SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OF 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): January 10, 2000
AMERICA ONLINE, INC.
(Exact Name of Registrant as Specified in Charter)
Delaware 001-12143 54-1322110
(State or Other Jurisdiction (Commission File (I.R.S. Employer
of Incorporation) Number) Identification No.)
22000 AOL Way, Dulles, Virginia 20166
(Address of Principal Executive Offices) (Zip Code)
(703) 265-1000
(Registrant's Telephone Number, Including Area Code)
Not applicable
(Former Name or Former Address, if Changed Since Last Report)
Item 5. Other Events.
On January 10, 2000, America Online, Inc. ("America Online")
and Time Warner Inc. ("Time Warner") announced that they had entered into an
Agreement and Plan of Merger, dated as of January 10, 2000 (the "Merger
Agreement"), which sets forth the terms and conditions of the proposed merger of
equals (the "Merger") of America Online and Time Warner. Pursuant to the Merger
Agreement, a subsidiary of a newly organized Delaware corporation ("Holdco")
will merge (the "America Online Merger") with and into America Online, with
America Online surviving as a wholly owned subsidiary of Holdco, and another
subsidiary of Holdco will merge (the "Time Warner Merger") with and into Time
Warner, with Time Warner surviving as a wholly owned subsidiary of Holdco.
Holdco will be named AOL Time Warner Inc.
The Merger is intended to constitute an exchange or a
reorganization under the Internal Revenue Code of 1986, as amended. Consummation
of the Merger is subject to various conditions, including the approval by both
America Online's and Time Warner's stockholders and the receipt of required
regulatory approvals. A copy of the Merger Agreement is included herein as
Exhibit 2.1 and a copy of the joint press release of America Online and Time
Warner with respect to the Merger is included herein as Exhibit 99.1.
In connection with the Merger Agreement, America Online and
Time Warner entered into reciprocal stock option agreements, each dated as of
January 10, 2000 (the "Stock Option Agreements"), pursuant to one of which
America Online has the right, under certain circumstances, to purchase up to
19.9% of the issued and outstanding shares of common stock of Time Warner, at a
price per share equal to $110.63, and pursuant to the other, Time Warner has the
right, under certain circumstances, to purchase up to 19.9% of the issued and
outstanding shares of common stock of America Online, at a price per share equal
to $73.75. Copies of the Stock Option Agreements are included herein as Exhibits
10.1 and 10.2.
Also concurrently with the execution of the Merger Agreement,
America Online, R.E. Turner III and certain stockholders of Time Warner
affiliated with Mr. Turner, who collectively own beneficially approximately 9%
of the outstanding common stock of Time Warner, entered into a Voting Agreement
(the "Voting Agreement") pursuant to which Mr. Turner and such stockholders have
agreed to vote their shares of common stock of Time Warner in favor of the Time
Warner Merger. A copy of the Voting Agreement is included herein as Exhibit
10.3.
The Merger Agreement, the Stock Option Agreements, the Voting
Agreement and the joint press release are incorporated herein by reference into
this Item 5 and the foregoing description of such documents and the transactions
contemplated therein are qualified in their entirety by reference to such
exhibits.
Item 7. Financial Statements, Pro Forma Financial Information and
Exhibits.
(c) Exhibits:
2.1 Agreement and Plan of Merger, dated as of January 10, 2000,
between America Online, Inc. and Time Warner Inc.
10.1 Stock Option Agreement, dated as of January 10, 2000, between
America Online, Inc. and Time Warner Inc.
10.2 Stock Option Agreement, dated as of January 10, 2000, between
Time Warner Inc. and America Online, Inc.
10.3 Voting Agreement, dated as of January 10, 2000, among America
Online, Inc. and certain stockholders of Time Warner Inc.
99.1 Joint Press Release, dated January 10, 2000, announcing the
execution of the Agreement and Plan of Merger between America
Online, Inc. and Time Warner Inc.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Date: January 14, 2000
AMERICA ONLINE, INC.
By: /s/J. Michael Kelly
Name: J. Michael Kelly
Title: Senior Vice President &
Chief Financial Officer
EXHIBIT INDEX
Exhibit
Number Description
2.1 Agreement and Plan of Merger, dated as of January 10, 2000,
between America Online, Inc. and Time Warner Inc.
10.1 Stock Option Agreement, dated as of January 10, 2000, between
America Online, Inc. and Time Warner Inc.
10.2 Stock Option Agreement, dated as of January 10, 2000, between
Time Warner Inc. and America Online, Inc.
10.3 Voting Agreement, dated as of January 10, 2000, among America
Online, Inc. and certain stockholders of Time Warner Inc.
99.1 Joint Press Release, dated January 10, 2000, announcing the
execution of the Agreement and Plan of Merger between America
Online, Inc. and Time Warner Inc.
AGREEMENT AND PLAN OF MERGER
DATED AS OF JANUARY 10, 2000
BETWEEN
AMERICA ONLINE, INC.
AND
TIME WARNER INC.
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 corporation ("Time
Warner").
W I T N E S S E T H:
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 2.1(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 defined in Section 2.3) will be converted into the right to receive shares
of capital stock of Holdco (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 $0.01 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
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 and 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-1 (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 Holdco. 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:
(a) a corporation organized under the laws of the State of
Delaware ("Time Warner Merger 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 Merger Sub" and, together with Time Warner Merger Sub,
the "Merger 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 Holdco and the Merger Subsidiaries.
Time Warner and America Online shall cause the directors of Holdco 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 Holdco 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 RELATED MATTERS
2.1 The Mergers. 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:
(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 Holdco.
(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
Holdco. 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) of the 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.
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2.5 Charters and Bylaws.
(a) Certificates of Incorporation. 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 of Treasury 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 Holdco Capital Stock (as defined
below) in accordance with the following table:
<TABLE>
Each Share of the Specified Number and Class or Series of Shares of Holdco Capital
Class or Series of Time Warner Capital Stock Stock Into Which Converted
- -------------------------------------------- --------------------------
<S> <C>
Time Warner Common Stock........... 1.5 shares (as the same may be adjusted according to
Section 2.9, the "Exchange Ratio") of Holdco Common
Stock
Time Warner Series LMCN-V Common.... 1.5 shares of Series LMCN-V Common Stock, par value
Stock, par value $0.01 per share $0.01 per share, of Holdco ("Holdco Series LMCN-V
("Time Warner Series LMCN-V Common Stock") 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
Time Warner Series LMC Common.... 1.5 shares of Series LMC Common Stock, par value $0.01
Stock, par value $0.01 per share per share, of Holdco ("Holdco Series LMC Common
("Time Warner Series LMC Common Stock") 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
Time Warner Series E Convertible... One share of Series E Convertible Preferred Stock, par
Preferred Stock, value $0.10 per share, of Holdco ("Holdco Series E
par value $0.10 per share Preferred Stock")
("Time Warner Series E Preferred Stock")
Time Warner Series F Convertible... One share of Series F Convertible Preferred Stock, par
Preferred Stock, value $0.10 per share, of Holdco ("Holdco Series F
par value $0.10 per share Preferred Stock")
("Time Warner Series F Preferred Stock")
Time Warner Series I Convertible... One share of Series I Convertible Preferred Stock, par
Preferred Stock, value $0.10 per share, of Holdco ("Holdco Series I
par value $0.10 per share Preferred Stock")
("Time Warner Series F Preferred Stock")
Time Warner Series J Convertible... One share of Series J Convertible Preferred Stock, par
Preferred Stock, value $0.10 per share, of Holdco ("Holdco Series J
par value $0.10 per share ("Time Warner Preferred Stock" and, together with Holdco Common
Series J Preferred Stock" and together, Stock, Holdco Series LMCN-V Common Stock, Holdco
with Time Warner Series E Preferred Stock, Series LMC Common Stock, Holdco Series E Preferred
Time Warner Series F Preferred Stock and Stock, Holdco Series F Preferred Stock and Holdco
Time Warner Series I PreferredStock, the Series I Preferred Stock, the "Holdco Capital Stock")
"Time Warner Preferred Stock")
</TABLE>
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
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 Holdco 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 Holdco
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 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
Holdco 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 Holdco Common Stock
at least equal to the number of shares of Holdco 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 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.
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 defined 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 Rights. (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 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 of the 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 (ii) 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 of Treasury 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 Merger Consideration" and, together
with the Time Warner Merger Consideration, the "Merger Consideration").
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 defined 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 Holdco 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 Holdco
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 of the date
hereof in accordance with their terms shall not constitute a Material Adverse
Effect on America Online.
(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
Holdco 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 Holdco 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 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 documents 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 Holdco 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 number
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 Holdco Capital Stock evidencing, in the aggregate, the
proper number 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
documents 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 Unexchanged 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 Holdco 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 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 Holdco
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 Holdco
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 Holdco
Capital Stock.
3.4 No Further Ownership Rights in Time Warner Capital Stock or America Online
Common Stock. All shares of Holdco 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 Holdco Capital Stock.
(a) No certificates or scrip or shares of Holdco 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 of Exchange 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 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 Holdco Capital Stock to which such holders are
entitled pursuant to Section 3.5 and any dividends or distributions with respect
to shares of Holdco 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 defined in Section 4.1(c)(iii))
shall, to the extent permitted by law, become the property of Holdco 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 of the 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 Holdco 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.
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 of its 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 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-1 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 defined 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 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 Section 4.1(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
(1) 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 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 (J) 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 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 Reports"),
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 4.1(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 defined 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 of the 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 defined 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
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 of Incorporation 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 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 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, financial 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.
(l) 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 financial 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 601(b)(10) 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.
(o) 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 9.11(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.
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.
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 6.10(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 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 manner 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 manner 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 of its 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.
(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 (1) 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 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 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 Statement/Prospectus 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 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 4.2(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
Statement/Prospectus 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 of
Incorporation 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) Vote 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.
(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 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, financial 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 Time Warner except Morgan Stanley Dean Witter & Co. Incorporated,
whose fees and expenses will be paid by Time Warner.
(l) 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 financial 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.
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 defined in Item 601(b)(10) 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.
(o) 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.
(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 Subsidiaries 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 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 5.1(c) of the 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 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 SEC 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 defined 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 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% of the 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 SEC 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 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.
(l) 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 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 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 of this Section 5.2(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 5.2(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-A/N 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 Warner 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 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 wholly 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 financings 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) Governing 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 Warner
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 SEC 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, 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 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.
(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 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 Warner 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.
(l) 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 Filings. 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 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 Statement/Prospectus") 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 S-4"). The Joint Proxy Statement/Prospectus 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 Statement/Prospectus 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
Statement/Prospectus 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 Statement/Prospectus
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 Statement/Prospectus or the Form
S-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 Statement/Prospectus, 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 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 defined in Section 6.1(b)), may amend or supplement the Joint
Proxy Statement/Prospectus or Form S-4 (including by incorporation by reference)
pursuant to a Qualifying Amendment (as defined 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 "Qualifying Amendment" means an amendment or supplement to the
Joint Proxy Statement/Prospectus 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
Statement/Prospectus 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
Statement/Prospectus 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 Statement/Prospectus 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 SEC and
disseminated to the stockholders of America Online and Time Warner.
(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 (I) 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 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 Holdco 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 Holdco 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 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 of the 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 Investment Regulations 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 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 "FTC") 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 DOJ, 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) or 8.1(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 of 20% 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 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 Time 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 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 shall 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 Statement/Prospectus 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
Statement/Prospectus 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.
6.7 Directors' and Officers' Indemnification and Insurance. (a) Holdco shall (i)
indemnify and hold harmless, 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 of 200% 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 Holdco 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 harmless, 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
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 any one 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 Holdco 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, financial 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 Holdco Common Stock to be issued in the
Merger and the shares of Holdco 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 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 purposes, (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 6.10(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 Online 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 Effective Time, a written
agreement substantially in the form attached as Exhibit 6.11 hereto (an
"Affiliate Agreement").
(b) Not less than 45 days prior to the date of the America
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
Warner 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 of this 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 of the 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.
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 Injunctions or Restraints, Illegality. No Laws shall have been adopted or
promulgated, and no temporary restraining order, preliminary 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 Regulations. 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.
(f) NYSE Listing. The shares of Holdco Common Stock to be issued in the Mergers
and such other shares of Holdco 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 financial 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 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 Obligations 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 Obligations 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)(1), 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.
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 Statement/Prospectus in accordance with Section
6.1(a);
(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 Statement/Prospectus 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
willful 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 8.1(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), if later, 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 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 8.1(d) (provided that the basis for such termination is the
failure of America Online's stockholders to adopt this Agreement) or pursuant to
Section 8.1(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 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) Time Warner shall terminate this Agreement pursuant
to Section 8.1(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 8.1(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
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 of its 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 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
Dulles, Virginia 20166
Attention: Paul T. Cappuccio, Esq.
with a copy to:
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, New York 10017
Attention: Richard I. Beattie, Esq.
(b) if to Time Warner to:
Time Warner Inc.
75 Rockefeller Plaza
New York, NY 10019
Attention: Christopher P. Bogart, Esq.
with a copy to:
Cravath, Swaine & Moore
Worldwide Plaza
825 Eighth Avenue
New York, New York 10019
Attention: Robert A. Kindler, Esq.
9.3 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 table of contents and 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." 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 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.
9.5 Entire Agreement; 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 remedy 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 of law
principles thereof).
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 of law 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.
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 defined in the Exchange Act).
(i) "Subsidiary" 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 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
any one 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.
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.
AMERICA ONLINE, INC.
By: /s/ Stephen M. Case
Name: Stephen M. Case
Title: Chairman & Chief Executive Officer
TIME WARNER INC.
By: /s/ Gerald M. Levin
Name: Gerald M. Levin
Title: Chairman & Chief Executive Officer
EXHIBIT D-1
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.
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.
(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 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 payment of dividends,
dividends may be declared and paid on the Common 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 5. 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 151(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 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.
(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 conditions 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 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 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 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 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.
[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.]
EXHIBIT D-2
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
Meetings 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 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 5. Quorum. 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 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 Executive 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 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. To be in proper written
form, a stockholder's 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 an 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 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 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, Qualification 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 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 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 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. Quorum 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 5. Place of Meeting. Subject to Sections 6 and 7 of
this Article III, 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
meeting 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.
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. Participation in Meeting by Means of
Communications Equipment. Any one or more members of the Board or any committee
thereof may participate in any meeting of the Board or of any such committee 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.
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 shall 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. Notwithstanding 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.
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 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: (i) 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 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;
provided 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; Quorum. 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 protesting, 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 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.
SECTION 3. Resignation. Any officer may resign at any time by
giving notice to the Board, the Chief Executive Officer or the Secretary. 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 supervision 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 duties as he 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 Corporation; 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 Corporation 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 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.
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 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 Expenses; 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 Expenses. 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 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 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 arbitration 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).
(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 receive part but not all of the
indemnification or advancement of expenses sought, the expenses
incurred by the Indemnitee in connection with such judicial
adjudication or arbitration shall be prorated accordingly.
(e) Definitions. For purposes of this Section 4:
(i) "Authorized Officer" means any one 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 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 Serving 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 that 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 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 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 by a 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.
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 any 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
notice of or to vote at a meeting of the stockholders shall apply to any
adjournment of the meeting; provided, however, that the Board may fix a new
record date for the adjourned meeting.
SECTION 7. Transfer Agents and Registrars. The Board may
appoint, or authorize any officer or officers to appoint, one or more transfer
agents and one or more registrars.
ARTICLE VIII
Seal
The Board shall provide a suitable corporate seal, which shall
be in the form of a circle and shall bear the full name of the Corporation and
shall be in the charge of the Secretary. The seal may be used by causing it or a
facsimile thereof to be impressed or affixed or in any other manner reproduced.
ARTICLE IX
Fiscal Year
The fiscal year of the Corporation shall end on the 31st day
of December in each year.
ARTICLE X
Waiver of Notice
Whenever any notice whatsoever is required to be given by
these By-laws, by the Certificate or by law, the person entitled thereto may,
either before or after the meeting or other matter in respect of which such
notice is to be given, waive such notice in writing or as otherwise permitted by
law, which shall be filed with or entered upon the records of the meeting or the
records kept with respect to such other matter, as the case may be, and in such
event such notice need not be given to such person and such waiver shall be
deemed equivalent to such notice.
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 Corporation to whom power in respect of financial operations shall have been
delegated by the Board or any such committee or in these By-laws shall select.
SECTION 3. Checks. All checks, drafts and other orders for the
payment of money out of the funds of the Corporation, and all notes or other
evidences of indebtedness of the Corporation, shall be signed on behalf of the
Corporation in such manner as shall from time to time be determined by
resolution of the Board or of any committee thereof or by any officer of the
Corporation to whom power in respect of financial operations shall have been
delegated by the Board or any such committee thereof or as set forth in these
By-laws.
SECTION 4. Proxies in Respect of Stock or Other Securities of
Other Corporations. The Board or any committee thereof shall designate the
officers of the Corporation who shall have authority from time to time to
appoint an agent or agents of the Corporation to exercise in the name and on
behalf of the Corporation the powers and rights which the Corporation may have
as the holder of stock or other securities in any other corporation or other
entity, and to vote or consent in respect of such stock or securities; such
designated officers may instruct the person or persons so appointed as to the
manner of exercising such powers and rights; and such designated officers may
execute or cause to be executed in the name and on behalf of the Corporation and
under its corporate seal, or otherwise, such written proxies, powers of attorney
or other instruments as they may deem necessary or proper in order that the
Corporation may exercise its said powers and rights.
SECTION 5. Subject to Law and Certificate of Incorporation.
All powers, duties and responsibilities provided for in these By-laws, whether
or not explicitly so qualified, are qualified by the provisions of the
Certificate and applicable laws.
<TABLE>
TABLE OF CONTENTS
Page
<S> <C>
ARTICLE I FORMATION OF HOLDING COMPANY AND SUBSIDIARIES..........................2
1.1 ORGANIZATION OF HOLDCO.........................................2
1.2 DIRECTORS AND OFFICERS OF HOLDCO...............................2
1.3 ORGANIZATION OF MERGER SUBSIDIARIES............................2
1.4 ACTIONS OF DIRECTORS AND OFFICERS..............................3
1.5 ACTIONS OF TIME WARNER AND AMERICA ONLINE......................3
ARTICLE II THE MERGERS; CERTAIN RELATED MATTERS..................................3
2.1 THE MERGERS....................................................3
2.2 CLOSING........................................................4
2.3 EFFECTIVE TIME.................................................4
2.4 EFFECTS OF THE MERGERS.........................................4
2.5 CHARTERS AND BYLAWS............................................4
2.6 OFFICERS AND DIRECTORS.........................................5
2.7 EFFECT ON TIME WARNER CAPITAL STOCK............................5
2.8 TIME WARNER STOCK OPTIONS AND OTHER EQUITY-BASED AWARDS........7
2.9 CERTAIN ADJUSTMENTS............................................9
2.10 TIME WARNER APPRAISAL RIGHTS...................................9
2.11 EFFECT ON AMERICA ONLINE COMMON STOCK.........................10
2.12 AMERICA ONLINE STOCK OPTIONS AND OTHER EQUITY-BASED AWARDS....11
ARTICLE III EXCHANGE OF CERTIFICATES............................................12
3.1 EXCHANGE FUND.................................................12
3.2 EXCHANGE PROCEDURES...........................................12
3.3 DISTRIBUTIONS WITH RESPECT TO UNEXCHANGED SHARES..............13
3.4 NO FURTHER OWNERSHIP RIGHTS IN TIME WARNER CAPITAL STOCK
OR AMERICA ONLINE COMMON STOCK................................13
3.5 NO FRACTIONAL SHARES OF HOLDCO CAPITAL STOCK..................14
3.6 TERMINATION OF EXCHANGE FUND..................................14
3.7 NO LIABILITY..................................................15
3.8 INVESTMENT OF THE EXCHANGE FUND...............................15
3.9 LOST CERTIFICATES.............................................15
3.10 WITHHOLDING RIGHTS............................................15
3.11 FURTHER ASSURANCES............................................15
3.12 STOCK TRANSFER BOOKS..........................................16
ARTICLE IV REPRESENTATIONS AND WARRANTIES.......................................16
4.1 REPRESENTATIONS AND WARRANTIES OF AMERICA ONLINE..............16
(a) Organization, Standing and Power; Subsidiaries...........16
(b) Capital Structure........................................17
(c) Authority; No Conflicts..................................18
(d) Reports and Financial Statements.........................20
(e) Information Supplied.....................................21
(f) Board Approval...........................................21
(g) Vote Required............................................22
(h) Litigation; Compliance with Laws.........................22
(i) Absence of Certain Changes or Events.....................22
(j) Intellectual Property; Year 2000.........................23
(k) Brokers or Finders.......................................24
(l) Opinion of America Online Financial Advisor..............24
(m) Taxes....................................................24
(n) Certain Contracts........................................25
(o) America Online Stockholder Rights Plan...................25
(p) Employee Benefits........................................25
4.2 REPRESENTATIONS AND WARRANTIES OF TIME WARNER.................26
(a) Organization, Standing and Power; Subsidiaries...........26
(b) Capital Structure........................................27
(c) Authority; No Conflicts..................................29
(d) Reports and Financial Statements.........................30
(e) Information Supplied.....................................30
(f) Board Approval...........................................31
(g) Vote Required............................................31
(h) Litigation; Compliance with Laws.........................32
(i) Absence of Certain Changes or Events.....................32
(j) Intellectual Property; Year 2000.........................32
(k) Brokers or Finders.......................................33
(l) Opinion of Time Warner Financial Advisor.................33
(m) Taxes....................................................34
(n) Certain Contracts........................................34
(o) Time Warner Stockholder Rights Plan......................34
(p) Employee Benefits........................................34
ARTICLE V COVENANTS RELATING TO CONDUCT OF BUSINESS.............................35
5.1 COVENANTS OF AMERICA ONLINE...................................35
(a) Ordinary Course..........................................35
(b) Dividends; Changes in Share Capital......................36
(c) Issuance of Securities...................................36
(d) Governing Documents......................................36
(e) No Acquisitions..........................................37
(f) No Dispositions..........................................37
(g) Investments; Indebtedness................................37
(h) Tax-Free Qualification...................................38
(i) Compensation.............................................38
(j) Accounting Methods; Income Tax Elections.................39
(k) Certain Agreements and Arrangements......................39
(l) Satisfaction of Closing Conditions.......................39
(m) No Related Actions.......................................39
5.2 COVENANTS OF TIME WARNER......................................39
(a) Ordinary Course..........................................40
(b) Dividends; Changes in Share Capital......................40
(c) Issuance of Securities...................................41
(d) Governing Documents......................................41
(e) No Acquisitions..........................................41
(f) No Dispositions..........................................42
(g) Investments; Indebtedness................................42
(h) Tax-Free Qualification...................................43
(i) Compensation.............................................43
(j) Accounting Methods; Income Tax Elections.................43
(k) Certain Agreements and Arrangements......................44
(l) Satisfaction of Closing Conditions.......................44
(m) No Related Actions.......................................44
5.3 GOVERNMENTAL FILINGS..........................................44
5.4 CONTROL OF OTHER PARTY'S BUSINESS.............................44
ARTICLE VI ADDITIONAL AGREEMENTS................................................45
6.1 PREPARATION OF PROXY STATEMENT; STOCKHOLDERS MEETINGS.........45
6.2 HOLDCO BOARD OF DIRECTORS; EXECUTIVE OFFICERS.................48
6.3 ACCESS TO INFORMATION.........................................48
6.4 REASONABLE BEST EFFORTS.......................................48
6.5 ACQUISITION PROPOSALS.........................................51
6.6 FEES AND EXPENSES.............................................53
6.7 DIRECTORS'AND OFFICERS'INDEMNIFICATION AND INSURANCE..........53
6.8 PUBLIC ANNOUNCEMENTS..........................................55
6.9 LISTING OF SHARES OF HOLDCO COMMON STOCK......................55
6.10 RIGHTS AGREEMENTS.............................................55
6.11 AFFILIATES....................................................56
6.12 SECTION 16 MATTERS............................................56
6.13 AMERICA ONLINE INDEBTEDNESS AND TIME WARNER INDEBTEDNESS......57
ARTICLE VII CONDITIONS PRECEDENT................................................57
7.1 CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT ITS RESPECTIVE
MERGER........................................................57
(a) Stockholder Approval.....................................57
(b) No Injunctions or Restraints, Illegality.................57
(c) HSR Act; EC Merger Regulation; Canadian Investment
Regulations..............................................58
(d) FCC Approvals............................................58
(e) Cable Franchising Authorities and PUCs Approvals.........58
(f) NYSE Listing.............................................58
(g) Effectiveness of the Form S-4............................58
7.2 ADDITIONAL CONDITIONS TO OBLIGATIONS OF AMERICA ONLINE........58
(a) Representations and Warranties...........................59
(b) Performance of Obligations of Time Warner................59
(c) Tax Opinion..............................................59
(d) Time Warner Conditions...................................59
7.3 ADDITIONAL CONDITIONS TO OBLIGATIONS OF TIME WARNER...........59
(a) Representations and Warranties...........................59
(b) Performance of Obligations of America Online.............60
(c) Tax Opinion..............................................60
(d) America Online Conditions................................60
ARTICLE VIII TERMINATION AND AMENDMENT..........................................60
8.1 TERMINATION...................................................60
8.2 EFFECT OF TERMINATION.........................................62
8.3 AMENDMENT.....................................................64
8.4 EXTENSION; WAIVER.............................................64
ARTICLE IX GENERAL PROVISIONS...................................................64
9.1 NON-SURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS....64
9.2 NOTICES.......................................................64
9.3 INTERPRETATION................................................65
9.4 COUNTERPARTS..................................................66
9.5 ENTIRE AGREEMENT; NO THIRD PARTY BENEFICIARIES................66
9.6 GOVERNING LAW.................................................66
9.7 SEVERABILITY..................................................66
9.8 ASSIGNMENT....................................................67
9.9 SUBMISSION TO JURISDICTION; WAIVERS...........................67
9.10 ENFORCEMENT...................................................67
9.11 DEFINITIONS...................................................67
</TABLE>
LIST OF EXHIBITS
Exhibit Title
Exhibit A Stock Option Agreement for Time Warner
Exhibit B Stock Option Agreement for America Online
Exhibit C Voting Agreement
Exhibit D-1 Form of Restated Certificate of Incorporation of Holdco
Exhibit D-2 Form of Bylaws of Holdco
Exhibit 6.11 Form of Affiliate Agreement
Exhibit 7.2(c)(1) Form of Holdco Representations Letters
Exhibit 7.2(c)(2) Form of America Online Representations Letter
Exhibit 7.2(c)(3) Form of Time Warner Representations Letter
Exhibit 10.1
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").
W I T N E S S E 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, of Issuer ("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 of Issuer Common Stock (representing 19.9%
of the outstanding shares of Issuer 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 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 issuance, such number together
with any shares of Issuer Common Stock previously issued 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 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 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 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 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 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 INC. 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 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 3.1 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.
ARTICLE III
ADJUSTMENT UPON CHANGES IN CAPITALIZATION
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 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 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 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 of Issuer (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
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 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 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 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 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 if Issuer 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, 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 of Issuer'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 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 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 Issues 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 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 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:
America Online, Inc.
22000 AOL Way
Dulles, Virginia
Attention: Paul T. Cappuccio, Esq.
with a copy to:
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, New York 10017
Attention: Richard I. Beattie, Esq.
(b) if to Issuer to:
Time Warner Inc.
75 Rockefeller Plaza
New York, NY 10019
Attention: Christopher P. Bogart, Esq.
with a copy to:
Cravath, Swaine & Moore
Worldwide Plaza
825 Eighth Avenue
New York, New York 10019
Attention: Robert A. Kindler, 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 of law
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.
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 of law 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]
IN WITNESS WHEREOF, Grantee and Issuer have caused this
Agreement to be duly executed as of the date first above written.
AMERICA ONLINE, INC.
By: /s/ Stephen M. Case
Name: Stephen M. Case
Title: Chairman & Chief Executive Officer
TIME WARNER INC.
By: /s/ Gerald M. Levin
Name: Gerald M. Levin
Title: Chairman & Chief Executive Officer
Exhibit 10.2
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").
W I T N E S S E 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, of Issuer ("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 of Issuer Common Stock (representing 19.9%
of the 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 issuance, such number together
with any shares of Issuer Common Stock previously issued 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 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, 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 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 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 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 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 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 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 AMERICA ONLINE, INC. 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 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 3.1 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.
ARTICLE III
ADJUSTMENT UPON CHANGES IN CAPITALIZATION
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 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 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 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 of Issuer (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
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 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 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 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 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 if Issuer 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, 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 of Issuer'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) of the 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 of Issuer 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 of Issuer 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 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 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 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 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
Attention: Christopher P. Bogart, Esq.
with a copy to:
Cravath, Swaine & Moore
Worldwide Plaza
825 Eighth Avenue
New York, New York 10019
Attention: Robert A. Kindler, Esq.
(b) if to Issuer to:
America Online, Inc.
22000 AOL Way
Dulles, Virginia
Attention: Paul T. Cappuccio, Esq.
with a copy to:
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, New York 10017
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 of law
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.
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 of law 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.
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IN WITNESS WHEREOF, Grantee and Issuer have caused this
Agreement to be duly executed as of the date first above written.
AMERICA ONLINE, INC.
By: /s/ Stephen M. Case
Name: Stephen M. Case
Title: Chairman & Chief Executive Officer
TIME WARNER INC.
By: /s/ Gerald M. Levin
Name: Gerald M. Levin
Title: Chairman & Chief Executive Officer
Exhibit 10.3
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").
W I T N E S S E 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 "Merger 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 counted 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.
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 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 3.1(c)) to comply with and perform all its
obligations under this Agreement.
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
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
Attention: Richard I. Beattie, Esq.
(b) if to a Stockholder, as provided on the
signature page hereof.
4.4 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.
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 of law 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.
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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.
AMERICA ONLINE, INC.
By: /s/ Stephen M. Case
Name: Stephen M. Case
Title: Chairman &
Chief Executive Officer
By: /s/ R.E. Turner, III
Name: R.E. Turner, III
Number of Existing Shares: 95,843,076
Notices
Address: One CNN Center
Box 105366
Atlanta, GA 30348-5366
Attention:R.E. Turner, III
TURNER PARTNERS, L.P.
By: /s/ R.E. Turner, III
Name: R.E. Turner, III
Title: General Partner
Number of Existing Shares: 6,028,896
Notices
Address: One CNN Center
Box 105366
Atlanta, GA 30348-5366
Attention: R.E. Turner, III
ROBERT E. TURNER CHARITABLE
REMAINDER UNITRUST NO. 2
By: /s/ R.E. Turner, III
Name: R.E. Turner, III
Title: Trustee
Number of Existing Shares: 2,600,998
Notices
Address: One CNN Center
Box 105366
Atlanta, GA 30348-5366
Attention:R.E. Turner, III
TURNER OUTDOOR, INC.
By: /s/ R.E. Turner, III
Name: R.E. Turner, III
Title: General Partner
Number of Existing Shares: 579,884
Notices
Address: One CNN Center
Box 105366
Atlanta, GA 30348-5366
Attention:R.E. Turner, III
Exhibit 99.1
AOL & Time Warner Will Merge To Create World's First Internet-Age Media &
Communications Company
AOL Time Warner Will Be Premier Global Company Delivering Branded Information,
Entertainment and Communications Across Rapidly Converging Media Platforms and
Changing Technology.
DULLES, VIRGINIA and NEW YORK, NEW YORK January 10, 2000 - America Online, Inc.
[NYSE:AOL] and Time Warner Inc. [NYSE:TWX] today announced a strategic merger of
equals to create the world's first fully integrated media and communications
company for the Internet Century in an all-stock combination valued at $350
billion.
To be named AOL Time Warner Inc. with combined revenues of over $30 billion,
this unique new enterprise will be the premier global company delivering branded
information, entertainment and communications services across rapidly converging
media platforms.
The merger will combine Time Warner's vast array of world-class media,
entertainment and news brands and its technologically advanced broadband
delivery systems with America Online's extensive Internet franchises, technology
and infrastructure, including the world's premier consumer online brands, the
largest community in cyberspace, and unmatched e-commerce capabilities. AOL Time
Warner's unparalleled resources of creative and journalistic talent, technology
assets and expertise, and management experience will enable the new company to
dramatically enhance consumers' access to the broadest selection of high-quality
content and interactive services.
By merging the world's leading Internet and media companies, AOL Time Warner
will be uniquely positioned to speed the development of the interactive medium
and the growth of all its businesses. The new company will provide an important
new broadband distribution platform for America Online's interactive services
and drive subscriber growth through cross-marketing with Time Warner's
pre-eminent brands.
AOL Time Warner's brands will include AOL, Time, CNN, CompuServe, Warner Bros.,
Netscape, Sports Illustrated, People, HBO, ICQ, AOL Instant Messenger, AOL
MovieFone, TBS, TNT, Cartoon Network, Digital City, Warner Music Group, Spinner,
Winamp, Fortune, AOL.COM, Entertainment Weekly, and Looney Tunes. In addition to
fully integrating its brands into a digital environment and bringing them closer
to consumers, AOL Time Warner will have a wealth of creative resources to
develop products specifically suited to interactive media.
Under the terms of a definitive merger agreement approved by unanimous votes at
meetings of each company's board of directors, Time Warner and America Online
stock will be converted to AOL Time Warner stock at fixed exchange ratios. The
Time Warner shareholders will receive 1.5 shares of AOL Time Warner for each
share of Time Warner stock they own. America Online shareholders will receive
one share of AOL Time Warner stock for each share of America Online stock they
own. The merger will be effected on a tax-free basis to shareholders. When
complete, America Online's shareholders will own approximately 55% and Time
Warner's shareholders will own approximately 45% of the new company. The stock
will be traded under the symbol AOL on the New York Stock Exchange.
The merger will be accounted for as a purchase transaction and is expected to be
accretive to America Online's cash earnings per share before the amortization of
goodwill. This transaction is subject to certain closing conditions, including
regulatory approvals and the approval of America Online and Time Warner
shareholders, and is expected to close by the end of the year. Mr. Ted Turner,
Vice Chairman of Time Warner, has agreed to vote his Time Warner shares,
representing approximately 9% of the company's outstanding common stock, in
favor of the merger.
Steve Case, Chairman and Chief Executive Officer of America Online, will become
Chairman of the Board of the new company. Gerald M. Levin, Time Warner's
Chairman and Chief Executive Officer, will become AOL Time Warner's Chief
Executive Officer. As Chairman, Mr. Case will play an active role in helping to
build and lead AOL Time Warner, focusing particularly on the technological
developments and policy initiatives driving the global expansion of the
interactive medium. As Chief Executive Officer, Mr. Levin will set the company's
strategy, working closely with Mr. Case, and will oversee the management of the
company. Mr. Levin will report to the board consisting of 16 members, with eight
appointed by each of the current America Online and Time Warner boards.
Mr. Turner will become Vice Chairman of AOL Time Warner. Time Warner President
Richard Parsons and America Online President and Chief Operating Officer Bob
Pittman will be co-Chief Operating Officers of AOL Time Warner. J. Michael
Kelly, Senior Vice President and Chief Financial Officer of America Online, will
become the new company's Chief Financial Officer and Executive Vice President. A
four-person integration committee, composed of Messrs. Pittman; Parsons; Kenneth
J. Novack, America Online's Vice Chairman; and Richard Bressler, Chairman and
Chief Executive Officer of Time Warner Digital Media, has been formed to ensure
a smooth and rapid combination of the two companies. The Committee will make its
recommendations to Messrs. Case and Levin. Messrs. Parsons, Pittman and Kelly
will report to Mr. Levin.
Building a New Medium for the New Millennium
Mr. Case said: "This is an historic moment in which new media has truly come of
age. We've always said that America Online's mission is to make the Internet as
central to people's lives as the telephone and television, and even more
valuable, and this is a once-in-a-lifetime opportunity to turn this promise into
reality. We're kicking off the new century with a unique new company that has
unparalleled assets and the ability to have a profoundly positive impact on
society. By joining forces with Time Warner, we will fundamentally change the
way people get information, communicate with others, buy products and are
entertained - providing far-reaching benefits to our customers and shareholders.
Mr. Case added: "We have tremendous respect for Jerry Levin and Time Warner
management, who have built the world's pre-eminent media company and have
fostered an entrepreneurial culture that will mesh well with our own. Time
Warner is the first major media company to not only recognize, but also fully
embrace the interactive medium. I look forward to working with them to build the
most valued and respected company in the world. By mobilizing the combined
creative energies and extraordinary management talent of both companies, we will
bring customers around the world an unmatched array of interactive services,
with enriched multi-media content and e-commerce opportunities."
Mr. Levin said: "This strategic combination with AOL accelerates the digital
transformation of Time Warner by giving our creative and content businesses the
widest possible canvas. The digital revolution has already begun to create
unprecedented and instantaneous access to every form of media and to unleash
immense possibilities for economic growth, human understanding and creative
expression. AOL Time Warner will lead this transformation, improving the lives
of consumers worldwide."
Mr. Levin added: "I look forward to partnering with Steve Case - a visionary
leader of the Internet - and his impressive management team. The opportunities
are limitless for everyone connected to AOL Time Warner - shareholders,
consumers, advertisers, the creative and talented people who drive our success,
and the global audiences we serve."
Mr. Pittman said: "The value of this merger lies not only in what it is today
but in what it will be in the future. We believe that AOL Time Warner will
provide companies worldwide with a convenient, one-stop way to put advertising
and commerce online as well as take advantage of the best in traditional
marketing. We will accelerate the development of Time Warner's cable broadband
assets by bringing AOL's hallmark ease-of-use to this platform. We expect
America Online to help drive the growth of cable broadband audiences, and we
will use our combined infrastructure and cross-promotional strengths to enhance
the growth and development of both America Online and Time Warner brands around
the world."
Mr. Parsons said: "This is a defining event for Time Warner and America Online
as well as a pivotal moment in the unfolding of the Internet age. By joining the
resources and talents of these two highly creative companies, we can accelerate
the development and deployment of a whole new generation of interactive services
and content. The heightened competition and expanded choices this will bring
about will be of great benefit to consumers. For the creative and innovative
people who are the lifeblood of our companies, it means a truly exciting range
of new opportunities to explore and give shape to. For our shareholders, it
means we'll be able to grow in ways we couldn't have as separate companies,
producing superior returns in both the short and long term."
New Marketing, Commerce, Content and Promotional Agreements
Separate from the merger transaction, America Online and Time Warner also
announced new marketing, commerce, content and promotional agreements that will
immediately expand various relationships already in place between the two
companies. These include:
- - The AOL service will feature Time Warner's popular InStyle magazine, expanding
on the popular content Time Warner already offers AOL members from People,
Teen People, Entertainment Weekly and other content currently on the service.
- - CNN.com and Entertaindom.com programming will be featured prominently on
various America Online services.
- - AOL members will have access to a wide range of Time Warner promotional music
clips from Time Warner's unparalleled selection of popular artists.
- - Time Warner and AOL MovieFone will participate in online-offline
cross-promotion of Time Warner movies and related content, including live
events.
- - Broadband CNN news content will be distributed on AOL Plus, the rich media
content offering designed for AOL members connecting via broadband, when it
launches this spring.
- - Time Warner will offer a number of special offers exclusively for AOL members,
which will include everything from discounts on magazine subscriptions to
premium cable subscriptions and movie passes.
- - Building on the companies' current offline cross-promotional activities,
including keywords on popular magazines like People and Teen People, Time
Warner will dramatically expand cross-promotion of AOL in a number of their
top offline media properties.
- - The popular Warner Bros. retail stores will promote the AOL service, including
through the in-store distribution of AOL disks.
- - Time Warner will include AOL disks in promotional mailings and product
shipments.
- - America Online will make available on Road Runner popular America Online
brands and products, including AOL Instant Messenger, Digital City, AOL Search
and AOL MovieFone.
The companies also said, with respect to broadband access, that AOL Time Warner
will be committed to ensuring consumer choice of ISPs and content and that they
hope this merger will persuade all companies operating broadband platforms to
provide consumers with real choice.
Combination Creates Full Range of Growth Opportunities
In addition to today's announcements, America Online and Time Warner will have
many other opportunities to combine their assets to create unique new expanded
services to drive increased consumer usage, and marketing and promotion
capabilities to fuel rapid growth for their shareholders and employees. These,
among others, include:
Music: The combination of Time Warner's prestigious music labels and roster of
established stars and new artists with America Online's online marketing and
e-commerce capacities will create powerful music destinations.
Entertainment: America Online's AOL TV and MovieFone combined with Time Warner's
cable networks and Warner Bros. movies and television will provide valuable
programming, cross-promotional, and e-commerce opportunities.
Broadband: AOL Time Warner's ability to offer the finest content will expand the
already growing number of consumers seeking to access the Internet at high
speeds via cable modem, DSL, wireless or satellite.
News: AOL Time Warner will continue to enhance its online news offering with the
world's most recognized and respected news media, including CNN, Time, and local
all-news channels such as NY1 News.
Technology: AOL Time Warner will be able to develop and leverage technology
across all of the businesses, creating new opportunities to expand services and
share infrastructure.
Telephony: For businesses and consumers, AOL Time Warner will offer a major
communications platform that combines America Online's popular instant messaging
products with Time Warner's ability to offer local telephony over cable.
About America Online, Inc.
Founded in 1985, America Online, Inc., based in Dulles, Virginia, is the world's
leader in interactive services, Web brands, Internet technologies, and
e-commerce services. America Online, Inc. operates: two worldwide Internet
services, America Online, with more than 20 million members, and CompuServe,
with more than 2.2 million members; several leading Internet brands including
ICQ, AOL Instant Messenger and Digital City, Inc.; the Netscape Netcenter and
AOL.COM portals; the Netscape Navigator and Communicator browsers; AOL
MovieFone, the nation's # 1 movie listing guide and ticketing service; and
Spinner Networks and NullSoft, Inc., leaders in Internet music. Through its
strategic alliance with Sun Microsystems, the company develops and offers
easy-to-deploy, end-to-end e-commerce and enterprise solutions for companies
operating in the Net Economy.
About Time Warner Inc.
Time Warner Inc. (NYSE: TWX, www.timewarner.com) is the world's leading media
company. Its businesses: cable networks, publishing, music, filmed
entertainment, cable and digital media.
Editor's Note:
An audio feed of the America Online/Time Warner press conference at 11 am EST
Monday, January 10, 2000 will be available to the media by calling 888-469-1386
(US) or 1-712-271-0747 (international) - Password: AOL. Webcasts of the press
conference will be available at http://www.corp.aol.com/cgi/announce.html and
http://www.timewarner.com
A live satellite feed will begin Monday at 6:45 am EST with logos and b-roll of
both companies being broadcast until approximately 11:00 am EST. At that time,
live coverage of the press conference including the question-and-answer session
will begin. After the live broadcast, the companies' logos and b-roll, as well
as selected highlights of the press conference, will be re-broadcast (1:00-3:00
pm EST). Satellite Coordinates: Galaxy 7, Transponder 2, C-Band Downlink
Frequency 3740 Vertical.
This release contains forward-looking statements within the meaning of the "safe
harbor" provisions of the Private Securities Litigation Reform Act of 1995.
These statements are based on management's current expectations or beliefs and
are subject to a number of factors and uncertainties that could cause actual
results to differ materially from those described in the forward-looking
statements. The forward-looking statements in this release address the following
subjects: expected date of closing the merger; future financial and operating
results; and timing and benefits of the merger.
The following factors, among others, could cause actual results to differ
materially from those described in the forward-looking statements: the risk that
the America Online's and Time Warner's businesses will not be integrated
successfully; costs related to the merger; failure of the America Online or Time
Warner stockholders to approve the merger; inability to obtain, or meet
conditions imposed for, governmental approvals for the merger; inability to
further identify, develop and achieve commercial success for new products,
services and technologies; increased competition and its effects on pricing,
spending, third-party relationships, the subscriber base and revenues; inability
to establish and maintain relationships with commerce, advertising, marketing,
technology and content providers; risk of accepting warrants in certain
agreements; risks of new and changing regulation in the U.S. and
internationally.
For a detailed discussion of these and other cautionary statements, please refer
to America Online's filings with the Securities and Exchange Commission,
especially in the "Forward-Looking Statements" section of the Management's
Discussion and Analysis section of the Company's Form 10-K for the fiscal year
ended June 30, 1999 and the Risk Factors section of the Company's S-3 filing
that became effective in November 1999, and Time Warner's filings with the
Securities and Exchange Commission, including the section titled "Caution
Concerning Forward-Looking Statements" of the Management's Discussion and
Analysis in its Form 10-K for the year ended December 31, 1998.
# # #
