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UNITED STATES OF AMERICA
BEFORE FEDERAL TRADE COMMISSION
COMMISSIONERS: Robert Pitofsky, Chairman
Sheila F. Anthony
Mozelle W. Thompson
Orson Swindle
Thomas B. Leary
_________________________________________________
)
In the matter of )
)
America Online, Inc., )
a corporation, )
) Docket No. C-3989
and )
)
Time Warner Inc., )
a corporation. )
_________________________________________________)
ORDER TO HOLD SEPARATE
The Federal Trade Commission ("Commission") having initiated an
investigation of the proposed merger of Respondent America Online, Inc. ("AOL")
and Respondent Time Warner Inc. ("Time Warner"), and Respondents having been
furnished thereafter with a draft of Complaint that the Bureau of Competition
proposed to present to the Commission for its consideration and which, if issued
by the Commission, would charge Respondents with violations of Section 5 of the
Federal Trade Commission Act, as amended, 15 U.S.C. 'SS' 45, and Section 7 of
the Clayton Act, as amended, 15 U.S.C. 'SS' 18; and
Respondents, their attorneys, and counsel for the Commission having
thereafter executed an Agreement Containing Consent Orders ("Consent
Agreement"), containing an admission by Respondents of all the jurisdictional
facts set forth in the aforesaid draft of Complaint, a statement that the
signing of said Consent Agreement is for settlement purposes only and does not
constitute an admission by Respondents that the law has been violated as alleged
in such Complaint, or that the facts as alleged in such Complaint, other than
jurisdictional facts, are true, and waivers and other provisions as required by
the Commission's Rules; and
The Commission having thereafter considered the matter and having
determined that it had reason to believe that Respondents have violated said
Acts, and that a Complaint should
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issue stating its charges in that respect, and having accepted the executed
Consent Agreement and placed such Consent Agreement and the draft of Complaint
on the public record for a period of thirty (30) days for the receipt and
consideration of public comments, now in further conformity with the procedure
described in Commission Rule 2.34, 16 C.F.R. 'SS' 2.34, the Commission issues
its Complaint, and hereby makes the following jurisdictional findings and
issues this Order to Hold Separate:
1. Respondent AOL is a corporation organized, existing and doing
business under and by virtue of the laws of the State of Delaware,
with its office and principal place of business located at 22000
AOL Way, Dulles, Virginia 20166.
2. Respondent Time Warner is a corporation organized, existing and
doing business under and by virtue of the laws of the State of
Delaware, with its office and principal place of business located
at 75 Rockefeller Plaza, New York, New York 10019.
3. The Federal Trade Commission has jurisdiction of the subject
matter of this proceeding and of the Respondents, and the
proceeding is in the public interest.
ORDER
I.
IT IS ORDERED that, as used in this Order to Hold Separate, the
following definitions shall apply:
A. "AOL" means America Online, Inc., its directors, officers,
employees, agents, representatives, successors, and assigns; its
subsidiaries, divisions, groups and affiliates controlled by
America Online, Inc., and the respective directors, officers,
employees, agents, representatives, successors, and assigns of
each.
B. "Time Warner" means Time Warner Inc., its directors, officers,
employees, agents, representatives, successors, and assigns; its
subsidiaries, divisions (including, but not limited to, Time
Warner Entertainment Company, L.P.), groups and affiliates
controlled by Time Warner Inc. and the respective directors,
officers, employees, agents, representatives, successors, and
assigns of each.
C. "Affiliated Cable Broadband ISP Service" means a Cable Broadband
ISP Service Affiliated with Respondent, excluding Road Runner.
D. "Affiliated" means having an attributable interest as defined in
47 C.F.R. 'SS' 76.501 (and accompanying notes), as that rule read
on July 1, 1996.
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E. "Alternative Cable Broadband ISP Service Agreement" means an
agreement between Respondents and a Non-affiliated ISP to provide
Cable Broadband ISP Service on Respondents' Cable Holdings.
F. "Available" means ready for immediate use at the request of a
Subscriber.
G. "Bandwidth" means the measure, in bits per second, of the speed of
data transmission.
H. "Broadband" means Bandwidth designed to operate at rates greater
than 128 kilobits per second.
I. "Cable Broadband ISP Service" means any ISP Service provided via
Broadband over cable.
J. "Cable Division" means each collection of localized communication
networks, comprising one or more cable systems, that transmits
multi-channel video, as well as other Content and services, by
means of coaxial cables and/or fiber optics, that is located in
the United States and is Controlled by Respondents.
K. "Commission" means the Federal Trade Commission.
L. "Consent Agreement" means the Agreement Containing Consent Orders
executed by the Respondents in this matter.
M. "Content" means data packets carrying information including, but
not limited to, links, video, audio, text, e-mail, message,
interactive signals, and interactive triggers.
N. "Control" means (1) either (i) holding 50% or more of the
outstanding voting securities of a Person or (ii) in the case of a
Person that has no outstanding voting securities, having the right
to 50% or more of the profits of the Person, or having the right
in the event of dissolution to 50% or more of the assets of the
Person or (2) having the contractual power presently to designate
50% or more of the directors of a Person that is a corporation, or
in the case of unincorporated Persons, of individuals exercising
similar functions.
O. "Decision and Order" means the Decision and Order issued pursuant
to the Consent Agreement, and all terms contained therein.
P. "Earthlink" means Earthlink, Inc., incorporated in Delaware, with
its principal place of business located at 1430 West Peachtree
Street, Suite 400, Atlanta,
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Georgia 30309 and its subsidiaries, divisions, groups and
affiliates controlled by Earthlink, and the successors and assigns
of each.
Q. "Earthlink Agreement" means the High-Speed Service Agreement
effective as of November 18, 2000, between Earthlink, Inc., and
Time Warner Entertainment Company, L.P.
R. "Identified Cable Division" means each of the Cable Divisions
identified in Appendix A of the Decision and Order, as well as any
other Cable Division with 300,000 Subscribers or more, that, after
the date Respondents execute the Consent Agreement, is, through
acquisition or otherwise, Controlled by Respondents. Any
Identified Cable Division shall cease to be an Identified Cable
Division for purposes of this Order to Hold Separate upon
disposition by Respondents of Respondents' Control over such
Identified Cable Division.
S. "ISP" means a provider of ISP Service.
T. "ISP Service" means the provision of connectivity to and services
that enable the use of the Internet by an end-user.
U. "Merger" means the transaction contemplated by the Second Amended
and Restated Agreement and Plan of Merger, dated as of January 10,
2000, among AOL Time Warner Inc., America Online, Inc., Time
Warner Inc., America Online Merger Sub Inc., and Time Warner
Merger Sub Inc.
V. "Monitor Trustee" means any Person appointed by the Commission
pursuant to Paragraph V. of the Decision and Order in this matter.
W. "Non-affiliated Cable Broadband ISP Service" means any Cable
Broadband ISP Service that is not Affiliated with or Controlled by
Respondents.
X. "Non-affiliated ISP" means any ISP that is not Affiliated with or
Controlled by Respondents.
Y. "Offer" or "Offering" means in any way proffering, including, but
not limited to, advertising, promoting, or announcing the current
or future availability of service or its price.
Z. "Person" means any natural person, corporate entity, partnership,
association, joint venture, government entity, or trust.
AA. "Respondents" means Time Warner and AOL.
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BB. "Respondents' Cable Holdings" means each and every Cable Division.
CC. "Road Runner" means Road Runner LLC, organized in Delaware, with
its principal place of business located at 13241 Woodland Park
Road, Herndon, Virginia 20171, and any successor thereto.
II.
IT IS FURTHER ORDERED that:
A. Until such time as Respondents have made Available an Affiliated
Cable Broadband ISP Service in each Identified Cable Division, and
regardless of whether Respondents have consummated the proposed
Merger, Respondents shall:
1. hold Road Runner and all of its businesses separate and apart
from AOL and all of its businesses;
2. operate the businesses of Road Runner independently of the
businesses of AOL; and
3. operate the businesses of AOL independently of the businesses
of Road Runner.
B. In holding Road Runner separate and apart from AOL and in
operating the businesses of each separately from the other,
Respondents shall take no steps to use, and shall not, in any way
directly or indirectly, use Road Runner and its businesses to
increase or otherwise advantage AOL and its businesses (as each of
Road Runner and AOL is constituted at the time Respondents execute
the Consent Agreement), or to use AOL and its businesses to
increase or otherwise advantage Road Runner and its businesses;
among other things, Respondents shall:
1. comply with the requirements of Paragraph II.A.1. of the
Decision and Order; and
2. refrain from:
a. engaging in cross-promotional or marketing activities
between AOL's services and Road Runner's services;
b. Offering or making Available cross links to AOL's
services from Road Runner's services or to Road Runner's
services from AOL's services;
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c. engaging in joint or cooperative advertising of AOL's
services and Road Runner's services;
d. Offering or making Available AOL's services on Road
Runner's services or Offering or making Available Road
Runner's services on AOL's services;
e. making references to or about AOL or AOL's services on
Road Runner's services or making references to or about
Road Runner or its services on AOL's services;
f. using lists of Road Runner subscribers or potential
subscribers as a means to Offer, promote, advertise,
market, or otherwise make references to or about AOL or
AOL's services;
g. using lists of AOL subscribers or potential subscribers
as a means to Offer, promote, advertise, market, or
otherwise make references to or about Road Runner or Road
Runner's services;
h. Offering or making Available formats, designs, and
products for use on or with AOL's services that are
similar to those of Road Runner;
i. Offering or making Available formats, designs, and
products for use on or with Road Runner's services that
are similar to those of AOL;
j. Offering or making Available a look or feel similar to
AOL or its services for use on Road Runner's services;
k. Offering or making Available a look or feel similar to
Road Runner or its services for use on AOL's services;
l. taking any steps to transform or transforming Road Runner
business into AOL business;
m. causing or permitting Road Runner to hire AOL employees;
and
n. causing or permitting AOL to hire Road Runner employees.
III.
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IT IS FURTHER ORDERED that, any time after Respondents execute the
Consent Agreement, the Commission may appoint a Monitor Trustee to monitor
Respondents' compliance with their obligations under this Order to Hold
Separate, which Monitor Trustee shall have the necessary rights, duties, and
responsibilities as described below:
A. The Commission shall select the Monitor Trustee, subject to the
consent of Respondents, which consent shall not be unreasonably
withheld. If Respondents have not opposed, in writing, including
the reasons for opposing, the selection of any proposed Monitor
Trustee within ten (10) days after notice by the staff of the
Commission to Respondents of the identity of any proposed Monitor
Trustee, Respondents shall be deemed to have consented to the
selection of the proposed Monitor Trustee. Within ten (10) days
after the appointment of the Monitor Trustee, Respondents shall
execute a trust agreement that, subject to the prior approval of
the Commission, confers on the Monitor Trustee all the power and
authority necessary to permit the Monitor Trustee to monitor
Respondents' compliance with the terms of this Order to Hold
Separate in a manner consistent with the purposes of this Order to
Hold Separate.
B. The Monitor Trustee shall have the power and authority to monitor
Respondent's compliance with the terms of this Order to Hold
Separate and shall exercise such power and authority and carry out
the duties and responsibilities of the Monitor Trustee in a manner
consistent with the purposes of this Order to Hold Separate in
consultation with the Commission.
C. The Monitor Trustee shall have full and complete access to all
personnel, books, records, documents and facilities of Respondents
related to compliance with this Order to Hold Separate or to any
other relevant information, as the Monitor Trustee may reasonably
request, including but not limited to all documents and records
kept in the normal course of business that relate to Respondents'
obligations under this Order to Hold Separate. Respondents shall
develop such financial or other information as such Monitor
Trustee may reasonably request and shall cooperate with the
Monitor Trustee. Respondents shall take no action to interfere
with or impede the Monitor Trustee's ability to perform his or her
responsibilities or to monitor Respondents' compliance with this
Order to Hold Separate.
D. Respondents may require the Monitor Trustee or any of the Persons
referred to in Paragraph IV.E. to sign a confidentiality agreement
prohibiting the disclosure of any information gained as a result
of his or her role as Monitor Trustee to anyone other than the
Commission.
E. The Monitor Trustee shall have the authority to employ, at the
cost and expense of Respondents, such consultants, accountants,
attorneys, and other
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representatives and assistants as are reasonably necessary to
carry out the Monitor Trustee's duties and responsibilities. The
Monitor Trustee shall account for all expenses incurred, including
fees for his or her services, subject to the approval of the
Commission.
F. The Monitor Trustee shall serve, without bond or other security,
at the cost and expense of Respondents, on reasonable and
customary terms commensurate with the Monitor Trustee's experience
and responsibilities. Respondents shall indemnify the Monitor
Trustee and hold the Monitor Trustee harmless against any losses,
claims, damages, liabilities, or expenses arising out of, or in
connection with, the performance of the Monitor Trustee's duties,
including all reasonable fees of counsel and other expe nses
incurred in connection with the preparation for, or defense of any
claim, whether or not resulting in any liability, except to the
extent that such liabilities, losses, damages, claims, or expenses
result from misfeasance, gross negligence, willful or wanton acts,
or bad faith by the Monitor Trustee.
G. The Monitor Trustee shall have no responsibility or obligation for
the operation of Respondents' businesses.
H. The Monitor Trustee shall serve until such time as Respondents
have complied with their obligations pursuant to this Order to
Hold Separate.
I. If the Commission determines that the Monitor Trustee has ceased
to act or failed to act diligently, the Commission may appoint a
substitute Monitor Trustee who shall have all the rights, duties,
powers, authorities, and responsibilities described in this
paragraph. The Commission shall select the substitute Monitor
Trustee, subject to the consent of Respondents, which consent
shall not be unreasonably withheld. If Respondents have not
opposed, in writing, including the reasons for opposing, the
selection of any proposed substitute Monitor Trustee within ten
(10) days after notice by the staff of the Commission to
Respondents of the identity of any proposed substitute Monitor
Trustee, Respondents shall be deemed to have consented to the
selection of the proposed substitute Monitor Trustee. Within ten
(10) days after the appointment of the substitute Monitor Trustee,
Respondents shall execute a trust agreement that, subject to the
prior approval of the Commission, confers on the substitute
Monitor Trustee all the power and authority necessary to permit
the substitute Monitor Trustee to monitor Respondents' compliance
with the terms of this Order to Hold Separate in a manner
consistent with the purposes of this Order to Hold Separate.
J. The Commission may on its own initiative or at the request of the
Monitor Trustee issue such additional orders or directions as may
be necessary or
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appropriate to assure compliance with the requirements of this
Order to Hold Separate.
K. The Monitor Trustee shall report in writing to the Commission
concerning Respondents' compliance with this Order to Hold
Separate thirty days after execution of the trust agreement and
every ninety days thereafter until this Order to Hold Separate
terminates.
IV.
IT IS FURTHER ORDERED that Respondents shall, within ten (10) days of
the date this Order to Hold Separate is final, circulate to all of Respondents'
employees a copy of this Order to Hold Separate and shall post a notice
accessible to all employees informing employees of Respondents' obligations
pursuant to this Order to Hold Separate.
V.
IT IS FURTHER ORDERED that Respondents shall notify the Commission at
least thirty (30) days prior to any proposed change in the Respondents such as
dissolution, assignment, sale resulting in the emergence of a successor
corporation or company, or the creation or dissolution of subsidiaries or any
other change in the corporation that may affect compliance obligations arising
out of this Order to Hold Separate.
VI.
IT IS FURTHER ORDERED that for the purposes of determining or securing
compliance with this Order to Hold Separate, and subject to any legally
recognized privilege, and upon written request with reasonable notice to
Respondents, Respondents shall permit any duly authorized representatives of the
Commission:
A. Access, during office hours of Respondents upon reasonable notice
and in the presence of counsel, to inspect and copy all books,
ledgers, accounts, correspondence, memoranda, and other records
and documents in the possession or under the control of
Respondents relating to any matters contained in this Order to
Hold Separate; and
B. Upon five (5) business days' notice to Respondents and without
restraint or interference from Respondents, to interview officers,
directors, or employees of Respondents, who may have counsel
present, regarding such matters.
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VII.
IT IS FURTHER ORDERED that this Order to Hold Separate shall terminate
on the earlier of:
A. The day after the Commission withdraws its acceptance of the
Consent Agreement pursuant to the provisions of Commission Rule
2.34, 16 C.F.R. 'SS''SS' 2.34;
B. The day after Respondents, in accordance with the requirements of
Paragraph II. of the Decision and Order, have made Available
Affiliated Cable Broadband ISP Service throughout all of the
Identified Cable Divisions; provided, however, that Respondents'
obligations pursuant to Paragraph III. of this Order to Hold
Separate in a particular Cable Division shall terminate on the day
after Respondents have made Available Affiliated Cable Broadband
ISP Service throughout that Cable Division so long as the
termination of Respondents' obligations pursuant to Paragraph III.
of this Order to Hold Separate in that Cable Division does not
affect, in any way, directly or indirectly, Respondents'
compliance with Paragraph III of this Order to Hold Separate
throughout the remainder of Respondents' Cable Holdings;
C. In the event that Respondents abandon their plans to consummate
the proposed Merger and so notify the Commission, on the day after
the date they withdraw their respective Notification and Report
Forms filed pursuant to Section 7A of the Clayton Act, 15
U.S.C. 'SS' 18a, and the regulations promulgated thereunder, 16
C.F.R. 'SS''SS' 800 et seq. in connection with the proposed
Merger; or
D. On the date the Decision and Order terminates.
By the Commission.
/s/ Donald S. Clark
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Donald S. Clark
Secretary
SEAL
ISSUED: December 14, 2000
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