EXECUTION COPY
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AGREEMENT AND PLAN OF MERGER
DATED AS OF JANUARY 10, 2000
BETWEEN
AMERICA ONLINE, INC.
AND
TIME WARNER INC.
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TABLE OF CONTENTS
Page
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.........................................5
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.....8
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.........................................13
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.................................14
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..........................................16
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.....................................24
(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......................31
(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.................................................33
(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...................35
(c) Issuance of Securities................................36
(d) Governing Documents...................................36
(e) No Acquisitions.......................................36
(f) No Dispositions.......................................37
(g) Investments; Indebtedness.............................37
(h) Tax-Free Qualification................................38
(i) Compensation..........................................38
(j) Accounting Methods; Income Tax Elections..............38
(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.......................................39
(b) Dividends; Changes in Share Capital...................40
(c) Issuance of Securities................................40
(d) Governing Documents...................................41
(e) No Acquisitions.......................................41
(f) No Dispositions.......................................41
(g) Investments; Indebtedness.............................41
(h) Tax-Free Qualification................................42
(i) Compensation..........................................42
(j) Accounting Methods; Income Tax Elections..............43
(k) Certain Agreements and Arrangements...................43
(l) Satisfaction of Closing Conditions....................43
(m) No Related Actions....................................43
5.3 Governmental Filings........................................43
5.4 Control of Other Party's Business...........................44
ARTICLE VI ADDITIONAL AGREEMENTS................................44
6.1 Preparation of Proxy Statement; Stockholders Meetings.......44
6.2 Holdco Board of Directors; Executive Officers...............47
6.3 Access to Information.......................................47
6.4 Reasonable Best Efforts.....................................48
6.5 Acquisition Proposals.......................................50
6.6 Fees and Expenses...........................................52
6.7 Directors' and Officers' Indemnification and Insurance......52
6.8 Public Announcements........................................54
6.9 Listing of Shares of Holdco Common Stock....................54
6.10 Rights Agreements...........................................54
6.11 Affiliates..................................................55
6.12 Section 16 Matters..........................................56
6.13 America Online and Time Warner Indebtedness.................56
ARTICLE VII CONDITIONS PRECEDENT.................................56
7.1 Conditions to Each Party's Obligation to Effect its
Respective Merger...........................................56
(a) Stockholder Approval..................................56
(b) No Injunctions or Restraints, Illegality..............57
(c) HSR Act; EC Merger Regulation; Canadian Investment
Regulations...........................................57
(d) FCC Approvals.........................................57
(e) Cable Franchising Authorities and PUCs Approvals......57
(f) NYSE Listing..........................................57
(g) Effectiveness of the Form S-4.........................57
7.2 Additional Conditions to Obligations of America Online. ...58
(a) Representations and Warranties........................58
(b) Performance of Obligations of Time Warner.............58
(c) Tax Opinion...........................................58
7.3 Additional Conditions to Obligations of Time Warner.........58
(a) Representations and Warranties........................59
(b) Performance of Obligations of America Online..........59
(c) Tax Opinion...........................................59
(d) America Online Conditions.............................59
ARTICLE VIII TERMINATION AND AMENDMENT............................59
8.1 Termination.................................................59
8.2 Effect of Termination.......................................61
8.3 Amendment...................................................63
8.4 Extension; Waiver...........................................63
ARTICLE IX GENERAL PROVISIONS...................................63
9.1 Non-Survival of Representations, Warranties and Agreements..63
9.2 Notices.....................................................63
9.3 Interpretation..............................................64
9.4 Counterparts................................................65
9.5 Entire Agreement; No Third Party Beneficiaries..............65
9.6 Governing Law...............................................65
9.7 Severability................................................65
9.8 Assignment..................................................65
9.9 Submission to Jurisdiction; Waivers.........................66
9.10 Enforcement.................................................66
9.11 Definitions.................................................66
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
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.
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:
Each Share of the Specified Number and Class or Series of
Class or Series of Time Warner Shares of Holdco Capital Stock
Capital Stock Into Which Converted
- --------------------------------- ---------------------------------
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 1.5 shares of Series LMCN-V Common
Common.......................... Stock, par value $0.01 per share, of
Stock, par value $0.01 per share Holdco ("Holdco Series LMCN-V
("Time Warner Series LMCN-V Common Stock"); provided that the
Common Stock") "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,
Stock, par value $0.01 per share par value $0.01 per share, of Holdco
("Time Warner Series LMC Common ("Holdco 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, Preferred Stock, par value $0.10 per
value $0.10 per share share, of Holdco ("Holdco Series E
("Time Warner Series E Preferred Preferred Stock")
Stock")
Time Warner Series F Convertible.... One share of Series F Convertible
Preferred Stock, Preferred Stock, par value $0.10 per
value $0.10 per share share, of Holdco ("Holdco Series F
("Time Warner Series F Preferred Preferred Stock")
Stock")
Time Warner Series I Convertible.. One share of Series I Convertible
Preferred Stock, Preferred Stock, par value $0.10 per
value $0.10 per share share, of Holdco ("Holdco Series I
("Time Warner Series F Preferred Preferred Stock")
Stock")
Time Warner Series J Convertible...... One share of Series J Convertible
Preferred Stock, Preferred Stock, par value $0.10 per
par value $0.10 per share ("Time share, of Holdco ("Holdco Series J
Warner Series J Preferred Stock" Preferred Stock" and, together with
and together, with Time Warner Holdco Common Stock, Holdco Series
Series E Preferred Stock, Time LMCN-V Common Stock, Holdco Series LMC
Warner Series F Preferred Stock Common Stock, Holdco Series E
and Time Warner Series I Preferred Preferred Stock, Holdco Series F
Stock, the "Time Warner Preferred Preferred Stock and Holdco Series I
Stock") Preferred Stock, the "Holdco Capital
Stock")
The Time Warner Series LMCN-V Common Stock and the Time Warner
Series LMC Common Stock are referred to herein collectively as the "Time
Warner Series Common Stock." The Time Warner Common Stock, the Time Warner
Series Common Stock and the Time Warner Preferred Stock are referred to herein
collectively as the "Time Warner Capital Stock." The shares of Holdco Capital
Stock into which shares of Time Warner Capital Stock are converted pursuant to
the foregoing are referred to herein collectively as the "Time Warner Merger
Consideration."
As a result of the Time Warner Merger and without any action on the
part of the holders thereof, at the Effective Time, all shares of Time Warner
Capital Stock shall cease to be outstanding and shall be canceled and retired
and shall cease to exist, and each holder of a certificate which immediately
prior to the Effective Time represented any such shares of Time Warner Capital
Stock (such certificate or other evidence of ownership, a "Time Warner
Certificate") shall thereafter cease to have any rights with respect to such
shares of Time Warner Capital Stock, except the right (subject to Section
2.10) to receive the applicable Time Warner Merger Consideration with respect
thereto and any cash in lieu of fractional shares of applicable Holdco Capital
Stock with respect thereto to be issued in consideration therefor and any
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 (B) the opportunity to participate in all negotiations and
proceedings with respect to demands under the DGCL consistent with the
obligations of Time Warner thereunder. Time Warner shall not, except with the
prior written consent of America Online, (x) make any payment with respect to
any such demand, (y) offer to settle or settle any such demand or (z) waive
any failure to timely deliver a written demand for appraisal or timely take
any other action to perfect appraisal rights in accordance with the DGCL.
2.11 Effect on America Online Common Stock. As of the Effective
Time, by virtue of the America Online Merger and without any action on the
part of the holder of any shares of America Online Common Stock or any shares
of capital stock of America Online Merger Sub:
(a) Capital Stock of America Online Merger Sub. Each issued and
outstanding share of common stock, par value $0.01 per share, of America
Online Merger Sub shall be converted into the right to receive one fully paid
and nonassessable share of common stock, par value $0.01 per share, of the
surviving corporation in the America Online Merger.
(b) Cancellation 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 Option 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 wilful and material breach of this Agreement.
(b) If (A) (I) either party shall terminate this Agreement pursuant
to Section 8.1(d) (provided that the basis for such termination is the failure
of Time Warner's stockholders to adopt this Agreement) or pursuant to Section
8.1(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
Fax: (703) 265-1495
Attention: Paul T. Cappuccio, Esq.
with a copy to:
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, New York 10017
Fax: (212) 455-2502
Attention: Richard I. Beattie, Esq.
(b) if to Time Warner to:
Time Warner Inc.
75 Rockefeller Plaza
New York, NY 10019
Fax: (212) 265-2646
Attention: Christopher P. Bogart, Esq.
with a copy to:
Cravath, Swaine & Moore
Worldwide Plaza
825 Eighth Avenue
New York, New York 10019
Fax: (212) 474-3700
Attention: Robert A. Kindler, Esq.
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 and Chief
Executive Officer
TIME WARNER INC.
By: /s/ Gerald M. Levin
------------------------------
Name: Gerald M. Levin
Title: Chairman and Chief
Executive Officer
EXHIBIT D-1 TO THE
MERGER AGREEMENT
RESTATED CERTIFICATE OF INCORPORATION
OF
AOL TIME WARNER INC.
ARTICLE I
The name of the corporation (hereinafter called the "Corporation")
is AOL TIME WARNER INC.
ARTICLE II
The address of the corporation's registered office in the State of
Delaware is 1013 Centre Road, City of Wilmington, County of New Castle. The
name of the Corporation's registered agent at such address is Corporation
Service Company.
ARTICLE III
The purpose of the Corporation is to engage in any lawful act or
activity for which corporations may be organized under the General Corporation
Law of the State of Delaware.
ARTICLE IV
SECTION 1. The total number of shares of all classes of stock which
the Corporation shall have authority to issue is 27.55 billion shares,
consisting of (1) 750 million shares of Preferred Stock, par value $0.10 per
share ("Preferred Stock"), (2) 25 billion shares of Common Stock, par value
$0.01 per share("Common Stock"), and (3) 1.8 billion shares of Series Common
Stock, par value $0.01 per share ("Series Common Stock"). The number of
authorized shares of any of the Preferred Stock, the Common Stock or the
Series Common Stock may be increased or decreased (but not below the number of
shares thereof then outstanding) by the affirmative vote of the holders of a
majority in voting power of the stock of the Corporation entitled to vote
thereon irrespective of the provisions of Section 242(b)(2) of the General
Corporation Law of the State of Delaware (or any successor provision thereto),
and no vote of the holders of any of the Preferred Stock, the Common Stock or
the Series Common Stock voting separately as a class shall be required
therefor.
2
SECTION 2. The Board of Directors is hereby expressly authorized, by
resolution or resolutions, to provide, out of the unissued shares of Preferred
Stock, for series of Preferred Stock and, with respect to each such series, to
fix the number of shares constituting such series and the designation of such
series, the voting powers (if any) of the shares of such series, and the
preferences and relative, participating, optional or other special rights, if
any, and any qualifications, limitations or restrictions thereof, of the
shares of such series. The powers, preferences and relative, participating,
optional and other special rights of each series of Preferred Stock, and the
qualifications, limitations or restrictions thereof, if any, may differ from
those of any and all other series at any time outstanding.
SECTION 3. The Board of Directors is hereby expressly authorized, by
resolution or resolutions, to provide, out of the unissued shares of Series
Common Stock, for series of Series Common Stock and, with respect to each such
series, to fix the number of shares constituting such series and the
designation of such series, the voting powers (if any) of the shares of such
series, and the preferences and relative, participating, optional or other
special rights, if any, and any qualifications, limitations or restrictions
thereof, of the shares of such series. The powers, preferences and relative,
participating, optional and other special rights of each series of Series
Common Stock, and the qualifications, limitations or restrictions thereof, if
any, may differ from those of any and all other series at any time
outstanding.
SECTION 4. (a) Each holder of Common Stock, as such, shall be
entitled to one vote for each share of Common Stock held of record by such
holder on all matters on which stockholders generally are entitled to vote;
provided, however, that, except as otherwise required by law, holders of
Common Stock, as such, shall not be entitled to vote on any amendment to this
Restated Certificate of Incorporation (including any Certificate of
Designation relating to any series of Preferred Stock or Series Common Stock)
that relates solely to the terms of one or more outstanding series of
Preferred Stock or Series Common Stock if the holders of such affected series
are entitled, either separately or together with the holders of one or more
other such series, to vote thereon pursuant to this Restated Certificate of
Incorporation (including any Certificate of Designation relating to any series
of Preferred Stock or Series Common Stock) or pursuant to the General
Corporation Law of the State of Delaware.
3
(b) Except as otherwise required by law, holders of a series of
Preferred Stock or Series Common Stock, as such, shall be entitled only to
such voting rights, if any, as shall expressly be granted thereto by this
Restated Certificate of Incorporation (including any Certificate of
Designation relating to such series).
(c) Subject to applicable law and the rights, if any, of the holders
of any outstanding series of Preferred Stock or Series 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
4
redemption shall be as follows:
(a) the redemption price of the shares to be redeemed pursuant to
this Section 5 shall be equal to the Fair Market Value of such shares;
(b) the redemption price of such shares may be paid in cash,
Redemption Securities or any combination thereof;
(c) if less than all the shares held by Disqualified Holders are to
be redeemed, the shares to be redeemed shall be selected in such manner
as shall be determined by the Board of Directors, which may include
selection first of the most recently purchased shares thereof, selection
by lot or selection in any other manner determined by the Board of
Directors;
(d) at least 30 days' written notice of the Redemption Date shall be
given to the record holders of the shares selected to be redeemed (unless
waived in writing by such holder); provided that the Redemption Date may
be the date on which written notice shall be given to record holders if
the cash or Redemption Securities necessary to effect the redemption
shall have been deposited in trust for the benefit of such record holders
and subject to immediate withdrawal by them upon surrender of the stock
certificates for their shares to be redeemed;
(e) from and after the Redemption Date, any and all rights of
whatever nature, which may be held by the owners of shares selected for
redemption (including without limitation any rights to vote or
participate in dividends declared on stock of the same class or series as
such shares), shall cease and terminate and they shall thenceforth be
entitled only to receive the cash or Redemption Securities payable upon
redemption; and
(f) such other terms and conditions as the Board shall determine.
For purposes of this Section 5:
(i) "Disqualified Holder" shall mean any holder of shares of stock
of the Corporation of any class or series whose holding of such stock may
result in the loss of any license or franchise from any governmental
agency held by the Corporation or any Subsidiary to conduct any portion
of the business of the Corporation or any Subsidiary.
5
(ii) "Fair Market Value" of a share of the Corporation's stock of
any class or series shall mean the average (unweighted) Closing Price for
such a share for each of the 45 most recent days on which shares of stock
of such class or series shall have been traded preceding the day on which
notice of redemption shall be given pursuant to paragraph (d) of this
Section 5; provided, however, that if shares of stock of such class or
series are not traded on any securities exchange or in the
over-the-counter market, "Fair Market Value" shall be determined by the
Board of Directors in good faith; and provided further, however, that
"Fair Market Value" as to any stockholder who purchased his stock within
120 days of a Redemption Date need not (unless otherwise determined by
the Board of Directors) exceed the purchase price paid by him. "Closing
Price" on any day means the reported last sales price regular way or, in
case no such sale takes place, the average of the reported closing bid
and asked prices regular way on the New York Stock Exchange Composite
Tape, or, if stock of the class or series in question is not quoted on
such Composite Tape, on the New York Stock Exchange, or, if such stock is
not listed on such exchange, on the principal United States registered
securities exchange on which such stock is listed, or, if such stock is
not listed on any such exchange, the highest closing sales price or bid
quotation for such stock on The Nasdaq Stock Market or any system then in
use, or if no such prices or quotations are available, the fair market
value on the day in question as determined by the Board of Directors in
good faith.
(iii) "Redemption Date" shall mean the date fixed by the Board of
Directors for the redemption of any shares of stock of the Corporation
pursuant to this Section 5.
(iv) "Redemption Securities" shall mean any debt or equity
securities of the Corporation, any Subsidiary or any other corporation,
or any combination thereof, having such terms and 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
6
to this Section 5 (assuming, in the case of Redemption Securities to be
publicly traded, such Redemption Securities were fully distributed and
subject only to normal trading activity).
(v) "Subsidiary" shall mean any corporation more than 50% of whose
outstanding stock having ordinary voting power in the election of
directors is owned by the Corporation, by a Subsidiary or by the
Corporation and one or more Subsidiaries.
ARTICLE V
SECTION 1. Except as otherwise fixed by or pursuant to the
provisions of Article IV of this Restated Certificate of Incorporation
relating to the rights of the holders of any series of Preferred Stock or
Series Common Stock or any class or series of stock having a preference over
the Common Stock as to dividends or upon liquidation, the number of the
directors of the Corporation shall be fixed from time to time by or pursuant
to the By-laws of the Corporation. The directors, other than those who may be
elected by the holders of any series of Preferred Stock or Series Common Stock
or any class or series of stock having a preference over the Common Stock as
to dividends or upon liquidation pursuant to the terms of this Restated
Certificate of Incorporation or any resolution or resolutions providing for
the issue of such class or series of stock adopted by the Board of Directors,
shall be elected by the stockholders entitled to vote thereon at each annual
meeting of stockholders and shall hold office until the next annual meeting of
stockholders and until each of their successors shall have been elected and
qualified. The term of office of each director in office at the time this
Section 1 of Article V becomes effective shall expire at the next annual
meeting of stockholders held after the time this Section 1 of Article V
becomes effective. The election of directors need not be by written ballot. No
decrease in the number of directors constituting the Board of Directors shall
shorten the term of any incumbent director.
SECTION 2. Advance notice of nominations for the election of
directors shall be given in the manner and to the extent provided in the
By-laws of the Corporation.
SECTION 3. Except as otherwise provided for or fixed by or pursuant
to the provisions of Article IV of this Restated Certificate of Incorporation
relating to the rights of the holders of any series of Preferred Stock or
Series Common Stock or any class or series of stock having a
7
preference over the Common Stock as to dividends or upon liquidation, newly
created directorships resulting from any increase in the number of directors
may be filled by the Board of Directors, or as otherwise provided in the
By-laws, and any vacancies on the Board of Directors resulting from death,
resignation, removal or other cause shall only be filled by the Board, and not
by the stockholders, by the affirmative vote of a majority of the remaining
directors then in office, even though less than a quorum of the Board of
Directors, or by a sole remaining director, or as otherwise provided in the
By-laws. Any director elected in accordance with the preceding sentence of
this Section 3 shall hold office until the next annual meeting of stockholders
and until such director's successor shall have been elected and qualified.
ARTICLE VI
Subject to the rights of the holders of any series of Preferred
Stock or Series Common Stock or any class or series of stock having a
preference over the Common Stock as to dividends or upon liquidation, any
action required or permitted to be taken by the stockholders of the
Corporation must be effected at a duly called annual or special meeting of
stockholders of the Corporation and may not be effected by any consent in
writing by such stockholders. Except as otherwise required by law and subject
to the rights of the holders of any series of Preferred Stock or Series Common
Stock or any class or series of stock having a preference over the Common
Stock as to dividends or upon liquidation, special meetings of stockholders of
the Corporation may be called only by the Board of Directors pursuant to a
resolution approved by a majority of the entire Board of Directors or as
otherwise provided in the By-laws of the Corporation.
ARTICLE VII
In furtherance and not in limitation of the powers conferred upon it
by law, the Board of Directors is expressly authorized to adopt, repeal, alter
or amend the By-laws of the Corporation by the vote of a majority of the
entire Board of Directors or such greater vote as shall be specified in the
By-laws of the Corporation. In addition to any requirements of law and any
other provision of this Restated Certificate of Incorporation or any
resolution or resolutions of the Board of Directors adopted pursuant to
Article IV of this Restated Certificate of Incorporation (and notwithstanding
the fact that a lesser percentage may
8
be specified by law, this Restated Certificate of Incorporation or any such
resolution or resolutions), the affirmative vote of the holders of 80% or more
of the combined voting power of the then outstanding shares of Voting Stock,
voting together as a single class, shall be required for stockholders to
adopt, amend, alter or repeal any provision of the By-laws.
ARTICLE VIII
In addition to any requirements of law and any other provisions of
this Restated Certificate of Incorporation or any resolution or resolutions of
the Board of Directors adopted pursuant to Article IV of this Restated
Certificate of Incorporation (and notwithstanding the fact that a lesser
percentage may be specified by law, this Restated Certificate of Incorporation
or any such resolution or resolutions), the affirmative vote of the holders of
80% or more of the combined voting power of the then outstanding shares of
Voting Stock, voting together as a single class, shall be required to amend,
alter or repeal, or adopt any provision inconsistent with, this Article VIII
or Article VII, or Section 5 of Article IV, of this Restated Certificate of
Incorporation. Subject to the foregoing provisions of this Article VIII, the
Corporation reserves the right to amend, alter or repeal any provision
contained in this Restated Certificate of Incorporation, in the manner now or
hereafter prescribed by statute, and all rights conferred upon stockholders
herein are subject to this reservation.
ARTICLE IX
SECTION 1. To the fullest extent that the General Corporation Law of
the State of Delaware or any other law of the State of Delaware as it exists
or as it may hereafter be amended permits the limitation or elimination of the
liability of directors, no director of the Corporation shall be liable to the
Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director. No amendment to or repeal of this Article IX shall apply
to or have any effect on the liability or alleged liability of any director of
the Corporation for or with respect to any acts or omissions of such director
occurring prior to such amendment or repeal.
SECTION 2. In addition to any requirements of law and any other
provisions of this Restated Certificate of Incorporation or any resolution or
resolutions of the Board
9
of Directors adopted pursuant to Article IV of this Restated Certificate of
Incorporation (and notwithstanding the fact that a lesser percentage may be
specified by law, this Restated Certificate of Incorporation or any such
resolution or resolutions), the affirmative vote of the holders of 80% or more
of the combined voting power of the then outstanding shares of Voting Stock,
voting together as a single class, shall be required to amend, alter or
repeal, or adopt any provision inconsistent with, this Article IX.
10
[The provisions of the certificates of designations filed with
respect to Time Warner's Series E Convertible Preferred Stock, Series F
Convertible Preferred Stock, Series I Convertible Preferred Stock, Series
J Convertible Preferred Stock, Series LMC Common Stock and Series LMCN-V
Common Stock will be incorporated into AOL Time Warner Inc.'s Restated
Certificate of Incorporation mutatis mutandis. It being understood that
the conversion ratio with respect to each such series of Convertible
Preferred Stock shall be appropriately adjusted prior to the Effective
Time of the Mergers by multiplying the number of shares issuable upon
conversion of each share of each such series of Convertible Preferred
Stock by the Exchange Ratio.]
EXHIBIT D-2 TO THE
MERGER AGREEMENT
AOL TIME WARNER INC.
BY-LAWS
ARTICLE I
Offices
SECTION 1. Registered Office. The registered office of AOL TIME
WARNER INC. (hereinafter called the Corporation) in the State of Delaware
shall be at 1013 Centre Road, City of Wilmington, County of New Castle, and
the registered agent shall be Corporation Service Company, or such other
office or agent as the Board of Directors of the Corporation (the "Board")
shall from time to time select.
SECTION 2. Other Offices. The Corporation may also have an office or
offices, and keep the books and records of the Corporation, except as may
otherwise be required by law, at such other place or places, either within or
without the State of Delaware, as the Board may from time to time determine or
the business of the Corporation may require.
ARTICLE II
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
2
the stockholders for any purpose or purposes may be called by the Chief
Executive Officer or a majority of the entire Board. Only such business as is
specified in the notice of any special meeting of the stockholders shall come
before such meeting.
SECTION 4. Notice of Meetings. Except as otherwise provided by law,
notice of each meeting of the stockholders, whether annual or special, shall
be given not less than 10 nor more than 60 days before the date of the meeting
to each stockholder of record entitled to notice of the meeting. If mailed,
such notice shall be deemed given when deposited in the United States mail,
postage prepaid, directed to the stockholder at such stockholder's address as
it appears on the records of the Corporation. Each such notice shall state the
place, date and hour of the meeting, and, in the case of a special meeting,
the purpose or purposes for which the meeting is called. Notice of any meeting
of stockholders shall not be required to be given to any stockholder who shall
attend such meeting in person or by proxy without protesting, prior to or at
the commencement of the meeting, the lack of proper notice to such
stockholder, or who shall waive notice thereof as provided in Article X of
these By-laws. Notice of adjournment of a meeting of stockholders need not be
given if the time and place to which it is adjourned are announced at such
meeting, unless the adjournment is for more than 30 days or, after
adjournment, a new record date is fixed for the adjourned meeting.
SECTION 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
3
to the vote(s) to be taken by such class or series. At any such adjourned
meeting at which a quorum may be present, any business may be transacted which
might have been transacted at the meeting as originally called.
SECTION 7. Order of Business. At each meeting of the stockholders,
the Chairman of the Board or, in the absence of the Chairman of the Board, the
Chief 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
4
notice to the Secretary shall set forth in writing as to each matter the
stockholder proposes to bring before the annual meeting: (i) a brief
description of the business desired to be brought before the annual meeting
and the reasons for conducting such business at the annual meeting; (ii) the
name and address, as they appear on the Corporation's books, of the
stockholder proposing such business; (iii) the class and number of shares of
the Corporation which are beneficially owned by the stockholder; (iv) any
material interest of the stockholder in such business; and (v) if the
stockholder intends to solicit proxies in support of such stockholder's
proposal, a representation to that effect. The foregoing notice requirements
shall be deemed satisfied by a stockholder if the stockholder has notified the
Corporation of his or her intention to present a proposal at an annual meeting
and such stockholder's proposal has been included in a proxy statement that
has been prepared by management of the Corporation to solicit proxies for such
annual meeting; provided, however, that if such stockholder does not appear or
send a qualified representative to present such proposal at such annual
meeting, the Corporation need not present such proposal for a vote at such
meeting, notwithstanding that proxies in respect of such vote may have been
received by the Corporation. Notwithstanding anything in the By-laws to the
contrary, no business shall be conducted at any annual meeting except in
accordance with the procedures set forth in this Section 7. The chairman of 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
5
fixed in the Certificate or in the resolution or resolutions adopted by the
Board providing for the issuance of such stock, and each stockholder of record
of Common Stock shall be entitled at each meeting of stockholders to one vote
for each share of such stock, in each case, registered in such stockholder's
name on the books of the Corporation:
(1) on the date fixed pursuant to Section 6 of Article VII of these
By-laws as the record date for the determination of stockholders entitled
to notice of and to vote at such meeting; or
(2) if no such record date shall have been so fixed, then at the
close of business on the day next preceding the day on which notice of
such meeting is given, or, if notice is waived, at the close of business
on the day next preceding the day on which the meeting is held.
Each stockholder entitled to vote at any meeting of stockholders may
authorize not in excess of three persons to act for such stockholder by proxy.
Any such proxy shall be delivered to the secretary of such meeting at or prior
to the time designated for holding such meeting, but in any event not later
than the time designated in the order of business for so delivering such
proxies. No such proxy shall be voted or acted upon after three years from its
date, unless the proxy provides for a longer period.
At each meeting of the stockholders, all corporate actions to be
taken by vote of the stockholders (except as otherwise required by law and
except as otherwise provided in the Certificate or these By-laws) shall be
authorized by a majority of the votes cast by the stockholders entitled to
vote thereon who are present in person or represented by proxy, and where a
separate vote by class or series is required, a majority of the votes cast by
the stockholders of such class or series who are present in person or
represented by proxy shall be the act of such class or series.
Unless required by law or determined by the chairman of the meeting
to be advisable, the vote on any matter, including the election of directors,
need not be by written ballot.
SECTION 10. Inspectors. The chairman of the meeting shall appoint
two or more inspectors to act at any meeting of stockholders. Such inspectors
shall perform such duties as shall be required by law or specified by the
chairman of the meeting. Inspectors need not be
6
stockholders. No director or nominee for the office of director shall be
appointed such inspector.
SECTION 11. Public Announcements. For the purpose of Section 7 of
this Article II and Section 3 of Article III, "public announcement" shall mean
disclosure (i) in a press release reported by the Dow Jones News Service,
Reuters Information Service or any similar or successor news wire service or
(ii) in a communication distributed generally to stockholders and in a
document publicly filed by the Corporation with the Securities and Exchange
Commission pursuant to Sections 13, 14 or 15(d) of the Securities Exchange Act
of 1934 or any successor provisions thereto.
ARTICLE III
Board of Directors
SECTION 1. General Powers. The business and affairs of the
Corporation shall be managed by or under the direction of the Board, which may
exercise all such powers of the Corporation and do all such lawful acts and
things as are not by law or by the Certificate directed or required to be
exercised or done by the stockholders.
SECTION 2. Number, 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
7
annual meeting of stockholders and until each of their successors shall have
been duly elected and qualified.
Each director shall be at least 21 years of age. Directors need not
be stockholders of the Corporation.
In any election of directors, the persons receiving a plurality of
the votes cast, up to the number of directors to be elected in such election,
shall be deemed elected.
A majority of the members of the Board shall be persons determined
by the Board to be eligible to be classified as independent directors. In its
determination of a director's eligibility to be classified as an independent
director pursuant to this Section 2, the Board shall consider, among such
other factors as it may in any case deem relevant, that the director: (i) has
not been employed by the Corporation as an executive officer within the past
three years; (ii) is not a paid adviser or consultant to the Corporation and
derives no financial benefit from any entity as a result of advice or
consultancy provided to the Corporation by such entity; (iii) is not an
executive officer, director or significant stockholder of a significant
customer or supplier of the Corporation; (iv) has no personal services
contract with the Corporation; (v) is not an executive officer or director of
a tax-exempt entity receiving a significant part of its annual contributions
from the Corporation; (vi) is not a member of the immediate family of any
director who is not considered an independent director; and (vii) is free of
any other relationship that would interfere with the exercise of independent
judgment by such director.
SECTION 3. Notification of Nominations. Subject to the rights of the
holders of any series of Preferred Stock or Series Common Stock or any class
or series of stock having a preference over the Common Stock as to dividends
or upon dissolution, liquidation or winding up, nominations for the election
of directors may be made by the Board or by any stockholder who is a
stockholder of record at the time of giving of the notice of nomination
provided for in this Section 3 and who is entitled to vote for the election of
directors. Any stockholder of record entitled to vote for the election of
directors at a meeting may nominate persons for election as directors only if
timely written notice of such stockholder's intent to make such nomination is
given, either by personal delivery or by United States mail, postage prepaid,
to the Secretary. To be timely, a stockholder's notice must be delivered to or
mailed and received at the principal executive offices of the
8
Corporation (i) with respect to an election to be held at an annual meeting of
stockholders, not less than 90 nor more than 120 days prior to the first
anniversary of the date of the immediately preceding annual meeting; provided,
however, that in the event that the date of the annual meeting is more than 30
days earlier or more than 60 days later than such anniversary date, notice by
the stockholder to be timely must be so delivered or received not earlier than
the 120th day prior to such annual meeting and not later than the close of
business on the later of the 90th day prior to such annual meeting or the 10th
day following the day on which public announcement of the date of such meeting
is first made and (ii) with respect to an election to be held at a special
meeting of stockholders for the election of directors, not earlier than the
90th day prior to such special meeting and not later than the close of
business on the later of the 60th day prior to such special meeting or the
10th day following the day on which public announcement is first made of the
date of the special meeting and of the nominees to be elected at such meeting.
Each such notice shall set forth: (a) the name and address of the stockholder
who intends to make the nomination and of the person or persons to be
nominated; (b) a representation that the stockholder is a holder of record of
stock of the Corporation entitled to vote at such meeting and intends to
appear in person or by proxy at the meeting to nominate the person or persons
specified in the notice; (c) a description of all arrangements or
understandings between the stockholder and each nominee and any other person
or persons (naming such person or persons) pursuant to which the nomination or
nominations are to be made by the stockholder; (d) such other information
regarding each nominee proposed by such stockholder as would have been
required to be included in a proxy statement filed pursuant to the proxy rules
of the Securities and Exchange Commission had each nominee been nominated, or
intended to be nominated, by the Board; (e) the consent of each nominee to
serve as a director of the Corporation if so elected; and (f) if the
stockholder intends to solicit proxies in support of such stockholder's
nominee(s), a representation to that effect. The chairman of the meeting may
refuse to acknowledge the nomination of any person not made in compliance with
the foregoing procedure or if the stockholder solicits proxies in favor of
such stockholder's nominee(s) without having made the representation required
by the immediately preceding sentence. Only such persons who are nominated in
accordance with the procedures set forth in this Section 3 shall be eligible
to serve as directors of the Corporation.
Notwithstanding anything in the immediately preceding paragraph of
this Section 3 to the contrary, in
9
the event that the number of directors to be elected to the Board of Directors
of the Corporation at an annual meeting of stockholders is increased and there
is no public announcement naming all of the nominees for directors or
specifying the size of the increased Board of Directors made by the
Corporation at least 90 days prior to the first anniversary of the date of the
immediately preceding annual meeting, a stockholder's notice required by this
Section 3 shall also be considered timely, but only with respect to nominees
for any new positions created by such increase, if it shall be delivered to or
mailed to and received by the secretary at the principal executive offices of
the Corporation not later than the close of business on the 10th day following
the day on which such public announcement is first made by the Corporation.
SECTION 4. 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
10
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
11
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.
12
ARTICLE IV
Committees of the Board of Directors
SECTION 1. Establishment of Committees of the Board of Directors;
Election of Members of Committees of the Board of Directors; Functions of
Committees of the Board of Directors.
(a) The Corporation shall have four standing committees: the
nominating and governance committee, the audit and finance committee, the
compensation committee and the values and human development committee.
(b) The nominating and governance committee shall have the following
powers and authority: (i) evaluating and recommending director candidates to
the Board, (ii) assessing Board performance not less frequently than every
three years, (iii) recommending director compensation and benefits policy for
the Corporation, (iv) reviewing individual director performance as issues
arise, (v) evaluating and recommending candidates for Chief Executive Officer
to the Board and (vi) periodically reviewing the Corporation's corporate
governance profile. None of the members of the nominating and governance
committee shall be an officer or full-time employee of the Corporation or of
any subsidiary or affiliate of the Corporation.
(c) The audit and finance committee shall have the following powers
and authority: (i) employing independent public accountants to audit the books
of account, accounting procedures and financial statements of the Corporation
and to perform such other duties from time to time as the audit committee may
prescribe, (ii) receiving the reports and comments of the Corporation's
internal auditors and of the independent public accountants employed by the
committee and taking such action with respect thereto as it deems appropriate,
(iii) requesting the Corporation's consolidated subsidiaries and affiliated
companies to employ independent public accountants to audit their respective
books of account, accounting procedures and financial statements, (iv)
requesting the independent public accountants to furnish to the compensation
committee the certifications required under any present or future stock
option, incentive compensation or employee benefit plan of the Corporation,
(v) reviewing the adequacy of internal financial controls, (vi) approving the
accounting principles employed in financial reporting, (vii) approving the
appointment or removal of the Corporation's general auditor, (viii) reviewing
the accounting principles employed in
13
financial reporting, (ix) reviewing and making recommendations to the Board
concerning the financial structure and financial condition of the Company and
its subsidiaries, including annual budgets, long-term financial plans,
corporate borrowings, investments, capital expenditures, long-term commitments
and the issuance of stock and (x) approving such matters that are consistent
with the general financial policies and direction from time to time determined
by the Board. None of the members of the audit and finance committee shall be
an officer or full-time employee of the Corporation or of any subsidiary or
affiliate of the Corporation.
(d) The compensation committee shall have the following powers and
authority: (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
14
in accordance with and subject to the General Corporation Law of the State of
Delaware, from time to time establish additional committees of the Board to
exercise such powers and authorities of the Board, and to perform such other
functions, as the Board may from time to time determine.
(h) The Board may remove a director from a committee, change the
size of any committee or terminate any committee or change the chairmanship of
a committee only with the affirmative vote of not less than 75% of the Whole
Board.
(i) The Board may designate one or more directors as new members of
any committee to fill any vacancy on a committee and to fill a vacant
chairmanship of a committee, occurring as a result of a member or chairman
leaving the committee, whether through death, resignation, removal or
otherwise; 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
15
conduct of its meetings as such committee of the Board may deem proper. A
majority of the authorized members of any committee of the Board shall
constitute a quorum for the transaction of business at any meeting, and the
vote of a majority of the members thereof present at any meeting at which a
quorum is present shall be the act of such committee. Each committee of the
Board shall keep written minutes of its proceedings and shall report on such
proceedings to the Board.
ARTICLE V
Officers
SECTION 1. Number; Term of Office. The officers of the Corporation
shall be elected by the Board and shall consist of: a Chairman of the Board, a
Chief Executive Officer, two Chief Operating Officers, a Chief Financial
Officer and one or more Vice Chairmen and Vice Presidents (including, without
limitation, Assistant, Executive, Senior and Group Vice Presidents) and a
Treasurer, Secretary and Controller and such other officers or agents with
such titles and such duties as the Board may from time to time determine, each
to have such authority, functions or duties as in these By-laws provided or as
the Board may from time to time determine, and each to hold office for such
term as may be prescribed by the Board and until such person's successor shall
have been chosen and shall qualify, or until such person's death or
resignation, or until such person's removal in the manner hereinafter
provided. The Chairman of the Board, the Chief Executive Officer and the Vice
Chairmen shall be elected from among the directors. One person may hold the
offices and perform the duties of any two or more of said officers; provided,
however, that no officer shall execute, acknowledge or verify any instrument
in more than one capacity if such instrument is required by law, the
Certificate or these By-laws to be executed, acknowledged or verified by two
or more officers. The Board may require any officer or agent to give security
for the faithful performance of such person's duties.
SECTION 2. Removal. Subject to Section 14 of this Article V, any
officer may be removed, either with or without cause, by the Board at any
meeting thereof called for the purpose or, except in the case of any officer
elected by the Board or as provided in Section 4 of this Article V, by any
superior officer upon whom such power may be conferred by the Board.
16
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
17
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
18
in a book or books to be kept for that purpose; the Secretary shall see that
all notices required to be given by the Corporation are duly given and served;
the Secretary shall be custodian of the seal of the Corporation and shall
affix the seal or cause it to be affixed to all certificates of stock of the
Corporation (unless the seal of the Corporation on such certificates shall be
a facsimile, as hereinafter provided) and to all documents, the execution of
which on behalf of the Corporation under its seal is duly authorized in
accordance with the provisions of these By-laws; the Secretary shall have
charge of the books, records and papers of the Corporation and shall see that
the reports, statements and other documents required by law to be kept and
filed are properly kept and filed; and in general shall perform all of the
duties incident to the office of Secretary. The Secretary shall, when
requested, counsel with and advise the other officers of the Corporation and
shall perform such other duties as he may agree with the Chief Executive
Officer or as the Board may from time to time determine.
SECTION 13. Assistant Treasurers and Assistant Secretaries. Any
Assistant Treasurers and Assistant Secretaries shall perform such duties as
shall be assigned to them by the Board. Any Assistant Treasurer or Assistant
Secretary shall perform such duties as shall be assigned to them by the
Treasurer or Secretary, respectively, or by the Chief Executive Officer.
SECTION 14. Certain Actions. Notwithstanding anything to the
contrary contained in these By-laws, until December 31, 2003: (i) the removal
of Gerald M. Levin from the office of Chief Executive Officer, any
modification to the provisions of his employment contract which provide for
his term of office or any modification to the role, duties, authority or
reporting line of the Chief Executive Officer and (ii) the removal of Stephen
M. Case from the office of Chairman of the Board, any modification to the
role, duties, authority or reporting line of the Chairman of the Board, each
shall require the affirmative vote of 75% of the Whole Board. From and after
the end of the period set forth in the preceding sentence, any of the actions
set forth in the immediately preceding sentence may be taken upon the
affirmative vote of the number of directors which shall constitute, under the
terms of these By-laws, the action of the Board.
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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
20
in Section 1 of this Article or incurred by any such director, officer,
employee or agent in connection with any Proceeding referred to in Section 1
of this Article, whether or not the Corporation would have the power to
indemnify such person against such expense, liability or loss under the DGCL.
The Corporation may enter into contracts with any director, officer, employee
or agent of the Corporation or of any Covered Entity in furtherance of the
provisions of this Article and may create a trust fund, grant a security
interest or use other means (including, without limitation, a letter of
credit) to ensure the payment of such amounts as may be necessary to effect
indemnification as provided or authorized in this Article.
SECTION 3. Indemnification Not Exclusive Right. The right of
indemnification provided in this Article shall not be exclusive of any other
rights to which an Indemnitee may otherwise be entitled, and the provisions of
this Article shall inure to the benefit of the heirs and legal representatives
of any Indemnitee under this Article and shall be applicable to Proceedings
commenced or continuing after the adoption of this Article, whether arising
from acts or omissions occurring before or after such adoption.
SECTION 4. Advancement of 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
21
this Article, an Indemnitee shall submit to the Secretary a written
request, including such documentation and information as is reasonably
available to the Indemnitee and reasonably necessary to determine whether
and to what extent the Indemnitee is entitled to indemnification (the
"Supporting Documentation"). The determination of the Indemnitee's
entitlement to indemnification shall be made not later than 60 days after
receipt by the Corporation of the written request for indemnification
together with the Supporting Documentation. The Secretary shall, promptly
upon receipt of such a request for indemnification, advise the Board in
writing that the Indemnitee has requested indemnification.
(ii) The Indemnitee's entitlement to indemnification under this
Article shall be determined in one of the following ways: (A) by a
majority vote of the Disinterested Directors (as hereinafter defined in
Section 4(e) of this Article), whether or not they constitute a quorum of
the Board, or by a committee of Disinterested Directors designated by a
majority vote of the Disinterested Directors; (B) by a written opinion of
Independent Counsel (as hereinafter defined in Section 4(e) of this
Article) if (x) a Change in Control (as hereinafter defined in Section
4(e) of this Article) shall have occurred and the Indemnitee so requests
or (y) there are no Disinterested Directors or a majority of such
Disinterested Directors so directs; (C) by the stockholders of the
Corporation; or (D) as provided in Section 4(c) of this Article.
(iii) In the event the determination of entitlement to
indemnification is to be made by Independent Counsel pursuant to Section
4(b)(ii) of this Article, a majority of the Disinterested Directors shall
select the Independent Counsel, but only an Independent Counsel to which
the Indemnitee does not reasonably object; provided, however, that if a
Change in Control shall have occurred, the Indemnitee shall select such
Independent Counsel, but only an Independent Counsel to which a majority
of the Disinterested Directors does not reasonably object.
(c) Presumptions and Effect of Certain Proceedings. Except as
otherwise expressly provided in this Article, if a Change in Control
shall have occurred, the Indemnitee shall be presumed to be entitled to
indemnification under this Article (with respect to actions or omissions
occurring prior to such Change in Control) upon submission of a request
for
22
indemnification together with the Supporting Documentation in accordance
with Section 4(b)(i) of this Article, and thereafter the Corporation
shall have the burden of proof to overcome that presumption in reaching a
contrary determination. In any event, if the person or persons empowered
under Section 4(b) of this Article to determine entitlement to
indemnification shall not have been appointed or shall not have made a
determination within 60 days after receipt by the Corporation of the
request therefor, together with the Supporting Documentation, the
Indemnitee shall be deemed to be, and shall be, entitled to
indemnification unless (A) the Indemnitee misrepresented or failed to
disclose a material fact in making the request for indemnification or in
the Supporting Documentation or (B) such indemnification is prohibited by
law. The termination of any Proceeding described in Section 1 of this
Article, or of any claim, issue or matter therein, by judgment, order,
settlement or conviction, or upon a plea of nolo contendere or its
equivalent, shall not, of itself, adversely affect the right of the
Indemnitee to indemnification or create a presumption that the Indemnitee
did not act in good faith and in a manner which the Indemnitee reasonably
believed to be in or not opposed to the best interests of the Corporation
or, with respect to any criminal proceeding, that the Indemnitee had
reasonable cause to believe that such conduct was unlawful.
(d) Remedies of Indemnitee. (i) In the event that a determination is
made pursuant to Section 4(b) of this Article that the Indemnitee is not
entitled to indemnification under this Article, (A) the Indemnitee shall
be entitled to seek an adjudication of entitlement to such
indemnification either, at the Indemnitee's sole option, in (x) an
appropriate court of the State of Delaware or any other court of
competent jurisdiction or (y) an arbitration to be conducted by a single
arbitrator pursuant to the rules of the American Arbitration Association;
(B) any such judicial proceeding or 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).
23
(ii) If a determination shall have been made or deemed to have been
made, pursuant to Section 4(b) or (c) of this Article, that the
Indemnitee is entitled to indemnification, the Corporation shall be
obligated to pay the amounts constituting such indemnification within
five days after such determination has been made or deemed to have been
made and shall be conclusively bound by such determination unless (A) the
Indemnitee misrepresented or failed to disclose a material fact in making
the request for indemnification or in the Supporting Documentation or (B)
such indemnification is prohibited by law. In the event that (X)
advancement of expenses is not timely made pursuant to Section 4(a) of
this Article or (Y) payment of indemnification is not made within five
days after a determination of entitlement to indemnification has been
made or deemed to have been made pursuant to Section 4(b) or (c) of this
Article, the Indemnitee shall be entitled to seek judicial enforcement of
the Corporation's obligation to pay to the Indemnitee such advancement of
expenses or indemnification. Notwithstanding the foregoing, the
Corporation may bring an action, in an appropriate court in the State of
Delaware or any other court of competent jurisdiction, contesting the
right of the Indemnitee to receive indemnification hereunder, due to the
occurrence of an event described in sub-clause (A) or (B) of this clause
(ii) (a "Disqualifying Event"); provided, however, that in any such
action the Corporation shall have the burden of proving the occurrence of
such Disqualifying Event.
(iii) The Corporation shall be precluded from asserting in any
judicial proceeding or arbitration commenced pursuant to this Section
4(d) that the procedures and presumptions of this Article are not valid,
binding and enforceable and shall stipulate in any such court or before
any such arbitrator that the Corporation is bound by all the provisions
of this Article.
(iv) In the event that the Indemnitee, pursuant to this Section
4(d), seeks a judicial adjudication of or an award in arbitration to
enforce rights under, or to recover damages for breach of, this Article,
the Indemnitee shall be entitled to recover from the Corporation, and
shall be indemnified by the Corporation against, any expenses actually
and reasonably incurred by the Indemnitee if the Indemnitee prevails in
such judicial adjudication or arbitration. If it shall be determined in
such judicial adjudication or arbitration that the Indemnitee is entitled
to
24
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
25
Counsel" shall not include any person who, under the applicable standards
of professional conduct then prevailing under the law of the State of
Delaware, would have a conflict of interest in representing either the
Corporation or the Indemnitee in an action to determine the Indemnitee's
rights under this Article.
SECTION 5. Severability. If any provision or provisions of this
Article shall be held to be invalid, illegal or unenforceable for any reason
whatsoever: (a) the validity, legality and enforceability of the remaining
provisions of this Article (including, without limitation, all portions of any
paragraph of this Article containing any such provision held to be invalid,
illegal or unenforceable, that are not themselves invalid, illegal or
unenforceable) shall not in any way be affected or impaired thereby; and (b)
to the fullest extent possible, the provisions of this Article (including,
without limitation, all portions of any paragraph of this Article containing
any such provision held to be invalid, illegal or unenforceable, that are not
themselves invalid, illegal or enforceable) shall be construed so as to give
effect to the intent manifested by the provision held invalid, illegal or
unenforceable.
SECTION 6. Indemnification of Employees 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
26
such Subsidiary Director or Requested Employee in connection with any such
Proceeding, consistent with the provisions of this Article with respect to the
advancement of expenses of directors and officers of the Corporation.
SECTION 7. Indemnification of Employees and Agents. Notwithstanding
any other provision or provisions of this Article, the Corporation, to the
fullest extent of the provisions of this Article with respect to the
indemnification of directors and officers of the Corporation, may indemnify
any person other than a director or officer of the Corporation, a Subsidiary
Director or a Requested Employee, who is or was an employee or agent of the
Corporation and who is or was involved in any manner (including, without
limitation, as a party or a witness) or is threatened to be made so involved
in any threatened, pending or completed Proceeding by reason of the fact that
such person is or was a director, officer, employee or agent of a Covered
Entity against all expenses (including attorneys' fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred by such person in
connection with such Proceeding. The Corporation may also advance expenses
incurred by such employee or agent in connection with any such Proceeding,
consistent with the provisions of this Article with respect to the advancement
of expenses of directors and officers of the Corporation.
ARTICLE VII
Capital Stock
SECTION 1. Certificates for Shares. The shares of stock of the
Corporation shall be represented by certificates, or shall be uncertificated
shares that may be evidenced by a book-entry system maintained by the
registrar of such stock, or a combination of both. To the extent that shares
are represented by certificates, such certificates whenever authorized by the
Board, shall be in such form as shall be approved by the Board. The
certificates representing shares of stock of each class shall be signed by, or
in the name of, the Corporation by the Chairman of the Board, the Chief
Executive Officer or any Vice-President and by the Secretary or any Assistant
Secretary or the Treasurer or any Assistant Treasurer of the Corporation, and
sealed with the seal of the Corporation, which may be a facsimile thereof. Any
or all such signatures may be facsimiles if countersigned by a transfer agent
or registrar. Although any officer, transfer agent or registrar whose manual
or facsimile signature is affixed to such a certificate ceases to be such
officer, transfer agent
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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.
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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
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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.
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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
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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.