America Online Stock Options and agreements shall be assumed by Holdco and shall continue in
effect on the same terms and conditions (subject to the adjustments required by this Section 2.12
after giving effect to the America Online Merger and the terms of the America Online Stock
Option Plans). To the extent permitted by law, Holdco shall comply with the terms of the
America Online Stock Option Plans and shall take such reasonable steps as are necessary or
required by, and subject to the provisions of, such America Online Stock Option Plans, to have
the America Online Stock Options which qualified as incentive stock options prior to the
Effective Time continue to qualify as incentive stock options of Hold co after the Effective Time.
(d) Prior to the Effective Time, Holdco shall take all necessary action to
assume as of the Effective Time all obligations undertaken by, or on behalf of Holdco under this
Section 2.12 and to adopt at the Effective Time the America Online Stock Option Plans and each
America Online Converted Option, and to take all other actions called for by this Section 2.12,
including the reservation, issuance and listing of a number of shares of Hold co Common Stock at
least equal to the number of shares of Holdco Common Stock that will be subject to America
Online Converted Options. No later than the Effective Time, Holdco shall file a registration
statement on Form S-8 (or any successor or, including if Form S-8 is not available, other
appropriate forms) with respect to the shares of Holdco Common Stock subject to such options
or restricted shares and shall maintain the effectiveness of such registration statement or
registration statements (and maintain the current status of the prospectus or prospectuses
contained therein) for so long as such options or restricted shares remain outstanding.
ARTICLE III
EXCHANGE OF CERTIFICATES
3.1 Exchange Fund. Prior to the Effective Time, America Online shall
appoint a commercial bank or trust company reasonably acceptable to Time Warner, or a
subsidiary thereof, to act as exchange agent hereunder for the purpose of exchanging Certificates
for the applicable Merger Consideration (the "Exchange Agent"). At or prior to the Effective
Time, Holdco shall deposit with the Exchange Agent, in trust for the benefit of holders of shares
of Time Warner Capital Stock and America Online Common Stock, certificates representing the
shares of the Holdco Capital Stock issuable pursuant to Sections 2.7 and 2.11 in exchange for
outstanding shares of Time Warner Capital Stock and America Online Common Stock. Holdco
agrees to make available to the Exchange Agent from time to time as needed, cash sufficient to
pay cash in lieu of fractional shares pursuant to Section 3.5 and any dividends and other
003'80-C007-C2269-A018~CH9-~GA
12
distributions pursuant to Section 3.3. Any cash and certificates representing Holdco Capital
Stock deposited with the Exchange Agent shall hereinafter be referred to as the "Exchange
Fund".
3.2 Exchange Procedures. Promptly after the Effective Time, Holdco shall
cause the Exchange Agent to mail to each holder of a Certificate (i) a letter of transmittal which
shall specify that delivery shall be effected, and risk of loss and title to the Certificates shall pass,
only upon proper delivery of the Certificates to the Exchange Agent, and which letter shall be in
customary form and have such other provisions as America Online or Time Warner may
reasonably specify (such letter to be reasonably acceptable to Time Warner and America Online
prior to the Effective Time) and (ii) instructions for effecting the surrender of such Certificates in
exchange for the applicable Merger Consideration, together with any dividends and other
distributions with respect thereto and any cash in lieu of fractional shares. Upon surrender of a
Certificate to the Exchange Agent together with such letter of transmittal, duly executed and
completed in accordance with the instructions thereto, and such other docwnents as may
reasonably be required by the Exchange Agent, the holder of such Certificate shall be entitled to
receive in exchange therefor (A) one or more shares of Hold co Capital Stock (which shall be in
uncertificated book-entry form unless a physical certificate is requested or is otherwise required
by applicable law or regulation) representing, in the aggregate, the whole nwnber of shares that
such holder has the right to receive pursuant to Sections 2.7 or 2.11 (after taking into account all
shares of Time Warner Capital Stock and America Online Common Stock then held by such
holder) and (B) a check in the amount equal to the cash that such holder has the right to receive
pursuant to the provisions of this Article III, including cash in lieu of any fractional shares of
Holdco Capital Stock pursuant to Section 3.5 and dividends and other distributions pursuant to
Section 3.3. No interest will be paid or will accrue on any cash payable pursuant to Section 3.3
or Section 3.5. In the event of a transfer of ownership of Time Warner Capital Stock which is
not registered in the transfer records of Time Warner or a transfer of ownership of America
Online Common Stock which is not registered in the transfer records of America Online, one or
more shares of Hold co Capital Stock evidencing, in the aggregate, the proper nwnber of shares of
Holdco Capital Stock, a check in the proper amount of cash in lieu of any fractional shares of
Holdco Capital Stock pursuant to Section 3.5 and any dividends or other distributions to which
such holder is entitled pursuant to Section 3.3, may be issued with respect to such Time Warner
Capital Stock or America Online Common Stock to such a transferee if the Certificate
representing such shares of Time Warner Capital Stock or America Online Common Stock is
presented to the Exchange Agent, accompanied by all docwnents required to evidence and effect
such transfer and to evidence that any applicable stock transfer taxes have been paid.
3.3 Distributions with Respect to Un exchanged Shares. No dividends or
other distributions with a record date after the Effective Time shall be paid to the holder of any
unsurrendered Certificate with respect to the shares of Hold co Capital Stock that such holder
would be entitled to receive upon surrender of such Certificate and no cash payment in lieu of
fractional shares of Holdco Capital Stock shall be paid to any such holder pursuant to Section 3.5
until such holder shall surrender such Certificate in accordance with Section 3.2. Subject to the
003780-00C7-02269-A018E:H9-~GA
13
effect of applicable laws, following surrender of any such Certificate, there shall be paid to the
record holder thereof without interest, (a) promptly after the time of such surrender, the amount
of any cash payable in lieu of fractional shares of Hold co Capital Stock to which such holder is
entitled pursuant to Section 3.5 and the amount of dividends or other distributions with a record
date after the Effective Time theretofore paid with respect to such whole shares of Hold co
Capital Stock, and (b) at the appropriate payment date, the amount of dividends or other
distributions with a record date after the Effective Time and a payment date subsequent to such
surrender payable with respect to such shares of Hold co Capital Stock.
3.4 No Further Ownership Ri~hts in Time Warner Capital Stock or America
Online Common Stock. All shares of Hold co Capital Stock issued and cash paid upon
conversion of shares of Time Warner Capital Stock or America Online Common Stock in
accordance with the terms of Article II and this Article III (including any cash paid pursuant to
Sections 3.3 or 3.5) shall be deemed to have been issued or paid in full satisfaction of all rights
pertaining to the shares of Time Warner Capital Stock or America Online Common Stock.
3.5 No Fractional Shares of Hold co Capital Stock.
(a) No certificates or scrip or shares of Hold co Capital Stock representing
fractional shares of Holdco Capital Stock or book-entry credit of the same shall be issued upon
the surrender for exchange of Certificates and such fractional share interests will not entitle the
owner thereof to vote or to have any rights of a stockholder of Holdco or a holder of shares of
Holdco Capital Stock.
(b) Notwithstanding any other provision of this Agreement, each holder of
shares of Time Warner Common Stock exchanged pursuant to the Time Warner Merger who
would otherwise have been entitled to receive a fraction of a share of Holdco Common Stock or
Holdco Series Common Stock (determined after taking into account all Certificates delivered by
such holder) shall receive, in lieu thereof, cash (without interest) in an amount equal to the
product of (i) such fractional part of a share of Holdco Common Stock multiplied by (ii) the
closing price for a share of Holdco Common Stock as reported on the New York Stock
Exchange, Inc. ("NYSE") Composite Transactions Tape on the first trading day following the
date on which the Effective Time occurs. As promptly as practicable after the determination of
the amount of cash, if any, to be paid to holders of fractional interests, the Exchange Agent shall
so notify Holdco, and Holdco shall deposit such amount with the Exchange Agent and shall
cause the Exchange Agent to forward payments to such holders of fractional interests subject to
and in accordance with the terms hereof.
3.6 Termination ofExchan~e Fund. Any portion of the Exchange Fund
which remains undistributed to the holders of Certificates for six months after the Effective Time
shall, at Holdco's request, be delivered to Holdco or otherwise on the instruction of Holdco, and
any holders of the Certificates who have not theretofore complied with this Article III shall after
such delivery look only to Holdco for the Merger Consideration with respect to the shares of
003:80-0007-02269-AOl8SCE9-MGA
14
Time Warner Capital Stock or America Online Common Stock formerly represented thereby to
which such holders are entitled pursuant to Sections 2.7, 2.11 and 3.2, any cash in lieu of
fractional shares of Hold co Capital Stock to which such holders are entitled pursuant to Section
3.5 and any dividends or distributions.with respect to shares of Hold co Capital Stock to which
such holders are entitled pursuant to Section 3.3. Any such portion of the Exchange Fund
remaining unclaimed by holders of shares of Time Warner Capital Stock or America Online
Common Stock immediately prior to such time as such amounts would otherwise escheat to or
become property of any Governmental Entity (as defmed in Section 4. 1 (c)(iii)) shall, to the
extent permitted by law, become the property of Hold co free and clear of any claims or interest
of any Person previously entitled thereto.
3.7 No Liability. None of Holdco, America Online, America Online Merger
Sub, Time Warner, Time Warner Merger Sub or the Exchange Agent shall be liable to any
Person in respect of any Merger Consideration from the Exchange Fund delivered to a public
official pursuant to any applicable abandoned property, escheat or similar law.
3.8 Investment ofthe Exchange Fund. The Exchange Agent shall invest any
cash included in the Exchange Fund as directed by Holdco on a daily basis; provided that no
such investment or loss thereon shall affect the amounts payable to Time Warner or America
Online stockholders pursuant to Article II and the other provisions of this Article III. Any
interest and other income resulting from such investments shall promptly be paid to Holdco.
3.9 Lost Certificates. If any Certificate shall have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the Person claiming such Certificate to
be lost, stolen or destroyed and, if required by Holdco, the posting by such Person of a bond in
such reasonable amount as Holdco may direct as indemnity against any claim that may be made
against it with respect to such Certificate, the Exchange Agent will deliver in exchange for such
lost, stolen or destroyed Certificate the applicable Merger Consideration with respect to the
shares of Time Warner Capital Stock or America Online Common Stock formerly represented
thereby, any cash in lieu of fractional shares of Holdco Capital Stock, and unpaid dividends and
distributions on shares of Hold co Capital Stock deliverable in respect thereof, pursuant to this
Agreement.
3.10 Withholding Rights. Holdco shall be entitled to deduct and withhold
from the consideration otherwise payable pursuant to this Agreement to any holder of shares of
Time Warner Capital Stock or America Online Common Stock such amounts as it is required to
deduct and withhold with respect to the making of such payment under the Code and the rules
and regulations promulgated thereunder, or any provision of state, local or foreign tax law. To
the extent that amounts are so withheld by Holdco, such withheld amounts shall be treated for all
purposes of this Agreement as having been paid to the holder of the shares of Time Warner
Capital Stock or America Online Common Stock in respect of which such deduction and
withholding was made by Holdco.
003780-0007-02269-AC18ECP.9-XGA
15
3.11 Further Assurances. At and after the Effective Time, the officers and
directors of Holdco will be authorized to execute and deliver, in the name and on behalf of
America Online, America Online Merger Sub, Time Warner or Time Warner Merger Sub, any
deeds, bills of sale, assignments or assurances and to take and do, in the name and on behalf of
America Online, America Online Merger Sub, Time Warner or Time Warner Merger Sub, any
other actions and things to vest, perfect or confIrm of record or otherwise in Holdco any and all
right, title and interest in, to and under any of the rights, properties or assets acquired or to be
acquired by Holdco as a result of, or in connection with, the Mergers.
3.12 Stock Transfer Books. The stock transfer books of Time Warner and
America Online shall be closed immediately upon the Effective Time and there shall be no
further registration of transfers of shares of Time Warner Capital Stock or America Online
Common Stock thereafter on the records of Time Warner or America Online. On or after the
Effective Time, any CertifIcates presented to the Exchange Agent or Holdco for any reason shall
be converted into the right to receive the applicable Merger Consideration with respect to the
shares of Time Warner Capital Stock or America Online Common Stock formerly represented
thereby (including any cash in lieu of fractional shares of Holdco Capital Stock to which the
holders thereof are entitled pursuant to Section 3.5 and any dividends or other distributions to
which the holders thereof are entitled pursuant to Section 3.3).
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
4.1 Representations and Warranties of America Online. Except as disclosed
in the America Online Filed SEC Reports (as defIned in Section 4.1 (d)(ii)) or as set forth in the
America Online Disclosure Schedule delivered by America Online to Time Warner prior to the
execution of this Agreement (the "America Online Disclosure Schedule"), America Online
represents and warrants to Time Warner as follows:
(a) Organization. Standing and Power: Subsidiaries.
(i) Each of America Online and each ofits Subsidiaries (as defined in
Section 9.11) is a corporation or other organization duly organized, validly existing and in good
standing under the laws of its jurisdiction of incorporation or organization, has the requisite
power and authority to own, lease and operate its properties and to carry on its business as now
being conducted, except where the failure to be so organized, existing and in good standing or to
have such power and authority, individually or in the aggregate, would not reasonably be
expected to have a Material Adverse Effect (as defIned in Section 9.11) on America Online, and
is duly qualifIed and in good standing to do business in each jurisdiction in which the nature of
its business or the ownership or leasing of its properties makes such qualifIcation necessary other
than in such jurisdictions where the failure so to qualify or to be in good standing, individually or
OJ3700-0007-02269-A018SCE9-~GA
16
in the aggregate, would not reasonably be expected to have a Material Adverse Effect on
America Online. The copies of the certificate of incorporation and bylaws of America Online
which were previously furnished or made available to Time Warner are true, complete and
correct copies of such documents as in effect on the date of this Agreement.
(ii) Exhibit 21 to America Online's Annual Report on Form 10-K for the
fiscal year ended June 30, 1999 includes all the Subsidiaries of America Online which as of the
date of this Agreement are Significant Subsidiaries (as defined in Rule 1-02 of Regulation S-X of
the Securities and Exchange Commission (the "SEC")). All the outstanding shares of capital
stock of, or other equity interests in, each such Significant Subsidiary have been validly issued
and are fully paid and nonassessable and are, except as set forth in such Exhibit 21, owned
directly or indirectly by America Online, free and clear of all pledges, claims, liens, charges,
encumbrances and security interests of any kind or nature whatsoever (collectively "Liens") and
free of any other restriction (including any restriction on the right to vote, sell or otherwise
dispose of such capital stock or other ownership interests), except for restrictions imposed by
applicable securities laws. Except as disclosed in Section 4. 1 (a) of the America Online
Disclosure Schedule, as of the date of this Agreement, neither America Online nor any of its
Subsidiaries directly or indirectly owns any equity or similar interest in, or any interest
convertible into or exchangeable or exercisable for, any corporation, partnership, joint venture or
other business association or entity (other than Subsidiaries), that is or would reasonably be
expected to be material to America Online and its Subsidiaries taken as a whole.
(b) Capital Structure.
(i) As of January 5, 2000, the authorized capital stock of America Online
consists of (A) 6,000,000,000 shares of America Online Common Stock, of which 2,274,045,973
shares were outstanding and (B) 5,000,000 shares of Preferred Stock, par value $0.01 per share,
none of which were outstanding and 500,000 of which have been designated Series A-I Junior
Participating Preferred Stock and reserved for issuance upon exercise of the rights (the "America
Online Rights") distributed to the holders of America Online Common Stock pursuant to the
Rights Agreement, dated as of May 12, 1998 between America Online and BankBoston, N.A., as
Rights Agent (the "America Online Rights Agreement"). Except as disclosed in Section 4. 1 (b)
of the America Online Disclosure Schedule, since January 5, 2000 to the date of this Agreement,
there have been no issuances of shares of the capital stock of America Online or any other
securities of America Online other than pursuant to options or rights outstanding as of January 5,
2000 under the Benefit Plans (as defmed in Section 9.11(b)) of America Online or conversion of
convertible debt securities of America Online. All issued and outstanding shares of the capital
stock of America Online are duly authorized, validly issued, fully paid and nonassessable and
free of any preemptive rights. There were outstanding as of January 5, 2000 no options, warrants
or other rights to acquire capital stock from America Online other than (x) the America Online
Rights, (y) options and other rights to acquire America Online Common Stock from America
Online representing in the aggregate the right to purchase approximately 376,107,825 shares of
America Online Common Stock (such options, together with the other employee stock options
00378C-8007-02269-^Q:2SC~9-MGA
17
issued by America Online after the date hereof in accordance with the America Online Stock
Option Plans and Section 5.1, collectively, the "America Online Stock Options") under America
Online's Employee Stock Purchase Plan, 1992 Employee, Director and Consultant Stock Option
Plan, Quantum Computer Services, Inc. 1987 Stock Incentive Plan and Quantum Computer
Services, Inc. Incentive Stock Option Plan (1985) and other option plans assumed by America
Online (collectively, the "America Online Stock Option Plans") and (z) the 4% Convertible
Subordinated Notes due November 15,2002 of America Online and the Convertible
Subordinated Notes due 2019 of America Online. Except in connection with new hire grants of
America Online Stock Options made in a manner consistent with past practice to purchase, in the
aggregate, not more than 100,000 shares of America Online Common Stock, Section 4.1 (b) of
the America Online Disclosure Schedule sets forth a complete and correct list, as of January 5,
2000, of the number of shares of America Online Common Stock subject to America Online
Stock Options or other rights to purchase or receive America Online Common Stock granted
under the America Online Benefit Plans or otherwise and the weighted average exercise price of
the outstanding America Online Stock Options referenced therein. Except in connection with
new hire grants of America Online Stock Options made in a manner consistent with past practice
to purchase, in the aggregate, not more than 100,000 shares of America Online Common Stock,
no options or warrants or other rights to acquire capital stock from America Online have been
issued or granted since January 5, 2000 to the date of this Agreement.
(ii) No bonds, debentures, notes or other indebtedness of America Online
having the right to vote on any matters on which holders of capital stock of America Online may
vote ("America Online Voting Debt") are issued or outstanding.
(iii) Except as otherwise set forth in this Section 4.1(b) or in Section 4. 1 (b)
of America Online Disclosure Schedule, as of the date of this Agreement, there are no securities,
options, warrants, calls, rights, commitments, agreements, arrangements or undertakings of any
kind to which America Online or any of its Subsidiaries is a party or by which any of them is
bound obligating America Online or any of its Subsidiaries to issue, deliver or sell, or cause to be
issued, delivered or sold, additional shares of capital stock or other voting securities of America
Online or any of its Subsidiaries or obligating America Online or any of its Subsidiaries to issue,
grant, extend or enter into any such security, option, warrant, call, right, commitment, agreement,
arrangement or undertaking. Except as disclosed in Section 4.1 (b) of the America Online
Disclosure Statement, as of the date of this Agreement, there are no outstanding obligations of
America Online or any of its Subsidiaries to repurchase, redeem or otherwise acquire any shares
of capital stock of America Online or any of its Subsidiaries.
(c) Authority: No Conflicts.
(i) America Online has all requisite corporate power and authority to enter
into this Agreement and the Stock Option Agreements and to consummate the transactions
contemplated hereby and thereby, subject in the case of the consummation of the America Online
Merger to the adoption of this Agreement by the Required America Online Vote (as defined in
003760-0007 - 02 2 6 9-';018 SCr.9-~jG;'.
18
Section 4.I(g)). The execution and delivery of this Agreement and the Stock Option Agreements
and the consummation of the transactions contemplated hereby and thereby have been duly
authorized by all necessary corporate action on the part of America Online and no other
corporate proceedings on the part of America Online are necessary to authorize the execution and
delivery of this Agreement or to consummate the America Online Merger and the other
transactions contemplated hereby, subject in the case of the consummation of the America
Online Merger to the adoption of this Agreement by the Required America Online Vote. This
Agreement and the Stock Option Agreements have been duly executed and delivered by America
Online and constitute valid and binding agreements of America Online, enforceable against
America Online in accordance with their respective terms, except as such enforceability may be
limited by bankruptcy, insolvency, reorganization, moratorium and similar laws relating to or
affecting creditors generally or by general equity principles (regardless of whether such
enforceability is considered in a proceeding in equity or at law).
(ii) The execution and delivery of this Agreement and the Stock Option
Agreements by America Online do not, and the consummation by America Online of the
America Online Merger and the other transactions contemplated hereby and thereby will not,
conflict with, or result in any violation of, or constitute a default (with or without notice or lapse
of time, or both) under, or give rise to a right of, or result by its terms in the, termination,
amendment, cancellation or acceleration of any obligation or the loss of a material benefit under,
or the creation of a Lien, charge, "put" or "call" right or other encumbrance on, or the loss of,
any assets, including Intellectual Property (any such conflict, violation, default, right of
termination, amendment, cancellation or acceleration, loss or creation, a "Violation") pursuant
to: (A) any provision of the certificate of incorporation or bylaws or similar organizational
document of America Online or any Significant Subsidiary of America Online, or (B) except (I)
as, individually or in the aggregate, (2) would not reasonably be expected to have a Material
Adverse Effect on America Online or would not prevent or materially delay the consummation of
the Mergers, subject to obtaining or making the consents, approvals, orders, authorizations,
registrations, declarations and filings referred to in paragraph (iii) below and except with respect
to employee stock options and other awards or (3) set forth in Section 4. 1 (c)(ii) of the America
Online Disclosure Schedule, any loan or credit agreement, note, mortgage, bond, indenture,
lease, benefit plan or other agreement, obligation, instrument, permit, concession, franchise,
license, judgment, order, decree, statute, law, ordinance, rule or regulation applicable to America
Online or any Subsidiary of America Online or their respective properties or assets.
(iii) No consent, approval, order or authorization of, or registration,
declaration or filing with, any supranational, national, state, municipal, local or foreign
government, any instrumentality, subdivision, court, administrative agency or commission or
other authority thereof, or any quasi-governmental or private body exercising any regulatory,
taxing, importing or other governmental or quasi-governmental authority (a "Governmental
Entity") or any other Person, is required by or with respect to America Online or any Subsidiary
of America Online in connection with the execution and delivery of this Agreement and the
Stock Option Agreements by America Online or the consummation of the America Online
OC3780-0CQ7-02269-^C:8~CH9-MGA
19
Merger and the other transactions contemplated hereby and thereby, except for those required
under or in relation to (A) the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended (the "HSR Act"), Council Regulation No. 4064/89 of the European Community, as
amended (the "EC Merger Regulation"), the Competition Act (Canada) and the Investment
Canada Act of 1985 (Canada) ("Canadian Investment Regulations"), (B) state securities or "blue
sky" laws (the "Blue Sky Laws"), (C) the Securities Act of 1933, as amended (the "Securities
Act"), (D) the Securities Exchange Act of 1934, as amended (the "Exchange Act"), (E) the
DGCL with respect to the filing of the Certificates of Merger, (F) the rules and regulations of the
NYSE, (G) antitrust or other competition laws of other jurisdictions, (H) the Communications
Act of 1934, as amended, and the rules and regulations of the Federal Communications
Commission or any successor entity (the "FCC") thereunder (the "Communications Act"),
(I) rules and regulations of (x) the cable franchising authorities having jurisdiction over the cable
systems of Time Warner and its Subsidiaries and Affiliates (the "Franchising Authorities") and
(y) the state public service commissions having jurisdiction over the assets of Time Warner and
its Subsidiaries and Affiliates ("PUCs") and (1) such consents, approvals, orders, authorizations,
registrations, declarations and filings the failure of which to make or obtain, individually or in
the aggregate, would not reasonably be expected to have a Material Adverse Effect on America
Online. Consents, approvals, orders, authorizations, registrations, declarations and filings
required under or in relation to any of the foregoing clauses (A) through (I) are hereinafter
referred to as "Necessary Consents".
(d) Reports and Financial Statements.
(i) America Online has filed all required registration statements,
prospectuses, reports, schedules, forms, statements and other documents required to be filed by it
with the SEC since July 1, 1997 (collectively, including all exhibits thereto, the "America Online
SEC Reports"). Except as set forth in Section 4.1 (d) of the America Online Disclosure Schedule,
no Subsidiary of America Online is required to file any form, report, registration statement,
prospectus or other document with the SEC. None of the America Online SEC Reports, as of
their respective dates (and, if amended or superseded by a filing prior to the date of this
Agreement, then on the date of such filing), contained or will contain any untrue statement of a
material fact or omitted or will omit to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under which they were
made, not misleading. Each of the financial statements (including the related notes) included in
the America Online SEC Reports presents fairly, in all material respects, the consolidated
financial position and consolidated results of operations and cash flows of America Online and
its consolidated Subsidiaries as of the respective dates or for the respective periods set forth
therein, all in conformity with United States generally accepted accounting principles ("GAAP")
consistently applied during the periods involved except as otherwise noted therein, and subject,
in the case of the unaudited interim financial statements, to the absence of notes and normal year-
end adjustments that have not been and are not expected to be material in amount. All of such
America Online SEC Reports, as of their respective dates (and as of the date of any amendment
to the respective America Online SEC Report), complied as to form in all material respects with
0037aO-0007-02269-A012SCH9-MGA
20
the applicable requirements of the Securities Act and the Exchange Act and the rules and
regulations promulgated thereunder.
(ii) Except as disclosed in the America Online SEC Reports filed and
publicly available prior to the date hereof (the "America Online Filed SEC R~orts"), America
Online and its Subsidiaries have not incurred any liabilities that are of a nature that would be
required to be disclosed on a balance sheet of America Online and its Subsidiaries or the
footnotes thereto prepared in conformity with GAAP, other than (A) liabilities incurred in the
ordinary course of business, (B) liabilities incurred in accordance with Section 5.1, (C) liabilities
for Taxes (as defined in Section 4. I (m)) or (D) liabilities that, individually or in the aggregate,
would not reasonably be expected to have a Material Adverse Effect on America Online.
(e) Information Supplied.
(i) None of the information supplied or to be supplied by America Online
for inclusion or incorporation by reference in (A) the Form S-4 (as defmed in Section 6.1) will, at
the time the Form S-4 is filed with the SEC, at any time it is amended or supplemented or at the
time it becomes effective under the Securities Act, contain any untrue statement of a material fact
or omit to state any material fact required to be stated therein or necessary to make the statements
therein, in light ofthe circumstances under which they were made, not misleading and (B) the
Joint Proxy Statement/Prospectus (as defined in Section 6.1) will, on the date it is first mailed to
Time Warner stockholders or America Online stockholders or at the time of the Time Warner
Stockholders Meeting or the America Online Stockholders Meeting (each as defmed in Section
6.1), contain any untrue statement of a material fact or omit to state any material fact required to
be stated therein or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. The Form S-4 and the Joint Proxy
Statement/Prospectus will comply as to form in all material respects with the requirements of the
Exchange Act and the Securities Act and the rules and regulations of the SEC thereunder.
(ii) Notwithstanding the foregoing provisions of this Section 4. 1 (e), no
representation or warranty is made by America Online with respect to statements made or
incorporated by reference in the Form S-4 or the Joint Proxy Statement/Prospectus based on
information supplied by Time Warner for inclusion or incorporation by reference therein.
(f) Board Approval. The Board of Directors of America Online, by
resolutions duly adopted by unanimous vote of those voting at a meeting duly called and held
and not subsequently rescinded or modified in any way (the "America Online Board Approval"),
has duly (i) determined that this Agreement and the America Online Merger and the America
Online Stock Option Agreement are fair to and in the best interests of America Online and its
stockholders and declared the America Online Merger to be advisable, (ii) approved this
Agreement, the America Online Stock Option Agreement, the Voting Agreement, the America
Online Merger, and (iii) recommended that the stockholders of America Online adopt this
Agreement and directed that such matter be submitted for consideration by America Online's
003760-0007-02269-AOleSC~9-~GA
21
stockholders at the America Online Stockholders Meeting. The America Online Board Approval
constitutes approval of this Agreement, the America Online Stock Option Agreement and the
America Online Merger for purposes of Section 203 of the DGCL and Article EIGHTH of the
Restated Certificate oflncorporation of America Online. To the knowledge of America Online,
except for Section 203 of the DGCL (which has been rendered inapplicable), no state takeover
statute is applicable to this Agreement, the America Online Stock Option Agreement or the
America Online Merger or the other transactions contemplated hereby or thereby.
(g) Vote Required. The affirmative vote of the holders of a majority of the
outstanding shares of America Online Common Stock to adopt this Agreement (the "Required
America Online Vote") is the only vote of the holders of any class or series of America Online
capital stock necessary to approve or adopt this Agreement, the America Online Stock Option
Agreement and the America Online Merger and to consummate the America Online Merger and
the other transactions contemplated hereby and thereby.
(h) Litigation: Compliance with Laws.
(i) There are no suits, actions, judgments or proceedings (collectively,
"Actions") pending or, to the knowledge of America Online, threatened, against or affecting
America Online or any Subsidiary of America Online or any property or asset of America Online
or any Subsidiary of America Online which, individually or in the aggregate, would reasonably
be expected to have a Material Adverse Effect on America Online, nor are there any judgments,
decrees, injunctions, rules or orders of any Governmental Entity or arbitrator outstanding against
America Online or any Subsidiary of America Online which, individually or in the aggregate,
would reasonably be expected to have a Material Adverse Effect on America Online.
(ii) Except as, individually or in the aggregate, would not reasonably be
expected to have a Material Adverse Effect on America Online, America Online and its
Subsidiaries hold all permits, licenses, franchises, variances, exemptions, orders and approvals
of all Governmental Entities which are necessary for the operation of the businesses as now
being conducted of America Online and its Subsidiaries, taken as a whole (the "America Online
Permits"), and no suspension or cancellation of any of the America Online Permits is pending or,
to the knowledge of America Online, threatened. America Online and its Subsidiaries are in
compliance with the terms of the America Online Permits, except where the failure to so comply,
individually or in the aggregate, would not reasonably be expected to have a Material Adverse
Effect on America Online. Neither America Online nor its Subsidiaries is in violation of, and
America Online and its Subsidiaries have not received any notices of violations with respect to,
any laws, statutes, ordinances, rules or regulations of any Governmental Entity, except for
violations which, individually or in the aggregate, would not reasonably be expected to have a
Material Adverse Effect on America Online.
(i) Absence of Certain Changes or Events. Except as disclosed in Section
4.1 (i) of the America Online Disclosure Schedule and for liabilities permitted to be incurred in
0037S0-0007-02269-A018ECr.9-~GA
22
accordance with this Agreement or the transactions contemplated hereby, since September 30,
1999, America Online and its Subsidiaries have conducted their business only in the ordinary
course and in a manner consistent with past practice and, since December 31, 1998, there have
not been any changes, circumstances or events which, individually or in the aggregate, have had,
or would reasonably be expected to have, a Material Adverse Effect on America Online.
(j) Intellectual Property: Year 2000.
(i) Except as would not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect on America Online: (a) America Online and each of
its Subsidiaries owns, or is licensed to use (in each case, free and clear of any Liens), all
Intellectual Property (as defined below) used in or necessary for the conduct of its business as
currently conducted; (b) to the knowledge of America Online, the use of any Intellectual Property
by America Online and its Subsidiaries does not infringe on or otherwise violate the rights of any
Person, (c) the use of the Intellectual Property is in accordance with applicable licenses pursuant
to which America Online or any Subsidiary acquired the right to use any Intellectual Property;
and (d) to the knowledge of America Online, no Person is challenging, infringing on or otherwise
violating any right of America Online or any of its Subsidiaries with respect to any Intellectual
Property owned by and/or licensed to America Online or its Subsidiaries. As of the date of this
Agreement, except as would not reasonably be expected, individually or in the aggregate, to have
a Material Adverse Effect on America Online, neither America Online nor any of its Subsidiaries
has knowledge of any pending claim, order or proceeding with respect to any Intellectual
Property used by America Online and its Subsidiaries and to its knowledge no Intellectual
Property owned and/or licensed by America Online or its Subsidiaries is being used or enforced
in a manner that would reasonably be expected to result in the abandonment, cancellation or
unenforceability of such Intellectual Property. For purposes of this Agreement, "Intellectual
Property" shall mean trademarks, service marks, brand names, certification marks, trade dress
and other indications of origin, the goodwill associated with the foregoing and registrations in
any jurisdiction of, and applications in any jurisdiction to register, the foregoing, including any
extension, modification or renewal of any such registration or application; inventions,
discoveries and ideas, whether patentable or not, in any jurisdiction; patents, applications for
patents (including, without limitation, divisions, continuations, continuations in part and renewal
applications), and any renewals, extensions or reissues thereof, in any jurisdiction; nonpublic
information, trade secrets and confidential information and rights in any jurisdiction to limit the
use or disclosure thereof by any person; writings and other works, whether copyrightable or not,
in any jurisdiction; and registrations or applications for registration of copyrights in any
jurisdiction, and any renewals or extensions thereof: any similar intellectual property or
proprietary rights.
(ii) Prior to the date of this Agreement, America Online and its Subsidiaries
have undertaken a concerted effort to ensure that all of the computer software, computer
firmware, computer hardware, and other similar or related items of automated, computerized,
and/or software system(s) that are used or relied on by America Online or any or its Subsidiaries
00378C-0007-02269-A018ECH9-~GA
23
in the conduct of their respective businesses will not malfunction, will not cease to function, will
not generate incorrect data, and will not provide incorrect results when processing, providing
and/or receiving (a) date-related data into and between the years 1999 and 2000 and (b) date-
related data in connection with any valid date in the twentieth and twenty-first centuries. As of
the date of this Agreement, except as would not reasonably be expected, individually or in the
aggregate, America Online reasonably believes that such effort will be successful.
(k) Brokers or Finders. No agent, broker, investment banker, fmancial
advisor or other firm or Person is or will be entitled to any broker's or finder's fee or any other
similar commission or fee in connection with any of the transactions contemplated by this
Agreement based upon arrangements made by or on behalf of America Online, except Salomon
Smith Barney, Inc., whose fees and expenses will be paid by America Online.
(1) Opinion of America Online Financial Advisor. America Online has
received the opinion of Salomon Smith Barney, Inc., dated the date of this Agreement, to the
effect that, as of such date, the Exchange Ratio is fair to America Online, from a fmancial point
of view, a copy of which opinion will be made available to Time Warner promptly after the date
of this Agreement.
(m) Taxes. Each of America Online and its Subsidiaries has filed all Tax
Returns required to have been filed (or extensions have been duly obtained) and has paid all
Taxes required to have been paid by it, except where failure to file such Tax Returns or pay such
Taxes would not, individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect on America Online. For purposes of this Agreement: (i) "Tax" (and, with
correlative meaning, "Taxes") means any federal, state, local or foreign income, gross receipts,
property, sales, use, license, excise, franchise, employment, payroll, withholding, alternative or
add on minimum, ad valorem, transfer or excise tax, or any other tax, custom, duty,
governmental fee or other like assessment or charge of any kind whatsoever, together with any
interest or penalty, imposed by any governmental authority or any obligation to pay Taxes
imposed on any entity for which a party to this Agreement is liable as a result of any
indemnification provision or other contractual obligation, and (ii) "Tax Return" means any
return, report or similar statement required to be filed with respect to any Tax (including any
attached schedules), including, without limitation, any information return, claim for refund,
amended return or declaration of estimated Tax.
Neither America Online nor any of its Subsidiaries has taken any action or knows
of any fact that is reasonably likely to prevent the Mergers from qualifying as exchanges within
the meaning of Section 351 of the Code and as reorganizations within the meaning of Section
368( a) of the Code.
(n) Certain Contracts. As of the date hereof, except as disclosed in Section
4.1 (n) of the America Online Disclosure Schedule, neither America Online nor any of its
Subsidiaries is a party to or bound by (i) any "material contracts" (as such term is defined in Item
003780-0007-02269-AC18ECH9-MGA
24
601(b)(IO) of Regulation S-K of the SEC) with respect to America Online and its Subsidiaries or
(ii) any material agreement that restricts the ability of America Online or Time Warner or any of
their Subsidiaries or affiliates to distribute, promote, market or otherwise offer Internet and
interactive services, Internet and interactive programming, or Internet and interactive
functionality on the cable systems owned by Time Warner or its Subsidiaries or affiliates
(collectively, "America Online Internet Restrictions"). All contracts described in clause (i) are
valid and in full force and effect except to the extent they have previously expired in accordance
with their terms or if the failure to be in full force and effect, individually or in the aggregate,
would not reasonably be expected to have a Material Adverse Effect on America Online. Neither
America Online nor any of its Subsidiaries has violated any provision of, or committed or failed
to perform any act which with or without notice, lapse of time or both would constitute a default
under the provisions of, any contract described in clause (i), except in each case for those
violations and defaults which, individually or in the aggregate, would not reasonably be expected
to result in a Material Adverse Effect on America Online.
(0) America Online Stockholder Rights Plan. The Board of Directors of
America Online has amended the America Online Rights Agreement in accordance with its terms
to render it inapplicable to the transactions contemplated by this Agreement and the America
Online Stock Option Agreement.
(p) Employee Benefits.
(i) The Benefit Plans, whether oral or written, under which any current or
former employee or director of America Online or its Subsidiaries has any present or future right
to benefits contributed to, sponsored by or maintained by America Online or its Subsidiaries, or
under which America Online or its Subsidiaries has any present or future liability shall be
collectively referred to as the "America Online Benefit Plans."
(ii) Except as set forth in Section 4.1(p) of the America Online Disclosure
Schedule, with respect to each America Online Benefit Plan, no liability has been incurred and
there exists no condition or circumstances in connection with which America Online or any of its
Subsidiaries could be subject to any liability that is reasonably likely, individually or in the
aggregate, to have a Material Adverse Effect on America Online, in each case under ERISA (as
defined in Section 9.1 I (b)), the Code, or any other applicable law, rule or regulation.
(iii) America Online and its Subsidiaries are in compliance with all Federal,
state, local and foreign requirements regarding employment, except for any failures to comply
that are not reasonably likely, individually or in the aggregate, to have a Material Adverse Effect
on America Online. As of the date of this Agreement, there is no labor dispute, strike or work
stoppage against America Online or any of its Subsidiaries pending or, to the knowledge of
America Online, threatened which may interfere with the business activities of America Online
or any of its Subsidiaries, except where such dispute, strike or work stoppage is not reasonably
likely, individually or in the aggregate, to have a Material Adverse Effect on America Online.
GG3720-0007-02269-^O:82C~9-XGA
25
4.2 Representations and Warranties of Time Warner. Except as disclosed in
the Time Warner Filed SEC Reports (as defined in Section 4.2(d)(ii)) or as set forth in the Time
Warner Disclosure Schedule delivered by Time Warner to America Online prior to the execution
of this Agreement (the "Time Warner Disclosure Schedule"), Time Warner represents and
warrants to America Online as follows:
(a) Organization. Standing and Power: Subsidiaries.
(i) Each of Time Warner and each of its Subsidiaries is a corporation or
other organization duly organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation or organization, has the requisite power and authority to own, lease
and operate its properties and to carry on its business as now being conducted, except where the
failure to be so organized, existing and in good standing or to have such power and authority,
individually or in the aggregate, would not reasonably be expected to have a Material Adverse
Effect on Time Warner, and is duly qualified and in good standing to do business in each
jurisdiction in which the nature of its business or the ownership or leasing of its properties makes
such qualification necessary other than in such jurisdictions where the failure so to qualify or to
be in good standing, individually or in the aggregate, would not reasonably be expected to have a
Material Adverse Effect on Time Warner. The copies of the certificate of incorporation and
bylaws of Time Warner which were previously furnished or made available to America Online
are true, complete and correct copies of such documents as in effect on the date of this
Agreement and the copy of the Agreement of Limited Partnership, dated as of October 29, 1991,
as amended, of Time Warner Entertainment Company, L.P. ("TWE") which was previously
furnished to America Online is a true, complete and correct copy of such agreement as in effect
on the date of this Agreement (the "TWE Partnership Agreement").
(ii) Exhibit 21 to Time Warner's Annual Report on Form 10-K for the year
ended December 31, 1998 includes all the Subsidiaries of Time Warner which as of the date of
this Agreement are Significant Subsidiaries (as defined in Rule 1-02 of Regulation S-X of the
SEC and including TWE). All the outstanding shares of capital stock of, or other equity interests
in, each such Significant Subsidiary have been validly issued and are fully paid and
nonassessable and are, except as set forth in such Exhibit 21 and in the TWE Partnership
Agreement, owned directly or indirectly by Time Warner, free and clear of all Liens and free of
any other restriction (including any restriction on the right to vote, sell or otherwise dispose of
such capital stock or other ownership interests), except for restrictions imposed by applicable
securities laws. As of the date of this Agreement, neither Time Warner nor any of its
Subsidiaries directly or indirectly owns any equity or similar interest in, or any interest
convertible into or exchangeable or exercisable for, any corporation, partnership, joint venture or
other business association or entity (other than Subsidiaries), that is or would reasonably be
expected to be material to Time Warner and its Subsidiaries taken as a whole.
00378C-OC07-C22E9-A018ECH9-MGA
26
Time Warner indirectly owns a 74.49% priority capital and residual equity interest
in TWE as described in the TWE Partnership Agreement, free and clear of all Liens (except
under the TWE Partnership Agreement).
(b) Capital Structure.
(i) As of November 30, 1999, the authorized capital stock of Time Warner
consists of (a) 5,000,000,000 shares of Time Warner Common Stock of which 1,172,176,909
shares were outstanding, (B) 600,000,000 shares of Series Common Stock, par value $.01 per
share, of which (1) 140,000,000 shares have been designated as Time Warner Series LMC
Common Stock, of which no shares are outstanding and (2) 140,000,000 shares have been
designated as Time Warner Series LMCN-V Common Stock, of which 114,123,884 shares are
outstanding, and (C) 250,000,000 shares of preferred stock, par value $.10 per share, of which
(1) 8,000,000 shares have been designated Series A Participating Cumulative Preferred Stock
and reserved for issuance upon exercise of the rights (the "Time Warner Rights") distributed to
holders of Time Warner Common Stock pursuant to the Rights Agreement, dated as of
October 10, 1996 between Time Warner and ChaseMellon Shareholder Services, LLC, as Rights
Agent, as amended (together with any substitute rights agreement entered into pursuant to
Section 6.1 O(b), the "Time Warner Rights Agreement"), (2) 11,000,000 shares have been
designated Series D Convertible Preferred Stock, of which no shares are outstanding,
(3) 3,250,000 shares have been designated Series E Convertible Preferred Stock, of which
3,129,251 shares are outstanding, (4) 3,100,000 shares have been designated Series F
Convertible Preferred Stock, of which 2,965,761 shares are outstanding, (5) 7,000,000 shares
have been designated Series I Convertible Preferred Stock, of which 700,000 shares are
outstanding and (6) 3,350,000 shares have been designated Series J Convertible Preferred Stock,
of which 1,608,708 shares are outstanding. Since November 30, 1999 to the date of this
Agreement, there have been no issuances of shares of the capital stock of Time Warner or any
other securities of Time Warner other than issuances of shares pursuant to outstanding
convertible securities or options or rights outstanding as of November 30, 1999 and 59,250 Time
Warner Restricted Shares under the Benefit Plans of Time Warner, and pursuant to the Time
Warner Dividend Reinvestment and Stock Purchase Plan. All issued and outstanding shares of
the capital stock of Time Warner are duly authorized, validly issued, fully paid and
nonassessable, and free of any preemptive rights. All accrued dividends that were payable on
Time Warner Preferred Stock have been paid. There were outstanding as of December 31, 1999
no options, warrants or other rights to acquire capital stock from Time Warner other than (x) the
Time Warner Rights and (y) approximately 135,867,893 Time Warner Stock Options (as defined
in the next sentence) and 82,000 Time Warner Restricted Shares. The options and other rights to
acquire Time Warner Common Stock from Time Warner representing the right to purchase
shares of Time Warner Common Stock, together with other employee stock options issued by
Time Warner after the date hereof in accordance with the Time Warner Stock Option Plans (as
defined in the next sentence) and Section 5.2, are referred to herein collectively as the "Time
Warner Stock Options"). The Time Warner Stock Options and the Time Warner Restricted
Shares have been and will be granted under the Time Warner 1986 Stock Option Plan, the 1988
0037SJ-0007-02269-A018ECH9-~GA
27
Stock Incentive Plan of Time Warner Inc., Time Warner 1989 Stock Incentive Plan, Time
Warner 1994 Stock Option Plan, Time Warner Corporate Group Stock Incentive Plan, Time
Warner 1997 Stock Option Plan, Time Warner 1996 Stock Option Plan for Non-Employee
Directors, Time Warner 1989 WCI Replacement Stock Option Plan, 1989 Lorimar Non-
Employee Replacement Stock Option Plan, Time Warner 1993 Stock Option Plan, Time Warner
Filmed Entertainment Group Stock Incentive Plan, Time Warner Music Group Stock Incentive
Plan, Time Warner Programming Group Stock Incentive Plan, Time Warner Publishing Group
Stock Incentive Plan, Time Warner Cable Group Stock Incentive Plan, Subsidiary 1988 Stock
Option Plan, Subsidiary 1993 Stock Option and Equity-Based Award Plan, Subsidiary 1986
'Stock Option Plan, Subsidiary 1990 Stock Option Plan, Subsidiary 1991 Stock Option Plan and
Subsidiary Nonqualified Stock Option Agreements, the Time Warner 1999 Restricted Stock
Plan, the Time Warner 1988 Restricted Stock Plan for Non-Employee Directors and the Time
Warner 1999 International Employees Restricted Stock Plan (collectively, the "Time Warner
Stock Option Plans"). Except in connection with pre-employment grants of Time Warner Stock
Options made in a m8IU1er consistent with past practice to purchase, in the aggregate, not more
than 100,000 shares of Time Warner Common Stock, Section 4.2(b)(i) of the Time Warner
Disclosure Schedule sets forth a complete and correct list, as of December 31, 1999, of the
number of shares of Time Warner Common Stock subject to Time Warner Stock Options or
other rights to purchase or receive Time Warner Common Stock granted under the Time Warner
Benefit Plans or otherwise and the weighted average exercise price of the outstanding Time
Warner Stock Options referenced therein. Except in connection with pre-employment grants of
Time Warner Stock Options made in a m8IU1er consistent with past practice to purchase, in the
aggregate, not more than 100,000 shares of Time Warner Common Stock, no options or warrants
or other rights to acquire capital stock from Time Warner have been issued or granted since
December 31, 1999 to the date of this Agreement.
(ii) No bonds, debentures, notes or other indebtedness of Time Warner
having the right to vote on any matters on which holders of capital stock of Time Warner may
vote ("Time Warner Voting Debt") are issued or outstanding.
(iii) Except as otherwise set forth in this Section 4.2(b) or in Section
4.2(b)(iii) of the Time Warner Disclosure Schedule, as of the date of this Agreement, there are no
securities, options, warrants, calls, rights, commitments, agreements, arrangements or
undertakings of any kind to which Time Warner or any of its Subsidiaries is a party or by which
any of them is bound obligating Time Warner or any of its Subsidiaries to issue, deliver or sell,
or cause to be issued, delivered or sold, additional shares of capital stock or other voting
securities of Time Warner or any ofits Subsidiaries or obligating Time Warner or any of its
Subsidiaries to issue, grant, extend or enter into any such security, option, warrant, call, right,
commitment, agreement, arrangement or undertaking. As of the date of this Agreement, there
are no outstanding obligations of Time Warner or any of its Subsidiaries to repurchase, redeem
or otherwise acquire any shares of capital stock of Time Warner or any of its Subsidiaries.
:03iSO-0007-02269-A018ECH9-~GA
28
(c) Authority: No Conflicts.
(i) Time Warner has all requisite corporate power and authority to enter into
this Agreement and the Stock Option Agreements and to consummate the transactions
contemplated hereby and thereby, subject in the case of the consummation of the Time Warner
Merger to the adoption of this Agreement by the Required Time Warner Vote (as defined in
Section 4.2(g)). The execution and delivery of this Agreement and the Stock Option Agreements
and the consummation of the transactions contemplated hereby and thereby have been duly
authorized by all necessary corporate action on the part of Time Warner and no other corporate
proceedings on the part of Time Warner are necessary to authorize the execution and delivery of
the Agreement or. to consummate the Time Warner Merger and the other transactions
contemplated hereby, subject in the case of the consummation of the Time Warner Merger to the
adoption of this Agreement by the Required Time Warner Vote. This Agreement and the Stock
Option Agreements have been duly executed and delivered by Time Warner and constitute valid
and binding agreements of Time Warner, enforceable against Time Warner in accordance with
their respective terms, except as such enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium and similar laws relating to or affecting creditors generally or by
general equity principles (regardless of whether such enforceability is considered in a proceeding
in equity or at law).
(ii) The execution and delivery of this Agreement and the Stock Option
Agreements by Time Warner do not, and the consummation by Time Warner of the Time Warner
Merger and the other transactions contemplated hereby and thereby will not, conflict with, or
result in a Violation pursuant to: (A) any provision of the certificate of incorporation or bylaws
or similar organizational document of Time Warner or any Significant Subsidiary of Time
Warner (including the TWE Partnership Agreement) or (B) except (I) as, individually or in the
aggregate, would not reasonably be expected to have a Material Adverse Effect on Time Warner
or (2) would not prevent or materially delay the consummation of the Mergers, subject to
obtaining or making the consents, approvals, orders, authorizations, registrations, declarations
and filings referred to in paragraph (iii) below or (3) set forth in Section 4.2(c)(ii) of the Time
Warner Disclosure Schedule and except with respect to employee stock options and other
awards, any loan or credit agreement, note, mortgage, bond, indenture, lease, benefit plan or
other agreement, obligation, instrument, permit, concession, franchise, license, judgment, order,
decree, statute, law, ordinance, rule or regulation applicable to Time Warner or any Subsidiary of
Time Warner or their respective properties or assets.
(iii) No consent, approval, order or authorization of, or registration,
declaration or filing with, any Governmental Entity or any other Person is required by or with
respect to Time Warner or any Subsidiary of Time Warner in connection with the execution and
delivery of this Agreement and the Stock Option Agreements by Time Warner or the
consummation of the Time Warner Merger and the other transactions contemplated hereby and
thereby, except the Necessary Consents and such consents, approvals, orders, authorizations,
registrations, declarations and filings the failure of which to make or obtain, individually or in
OC3i90-C007-02269-h018SCH9-~Gh
29
the aggregate, would not reasonably be expected to have a Material Adverse Effect on Time
Warner.
(d) Reports and Financial Statements.
(i) Each of Time Warner and TWE have filed all required registration
statements, prospectuses, reports, schedules, forms, statements and other documents required to
be filed by each of them with the SEC since December 31, 1996 (collectively, including all
exhibits thereto, the "Time Warner SEC Reports"). Except as set forth in Section 4.2(d)(i) of the
Time Warner Disclosure Schedule, no Subsidiary of Time Warner is required to file any form,
report, registration statement, prospectus or other document with the SEC. None of the Time
Warner. SEC Reports, as of their respective dates (and, if amended or superseded by a filing prior
to the date of this Agreement, then on the date of such filing), contained or will contain any
untrue statement of a material fact or omitted or will omit to state a material fact required to be
stated therein or necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading. Each of the financial statements (including the related
notes) included in the Time Warner SEC Reports presents fairly, in all material respects, the
consolidated financial position and consolidated results of operations and cash flows of Time
Warner or TWE, as the case may be, and its consolidated Subsidiaries as of the respective dates
or for the respective periods set forth therein, all in conformity with GAAP consistently applied
during the periods involved except as otherwise noted therein, and subject, in the case of the
unaudited interim financial statements, to the absence of notes and normal year-end adjustments
that have not been and are not expected to be material in amount. All of such Time Warner SEC
Reports, as of their respective dates (and as of the date of any amendment to the respective Time
Warner SEC Report), complied as to form in all material respects with the applicable
requirements of the Securities Act and the Exchange Act and the rules and regulations
promulgated thereunder.
(ii) Except as disclosed in the Time Warner SEC Reports filed and publicly
available prior to the date hereof (the "Time Warner Filed SEC Reports"), Time Warner and its
Subsidiaries have not incurred any liabilities that are of a nature that would be required to be
disclosed on a balance sheet of Time Warner and its Subsidiaries or the footnotes thereto
prepared in conformity with GAAP, other than (A) liabilities incurred in the ordinary course of
business, (B) liabilities incurred in accordance with Section 5.2, (C) liabilities for Taxes or
(D) liabilities that, individually or in the aggregate, would not reasonably be expected to have a
Material Adverse Effect on Time Warner.
(e) Information Supplied.
(i) None of the information supplied or to be supplied by Time Warner for
inclusion or incorporation by reference in (A) the Form S-4 will, at the time the Form S-4 is filed
with the SEC, at any time it is amended or supplemented or at the time it becomes effective
under the Securities Act, contain any untrue statement of a material fact or omit to state any
C037SQ-0007-02269-Ac:eSCp.9-MGA
30
material fact required to be stated therein or necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading, and (B) the Joint Proxy
StatementJProspectus will, on the date it is first mailed to Time Warner stockholders or America
Online stockholders or at the time of the Time Warner Stockholders Meeting or the America
Online Stockholders Meeting, contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they were made, not misleading. The Form S-4 and the
Joint Proxy StatementJProspectus will comply as to form in all material respects with the
requirements of the Exchange Act and the Securities Act and the rules and regulations of the
SEC thereunder.
(ii) Notwithstanding the foregoing provisions of this Section 4.2(e), no
representation or warranty is made by Time Warner with respect to statements made or
incorporated by reference in the Form S-4 or the Joint Proxy StatementJProspectus based on
information supplied by America Online for inclusion or incorporation by reference therein.
(f) Board Approval. The Board of Directors of Time Warner, by
resolutions duly adopted by unanimous vote of those voting at a meeting duly called and held
and not subsequently rescinded or modified in any way (the "Time Warner Board Approval"),
has duly (i) determined that this Agreement and the Time Warner Merger and the Time Warner
Stock Option Agreement are fair to and in the best interests of Time Warner and its stockholders
and declared the Time Warner Merger to be advisable, (ii) approved this Agreement, the Time
Warner Stock Option Agreement, the Voting Agreement and the Time Warner Merger and (iii)
recommended that the stockholders of Time Warner adopt this Agreement and directed that such
matter be submitted for consideration by Time Warner's stockholders at the Time Warner
Stockholders Meeting. The Time Warner Board Approval constitutes approval of this
Agreement, the Time Warner Stock Option Agreement, the Voting Agreement and the Time
Warner Merger for purposes of Section 203 of the DGCL and Article V of the Restated
Certificate ofIncorporation of Time Warner. To the knowledge of Time Warner, except for
Section 203 of the DGCL (which has been rendered inapplicable), no state takeover statute is
applicable to this Agreement, the Time Warner Stock Option Agreement, the Voting Agreement
or the Time Warner Merger or the other transactions contemplated hereby or thereby.
(g) V ote Required. The affirmative vote of the holders of a majority of the
voting power of the outstanding shares of Time Warner Series LMC Common Stock, Time
Warner Common Stock and Time Warner Preferred Stock, voting together as a single class, to
adopt this Agreement (the "Required Time Warner Vote") is the only vote of the holders of any
class or series of Time Warner capital stock necessary to approve or adopt this Agreement, the
Time Warner Stock Option Agreement and the Time Warner Merger and to consummate the
Time Warner Merger and the other transactions contemplated hereby and thereby.
OC3;e2-0CC7-02269~AC18ECr.9-~GA
31
(h) Litigation: Compliance with Laws.
(i) There are no Actions pending or, to the knowledge of Time Warner,
threatened, against or affecting Time Warner or any Subsidiary of Time Warner or any property
or asset of Time Warner or any Subsidiary of Time Warner which, individually or in the
aggregate, would reasonably be expected to have a Material Adverse Effect on Time Warner, nor
are there any judgments, decrees, injunctions, rules or orders of any Governmental Entity or
arbitrator outstanding against Time Warner or any Subsidiary of Time Warner which,
individually or in the aggregate, would reasonably be expected to have a Material Adverse Effect
on Time Warner.
(ii) Except as individually or in the aggregate would not reasonably be
expected to have a Material Adverse Effect on Time Warner, Time Warner and its Subsidiaries
hold all permits, licenses, franchises, variances, exemptions, orders and approvals of all
Governmental Entities which are necessary for the operation of the businesses as now being
conducted of Time Warner and its Subsidiaries, taken as a whole (the "Time Warner Permits"),
and no suspension or cancellation of any of the Time Warner Permits is pending or, to the
knowledge of Time Warner, threatened. Time Warner and its Subsidiaries are in compliance
with the terms of the Time Warner Permits, except where the failure to so comply, individually
or in the aggregate, would not reasonably be expected to have a Material Adverse Effect on Time
Warner. Neither Time Warner nor its Subsidiaries is in violation of, and Time Warner and its
Subsidiaries have not received any notices of violations with respect to, any laws, statutes,
ordinances, rules or regulations of any Governmental Entity, except for violations which,
individually or in the aggregate, would not reasonably be expected to have a Material Adverse
Effect on Time Warner.
(i) Absence of Certain Changes or Events. Except as disclosed in Section
4.2(i) of the Time Warner Disclosure Schedule and for liabilities permitted to be incurred in
accordance with this Agreement or the transactions contemplated hereby, since September 30,
1999, Time Warner and its Subsidiaries have conducted their business only in the ordinary
course and in a manner consistent with past practice and, since December 31, 1998, there have
not been any changes, circumstances or events which, individually or in the aggregate, have had,
or would reasonably be expected to have, a Material Adverse Effect on Time Warner.
(j) Intellectual Property: Year 2000.
(i) Except as would not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect on Time Warner: (a) Time Warner and each of its
Subsidiaries owns, or is licensed to use (in each case, free and clear of any Liens), all Intellectual
Property used in or necessary for the conduct of its business as currently conducted; (b) to the
knowledge of Time Warner, the use of any Intellectual Property by Time Warner and its
Subsidiaries does not infringe on or otherwise violate the rights of any Person, (c) the use of the
Intellectual Property is in accordance with applicable licenses pursuant to which Time Warner or
003!90-0007-02269-~O~8ECH9-~GA
32
any Subsidiary acquired the right to use any Intellectual Property; and (d) to the knowledge of
Time Warner, no Person is challenging, infringing on or otherwise violating any right of Time
Warner or any of its Subsidiaries with respect to any Intellectual Property owned by and/or
licensed to Time Warner or its Subsidiaries. As of the date of this Agreement, except as would
not reasonably be expected, individually or in the aggregate, to have a Material Adverse Effect
on Time Warner, neither Time Warner nor any of its Subsidiaries has knowledge of any pending
claim, order or proceeding with respect to any Intellectual Property used by Time Warner and its
Subsidiaries and to its knowledge no Intellectual Property owned and/or licensed by Time
Warner or its Subsidiaries is being used or enforced in a manner that would reasonably be
expected to result in the abandonment, cancellation or unenforceability of such Intellectual
Property .
(ii) Prior to the date of this Agreement, Time Warner and its Subsidiaries
have undertaken a concerted effort to ensure that all of the computer software, computer
firmware, computer hardware, and other similar or related items of automated, computerized,
and/or software system(s) that are used or relied on by Time Warner or any or its Subsidiaries in
the conduct of their respective businesses will not malfunction, will not cease to function, will
not generate incorrect data, and will not provide incorrect results when processing, providing
and/or receiving (a) date-related data into and between the years 1999 and 2000 and (b) date-
related data in connection with any valid date in the twentieth and twenty-first centuries. As of
the date of this Agreement, except as would not reasonably be expected, individually or in the
aggregate, to have a Material Adverse Effect on Time Warner, Time Warner reasonably believes
that such effort will be successful.
(k) Brokers or Finders. No agent, broker, investment banker, fmancial
advisor or other firm or Person is or will be entitled to any broker's or fmder's fee or any other
similar commission or fee in connection with any of the transactions contemplated by this
Agreement, based upon arrangements made by or on behalf of Time Warner except Morgan
Stanley Dean Witter & Co. Incorporated, whose fees and expenses will be paid by Time Warner.
(I) Opinion of Time Warner Financial Advisor. Time Warner has received
the opinion of Morgan Stanley Dean Witter & Co. Incorporated, dated the date of this
Agreement, to the effect that, as of such date, the Exchange Ratio is fair, from a fmancial point of
view, to the holders of Time Warner Common Stock and Time Warner Series Common Stock, a
copy of which opinion will be made available to America Online promptly after the date of this
Agreement.
(m) Taxes. Each of Time Warner and its Subsidiaries has filed all Tax
Returns required to have been filed (or extensions have been duly obtained) and has paid all
Taxes required to have been paid by it, except where failure to file such Tax Returns or pay such
Taxes would not, individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect on Time Warner.
003780-CC07-C2269-AOleSC~9-XGA
33
Neither Time Warner nor any of its Subsidiaries has taken any action or knows of
any fact that is reasonably likely to prevent the Mergers from qualifying as exchanges within the
meaning of Section 351 of the Code and as reorganizations within the meaning of Section 368(a)
of the Code.
(n) Certain Contracts. As of the date hereof, except as disclosed in Section
4.2(n) of the Time Warner Disclosure Schedule, neither Time Warner nor any of its Subsidiaries
is a party to or bound by (i) any "material contracts" (as such term is defmed in Item 601(b)(1O)
of Regulation S-K of the SEC) with respect to Time Warner and its Subsidiaries or (ii) any
material agreement that restricts the ability of America Online or Time Warner or any of their
Subsidiaries or affiliates to distribute, promote, market or otherwise offer Internet and interactive
services, Internet and interactive programming, or Internet and interactive functionality on the
cable systems owned by Time Warner or its Subsidiaries or affiliates (collectively, "Time
Warner Internet Restrictions"). All contracts described in clause (i) are valid and in full force
and effect except to the extent they have previously expired in accordance with their terms or if
the failure to be in full force and effect, individually or in the aggregate, would not reasonably be
expected to have a Material Adverse Effect on Time Warner. Neither Time Warner nor any of its
Subsidiaries has violated any provision of, or committed or failed to perform any act which with
or without notice, lapse of time or both would constitute a default under the provisions of, any
contract described in clause (i), except in each case for those violations and defaults which,
individually or in the aggregate, would not reasonably be expected to result in a Material
Adverse Effect on Time Warner.
(0) Time Warner Stockholder Rights Plan. The Board of Directors of Time
Warner has amended the Time Warner Rights Agreement in accordance with its terms to render
it inapplicable to the transactions contemplated by this Agreement and the Time Warner Stock
Option Agreement.
(P) Employee Benefits.
(i) The Benefit Plans, whether oral or written, under which any current or
former employee or director of Time Warner or its Subsidiaries has any present or future right to
benefits contributed to, sponsored by or maintained by Time Warner or its Subsidiaries, or under
which Time Warner or its Subsidiaries has any present or future liability shall be collectively
referred to as the "Time Warner Benefit Plans."
(ii) With respect to each Time Warner Benefit Plan, no liability has been
incurred and there exists no condition or circumstances in connection with which Time Warner
or any of its Subsidiaries could be subject to any liability that is reasonably likely, individually or
in the aggregate, to have a Material Adverse Effect on Time Warner, in each case under ERISA,
the Code, or any other applicable law, rule or regulation.
OC3780-0007-02269-A016ECH9-~GA
34
(iii) Time Warner and its Subsidiaries are in compliance with all Federal,
state, local and foreign requirements regarding employment, except for any failures to comply
that are not reasonably likely, individually or in the aggregate, to have a Material Adverse Effect
on Time Warner. As of the date of this Agreement, there is no labor dispute, strike or work
stoppage against Time Warner or any of its Sub~idiaries pending or, to the knowledge of Time
Warner, threatened which may interfere with the business activities of Time Warner or any of its
Subsidiaries, except where such dispute, strike or work stoppage is not reasonably likely,
individually or in the aggregate, to have a Material Adverse Effect on Time Warner.
ARTICLE V
COVENANTS RELATING TO CONDUCT OF BUSINESS
5.1 Covenants of America Online. During the period from the date of this
Agreement and continuing until the Effective Time, America Online agrees as to itself and its
Subsidiaries that (except as expressly contemplated or permitted by this Agreement, the Stock
Option Agreements or Section 5.1 (including its subsections) of the America Online Disclosure
Schedule or as required by a Governmental Entity or to the extent that Time Warner shall
otherwise consent in writing, which consent shall not be unreasonably withheld or delayed):
(a) Ordinary Course.
(i) America Online and its Subsidiaries shall carry on their respective
businesses in the usual, regular and ordinary course in all material respects, in substantially the
same manner as heretofore conducted, and shall use its reasonable best efforts to preserve intact
their present lines of business, maintain their rights and franchises and preserve their
relationships with customers, suppliers and others having business dealings with them to the end
that their ongoing businesses shall not be impaired in any material respect at the Effective Time;
provided, however, that no action by America Online or its Subsidiaries with respect to matters
specifically addressed by any other provision of this Section 5.1 shall be deemed a breach of this
Section 5.1 (a )( i) unless such action would constitute a breach of one or more of such other
proVISIons.
(ii) Other than in connection with acquisitions permitted by Section 5.1(e) or
investments permitted by Section 5.2(g), America Online shall not, and shall not permit any of
its Subsidiaries to, (A) enter into any new material line of business or (B) incur or commit to any
capital expenditures or any obligations or liabilities in connection therewith other than capital
expenditures and obligations or liabilities in connection therewith incurred or committed to in the
ordinary course of business consistent with past practice.
(b) Dividends: Changes in Share Capital. America Online shall not, and
shall not permit any of its Subsidiaries to, and shall not propose to, (i) declare or pay any
C~3~30-0007-C2269-AC:8~CH9-~GA
35
dividends on or make other distributions in respect of any of its capital stock, except than as
permitted by Section 5.1 (b )(ii), (ii) split, combine or reclassify any of its capital stock or issue or
authorize or propose the issuance of any other securities in respect of, in lieu of or in substitution
for, shares of its capital stock, except for (x) any such transaction by a wholly owned Subsidiary
of America Online which remains a wholly owned Subsidiary after consummation of such
transaction or (y) a stock split of the America Online Common Stock or (iii) repurchase, redeem
or otherwise acquire any shares of its capital stock or any securities convertible into or
exercisable for any shares of its capital stock except for the purchase from time to time by
America Online of America Online Common Stock (and the associated America Online Rights)
in connection with the America Online Benefit Plans in the ordinary course of business
consistent with past practice.
(c) Issuance of Securities. America Online shall not, and shall not permit
any of its Subsidiaries to, issue, deliver or sell, or authorize or propose the issuance, delivery or
sale of, any shares of its capital stock of any class, any America Online Voting Debt or any
securities convertible into or exercisable for, or any rights, warrants, calls or options to acquire,
any such shares or America Online Voting Debt, or enter into any commitment, arrangement,
undertaking or agreement with respect to any of the foregoing, other than (i) the issuance of
America Online Common Stock (and the associated America Online Rights) upon the exercise of
America Online Stock Options in accordance with their present terms or pursuant to America
Online Stock Options or other stock based awards granted pursuant to clause (ii) below, (ii) the
granting of America Online Stock Options or other stock based awards of or to acquire shares of
America Online Common Stock granted under Benefit Plans outstanding on the date hereof in
the ordinary course of business consistent with past practice, (iii) issuances by a wholly owned
Subsidiary of America Online of capital stock to such Subsidiary's parent or another wholly
owned Subsidiary of America Online, (iv) pursuant to acquisitions and investments as disclosed
in Section 5.1 (e) or 5.1 (g) of the America Online Disclosure Schedule or the financings therefor
or as disclosed in Section 5.I(c) ofthe America Online Disclosure Schedule, (v) issuances in
accordance with the America Online Rights Agreement or (vi) issuances pursuant to the America
Online Stock Option Agreement.
(d) Governing Documents. Except to the extent required to comply with
their respective obligations hereunder or with applicable law, America Online and America
Online Merger Sub shall not amend or propose to so amend their respective certificates of
incorporation or bylaws.
(e) No Acquisitions. Other than (i) pursuant to the Time Warner Stock
Option Agreement, (ii) acquisitions disclosed in Section 5.1(e) of the America Online Disclosure
Schedule and (iii) acquisitions in existing or related lines of business of America Online the fair
market value of the total consideration (including the value of indebtedness acquired or assumed)
for which does not exceed the amount specified in the aggregate for such acquisitions in Section
5.1 (e)(iii) of the America Online Disclosure Schedule and none of which acquisitions referred to
in this clause (iii) presents a material risk of making it materially more difficult to obtain any
003780-00Q7-022E9-A018ECn9-MGA
36
approval or authorization required in connection with the Mergers under applicable Laws,
America Online shall not, and shall not permit any of its Subsidiaries to, acquire or agree to
acquire by merger or consolidation, or by purchasing a substantial equity interest in or a
substantial portion of the assets of, or by any other manner, any business or any corporation,
partnership, association or other business organization or division thereof or otherwise acquire or
agree to acquire any assets (excluding the acquisition of assets used in the operations of the
business of America Online and its Subsidiaries in the ordinary course, which assets do not
constitute a business unit, division or all or substantially all of the assets of the transferor);
provided, however, that the foregoing shall not prohibit (x) internal reorganizations or
- consolidations involving existing Subsidiaries of America Online or (y) the creation of new
Subsidiaries of America Online organized to conduct or continue activities otherwise permitted
by this Agreement.
(f) No Dispositions. Other than (i) internal reorganizations or
consolidations involving existing Subsidiaries of America Online, (ii) dispositions referred to in
the America Online SEe Reports filed prior to the date of this Agreement or (iii) as may be
required by or in conformance with law or regulation in order to permit or facilitate the
consummation of the transactions contemplated hereby or as disclosed in Section 5.1(f) of the
America Online Disclosure Schedule, America Online shall not, and shall not permit any of its
Subsidiaries to, sell, lease or otherwise dispose of, or agree to sell, lease or otherwise dispose of,
any of its assets (including capital stock of Subsidiaries of America Online but excluding
inventory in the ordinary course of business), if the fair market value of the total consideration
(including the value of the indebtedness acquired or assumed) therefor exceeds the amount
specified in the aggregate for all such dispositions in Section 5.1(f) of the America Online
Disclosure Schedule.
(g) Investments: Indebtedness. America Online shall not, and shall not
permit any of its Subsidiaries to, (i) other than in connection with acquisitions permitted by
Section 5.1(e) or as disclosed in Section 5.1(g) of the America Online Disclosure Schedule, make
any loans, advances or capital contributions to, or investments in, any other Person, other than
(x) loans or investments by America Online or a Subsidiary of America Online to or in America
Online or any Subsidiary of America Online, (y) employee loans or advances made in the
ordinary course of business or (z) in the ordinary course of business consistent with past practice
which are not, individually or in the aggregate, material to America Online and its Subsidiaries
taken as a whole (provided that none of such transactions referred to in this clause (z) presents a
material risk of making it more difficult to obtain any approval or authorization required in
connection with the Mergers under Regulatory Law (as defmed in Section 6.4(c)) or (ii) without
regard to anything contained in the America Online Disclosure Schedule, incur any indebtedness
for borrowed money or guarantee any such indebtedness of another Person, issue or sell any debt
securities or warrants or other rights to acquire any debt securities of America Online or any of
its Subsidiaries, guarantee any debt securities of another person, enter into any "keep well" or
other agreement to maintain any financial statement condition of another Person (other than any
wholly owned Subsidiary) or enter into any arrangement having the economic effect of any of the
OG37cO-OCC7-02269-~O"5SC~9-MGA
37
foregoing (collectively, "America Online Indebtedness"), except for (A) any America Online
Indebtedness so long as (x) after the incurrence or issuance of such America Online Indebtedness
America Online's consolidated indebtedness would not exceed 125% ofthe consolidated
indebtedness of America Online as of the date hereof and (y) no America Online credit rating
would be downgraded by either Moody's Investors Service, Inc. ("Moody's") or Standard &
Poor's Corporation ("S&P") (provided that the consummation of this Agreement or any of the
transactions contemplated hereby shall not give rise to, cause or result in, a default or event of
default under the agreement or instrument governing any such indebtedness or, an obligation to
pay any amount thereunder solely as a result of the consummation of this Agreement or any of
the transactions contemplated hereby) and (B) intercompany indebtedness between America
Online and any of its wholly owned Subsidiaries or between such wholly owned Subsidiaries.
(h) Tax-Free Qualification. America Online shall use its reasonable best
efforts not to, and shall use its reasonable best efforts not to permit any of its Subsidiaries to, take
any action (including any action otherwise permitted by this Section 5.1) that would prevent or
impede the Mergers from qualifying as exchanges under Section 351 of the Code and as
reorganizations under Section 368 of the Code; provided, however, that nothing hereunder shall
limit the ability of America Online to exercise its rights and/or fulfill its obligations under the
Stock Option Agreements.
(i) Compensation. Except (x) as set forth in Sections 5.1(c) or 5.1(i) of the
America Online Disclosure Schedule, (y) as required by law or by the terms of any collective
bargaining agreement or other agreement currently in effect between America Online or any
Subsidiary of America Online and any executive officer or employee thereof or (z) in the
ordinary course of business consistent with past practice, America Online shall not increase the
amount of compensation of any director, executive officer or key employee of America Online or
any material Subsidiary or business unit of America Online, or make any increase in or
commitment to increase any employee benefits, issue any additional America Online Stock
Options, adopt or amend or make any commitment to adopt or amend any Benefit Plan or make
any contribution, other than regularly scheduled contributions, to any America Online Benefit
Plan. Any option committed to be granted or granted after the date hereof shall not accelerate as
a result of the approval or consummation of any transaction contemplated by this Agreement.
Should any modification of the America Online Option Plans necessary to effectuate the
immediately preceding sentence render any transaction to which America Online is a party, and
which is intended to be eligible for pooling-of-interest accounting under APB No. 16, ineligible
for such treatment then such modification shall not be required; provided, that the number of
shares subject to options to be granted in the ordinary course consistent with past practice shall
be reduced to reflect the effect of such acceleration.
(j) Accounting Methods: Income Tax Elections. Except as disclosed in
America Online SEe Reports filed prior to the date of this Agreement, or as required by a
Governmental Entity, America Online shall not change its methods of accounting in effect at
September 30, 1999, except as required by changes in GAAP as concurred in by America
003i3C-0007-02269-h018SCH9-MGA
38
Online's independent public accountants. America Online shall not (i) change its fiscal year
(other than to the calendar year) or (ii) make any tax election that, individually or in the
aggregate, would have a Material Adverse Effect on America Online.
(k) Certain Agreements and Arrangements. Except as disclosed in Section
5.1(k) of the America Online Disclosure Schedule, America Online shall not, and shall not
permit any of its Subsidiaries to, enter into any America Online Internet Restrictions or any
agreements or arrangements (x) that limit or otherwise restrict America Online or any of its
Subsidiaries or any of their respective Affiliates or any successor thereto or that could, after the
Effective Time, limit or restrict America Online or any of its Affiliates (including Holdco) or any
successor thereto, from engaging or competing in any line of business or in any geographic area
which agreements or arrangements, individually or in the aggregate, would reasonably be
expected to have a Material Adverse Effect on Holdco and its Subsidiaries, taken together, after
giving effect to the Mergers or (y) of a type described in Section 5.1 (k) of the Time Warner
Disclosure Schedule.
(1) Satisfaction of Closing Conditions. Except as required by law, America
Online shall not, and shall not permit any of its Subsidiaries to, take any action that would, or
would reasonably be expected to, result in (i) any of the conditions to the Mergers set forth in
Article VII not being satisfied or (ii) a material delay in the satisfaction of such conditions.
(m) No Related Actions. America Online will not, and will not permit any
of its Subsidiaries to, agree or commit to do any of the foregoing.
5.2 Covenants of Time Warner. During the period from the date of this
Agreement and continuing until the Effective Time, Time Warner agrees as to itself and its
Subsidiaries that (except as expressly contemplated or permitted by this Agreement, the Stock
Option Agreements or Section 5.2 (including its subsections) of the Time Warner Disclosure
Schedule or as required by a Governmental Entity or to the extent that America Online shall
otherwise consent in writing, which consent shall not be unreasonably withheld or delayed):
(a) OrdinarY Course.
(i) Time Warner and its Subsidiaries shall carry on their respective
businesses in the usual, regular and ordinary course in all material respects, in
substantially the same manner as heretofore conducted, and shall use its reasonable best
efforts to preserve intact their present lines o~business, maintain their rights and
franchises and preserve their relationships with customers, suppliers and others having
business dealings with them to the end that their ongoing businesses shall not be impaired
in any material respect at the Effective Time; provided, however, that no action by Time
Warner or its Subsidiaries with respect to matters specifically addressed by any other
provision of this Section 5.2 shall be deemed a breach ofthis Section 5.2(a)(i) unless such
action would constitute a breach of one or more of such other provisions.
00378C-0007-C2269-A018SC~9-~SA
39
(ii) Other than in connection with acquisitions permitted by Section 5.2(e) or
investments permitted by Section 5.2(g), Time Warner shall not, and shall not permit any
of its Subsidiaries to, (A) enter into any new material line of business or (B) incur or
commit to any capital expenditures or any obligations or liabilities in connection
therewith other than capital expenditures and obligations or liabilities in connection
therewith as disclosed in Section 5.2(a) of the Time Warner Disclosure Schedule or
incurred or committed to in the ordinary course of business consistent with past practice.
(b) Dividends: Changes in Share Capital. Time Warner shall not, and shall
'not permit any of its Subsidiaries to, and shall not propose to, (i) declare or pay any dividends on
or make other distributions in respect of any of its capital stock, except (A) the declaration and
payment of regular quarterly cash dividends not in excess of$0.045 per share of Time Warner
Common Stock, $0.045 per share of Series LMCN-V Common Stock, $0.9375 per share of Time
Warner Series E Preferred Stock, $0.1874 per share of Time Warner Series F Preferred Stock,
$0.9375 per share of Time Warner Series I Preferred Stock or $0.9375 per share of Series J
Preferred Stock, in each case, with usual record and payment dates for such dividends in
accordance with past dividend practice and, in the case of Time Warner Series Common Stock or
Time Warner Preferred Stock, the certificate of designations therefor, and (B) for dividends by
wholly owned Subsidiaries of Time Warner, distributions by TWE or TWE-AfN to the partners
therein according to their respective governing documents in amounts and at times in the
ordinary course of business consistent with past practice and as permitted by Section 5.2(b)(ii),
(ii) split, combine or reclassify any of its capital stock or issue or authorize or propose the
issuance of any other securities in respect of, in lieu of or in substitution for, shares of its capital
stock, except for (x) any such transaction by a wholly owned Subsidiary of Time Warner which
remains a wholly owned Subsidiary after consummation of such transaction or (y) a stock split of
the Time Warner Common Stock, or (iii) except as set forth in Section 5.2(b) of the Time Warner
Disclosure Schedule, repurchase, redeem or otherwise acquire any shares of its capital stock or
any securities convertible into or exercisable for any shares of its capital stock except for the
purchase from time to time by Time Warner of Time Warner Common Stock (and the associated
Time Warner Rights) in connection with the Time Warner Benefit Plans in the ordinary course of
business consistent with past practice.
(c) Issuance of Securities. Time Warner shall not, and shall not permit any
of its Subsidiaries to, issue, deliver or sell, or authorize or propose the issuance, delivery or sale
of, any shares of its capital stock of any class, any Time W arner Voting Debt or any securities
convertible into or exercisable for, or any rights, warrants, calls or options to acquire, any such
shares or Time Warner Voting Debt, or enter into any commitment, arrangement, undertaking or
agreement with respect to any of the foregoing, other than (i) the issuance of Time Warner
Common Stock (and the associated Time Warner Rights) upon the exercise of Time Warner
Stock Options in accordance with their present terms or pursuant to Time Warner Stock Options
or other stock based awards granted pursuant to clause (ii) below, (ii) the granting of Time
Warner Stock Options or other stock based awards of or to acquire shares of Time Warner
Common Stock granted under Benefit Plans outstanding on the date hereof in the ordinary course
C03750-0007-02269-A018ECH9-V-GA
40
of business consistent with past practice, (iii) issuances by a wholly owned Subsidiary of Time
Warner of capital stock to such Subsidiary's parent or another whoIly owned Subsidiary of Time
Warner, (iv) pursuant to acquisitions and investments as disclosed in Section 5.2(e) or 5.2(g) of
the Time Warner Disclosure Schedule or the fmancings therefor, (v) issuances disclosed in
Section 5.2(c) of the Time Warner Disclosure Schedule, (vi) issuances in accordance with the
Time Warner Rights Agreement or (vii) issuances pursuant to the Time Warner Stock Option
Agreement.
(d) Govemin~ Documents. Except as set forth in Section 5.2(d) of the Time
Warner Disclosure Schedule or to the extent required to comply with their respective obligations
hereunder or with applicable law, Time Warner and Time Warner Merger Sub shall not amend or
propose to so amend their respective certificates of incorporation or bylaws.
(e) No ACQuisitions. Other than (i) pursuant to the America Online Stock
Option Agreement, (ii) acquisitions disclosed in Section 5.2(e) of the Time Warner Disclosure
Schedule and (iii) acquisitions in existing or related lines of business of Time Warner the fair
market value of the total consideration (including the value of indebtedness acquired or assumed)
for which does not exceed the amount specified in the aggregate for such acquisitions in Section
5.2(e)(iii) of the Time Warner Disclosure Schedule and none of which acquisitions referred to in
this clause (iii) presents a material risk of making it materially more difficult to obtain any
approval or authorization required in connection with the Mergers under applicable Laws, Time
Warner shall not, and shall not permit any of its Subsidiaries to, acquire or agree to acquire by
merger or consolidation, or by purchasing a substantial equity interest in or a substantial portion
of the assets of, or by any other manner, any business or any corporation, partnership, association
or other business organization or division thereof or otherwise acquire or agree to acquire any
assets (excluding the acquisition of assets used in the operations of the business of Time Wamer
and its Subsidiaries in the ordinary course, which assets do not constitute a business unit,
division or all or substantially of the assets of the transferor); provided, however, that the
foregoing shall not prohibit (x) internal reorganizations or consolidations involving existing
Subsidiaries of Time Warner or (y) the creation of new Subsidiaries of Time Warner organized to
conduct or continue activities otherwise permitted by this Agreement.
(f) No Dispositions. Other than (i) internal reorganizations or
consolidations involving existing Subsidiaries of Time Warner, (ii) dispositions referred to in the
Time Warner SEe Reports filed prior to the date of this Agreement, (iii) as may be required by
or in conformance with law or regulation in order to permit or facilitate the consummation of the
transactions contemplated hereby or (iv) as disclosed in Section 5.2(f) of the Time Warner
Disclosure Schedule, Time Warner shall not, and shall not permit any of its Subsidiaries to, seIl,
lease or otherwise dispose of, or agree to sell, lease or otherwise dispose of, any of its assets
(including capital stock of Subsidiaries of Time Warner but excluding inventory in the ordinary
course of business), if the fair market value of the total consideration (including the value of the
indebtedness acquired or assumed) therefor exceeds the amount specified in the aggregate for all
such dispositions in Section 5.2(f) of the Time Warner Disclosure Schedule.
CC372C-8Cvl-82269-AC18SCE9-~GA
41
(g) Investments: Indebtedness. Time Warner shall not, and shall not permit
any of its Subsidiaries to, (i) other than in connection with acquisitions permitted by Section
5.2(e) or as disclosed in Section 5.1(g) of the Time Warner Disclosure Schedule, make any loans,
advances or capital contributions to, or investments in, any other Person, other than (x) loans or
investments by Time Warner or a Subsidiary of Time Warner to or in Time Warner or any
Subsidiary of Time Warner, (y) employee loans or advances made in the ordinary course of
business or (z) in the ordinary course of business consistent with past practice which are not,
individually or in the aggregate, material to Time Warner and its Subsidiaries taken as a whole
(provided that none of such transactions referred to in this clause (z) presents a material risk of
making it more difficult to obtain any approval or authorization required in connection with the
Mergers under Regulatory Law or (ii) without regard to anything contained in the Time Warner
Disclosure Schedule, incur any indebtedness for borrowed money or guarantee any such
indebtedness of another Person, issue or sell any debt securities or warrants or other rights to
acquire any debt securities of Time Warner or any of its Subsidiaries, guarantee any debt
securities of another person, enter into any "keep well" or other agreement to maintain any
financial statement condition of another Person (other than any wholly owned Subsidiary) or
enter into any arrangement having the economic effect of any of the foregoing (collectively,
"Time Warner Indebtedness"), except for (A) any Time Warner Indebtedness so long as (x) after
the incurrence or issuance of such Time Warner Indebtedness Time Warner's consolidated
indebtedness would not exceed 125% of the consolidated indebtedness of Time Warner as of the
date hereof and (y) no Time Warner credit rating would be downgraded by either Moody's or
S&P (provided that the consummation of this Agreement or any of the transactions contemplated
hereby shall not give rise to, cause or result in, a default or event of default under the agreement
or instrument governing any such indebtedness or, an obligation to pay any amount thereunder
solely as a result of the consummation of this Agreement or any of the transactions contemplated
hereby) and (B) intercompany indebtedness between Time Warner and any of its wholly owned
Subsidiaries or between such wholly owned Subsidiaries.
(h) Tax-Free Qualification. Time Warner shall use its reasonable best
efforts not to, and shall use its reasonable best efforts not to permit any of its Subsidiaries to, take
any action (including any action otherwise permitted by this Section 5.2) that would prevent or
impede the Mergers from qualifying as exchanges under Section 351 of the Code and as
reorganizations under Section 368 of the Code; provided, however, that nothing hereunder shall
limit the ability of Time Warner to exercise its rights and/or fulfill its obligations under the Stock
Option Agreements.
(i) Compensation. Except (x) as set forth in Section 5.2(c) or 5.2 (i) of the
Time Warner Disclosure Schedule, (y) as required by law or by the terms of any collective
bargaining agreement or other agreement currently in effect between Time Warner or any
Subsidiary of Time Warner and any executive officer or employee thereof or (z) in the ordinary
course of business consistent with past practice, Time Warner shall not increase the amount of
compensation of any director, executive officer or key employee of Time Warner or any material
Subsidiary or business unit of Time Warner, or make any increase in or commitment to increase
003780-0007-02269-AO"6SC~9-V.GA
42
any employee benefits, issue any additional Time Warner Stock Options, adopt or amend or
make any commitment to adopt or amend any Benefit Plan or make any contribution, other than
regularly scheduled contributions, to any Time Warner Benefit Plan. Any option granted or
committed to be granted after the date hereof shall not accelerate as a result of the approval or
consummation of any transaction contemplated by this Agreement. Should any modification of
the Time Wamer Option Plans necessary to effectuate the immediately preceding sentence render
any transaction to which Time Warner is a party, and which is intended to be eligible for
pooling-of-interest accounting under APB No. 16, ineligible for such treatment then such
modification shall not be required; provided that the number of shares subject to options to be
granted in the ordinary course consistent with past practice shall be reduced to reflect the effect
of such acceleration.
(j) Accounting Methods: Income Tax Elections. Except as disclosed in
Time Warner SEC Reports filed prior to the date of this Agreement, or as required by a
Governmental Entity, Time Warner shall not change its methods of accounting in effect at
September 30, 1999, except as required by changes in GAAP as concurred in by Time Warner's
independent public accountants. Time Warner shall not (i) change its fiscal year or (ii) make any
tax election that, individually or in the aggregate, would have a Material Adverse Effect on Time
Warner.
(k) Certain Agreements and Arrangements. Time Warner shall not, and
shall not permit any of its Subsidiaries to, enter into any Time Warner Internet Restrictions or
any agreements or arrangements (x) that limit or otherwise restrict Time Warner or any of its
Subsidiaries or any of their respective Affiliates or any successor thereto, or that could, after the
Effective Time, limit or restrict America Online or any of its Affiliates (including Holdco) or any
successor thereto, from engaging or competing in any line of business or in any geographic area
which agreements or arrangements, individually or in the aggregate, would reasonably be
expected to have a Material Adverse Effect on Holdco and its Subsidiaries, taken together, after
giving effect to the Mergers or (y) of a type described in Section 5.2(k) of the America Online
Disclosure Schedule.
(1) Satisfaction of Closing Conditions. Except as required by law, Time
Warner shall not, and shall not permit any of its Subsidiaries to, take any action that would, or
would reasonably be expected to, result in (i) any of the conditions to the Mergers set forth in
Article VII not being satisfied or (ii) a material delay in the satisfaction of such conditions.
(m) No Related Actions. Time Warner will not, and will not permit any of
its Subsidiaries to, agree or commit to do any of the foregoing.
5.3 Governmental Filin~s. Each party shall (a) confer on a reasonable basis
with the other and (b) report to the other (to the extent permitted by law or regulation or any
applicable confidentiality agreement) on operational matters. Time Warner and America Online
shall file all reports required to be filed by each of them with the SEC (and all other
003788-0J07-C22E9-A018SCH9-~GA
43
Governmental Entities) between the date of this Agreement and the Effective Time and shall, if
requested by the other party and to the extent permitted by law or regulation or any applicable
confidentiality agreement, deliver to the other party copies of all such reports, announcements
and publications promptly after such request.
5.4 Control of Other Party's Business. Nothing contained in this Agreement
shall give Time Warner, directly or indirectly, the right to control or direct America Online's
operations and nothing contained in this Agreement shall give America Online, directly or
indirectly, the right to control or direct Time Warner's operations prior to the Effective Time.
Prior to the Effective Time, each of Time Warner and America Online shall exercise, consistent
with the terms and conditions of this Agreement, complete control and supervision over its
respective operations.
ARTICLE VI
ADDITIONAL AGREEMENTS
6.1 Preparation of Proxy Statement: Stockholders Meetings.
(a) As promptly as reasonably practicable following the date hereof,
America Online and Time Warner shall cooperate in preparing and each shall cause to be filed
with the SEC mutually acceptable proxy materials which shall constitute the joint proxy
statement/prospectus relating to the matters to be submitted to the America Online stockholders
at the America Online Stockholders Meeting and the matters to be submitted to the Time Warner
stockholders at the Time Warner Stockholders Meeting (such proxy statement/prospectus, and
any amendments or supplements thereto, the "Joint Proxy StatementJProspectus") and Holdco
shall prepare and file with the SEC a registration statement on Form S-4 with respect to the
issuance of Holdco Capital Stock in the Mergers (such Form S-4, and any amendments or
supplements thereto, the "Form 8-4"). The Joint Proxy StatementJProspectus will be included as
a prospectus in and will constitute a part of the Form S-4 as Holdco's prospectus. Each of
America Online and Time Warner shall use reasonable best efforts to have the Joint Proxy
StatementJProspectus cleared by the SEC and the Form S-4 declared effective by the SEC and to
keep the Form S-4 effective as long as is necessary to consummate the Mergers and the
transactions contemplated thereby. America Online and Time Warner shall, as promptly as
practicable after receipt thereof, provide the other party copies of any written comments and
advise the other party of any oral comments, with respect to the Joint Proxy
StatementlProspectus or Form S-4 received from the SEC. The parties shall cooperate and
provide the other with a reasonable opportunity to review and comment on any amendment or
supplement to the Joint Proxy StatementJProspectus and the Form S-4 prior to filing such with
the SEC, and will provide each other with a copy of all such filings made with the SEC.
Notwithstanding any other provision herein to the contrary, no amendment or supplement
(including by incorporation by reference) to the Joint Proxy StatementIProspectus or the Form S-
C0378S-CC07-C2269-AOleSC~9-XGA
44
4 shall be made without the approval of both parties, which approval shall not be unreasonably
withheld or delayed; provided that with respect to documents filed by a party which are
incorporated by reference in the Form S-4 or Joint Proxy StatementJProspectus, this right of
approval shall apply only with respect to information relating to the other party or its business,
fmancial condition or results of operations; and provided further that America Online, in
connection with a Change in the America Online Recommendation (as defined in Section 6.1(c)),
and Time Warner, in connection with a Change in the Time Warner Recommendation (as defmed
in Section 6. 1 (b)), may amend or supplement the Joint Proxy StatementJProspectus or Form S-4
(including by incorporation by reference) pursuant to a Qualifying Amendment (as defmed
below) to effect such a Change, and in such event, this right of approval shall apply only with
respect to information relating to the other party or its business, financial condition or results of
operations, and shall be subject to the right of each party to have its Board of Directors'
deliberations and conclusions to be accurately described. A "Qualifyin~ Amendment" means an
amendment or supplement to the Joint Proxy StatementJProspectus or Form S-4 (including by
incorporation by reference) to the extent it contains (i) a Change in the America Online
Recommendation or a Change in the Time Warner Recommendation (as the case may be), (ii) a
statement of the reasons of the Board of Directors of America Online or Time Warner (as the
case may be) for making such Change in the America Online Recommendation or Change in the
Time Warner Recommendation (as the case may be) and (iii) additional information reasonably
related to the foregoing. America Online will use reasonable best efforts to cause the Joint Proxy
Statements/Prospectus to be mailed to America Online stockholders, and Time Warner will use
reasonable best efforts to cause the Joint Proxy StatementlProspectus to be mailed to Time
Warner's stockholders, in each case as promptly as practicable after the Form S-4 is declared
effective under the Securities Act. Holdco shall also take any action (other than qualifying to do
business in any jurisdiction in which it is not now so qualified or to file a general consent to
service of process) required to be taken under any applicable state securities laws in connection
with the Mergers and each of Time Warner and America Online shall furnish all information
concerning it and the holders of its capital stock as may be reasonably requested in connection
with any such action. Each party will advise the other party, promptly after it receives notice
thereof, of the time when the Form S-4 has become effective, the issuance of any stop order, the
suspension of the qualification of the Holdco Capital Stock issuable in connection with the
Mergers for offering or sale in any jurisdiction, or any request by the SEC for amendment of the
Joint Proxy StatementIProspectus or the Form S-4. If at any time prior to the Effective Time any
information relating to America Online or Time Warner, or any of their respective affiliates,
officers or directors, should be discovered by America Online or Time Warner which should be
set forth in an amendment or supplement to any of the Form S-4 or the Joint Proxy
StatementIProspectus so that any of such documents would not include any misstatement of a
material fact or omit to state any material fact necessary to make the statements therein, in light
of the circumstances under which they were made, not misleading, the party which discovers
such information shall promptly notify the other party hereto and, to the extent required by law,
rules or regulations, an appropriate amendment or supplement describing such information shall
be promptly filed with the SEe and disseminated to the stockholders of America Online and
Time Warner.
OG3190-0JO:-02269-A012SCS9-~GA
45
(b) Time Warner shall duly take all lawful action to call, give notice of,
convene and hold a meeting of its stockholders on a date determined in accordance with the
mutual agreement of Time Warner and America Online (the "Time Warner Stockholders
Meeting") for the purpose of obtaining the Required Time Warner Vote with respect to the
transactions contemplated by this Agreement and shall take all lawful action to solicit the
adoption of this Agreement by the Required Time Warner Vote; and the Board of Directors of
Time Warner shall recommend adoption of this Agreement by the stockholders of Time Warner
to the effect as set forth in Section 4.2(f) (the "Time Warner Recommendation"), and shall not,
unless America Online makes a Change in the America Online Recommendation, (x) withdraw,
modify or qualify (or propose to withdraw, modify or qualify) in any manner adverse to America
Online such recommendation or (y) take any action or make any statement (other than any action
described in the foregoing clause (x)) in connection with the Time Warner Stockholders Meeting
inconsistent with such recommendation (collectively, a "Change in the Time Warner
Recommendation"); provided, however, any action or statement under clause (y) will not be
deemed a Change in the Time Warner Recommendation provided (1) such action or statement is
taken or made pursuant to advice from Cravath, Swaine & Moore, counsel to Time Warner, to
the effect that such action or statement is required by applicable Law, (II) if a Time Warner
Public Proposal has been made and not rescinded, such action or statement shall not relate to
such Time Warner Public Proposal other than any factual statement required by any regulatory
authority (including the SEC) and shall in any event include a rejection of such Time Warner
Public Proposal and (III) such action or statement also includes a reaffirmation of the Time
Warner Board of Directors' approval of the Mergers and the other transactions contemplated
hereby and recommendation to the Time Warner stockholders to adopt this Agreement; provided
further, however, that the Board of Directors of Time Warner may make a Change in the Time
Warner Recommendation pursuant to Section 6.5 hereof. Notwithstanding any Change in the
Time Warner Recommendation, this Agreement shall be submitted to the stockholders of Time
Warner at the Time Warner Stockholders Meeting for the purpose of adopting this Agreement
and nothing contained herein shall be deemed to relieve Time Warner of such obligation.
( c) America Online shall duly take all lawful action to call, give notice of,
convene and hold a meeting of its stockholders on a date determined in accordance with the
mutual agreement of America Online and Time Warner (the "America Online Stockholders
Meeting") for the purpose of obtaining the America Online Stockholder Approval with respect to
the transactions contemplated by this Agreement and shall take all lawful action to solicit the
adoption of this Agreement, and the Board of Directors of America Online shall recommend
adoption of this Agreement by the stockholders of America Online to the effect as set forth in
Section 4.1(f) (the "America Online Recommendation"), and shall not, unless Time Warner
makes a Change in the Time Warner Recommendation, (x) withdraw, modify or qualify (or
propose to withdraw, modify or qualify) in any manner adverse to Time Warner such
recommendation or (y) take any action or make any statement (other than any action described in
the foregoing clause (x)) in connection with the America Online Stockholders Meeting
inconsistent with such recommendation (collectively, a "Change in the America Online
Recommendation"); provided, however, any action or statement under clause (y) will not be
OC3780-0007-02269-A018SC~9-MGA
46
deemed a Change in the America Online Recommendation provided (I) such action or statement
is taken or made pursuant to advice from Simpson Thacher & Bartlett, counsel to America
Online, to the effect that such action or statement is required by applicable Law, (II) if an
America Online Public Proposal has been made and not rescinded, such action or statement shall
not relate to such America Online Public Proposal other than any factual statement required by
any regulatory authority (including the SEC) and shall in any event include a rejection of such
America Online Public Proposal and (III) such action or statement also includes a reaffirmation
of the America Online Board of Directors' approval of the Mergers and the other transactions
contemplated hereby and recommendation to the America Online stockholders to adopt this
Agreement; provided further, however, that the Board of Directors of America Online may make
a Change in the America Online Recommendation pursuant to Section 6.5 hereof.
Notwithstanding any Change in the America Online Recommendation, this Agreement shall be
submitted to the stockholders of America Online at the America Online Stockholders Meeting
for the purpose of adopting this Agreement and nothing contained herein shall be deemed to
relieve America Online of such obligation.
6.2 Holdco Board of Directors: Executive Officers.
(a) At or prior to the Effective Time, each party hereto will take all action
necessary to (i) cause the Board of Directors of Hold co and each committee thereof as of the
Effective Time to be comprised in accordance with Schedule 6.2(a) hereto and (ii) cause the
individuals listed in Schedule 6.2(a) hereto to be appointed as officers of Hold co as of the
Effective Time in accordance with Schedule 6.2(a) hereto.
(b) Promptly following the date hereof, each party hereto will take all action
necessary to form the Transition Team, in accordance with Schedule 6.2(a) hereto. Following
the Effective Time, each party hereto will comply, and will cause Holdco to comply, with the
provisions of Schedule 6.2( a) hereto which by their terms are applicable from and after the
Effective Time.
6.3 Access to Information. Upon reasonable notice, each party shall (and
shall cause its Subsidiaries to) afford to the officers, employees, accountants, counsel, financial
advisors and other representatives of the other party reasonable access during normal business
hours, during the period prior to the Effective Time, to all its properties, books, contracts,
commitments, records, officers and employees and, during such period, such party shall (and
shall cause its Subsidiaries to) furnish promptly to the other party (a) a copy of each report,
schedule, registration statement and other document filed, published, announced or received by it
during such period pursuant to the requirements of Federal or state securities laws, the
Communications Act, the HSR Act and the laws, rules and regulations of Franchising Authorities
and PUCs, as applicable (other than documents which such party is not permitted to disclose
under applicable law), and (b) all other information concerning it and its business, properties and
personnel as such other party may reasonably request; provided, however, that either party may
restrict the foregoing access to the extent that (i) any law, treaty, rule or regulation of any
003780-0007-02269-AOle~C~9-~G~
47
Governmental Entity applicable to such party or any contract requires such party or its
Subsidiaries to restrict or prohibit access to any such properties or information or (ii) the
information is subject to confidentiality obligations to a third party. The parties will hold any
such information obtained pursuant to this Section 6.3 in confidence in accordance with, and
shall otherwise be subject to, the provisions of the confidentiality letter dated December 10,
1999, between Time Warner and America Online (the "Confidentiality Agreement"), which
Confidentiality Agreement shall continue in full force and effect. Any investigation by either of
America Online or Time Warner shall not affect the representations and warranties of the other.
6.4 Reasonable Best Efforts.
(a) Subject to the terms and conditions of this Agreement, each party will
use its reasonable best efforts to take, or cause to be taken, all actions and to do, or cause to be
done, all things necessary, proper or advisable under this Agreement and applicable laws and
regulations to consummate the Mergers and the other transactions contemplated by this
Agreement as soon as practicable after the date hereof, including (i) preparing and filing as
promptly as practicable all documentation to effect all necessary applications, notices, petitions,
filings, tax ruling requests and other documents and to obtain as promptly as practicable all
Necessary Consents and all other consents, waivers, licenses, orders, registrations, approvals,
permits, rulings, authorizations and clearances necessary or advisable to be obtained from any
third party and/or any Governmental Entity in order to consummate the Mergers or any ofthe
other transactions contemplated by this Agreement and the Stockholders Agreements
(collectively, the "Required Approvals") and (ii) taking all reasonable steps as may be necessary
to obtain all such Necessary Consents and the Required Approvals. In furtherance and not in
limitation of the foregoing, each party hereto agrees to make, as promptly as practicable, to the
extent it has not already done so, (i) an appropriate filing of a Notification and Report Form
pursuant to the HSR Act with respect to the transactions contemplated hereby (which filing shall
be made in any event within 10 Business Days of the date hereof), (ii) appropriate filings with
the FCC, Franchising Authorities and PUCs with respect to the transactions contemplated
hereby, (iii) appropriate filings with the European Commission in accordance with applicable
competition, merger control, antitrust, investment or similar laws and any necessary filings under
the Canadian InvestmentRegulations within the time periods specified thereunder, and (iv) all
other necessary filings with other Governmental Entities relating to the Mergers, and, in each
case, to supply as promptly as practicable any additional information and documentary material
that may be requested pursuant to such laws or by such authorities and to use reasonable best
efforts to cause the expiration or termination of the applicable waiting periods under the HSR
Act and the receipt of Required Approvals under such other laws or from such authorities as soon
as practicable. Notwithstanding the foregoing, nothing in this Section 6.4 shall require,. or be
deemed to require, (i) America Online or Time Warner to agree to or effect any divestiture, hold
separate any business or assets or take any other action if doing so would, individually or in the
aggregate, reasonably be expected to result in a Material Adverse Effect on Holdco after the
Mergers or (ii) America Online or Time Warner to agree to or effect any divestiture, hold
separate any business or take any other action that is not conditional on the consummation of the
0037aO-0007-02269-A016~CH9-MGA
48
Mergers. Neither party shall take or agree to take any action identified in clause (i) or (ii) of the
immediately preceding sentence without the prior written consent of the other party (which shall
not be unreasonably withheld or delayed).
(b) Each of Time Warner and America Online shall, in connection with the
efforts referenced in Section 6.4(a) to obtain all Required Approvals, use its reasonable best
efforts to (i) cooperate in all respects with each other in connection with any filing or submission
and in connection with any investigation or other inquiry, including any proceeding initiated by a
private party, (ii) promptly inform the other party of any communication received by such party
from, or given by such party to, the FCC, Franchising Authorities, PUCs, the Antitrust Division
of the Department of Justice (the "DOJ"), the Federal Trade Commission (the '~") or any
other Governmental Entity and of any material communication received or given in connection
with any proceeding by a private party, in each case regrading any of the transactions
contemplated hereby, and (iii) consult with each other in advance to the extent practicable of any
meeting or conference with, the FCC, Franchising Authorities, PUCs, the DOJ, the FTC or any
such other Governmental Entity or, in connection with any proceeding by a private party, with
any other Person, and to the extent permitted by the FCC, PUCs, the DOl, the FTC or such other
applicable Governmental Entity or other Person, give the other party the opportunity to attend
and participate in such meetings and conferences.
(c) In furtherance and not in limitation of the covenants of the parties
contained in Section 6.4( a) and 6.4(b), if any administrative or judicial action or proceeding,
including any proceeding by a private party, is instituted (or threatened to be instituted)
challenging any transaction contemplated by this Agreement as violative of any Regulatory Law
(as defined below), or if any statute, rule, regulation, executive order, decree, injunction or
administrative order is enacted, entered, promulgated or enforced by a Governmental Entity
which would make the Mergers or the other transactions contemplated hereby illegal or would
otherwise prohibit or materially impair or delay the consummation of the Mergers or the other
transactions contemplated hereby, each of Time Warner and America Online shall cooperate in
all respects with each other and use its respective reasonable best efforts, including without
limitation, subject to the penultimate sentence of Section 6.4(a), selling, holding separate or
otherwise disposing of or conducting their business in a specified manner, or agreeing to sell,
hold separate or otherwise dispose of or conduct their business in a specified manner or
permitting the sale, holding separate or other disposition of, any assets of America Online, Time
Warner or their respective Subsidiaries or the conducting of their business in a specified manner,
to contest and resist any such action or proceeding and to have vacated, lifted, reversed or
overturned any decree, judgment, injunction or other order, whether temporary, preliminary or
permanent, that is in effect and that prohibits, prevents or restricts consummation of the Mergers
or the other transactions contemplated by this Agreement and to have such statute, rule,
regulation, executive order, decree, injunction or administrative order repealed, rescinded or
made inapplicable so as to permit consummation of the transactions contemplated by this
Agreement. Notwithstanding the foregoing or any other provision of this Agreement, nothing in
this Section 6.4 shall limit a party's right to terminate this Agreement pursuant to Section 8.1 (b)
003780-0C07-02269-AC1SECH9-MGA
49
or 8.l(c) so long as such party has up to then complied with its obligations under this Section
6.4. For purposes of this Agreement, "Regulatory Law" means the Sherman Act, as amended,
the EC Merger Regulation, the Clayton Act, as amended, the HSR Act, the Federal Trade
Commission Act, as amended, the Communications Act, the Canadian Investment Regulations,
and all other federal, state and foreign, if any, statutes, rules, regulations, orders, decrees,
administrative and judicial doctrines and other laws that are designed or intended to prohibit,
restrict or regulate (i) mergers, acquisitions or other business combinations, (ii) foreign
investment or (iii) actions having the purpose or effect of monopolization or restraint of trade or
lessening of competition.
(d) America Online and its Board of Directors shall, if any state takeover
statute or similar statute becomes applicable to this Agreement, the Mergers, the Stock Option
Agreements or any other transactions contemplated hereby or thereby, take all action reasonably
necessary to ensure that the Mergers and the other transactions contemplated by this Agreement
and the Stock Option Agreements may be consummated as promptly as practicable on the terms
contemplated hereby or thereby and otherwise to minimize the effect of such statute or regulation
on this Agreement, the Mergers, the Stock Option Agreements and the other transactions
contemplated hereby or thereby.
(e) Time Warner and its Board of Directors shall, if any state takeover
statute or similar statute becomes applicable to this Agreement, the Mergers, the Stock Option
Agreements or any other transactions contemplated hereby or thereby, take all action reasonably
necessary to ensure that the Mergers and the other transactions contemplated by this Agreement
and the Stock Option Agreements may be consummated as promptly as practicable on the terms
contemplated hereby or thereby and otherwise to minimize the effect of such statute or
regulation on this Agreement, the Mergers, the Stock Option Agreements and the other
transactions contemplated hereby or thereby.
6.5 Acquisition Proposals.
(a) Without limitation on any of such party's other obligations under this
Agreement (including under Article V hereof), each of America Online and Time Warner agrees
that neither it nor any of its Subsidiaries nor any of the officers and directors of it or its
Subsidiaries shall, and that it shall use its reasonable best efforts to cause its and its Subsidiaries'
employees, agents and representatives (including any investment banker, attorney or accountant
retained by it or any of its Subsidiaries) not to, directly or indirectly, (i) initiate, solicit,
encourage or knowingly facilitate any inquiries or the making of any proposal or offer with
respect to, or a transaction to effect, a merger, reorganization, share exchange, consolidation,
business combination, recapitalization, liquidation, dissolution or similar transaction involving it
or any of its Significant Subsidiaries (as defined in Rule 1-02 of Regulation S-X of the SEC and,
with respect to Time Warner, including TWE), or any purchase or sale of20% or more of the
consolidated assets (including without limitation stock of its Subsidiaries) of such party and its
Subsidiaries, taken as a whole, or any purchase or sale of, or tender or exchange offer for, the
003730-0007-C2269-A016ECn9-MGA
50
equity securities of such party that, if consummated, would result in any Person (or the
stockholders of such Person) beneficially owning securities representing 20% or more of the total
voting power of such party (or of the surviving parent entity in such transaction) or any of its
Significant Subsidiaries (any such proposal, offer or transaction (other than a proposal or offer
made by the other party or an Affiliate thereof) being hereinafter referred to as an "ACQuisition
Proposal"), (ii) have any discussion with or provide any confidential information or data to any
Person relating to an Acquisition Proposal, or engage in any negotiations concerning an
Acquisition Proposal, or knowingly facilitate any effort or attempt to make or implement an
Acquisition Proposal, (iii) approve or recommend, or propose publicly to approve or recommend,
any Acquisition Proposal or (iv) approve or recommend, or propose to approve or recommend, or
execute or enter into, any letter of intent, agreement in principle, merger agreement, acquisition
agreement, option agreement or other similar agreement or propose publicly or agree to do any of
the foregoing related to any Acquisition Proposal.
(b) Notwithstanding anything in this Agreement to the contrary, each of
America Online and Time Warner or its respective Board of Directors shall be permitted to
(A) to the extent applicable, comply with Rule 14d-9 and Rule 14e-2 promulgated under the
Exchange Act with regard to an Acquisition Proposal, (B) effect a Change in the America Online
or Tirne Warner Recommendation, as the case may be, or (C) engage in any discussions or
negotiations with, or provide any information to, any Person in response to an unsolicited bona
fide written Acquisition Proposal by any such Person, if and only to the extent that, in any such
case referred to in clause (B) or (C), (i) its Stockholders Meeting shall not have occurred, (ii) (x)
in the case of clause (B) above, it has received an unsolicited bona fide written Acquisition
Proposal :from a third party and its Board of Directors concludes in good faith that such
Acquisition Proposal constitutes a Superior Proposal (as defined below) and (y) in the case of
clause (C) above, its Board of Directors concludes in good faith that there is a reasonable
likelihood that such Acquisition Proposal could constitute a Superior Proposal, (iii) in the case of
clause (B) or (C) above, its Board of Directors, after consultation with outside counsel,
determines in good faith that the failure to take such action would be inconsistent with its
fiduciary duties under applicable Law, (iv) prior to providing any information or data to any
Person in connection with an Acquisition Proposal by any such Person, its Board of Directors
receives :from such Person an executed confidentiality agreement having provisions that are
customary in such agreements, as advised by counsel, provided that if such confidentiality
agreement contains provisions that are less restrictive than the comparable provision, or omits
restrictive provisions, contained in the Confidentiality Agreement, then the Confidentiality
Agreement will be deemed to be amended to contain only such less restrictive provisions or to
omit such restrictive provisions, as the case may be, and (v) prior to providing any information or
data to any Person or entering into discussions or negotiations with any Person, such party
notifies the other party promptly of such inquiries, proposals or offers received by, any such
information requested from, or any such discussions or negotiations sought to be initiated or
continued with, any of its representatives indicating, in connection with such notice, the name of
such Person and the material terms and conditions of any inquiries, proposals or offers. Each of
America Online and Time Warner agrees that it will promptly keep the other party informed of
003780-0007-02269-A016EC~9-~GA
51
the status and terms of any such proposals or offers and the status and terms of any such
discussions or negotiations. Each of America Online and Time Warner agrees that it will, and
will cause its officers, directors and representatives to, immediately cease and cause to be
terminated any activities, discussions or negotiations existing as of the date of this Agreement
with any parties conducted heretofore with respect to any Acquisition Proposal. Each of
America Online and Time Warner agrees that it will use reasonable best efforts to promptly
inform its directors, officers, key employees, agents and representatives of the obligations
undertaken in this Section 6.5. Nothing in this Section 6.5 shall (x) permit America Online or
Time Warner to terminate this Agreement (except as specifically provided in Article VIII hereof)
'Or (y) affect any other obligation of America Online or Time Warner under this Agreement.
Neither America Online nor Time Warner shall submit to the vote of its stockholders any
Acquisition Proposal other than the America Online Merger or Time Warner Merger,
respectively. "Superior Proposal" means with respect to America Online or Time Warner, as the
case may be, a bona fide written proposal made by a Person other than either such party which is
(I) for a merger, reorganization, consolidation, share exchange, business combination,
recapitalization, or similar transaction involving such party as a result of which the other party
thereto or its stockholders will own 40% or more of the combined voting power of the entity
surviving or resulting from such transaction (or the ultimate parent entity thereof), and (II) is on
terms which the Board of Directors of such party in good faith concludes (following receipt of
the advice of its financial advisors and outside counsel), taking into account, among other things,
all legal, financial, regulatory and other aspects of the proposal and the Person making the
proposal, (x) would, if consummated, result in a transaction that is more favorable to its
stockholders (in their capacities as stockholders), from a financial point of view, than the
transactions contemplated by this Agreement and (y) is reasonably capable of being completed.
6.6 Fees and Expenses. Subject to Section 8.2, whether or not the Mergers
are consummated, all Expenses (as defined below) incurred in connection with this Agreement
and the transactions contemplated hereby shall be paid by the party incurring such Expenses,
except (a) if the Mergers are consummated, the surviving corporation of each Merger sh'll pay,
or cause to be paid, any and all property or transfer taxes imposed in connection with such
Merger and (b) Expenses incurred in connection with the filing, printing and mailing of the Joint
Proxy StatementlProspectus and Form S-4, which shall be shared equally by America Online and
Time Warner. As used in this Agreement, "Expenses" includes all out-of-pocket expenses
(including, without limitation, all fees and expenses of counsel, accountants, investment bankers,
experts and consultants to a party hereto and its affiliates) incurred by a party or on its behalf in
connection with or related to the authorization, preparation, negotiation, execution and
performance of this Agreement, the Stock Option Agreements and the Voting Agreement and the
transactions contemplated hereby and thereby, including the preparation, printing, filing and
mailing of the Joint Proxy StatementlProspectus and Form S-4 and the solicitation of stockholder
approvals and all other matters related to the transactions contemplated hereby and thereby. The
parties hereto shall cooperate with each other in preparing, executing and filing any Tax Returns
with respect to property or transfer taxes.
00378C-C007-02269-A018ECH9-MGA
52
6.7 Directors' and Officers' Indemnification and Insurance. (a) Holdco
shall (i) indemnify and hold hannless, and provide advancement of expenses to, all past and
present directors, officers and employees of Time Warner and its Subsidiaries (in all of their
capacities) (a) to the same extent such persons are indemnified or have the right to advancement
of expenses as of the date of this Agreement by Time Warner pursuant to Time Warner's
certificate of incorporation, bylaws and indemnification agreements, if any, in existence on the
date hereof with any directors, officers and employees of Time Warner and its Subsidiaries and
(b) without limitation to clause (a), to the fullest extent permitted by law, in each case for acts or
omissions occurring at or prior to the Effective Time (including for acts or omissions occurring
in connection with the approval of this Agreement and the consummation of the transactions
contemplated hereby), (ii) include and cause to be maintained in effect in Holdco's (or any
successor's) certificate of incorporation and bylaws after the Effective Time, provisions
regarding elimination of liability of directors, indemnification of officers, directors and
employees and advancement of expenses which are, in the aggregate, no less advantageous to the
intended beneficiaries than the corresponding provisions contained in the current certificate of
incorporation and bylaws of Time Warner and (iii) cause to be maintained for a period of six
years after the Effective Time the current policies of directors' and officers' liability insurance
and fiduciary liability insurance maintained by Time Warner (provided that Holdco (or any
successor) may substitute therefor one or more policies of at least the same coverage and
amounts containing terms and conditions which are, in the aggregate, no less advantageous to the
insured) with respect to claims arising from facts or events that occurred on or before the
Effective Time; provided, however, that in no event shall Holdco be required to expend in any
one year an amount in excess of200% of the annual premiums currently paid by Time Warner
for such insurance; and, provided further that if the annual premiums of such insurance coverage
exceed such amount, Holdco shall be obligated to obtain a policy with the greatest coverage
available for a cost not exceeding such amount. The obligations of Hold co under this Section
6.7(a) shall not be terminated or modified in such a manner as to adversely affect any indemnitee
to whom this Section 6.7(a) applies without the consent of such affected indemnitee (it being
expressly agreed that the indemnitees to whom this Section 6.7(a) applies shall be third party
beneficiaries of this Section 6.7(a)).
(b) Holdco shall (i) indemnify and hold hannless, and provide advancement
of expenses to, all past and present directors, officers and employees of America Online and its
Subsidiaries (in all of their capacities) (a) to the same extent such persons are indemnified or
have the right to advancement of expenses as of the date of this Agreement by America Online
pursuant to America Online's certificate of incorporation, bylaws and indemnification
agreements, if any, in existence on the date hereof with any directors, officers and employees of
America Online and its Subsidiaries and (b) without limitation to clause (a), to the fullest extent
permitted by law, in each case for acts or omissions occurring at or prior to the Effective Time
(including for acts or omissions occurring in connection with the approval of this Agreement and
the consummation of the transactions contemplated hereby), (ii) include and cause to be
maintained in effect in Holdco's (or any successor's) certificate of incorporation and bylaws after
the Effective Time, provisions regarding elimination of liability of directors, indemnification of
C03780-C007-02269-A016ECH,-~GA
53
officers, directors and employees and advancement of expenses which are, in the aggregate, no
less advantageous to the intended beneficiaries than the corresponding provisions contained in
the current certificate of incorporation and bylaws of America Online and (iii) cause to be
maintained for a period of six years after the Effective Time the current policies of directors' and
officers' liability insurance and fiduciary liability insurance maintained by America Online
(provided that Holdco (or any successor) may substitute therefor one or more policies of at least
the same coverage and amounts containing terms and conditions which are, in the aggregate, no
less advantageous to the insured) with respect to claims arising from facts or events that occurred
on or before the Effective Time; provided, however, that in no event shall Holdco be required to
expend in anyone year an amount in excess of 200% of the annual premiums currently paid by
America Online for such insurance; and, provided further that if the annual premiums of such
insurance coverage exceed such amount, Holdco shall be obligated to obtain a policy with the
greatest coverage available for a cost not exceeding such amount. The obligations of Hold co
under this Section 6.7(b) shall not be terminated or modified in such a manner as to adversely
affect any indemnitee to whom this Section 6.7(b) applies without the consent of such affected
indemnitee (it being expressly agreed that the indemnitees to whom this Section 6.7(b) applies
shall be third party beneficiaries of this Section 6.7(b)).
6.8 Public Announcements. America Online and Time Warner shall use
reasonable best efforts to develop a joint communications plan and each party shall use
reasonable best efforts (i) to ensure that all press releases and other public statements with
respect to the transactions contemplated hereby shall be consistent with such joint
communications plan and (ii) unless otherwise required by applicable law or by obligations
pursuant to any listing agreement with or rules of any securities exchange, to consult with each
other before issuing any press release or, to the extent practical, otherwise making any public
statement with respect to this Agreement or the transactions contemplated hereby. In addition to
the foregoing, except to the extent disclosed in or consistent with the Joint Proxy
Statement/Prospectus in accordance with the provisions of Section 6.1, neither America Online
nor Time Warner shall issue any press release or otherwise make any public statement or
disclosure concerning the other party or the other party's business, fmancial condition or results
of operations without the consent of the other party, which consent shall not be unreasonably
withheld or delayed.
6.9 Listing of Shares of Holdco Common Stock. Holdco shall use its
reasonable best efforts to cause the shares of Hold co Common Stock to be issued in the Merger
and the shares of Hold co Common Stock to be reserved for issuance upon exercise of the Time
Warner Stock Options and America Online Stock Options to be approved for listing on the
NYSE, subject to official notice of issuance, prior to the Closing Date.
6.10 Rights Agreements. (a) The Board of Directors of America Online shall
take all action to the extent necessary (including amending the America Online Rights
Agreement) in order to render the America Online Rights inapplicable to the America Online
Merger and the other transactions contemplated by this Agreement and the Stock Option
OQ3~80-0007-02269-AOl8~CH9-~GA
54
Agreements. Except in connection with the foregoing sentence, the Board of Directors of
America Online shall not, without the prior written consent of Time Warner, (i) amend the
America Online Rights Agreement or (ii) take any action with respect to, or make any
determination under, the America Online Rights Agreement, including a redemption of the
America Online Rights, in each case in order to facilitate any Acquisition Proposal with respect
to America Online.
(b) The Board of Directors of Time Warner shall take all action to the extent
necessary (including amending the Time Warner Rights Agreement) in order to render the Time
Warner Rights inapplicable to the Time Warner Merger and the other transactions contemplated
by this Agreement and the Stock Option Agreements. Except in connection with the foregoing
sentence, the Board of Directors of Time Warner shall not, without the prior written consent of
America Online, (i) amend the Time Warner Rights Agreement or (ii) take any action with
respect to, or make any determination under, the Time Warner Rights Agreement, including a
redemption of the Time Warner Rights, in each case in order to facilitate any Acquisition
Proposal with respect to Time Warner. Notwithstanding the preceding sentence, Time Warner
may, in its sole discretion, either resolve to redeem the Time Warner Rights effective as of, or
amend the expiration date of the Time Warner Rights Agreement to provide that it terminates on,
the close of business on the date of Time Warner's 2000 annual meeting of stockholders;
provided, however, that if prior to, on, or following such date a person has (i) indicated (either
publicly or in a manner which becomes known to America Online or Time Warner) its intention
to accumulate Time Warner Capital Stock other than for investment pwposes, (ii) indicated
(either publicly or in a manner which becomes known to America Online or Time Warner) its
intention to make an Acquisition Proposal with respect to Time Warner or (iii) made an
Acquisition Proposal with respect to Time Warner, then, upon the written request of America
Online, Time Warner shall within 10 business days following such request take all action
necessary to enter into a new stockholder rights plan no less favorable to Time Warner or
America Online than the Time Warner Rights Agreement. Time Warner shall give America
Online prompt notice of any information known by Time Warner with respect to the occurrence
of an event set forth in clauses (i), (ii) and (iii) of the immediately preceding sentence. Upon the
implementation of such new stockholder rights plan, Time Warner shall be subject to this Section
6.1 O(b) without giving effect to the immediately preceding sentence.
6.11 Affiliates.
(a) Not less than 45 days prior to the date of the Time Warner Stockholders
Meeting, Time Warner shall deliver to America Onli'1e a letter identifying all persons who, in the
judgment of Time Warner, may be deemed at the time this Agreement is submitted for adoption
by the stockholders of Time Warner, "affiliates" of Time Warner for purposes of Rule 145 under
the Securities Act and applicable SEC rules and regulations, and such list shall be updated as
necessary to reflect changes from the date thereof. Time Warner shall use reasonable best efforts
to cause each person identified on such list to deliver to Holdco not less than 30 days prior to the
0037 S 0- 0007 -022 6 3-A016::CH9-~;:;;"
55
Effective Time, a written agreement substantially in the form attached as Exhibit 6.11 hereto (an
"Affiliate A~eement").
(b) Not less than 45 days prior to the date of the Ameri(::a Online
Stockholders Meeting, America Online shall deliver to Time Warner a letter identifying all
persons who, in the judgment of America Online, may be deemed at the time this Agreement is
submitted for adoption by the stockholders of America Online, "affiliates" of America Online for
purposes of Rule 145 under the Securities Act and applicable SEC rules and regulations, and
such list shall be updated as necessary to reflect changes from the date thereof. America Online
shall use reasonable best efforts to cause each person identified on such list to deliver to Holdco
not less than 30 days prior to the Effective Time, an Affiliate Agreement.
6.12 Section 16 Matters. Prior to the Effective Time, America Online and
Time Wamer shall take all such steps as may be required to cause any dispositions of Time
Warner Capital Stock or America Online Common Stock (including derivative securities with
respect to Time Warner Capital Stock or America Online Common Stock) or acquisitions of
Holdco Common Stock (including derivative securities with respect to Holdco Common Stock)
resulting from the transactions contemplated by Article I or Article II ofthis Agreement by each
individual who is subject to the reporting requirements of Section 16( a) of the Exchange Act
with respect to America Online and Time Warner, to be exempt under Rule 16b-3 promulgated
under the Exchange Act.
6.13 America Online Indebtedness and Time Warner Indebtedness. With
respect to America Online Indebtedness and Time Warner Indebtedness issued under indentures
qualified under the Trust Indenture Act of 1939, and any other America Online Indebtedness or
Time Warner Indebtedness the terms of which require Holdco to assume such debt in order to
avoid default thereunder (collectively, the "Assumed Indentures"), Holdco shall execute and
deliver to the trustees or other representatives in accordance with the terms of the respective
Assumed Indentures, supplemental indentures or other instruments, in form satisfactory to the
respective trustees or other representatives, expressly assuming the obligations of America
Online or Time Warner, as applicable, with respect to the due and punctual payment of the
principal of (and premium, if any) and interest, if any, on, and conversion obligations under, all
debt securities issued by America Online or Time Warner, as applicable, under the respective
Assumed Indentures and the due and punctual performance of all the terms, covenants and
conditions ofthe respective Assumed Indentures to be kept or performed by America Online or
Time Warner, respectively, and shall deliver such supplemental indentures or other instruments
to the respective trustees or other representatives under the Assumed Indentures.
00378C-OC07-02269-~018SCc.9-MGA
56
ARTICLE VII
CONDITIONS PRECEDENT
7.1 Conditions to Each Party's Obligation to Effect its Respective :Merger.
The respective obligations of Time Warner and America Online to effect the Time Warner
Merger and America Online Merger are subject to the satisfaction or waiver on or prior to the
Closing Date of the following conditions:
(a) Stockholder Approval. (i) Time Warner shall have obtained the
Required Time Warner Vote in connection with the adoption of this Agreement by the
stockholders of Time Warner and (ii) America Online shall have obtained the America Online
Stockholder Approval in connection with the adoption of this Agreement by the stockholders of
America Online.
(b) No Iniunctions or Restraints. Illegality. No Laws shall have been
adopted or promulgated, and no temporary restraining order, prelip1inary or permanent injunction
or other order issued by a court or other Governmental Entity of competent jurisdiction shall be
in effect, having the effect of making the Mergers illegal or otherwise prohibiting consummation
of the Mergers.
(c) HSR Act: EC Merger Regulation: Canadian Investment Reilllations.
The waiting period (and any extension thereof) applicable to the Mergers under the HSR Act
shall have been terminated or shall have expired and any required approval of the Mergers of the
European Commission or Canadian Governmental Entities shall have been obtained pursuant to
the EC Merger Regulation and the Canadian Investment Regulations, respectively.
(d) FCC Approvals. All material orders and approvals of the FCC required
in connection with the consummation of the transactions contemplated hereby shall have been
obtained and become final; provided, however, that the provisions of this Section 7.1(d) shall not
be available to any party whose failure to fulfill its obligations pursuant to Section 6.4 has been
the cause of, or shall have resulted in, the failure to obtain such order or approval.
(e) Cable Franchising Authorities and PUCs Approvals. All consents,
approvals and actions of, filings with and notices to any Cable Franchising Authorities or PUCs
required of America Online, Time Warner or any of their Subsidiaries to consummate the
Mergers and the other transactions contemplated hereby, the failure of which to be obtained or
taken, individually or in the aggregate, would reasonably be expected to have a Material Adverse
Effect on Holdco after giving effect to the Mergers, shall have been obtained; provided, however,
that the provisions of this Section 7.1 (e) shall not be available to any party whose failure to fulfill
its obligations pursuant to Section 6.4 has been the cause of, or shall have resulted in, the failure
to obtain such consent or approval or action.
C037;O-OC07-02269-A018SCM9-~GA
57
(f) NYSE Listing. The shares of Holdco Common Stock to be issued in the
Mergers and such other shares of Hold co Common Stock to be reserved for issuance in
connection with the Mergers shall have been approved for listing on the NYSE, subject to
official notice of issuance.
(g) Effectiveness of the Form S-4. The Form S-4 shall have been declared
effective by the SEC under the Securities Act and no stop order suspending the effectiveness of
the Form S-4 shall have been issued by the SEC and no proceedings for that purpose shall have
been initiated or threatened by the SEC.
7.2 Additional Conditions to Obligations of America Online. The
obligations of America Online to effect the America Online Merger are subject to the
satisfaction, or waiver by America Online, on or prior to the Closing Date of the following
conditions:
(a) Representations and Warranties. Each of the representations and
warranties of Time Warner set forth in this Agreement, disregarding all qualifications and
exceptions contained therein relating to materiality or Material Adverse Effect, shall be true and
correct as of the date of this Agreement and as of the Closing Date as though made on and as of
the Closing Date (except to the extent that such representations and warranties speak as of
another date, in which case such representations and warranties shall be true and correct as of
such other date), except where the failure of such representations and warranties to be true and
correct would not, individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect on Time Warner; and America Online shall have received a certificate of a senior
executive officer and a senior financial officer of Time Warner to such effect.
(b) Performance of Obligations of Time Warner. Time Warner shall have
performed or complied with all agreements and covenants required to be performed by it under
this Agreement at or prior to the Closing Date that are qualified as to materiality or Material
Adverse Effect and shall have performed or complied in all material respects with all other
material agreements and covenants required to be performed by it under this Agreement at or
prior to the Closing Date that are not so qualified, and America Online shall have received a
certificate of a senior executive officer and a senior [mancial officer of Time Warner to such
effect.
(c) Tax Opinion. America Online shall have received from Simpson
Thacher & Bartlett, counsel to America Online, on the Closing Date, a written opinion to the
effect that for federal income tax purposes each Merger will constitute an exchange to which
Section 351 of the Code applies or a reorganization within the meaning of Section 368(a) of the
Code, or both. In rendering such opinion, counsel to America Online shall be entitled to rely
upon information, representations and assumptions provided by Holdco, America Online and
Time Warner substantially in the form of Exhibits 7.2(c)(1), 7.2(c)(2) and 7.2(c)(3) (allowing for
003;SO-0007-02269-A018ECE9-~GA
58
such amendments to the representations as counsel to America Online deems reasonably
necessary).
(d) Time Warner Conditions. The conditions set forth in Section 7.3 (other
than Section 7.3(d)) shall have been satisfied or waived by Time Warner.
7.3 Additional Conditions to Oblig:ations of Time Warner. The obligations
of Time Warner to effect the Time Warner Merger are subject to the satisfaction, or waiver by
Time Warner, on or prior to the Closing Date of the following additional conditions:
(a) Representations and Warranties. Each of the representations and
warranties of America Online set forth in this Agreement, disregarding all qualifications and
exceptions contained therein relating to materiality or Material Adverse Effect, shall be true and
correct as of the date of this Agreement and as of the Closing Date as though made on and as of
the Closing Date (except to the extent that such representations and warranties speak as of
another date, in which case such representations and warranties shall be true and correct as of
such other date), except where the failure of such representations and warranties to be true and
correct would not, individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect on America Online; and Time Warner shall have received a certificate of a senior
executive officer and a senior financial officer of America Online to such effect.
(b) Performance of Obliiations of America Online. America Online shall
have performed or complied with all agreements and covenants required to be performed by it
under this Agreement at or prior to the Closing Date that are qualified as to materiality or
Material Adverse Effect and shall have performed or complied in all material respects with all
other material agreements and covenants required to be performed by it under this Agreement at
or prior to the Closing Date that are not so qualified, and Time Warner shall have received a
certificate of a senior executive officer and a senior financial officer of America Online to such
effect.
(c) Tax Opinion. Time Warner shall have received from Cravath, Swaine &
Moore, counsel to Time Warner, on the Closing Date, a written opinion to the effect that for
federal income tax purposes each Merger will constitute an exchange to which Section 351 of the
Code applies or a reorganization within the meaning of Section 368(a) of the Code, or both. In
rendering such opinion, counsel to Time Warner shall be entitled to rely upon information,
representations and assumptions provided by Holdco, America Online and Time Warner
substantially in the form of Exhibits 7.2(c)(l), 7.2(c)(2) and 7.2(c)(3) (allowing for such
amendments to the representations as counsel to Time Warner deems reasonably necessary).
(d) America Online Conditions. The conditions set forth in Section 7.2
(other than 7 .2{ d)) shall have been satisfied or waived by America Online.
0037aO-0007-Q22E9-AO~6~C~9-~G~
59
ARTICLE VIII
TERMINATION AND AMENDMENT
8.1 Termination. This Agreement may be terminated at any time prior to the
Effective Time, by action taken or authorized by the Board of Directors of the terminating party
or parties, and except as provided below, whether before or after approval of the matters
presented in connection with the Mergers by the stockholders of Time Warner or America
Online:
(a) By mutual written consent of America Online and Time Warner;
(b) By either Time Warner or America Online, if the Effective Time shall
not have occurred on or before May 31, 2001 (the "Termination Date"); provided, however, that
the right to terminate this Agreement under this Section 8.1 (b) shall not be available to any party
whose failure to fulfill any obligation under this Agreement (including without limitation such
party's obligations set forth in Section 6.4) has been the cause of, or resulted in, the failure of the
Effective Time to occur on or before the Termination Date;
(c) By either Time Warner or America Online, if any Governmental Entity
(i) shall have issued an order, decree or ruling or taken any other action (which the parties shall
have used their reasonable best efforts to resist, resolve or lift, as applicable, in accordance with
Section 6.4) permanently restraining, enjoining or otherwise prohibiting the transactions
contemplated by this Agreement, and such order, decree, ruling or other action shall have
become final and nonappealable or (ii) shall have failed to issue an order, decree or ruling or to
take any other action, and such denial of a request to issue such order, decree, ruling or take such
other action shall have become final and nonappealable (which order, decree, ruling or other
action the parties shall have used their reasonable best efforts to obtain, in accordance with
Section 6.4), in the case of each of (i) and (ii) which is necessary to fulfill the conditions set forth
in Sections 7.1 (c), (d) or (e), as applicable; provided, however, that the right to terminate this
Agreement under this Section 8.1 (c) shall not be available to any party whose failure to comply
with Section 6.4 has been the cause of such action or inaction;
(d) By either Time Warner or America Online, if the approvals of the
stockholders of either America Online or Time Warner contemplated by this Agreement shall not
have been obtained by reason of the failure to obtain the required vote at a duly held meeting of
stockholders or of any adjournment thereof at which the vote was taken;
(e) By America Online, if Time Warner shall have (i) failed to make the
Time Warner Recommendation or effected a Change in the Time Warner Recommendation (or
resolved to take any such action), whether or not permitted by the terms hereof, or (ii) materially
breached its obligations under this Agreement by reason of a failure to call the Time Warner
Stockholders Meeting in accordance with Section 6.1 (b) or a failure to prepare and mail to its
stockholders the Joint Proxy StatementlProspectus in accordance with Section 6.I(a);
CC3780-0007-02269-~OlE~CH9-~GA
60
(f) By Time Warner, if America Online shall have (i) failed to make the
America Online Recommendation or effected a Change in the America Online Recommendation
(or resolved to take any such action), whether or not permitted by the terms hereof or (ii)
materially breached its obligations under this Agreement by reason of a failure to call the
America Online Stockholders Meeting in accordance with Section 6.1 (c) or a failure to prepare
and mail to its stockholders the Joint Proxy StatementlProspectus in accordance with Section
6.1(a);
(g) By Time Warner, if America Online shall have breached or failed to
perform any of its representations, warranties, covenants or other agreements contained in this
Agreement, such that the conditions set forth in Section 7.3(a) or (b) are not capable of being
satisfied on or before the Termination Date; or
(h) By America Online, if Time Warner shall have breached or failed to
perform any of its representations, warranties, covenants or other agreements contained in this
Agreement, such that the conditions set forth in Section 7.2(a) or (b) are not capable of being
satisfied on or before the Termination Date.
8.2 Effect of Termination.
(a) In the event of termination of this Agreement by either Time Warner or
America Online as provided in Section 8.1, this Agreement shall forthwith become void and
there shall be no liability or obligation on the part of America Online or Time Warner or their
respective officers or directors except with respect to Section 4.1(k), Section 4.2(k), the second
sentence of Section 6.3, Section 6.6, this Section 8.2 and Article IX, which provisions shall
survive such termination, and except that, notwithstanding anything to the contrary contained in
this Agreement, neither America Online nor Time Warner shall be relieved or released from any
liabilities or damages arising out of its wilful and material breach of this Agreement.
(b) If (A) (I) either party shall terminate this Agreement pursuant to Section
8. 1 (d) (provided that the basis for such termination is the failure of Time Warner's stockholders
to adopt this Agreement) or pursuant to Section 8.I(b) without the Time Warner Stockholder
Meeting having occurred, (II) at any time after the date of this Agreement and before such
termination an Acquisition Proposal with respect to Time Warner shall have been publicly
announced or otherwise communicated to the senior management, Board of Directors or
stockholders of Time Warner (a "Time Warner Public Proposal") and (III) within twelve months
of such termination Time Warner or any of its Subsidiaries enters into any defInitive agreement
with respect to, or consummates, any Acquisition Proposal (for purposes of this clause (III), the
term "ACQuisition Proposal" shall have the meaning assigned to such term in Section 6.5(a)
except that references to "20%" therein shall be deemed to be references to "40%") or (B)
America Online shall terminate this Agreement pursuant to Section 8.1(e); then Time Warner
shall promptly, but in no event later than the date of such termination (or in the case of clause
(A), iflater, the date Time Warner or its Subsidiary enters into such agreement with respect to or
consummates such Acquisition Proposal), pay America Online an amount equal to the Time
003780-0007-02269-Ao:eSC~9-MGA
61
Warner Termination Fee, by wire transfer of immediately available funds (less any amounts
previously paid or payable by Time Warner pursuant to Section 8.2(d)). The "Time Warner
Termination Fee" shall be an amount equal to 2.75% of the product of (x) the number of shares
of Time Warner Common Stock outstanding as of the date hereof (assuming the exercise of all
outstanding options (other than the option granted pursuant to the Time Warner Stock Option
Agreement) and the conversion into Time Warner Common Stock of all securities of Time
Warner convertible into Time Warner Common Stock) multiplied by (y) the Exchange Ratio
multiplied by (z) the last sale price of America Online Common Stock on the NYSE on January
7,2000 (such product, the "Time Warner Amount").
(c) If (A) (I) either party shall terminate this Agreement pursuant to Section
8.I(d) (provided that the basis for such termination is the failure of America Online's
stockholders to adopt this Agreement) or pursuant to Section 8.l(b) without the America Online
Stockholders Meeting having occurred, (II) at any time after the date of this Agreement and
before such termination an Acquisition Proposal with respect to America Online shall have been
publicly announced or otherwise communicated to the senior management, Board of Directors or
stockholders of America Online (an "America Online Public Proposal") and (III) within twelve
months of such termination America Online or any of its Subsidiaries enters into any definitive
agreement with respect to, or consummates, any Acquisition Proposal (for pwposes of this clause
(III), the term "Acquisition Proposal" shall have the meaning assigned to such term in Section
6.5(a) except that references to "20%" therein shall be deemed to be references to "40%") or (B)
Time Warner shall terminate this Agreement pursuant to Section 8.l(f); then America Online
shall promptly, but in no event later than the date of such termination (or in the case of clause
(A), if later, the date America Online or its Subsidiary enters into such agreement with respect to
or consummates such Acquisition Proposal), pay Time Warner an amount equal to the America
Online Termination Fee (less any amounts previously paid or payable by America Online
pursuant to Section 8.2( d)), by wire transfer of immediately available funds. The "America
Online Termination Fee" shall be an amount equal to 2.75% of the product of (x) the number of
shares of America Online Common Stock outstanding as of the date hereof (assuming exercise of
all outstanding options (other than the option granted pursuant to the America Online Stock
Option Agreement) and the conversion into America Online Common Stock of all securities of
America Online convertible into America Online Common Stock) multiplied by (y) the last sale
price of America Online Common Stock on the NYSE on January 7, 2000 (such product, the
"America Online Amount").
(d) If either party shall terminate this Agreement pursuant to Section 8.l(d)
and the basis for such termination is the failure of Time Warner's stockholders to adopt this
Agreement), then Time Warner shall promptly, but in no event later than the date of such
termination, pay America Online an amount equal to one percent of the Time Warner Amount,
payable by wire transfer of immediately available funds; provided that no payment shall be made
pursuant to this sentence if the Time Warner Termination Fee has been paid pursuant to Section
8.2(b). If either party shall terminate this Agreement pursuant to Section 8.1 (d) and the basis for
such termination is the failure of America Online's stockholders to adopt this Agreement, then
America Online shall promptly, but in no event later than the date of such termination, pay Time
OG373C-OJ07-02269-h018~CH9-MGA
62
Warner an amount equal to one percent of the America Online Amount, payable by wire transfer
of immediately available funds; provided that no payment shall be made pursuant to this
sentence if the America Online Termination Fee has been paid pursuant to Section 8.2(c).
(e) The parties acknowledge that the agreements contained in this
Section 8.2 are an integral part of the transactions contemplated by this Agreement, and that,
without these agreements, neither party would enter into this Agreement; accordingly, if either
party fails promptly to pay any amount due pursuant to this Section 8.2, and, in order to obtain
such payment, the other party commences a suit which results in a judgment against such party
_ for the fee set forth in this Section 8.2, such party shall pay to the other party its costs and
expenses (including attorneys' fees and expenses) in connection with such suit, together with
interest on the amount of the fee at the prime rate of Citibank, N.A. in effect on the date such
payment was required to be made notwithstanding the provisions of Section 6.6. The parties
agree that any remedy or amount payable pursuant to this Section 8.2 shall not preclude any
other remedy or amount payable hereunder and shall not be an exclusive remedy for any breach
of any representation, warranty, covenant or agreement contained in this Agreement.
8.3 Amendment. This Agreement may be amended by the parties hereto, by
action taken or authorized by their respective Boards of Directors, at any time before or after
approval of the matters presented in connection with the Mergers by the stockholders of Time
Warner and America Online, but, after any such approval, no amendment shall be made which
by law or in accordance with the rules of any relevant stock exchange requires further approval
by such stockholders without such further approval. This Agreement may not be amended
except by an instrument in writing signed on behalf of each of the parties hereto.
8.4 Extension: Waiver. At any time prior to the Effective Time, the parties
hereto, by action taken or authorized by their respective Boards of Directors, may, to the extent
legally allowed, (i) extend the time for the performance of any of the obligations or other acts of
the other parties hereto, (ii) waive any inaccuracies in the representations and warranties
contained herein or in any document delivered pursuant hereto and (iii) waive compliance with
any of the agreements or conditions contained herein. Any agreement on the part of a party
hereto to any such extension or waiver shall be valid only if set forth in a written instrument
signed on behalf of such party. The failure of any party to this Agreement to assert any ofi15
rights under this Agreement or otherwise shall not constitute a waiver of those rights.
ARTICLE IX
GENERAL PROVISIONS
9.1 Non-Survival of Representations. Warranties and Agreements. None of
the representations, warranties, covenants and other agreements in this Agreement or in any
instrument delivered pursuant to this Agreement, including any rights arising out of any breach
of such representations, warranties, covenants, agreements and other provisions, shall survive the
0037S0-0007-02269-A018SCH9-~GA
63
Effective Time, except for those covenants, agreements and other provisions contained herein
(including Section 6.7, Section 6.2 and Schedule 6.2(a)) that by their terms apply or are to be
performed in whole or in part after the Effective Time and this Article IX.
9.2 Notices. All notices and other communications hereunder shall be in
writing and shall be deemed duly given (a) on the date of delivery if delivered personally, or by
telecopy or telefacsimile, upon confIrmation of receipt, (b) on the fIrst Business Day following
the date of dispatch if delivered by a recognized next-day courier service, or (c) on the tenth
Business Day following the date. of mailing if delivered by registered or certifIed mail, return
receipt requested, postage prepaid. All notices hereunder shall be delivered as set forth below, or
pursuant to such other instructions as may be designated in writing by the party to receive such
notice:
(a) if to America Online to:
America Online, Inc.
22000 AOL Way
DulIes, Virginia 20166
Fax: (703) 265-1495
Attention: Paul T. Cappuccio, Esq.
with a copy to:
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, New York 10017
Fax: (212) 455-2502
Attention: Richard 1. Beattie, Esq.
(b) ifto Time Warner to:
Time Warner Inc.
75 Rockefeller Plaza
New York, NY 10019
Fax: (212) 265-2646
Attention: Christopher P. Bogart, Esq.
003?SO-CCO'-02269-AG18ECH9-~GA
64
with a copy to:
Cravath, Swaine & Moore
Worldwide Plaza
825 Eighth A venue
New York, New York 10019
Fax: (212) 474-3700
Attention: Robert A. Kindler, Esq.
9.3 Intex:pretation. When a reference is made in this Agreement to Articles,
Sections, Exhibits or Schedules, such reference shall be to an Article or Section of or Exhibit or
Schedule to this Agreement unless otherwise indicated. The table of contents and headings
contained in this Agreement are for reference pwposes only and shall not affect in any way the
meaning or interpretation of this Agreement. Whenever the words "include," "includes" or
"including" are used in this Agreement, they shall be deemed to be followed by the words
"without limitation." In addition, each Section of this Agreement is qualified by the matters set
forth with respect to such Section on the America Online Disclosure Schedule, the Time Warner
Disclosure Schedule and the Schedules to this Agreement, as applicable, to the extent specified
therein and such other Sections of this Agreement to the extent a matter in such Section is
disclosed in such a way as to make its relevance called for by such other Section readily
apparent.
9.4 Countex:parts. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and shall become
effective when one or more counterparts have been signed by each of the parties and delivered to
the other party, it being understood that both parties need not sign the same counterpart.
9.5 Entire Aweement: No Third Party Beneficiaries.
(a) This Agreement, the Stock Option Agreements, the Confidentiality
Agreement and the exhibits and schedules hereto and the other agreements and instruments of the
parties delivered in connection herewith constitute the entire agreement and supersede all prior
agreements and understandings, both written and oral, among the parties with respect to the
subject matter hereof.
(b) This Agreement shall be binding upon and inure solely to the benefit of
each party hereto, and nothing in this Agreement, express or implied, is intended to or shall
confer upon any other Person any right, benefit or r~medy of any nature whatsoever under or by
reason of this Agreement, other than Section 6.7 (which is intended to be for the benefit of the
Persons covered thereby).
9.6 Governing Law. This Agreement shall be governed and construed in
accordance with the laws of the State of Delaware (without giving effect to choice oflaw
principles thereof).
OC378C-0007-C2269-A018ECH9-MGA
65
9.7 Severability. If any term or other provision of this Agreement is invalid,
illegal or incapable of being enforced by any law or public policy, all other terms and provisions
of this Agreement shall nevertheless remain in full force and effect so long as the economic or
legal substance of the transactions contemplated hereby is not affected in any manner materially
adverse to any party. Upon such determination that any term or other provision is invalid, illegal
or incapable of being enforced, the parties hereto shall negotiate in good faith to modify this
Agreement so as to effect the original intent of the parties as closely as possible in an acceptable
manner in order that the transactions contemplated hereby are consummated as originally
contemplated to the greatest extent possible.
9.8 Assignment. Neither this Agreement nor any of the rights, interests or
obligations hereunder shall be assigned by any of the parties hereto, in whole or in part (whether
by operation oflaw or otherwise), without the prior written consent of the other party, and any
attempt to make any such assignment without such consent shall be null and void. Subject to the
preceding sentence, this Agreement will be binding upon, inure to the benefit of and be
enforceable by the parties and their respective successors and assigns.
9.9 Submission to Jurisdiction: Waivers. Each of America Online and Time
Warner irrevocably agrees that any legal action or proceeding with respect to this Agreement or
for recognition and enforcement of any judgment in respect hereof brought by the other party
hereto or its successors or assigns may be brought and determined in the Chancery or other
Courts of the State of Delaware, and each of America Online and Time Warner hereby
irrevocably submits with regard to any such action or proceeding for itself and in respect to its
property, generally and unconditionally, to the nonexclusive jurisdiction of the aforesaid courts.
Each of America Online and Time Warner hereby irrevocably waives, and agrees not to assert,
by way of motion, as a defense, counterclaim or otherwise, in any action or proceeding with
respect to this Agreement, (a) any claim that it is not personally subject to the jurisdiction of the
above-named courts for any reason other than the failure to lawfully serve process (b) that it or
its property is exempt or immune from jurisdiction of any such court or from any legal process
commenced in such courts (whether through service of notice, attachment prior to judgment,
attachment in aid of execution of judgment, execution of judgment or otherwise), (c) to the
fullest extent permitted by applicable law, that (i) the suit, action or proceeding in any such court
is brought in an inconvenient forum, (ii) the venue of such suit, action or proceeding is improper
and (iii) this Agreement, or the subject matter hereof, may not be enforced in or by such courts
and (d) any right to a trial by jury.
9.10 Enforcement. The parties agree that irreparable damage would occur in
the event that any of the provisions of this Agreement were not performed in accordance with
their specific terms. It is accordingly agreed that the parties shall be entitled to specific
performance of the terms hereof, this being in addition to any other remedy to which they are
entitled at law or in equity.
0037S0-0007-02269-A018ECH9-MGA
66
9.11 Definitions. As used in this Agreement:
(a) "beneficial ownership" or "beneficially own" shall have the meaning
under Section 13(d) of the Exchange Act and the rules and regulations thereunder.
(b) "Benefit Plans" means, with respect to any Person, each employee
benefit plan, program, arrangement and contract (including, without limitation, any "employee
benefit plan," as defined in Section 3(3) of the Employee Retirement Income Security Act of
1974, as amended ("ERISA") and any bonus, deferred compensation, stock bonus, stock
purchase, restricted stock, stock option, employment, termination, stay agreement or bonus,
change in control and severance plan, program, arrangement and contract) in effect on the date of
this Agreement or disclosed on the Time Warner Disclosure Schedule or the America Online
Disclosure Schedule, as the case may be, to which such Person or its Subsidiary is a party, which
is maintained or contributed to by such Person, or with respect to which such Person could incur
material liability under Sections 4069, 4201 or 4212(c) of ERISA.
(c) "Board of Directors" means the Board of Directors of any specified
Person and any committees thereof.
(d) "Business Day" means any day on which banks are not required or
authorized to close in the City of New York.
(e) "known" or "knowledge" means, with respect to any party, the
knowledge of such party's executive officers after reasonable inquiry.
(f) "Material Adverse Effect" means, with respect to any entity any event,
change, circumstance or effect that is or is reasonably likely to be materially adverse to (i) the
business, financial condition or results of operations of such entity and its Subsidiaries taken as a
whole, other than any event, change, circumstance or effect relating (x) to the economy or
financial markets in general or (y) in general to the industries in which such entity operates and
not specifically relating to (or having the effect of specifically relating to or having a materially
disproportionate effect (relative to most other industry participants) on) such entity or (ii) the
ability of such entity to consummate the transactions contemplated by this Agreement.
(g) "the other party" means, with respect to Time Warner, America Online
and means, with respect to America Online, Time Warner.
(h) "Person" means an individual, corporation, limited liability company,
partnership, association, trust, unincorporated organization, other entity or group (as defmed in
the Exchange Act).
(i) "Subsidiarv" when used with respect to any party means any corporation
or other organization, whether incorporated or unincorporated, at least a majority of the securities
or other interests of which having by their terms ordinary voting power to elect a majority of the
003780-0007-02269-A018EC~9-MGA
67
Board of Directors or others performing similar functions with respect to such corporation or
other organization is directly or indirectly owned or controlled by such party or by anyone or
more of its Subsidiaries, or by such party and one or more of its Subsidiaries. For the avoidance
of doubt, TWE and TWE-AN Partnership shall be considered a Subsidiary of Time Warner.
003780-COC7-C226~-A01BECE~-~GA
68
IN WITNESS WHEREOF, America Online and Time Warner have caused this
Agreement to be signed by their respective officers thereunto duly authorized, all as of the date
first written above.
AME~
By:
Name: Stephen M. Case
Title: Chainnan & Chief Executive Officer
TIME WARNER INe.
By:
Name:
Title:
l)l \VTTh-ESS WHEREOF, America Online and Time Warner have caused this
Agreement to be signed by their respective officers thereunto duly auth.orized, all as of the date
fir~t written above.
: ::,-; :-: ::~-'::2-:-;-.:'..,:':F"..-:."::'_"':;'"
AMERICA O~LINE, Th.'C.
By:
Name:
Title:
TIyfE WAR:-JER INC.
By: fJ-</t JJ( 11 .b/~'
.
Name:
Title:
EXECUTION COPY
STOCK OPTION AGREEMENT, dated as of January 10,2000 (the
"Agreement"), between America Online, Inc., a Delaware corporation ("Grantee"), and Time
Warner Inc., a Delaware corporation ("Issuer").
WIT N E SSE T H:
WHEREAS, Grantee and Issuer are, concurrently with the execution and delivery
of this Agreement, entering into an Agreement and Plan of Merger, dated as of the date hereof
(the "Merger Agreement;" capitalized terms used without definition herein having the meanings
assigned to them in the Merger Agreement), pursuant to which the parties will engage in a
business combination in a merger of equals (the "Merger"); and
WHEREAS, as a condition to their willingness to enter into the Merger
Agreement, Grantee has required that Issuer agree, and believing it to be in the best interests of
Issuer, Issuer has agreed, among other things, to grant to Grantee the Option (as hereinafter
defined) to purchase shares of common stock, par value $.01 per share, ofIssuer ("Issuer
Common Stock") at a price per share equal to the Exercise Price (as hereinafter defined).
NOW THEREFORE, in consideration of the foregoing and the mutual
representations, warranties, covenants and agreements herein contained, and intending to be
legally bound hereby, the parties hereto agree as follows:
ARTICLE I
OPTION TO PURCHASE SHARES
1.1 Grant of Option.
(a) Issuer hereby grants to Grantee an irrevocable option to purchase,
in whole or in part, an aggregate of up to 233,263,204 duly authorized, validly issued, fully paid
and nonassessable shares ofIssuer Common Stock (representing 19.9% of the outstanding shares
ofIssuer Common Stock as of November 30, 1999) on the terms and subject to the conditions set
forth herein (the "Option"); provided, however, that in no event shall the number of shares of
Issuer Common Stock for which this Option is exercisable exceed 19.9% of the issued and
outstanding shares ofIssuer Common Stock at the time of exercise without giving effect to the
issuance of any Option Shares (as hereinafter defined). The number of shares ofIssuer Common
Stock that may be received upon the exercise of the Option and the Exercise Price are subject to
adjustment as herein set forth.
(b) In the event that any additional shares of Issuer Common Stock are
issued or otherwise become outstanding after the date of this Agreement (other than pursuant to
this Agreement and other than pursuant to an event described in Section 3.1 hereof), the number
of shares of Issuer Common Stock subject to the Option shall be increased so that, after such
issuance, such number together with any shares of Issuer Common Stock previously issued
:J3!SO-C:C!-02829-99S:?J;4-AG~
2
pursuant hereto, equals 19.9% of the number of shares of Issuer Common Stock then issued and
outstanding without giving effect to any shares subject or issued pursuant to the Option. Nothing
contained in this Section 1.1 (b) or elsewhere in this Agreement shall be deemed to authorize
Issuer to breach or fail to comply with any provision of the Merger Agreement. As used herein,
the term "Option Shares" means the shares of Issuer Common Stock issuable pursuant to the
Option, as the number of such shares shall be adjusted pursuant to the terms hereof.
1.2 Exercise of Option.
(a) The Option may be exercised by Grantee, in whole or in part, at
any time, or from time to time, commencing upon the Exercise Date and prior to the Expiration
Date. As used herein, the term "Exercise Date" means the date on which Grantee becomes
unconditionally entitled to receive the Time Warner Termination Fee pursuant to Section 8.2(b)
of the Merger Agreement. As used herein, the term "Expiration Date" means the first to occur
prior to Grantee's exercise of the Option pursuant to Section 1.2(b) of:
(i) the Effective Time;
(ii) written notice of termination of this Agreement by Grantee to
Issuer;
(iii) 12 months after the first occurrence of an Exercise Date; or
(iv) the date of termination of the Merger Agreement, unless, in
the case of this clause (iv), Grantee has the right to receive the Time Warner Termination
Fee either (x) upon or (y) following such termination upon the occurrence of certain
events, in which case the Option will not terminate until the later of (x) 15 business days
following the time the Time Warner Termination Fee becomes unconditionally payable
and (y) the expiration of the period in which Grantee has such right to receive the Time
Warner Termination Fee.
Notwithstanding the termination of the Option, Grantee shall be entitled to purchase those
Option Shares with respect to which it may have exercised the Option by delivery of an Option
Notice (as defined below) prior to the Expiration Date, and the termination of the Option will not
affect any rights hereunder which by their terms do not terminate or expire prior to or at the
Expiration Date.
(b) In the event Grantee wishes to exercise the Option, Grantee shall
send a written notice to Issuer of its intention to so exercise the Option (an "Option Notice"),
specifying the number of Option Shares to be purchased (and the denominations of the
certificates, if more than one), whether the aggregate Exercise Price will be paid in cash or by
surrendering a portion of the Option in accordance with Section 1.3(b) or a combination thereof,
and the place in the United States, time and date of the closing of such purchase (the "Option
Closing" and the date of such Closing, the "Option Closing Date"), which date shall not be less
than two Business Days nor more than ten Business Days from the date on which an Option
;C':: -; 3~, -:: Ci-02 63 9 -993:PDJ4-;"GR
3
Notice is delivered; provided that the Option Closing shall be held only if (i) such purchase
would not otherwise violate or cause the violation of, any applicable material law, statute,
ordinance, rule or regulation (collectively, "Laws") (including the HSR Act and the
Communications Act), and (ii) no material judgment, order, writ, injunction, ruling or decree of
any Governmental Entity (collectively, "Orders") shall have been promulgated, enacted, entered
into, or enforced by any Governmental Entity which prohibits delivery of the Option Shares,
whether temporary, preliminary or permanent; provided, however, that the parties hereto shall
use their reasonable best efforts to (x) promptly make and process all necessary filings and
applications and obtain all consents, approvals, Orders, authorizations, registrations and
declarations or expiration or termination of any required waiting periods (collectively,
"Approvals") and to comply with any such applicable Laws and (y) have any such Order vacated
or reversed. In the event the Option Closing is delayed pursuant to clause (i) or (ii) above, the
Option Closing shall be within ten Business Days following the cessation of such restriction,
violation, Law or Order or the receipt of any necessary Approval, as the case may be (so long as
the Option Notice was delivered prior to the Expiration Date); provided further that,
notwithstanding any prior Option Notice, Grantee shall be entitled to rescind such Option Notice
and shall not be obligated to purchase any Option Shares in connection with such exercise upon
written notice to such effect to Issuer.
(c) At any Option Closing, (i) Issuer shall deliver to Grantee all ofthe
Option Shares to be purchased by delivery of a certificate or certificates evidencing such Option
Shares in the denominations designated by Grantee in the Option Notice, and (ii) if the Option is
exercised in part and/or surrendered in part to pay the aggregate Exercise Price pursuant to
Section 1.3(b), Issuer and Grantee shall execute and deliver an amendment to this Agreement
reflecting the Option Shares for which the Option has not been exercised and/or surrendered. If
at the time of issuance of any Option Shares pursuant to an exercise of all or part of the Option
hereunder, Issuer shall have issued any rights or other securities which are attached to or
otherwise associated with the Issuer Common Stock, then each Option Share issued pursuant to
such exercise shall also represent such rights or other securities with terms substantially the same
as and at least as favorable to Grantee as are provided under any shareholder rights agreement or
similar agreement of Issuer then in effect. At the Option Closing, Grantee shall pay to Issuer by
wire transfer of immediately available funds to an account specified by Issuer to Grantee in
writing at least two Business Days prior to the Option Closing an amount equal to the Exercise
Price multiplied by the number of Option Shares to be purchased for cash pursuant to this Article
I; provided that the failure or refusal of Issuer to specify an account shall not affect Issuer's
obligation to issue the Option Shares.
(d) Upon the delivery by Grantee to Issuer of the Option Notice and
the tender of the applicable aggregate Exercise Price in immediately available funds or the
requisite portion of the Option in accordance with Section 1.3, Grantee shall be deemed to be the
holder of record of the Option Shares issuable upon such exercise, notwithstanding that the stock
transfer books of Issuer may then be closed, that certificates representing such Option Shares
may not then have been actually delivered to Grantee, or Issuer may have failed or refused to take
any action required of it hereunder. Issuer shall pay all expenses that may be payable in
connection with the preparation, issuance and delivery of stock certificates or an amendment to
CC2~S:-GvCI-J2S39-993:?~~4-hGR
4
this Agreement under this Section 1.2 and any filing fees and other expenses arising from the
performance of the transactions contemplated hereby.
1.3 Payments.
(a) The purchase and sale of the Option Shares pursuant to Section 1.2
of this Agreement shall be at a purchase price equal to $110.63 per Share (as such amount may
be adjusted pursuant to the terms hereof, the "Exercise Price"), payable at Grantee's option in
cash, by surrender of a portion of the Option in accordance with Section 1.3(b), or a combination
thereof.
(b) Grantee may elect to purchase Option Shares issuable, and pay
some or all of the aggregate Exercise Price payable, upon an exercise of the Option by
surrendering a portion of the Option with respect to such number of Option Shares as is
determined by dividing (i) the aggregate Exercise Price payable in respect of the number of
Option Shares being purchased in such manner by (ii) the excess of the Fair Market Value (as
defined below) per share of Issuer Common Stock as of the last trading day preceding the date
Grantee delivers its Option Notice (such date, the "Option Exercise Date") over the per share
Exercise Price. The "Fair Market Value" per share ofIssuer Common Stock shall be (i) if the
Issuer Common Stock is listed on the New York Stock Exchange, Inc. (the "NYSE") or any other
nationally recognized exchange or trading system as of the Option Exercise Date, the average of
last reported sale prices per share of Issuer Common Stock thereon for the 10 trading days
commencing on the 12th trading day immediately preceding the Option Exercise Date, or (ii) if
the Issuer Common Stock is not listed on the NYSE or any other nationally recognized exchange
or trading system as of the Option Exercise Date, the amount determined by a mutually
acceptable independent investment banking firm as the value per share the Issuer Common Stock
would have if publicly traded on a nationally recognized exchange or trading system (assuming
no discount for minority interest, illiquidity or restrictions on transfer). That portion of the
Option so surrendered under this Section 1.3(b) shall be canceled and shall thereafter be of no
further force and effect.
(c) Certificates for the Option Shares delivered at an Option Closing
will have typed or printed thereon a restrictive legend which will read substantially as follows:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND
MAY BE REOFFERED OR SOLD ONLY If SO REGISTERED OR IF AN
EXEMPTION FROM SUCH REGISTRATION IS AVAILABLE. SUCH SECURITIES
ARE ALSO SUBJECT TO ADDITIONAL RESTRICTIONS ON TRANSFER AS SET
FORTH IN THE STOCK OPTION AGREEMENT DATED AS OF JANUARY 10,
2000, A COpy OF WHICH MAY BE OBTAINED FROM THE SECRETARY OF
TIME WARNER INe. AT ITS PRINCIPAL EXECUTIVE OFFICES."
It is understood and agreed that (i) the reference to restrictions arising under the Securities Act in
the above legend will be removed by delivery of substitute certificate(s) without such reference if
CC3;3C-:::7-:2839-99SF?D~4-hGR
5
such Option Shares have been registered pursuant to the Securities Act, such Option Shares have
been sold in reliance on and in accordance with Rule 144 under the Securities Act or Grantee has
delivered to Issuer a copy of a letter from the staff of the SEC, or an opinion of counsel in form
and substance reasonably satisfactory to Issuer and its counsel, to the effect that such legend is
not required for purposes of the Securities Act and (ii) the reference to restrictions pursuant to
this Agreement in the above legend will be removed by delivery of substitute certificate(s)
without such reference if the Option Shares evidenced by certificate(s) containing such reference
have been sold or transferred in compliance with the provisions of this Agreement under
.circumstances that do not require the retention of such reference.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
2. I Representations and Warranties of Grantee. Grantee hereby represents and
warrants to Issuer that any Option Shares or other securities acquired by Grantee upon exercise of
the Option will not be taken with a view to the public distribution thereof and will not be
transferred or otherwise disposed of except in a transaction registered or exempt from registration
under the Securities Act.
2.2 Representations and Warranties ofIssuer. Issuer hereby represents and
warrants to Grantee as follows:
(a) Option Shares. Issuer has taken all necessary corporate and other
action to authorize and reserve for issuance, and, subject to receipt of any Approvals, to permit it
to issue, the Option Shares and all additional shares or other securities which may be issued
pursuant to Section 3. I upon exercise of the Option, and, at all times from the date hereof until
such time as the obligation to deliver Option Shares hereunder terminates, will have reserved for
issuance upon exercise of the Option the Option Shares and such other additional shares or
securities, if any. All of the Option Shares and all additional shares or other securities or
property which may be issuable pursuant to Section 3.1, upon exercise of the Option and
issuance pursuant hereto, shall be duly authorized, validly issued, fully paid and nonassessable,
shall be delivered free and clear of all Liens of any nature whatsoever, and shall not be subject to
any preemptive or similar right of any Person.
(b) No Restrictions. No Delaware law or other takeover statute or
similar Law and no provision of the Restated Certificate of Incorporation or Bylaws of Issuer or
any agreement to which Issuer is a party (a) would or would purport to impose restrictions which
might adversely affect or delay the consummation of the transactions contemplated by this
Agreement, or (b) as a result of the consummation of the transactions contemplated by this
Agreement, (i) would or would purport to restrict or impair the ability of Grantee to vote or
otherwise exercise the rights of a shareholder with respect to securities of Issuer or any of its
Subsidiaries that may be acquired or controlled by Grantee or (ii) would or would purport to
entitle any Person to acquire securities of Issuer.
C~2~2:-CC07-02839-993=?~J~-AGR
6
ARTICLE III
ADJUSTMENT UPON CHANGES IN CAPITALIZATION
3.1 Adiustment Upon Changes in Capitalization. In addition to the adjustment
in the number of shares of Issuer Common Stock that may be purchased upon exercise of the
Option pursuant to Section 1.1 of this Agreement, the number of shares of Issuer Common Stock
that may be purchased upon the exercise of the Option and the Exercise Price shall be subject to
adjustment from time to time as provided in this Section 3.1. In the event of any change in the
number of issued and outstanding shares of Issuer Common Stock by reason of any stock
dividend, split-up, merger, recapitalization, combination, conversion, exchange of shares, spin-
off or other change in the corporate or capital structure of Issuer which would have the effect of
diluting or otherwise diminishing Grantee's rights hereunder, the number and kind of Option
Shares or other securities subject to the Option and the Exercise Price therefor shall be
appropriately adjusted so that Grantee shall receive upon exercise of the Option (or, if such a
change occurs between exercise and the Option Closing, upon the Option Closing) the number
and kind of shares or other securities or property that Grantee would have received in respect of
the Option Shares that Grantee is entitled to purchase upon exercise of the Option if the Option
had been exercised (or the purchase thereunder had been consummated, as the case may be)
immediately prior to such event or the record date for such event, as applicable. The rights of
Grantee under this Section shall be in addition to, and shall in no way limit, its rights against
Issuer for breach of or the failure to perform any provision of the Merger Agreement.
ARTICLE IV
REGISTRATION RIGHTS
4.1 Registration of Option Shares Under the Securities Act.
(a) If requested by Grantee at any time and from time to time within
two years after receipt by Grantee of Option Shares (the "Registration Period"), Issuer shall use
its reasonable best efforts, as promptly as practicable, to effect the registration under the
Securities Act and any applicable state law (a "Demand Registration") of such number of Option
Shares or such other Issuer securities owned by or issuable to Grantee in accordance with the
method of sale or other disposition contemplated by Grantee, including a "shelf' registration
statement under Rule 415 of the Securities Act or any successor provision, and to obtain all
consents or waivers of other parties that are required therefor. Grantee agrees to use reasonable
best efforts to cause, and to use reasonable best efforts to cause any underwriters of any sale or
other disposition to cause, any sale or other disposition pursuant to such registration statement to
be effected on a widely distributed basis so that upon consummation thereof no purchaser or
transferee will own beneficially more than 3% of the then-outstanding voting power ofIssuer.
Except with respect to such a "shelf' registration, Issuer shall keep such Demand Registration
effective for a period of not less than 150 days, unless, in the written opinion of counsel to Issuer,
SC3iSQ-OC:i-::339-993F?DJ4-AGR
7
which opinion shall be delivered to Grantee and which shall be satisfactory in form and
substance to Grantee and its counsel, such registration under the Securities Act is not required in
order to lawfully sell and distribute such Option Shares or other Issuer securities in the manner
contemplated by Grantee. Issuer shall only have the obligation to effect three Demand
Registrations pursuant to this Section 4.1 ; provided that only requests relating to a registration
statement that has become effective under the Securities Act shall be counted for purposes of
determining the number of Demand Registrations made. Issuer shall be entitled to postpone for
up to 150 days from receipt of Grantee's request for a Demand Registration the filing of any
registration statement in connection therewith if the Board of Directors of Issuer determines in its
good faith reasonable judgment that such registration would materially interfere with or require
premature disclosure of, any material acquisition, reorganization, pending or proposed offering of
Issuer Securities or other transaction involving Issuer or any other material contract under active
negotiation by Issuer; and provided further that Issuer shall not have postponed any Demand
Registration pursuant to this sentence during the twelve month period immediately preceding the
date of delivery of Grantee's request for a Demand Registration.
(b) If Issuer effects a registration under the Securities Act of Issuer
Common Stock for its own account or for any other stockholders ofIssuer (other than on Form
S-4 or Form S-8, or any successor form), Grantee shall have the right to participate in such
registration and include in such registration the number of shares ofIssuer Common Stock or
such other Issuer securities as Grantee shall designate by notice to Issuer (an "Incidental
Registration" and, together with a Demand Registration, a "Re~stration"); provided, however,
that, if the managing underwriters of such offering advise Issuer: in writing that in their opinion
the number of shares ofIssuer Common Stock or other securities requested to be included in
such Incidental Registration exceeds the number which can be sold in such offering, Issuer shall
include therein (i) first, all shares proposed to be included therein by Issuer, (ii) second, subject
to the rights of any other holders of registration rights in effect as of the date hereof, the shares
requested to be included therein by Grantee and (iii) third, shares proposed to be included therein
by any other stockholder of Issuer. Participation by Grantee in any Incidental Registration shall
not affect the obligation of Issuer to effect Demand Registrations under this Section 4.1. Issuer
may withdraw any registration under the Securities Act that gives rise to an Incidental
Registration without the consent of Grantee.
(c) In connection with any Registration pursuant to this Section 4.1,
(i) Issuer and Grantee shall provide each other and any underwriter of the offering with
customary representations, warranties, covenants, indemnification and contribution obligations in
connection with such Registration, and (ii) Issuer shall use reasonable best efforts to cause any
Option Shares included in such Registration to be approved for listing on the NYSE or any other
nationally recognized exchange or trading system upon which Issuer's securities are then listed,
subject to official notice of issuance, which notice shall be given by Issuer upon issuance.
Grantee will provide all information reasonably requested by Issuer for inclusion in any
registration statement to be filed hereunder. The costs and expenses incurred by Issuer in
connection with any Registration pursuant to this Section 4.1 (including any fees related to
qualifications under Blue Sky Laws and SEC filing fees) (the "Registration Expenses") shall be
CC3i2C-=:C~-G2S39-993:?DJ~-~3~
8
borne by Issuer, excluding legal fees of Grantee's counsel and underwriting discounts or
commissions with respect to Option Shares to be sold by Grantee included in a Registration.
4.2 Transfers of Option Shares. The Option Shares may not be sold, assigned,
transferred, or otherwise disposed of except (i) in an underwritten public offering as provided in
Section 4.1 or (ii) to any purchaser of transferee who would not, to the knowledge of the Grantee
after reasonable inquiry, immediately following such sale, assignment, transfer or disposal
beneficially own more than 3% of the then-outstanding voting power of the Issuer; provided,
however, that Grantee shall be permitted to sell any Option Shares if such sale is made pursuant
to a tender or exchange offer that has been approved or recommended by a majority of the
members of the Board of Directors oflssuer (which majority shall include a majority of directors
who were directors as of the date hereof).
ARTICLE V
REPURCHASE RIGHTS; SUBSTITUTE OPTIONS
5.1 Repurchase Rights.
(a) Subject to Section 6.1, at any time on or after the Exercise Date
and prior to the Expiration Date, Grantee shall have the right (the "Repurchase Right") to require
Issuer to repurchase from Grantee (i) the Option or any part thereof as Grantee shall designate at
a price (the "Option Repurchase Price") equal to the amount, subject to reduction at the sole
discretion of Grantee pursuant to clause (iii) of Section 6.1 (a), by which (A) the Market/Offer
Price (as defined below) exceeds (B) the Exercise Price, multiplied by the number of Option
Shares as to which the Option is to be repurchased and (ii) such number of Option Shares as
Grantee shall designate at a price (the "Option Share Repurchase Price") equal to the
Market/Offer Price multiplied by the number of Option Shares so designated. The term
"Market/Offer Price" shall mean the highest of (i) the highest price per share of Issuer Common
Stock offered or paid in any Acquisition Proposal, or (ii) the highest closing price for shares of
Issuer Common Stock during the six-month period immediately preceding the date Grantee gives
the Repurchase Notice (as hereinafter defined). In determining the Market/Offer Price, the value
of consideration other than cash shall be determined by a nationally recognized investment
banking firm selected by Grantee and reasonably acceptable to Issuer, which determination,
absent manifest error, shall be conclusive for all purposes of this Agreement.
(b) Grantee shall exercise its Repurchase Right by delivering to Issuer
written notice (a "Repurchase Notice") stating that Grantee elects to require Issuer to repurchase
all or a portion of the Option and/or the Option Shares as specified therein. The closing of the
Repurchase Right (the "Repurchase Closing") shall take place in the United States at the place,
time and date specified in the Repurchase Notice, which date shall not be less than two Business
Days nor more than ten Business Days from the date on which the Repurchase Notice is
delivered. At the Repurchase Closing, subject to the receipt of a writing evidencing the surrender
of the Option and/or certificates representing Option Shares, as the case may be, Issuer shall
Cv37o~-C:S/-02839-993F?JJ4-AGR
9
deliver to Grantee the Option Repurchase Price therefor or the Option Share Repurchase Price
therefor, as the case may be, or the portion thereof that Issuer is not then prohibited under
applicable Law from so delivering. At the Repurchase Closing, (i) Issuer shall pay to Grantee the
Option Repurchase Price for the portion of the Option which is to be repurchased or the Option
Shares Repurchase Price for the number of Option Shares to be repurchased, as the case may be,
by wire transfer of immediately available funds to an account specified by Grantee at least 24
hours prior to the Repurchase Closing and (ii) if the Option is repurchased only in part, Issuer
and Grantee shall execute and deliver an amendment to this Agreement reflecting the Option
Shares for which the Option is not being repurchased.
(c) To the extent that Issuer is prohibited under applicable Law from
repurchasing the portion of the Option or the Option Shares designated in such Repurchase
Notice, Issuer shall immediately so notify Grantee and thereafter deliver, from time to time, to
Grantee the portion of the Option Repurchase Price and the Option Share Repurchase Price,
respectively, that it is no longer prohibited from delivering, within five Business Days after the
date on which Issuer is no longer so prohibited; provided, however, that ifIssuer at any time after
delivery of a Repurchase Notice is prohibited under applicable Law from delivering to Grantee
the full amount of the Option Repurchase Price and the Option Share Repurchase Price for the
Option or Option Shares to be repurchased, respectively, Grantee may rescind the exercise of the
Repurchase Right, whether in whole, in part or to the extent of the prohibition, and, to the extent
rescinded, no part of the amounts, terms or the rights with respect to the Option or Repurchase
Right shall be changed or affected as if such Repurchase Right were not exercised. Issuer shall
use its reasonable best efforts to obtain all required regulatory and legal approvals and to file any
required notices to permit Grantee to exercise its Repurchase Right and shall use its reasonable
best efforts to avoid or cause to be rescinded or rendered inapplicable any prohibition on Issuer's
repurchase of the Option or the Option Shares.
5.2 Substitute Option.
(a) In the event that Issuer enters into an agreement (i) to consolidate
with or merge into any Person, other than Grantee or any Subsidiary of Grantee (each an
"Excluded Person"), and Issuer is not the continuing or surviving corporation of such
consolidation or merger, (ii) to permit any Person, other than an Excluded Person, to merge into
Issuer and Issuer shall be the continuing or surviving or acquiring corporation, but, in connection
with such merger, the then outstanding shares of Issuer Common Stock shall be changed into or
exchanged for stock or other securities of any other Person or cash or any other property or the
then outstanding shares of Issuer Common Stock shall after such merger represent less than 50%
of the outstanding voting securities of the merged or acquiring company, or (iii) to sell or
otherwise transfer all or substantially all of its assets to any Person, other than an Excluded
Person, then, and in each such case, the agreement governing such transaction shall make proper
provision so that, unless earlier exercised by Grantee, the Option shall, upon the consummation
of any such transaction and upon the terms and conditions set forth herein, be converted into, or
exchanged for, an option with identical terms appropriately adjusted to acquire the number and
class of shares or other securities or property that Grantee would have received in respect of
Issuer Common Stock if the Option had been exercised immediately prior to such consolidation,
00373J-QOC7-02839-993=P~J~-AG?
10
merger, sale, or transfer, or the record date therefor, as applicable and make any other necessary
adjustments; provided, however, that if such a conversion or exchange cannot, because of
applicable Law be the same as the Option, such terms shall be as similar as possible and in no
event less advantageous to Grantee than the Option.
(b) In addition to any other restrictions or covenants, Issuer agrees that
it shall not enter or agree to enter into any transaction described in Section 5.2(a) unless the
Acquiring Corporation (as hereinafter defined) and any Person that controls the Acquiring
Corporation assume in writing all the obligations of Issuer hereunder and agree for the benefit of
Grantee to comply with this Article V.
(c) For purposes of this Section 5.2, the term "Acquiring Corporation"
shall mean (i) the continuing or surviving Person of a consolidation or merger with Issuer (if
other than Issuer), (ii) Issuer in a consolidation or merger in which Issuer is the continuing or
surviving or acquiring Person, and (iii) the transferee of all or substantially all ofIssuer's assets.
ARTICLE VI
MISCELLANEOUS
6.1 Total Profit.
(a) Notwithstanding any other provision of this Agreement, in no
event shall Grantee's Total Profit (as hereinafter defined) plus any Time Warner Termination Fee
paid pursuant to Section 8.2(b) and any fees paid by Issuer pursuant to Section 8.2(d) of the
Merger Agreement (such Time Warner Termination Fee and such fees paid pursuant to Section
8.2(d) of the Merger Agreement, collectively, the "Total Issuer Fees") exceed in the aggregate an
amount (the "Limitation Amount") equal to 2.75% of the product of (x) the number of shares of
Issuer Common Stock outstanding as of the date hereof (assuming the exercise of all outstanding
options (other than the Option) and the conversion into Issuer Common Stock of all securities of
the Issuer convertible into Issuer Common Stock) multiplied by (y) the Exchange Ratio
multiplied by (z) the last sale price of the common stock, par value $0.01 per share, of Grantee
on the NYSE on January 7,2000, and, if the total amount that would otherwise be received by
Grantee otherwise would exceed such amount, Grantee, at its sole election, shall either (i) reduce
the number of shares of Issuer Common Stock subject to this Option, (ii) deliver to Issuer for
cancellation Option Shares previously purchased by Grantee, (iii) reduce the amount ofthe
Option Repurchase Price or the Option Share Repurchase Price, (iv) pay cash to Issuer, or (v) any
combination thereof, so that Grantee's actually realized Total Profit, when aggregated with the
Total Issuer Fees so paid to Grantee, shall not exceed the Limitation Amount after taking into
account the foregoing actions.
(b) Notwithstanding any other provision of this Agreement, the Option
may not be exercised for a number of Option Shares as would, as of the date of exercise, result in
a Notional Total Profit (as defined below) which, together with the Total Issuer Fees theretofore
G~3~3~-C~C7-02839-99B:?DJ~-AGR
11
paid to Grantee, would exceed the Limitation Amount; provided, that nothing in this sentence
shall restrict any exercise of the Option permitted hereby on any subsequent date.
(c) As used herein, the term "Total Profit" shall mean the aggregate
amount (before taxes) of the following: (i) the amount received by Grantee pursuant to Issuer's
repurchase of the Option (or any portion thereof) pursuant to Section 5.1, (ii) (x) the amount
received by Grantee pursuant to Issuer's repurchase of Option Shares pursuant to Section 5.1,
less (y) Grantee's purchase price for such Option Shares, (iii) (x) the net cash amounts or the fair
market value of any property received by Grantee pursuant to any consummated arm's-length
sales of Option Shares (or any other securities into which such Option Shares are converted or
exchanged) to any unaffiliated party, less (y) Grantee's purchase price of such Option Shares.
(d) As used herein, the term "Notional Total Profit" with respect to
any number of Option Shares as to which Grantee may propose to exercise the Option shall be
the Total Profit determined as of the date of such proposal assuming that the Option was
exercised on such date for such number of Option Shares and assuming that such Option Shares,
together with all other Option Shares held by Grantee and its affiliates as of such date, were sold
for cash at the closing market price (less customary brokerage commissions) for shares of Issuer
Common Stock on the preceding trading day on the NYSE (or on any other nationally recognized
exchange or trading system on which shares of Issuer Common Stock are then so listed or
traded).
6.2 Further Assurances: Listing.
(a) From time to time, at the other party's request and without further
consideration, each party hereto shall execute and deliver such additional documents and take all
such further action as may be necessary or desirable to consummate the transactions
contemplated by this Agreement, including, without limitation, to vest in Grantee good and
marketable title, free and clear of all Liens, to any Option Shares purchased hereunder. Issuer
agrees not to avoid or seek to avoid (whether by charter amendment or through reorganization,
consolidation, merger, issuance of rights or securities, the Time Warner Rights Agreement or
similar agreement, dissolution or sale of assets, or by any other voluntary act) the observance or
performance of any of the covenants, agreements or conditions to be observed or performed
hereunder by it.
(b) If the Issuer Common Stock or any other securities to be acquired
upon exercise of the Option are then listed on the NYSE (or any other national securities
exchange or trading system), Issuer, upon the request of Grantee, will promptly file an
application to list the shares of Issuer Common Stock or such other securities to be acquired upon
exercise of the Option on the NYSE (and any other national securities exchange or trading
system) and will use reasonable best efforts to obtain approval of such listing as promptly as
practicable.
6.3 Division of Option: Lost Options. The Agreement (and the Option granted
hereby) are exchangeable, without expense, at the option of Grantee, upon presentation and
2C3/3S-0J~I-j~o3?-993=?~:~-AG~
12
surrender of this Agreement at the principal office of Issuer, for other agreements providing for
Options of different denominations entitling Grantee to purchase, on the same terms and subject
to the same conditions as are set forth herein, in the aggregate the same number of Option Shares
purchasable hereunder. Upon receipt by Issuer of evidence reasonably satisfactory to it of the
loss, theft or destruction or mutilation of this Agreement, and (in the case of loss, theft or
destruction) of reasonably satisfactory indemnification, and upon surrender and cancellation of
this Agreement, if mutilated, Issuer will execute and deliver a new agreement oflike tenor and
date.
6.4 Amendment. This Agreement may not be amended except by an
instrument in writing signed on behalf of each of the parties hereto.
6.5 Notices. All notices and other communications hereunder shall be in
writing and shall be deemed duly given (a) on the date of delivery if delivered personally, or by
telecopy or telefacsimile, upon confirmation of receipt, (b) on the first Business Day following
the date of dispatch if delivered by a recognized next-day courier service, or (c) on the tenth
Business Day following the date of mailing if delivered by registered or certified mail, return
receipt requested, postage prepaid. All notices hereunder shall be delivered as set forth below, or
pursuant to such other instructions as may be designated in writing by the party to receive such
notice:
(a) if to Grantee to:
America Online, Inc.
22000 AOL Way
Dulles, Virginia
Fax: (703) 265-1495
Attention: Paul T. Cappuccio, Esq.
with a copy to:
Simpson Thacher & Bartlett
425 Lexington A venue
New York, New York 10017
Fax: (212) 455-2502
Attention: Richard I. Beattie, Esq.
(b) if to Issuer to:
Time Warner Inc.
75 Rockefeller Plaza
New York, NY 10019
Fax: (212) 265-2646
Attention: Christopher P. Bogart, Esq.
O:3;SS-COO,-O~839-993F?~J~-AGR
13
with a copy to:
Cravath, Swaine & Moore
Worldwide Plaza
825 Eighth Avenue
New York, New York 10019
Fax: (212) 474-3700
Attention: Robert A. Kindler, Esq.
6.6 Intet:pretation. When a reference is made in this Agreement to Articles,
Sections, Exhibits or Schedules, such reference shall be to an Article or Section of or Exhibit or
Schedule to this Agreement unless otherwise indicated. The headings contained in this
Agreement are for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. Whenever the words "include," "includes" or "including" are
used in this Agreement, they shall be deemed to be followed by the words ''without limitation."
6.7 Counte(parts. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and shall become
effective when one or more counterparts have been signed by each of the parties and delivered to
the other party, it being understood that both parties need not sign the same counterpart.
6.8 Entire Agreement: No Third Party Beneficiaries.
(a) This Agreement and the other agreements of the parties referred to
herein constitute the entire agreement and supersede all prior agreements and understandings,
both written and oral, among the parties with respect to the subject matter hereof.
(b) This Agreement shall be binding upon and inure solely to the
benefit of each party hereto, and nothing in this Agreement, express or implied, is intended to or
shall confer upon any other Person any right, benefit or remedy of any nature whatsoever under
or by reason of this Agreement.
6.9 Governing Law. This Agreement shall be governed and construed in
accordance with the laws of the State of Delaware (without giving effect to choice oflaw
principles thereof).
6.10 Severability. If any term or other provision of this Agreement is invalid,
illegal or incapable of being enforced by any law or public policy, all other terms and provisions
of this Agreement shall nevertheless remain in full force and effect so long as the economic or
legal substance of the transactions contemplated hereby is not affected in any manner materially
adverse to any party. Upon such determination that any term or other provision is invalid, illegal
or incapable of being enforced, the parties hereto shall negotiate in good faith to modify this
Agreement so as to effect the original intent of the parties as closely as possible in an acceptable
manner in order that the transactions contemplated hereby are consummated as originally
contemplated to the greatest extent possible.
c::: 2 -; .;': - ':,::)'7 -0: 23 9- 993F?VJ~ -';G~
14
6.11 Assignment. Neither this Agreement nor any of the rights, interests or
obligations hereunder shall be assigned by any of the parties hereto, in whole or in part (whether
by operation oflaw or otherwise), without the prior written consent of the other party, and any
attempt to make any such assignment without such consent shall be null and void. Subject to the
preceding sentence, this Agreement will be binding upon, inure to the benefit of and be
enforceable by the parties and their respective successors and assigns.
6.12 Submission to Jurisdiction: Waivers. Each of Grantee and Issuer
irrevocably agrees that any legal action or proceeding with respect to this Agreement or for
recognition and enforcement of any judgment in respect hereof brought by the other party hereto
or its successors or assigns may be brought and determined in the Chancery or other Courts of the
State of Delaware, and each of Grantee and Issuer hereby irrevocably submits with regard to any
such action or proceeding for itself and in respect to its property, generally and unconditionally,
to the nonexclusive jurisdiction of the aforesaid courts. Each of Grantee and Issuer hereby
irrevocably waives, and agrees not to assert, by way of motion, as a defense, counterclaim or
otherwise, in any action or proceeding with respect to this Agreement, (a) any claim that it is not
personally subject to the jurisdiction of the above-named courts for any reason other than the
failure to lawfully serve process (b) that it or its property is exempt or immune from jurisdiction
of any such court or from any legal process commenced in such courts (whether through service
of notice, attachment prior to judgment, attachment in aid of execution of judgment, execution of
judgment or otherwise), (c) to the fullest extent permitted by applicable law, that (i) the suit,
action or proceeding in any such court is brought in an inconvenient forum, (ii) the venue of such
suit, action or proceeding is improper and (iii) this Agreement, or the subject matter hereof, may
not be enforced in or by such courts and (d) any right to a trial by jury.
6.13 Enforcement. The parties agree that irreparable damage would occur in
the event that any of the provisions of this Agreement were not performed in accordance with
their specific terms. It is accordingly agreed that the parties shall be entitled to specific
performance of the terms hereof, this being in addition to any other remedy to which they are
entitled at law or in equity.
6.14 Failure or Indulgence Not Waiver: Remedies Cumulative. No failure or
delay on the part of any party hereto in the exercise of any right hereunder will impair such right
or be construed to be a waiver of, or acquiescence in, any breach of any representation, warranty
or agreement herein, nor will any single or partial exercise of any such right preclude other or
further exercise thereof or of any other right. All rights and remedies existing under this
Agreement are cumulative to, and not exclusive to, and not exclusive of, any rights or remedies
otherwise available.
[Remainder of this page intentionally left blank]
C=3~2~-JJOi-J2839-993??DJ4-AGR
IN WITNESS WHEREOF, Grantee and Issuer have caused this Agreement to be
duly executed as of the date first above written.
By:
N am. tephen M. Case
Title: Chairman & Chief Executive Officer
TIME WARNER INe.
By:
Name:
Title:
I='! \VTThESS \\'1-IEREOF, Grantee and Issuer have caused this Agreement to be
duly executed as of the date first above wrirten.
AMERICA OKLE\E, INC.
By:
Name:
Tide:
Tl:\tlE WAR);ER NC.
By: NA 11 1Y1' 'w<
Name:
Title:
~,: .:,_.~ :-~c: 7-~:;:;:- ;.~=:;.::': ~ -.'::':S
EXECUTION COpy
STOCK OPTION AGREEMENT, dated as of January 10,2000 (the
"Agreement"), between Time Warner Inc., a Delaware corporation ("Grantee"), and America
Online, Inc., a Delaware corporation ("Issuer").
WIT N E SSE T H:
WHEREAS, Grantee and Issuer are, concurrently with the execution and delivery
of this Agreement, entering into an Agreement and Plan of Merger, dated as of the date hereof
(the "Merger Agreement;" capitalized terms used without definition herein having the meanings
assigned to them in the Merger Agreement), pursuant to which the parties will engage in a
business combination in a merger of equals (the "Merger"); and
WHEREAS, as a condition to their willingness to enter into the Merger
Agreement, Grantee has required that Issuer agree, and believing it to be in the best interests of
Issuer, Issuer has agreed, among other things, to grant to Grantee the Option (as hereinafter
defined) to purchase shares of common stock, par value S.OI per share, ofIssuer ("Issuer
Common Stock") at a price per share equal to the Exercise Price (as hereinafter defined).
NOW THEREFORE, in consideration of the foregoing and the mutual
representations, warranties, covenants and agreements herein contained, and intending to be
legally bound hereby, the parties hereto agree as follows:
ARTICLE I
OPTION TO PURCHASE SHARES
1.1 Grant of Option.
(a) Issuer hereby grants to Grantee an irrevocable option to purchase,
in whole or in part, an aggregate of up to 452,535,148 duly authorized, validly issued, fully paid
and nonassessable shares ofIssuer Common Stock (representing 19.9% ofthe outstanding shares
of Issuer Common Stock as of January 5,2000) on the terms and subject to the conditions set
forth herein (the "Option"); provided, however, that in no event shall the number of shares of
Issuer Common Stock for which this Option is exercisable exceed 19.9% of the issued and
outstanding shares of Issuer Common Stock at the time of exercise without giving effect to the
issuance of any Option Shares (as hereinafter defined). The number of shares of Issuer Common
Stock that may be received upon the exercise of the Option and the Exercise Price are subject to
adjustment as herein set forth.
(b) In the event that any additional shares of Issuer Common Stock are
issued or otherwise become outstanding after the date of this Agreement (other than pursuant to
this Agreement and other than pursuant to an event described in Section 3.1 hereof), the number
of shares of Issuer Common Stock subject to the Option shall be increased so that, after such
C03ic2-:~~7-02259-AQlA52:M-AG?
2
issuance, such number together with any shares of Issuer Common Stock previously issued
pursuant hereto, equals 19.9% ofthe number of shares ofIssuer Common Stock then issued and
outstanding without giving effect to any shares subject or issued pursuant to the Option. Nothing
contained in this Section 1.1 (b) or elsewhere in this Agreement shall be deemed to authorize
Issuer to breach or fail to comply with any provision of the Merger Agreement. As used herein,
the term "Option Shares" means the shares ofIssuer Common Stock issuable pursuant to the
Option, as the number of such shares shall be adjusted pursuant to the terms hereof.
1.2 Exercise of Option.
(a) The Option may be exercised by Grantee, in whole or in part, at
any time, or from time to time, commencing upon the Exercise Date and prior to the Expiration
Date. As used herein, the term "Exercise Date" means the date on which Grantee becomes
unconditionally entitled to receive the America Online Termination Fee pursuant to Section
8.2(c) of the Merger Agreement. As used herein, the term "Expiration Date" means the first to
occur prior to Grantee's exercise of the Option pursuant to Section 1.2(b) of:
(i) the Effective Time;
(ii) written notice of termination of this Agreement by Grantee to
Issuer;
(iii) 12 months after the first occurrence of an Exercise Date; or
(iv) the date of termination of the Merger Agreement, unless, in
the case of this clause (iv), Grantee has the right to receive the America Online
Termination Fee either (x) upon or (y) following such termination upon the occurrence of
certain events, in which case the Option will not terminate until the later of (x) 15
business days following the time the America Online Termination Fee becomes
unconditionally payable and (y) the expiration of the period in which Grantee has such
right to receive the America Online Termination Fee.
Notwithstanding the termination of the Option, Grantee shall be entitled to purchase those
Option Shares with respect to which it may have exercised the Option by delivery of an Option
Notice (as defined below) prior to the Expiration Date, and the termination of the Option will not
affect any rights hereunder which by their terms do not terminate or expire prior to or at the
Expiration Date.
(b) In the event Grantee wishes to exercise the Option, Grantee shall
send a written notice to Issuer of its intention to so exercise the Option (an "Option Notice"),
specifying the number of Option Shares to be purchased (and the denominations of the
certificates, ifmore than one), whether the aggregate Exercise Price will be paid in cash or by
surrendering a p011ion of the Option in accordance with Section 1.3(b) or a combination thereof,
and the place in the United States, time and date of the closing of such purchase (the "Option
Closing" and the date of such Closing, the "Option Closing Date"), which date shall not be less
C:37S:-C:07-G2:69-~G:A521M-AGR
3
than two Business Days nor more than ten Business Days from the date on which an Option
Notice is delivered; provided that the Option Closing shall be held only if (i) such purchase
would not otherwise violate or cause the violation of, any applicable material law, statute,
ordinance, rule or regulation (collectively, "Laws") (including the HSR Act and the
Communications Act), and (ii) no material judgment, order, writ, injunction, ruling or decree of
any Governmental Entity (collectively, "Orders") shall have been promulgated, enacted, entered
into, or enforced by any Governmental Entity which prohibits delivery of the Option Shares,
whether temporary, preliminary or permanent; provided, however, that the parties hereto shall
use their reasonable best efforts to (x) promptly make and process all necessary filings and
applications and obtain all consents, approvals, Orders, authorizations, registrations and
declarations or expiration or termination of any required waiting periods (collectively,
"Approvals") and to comply with any such applicable Laws and (y) have any such Order vacated
or reversed. In the event the Option Closing is delayed pursuant to clause (i) or (ii) above, the
Option Closing shall be within ten Business Days following the cessation of such restriction,
violation, Law or Order or the receipt of any necessary Approval, as the case may be (so long as
the Option Notice was delivered prior to the Expiration Date); provided further that,
notwithstanding any prior Option Notice, Grantee shall be entitled to rescind such Option Notice
and shall not be obligated to purchase any Option Shares in connection with such exercise upon
written notice to such effect to Issuer.
(c) At any Option Closing, (i) Issuer shall deliver to Grantee all of the
Option Shares to be purchased by delivery of a certificate or certificates evidencing such Option
Shares in the denominations designated by Grantee in the Option Notice, and (ii) if the Option is
exercised in part and/or surrendered in part to pay the aggregate Exercise Price pursuant to
Section 1.3(b), Issuer and Grantee shall execute and deliver an amendment to this Agreement
reflecting the Option Shares for which the Option has not been exercised and/or surrendered. If
at the time of issuance of any Option Shares pursuant to an exercise of all or part of the Option
hereunder, Issuer shall have issued any rights or other securities which are attached to or
otherwise associated with the Issuer Common Stock, then each Option Share issued pursuant to
such exercise shall also represent such rights or other securities with terms substantially the same
as and at least as favorable to Grantee as are provided under any shareholder rights agreement or
similar agreement of Issuer then in effect. At the Option Closing, Grantee shall pay to Issuer by
wire transfer of immediately available funds to an account specified by Issuer to Grantee in
writing at least two Business Days prior to the Option Closing an amount equal to the Exercise
Price multiplied by the number of Option Shares to be purchased for cash pursuant to this Article
I; provided that the failure or refusal ofIssuer to specify an account shall not affect Issuer's
obligation to issue the Option Shares.
(d) Upon the delivery by Grantee to Issuer of the Option Notice and
the tender of the applicable aggregate Exercise Price in immediately available funds or the
requisite portion of the Option in accordance with Section 1.3, Grantee shall be deemed to be the
holder of record of the Option Shares issuable upon such exercise, notwithstanding that the stock
transfer books of Issuer may then be closed, that certificates representing such Option Shares
may not then have been actually delivered to Grantee, or Issuer may have failed or refused to take
any action required of it hereunder. Issuer shall pay all expenses that may be payable in
C03iS0-CC2/-02269-AOlh52~M-AGR
4
connection with the preparation, issuance and delivery of stock certificates or an amendment to
this Agreement under this Section 1.2 and any filing fees and other expenses arising from the
performance of the transactions contemplated hereby.
1.3 Payments.
(a) The purchase and sale of the Option Shares pursuant to Section 1.2
of this Agreement shall be at a purchase price equal to $73.75 per Share (as such amount may be
adjusted pursuant to the terms hereof, the "Exercise Price"), payable at Grantee's option in cash,
by surrender of a portion of the Option in accordance with Section 1.3(b), or a combination
thereof.
(b) Grantee may elect to purchase Option Shares issuable, and pay
some or all of the aggregate Exercise Price payable, upon an exercise of the Option by
surrendering a portion of the Option with respect to such number of Option Shares as is
determined by dividing (i) the aggregate Exercise Price payable in respect of the number of
Option Shares being purchased in such manner by (ii) the excess of the Fair Market Value (as
defined below) per share ofIssuer Common Stock as of the last trading day preceding the date
Grantee delivers its Option Notice (such date, the "Option Exercise Date") over the per share
Exercise Price. The "Fair Market Value" per share of Issuer Common Stock shall be (i) if the
Issuer Common Stock is listed on the New York Stock Exchange, Inc. (the "NYSE") or any other
nationally recognized exchange or trading system as of the Option Exercise Date, the average of
last reported sale prices per share ofIssuer Common Stock thereon for the 10 trading days
commencing on the 12th trading day immediately preceding the Option Exercise Date, or (ii) if
the Issuer Common Stock is not listed on the NYSE or any other nationally recognized exchange
or trading system as of the Option Exercise Date, the amount determined by a mutually
acceptable independent investment banking firm as the value per share the Issuer Common Stock
would have if publicly traded on a nationally recognized exchange or trading system (assuming
no discount for minority interest, illiquidity or restrictions on transfer). That portion of the
Option so surrendered under this Section 1.3(b) shall be canceled and shall thereafter be of no
further force and effect.
(c) Certificates for the Option Shares delivered at an Option Closing
will have typed or printed thereon a restrictive legend which will read substantially as follows:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND
MA Y BE REOFFERED OR SOLD ONLY IF SO REGISTERED OR IF AN
EXEMPTION FROM SUCH REGISTRATION IS AVAILABLE. SUCH SECURITIES
ARE ALSO SUBJECT TO ADDITIONAL RESTRICTIONS ON TRANSFER AS SET
FORTH IN THE STOCK OPTION AGREEMENT DATED AS OF JANUARY 10,
2000, A COpy OF WHICH MAYBE OBTAINED FROM THE SECRETARY OF
AMERICA ONLINE, me. AT ITS PRINCIPAL EXECUTIVE OFFICES."
OC3~cO-8CC7-C2269-AO:A52:~-AGR
5
It is understood and agreed that (i) the reference to restrictions arising under the Securities Act in
the above legend will be removed by delivery of substitute certificate(s) without such reference if
such Option Shares have been registered pursuant to the Securities Act, such Option Shares have
been sold in reliance on and in accordance with Rule 144 under the Securities Act or Grantee has
delivered to Issuer a copy of a letter from the staff of the SEC, or an opinion of counsel in form
and substance reasonably satisfactory to Issuer and its counsel, to the effect that such legend is
not required for purposes of the Securities Act and (ii) the reference to restrictions pursuant to
this Agreement in the above legend will be removed by delivery of substitute certificate(s)
without such reference if the Option Shares evidenced by certificate(s) containing such reference
have been sold or transferred in compliance with the provisions of this Agreement under
circumstances that do not require the retention of such reference.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
2.1 Representations and Warranties of Grantee. Grantee hereby represents and
warrants to Issuer that any Option Shares or other securities acquired by Grantee upon exercise of
the Option will not be taken with a view to the public distribution thereof and will not be
transferred or otherwise disposed of except in a transaction registered or exempt from registration
under the Securities Act.
2.2 Representations and Warranties of Issuer. Issuer hereby represents and
warrants to Grantee as follows:
(a) Option Shares. Issuer has taken all necessary corporate and other
action to authorize and reserve for issuance, and, subject to receipt of any Approvals, to permit it
to issue, the Option Shares and all additional shares or other securities which may be issued
pursuant to Section 3. I upon exercise of the Option, and, at all times from the date hereof until
such time as the obligation to deliver Option Shares hereunder terminates, will have reserved for
issuance upon exercise of the Option the Option Shares and such other additional shares or
securities, if any. All of the Option Shares and all additional shares or other securities or
property which may be issuable pursuant to Section 3.1, upon exercise of the Option and
issuance pursuant hereto, shall be duly authorized, validly issued, fully paid and nonassessable,
shall be delivered free and clear of all Liens of any nature whatsoever, and shall not be subject to
any preemptive or similar right of any Person.
(b) No Restrictions. No Delaware law or other takeover statute or
similar Law and no provision of the Restated Certificate of Incorporation or Bylaws of Issuer or
any agreement to which Issuer is a party (a) would or would purport to impose restrictions which
might adversely affect or delay the consummation of the transactions contemplated by this
Agreement, or (b) as a result of the consummation of the transactions contemplated by this
Agreement, (i) would or \vould purport to restrict or impair the ability of Grantee to vote or
otherwise exercise the rights of a shareholder with respect to securities of Issuer or any of its
:S313:-C087-C2269-AOIA521M-~GR
6
Subsidiaries that may be acquired or controlled by Grantee or (ii) would or would purport to
entitle any Person to acquire securities oflssuer.
ARTICLE III
ADJUSTMENT UPON CHANGES IN CAPIT ALIZA TION
3.1 Adjustment Upon Changes in Capitalization. In addition to the adjustment
in the number of shares of Issuer Common Stock that may be purchased upon exercise of the
Option pursuant to Section 1.1 of this Agreement, the number of shares ofIssuer Common Stock
that may be purchased upon the exercise of the Option and the Exercise Price shall be subject to
adjustment from time to time as provided in this Section 3.1. In the event of any change in the
number of issued and outstanding shares of Issuer Common Stock by reason of any stock
dividend, split-up, merger, recapitalization, combination, conversion, exchange of shares, spin-
off or other change in the corporate or capital structure of Issuer which would have the effect of
diluting or otherwise diminishing Grantee's rights hereunder, the number and kind of Option
Shares or other securities subject to the Option and the Exercise Price therefor shall be
appropriately adjusted so that Grantee shall receive upon exercise of the Option (or, if such a
change occurs between exercise and the Option Closing, upon the Option Closing) the number
and kind of shares or other securities or property that Grantee would have received in respect of
the Option Shares that Grantee is entitled to purchase upon exercise of the Option if the Option
had been exercised (or the purchase thereunder had been consummated, as the case may be)
immediately prior to such event or the record date for such event, as applicable. The rights of
Grantee under this Section shall be in addition to, and shall in no way limit, its rights against
Issuer for breach of or the failure to perform any provision of the Merger Agreement.
ARTICLE IV
REGISTRATION RIGHTS
4.1 Registration of Option Shares Under the Securities Act.
(a) If requested by Grantee at any time and from time to time within
two years after receipt by Grantee of Option Shares (the "Registration Period"), Issuer shall use
its reasonable best efforts, as promptly as practicable, to effect the registration under the
Securities Act and any applicable state law (a "Demand Registration") of such number of Option
Shares or such other Issuer securities owned by or issuable to Grantee in accordance with the
method of sale or other disposition contemplated by Grantee, including a "shelf' registration
statement under Rule 415 of the Securities Act or any successor provision, and to obtain all
consents or waivers of other parties that are required therefor. Grantee agrees to use reasonable
best efforts to cause, and to use reasonable best efforts to cause any underwriters of any sale or
other disposition to cause, any sale or other disposition pursuant to such registration statement to
be effected on a widely distributed basis so that upon consummation thereof no purchaser or
~J372~-Cv:i-22269-h01A521M-AGR
7
transferee will own beneficially more than 3% of the then-outstanding voting power of Issuer.
Except with respect to such a "shelf' registration, Issuer shall keep such Demand Registration
effective for a period of not less than 150 days, unless, in the written opinion of counsel to Issuer,
which opinion shall be delivered to Grantee and which shall be satisfactory in form and
substance to Grantee and its counsel, such registration under the Securities Act is not required in
order to lawfully sell and distribute such Option Shares or other Issuer securities in the manner
contemplated by Grantee. Issuer shall only have the obligation to effect three Demand
Registrations pursuant to this Section 4.1; provided that only requests relating to a registration
statement that has become effective under the Securities Act shall be counted for purposes of
determining the number of Demand Registrations made. Issuer shall be entitled to postpone for
up to 150 days from receipt of Grantee's request for a Demand Registration the filing of any
registration statement in connection therewith if the Board of Directors ofIssuer determines in its
good faith reasonable judgment that such registration would materially interfere with or require
premature disclosure of, any material acquisition, reorganization, pending or proposed offering of
Issuer Securities or other transaction involving Issuer or any other material contract under active
negotiation by Issuer; and provided further that Issuer shall not have postponed any Demand
Registration pursuant to this sentence during the twelve month period immediately preceding the
date of delivery of Grantee's request for a Demand Registration.
(b) If Issuer effects a registration under the Securities Act of Issuer
Common Stock for its own account or for any other stockholders ofIssuer (other than on Form
S-4 or Form S-8, or any successor form), Grantee shall have the right to participate in such
registration and include in such registration the number of shares of Issuer Common Stock or
such other Issuer securities as Grantee shall designate by notice to Issuer (an "Incidental
Registration" and, together with a Demand Registration, a "Registration"); provided, however,
that, if the managing underwriters of such offering advise Issuer in writing that in their opinion
the number of shares of Issuer Common Stock or other securities requested to be included in
such Incidental Registration exceeds the number which can be sold in such offering, Issuer shall
include therein (i) first, all shares proposed to be included therein by Issuer, (ii) second, subject
to the rights of any other holders of registration rights in effect as of the date hereof, the shares
requested to be included therein by Grantee and (iii) third, shares proposed to be included therein
by any other stockholder of Issuer. Participation by Grantee in any Incidental Registration shall
not affect the obligation of Issuer to effect Demand Registrations under this Section 4.1. Issuer
may withdraw any registration under the Securities Act that gives rise to an Incidental
Registration without the consent of Grantee.
(c) In connection with any Registration pursuant to this Section 4.1,
(i) Issuer and Grantee shall provide each other and any underwriter of the offering with
customary representations, warranties, covenants, indemnification and contribution obligations in
connection with such Registration, and (ii) Issuer shall use reasonable best efforts to cause any
Option Shares included in such Registration to be approved for listing on the NYSE or any other
nationally recogrrized exchange or trading system upon which Issuer's securities are then listed,
subject to official notice of issuance, which notice shall be given by Issuer upon issuance.
Grantee will provide all infonnation reasonably requested by Issuer for inclusion in any
registration statement to be filed hereunder. The costs and expenses incurred by Issuer in
8C37S:-8C07-J2269-AOlA521M-AGR
8
connection with any Registration pursuant to this Section 4.1 (including any fees related to
qualifications under Blue Sky Laws and SEC filing fees) (the "Registration Expenses") shall be
borne by Issuer, excluding legal fees of Grantee's counsel and underwriting discounts or
commissions with respect to Option Shares to be sold by Grantee included in a Registration.
4.2 Transfers of Option Shares. The Option Shares may not be sold, assigned,
transferred, or otherwise disposed of except (i) in an underwritten public offering as provided in
section 4.1 or (ii) to any purchaser of transferee who would not, to the knowledge ofthe Grantee
after reasonable inquiry, immediately following such sale, assignment, transfer or disposal
beneficially own more than 3% of the then-outstanding voting power of the Issuer; provided,
however, that Grantee shall be permitted to sell any Option Shares if such sale is made pursuant
to a tender or exchange offer that has been approved or recommended by a majority of the
members of the Board of Directors of Issuer (which majority shall include a majority of directors
who were directors as of the date hereof).
ARTICLE V
REPURCHASE RIGHTS; SUBSTITUTE OPTIONS
5.1 Repurchase Ri ghts.
(a) Subject to Section 6.1, at any time on or after the Exercise Date
and prior to the Expiration Date, Grantee shall have the right (the "Repurchase Right") to require
Issuer to repurchase from Grantee (i) the Option or any part thereof as Grantee shall designate at
a price (the "Option Repurchase Price") equal to the amount, subject to reduction at the sole
discretion of Grantee pursuant to clause (iii) of Section 6.1 (a), by which (A) the Market/Offer
Price (as defined below) exceeds (B) the Exercise Price, multiplied by the number of Option
Shares as to which the Option is to be repurchased and (ii) such number of Option Shares as
Grantee shall designate at a price (the "Option Share Repurchase Price") equal to the
Market/Offer Price multiplied by the number of Option Shares so designated. The term
"Market/Offer Price" shall mean the highest of (i) the highest price per share of Issuer Common
Stock offered or paid in any Acquisition Proposal, or (ii) the highest closing price for shares of
Issuer Common Stock during the six-month period immediately preceding the date Grantee gives
the Repurchase Notice (as hereinafter defined). In determining the Market/Offer Price, the value
of consideration other than cash shall be determined by a nationally recognized investment
banking firm selected by Grantee and reasonably acceptable to Issuer, which determination,
absent manifest error, shall be conclusive for all purposes of this Agreement.
(b) Grantee shall exercise its Repurchase Right by delivering to Issuer
written notice (a "Repurchase Notice") stating that Grantee elects to require Issuer to repurchase
all or a portion of the Option and/or the Option Shares as specified therein. The closing of the
Repurchase Right (the "Repurchase Closing") shall take place in the United States at the place,
time and date specified in the Repurchase Notice, which date shall not be less than two Business
Days nor more than ten Business Days from the date on which the Repurchase Notice is
C03IS:-C:~;-C2259-~OlA521M-AGR
9
delivered. At the Repurchase Closing, subject to the receipt of a writing evidencing the surrender
of the Option and/or certificates representing Option Shares, as the case may be, Issuer shall
deliver to Grantee the Option Repurchase Price therefor or the Option Share Repurchase Price
therefor, as the case may be, or the portion thereof that Issuer is not then prohibited under
applicable Law from so delivering. At the Repurchase Closing, (i) Issuer shall pay to Grantee the
Option Repurchase Price for the portion of the Option which is to be repurchased or the Option
Shares Repurchase Price for the number of Option Shares to be repurchased, as the case may be,
by wire transfer of immediately available funds to an account specified by Grantee at least 24
hours prior to the Repurchase Closing and (ii) if the Option is repurchased only in part, Issuer
and Grantee shall execute and deliver an amendment to this Agreement reflecting the Option
Shares for which the Option is not being repurchased.
(c) To the extent that Issuer is prohibited under applicable Law from
repurchasing the portion of the Option or the Option Shares designated in such Repurchase
Notice, Issuer shall immediately so notify Grantee and thereafter deliver, from time to time, to
Grantee the portion of the Option Repurchase Price and the Option Share Repurchase Price,
respectively, that it is no longer prohibited from delivering, within five Business Days after the
date on which Issuer is no longer so prohibited; provided, however, that iflssuer at any time after
delivery of a Repurchase Notice is prohibited under applicable Law from delivering to Grantee
the full amount of the Option Repurchase Price and the Option Share Repurchase Price for the
Option or Option Shares to be repurchased, respectively, Grantee may rescind the exercise of the
Repurchase Right, whether in whole, in part or to the extent of the prohibition, and, to the extent
rescinded, no part of the amounts, terms or the rights with respect to the Option or Repurchase
Right shall be changed or affected as if such Repurchase Right were not exercised. Issuer shall
use its reasonable best efforts to obtain all required regulatory and legal approvals and to file any
required notices to permit Grantee to exercise its Repurchase Right and shall use its reasonable
best efforts to avoid or cause to be rescinded or rendered inapplicable any prohibition on Issuer's
repurchase of the Option or the Option Shares.
5.2 Substitute Option.
(a) In the event that Issuer enters into an agreement (i) to consolidate
with or merge into any Person, other than Grantee or any Subsidiary of Grantee (each an
"Excluded Person"), and Issuer is not the continuing or surviving corporation of such
consolidation or merger, (ii) to permit any Person, other than an Excluded Person, to merge into
Issuer and Issuer shall be the continuing or surviving or acquiring corporation, but, in connection
with such merger, the then outstanding shares of Issuer Common Stock shall be changed into or
exchanged for stock or other securities of any other Person or cash or any other property or the
then outstanding shares of Issuer Common Stock shall after such merger represent less than 50%
of the outstanding voting securities of the merged or acquiring company, or (iii) to sell or
otherwise transfer all or substantially all of its assets to any Person, other than an Excluded
Person. then, and in each such case, the agreement governing such transaction shall make proper
pro\"ision so that, unless earlier exercised by Grantee, the Option shall, upon the consummation
of any such transaction and upon the terms and conditions set forth herein, be converted into, or
exchanged for, an option with identical terms appropriately adjusted to acquire the number and
CG373J-~~C7-02269-A01A521~-AG~
10
class of shares or other securities or property that Grantee would have received in respect of
Issuer Common Stock if the Option had been exercised immediately prior to such consolidation,
merger, sale, or transfer, or the record date therefor, as applicable and make any other necessary
adjustments; provided, however, that if such a conversion or exchange cannot, because of
applicable Law be the same as the Option, such terms shall be as similar as possible and in no
event less advantageous to Grantee than the Option.
(b) In addition to any other restrictions or covenants, Issuer agrees that
it shall not enter or agree to enter into any transaction described in Section 5.2(a) unless the
Acquiring Corporation (as hereinafter defined) and any Person that controls the Acquiring
Corporation assume in writing all the obligations of Issuer hereunder and agree for the benefit of
Grantee to comply with this Article V.
(c) For purposes of this Section 5.2, the term "AcQuirin~ COl:poration"
shall mean (i) the continuing or surviving Person of a consolidation or merger with Issuer (if
other than Issuer), (ii) Issuer in a consolidation or merger in which Issuer is the continuing or
surviving or acquiring Person, and (iii) the transferee of all or substantially all ofIssuer's assets.
ARTICLE VI
MISCELLANEOUS
6.1 Total Profit.
(a) Notwithstanding any other provision of this Agreement, in no
event shall Grantee's Total Profit (as hereinafter defined) plus any America Online Termination
Fee paid pursuant to Section 8.2(c) and any fees paid by Issuer pursuant to Section 8.2(d) ofthe
Merger Agreement (such America Online Termination Fee and such fees paid pursuant to
Section 8.2(d) of the Merger Agreement, collectively, the "Total Issuer Fees") exceed in the
aggregate an amount (the "Limitation Amount") equal to 2.75% of the product of (x) the number
of shares of Issuer Common Stock outstanding as of the date hereof (assuming the exercise of all
outstanding options (other than the Option) and the conversion into Issuer Common Stock of all
securities of the Issuer convertible into Issuer Common Stock) multiplied by (y) the last sale
price oflssuer Common Stock on the NYSE on January 7,2000, and, if the total amount that
would otherwise be received by Grantee otherwise would exceed such amount, Grantee, at its
sole election, shall either (i) reduce the number of shares oflssuer Common Stock subject to this
Option, (ii) deliver to Issuer for cancellation Option Shares previously purchased by Grantee,
(iii) reduce the amount of the Option Repurchase Price or the Option Share Repurchase Price,
(iv) pay cash to Issuer, or (v) any combination thereof, so that Grantee's actually realized Total
Profit, when aggregated with the Total Issuer Fees so paid to Grantee, shall not exceed the
Limitation Amount after taking into account the foregoing actions.
(b) Notwithstanding any other provision of this Agreement, the Option
may not be exercised for a number of Option Shares as would, as of the date of exercise, result in
Cj3:5~-CC07-22269-~~1~52lM-AGR
11
a Notional Total Profit (as defined below) which, together with the Total Issuer Fees theretofore
paid to Grantee, would exceed the Limitation Amount; provided, that nothing in this sentence
shall restrict any exercise of the Option permitted hereby on any subsequent date.
(c) As used herein, the term "Total Profit" shall mean the aggregate
amount (before taxes) of the following: (i) the amount received by Grantee pursuant to Issuer's
repurchase of the Option (or any portion thereof) pursuant to Section 5.1, (ii) (x) the amount
received by Grantee pursuant to Issuer's repurchase of Option Shares pursuant to Section 5.1,
less (y) Grantee's purchase price for such Option Shares, (iii) (x) the net cash amounts or the fair
market value of any property received by Grantee pursuant to any consummated arm's-length
sales of Option Shares (or any other securities into which such Option Shares are converted or
exchanged) to any unaffiliated party, less (y) Grantee's purchase price of such Option Shares.
(d) As used herein, the term "Notional Total Profit" with respect to
any number of Option Shares as to which Grantee may propose to exercise the Option shall be
the Total Profit determined as of the date of such proposal assuming that the Option was
exercised on such date for such number of Option Shares and assuming that such Option Shares,
together with all other Option Shares held by Grantee and its affiliates as of such date, were sold
for cash at the closing market price (less customary brokerage commissions) for shares of Issuer
Common Stock on the preceding trading day on the NYSE (or on any other nationally recognized
exchange or trading system on which shares of Issuer Common Stock are then so listed or
traded).
6.2 Further Assurances: Listing.
(a) From time to time, at the other party's request and without further
consideration, each party hereto shall execute and deliver such additional documents and take all
such further action as may be necessary or desirable to consummate the transactions
contemplated by this Agreement, including, without limitation, to vest in Grantee good and
marketable title, free and clear of all Liens, to any Option Shares purchased hereunder. Issuer
agrees not to avoid or seek to avoid (whether by charter amendment or through reorganization,
consolidation, merger, issuance of rights or securities, the America Online Rights Agreement or
similar agreement, dissolution or sale of assets, or by any other voluntary act) the observance or
performance of any of the covenants, agreements or conditions to be observed or performed
hereunder by it.
(b) If the Issuer Common Stock or any other securities to be acquired
upon exercise of the Option are then listed on the NYSE (or any other national securities
exchange or trading system), Issuer, upon the request of Grantee, will promptly file an
application to list the shares of Issuer Common Stock or such other securities to be acquired upon
exercise of the Option on the NYSE (and any other national securities exchange or trading
system) and ,vill use reasonable best efforts to obtain approval of such listing as promptly as
practicable.
003738-0007-02269-A01A521M-AGR
12
6.3 Division of Option: Lost Options. The Agreement (and the Option granted
hereby) are exchangeable, without expense, at the option of Grantee, upon presentation and
surrender of this Agreement at the principal office of Issuer, for other agreements providing for
Options of different denominations entitling Grantee to purchase, on the same terms and subject
to the same conditions as are set forth herein, in the aggregate the same number of Option Shares
purchasable hereunder. Upon receipt by Issuer of evidence reasonably satisfactory to it of the
loss, theft or destruction or mutilation of this Agreement, and (in the case ofloss, theft or
destruction) of reasonably satisfactory indemnification, and upon surrender and cancellation of
this Agreement, ifmutilated, Issuer will execute and deliver a new agreement of like tenor and
date.
6.4 Amendment. This Agreement may not be amended except by an
instrument in writing signed on behalf of each of the parties hereto.
6.5 Notices. All notices and other communications hereunder shall be in
writing and shall be deemed duly given (a) on the date of delivery if delivered personally, or by
telecopy or telefacsimile, upon confirmation of receipt, (b) on the first Business Day following
the date of dispatch if delivered by a recognized next-day courier service, or (c) on the tenth
Business Day following the date of mailing if delivered by registered or certified mail, return
receipt requested, postage prepaid. All notices hereunder shall be delivered as set forth below, or
pursuant to such other instructions as may be designated in writing by the party to receive such
notice:
(a) if to Grantee to:
Time Warner Inc.
75 Rockefeller Plaza
New York, NY 10019
Fax: (212) 265-2646
Attention: Christopher P. Bogart, Esq.
with a copy to:
Cravath, Swaine & Moore
Worldwide Plaza
825 Eighth Avenue
New York, New York 10019
Fax: (212) 474-3700
Attention: Robert A. Kindler, Esq.
C03730-COJ7-Q22E9-AQ~A52~~-AG~
13
(b) if to Issuer to:
America Online, Inc.
22000 AOL Way
Dulles, Virginia
Fax: (703) 265-1495
Attention: Paul T. Cappuccio, Esq.
with a copy to:
Simpson Thacher & Bartlett
425 Lexingt~m Avenue
New York, New York 10017
Fax: (212) 455-2502
Attention: Richard I. Beattie, Esq.
6.6 Interpretation. When a reference is made in this Agreement to Articles,
Sections, Exhibits or Schedules, such reference shall be to an Article or Section of or Exhibit or
Schedule to this Agreement unless otherwise indicated. The headings contained in this
Agreement are for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. Whenever the words "include," "includes" or "including" are
used in this Agreement, they shall be deemed to be followed by the words "without limitation."
6.7 Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and shall become
effective when one or more counterparts have been signed by each of the parties and delivered to
the other party, it being understood that both parties need not sign the same counterpart.
6.8 Entire Agreement: No Third Party Beneficiaries.
(a) This Agreement and the other agreements of the parties referred to
herein constitute the entire agreement and supersede all prior agreements and understandings,
both written and oral, among the parties with respect to the subject matter hereof.
(b) This Agreement shall be binding upon and inure solely to the
benefit of each party hereto, and nothing in this Agreement, express or implied, is intended to or
shall confer upon any other Person any right, benefit or remedy of any nature whatsoever under
or by reason of this Agreement.
6.9 Governing Law. This Agreement shall be governed and construed in
accordance with the laws of the State of Delaware (without giving effect to choice oflaw
principles thereof).
~8318G-8:07-C2269-~81A521X-AG2
14
6.10 Severability. If any term or other provision of this Agreement is invalid,
illegal or incapable of being enforced by any law or public policy, all other terms and provisions
of this Agreement shall nevertheless remain in full force and effect so long as the economic or
legal substance of the transactions contemplated hereby is not affected in any manner materially
adverse to any party. Upon such determination that any term or other provision is invalid, illegal
or incapable of being enforced, the parties hereto shall negotiate in good faith to modify this
Agreement so as to effect the original intent of the parties as closely as possible in an acceptable
manner in order that the transactions contemplated hereby are consummated as originally
contemplated to the greatest extent possible.
6.11 Assignment. Neither this Agreement nor any of the rights, interests or
obligations hereunder shall be assigned by any of the parties hereto, in whole or in part (whether
by operation oflaw or otherwise), without the prior written consent of the other party, and any
attempt to make any such assignment without such consent shall be null and void. Subject to the
preceding sentence, this Agreement will be binding upon, inure to the benefit of and be
enforceable by the parties and their respective successors and assigns.
6.12 Submission to Jurisdiction: Waivers. Each of Grantee and Issuer
irrevocably agrees that any legal action or proceeding with respect to this Agreement or for
recognition and enforcement of any judgment in respect hereof brought by the other party hereto
or its successors or assigns may be brought and determined in the Chancery or other Courts of the
State of Delaware, and each of Grantee and Issuer hereby irrevocably submits with regard to any
such action or proceeding for itself and in respect to its property, generally and unconditionally,
to the nonexclusive jurisdiction of the aforesaid courts. Each of Grantee and Issuer hereby
irrevocably waives, and agrees not to assert, by way of motion, as a defense, counterclaim or
otherwise, in any action or proceeding with respect to this Agreement, (a) any claim that it is not
personally subject to the jurisdiction of the above-named courts for any reason other than the
failure to lawfully serve process (b) that it or its property is exempt or immune from jurisdiction
of any such court or from any legal process commenced in such courts (whether through service
of notice, attachment prior to judgment, attachment in aid of execution of judgment, execution of
judgment or otherwise), (c) to the fullest extent permitted by applicable law, that (i) the suit,
action or proceeding in any such court is brought in an inconvenient forum, (ii) the venue of such
suit, action or proceeding is improper and (iii) this Agreement, or the subject matter hereof, may
not be enforced in or by such courts and (d) any right to a trial by jury.
6.13 Enforcement. The parties agree that irreparable damage would occur in
the event that any of the provisions of this Agreement were not performed in accordance with
their specific terms. It is accordingly agreed that the parties shall be entitled to specific
performance of the terms hereof, this being in addition to any other remedy to which they are
entitled at law or in equity.
6.14 Failure or Indulgence Not Waiver: Remedies Cumulative. No failure or
delay on the part of any party hereto in the exercise of any right hereunder will impair such right
or be construed tobe a waiver of, or acquiescence in, any breach of any representation, warranty
or agreement herein, nor will any single or partial exercise of any such right preclude other or
C03730-0007-02269-A01A521~-AGR
further exercise thereof or of any other right. All rights and remedies existing under this
Agreement are cumulative to, and not exclusive to, and not exclusive of, any rights or remedies
otherwise available.
[Remainder of this page intentionally left blank]
:J3122-0CC7-C2269-A01A52:~-AG?
15
IN WITNESS WHEREOF, Grantee and Issuer have caused this Agreement to be
duly executed as of the date first above written.
AM~
By: ---<-----
e: Stephen M. Case
Title: Chairman & Chief Executive Officer
TIME WARNER INC.
By:
Name:
Title:
1)1 \VIT~"ESS WHEREOF, Grantee and Issuer have caused this Agreement to be
duly executed as of the date first above \vritten.
A...\1ERICA ONLThTE, INC.
By:
?\ame:
Title:
TI:\1E WARKER INC.
By:
);ame:
Tj~le:
/)~ J1 fV1~'~
"',- :":" ...,0,..-. -~2~::";-_~,-: -::;--:..._~":.~
EXECUTION COPY
VOTING AGREEMENT, dated as of January 10,2000 (this "Agreement"),
among America Online, Inc., a Delaware corporation ("America Online"), and the stockholders
of Time Warner Inc., a Delaware corporation ("Time Warner"), that are parties hereto (each, a
"Stockholder" and, collectively, the "Stockholders").
WIT N E SSE T H:
WHEREAS, America Online and Time Warner are, concurrently with the
execution and delivery of this Agreement, entering into an Agreement and Plan of Merger, dated
as of the date hereof (the "Merier Agreement;" capitalized terms used without definition herein
having the meanings assigned to them in the Merger Agreement), pursuant to which Time
Warner will engage in a business combination in a merger of equals with America Online (the
"Time Warner Merger"); and
WHEREAS, as of the date hereof, each Stockholder is the record and beneficial
owner of the number of shares of common stock, par value $0.01 per share, of Time Warner
("Time Warner Common Stock"), as set forth on the signature page hereof beneath such
Stockholder's name (with respect to each Stockholder, such Stockholder's "Existing Shares"
and, together with any shares of Time Warner Common Stock or other voting capital stock of
Time Warner acquired after the date hereof, whether upon the exercise of warrants, options,
conversion of convertible securities or otherwise, such Stockholder's "Shares");
NOW THEREFORE, in consideration of the foregoing and the mutual
representations, warranties, covenants and agreements herein contained, and intending to be
legally bound hereby, the parties hereto agree as follows: .
ARTICLE I
VOTING
1.1 Agreement to Vote. Each Stockholder hereby agrees that it shall, and shall
cause the holder of record on any applicable record date to, from time to time, at the request of
America Online, at any meeting (whether annual or special and whether or not an adjourned or
postponed meeting) of stockholders of Time Warner, however called, or in connection with any
written consent of the holders of Time Warner Common Stock, (a) if a meeting is held, appear at
such meeting or otherwise cause the Shares to be co~nted as present thereat for purposes of
establishing a quorum, and (b) vote or consent (or cause to be voted or consented), in person or
by proxy, all Shares, and any other voting securities of Time Warner (whether acquired
heretofore or hereafter) that are beneficially owned or held of record by such Stockholder or as to
which such Stockholder has, directly or indirectly, the right to vote or direct the voting, in favor
of the approval and adoption of the Merger Agreement, the Time Warner Merger and any action
required in furtherance thereof.
003780-0007-02839-99BG134A-AGR
2
1.2 No Ownership Interest. Nothing contained in this Agreement shall be
deemed to vest in America Online any direct or indirect ownership or incidence of ownership of
or with respect to any Shares. All rights, ownership and economic benefits of and relating to the
Shares shall remain vested in and belong to the Stockholders, and America Online shall have no
authority to manage, direct, superintend, restrict, regulate, govern, or administer any of the
policies or operations of Time Warner or exercise any power or authority to direct the
Stockholders in the voting of any of the Shares, except as otherwise provided herein, or in the
performance of the Stockholders' duties or responsibilities as stockholders of Time Warner.
1.3 No Inconsistent Agreements. Each Stockholder hereby covenants and
agrees that, except as contemplated by this Agreement and the Merger Agreement, the
Stockholder (a) has not entered, and shall not enter at any time while this Agreement remains in
effect, into any voting agreement or voting trust with respect to the Shares and (b) has not
granted, and shall not grant at any time while this Agreement remains in effect, a proxy or power
of attorney with respect to the Shares, in either case, which is inconsistent with such
Stockholder's obligations pursuant to this Agreement.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF EACH STOCKHOLDER
Each Stockholder hereby, severally and not jointly, represents and warrants to
America Online as follows:
2.1 Authorization: Validity of Agreement: Necessary Action. Such
Stockholder has full power and authority to execute and deliver this Agreement, to perform such
Stockholder's obligations hereunder and to consummate the transactions contemplated hereby.
The execution, delivery and performance by such Stockholder of this Agreement and the
consummation by it of the transactions contemplated hereby have been duly and validly
authorized by such Stockholder and no other actions or proceedings on the part of such
Stockholder are necessary to authorize the execution and delivery by it of this Agreement and the
consummation by it of the transactions contemplated hereby. This Agreement has been duly
executed and delivered by such Stockholder, and, assuming this Agreement constitutes a valid
and binding obligation of America Online, constitutes a valid and binding obligation of such
Stockholder, enforceable against it in accordance with its terms.
2.2 Shares. Such Stockholder's Existing Shares are, and all of its Shares from
the date hereof through and on the Closing Date will be, owned beneficially and of record by
such Stockholder (subject to any dispositions of Shares permitted by Section 3.1 (a) hereof). As
of the date hereof, such Stockholder's Existing Shares constitute all of the shares of Time Warner
Common Stock owned of record or beneficially by such Stockholder. Such Stockholder has or
will have sole voting power, sole power of disposition, sole power to issue instructions with
respect to the matters set forth in Article I hereof, and sole power to agree to all of the matters set
003780-0007-02839-99BG134A-AGR
3
forth in this Agreement, in each case with respect to all of such Stockholder's Existing Shares
and with respect to all of such Stockholder's Shares on the Closing Date, with no limitations,
qualifications or restrictions on such rights, subject to applicable federal securities laws, the
terms of this Agreement and the terms of the Loan Agreement (as defined below in Section
3.1(a)).
ARTICLE III
OTHER COVENANTS
3.1 Further Agreements of Stockholders.
(a) Each Stockholder, severally and not jointly, hereby agrees, while
this Agreement is in effect, and except as contemplated hereby, not to sell, transfer, pledge,
encumber, assign or otherwise dispose of (collectively, a "Transfer") or enforce or permit the
execution of the provisions of any redemption, share purchase or sale, recapitalization or other
agreement with Time Warner or enter into any contract, option or other arrangement or
understanding with respect to the offer for sale, sale, transfer, pledge, encumbrance, assignment
or other disposition of, any of its Existing Shares, any Shares acquired after the date hereof, any
securities exercisable for or convertible into Time Warner Common Stock, any other capital
stock of Time Warner or any interest in any of the foregoing with any Person, except to a Person
who agrees in writing, in an instrument reasonably acceptable to America Online, to be bound by
this Agreement as a Stockholder and be subject to Section 1.1; provided, however, that the
Stockholders collectively may Transfer an aggregate of up to five percent of the Existing Shares
held of record by the Stockholders collectively as of the date hereof without compliance with this
Section 3.1 ( a); and provided further that the restrictions contained in this Section 3.1 ( a) do not
apply to Existing Shares now pledged by Stockholders to Merrill Lynch International Bank
Limited (the "Bank") to secure a revolving credit facility to R.E. Turner pursuant to that certain
Loan and Collateral Account Agreement dated April 4, 1996, as amended, between the Bank and
R.E. Turner (the "Loan Agreement").
(b) In the event of a stock dividend or distribution, or any change in
Time Warner Common Stock by reason of any stock dividend or distribution, or any change in
Time Warner Common Stock by reason of any stock dividend, split-up, recapitalization,
combination, exchange of shares or the like, the term "Shares" shall be deemed to refer to and
include the Shares as well as all such stock dividends and distributions and any securities into
which or for which any or all of the Shares may be changed or exchanged or which are received
in such transaction.
(c) Each Stockholder covenants and agrees with the other
Stockholders and for the benefit of Time Warner (which shall be a third party beneficiary of this
Section 3. I(c)) to comply with and perform all its obligations under this Agreement.
003780-0007-02839-99BG134A-AGR
4
ARTICLE IV
MISCELLANEOUS
4.1 Termination. This Agreement shall terminate and no party shall have any
rights or duties hereunder upon the earlier of (a) the Effective Time or (b) termination of the
Merger Agreement pursuant to Section 8.1 thereof. Nothing in this Section 4.1 shall relieve or
otherwise limit any party of liability for breach of this Agreement.
4.2 Further Assurances. From time to time, at the other party's request and
without further consideration, each party hereto shall execute and deliver such additional
documents and take all such further action as may be necessary or desirable to consummate the
transactions contemplated by this Agreement.
4.3 Notices. All notices and other communications hereunder shall be in
writing and shall be deemed duly given (a) on the date of delivery if delivered personally, or by
telecopy or telefacsimile, upon confirmation of receipt, (b) on the first Business Day following
the date of dispatch if delivered by a recognized next-day courier service, or (c) on the tenth
Business Day following the date of mailing if delivered by registered or certified mail, return
receipt requested, postage prepaid. All notices hereunder shall be delivered as set forth below, or
pursuant to such other instructions as may be designated in writing by the party to receive such
notice:
(a) if to America Online to:
22000 AOL Way
Dulles, Virginia 20166
Fax: (703) 265-1495
Attention: Paul T. Cappuccio,
Senior Vice President and General Counsel
with a copy to:
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, New York 10017
Fax: (212) 455-2502
Attention: Richard I. Beattie, Esq.
(b) if to a Stockholder, as provided on the signature page hereof.
4.4 Counteq)arts. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and shall become
003780-0007-02839-99BG134A-AGR
5
effective when one or more counterparts have been signed by each of the parties and delivered to
the other party, it being understood that both parties need not sign the same counterpart.
4.5 Governing Law. This Agreement shall be governed and construed in
accordance with the laws of the State of Delaware (without giving effect to choice oflaw
principles thereof).
4.6 Amendment. This Agreement may not be amended except by an
instrument in writing signed on behalf of each of the parties hereto.
4.7 Enforcement. The parties agree that irreparable damage would occur in
the event that any of the provisions of this Agreement were not performed in accordance with
their specific terms. It is accordingly agreed that the parties shall be entitled to specific
performance of the terms hereof, this being in addition to any other remedy to which they are
entitled at law or in equity.
[Remainder of this page intentionally left blank]
003780-0007-02839-99BG134A-AGR
IN WITNESS WHEREOF, America Online and each of the Stockholders have
caused this Agreement to be signed by their respective officers or other authorized person
thereunto duly authorized as of the date first written above.
~~
e: Stephen M. Case
Title: Chairman & Chief Executive Officer
R.E. Turner III
Number of Existing Shares: 95,843,076
Notices
Address: One CNN Center
Box 105366
Atlanta, GA 30348-5366
Fax: (404) 827-3000
Attention: R.E. Turner III
TURNER PARTNERS, L.P.
By:
Its General Partner
By:
Name:
Title:
Number of Existing Shares: 6,028,896
Notices
Address: One CNN Center
Box 105366
Atlanta, GA 30348-5366
Fax: (404) 827-3000
Attention: R.E. Turner III
6
IN \V!TNESS WHEREOF. America Online and each of the Stockholders have
caused this Agreement to be signed by their respective officers or other authorized person
thereunto duly authorized as of the date frrst written above.
A!vIERICA ONLDJE, INC.
By:
1'\umber of Existing Shares: 95,843,076
Notice~
Address: One ~ Center
Box 105366
Atlanta, GA 30348-5366
Fax: (404) 827-3000
Attention: R.E. Turner III
By:
By:
Number of Existing Shares: 6,028,896
Notices
Address: One CNN Center
Box 105366
Atlanta, GA 30348-5366
Fax: (404) 827-3000
Attention: R.E. Turner III
~C376v-~Ov7-02639-,~5G13~;-AGR
~
I
By:
Name:
Title:
Number of Existing Shares: 2,600,998
Notices
Address: One CNN Center
Box 105366
Atlanta., GA 30348-5366
Fax: (404) 827-3000
Attention: R.E. Turner m
)lumber of Existing Shares: 579,884
Notices
Address: One CNN Center
Box 105366
Atlanta, GA 30348-5366
Fa;"(: (404) 827-3000
Attention: R.E. Turner HI
003 i 3.:. - ~ O~; - C? 23 9 -:) 'j:W::'3 .u-';'::;P.
EXHIBIT D-1 TO THE
MERGER AGREEMENT
RESTATED CERTIFICATE OF INCORPORATION
OF
AOL TIME WARNER INC.
ARTICLE I
The name of the corporation (hereinafter called
the "Corporation") is AOL TIME WARNER INC.
ARTICLE II
The address of the corporation's registered office
in the State of Delaware is 1013 Centre Road, City of
Wilmington, County of New Castle. The name of the
Corporation's registered agent at such address is
corporation Service Company.,
ARTICLE III
The purpose of the Corporation is to engage in any
lawful act or activity for which corporations may be
organized under the General Corporation Law of the State of
Delaware.
ARTICLE IV
SECTION 1. The total number of shares of all
classes of stock which the Corporation shall have authority
to issue is 27.55 billion shares, consisting of (1) 750
million shares of Preferred Stock, par value $0.10 per share
("Preferred Stock"), (2) 25 billion shares of Common Stock,
par value $0.01 per share("Common Stock"), and
(3) 1.8 billion shares of Series Common Stock, par value
$0.01 per share ("Series Common Stock"). The number of
authorized shares of any of the Preferred Stock, the Common
Stock or the Series Common Stock may be increased or
decreased (but not below the number of shares thereof then
outstanding) by the affirmative vote of the holders of a
majority in voting power of the stock of the Corporation
entitled to vote thereon irrespective of the provisions of
Section 242(b) (2) of the General Corporation Law of the
State of Delaware (or any successor provision thereto), and
no vote of the holders of any of the Preferred Stock, the
Common Stock or the Series Common Stock voting separately as
a class shall be required therefor.
[NYCorp;987710.4:4675B:Ol/12/2000--1:06p]
2
SECTION 2. The Board of Directors is hereby
expressly authorized, by resolution or resolutions, to
provide, out of the unissued shares of Preferred Stock, for
series of Preferred Stock and, with respect to each such
series, to fix the number of shares constituting such series
and the designation of such series, the voting powers (if
any) of the shares of such series, and the preferences and
relative, participating, optional or other special rights,
if any, and any qualifications, limitations or restrictions
thereof, of the shares of such series. The powers,
preferences and relative, participating, optional and other
special rights of each series of Preferred Stock, and the
qualifications, limitations or restrictions thereof, if any,
may differ from those of any and all other series at any
time outstanding.
SECTION 3. The Board of Directors is hereby
expressly authorized, by resolution or resolutions, to
provide, out of the unissued shares of Series Common Stock,
for series of Series Common Stock and, with respect to each
such series, to fix the number of shares constituting such
series and the designation of such series, the voting powers
(if any) of the shares of such series, and the preferences
and relative, participating, optional or other special
rights, if any, and any qualifications, limitations or
restrictions thereof, of the shares of such series. The
powers, preferences and relative, participating, optional
and other special rights of each series of Series Common
Stock, and the qualifications, limitations or restrictions
thereof, if any, may differ from those of any and all other
series at any time outstanding.
SECTION 4. (a) Each holder of Common Stock, as
such, shall be entitled to one vote for each share of Common
Stock held of record by such holder on all matters on which
stockholders generally are entitled to vote; provided,
however, that, except as otherwise required by law, holders
of Common Stock, as such, shall not be entitled to vote on
any amendment to this Restated Certificate of Incorporation
(including any Certificate of Designation relating to any
series of Preferred Stock or Series Common Stock) that
relates solely to the terms of one or more outstanding
series of Preferred Stock or Series Common Stock if the
holders of such affected series are entitled, either
separately or together with the holders of one or more other
such series, to vote thereon pursuant to this Restated
Certificate of Incorporation (including any Certificate of
Designation relating to any series of Preferred Stock or
Series Common Stock) or pursuant to the General Corporation
Law of the State of Delaware.
[NYCorp~9B7710.4:467SB:Ol/12/2000--1:06p)
3
(b) Except as otherwise required by law, holders
of a series of Preferred Stock or Series Common Stock, as
such, shall be entitled only to such voting rights, if any,
as shall expressly be granted thereto by this Restated
Certificate of Incorporation (including any Certificate of
Designation relating to such series) .
(c) Subject to applicable law and the rights, if
any, of the holders of any outstanding series of Preferred
Stock or Series Cornmon Stock or any class or series of stock
having a preference over or the right to participate with
the Common Stock with respect to the payment of dividends,
dividends may be declared and paid on the Cornmon Stock at
such times and in such amounts as the Board of Directors in
its discretion shall determine.
(d) Upon the dissolution, liquidation or winding
up of the Corporation, subject to the rights, if any, of the
holders of any outstanding series of Preferred Stock or
Series Common Stock or any class or series of stock having a
preference over or the right to participate with the Common
Stock with respect to the distribution of assets of the
Corporation upon such dissolution, liquidation or winding up
of the corporation, the holders of the Common Stock, as
such, shall be entitled to receive the assets of the
Corporation available for distribution to its stockholders
ratably in proportion to the number of shares held by them.
SECTION s. Notwithstanding any other provision of
this Restated Certificate of Incorporation to the contrary,
but subject to the provisions of any resolution or
resolutions of the Board of Directors adopted pursuant to
this Article IV creating (i) any series of Preferred Stock,
(ii) any series of any other class or series of stock having
a preference over the Common Stock as to dividends or upon
liquidation or (iii) any series of Series Common Stock,
outstanding shares of Common Stock, Series Common Stock,
Preferred Stock or any other class or series of stock of the
Corporation shall always be subject to redemption by the
Corporation, by action of the Board of Directors, if in the
judgment of the Board of Directors such action should be
taken, pursuant to Section lSl(b) of the General Corporation
Law of the State of Delaware (or by any other applicable
provision of law), to the extent necessary to prevent the
loss or secure the reinstatement of any license or franchise
from any governmental agency held by the Corporation or any
Subsidiary to conduct any portion of the business of the
Corporation or such Subsidiary, which license or franchise
is conditioned upon some or all of the holders of the
Corporation's stock of any class or series possessing
prescribed qualifications. The terms and conditions of such
[NYCorp;9B77l0.4:4675B:Ol!l2!2000--l:06p]
4
redemption shall be as follows:
(a) the redemption price of the shares to be
redeemed pursuant to this Section 5 shall be equal to
the Fair Market Value of such shares;
(b) the redemption price of such shares may be
paid in cash, Redemption Securities or any combination
thereof;
(c) if less than all the shares held by
Disqualified Holders are to be redeemed, the shares to
be redeemed shall be selected in such manner as shall
be determined by the Board of Directors, which may
include selection first of the most recently purchased
shares thereof, selection by lot or selection in any
other manner determined by the Board of Directors;
(d) at least 30 days' written notice of the
Redemption Date shall be given to the record holders of
the shares selected to be redeemed (unless waived in
writing by such holder); provided that the Redemption
Date may be the date on which written notice shall be
given to record holders if the cash or Redemption
Securities necessary to effect the redemption shall
have been deposited in trust for the benefit of such
record holders and subject to immediate withdrawal by
them upon surrender of the stock certificates for their
shares to be redeemed; .
(e) from and after the Redemption Date, any and
all rights of whatever nature, which may be held by the
owners of shares selected for redemption (including
without limitation any rights to vote or participate in
dividends declared on stock of the same class or series
as such shares), shall cease and terminate and they
shall thenceforth be entitled only to receive the cash
or Redemption Securities payable upon redemption; and
(f) such other terms and conditions as the Board
shall determine.
For purposes of this Section 5:
(i) "Disqualified Holder" shall mean any holder
of shares of stock of the Corporation of any class or
series whose holding of such stock may result in the
loss of any license or franchise from any governmental
agency held by the Corporation or any Subsidiary to
conduct any portion of the business of the Corporation
or any Subsidiary.
(NYCorpI987710.4:4675B:Ol/12/2000--1:06p]
5
(ii) "Fair Market Value" of a share of the
Corporation's stock of any class or series shall mean
the average (unweighted) Closing Price for such a share
for each of the 45 most recent days on which shares of
stock of such class or series shall have been traded
preceding the day on which notice of redemption shall
be given pursuant to paragraph (d) of this Section 5;
provided, however, that if shares of stock of such
class or series are not traded on any securities
exchange or in the over-the-counter market, "Fair
Market Value" shall be determined by the Board of
Directors in good faith; and provided further, however,
that "Fair Market Value" as to any stockholder who
purchased his stock within 120 days of a Redemption
Date need not (unless otherwise determined by the Board
of Directors) exceed the purchase price paid by him.
"Closing Price" on any day means the reported last
sales price regular way or, in case no such sale takes
place, the average of the reported closing bid and
asked prices regular way on the New York Stock Exchange
Composite Tape, or, if stock of the class or series in
question is not quoted on such Composite Tape, on the
New York Stock Exchange, or, if such stock is not
listed on such exchange, on the principal United States
registered securities exchange on which such stock is
listed, or, if such stock is not listed on any such
exchange, the highest closing sales price or bid
quotation for such stock on The Nasdaq Stock Market or
any system then in use, or if no such'prices or
quotations are available, the fair market value on the
day in question as determined by the Board of Directors
in good faith.
(iii) "Redemption Date" shall mean the date fixed
by the Board of Directors for the redemption of any
shares of stock of the Corporation pursuant to this
Section 5.
(iv) "Redemption Securities" shall mean any debt
or equity securities of the Corporation, any Subsidiary
or any other corporation, or any combination thereof,
having such terms and cOl!ditions as shall be approved
by the Board of Directors and which, together with any
cash to be paid as part of the redemption price, in the
opinion of any nationally recognized investment banking
firm selected by the Board of Directors (which may be a
firm which provides other investment banking, brokerage
or other services to the Corporation), has a value, at
the time notice of redemption is given pursuant to
paragraph (d) of this Section 5, at least equal to the
Fair Market Value of the shares to be redeemed pursuant
[NYCorp;987710.4:4675B:Ol/12/2000--1:06p]
6
to this Section 5 (assuming, in the case of Redemption
Securities to be publicly traded, such Redemption
Securities were fully distributed and subject only to
normal trading activity) .
(v) "Subsidiary" shall mean any corporation more
than 50% of whose outstanding stock having ordinary
voting power in the election of directors is owned by
the Corporation, by a Subsidiary or by the Corporation
and one or more Subsidiaries.
ARTICLE V
SECTION 1. Except as otherwise fixed by or
pursuant to the provisions of Article IV of this Restated
Certificate of Incorporation relating to the rights of the
holders of any series of Preferred Stock or Series Common
Stock or any class or series of stock having a preference
over the Common Stock as to dividends or upon liquidation,
the number of the directors of the Corporation shall be
fixed from time to time by or pursuant to the By-laws of the
Corporation. The directors, other than those who may be
elected by the holders of any series of Preferred Stock or
Series Common Stock or any class or series of stock having a
preference over the Common Stock as to dividends or upon
liquidation pursuant to the terms of this Restated
Certificate of Incorporation or any resolution or
resolutions providing for the issue of such class or series
of stock adopted by the Board of Directors, shall be elected
by the stockholders entitled to vote thereon at each annual
meeting of stockholders and shall hold office until the next
annual meeting of stockholders and until each of their
successors shall have been elected and qualified. The term
of office of each director in office at the time this
Section 1 of Article V becomes effective shall expire at the
next annual meeting of stockholders held after the time this
Section 1 of Article V becomes effective. The election of
directors need not be by written ballot. No decrease in the
number of directors constituting the Board of Directors
shall shorten the term of any incumbent director.
SECTION 2. Advance notice of nominations for the
election of directors shall be given in the manner and to
the extent provided in the By-laws of the Corporation.
SECTION 3. Except as otherwise provided for or
fixed by or pursuant to the provisions of Article IV of this
Restated Certificate of Incorporation relating to the rights
of the holders of any series of Preferred Stock or Series
Common Stock or any class or series of stock having a
[NYCorp:987710.4:467SB:Ol/12/2000--1:06p]
7
preference over the Common Stock as to dividends or upon
liquidation, newly created directorships resulting from any
increase in the number of directors may be filled by the
Board of Directors, or as otherwise provided in the By-laws,
and any vacancies on the Board of Directors resulting from
death, resignation, removal or other cause shall only be
filled by the Board, and not by the stockholders, by the
affirmative vote of a majority of the remaining directors
then in office, even though less than a quorum of the Board
of Directors, or by a sole remaining director, or as
otherwise provided in the By-laws. Any director elected in
accordance with the preceding sentence of this Section 3
shall hold office until the next annual meeting of
stockholders and until such director's successor shall have
been elected and qualified.
ARTICLE VI
Subject to the rights of the holders of any series
of Preferred Stock or Series Common Stock or any class or
series of stock having a preference over the Common Stock as
to dividends or upon liquidation, any action required or
permitted to be taken by the stockholders of the Corporation
must be effected at a duly called annual or special meeting
of stockholders of the Corporation and may not be effected
by any consent in writing by such stockholders. Except as
otherwise required by law and subject to the rights of the
holders of any series of Preferred Stock or Series Common
Stock or any class or series of stock having a preference
over the Common Stock as to dividends or upon liquidation,
special meetings of stockholders of the Corporation may be
called only by the Board of Directors pursuant to a
resolution approved by a majority of the entire Board of
Directors or as otherwise provided in the By-laws of the
Corporation.
ARTICLE VII
In furtherance and not in limitation of the powers
conferred upon it by law, the Board of Directors is
expressly authorized to adopt, repeal, alter or amend the
By-laws of the Corporation by the vote of a majority of the
entire Board of Directors or such greater vote as shall be
specified in the By-laws of the Corporation. In addition to
any requirements of law and any other provision of this
Restated Certificate of Incorporation or any resolution or
resolutions of the Board of Directors adopted pursuant to
Article IV of this Restated Certificate of Incorporation
(and notwithstanding the fact that a lesser percentage may
[NYCorpI987710.4:4675B:Ol/12/2000--1:06p]
8
be specified by law, this Restated Certificate of
Incorporation or any such resolution or resolutions), the
affirmative vote of the holders of 80% or more of the
combined voting power of the then outstanding shares of
Voting Stock, voting together as a single class, shall be
required for stockholders to adopt, amend, alter or repeal
any provision of the By-laws.
ARTICLE VIII
In addition to any requirements of law and any
other provisions of this Restated Certificate of
Incorporation or any resolution or resolutions of the Board
of Directors adopted pursuant to Article IV of this Restated
Certificate of Incorporation (and notwithstanding the fact
that a lesser percentage may be specified by law, this
Restated Certificate of Incorporation or any such resolution
or resolutions), the affirmative vote of the holders of 80%
or more of the combined voting power of the then outstanding
shares of Voting Stock, voting together as a single class,
shall be required to amend, alter or repeal, or adopt any
provision inconsistent with, this Article VIII or Article
VII, or Section 5 of Article IV, of this Restated
Certificate of Incorporation. Subject to the foregoing
provisions of this Article VIII, the Corporation reserves
the right to amend, alter or repeal any provision contained
in this Restated Certificate of Incorporation, in the manner
now or hereafter prescribed by statute, and all rights
conferred upon stockholders herein are subject to this
reservation.
ARTICLE IX
SECTION 1. To the fullest extent that the General
Corporation Law of the State of Delaware or any other law of
the State of Delaware as it exists or as it may hereafter be
amended permits the limitation or elimination of the
liability of directors, no director of the Corporation shall
be liable to the Corporation or its stockholders for
monetary damages for breach of fiduciary duty as a director.
No amendment to or repeal of this Article IX shall apply to
or have any effect on the liability or alleged liability of
any director of the Corporation for or with respect to any
acts or omissions of such director occurring prior to such
amendment or repeal.
SECTION 2. In addition to any requirements of law
and any other provisions of this Restated Certificate of
Incorporation or any resolution or resolutions of the Board
[NYCorp/987710.4:4675B:Ol/12/2000--1:06p]
9
of Directors adopted pursuant to Article IV of this Restated
Certificate of Incorporation (and notwithstanding the fact
that a lesser percentage may be specified by law, this
Restated Certificate of Incorporation or any such resolution
or resolutions), the affirmative vote of the holders of 80%
or more of the combined voting power of the then outstanding
shares of Voting Stock, voting together as a single class,
shall be required to amend, alter or repeal, or adopt any
provision inconsistent with, this Article IX.
[NYCorp/9877l0.4:467SB:Ol/l2/2000--l:06p]
10
[The provisions of the certificates of
designations filed with respect to Time Warner's Series E
Convertible Preferred Stock, Series F Convertible Preferred
Stock, Series I Convertible Preferred Stock, Series J
Convertible Preferred Stock, Series LMC Common Stock and
Series LMCN-V Common Stock will be incorporated into AOL
Time Warner Inc.'s Restated Certificate of Incorporation
mutatis mutandis. It being understood that the conversion
ratio with respect to each such series of Convertible
Preferred Stock shall be appropriately adjusted prior to the
Effective Time of the Mergers by multiplying the number of
shares issuable upon conversion of each share of each such
series of Convertible Preferred Stock by the Exchange
Ratio.]
[NYCorp;98771D.4:4675B:Dl/12/2000--1:06p]
EXHIBIT D-2 TO THE
MERGER AGREEMENT
AOL TIME WARNER INC.
BY-LAWS
ARTICLE I
Offices
SECTION 1. Registered Office. The registered
office of AOL TIME WARNER INC. (hereinafter called the
Corporation) in the State of Delaware shall be at
1013 Centre Road, City of Wilmington, County of New Castle,
and the registered agent shall be Corporation Service
Company, or such other office or agent as the Board of
Directors of the Corporation (the "Board") shall from time
to time select.
SECTION 2. Other Offices. The Corporation may
also have an office or offices, and keep the books and
records of the Corporation, except as may otherwise be
required by law, at such other place or places, either
within or without the State of Delaware, as the Board may
from time to time determine or the business of the
Corporation may require.
ARTICLE II
Meetinas of Stockholders
SECTION 1. Place of Meeting. All meetings of the
stockholders of the Corporation (the "stockholders") shall
be held seriatim (sequentially) in New York City, NY, Los
Angeles, CA, Atlanta, GA and Dulles, VA.
SECTION 2. Annual Meetings. The annual meeting
of the stockholders for the election of directors and for
the transaction of such other business as may properly come
before the meeting shall be held on such date and at such
hour as shall from time to time be fixed by the Board. Any
previously scheduled annual meeting of the stockholders may
be postponed by action of the Board taken prior to the time
previously scheduled for such annual meeting of
stockholders.
SECTION 3. Special Meetings. Except as otherwise
required by law or the Restated Certificate of Incorporation
of the Corporation (the "Certificate") and subject to the
rights of the holders of any series of Preferred Stock or
Series Common Stock or any class or series of stock having a
preference over the Common Stock as to dividends or upon
dissolution, liquidation or winding up, special meetings of
[NYCorp;954809.8:4605B:O~/~O/2000--3:45p]
2
the stockholders for any purpose or purposes may be called
by the Chief Executive Officer or a majority of the entire
Board. Only such business as is specified in the notice of
any special meeting of the stockholders shall come before
such meeting.
SECTION 4. Notice of Meetings. Except as
otherwise provided by law, notice of each meeting of the
stockholders, whether annual or special, shall be given not
less than 10 nor more than 60 days before the date of the
meeting to each stockholder of record entitled to notice of
the meeting. If mailed, such notice shall be deemed given
when deposited in the United States mail, postage prepaid,
directed to the stockholder at such stockholder's address as
it appears on the records of the Corporation. Each such
notice shall state the place, date and hour of the meeting,
and, in the case of a special meeting, the purpose or
purposes for which the meeting is called. Notice of any
meeting of stockholders shall not be required to be given to
any stockholder who shall attend such meeting in person or
by proxy without protesting, prior to or at the commencement
of the meeting, the lack of proper notice to such
stockholder, or who shall waive notice thereof as provided
in Article X of these By-laws. Notice of adjournment of a
meeting of stockholders need not be given if the time and
place to which it is adjourned are announced at such
meeting, unless the adjournment is for more than 30 days or,
after adjournment, a new record date is fixed for the
adjourned meeting.
SECTION S. Ouorum. Except as otherwise provided
by law or by the Certificate, the holders of a majority of
the votes entitled to be cast by the stockholders entitled
to vote generally, present in person or by proxy, shall
constitute a quorum at any meeting of the stockholders;
provided, however, that in the case of any vote to be taken
by classes or series, the holders of a majority of the votes
entitled to be cast by the stockholders of a particular
class or series, present in person or by proxy, shall
constitute a quorum of such class.
SECTION 6. Adjournments. The chairman of the
meeting or the holders of a majority of the votes entitled
to be cast by the stockholders who are present in person or
by proxy may adjourn the meeting from time to time whether
or not a quorum is present. In the event that a quorum does
not exist with respect to any vote to be taken by a
particular class or series, the chairman of the meeting or
the holders of a majority of the votes entitled to be cast
by the stockholders of such class or series who are present
in person or by proxy may adjourn the meeting with respect
[NYCorp/954809.8:4605B:Ol/10/2000--3:4Sp]
3
to the vote{s) to be taken by such class or series. At any
such adjourned meeting at which a quorum may be present, any
business may be transacted which might have been transacted
at the meeting as originally called.
SECTION 7. Order of Business. At each meeting of
the stockholders, the Chairman of the Board or, in the
absence of the Chairman of the Board, the Chief Ex~cutive
Officer or, in the absence of the Chairman of the Board and
the Chief Executive Officer, such person as shall be
selected by the Board shall act as chairman of the meeting.
The order of business at each such meeting shall be as
determined by the chairman of the meeting. The chairman of
the meeting shall have the right and authority to prescribe
such rules, regulations and procedures and to do all such
acts and things as are necessary or desirable for the proper
conduct of the meeting, including, without limitation, the
establishment of procedures for the maintenance of order and
safety, limitations on the time allotted to questions or
comments on the affairs of the Corporation, restrictions on
entry to such meeting after the time prescribed for the
commencement thereof, and the opening and closing of the
voting polls.
At any annual meeting of stockholders, only such
business shall be conducted as shall have been brought
before the annual meeting (i) by or at the direction of the
chairman of the meeting or (ii) by any stockholder who is a
holder of record at the time of the giving' of the notice
provided for in this Section 7, who is entitled to vote at
the meeting and who complies with the procedures set forth
in this Section 7.
For business properly to be brought before an
annual meeting by a stockholder, the stockholder must have
given timely notice thereof in proper written form to the
Secretary of the Corporation (the "Secretary"). To be
timely, a stockholder's notice must be delivered to or
mailed and received at the principal executive offices of
the Corporation not less than 90 days nor more than 120 days
prior to the first anniversary of the date of the
immediately preceding annual ~eeting; provided, however,
that in the event that the date of the annual meeting is
more than 30 days earlier or more than 60 days later than
such anniversary date, notice by the stockholder to be
timely must be so delivered or received not earlier than the
120th day prior to such annual meeting and not later than
the close of business on the later of the 90th day prior to
such annual meeting or the 10th day following the day on
which public announcement of the date of such meeting is
first made. To be in proper written form, a stockholder's
[NYCorp,9S4809.8:460SB:Ol/10/2000--3:4Sp]
4
notice to the Secretary shall set forth in writing as to
each matter the stockholder proposes to bring before the
annual meeting: (i) a brief description of the business
desired to be brought before the annual meeting and the
reasons for conducting such business at the annual meeting;
(ii) the name and address, as they appear on the
Corporation's books, of the stockholder proposing such
business; (iii) the class and number of shares of the
Corporation which are beneficially owned by. the stockholder;
(iv) any material interest of the stockholder in such
business; and (v) if the stockholder intends to solicit
proxies in support of such stockholder's proposal, a
representation to that effect. The foregoing notice
requirements shall be deemed satisfied by a stockholder if
the stockholder has notified the Corporation of his or her
intention to present a proposal at an annual meeting and
such stockholder's proposal has been included in a proxy
statement that has been prepared by management of the
Corporation to solicit proxies for such annual meeting;
provided, however, that if such stockholder does not appear
or send a qualified representative to present such proposal
at such annual meeting, the Corporation need not present
such proposal for a vote at such meeting, notwithstanding
that proxies in respect of such vote may have been received
by the Corporation. Notwithstanding anything in the By-laws
to the contrary, no business shall be conducted at any
annual meeting except in accordance with the procedures set
forth in this Section 7. The chairman of ~n annual meeting
may refuse to permit any business to be brought before an
annual meeting which fails to comply with the foregoing
procedures or, in the case of a stockholder proposal, if the
stockholder solicits proxies in support of such
stockholder's proposal without having made the
representation required by clause (v) of the second
preceding sentence.
SECTION 8. List of Stockholders. It shall be the
duty of the Secretary or other officer who has charge of the
stock ledger to prepare and make, at least 10 days before
each meeting of the stockholders, a complete list of the
stockholders entitled to vote thereat, arranged in
alphabetical order, and showing the address of each
stockholder and the number of shares registered in such
stockholder's name. Such list shall be produced and kept
available at the times and places required by law.
SECTION 9. Voting. Except as otherwise provided
by law or by the Certificate, each stockholder of record of
any series of Preferred Stock or Series Common Stock shall
be entitled at each meeting of stockholders to such number
of votes, if any, for each share of such stock as may be
[NYCorp/954809.8:460SB:01/10/2000--3:4Sp]
5
fixed in the Certificate or in the resolution or resolutions
adopted by the Board providing for the issuance of such
stock, and each stockholder of record of Common Stock shall
be entitled at each meeting of stockholders to one vote for
each share of such stock, in each case, registered in such
stockholder's name on the books of the Corporation:
(1) on the date fixed pursuant to Section 6 of
Article VII of these By-laws as the record date for the
determination of stockholders entitled to notice of and
to vote at such meeting; or
(2) if no such record date shall have been so
fixed, then at the close of business on the day next
preceding the day on which notice of such meeting is
given, or, if notice is waived, at the close of
business on the day next preceding the day on which the
meeting is held.
Each stockholder entitled to vote at any meeting
of stockholders may authorize not in excess of three persons
to act for such stockholder by proxy. Any such proxy shall
be delivered to the secretary of such meeting at or prior to
the time designated for holding such meeting, but in any
event not later than the time designated in the order of
business for so delivering such proxies. No such proxy
shall be voted or acted upon after three years from its
date, unless the proxy provides for a longer period.
~
At each meeting of the stockholders, all corporate
actions to be taken by vote of the stockholders (except as
otherwise required by law and except as otherwise provided
in the Certificate or these By-laws) shall be authorized by
a majority of the votes cast by the stockholders entitled to
vote thereon who are present in person or represented by
proxy, and where a separate vote by class or series is
required, a majority of the votes cast by the stockholders
of such class or series who are present in person or
represented by proxy shall be the act of such class or
series.
Unless required by law or determined by the
chairman of the meeting to be advisable, the vote on any
matter, including the election of directors, need not be by
written ballot.
SECTION 10. Inspectors. The chairman of the
meeting shall appoint two or more inspectors to act at any
meeting of stockholders. Such inspectors shall perform such
duties as shall be required by law or specified by the
chairman of the meeting. Inspectors need not be
[NYCorp;9S4B09.B:460SB:Ol/10/2000--3:4Sp]
6
stockholders. No director or nominee for the office of
director shall be appointed such inspector.
SECTION 11. Public Announcements. For the
purpose of Section 7 of this Article II and Section 3 of
Article III, "public announcement" shall mean disclosure
(i) in a press release reported by the Dow Jones News
Service, Reuters Information Service or any similar or
successor news wire service or (ii) in a communication
distributed generally to stockholders and in a document
publicly filed by the Corporation with the Securities and
Exchange Commission pursuant to Sections 13, 14 or 15(d} of
the Securities Exchange Act of 1934 or any successor
provisions thereto.
ARTICLE III
Board of Directors
SECTION 1. General Powers. The business and
affairs of the Corporation shall be managed by or under the
direction of the Board, which may exercise all such powers
of the Corporation and do all such lawful acts and things as
are not by law or by the Certificate directed or required to
be exercised or done by the stockholders.
SECTION 2. Number. Oualification and Election.
Except as otherwise fixed by or pursuant to the provisions
of Article IV of the Certificate relating to the rights of
the holders of any series of Preferred Stock or Series
Common Stock or any class or series of stock having
preference over the Common Stock as to dividends or upon
dissolution, liquidation or winding up, subject to
Section 15 of this Article III, the number of directors
constituting the Whole Board shall be determined from time
to time by the Board and shall initially be 16. The term
"Whole Board" shall mean the total number of authorized
directors, whether or not there exist any vacancies or
unfilled previously authorized directorships.
The directors, other than those who may be elected
by the holders of shares of any series of Preferred Stock or
Series Common Stock or any class or series of stock having a
preference over the Common Stock of the Corporation as to
dividends or upon dissolution, liquidation or winding up
pursuant to the terms of Article IV of the Certificate or
any resolution or resolutions providing for the issuance of
such stock adopted by the Board, shall be elected by the
stockholders entitled to vote thereon at each annual meeting
of the stockholders, and shall hold office until the next
[NYCorp,954809.8:460SB:Ol!lO!2000--3:4Sp]
7
annual meeting of stockholders and until each of their
successors shall have been duly elected and qualified.
Each director shall be at least 21 years of age.
Directors need not be stockholders of the Corporation.
In any election of directors, the persons
receiving a plurality of the votes cast, up to the number of
directors to be elected in such election, shall be deemed
elected.
A majority of the members of the Board shall be
persons determined by the Board to be eligible to be
classified as independent directors. In its determination
of a director's eligibility to be classified as an
independent director pursuant to this Section 2, the Board
shall consider, among such other factors as it may in any
case deem relevant, that the director: (i) has not been
employed by the Corporation as an executive officer within
the past three years; (ii) is not a paid adviser or
consultant to the Corporation and derives no financial
benefit from any entity as a result of advice or consultancy
provided to the Corporation by such entity; (iii) is not an
executive officer, director or significant stockholder of a
significant customer or supplier of the Corporation;
(iv) has no personal services contract with the Corporation;
(v) is not an executive officer or director of a tax-exempt
entity receiving a significant part of its annual
contributions from the Corporation; (vi) is not a member of
the immediate family of any director who is not considered
an independent director; and (vii) is free of any other
relationship that would interfere with the exercise of
independent judgment by such director.
SECTION 3. Notification of Nominations. Subject
to the rights of the holders of any series of Preferred
Stock or Series Common Stock or any class or series of stock
having a preference over the Common Stock as to dividends or
upon dissolution, liquidation or winding up, nominations for
the election of directors may be made by the Board or by any
stockholder who is a stockholder of record at the time of
giving of the notice of nomination provided for in this
Section 3 and who is entitled to vote for the election of
directors. Any stockholder of record entitled to vote for
the election of directors at a meeting may nominate persons
for election as directors only if timely written notice of
such stockholder's intent to make such nomination is given,
either by personal delivery or by United States mail,
postage prepaid, to the Secretary. To be timely, a
stockholder's notice must be delivered to or mailed and
received at the principal executive offices of the
[NYCOrpI9S4809.8:460SB:Ol/10/2000--3:4Sp]
8
Corporation (i) with respect to an election to be held at an
annual meeting of stockholders, not less than 90 nor more
than 120 days prior to the first anniversary of the date of
the immediately preceding annual meeting; provided, however,
that in the event that the date of the annual meeting is
more than 30 days earlier or more than 60 days later than
such anniversary date, notice by the stockholder to be
timely must be so delivered or received not earlier than the
120th day prior to such annual meeting and not later than
the close of business on the later of the 90th day prior to
such annual meeting or the 10th day following the day on
which public announcement of the date of such meeting is
first made and (ii) with respect to an election to be held
at a special meeting of stockholders for the election of
directors, not earlier than the 90th day prior to such
special meeting and not later than the close of business on
the later of the 60th day prior to such special meeting or
the 10th day following the day on which public announcement
is first made of the date of the special meeting and of the
nominees to be elected at such meeting. Each such notice
shall set forth: (a) the name and address of the
stockholder who intends to make the nomination and of the
person or persons to be nominated; (b) a representation that
the stockholder is a holder of record of stock of the
Corporation entitled to vote at such meeting and intends to
appear in person or by proxy at the meeting to nominate the
person or persons specified in the notice; (c) a description
of all arrangements or understandings between the
stockholder and each nominee and any other person or persons
(naming such person or persons) pursuant to which the
nomination or nominations are to be made by the stockholder;
(d) such other information regarding each nominee proposed
by such stockholder as would have been required to be
included in a proxy statement filed pursuant to the proxy
rules of the Securities and Exchange Commission had each
nominee been nominated, or intended to be nominated, by the
Board; (e) the consent of each nominee to serve as a
director of the Corporation if so elected; and (f) if the
stockholder intends to solicit proxies in support of such
stockholder's nominee(s), a representation to that effect.
The chairman of the meeting may refuse to acknowledge the
nomination of any person not made in compliance with the
foregoing procedure or if the stockholder solicits proxies
in favor of such stockholder's nominee(s) without having
made the representation required by the immediately
preceding sentence. Only such persons who are nominated in
accordance with the procedures set forth in this Section 3
shall be eligible to serve as directors of the Corporation.
Notwithstanding anything in the immediately
preceding paragraph of this Section 3 to the contrary, in
[NYCorp,954809.8:4605B:Ol/lO/2000--3:45p]
9
the event that the number of directors to be elected to the
Board of Directors of the Corporation at an annual meeting
of stockholders is increased and there is no public
announcement naming all of the nominees for directors or
specifying the size of the increased Board of Directors made
by the Corporation at least 90 days prior to the first
anniversary of the date of the immediately preceding annual
meeting, a stockholder's notice required by this Section 3
shall also be considered timely, but only with respect to
nominees for any new positions created by such increase, if
it shall be delivered to or mailed to and received by the
secretary at the principal executive offices of the
Corporation not later than the close of business on the
10th day following the day on which such public announcement
is first made by the Corporation.
SECTION 4. Ouorum and Manner of Acting. Except
as otherwise provided by law, the Certificate or these By-
laws, a majority of the Whole Board shall constitute a
quorum for the transaction of business at any meeting of the
Board, and, except as so provided, the vote of a majority of
the directors present at any meeting at which a quorum is
present shall be the act of the Board. The chairman of the
meeting or a majority of the directors present may adjourn
the meeting to another time and place whether or not a
quorum is present. At any adjourned meeting at which a
quorum is present, any business may be transacted which
might have been transacted at the meeting as originally
called.
SECTION s. Place of Meeting. The Board may hold
its meetings at such place or places within or without the
State of Delaware as the Board may from time to time
determine or as shall be specified or fixed in the
respective notices or waivers of notice thereof.
SECTION 6. Regular Meetings. No fewer than six
regular meetings per year of the Board shall be held at such
times as the Board shall from time to time by resolution
determine, such meetings to be held seriatim (sequentially)
in New York City and Northern Virginia. If any day fixed
for a regular meeting shall be a legal holiday under the
laws of the place where the m~eting is to be held, the
meeting which would otherwise be held on that day shall be
held at the same hour on the next succeeding business day.
SECTION 7. Special Meetings. Special meetings of
the Board shall be held whenever called by the Chairman of
the Board, the Chief Executive Officer or by a majority of
the directors, and shall be held at such place, on such date
and at such time as he or they, as applicable, shall fix.
[NYCOrpl954809.8:4605B:Ol!lO!2000--3:45p]
10
SECTION 8. Notice of Meetings. Notice of regular
meetings of the Board or of any adjourned meeting thereof
need not be given. Notice of each special meeting of the
Board shall be given by overnight delivery service or mailed
to each director, in either case addressed to such director
at such director's residence or usual place of business, at
least two days before the day on which the meeting is to be
held or shall be sent to such director at such place by
telecopy or by electronic transmission or be given
personally or by telephone, not later than the day before
the meeting is to be held, but notice need not be given to
any director who shall, either before or after the meeting,
submit a signed waiver of such notice or who shall attend
such meeting without protesting, prior to or at its
commencement, the lack of notice to such director. Every
such notice shall state the time and place but need not
state the purpose of the meeting.
SECTION 9. Rules and Regulations. The Board may
adopt such rules and regulations not inconsistent with the
provisions of law, the Certificate or these By-laws for the
conduct of its meetings and management of the affairs of the
Corporation as the Board may deem proper.
SECTION 10. particination in Meeting by Means of
Communications Equipment. Anyone or more members of the
Board or any committee thereof may participate in any
meeting of the Board or of any such commit~ee by means of
conference telephone or similar communications equipment by
means of which all persons participating in the meeting can
hear each other or as otherwise permitted by law, and such
participation in a meeting shall constitute presence in
person at such meeting.
SECTION 11. Action Without Meeting. Any action
required or permitted to be taken at any meeting of the
Board or any committee thereof may be taken without a
meeting if all of the members of the Board or of any such
committee consent thereto in writing or as otherwise
permitted by law and, if required by law, the writing or
writings are filed with the minutes or proceedings of the
Board or of such committee.
SECTION 12. Resignations. Any director of the
Corporation may at any time resign by giving written notice
to the Board, the Chairman of the Board, the Chief Executive
Officer or the Secretary. Such resignation shall take
effect at the time specified therein or, if the time be not
specified therein, upon receipt thereof; and, unless
otherwise specified therein, the acceptance of such
resignation shall not be necessary to make it effective.
[NYCOrp,9S4B09.B:460SB:01/10/2000__3:4Sp]
11
SECTION 13. Vacancies. Subject to the rights of
the holders of any series of Preferred Stock or Series
Common Stock or any class or series of stock having a
preference over the Common Stock of the Corporation as to
dividends or upon dissolution, liquidation or winding up any
vacancies on the Board resulting from death, resignation,
removal or other cause shall only be filled by the Board,
and not by the stockholders, by the affirmative vote of a
majority of the remaining directors then in office, even
though less than a quorum of the Board, or by a sole
remaining director, and newly created directorships
resulting from any increase in the number of directors,
which increase shall be subject to Section 15 of this
Article III, shall only be filled by the Board, or if not so
filled, by the stockholders at the next annual meeting
thereof or at a special meeting called for that purpose in
accordance with Section 3 of Article II of these By-laws.
Any director elected in accordance with the preceding
sentence of this Section 13 shall hold office until the next
annual meeting of stockholders and until such director's
successor shall have been elected and qualified.
SECTION 14. Compensation. Each director, in
consideration of such person serving as a director, shall be
entitled to receive from the Corporation such amount per
annum and such fees (payable in cash or stock) for
attendance at meetings of the Board or of committees of the
Board, or both, as the Board shall from time to time
determine. In addition, each director shail be entitled to
receive from the Corporation reimbursement for the
reasonable expenses incurred by such person in connection
with the performance of such person's duties as a director.
Nothing contained in this Section shall preclude any
director from serving the Corporation or any of its
subsidiaries in any other capacity and receiving proper
compensation therefor.
SECTION 15. Certain Modifications. Notwith-
standing anything to the contrary contained in these
By-laws, the following actions taken either directly or
indirectly by the Board shall require the affirmative vote
of not less than 75% of the Whole Board: (i) any change in
the size of the Board; and (ii) any proposal to amend these
By-laws to be submitted to the stockholders of the
Corporation by the Board.
[NYCorpI9S4809.8:460SB:Ol/10/2000--3:4Sp]
12
ARTICLE IV
Committees of the Board of Directors
SECTION 1. Establishment of Committees of the
Board of Directors: Election of Members of Committees of the
Board of Directors: Functions of Committees of the Board of
Directors.
(a) The Corporation shall have four standing
committees: the nominating and governance committee, the
audit and finance committee, the compensation committee and
the values and human development committee.
(b) The nominating and governance committee shall
have the following powers and authority: (i) evaluating and
recommending director candidates to the Board,
(ii) assessing Board performance not less frequently than
every three years, (iii) recommending director compensation
and benefits policy for the Corporation, (iv) reviewing
individual director performance as issues arise,
(v) evaluating and recommending candidates for Chief
Executive Officer to the Board and (vi) periodically
reviewing the Corporation's corporate governance profile.
None of the members of the nominating and governance
committee shall be an officer or full-time employee of the
Corporation or of any subsidiary or affiliate of the
Corporation.
(c) The audit and finance committee shall have
the following powers and authority: (i) employing
independent public accountants to audit the books of
account, accounting procedures and financial statements of
the Corporation and to perform such other duties from time
to time as the audit committee may prescribe, (ii) receiving
the reports and comments of the Corporation's internal
auditors and of the independent public accountants employed
by the committee and taking such action with respect thereto
as it deems appropriate, (iii) requesting the Corporation's
consolidated subsidiaries and affiliated companies to employ
independent public accountants to audit their respective
books of account, accounting procedures and financial
statements, (iv) requesting the independent public
accountants to furnish to the compensation committee the
certifications required under any present or future stock
option, incentive compensation or employee benefit plan of
the Corporation, (v) reviewing the adequacy of internal
financial controls, (vi) approving the accounting principles
employed in financial reporting, (vii) approving the
appointment or removal of the Corporation's general auditor,
(viii) reviewing the accounting principles employed in
[NYCorp,954B09.B:4605B:Ol/10/2000--3:45p]
13
financial reporting, (ix) reviewing and making
recommendations to the Board concerning the financial
structure and financial condition of the Company and its
subsidiaries, including annual budgets, long-term financial
plans, corporate borrowings, investments, capital
expenditures, long-term commitments and the issuance of
stock and (x) approving such matters that are consistent
with the general financial policies and direction from time
to time determined by the Board. None of the members of the
audit and finance committee shall be an officer or full-time
employee of the Corporation or of any subsidiary or
affiliate of the Corporation.
(d) The compensation committee shall have the
following powers and authority: (il determining and fixing
the compensation for all senior officers of the Corporation
and its subsidiaries and divisions that the compensation
committee shall from time to time consider appropriate, as
well as all employees of the Corporation compensated at a
rate in excess of such amount per annum as may be fixed or
determined from time to time by the Board, (ii) performing
the duties of the committees of the Board provided for in
any present or future stock option, incentive compensation
or employee benefit plan of the Corporation and
(iii) reviewing the operations of and policies pertaining to
any present or future stock option, incentive compensation
or employee benefit plan of the Corporation that the
compensation committee shall from time to time consider
appropriate. None of the members of the compensation
committee shall be an officer or full-time employee of the
Corporation or of any subsidiary or affiliate of the
Corporation.
(e) The values and human development committee
shall have the following powers and authority:
(i) developing and articulating the Corporation's core
values, commitments and social responsibilities, (ii)
developing strategies for ensuring the Corporation's
involvement in the communities in which it does business;
(iii) establishing a strategy for developing its human
resources and leadership for the future; and (iv) finding
practical ways to increase workforce diversity at all levels
and to evaluate the Corporation's performance in advancing
the goal of greater workforce diversity.
(f) Any modification to the powers and authority
of any committee shall require the affirmative vote of not
less than 75% of the Whole Board.
(g) In addition, the Board may, with the
affirmative vote of not less than 75% of the Whole Board and
[NYCorp,9S4809.8:460SB:Ol!lO!2000--3:4Sp]
14
in accordance with and subject to the General Corporation
Law of the State of Delaware, from time to time establish
additional committees of the Board to exercise such powers
and authorities of the Board, and to perform such other
functions, as the Board may from time to time determine.
(h) The Board may remove a director from a
committee, change the size of any committee or terminate any
committee or change the chairmanship of a committee only
with the affirmative vote of not less than 75% of the Whole
Board.
(i) The Board may designate one or more directors
as new members of any committee to fill any vacancy on a
committee and to fill a vacant chairmanship of a committee,
occurring as a result of a member or chairman leaving the
committee, whether through death, resignation, removal or
otherwise; ?rovided that any such designation or any
designation by the Board of a director as an alternate
member of any committee in accordance with Section 141(c) (2)
of the Delaware General Corporation Law (the "DGCL") may
only be made with the affirmative vote of not less than
75% of the Whole Board.
SECTION 2. Procedure: Meetings: Ouorum. Regular
meetings of committees of the Board, of which no notice
shall be necessary, may be held at such times and places as
shall be fixed by resolution adopted by a majority of the
authorized members thereof. Special meetings of any
committee of the Board shall be called at the request of any
member thereof. Notice of each special meeting of any
committee of the Board shall be sent by overnight delivery
service, or mailed to each member thereof, in either case
addressed to such member at such member's residence or usual
place of business, at least two days before the day on which
the meeting is to be held or shall be sent to such member at
such place by telecopy or by electronic transmission or be
given personally or by telephone, not later than the day
before the meeting is to be held, but notice need not be
given to any member who shall, either before or after the
meeting, submit a signed waiver of such notice or who shall
attend such meeting without pLotesting, prior to or at its
commencement, the lack of such notice to such member. Any
special meeting of any committee of the Board shall be a
legal meeting without any notice thereof having been given,
if all the members thereof shall be present thereat and no
member shall protest the lack of notice to such member.
Notice of any adjourned meeting of any committee of the
Board need not be given. Any committee of the Board may
adopt such rules and regulations not inconsistent with the
provisions of law, the Certificate or these By-laws for the
[NYCorpl9S4S09.S:460SB:Ol/lO/2000__3:4Spj
15
conduct of its meetings as such committee of the Board may
deem proper. A majority of the authorized members of any
committee of the Board shall constitute a quorum for the
transaction of business at any meeting, and the vote of a
majority of the members thereof present at any meeting at
which a quorum is present shall be the act of such
committee. Each committee of the Board shall keep written
minutes of its proceedings and shall report on such
proceedings to the Board.
ARTICLE V
Officers
SECTION 1. Number: Term of Office. The officers
of the Corporation shall be elected by the Board and shall
consist of: a Chairman of the Board, a Chief Executive
Officer, two Chief Operating Officers, a Chief Financial
Officer and one or more Vice Chairmen and Vice Presidents
(including, without limitation, Assistant, Executive, Senior
and Group Vice Presidents) and a Treasurer, Secretary and
Controller and such other officers or agents with such
titles and such duties as the Board may from time to time
determine, each to have such authority, functions or duties
as in these By-laws provided or as the Board may from time
to time determine, and each to hold office for such term as
may be prescribed by the Board and until such person's
successor shall have been chosen and shall' qualify, or until
such person's death or resignation, or until such person's
removal in the manner hereinafter provided. The Chairman of
the Board, the Chief Executive Officer and the Vice Chairmen
shall be elected from among the directors. One person may
hold the offices and perform the duties of any two or more
of said officers; provided, however, that no officer shall
execute, acknowledge or verify any instrument in more than
one capacity if such instrument is required by law, the
Certificate or these By-laws to be executed, acknowledged or
verified by two or more officers. The Board may require any
officer or agent to give security for the faithful
performance of such person's duties.
SECTION 2. Removal. Subject to Section 14 of
this Article V, any officer may be removed, either with or
without cause, by the Board at any meeting thereof called
for the purpose or, except in the case of any officer
elected by the Board or as provided in Section 4 of this
Article V, by any superior officer upon whom such power may
be conferred by the Board.
[NYCorp,9S4809.8:460SB:Ol/10/2000--3:4Sp]
16
SECTION 3. Resignation. Any officer may resign
at any time by giving notice to the Board, the Chief
Executive Officer or the Sec~etary. Any such resignation
shall take effect at the date of receipt of such notice or
at any later date specified therein; and, unless otherwise
specified therein, the acceptance of such resignation shall
not be necessary to make it effective.
SECTION 4. Chairman of the Board. The Chairman
of the Board shall be an officer of the Corporation, subject
to the control of the Board, and shall report directly to
the Board. The Chairman of the Board shall have supervisory
responsibility over the functional areas of global public
policy (particularly with respect to the Internet),
technology policy and future innovation, venture-type
investments and philanthropy, operating and discharging
those responsibilities with the assistance of the following
officers reporting directly to the Chairman of the Board:
Kenneth Novack, Kenneth Lerer, George Vradenburg and William
Raduchel and their successors (such officers to be appointed
and removed only with the Chairman of the Board's approval
or upon action of the Board), shall play an active role in
helping to build and lead the Corporation, working closely
with the Chief Executive Officer to set the Corporation's
strategy, and shall be the co-spokesman for the Corporation
along with the Chief Executive Officer.
SECTION 5. Chief Executive Officer. The Chief
Executive Officer shall have general supe~ision and
direction of the business and affairs of the Corporation,
subject to the control of the Board and the provisions of
Section 4 of this Article V, and shall report directly to
the Board. The Chief Executive Officer shall, if present
and in the absence of the Chairman of the Board, preside at
meetings of the stockholders and of the Board.
SECTION 6. Chief Operating Officers. Each Chief
Operating Officer shall perform such senior duties in
connection with the operations of the Corporation as the
Board or the Chief Executive Officer shall from time to time
determine, and shall report directly to the Chief Executive
Officer. Each Chief Operating Officer, shall, when
requested, counsel with and advise the other officers of the
Corporation and shall perform such other duties as may be
agreed with the Chief Executive Officer or as the Board may
from time to time determine.
SECTION 7. Vice Chairman. The Vice Chairman
shall, when requested, counsel with and advise the other
officers of the Corporation and shall perform such other
[NYCorp/954809.8:460SB:Ol!lO!2000--3:4Sp)
17
duties ashe may agree with the Chief Executive Officer or
as the Board may from time to time determine.
SECTION 8. Chief Financial Officer. The Chief
Financial Officer shall perform all the powers and duties of
the office of the chief financial officer and in general
have overall supervision of the financial operations of the
Corporation. The Chief Financial Officer shall, when
requested, counsel with and advise the other officers of the
Corporation and shall perform such other duties as he may
agree with the Chief Executive Officer or as the Board may
from time to time determine. The Chief Financial Officer
shall report directly to the Chief Executive Officer.
SECTION 9. Vice-Presidents. Any Vice-President
shall have such powers and duties as shall be prescribed by
his superior officer or the Board. A Vice President shall,
when requested, counsel with and advise the other officers
of the Corporation and shall perform such other duties as he
may agree with the Chief Executive Officer or as the Board
may from time to time determine. A Vice-President need not
be an officer of the Corporation.
SECTION 10. Treasurer. The Treasurer, if one
shall have been elected, shall supervise and be responsible
for all the funds and securities of the Corporation; the
deposit of all moneys and other valuables to the credit of
the Corporation in depositories of the Co~oration;
borrowings and compliance with the provisions of all
indentures, agreements and instruments governing such
borrowings to which the Corporation is a party; the
disbursement of funds of the Corporation and the investment
of its funds; and in general shall perform all of the duties
incident to the office of the Treasurer. The Treasurer
shall, when requested, counsel with and advise the other
officers of the Corporation and shall perform such other
duties as he may agree with the Chief Executive Officer or
as the Board may from time to time determine.
SECTION 11. Controller. The Controller shall be
the chief accounting officer of the Corporation. The
Controller shall, when requested, counsel with and advise
the other officers of the COr?oration and shall perform such
other duties as he may agree with the Chief Executive
Officer or the Chief Financial Officer or as the Board may
from time to time determine.
SECTION 12. Secretary. It shall be the duty of
the Secretary to act as secretary at all meetings of the
Board, of the committees of the Board and of the
stockholders and to record the proceedings of such meetings
(NYCorp,9S4809.8:460SB:Ol/10/2000--3:4Sp]
18
in a book or books to be kept for that purpose; the
Secretary shall see that all notices required to be given by
the Corporation are duly given and served; the Secretary
shall be custodian of the seal of the Corporation and shall
affix the seal or cause it to be affixed to all certificates
of stock of the Corporation (unless the seal of the
Corporation on such certificates shall be a facsimile, as
hereinafter provided) and to all documents, the execution of
which on behalf of the Corporation under its seal is duly
authorized in accordance with the provisions of these By-
laws; the Secretary shall have charge of the books, records
and papers of the Corporation and shall see that the
reports, statements and other documents required by law to
be kept and filed are properly kept and filed; and in
general shall perform all of the duties incident to the
office of Secretary. The Secretary shall, when requested,
counsel with and advise the other officers of the
Corporation and shall perform such other duties as he may
agree with the Chief Executive Officer or as the Board may
from time to time determine.
SECTION 13. Assistant Treasurers and Assistant
Secretaries. Any Assistant Treasurers and Assistant
Secretaries shall perform such duties as shall be assigned
to them by the Board. Any Assistant Treasurer or Assistant
Secretary shall perform such duties as shall be assigned to
them by the Treasurer or Secretary, respectively, or by the
Chief Executive Officer.
SECTION 14. Certain Actions. Notwithstanding
anything to the contrary contained in these By-laws, until
December 31, 2003: (i) the removal of Gerald M. Levin from
the office of Chief Executive Officer, any modification to
the provisions of his employment contract which provide for
his term of office or any modification to the role, duties,
authority or reporting line of the Chief Executive Officer
and (ii) the removal of Stephen M. Case from the office of
Chairman of the Board, any modification to the role, duties,
authority or reporting line of the Chairman of the Board,
each shall require the affirmative vote of 75% of the Whole
Board. From and after the end of the period set forth in
the preceding sentence, any of the actions set forth in the
immediately preceding sentence may be taken upon the
affirmative vote of the number of directors which shall
constitute, under the terms of these By-laws, the action of
the Board.
[NYCorp/9S4809.8:460SB:Ol!lO!2000--3:45p]
19
ARTICLE VI
Indemnification
SECTION 1. Right to Indemnification. The
Corporation, to the fullest extent permitted or required by
Delaware General Corporation Law or other applicable law, as
the same exists or may hereafter be amended (but, in the
case of any such amendment and unless applicable law
otherwise requires, only to the extent that such amendment
permits the Corporation to provide broader indemnification
rights than such law permitted the Corporation to provide
prior to such amendment), shall indemnify and hold harmless
any person who is or was a director or officer of the
Corporation and who is or was involved in any manner
(including, without limitation, as a party or a witness) or
is threatened to be made so involved in any threatened,
pending or completed investigation, claim, action, suit or
proceeding, whether civil, criminal, administrative or
investigative (including, without limitation, any action,
suit or proceedings by or in the right of the Corporation to
procure a judgment in its favor) (a "Proceeding") by reason
of the fact that such person is or was a director, officer,
employee or agent of the Corporation, or is or was serving
at the request of the Corporation as a director, officer,
employee or agent of another corporation, partnership, joint
venture, trust or other enterprise (including, without
limitation, any employee benefit plan) (a "Covered Entity")
against all expenses (including attorneys' fees), judgments,
fines and amounts paid in settlement actually and reasonably
incurred by such person in connection with such Proceeding;
provided, however, that the foregoing shall not apply to a
director or officer of the Corporation with respect to a
Proceeding that was commenced by such director or officer
unless the proceeding was commenced after a Change in
Control (as hereinafter defined in Section 4(e) of this
Article). Any director or officer of the Corporation
entitled to indemnification as provided in this Section 1 is
hereinafter called an "Indemnitee". Any right of an
Indemnitee to indemnification shall be a contract right and
shall include the right to receive, prior to the conclusion
of any Proceeding, payment of any expenses incurred by the
Indemnitee in connection with such proceeding, consistent
with the provisions of applicable law as then in effect and
the other provisions of this Article.
SECTION 2. Insurance. Contracts and Funding. The
Corporation may purchase and maintain insurance to protect
itself and any director, officer, employee or agent of the
Corporation or of any Covered Entity against any expenses,
judgments, fines and amounts paid in settlement as specified
[NYCorp,954809.8:4605B:Ol!lO!2000--3:45p]
20
in Section 1 of this Article or incurred by any such
director, officer, employee or agent in connection with any
Proceeding referred to in Section 1 of this Article, whether
or not the Corporation would have the power to indemnify
such person against such expense, liability or loss under
the DGCL. The Corporation may enter into contracts with any
director, officer, employee or agent of the Corporation or
of any Covered Entity in furtherance of the provisions of
this Article and may create a trust fund, grant a security
interest or use other means (including, without limitation,
a letter of credit) to ensure the payment of such amounts as
may be necessary to effect indemnification as provided or
authorized in this Article.
SECTION 3. Indemnification Not Exclusive Right.
The right of indemnification provided in this Article shall
not be exclusive of any other rights to which an Indemnitee
may otherwise be entitled, and the provisions of this
Article shall inure to the benefit of the heirs and legal
representatives of any Indemnitee under this Article and
shall be applicable to Proceedings commenced or continuing
after the adoption of this Article, whether arising from
acts or omissions occurring before or after such adoption.
SECTION 4. Advancement of E~enses: Procedures:
Presumptions and Effect of Certain Proceedings: Remedies.
In furtherance, but not in limitation of the foregoing
provisions, the following procedures, presumptions and
remedies shall apply with respect to advancement of expenses
and the right to indemnification under this Article:
(a) Advancement of E~enses. All reasonable
expenses (including attorneys' fees) incurred by or on
behalf of the Indemnitee in connection with any
Proceeding shall be advanced to the Indemnitee by the
Corporation within 20 days after the receipt by the
Corporation of a statement or statements from the
Indemnitee requesting such advance or advances from
time to time, whether prior to or after final
disposition of such Proceeding. Such statement or
statements shall reasonably evidence the expenses
incurred by the Indemnitee and, if required by law at
the time of such advance, shall include or be
accompanied by an undertaking by or on behalf of the
Indemnitee to repay the amounts advanced if ultimately
it should be determined that the Indemnitee is not
entitled to be indemnified against such expenses
pursuant to this Article.
(b) Procedure for Determination of Entitlement to
Indemnification. (i) To obtain indemnification under
[NYCorp/954809.8:460SB:Ol/lO/2000__3:4Sp]
21
this Article, an Indemnitee shall submit to the
Secretary a written request, including such
documentation and information as is reasonably
available to the Indemnitee and reasonably necessary to
determine whether and to what extent the Indemnitee is
entitled to indemnification (the "Supporting
Documentation"). The determination of the Indemnitee's
entitlement to indemnification shall be made not later
than 60 days after receipt by the Corporation of the
written request for indemnification together with the
Supporting Documentation. The Secretary shall,
promptly upon receipt of such a request for
indemnification, advise the Board in writing that the
Indemnitee has requested indemnification.
(ii) The Indemnitee's entitlement to
indemnification under this Article shall be determined
in one of the following ways: (A) by a majority vote
of the Disinterested Directors (as hereinafter defined
in Section 4(e) of this Article), whether or not they
constitute a quorum of the Board, or by a committee of
Disinterested Directors designated by a majority vote
of the Disinterested Directors; (B) by a written
opinion of Independent Counsel (as hereinafter defined
in Section 4(e) of this Article) if (x) a Change in
Control (as hereinafter defined in Section 4(e) of this
Article) shall have occurred and the Indemnitee so
requests or (y) there are no Disinterested Directors or
a majority of such Disinterested Directors so directs;
(C) by the stockholders of the Corporation; or (D) as
provided in Section 4(c) of this Article.
(iii) In the event the determination of
entitlement to indemnification is to be made by
Independent Counsel pursuant to Section 4(b) (ii) of
this Article, a majority of the Disinterested Directors
shall select the Independent Counsel, but only an
Independent Counsel to which the Indemnitee does not
reasonably object; provided, however, that if a Change
in Control shall have occurred, the Indemnitee shall
select such Independent Counsel, but only an
Independent Counsel to which a majority of the
Disinterested Directors does not reasonably object.
(c) Presumptions and Effect of Certain
Proceedings. Except as otherwise expressly provided in
this Article, if a Change in Control shall have
occurred, the Indemnitee shall be presumed to be
entitled to indemnification under this Article (with
respect to actions or omissions occurring prior to such
Change in Control) upon submission of a request for
[NYCorp,954809.8:4605B:01!10!2000--3:45p]
22
indemnification together with the Supporting
Documentation in accordance with Section 4(b) (i) of
this Article, and thereafter the Corporation shall have
the burden of proof to overcome that presumption in
reaching a contrary determination. In any event, if
the person or persons empowered under Section 4(b) of
this Article to determine entitlement to
indemnification shall not have been appointed or shall
not have made a determination within 60 days after
receipt by the Corporation of the request therefor,
together with the Supporting Documentation, the
Indemnitee shall be deemed to be, and shall be,
entitled to indemnification unless {A) the Indemnitee
misrepresented or failed to disclose a material fact in
making the request for indemnification or in the
Supporting Documentation or (B) such indemnification is
prohibited by law. The termination of any Proceeding
described in Section 1 of this Article, or of any
claim, issue or matter therein, by judgment, order,
settlement or conviction, or upon a plea of nolo
contendere or its equivalent, shall not, of itself,
adversely affect the right of the Indemnitee to
indemnification or create a presumption that the
Indemnitee did not act in good faith and in a manner
which the Indemnitee reasonably believed to be in or
not opposed to the best interests of the Corporation
or, with respect to any criminal proceeding, that the
Indemnitee had reasonable cause to believe that such
conduct was unlawful. .
(d) Remedies of Indemnitee. (i) In the event
that a determination is made pursuant to Section 4(b)
of this Article that the Indemnitee is not entitled to
indemnification under this Article, (A) the Indemnitee
shall be entitled to seek an adjudication of
entitlement to such indemnification either, at the
Indemnitee's sole option, in (x) an appropriate court
of the State of Delaware or any other court of
competent jurisdiction or (y) an arbitration to be
conducted by a single arbitrator pursuant to the rules
of the American Arbitration Association; (B) any such
judicial proceeding or aroitration shall be de novo and
the Indemnitee shall not be prejudiced by reason of
such adverse determination; and (C) if a Change in
Control shall have occurred, in any such judicial
proceeding or arbitration, the Corporation shall have
the burden of proving that the Indemnitee is not
entitled to indemnification under this Article (with
respect to actions or omissions occurring prior to such
Change in Control) .
[NYCorp,9S4809.8:460SB:Ol/10/2000--3:4Sp]
23
(ii) If a determination shall have been made
or deemed to have been made, pursuant to Section 4(b)
or (c) of this Article, that the Indemnitee is entitled
to indemnification, the Corporation shall be obligated
to pay the amounts constituting such indemnification
within five days after such determination has been made
or deemed to have been made and shall be conclusively
bound by such determination unless (A) the Indemnitee
misrepresented or failed to disclose a material fact in
making the request for indemnification or in the
Supporting Documentation or (B) such indemnification is
prohibited by law. In the event that (X) advancement
of expenses is not timely made pursuant to Section 4(a)
of this Article or (Y) payment of indemnification is
not made within five days after a determination of
entitlement to indemnification has been made or deemed
to have been made pursuant to Section 4(b) or (c) of
this Article, the Indemnitee shall be entitled to seek
judicial enforcement of the Corporation's obligation to
pay to the Indemnitee such advancement of expenses or
indemnification. Notwithstanding the foregoing, the
Corporation may bring an action, in an appropriate
court in the State of Delaware or any other court of
competent jurisdiction, contesting the right of the
Indemnitee to receive indemnification hereunder, due to
the occurrence of an event described in sub-clause (A)
or (B) of this clause (ii) (a "Disqualifying Event");
provided, however, that in any such action the
Corporation shall have the burden of proving the
occurrence of such Disqualifying Event.
(iii) The Corporation shall be precluded from
asserting in any judicial proceeding or arbitration
commenced pursuant to this Section 4(d) that the
procedures and presumptions of this Article are not
valid, binding and enforceable and shall stipulate in
any such court or before any such arbitrator that the
Corporation is bound by all the provisions of this
Article.
(iv) In the event that the Indemnitee,
pursuant to this Section 4(d), seeks a judicial
adjudication of or an award in arbitration to enforce
rights under, or to recover damages for breach of, this
Article, the Indemnitee shall be entitled to recover
from the Corporation, and shall be indemnified by the
Corporation against, any expenses actually and
reasonably incurred by the Indemnitee if the Indemnitee
prevails in such judicial adjudication or arbitration.
If it shall be determined in such judicial adjudication
or"arbitration that the Indemnitee is entitled to
[NYCorp,9S4809.8:460SB:O~/~O/2000--3:4Sp]
24
receive part but not all of the indemnification or
advancement of expenses sought, the expenses incurred
by the Indemnitee in cc~ection with such judicial
adjudication or arbitration shall be prorated
accordingly.
(e) Definitions. For purposes of this Section 4:
(i) "Authorized Officer" means anyone of
the Chief Executive Officer, any Chief Operating
Officer, the Chief Financial Officer, any Vice
President or the Secretary of the Corporation.
(ii) "Change in Control" means the occurrence
of any of the following (w) any merger or consolidation
of the Corporation in which the Corporation is not the
continuing or surviving corporation or pursuant to
which shares of the Corporation's Common Stock would be
converted into cash, securities or other property,
other than a merger of the Corporation in which the
holders of the Corporation's Common Stock immediately
prior to the merger have the same proportionate
ownership of common stock of the surviving corporation
immediately after the merger, (x) any sale, lease,
exchange or other transfer (in one transaction or a
series of related transactions) of all, or
substantially all, the assets of the Corporation, or
the liquidation or dissolution of the Corporation or
(y) during any period of two consecutive years,
individuals who at the beginning of such period who
shall have constituted the entire Board shall have
ceased for any reason to constitute a majority thereof
unless the election, or the nomination for election by
the Corporation's stockholders, of each new director
shall have been approved by a vote of at least two-
thirds of the directors then still in office who were
directors at the beginning of the period.
(iii) "Disinterested Director" means a
director of the Corporation who is not or was not a
party to the Proceeding in respect of which
indemnification is sought by the Indemnitee.
(iv) "Independent Counsel" means a law firm
or a member of a law firm that neither presently is,
nor in the past five years has been, retained to
represent: (x) the Corporation or the Indemnitee in
any matter material to either such party or (y) any
other party to the Proceeding giving rise to a claim
for indemnification under this Article.
Notwithstanding the foregoing, the term "Independent
[NYCo%p,954809.8:460SB:Ol/10/2000-_3:45p]
25
Counsel" shall not include any person who, under the
applicable standards of professional conduct then
prevailing under the law of the State of Delaware,
would have a conflict of interest in representing
either the Corporation or the Indemnitee in an action
to determine the Indemnitee's rights under this
Article.
SECTION 5. Severability. If any provision or
provisions of this Article shall be held to be invalid,
illegal or unenforceable for any reason whatsoever: (a) the
validity, legality and enforceability of the remaining
provisions of this Article (including, without limitation,
all portions of any paragraph of this Article containing any
such provision held to be invalid, illegal or unenforceable,
that are not themselves invalid, illegal or unenforceable)
shall not in any way be affected or impaired thereby; and
(b) to the fullest extent possible, the provisions of this
Article (including, without limitation, all portions of any
paragraph of this Article containing any such provision held
to be invalid, illegal or unenforceable, that are not
themselves invalid, illegal or enforceable) shall be
construed so as to give effect to the intent manifested by
the provision held invalid, illegal or unenforceable.
SECTION 6. Indemnification of Employees Servino
as Directors. The Corporation, to the fullest extent of the
provisions of this Article with respect to the
indemnification of directors and officers of the
Corporation, shall indemnify any person who is or was an
employee of the Corporation and who is or was involved in
any manner (including, without limitation, as a party or a
witness) or is threatened to be made so involved in any
threatened, pending or completed Proceeding by reason of the
fact that such employee is or was serving (a) as a director
of a corporation in which the Corporation had at the time of
such service, directly or indirectly, a 50 percent or
greater equity interest (a "Subsidiary Director") and (b) at
the written request of an Authorized Officer, as a director
of another corporation in which the Corporation had at the
time of such service, directly or indirectly, a less than
50 percent equity interest (or no equity interest at all) or
in a capacity equivalent to t~at of a director for any
partnership, joint venture, trust or other enterprise
(including, without limitation, any employee benefit plan)
in which the Corporation has an interest (a "Requested
Employee"), against all expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by such Subsidiary Director
or Requested Employee in connection with such Proceeding.
The Corporation may also advance expenses incurred by any
[NYCorpt954809.8:4605B:Ol/10/2000--3:4Sp]
26
such Subsidiary Director or Requested Employee in connection
with any such Proceeding, consistent with the provisions of
this Article with respect to the advancement of expenses of
directors and officers of the Corporation.
SECTION 7. Indemnification of Employees and
Agents. Notwithstanding any other provision or provisions
of this Article, the Corporation, to the fullest extent of
the provisions of this Article with respect to the
indemnification of directors and officers of the
Corporation, may indemnify any person other than a director
or officer of the Corporation, a Subsidiary Director or a
Requested Employee, who is or was an employee or agent of
the Corporation and who is or was involved in any manner
(including, without limitation, as a party or a witness) or
is threatened to be made so involved in any threatened,
pending or completed Proceeding by reason of the fact that
such person is or was a director, officer, employee or agent
of a Covered Entity against all expenses (including
attorneys' fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred by such person
in connection with such Proceeding. The Corporation may
also advance expenses incurred by such employee or agent in
connection with any such Proceeding, consistent with the
provisions of this Article with respect to the advancement
of expenses of directors and officers of the Corporation.
ARTICLE VII
Capital Stock
SECTION 1. Certificates for Shares. The shares
of stock of the Corporation shall be represented by
certificates, or shall be uncertificated shares that may be
evidenced by a book-entry system maintained by the registrar
of such stock, or a combination of both. To the extent that
shares are represented by certificates, such certificates
whenever authorized by the Board, shall be in such form as
shall be approved by the Board. The certificates
representing shares of stock of each class shall be signed
by, or in the name of, the Corporation by the Chairman of
the Board, the Chief Executive Officer or any Vice-President
and by the Secretary or any Assistant Secretary or the
Treasurer or any Assistant Treasurer of the Corporation, and
sealed with the seal of the Corporation, which may be a
facsimile thereof. Any or all such signatures may be
facsimiles if countersigned by a transfer agent or
registrar. Although any officer, transfer agent or
registrar whose manual or facsimile signature is affixed to
such a certificate ceases to be such officer, transfer agent
[NYCorp;9S4809.8:460SB:01/10/2000__3:45p]
27
or registrar before such certificate has been issued, it may
nevertheless be issued by the Corporation with the same
effect as if such officer, transfer agent or registrar were
still such at the date of its issue.
The stock ledger and blank share certificates
shall be kept by the Secretary or by a transfer agent or by
a registrar or by any other officer or agent designated by
the Board.
SECTION 2. Transfer of Shares. Transfers of
shares of stock of each class of the Corporation shall be
made only on the books of the Corporation upon authorization
by the registered holder thereof, or by such holder's
attorney thereunto authorized by a power of attorney duly
executed and filed with the Secretary or a transfer agent
for such stock, if any, and if such shares are represented
bya certificate, upon surrender of the certificate or
certificates for such shares properly endorsed or
accompanied by a duly executed stock transfer power (or by
proper evidence of succession, assignment or authority to
transfer) and the payment of any taxes thereon; provided,
however, that the Corporation shall be entitled to recognize
and enforce any lawful restriction on transfer. The person
in whose name shares are registered on the books of the
Corporation shall be deemed the owner thereof for all
purposes as regards the Corporation; provided, however, that
whenever any transfer of shares shall be made for collateral
security and not absolutely, and written notice thereof
shall be given to the Secretary or to such transfer agent,
such fact shall be stated in the entry of the transfer. No
transfer of shares shall be valid as against the
Corporation, its stockholders and creditors for any purpose,
except to render the transferee liable for the debts of the
Corporation to the extent provided by law, until it shall
have been entered in the stock records of the Corporation by
an entry showing from and to whom transferred.
SECTION 3. Registered Stockholders and Addresses
of Stockholders. The Corporation shall be entitled to
recognize the exclusive right of a person registered on its
records as the owner of shares of stock to receive dividends
and to vote as such owner, shall be entitled to hold liable
for calls and assessments a person registered on its records
as the owner of shares of stock, and shall not be bound to
recognize any equitable or other claim to or interest in
such share or shares of stock on the part of any other
person, whether or not it shall have express or other notice
thereof, except as otherwise provided by the laws of
Delaware.
[NYCorpI954809.8:460SB:Ol/10/2000--3:45p)
28
Each stockholder shall designate to the Secretary
or transfer agent of the Corporation an address at which
notices of meetings and all other corporate notices may be
given to such person, and, if any stockholder shall fail to
designate such address, corporate notices may be given to
such person by mail directed to such person at such person's
post office address, if any, as the same appears on the
stock record books of the Corporation or at such person's
last known post office address.
SECTION 4. Lost. Destroyed and Mutilated
Certificates. The holder of any certificate representing
any shares of stock of the Corporation shall immediately
notify the Corporation of any loss, theft, destruction or
mutilation of such certificate; the Corporation may issue to
such holder a new certificate or certificates for shares,
upon the surrender of the mutilated certificate or, in the
case of loss, theft or destruction of the certificate, upon
satisfactory proof of such loss, theft or destruction; the
Board, or a committee designated thereby, or the transfer
agents and registrars for the stock, may, in their
discretion, require the owner of the lost, stolen or
destroyed certificate, or such person's legal
representative, to give the Corporation a bond in such sum
and with such surety or sureties as they may direct to
indemnify the Corporation and said transfer agents and
registrars against any claim that may be made on account of
the alleged loss, theft or destruction of ~ny such
certificate or the issuance of such new certificate.
SECTION 5. Regulations. The Board may make such
additional rules and regulations as it may deem expedient
concerning the issue, transfer and registration of
certificated or uncertificated shares of stock of each class
of the Corporation and may make such rules and take such
action as it may deem expedient concerning the issue of
certificates in lieu of certificates claimed to have been
lost, destroyed, stolen or mutilated.
SECTION 6. Fixing Date for Determination of
Stockholders of Record. In order that the Corporation may
determine the stockholders entitled to notice of or to vote
at any meeting of stockholders or any adjournment thereof,
or entitled to receive payment of any dividend or other
distribution or allotment or any rights, or entitled to
exercise any rights in respect of any change, conversion or
exchange of stock or for the purpose of any other lawful
action, the Board may fix, in advance, a record date, which
shall not be more than 60 nor less than 10 days before the
date of such meeting, nor more than 60 days prior to any
other action. A determination of stockholders entitled to
[NYCOrpI954809.8:4605B:Ol/10/2000__3:45p]
30
ARTICLE XI
Amendments
These By-laws may be altered, amended or repealed,
in whole or in part, or new By-laws may be adopted by the
stockholders or by the Board at any meeting thereof;
provided, however, that notice of such alteration,
amendment, repeal or adoption of new By-laws is contained in
the notice of such meeting of stockholders or in the notice
of such meeting of the Board and, in the latter case, such
notice is given not less than twenty-four hours prior to the
meeting. Unless a higher percentage is required by the
Certificate, all such amendments must be approved by either
the holders of eighty percent (80%) of the outstanding
shares of Voting Stock, voting as a single class, or by a
majority of the Board; provided, however, that,
notwithstanding the foregoing, until December 31, 2003, the
Board may not alter, amend or repeal, or adopt new By-laws
in conflict with, or recommend any such action to
stockholders, (i) any provision of these By-laws which
requires a 75% vote of the Whole Board for action to be
taken thereunder or (ii) this Article XI, without the
affirmative vote of not less than 75% of the Whole Board.
ARTICLE XII
Miscellaneous
SECTION 1. Execution of Documents. The Board or
any committee thereof shall designate the officers,
employees and agents of the Corporation who shall have power
to execute and deliver deeds, contracts, mortgages, bonds,
debentures, notes, checks, drafts and other orders for the
payment of money and other documents for and in the name of
the Corporation and may authorize (including authority to
redelegate) by written instrument to other officers,
employees or agents of the Corporation. Such delegation may
be by resolution or otherwise and the authority granted
shall be general or confined to specific matters, all as the
Board or any such committee may determine. In the absence
of such designation referred to in the first sentence of
this Section, the officers of the Corporation shall have
such power so referred to, to the extent incident to the
normal performance of their duties.
SECTION 2. Deposits. All funds of the
Corporation not otherwise employed shall be deposited from
time to time to the credit of the Corporation or otherwise
as the Board or any committee thereof or any officer of the
[NYCorpI9S4809.8:460SB:Ol!lO!2000--3:4Sp]
EXHIBIT 6.11
[FORM OF AFFILIATE LETTER]
, 200-
[Holdco]
[Address]
Ladies and Gentlemen:
Pursuant to the terms of the Agreement and Plan of Merger, dated as of January
10, 2000 (the "Merger Agreement"), between America Online, Inc. ("America Online") and
Time Warner Inc. ("Time Warner"), a subsidiary of a newly organized Delaware corporation
("Holdco") will merge with and into America Online with America Online surviving as a wholly
owned subsidiary of Holdco, and another subsidiary of Hold co will merge with and into Time
Warner with Time Warner surviving as a wholly owned subsidiary of Holdco (the "Mergers").
Capitalized terms used herein and not defined have the meanings assigned to them in the Merger
i\greement. ~
The undersigned has been advised that as of the date the Mergers are submitted to
stockholders of America Online or Time Warner, as applicable, for approval, the undersigned
may be an "affiliate" of America Online or Time Warner, as applicable, as the term is defmed for
purposes of paragraphs (c) and (d) of Rule 145 of the Securities and Exchange Commission (the
"Commission") under the Securities i\ct of 1933, as amended (the "Securities Act"), although
nothing contained herein shall be construed as an admission of such fact, or as a waiver of any
rights that the undersigned may have to object to any claim that the undersigned is such an
affiliate on or after the date of this letter.
i\s a result of the Mergers, the undersigned may receive Holdco Capital Stock or
Time Warner Converted Options or America Online Converted Options (collectively, "Holdco
Securities"). In respect of shares of Holdco Capital Stock, the undersigned would receive such
shares in exchange for shares owned by the undersigned of Time Warner Capital Stock or
America Online Common Stock, as applicable. In respect of the options, the undersigned would
receive such options in exchange for options held by the undersigned under the Time Warner
Stock Option Plans or the America Online Stock Option Plans.
003780-0007-0S143-A01BD5X2-AGR