The URL can be used to link to this page

Home My WebLink AboutTime Warner Cable Franchise Information 1 of 2 jT CITY OF ITHACA 108 East Green Street Ithaca, New York 14850-5690 t � .... ,f`� DEPARTMENT OF PLANNING AND DEVELOPMENT Po� O H. MATTHYS VAN CORT, DIRECTOR OF PLANNING AND DEVELOPMENT DOUGLAS B. McDONALD, DIRECTOR OF ECONOMIC DEVELOPMENT Telephone: Planning&Development-607/274-6550 Community Development/IURA- 607/274-6559 Fax: 607/274-6558 FAX TRANSMITTAL DATE: January 24,2000 NO. PAGES: 3 (including cover sheet) TO: FAX# .703-467-9849 ATTENTION Jean Rice (Individual/Department) COMPANY Rice,Williams Associates FROM: Rosemarie Tucker FAX# (607)274-6558 SUBJECT: Agreement from Time Warner to Negotiate Cable Franchise REMARKS: The following is the letter signed by Time Warner and City of Ithaca agreeing to negotiate the Cable Franchise. High Priority Confidential Normal rw h:\faxes\jean rice.doc(01/24/00) �7 "An Equal Opportunity Employer with a commitment to workforce diversification." A FILE COPY TIME WARNER . January 28, 2000 The Honorable Alan J. Cohen Q Y Mayor -' City of IthacaFEB 32000 108 East Green Street VL i Ithaca, NY 14850-5690 DEFARTT:;��iT 0'' Dear Mr. Cohen: By now you have received correspondence from us stating we are willing to proceed with informal negotiations. The members of the Time Warner Cable negotiating team will include: Tom Doheny, General Manager, Time Warner Cable Ithaca, Steve Miron, Vice-President of Operations, Time Warner Cable Syracuse Division, Mike Kennedy, Vice President of Engineering, Time Warner Cable Syracuse Division, Mike Munley, Vice-President of Business Development, Time Warner Cable Syracuse Division, Joe Rocco, Director of Finance, Time Warner Cable Syracuse Division, George Winner of the Law Offices of Denton, Keyser, LaBreque & Moore, Gary Matz, Corporate Counsel, Time Warner Cable and Patricia McCausland, Corporate Counsel, Time Warner Cable. The negotiating team is authorized to negotiate on behalf of Time Warner Cable but any agreement will be subject to the approval of our corporate office. Not all of the negotiating team will be present at each meeting. Appropriate members will be present when discussing their areas of expertise. We understand the only date still available from the original dates you suggested in your note is February 10 from 2:OOpm to 6:OOpm. We will plan on having our team available on the 10th. With respect to the Consortium's position on accepting provisions of the proposal, please note that any negotiated or acceptable items will be drafted for inclusion into a final franchise agreement on a stand alone basis. The proposal will not be included by reference, or otherwise, into any final document. Sincerely, Thomas P. Doheny General Manager cc: Ben Curtis, Intermunicipal Cable Commission r r Page 2 The Honorable Alan J. Cohen January 28, 2000 cc: Steve Miron Mike Kennedy Mike Munley Joe Rocco George Winner Gary Matz Patricia McCausland FILE COPY 'IleTIME WARNER CABLE January 28, 2000 The Honorable Alan J. Cohen Mayor City of Ithaca - 108 East Green Street r FEB 32000 Ithaca, NY 14850-5690 1 G� P,rT 'i '- Dear Mr. Cohen: Enclosed are the responses to the Ithaca Area Consortium's questions regarding our renewal proposal. I understand the February 9 and 15 are no longer good dates for negotiations, so we look forward to seeing you on February 10. Sincerel Thomas P. Doheny General Manager cc: Ben Curtis, Intermunicipal Cable Commission Trish McCausland Steve Miron George Winner Mary Cotter �� CC� ; 0 i TIME WARNER CABLE RESPONSE TO ITHACA AREA CABLE CONSORTIUM QUESTIONS 1. Time Warner Cable does not maintain records on Consortium area housing nor do we keep maps or house counts for areas outside the cable television plant that do not meet our line extension criteria. 2. WSYT is transmitted into Ithaca from Cortland via fiber optics; however, the problem with the reception of WSYT has been the broadcaster's transmitter. WSYT recently performed some much-needed repairs to its transmitter, improving picture quality a great deal. 3. During the first 8 months of 1999, 12% of service calls made to customers resulted in repeat service calls; of those, 16% were because the customer was not at home for the initial visit. 4. Representatives from all school districts in our service area were invited to an Educational Access Committee meeting on June 9th of 1999. Representatives from Lansing Elementary and Groton Central School were among those who attended. A Lansing Elementary teacher asked us to provide help producing a monthly interview style program and starting in February, we are partnering with the school and BOCES on this project. A Groton teacher asked for assistance with a start up video program. We are providing a mobile studio unit, training and assistance as requested to help the school district evaluate this method of video programming. Two Trumansburg teachers asked for assistance in starting a video program. Our staff person who handles educational access outreach has been meeting with them weekly. DeWitt Middle School, which we have assisted with programs for several years, is currently working on a new bulletin board initiative using space character generation equipment. All three programs are already in place. Going forward, under our Formal Proposal submitted November 17, 1999, to the extent PEG obligations are franchise fees under federal law, such costs shall be deducted from Consortium franchise fees in accordance with federal and state law. Other costs will be passed through to Consortium subscribers on a monthly basis in accordance with federal law. 5. Several factors affect estimating the cost of operating the studio additional hours, including whether studio use would increase and the level of staffing that would result. Assuming the question pertains to the hours between Sam & 3pm, the estimated cost of utilities would be approximately $14,000 per year, repairs and maintenance 1 would increase by approximately $3,425 and other operating costs would increase by approximately $4.,630. Employee costs currently average $32,530 per person annually. Concluding that one additional staff person would be required, the total cost is then estimated at $54,585. The least utilized of the current hours of operation are Tuesday, Wednesday and Thursday afternoons. Additionally we have had several months of studio classes cancelled due to lack of enrollment, which has left our studio,underutilized on Saturday afternoons. 6. While the RFRP requested a detailed breakdown by sites, such a breakdown is not possible to prepare because of the limited information (in some instances no information), provided to indicate the services to be used at each site, or how many locations within each site would utilize the indicated service. For similar reasons, it is not possible to provide a breakdown of the estimated costs for end user equipment. The total cost to construct and energize the requested fiber optic I-Net extensions would range between $5,000,000 and $7,000,000. Excluding the cost of the fiber infrastructure, each of the sixty-seven locations would have an average cost ranging between $84,000, (high) and $54,000 (low). This differential of approximately $30,000 represents an assumed average differential in the services used at different locations identified in the RFRP. 7. Attached is a list of franchises for the State of New York. Under federal law, during the renewal process we are required to meet the cable related needs and interests of the local community. Accordingly, insofar as the requested information relates to funding for local origination, PEG access equipment and facilities or an institutional network in other communities, all are irrelevant to a determination of the Consortium's needs and interests, as are Time Warner Cable's rates and hours of local programming in other communities. With respect to Time Warner Cable's experience in providing cable service, Time Warner Cable is the second largest cable operator in the country with over twenty years of experience providing service to over 12 million subscribers. Consortium subscribers have the most advanced system activated by Time Warner Cable to date nationwide together with the most advanced services including Road Runner and soon to be available digital services. Nonetheless, we reiterate, if there is a specific franchise of interest to the Consortium from the attached list, please identify the franchise and we will forward the requested information. 8. The approximate number of drops replaced during the last 24 months was 1,400. These drops were replaced for, among other reasons, to optimize performance of the high speed internet access service and for failure to meet specifications. 2 C 9.. Since submission of our Formal Proposal on November 17, 1999, the broadcaster, WSYT, has repaired its transmitter. The signal now meets FCC specifications. 10.At the present time, the Time Warner's digital product includes a number of digital services delivered via Athena. 11. The cost of an FCC approved EAS encode r/decodef,is approximately $2,500. These units are readily available from a number of vendors. 12. The 25,630 is an average subscriber count based on the seasonality of our entire system. The 18,700 is a year end number and not an average, and represents the 9 Consortium franchise areas alone. 13.As indicated on Page 4 of Exhibit 13, the $50,000 in Cable Casting Equipment is for the News Center 7 operation and is exclusive of PEG requirements. 14.The following is the current year-end basic subscriber count for 1999 by franchise area, and average yearly revenues per subscriber: EOY Subs Average Yearly Revenue City of Ithaca 8,883 $407 Town of Ithaca 4,812 $441 Village of Cayuga Heights 1,116 $531 Village of Trumansburg 551 $466 Village of Lansing 1,404 $501 Village of Groton 833 $518 Town of Groton 198 $484 Village of Freeville 188 $497 Village of Dryden 687 $488 Consortium Total 18,672 15. Live government programming may be carried to subscribers from each of the Consortium community's municipal buildings utilizing, or expanding upon, the existing institutional network for upstream feed and a government channel for downstream broadcast to subscribers. Because the actual locations have not been specifically identified, it is not possible to provide cost estimates at this time; however, when our 3 informal negotiations commence, we will be able to determine costs when we have a greater understanding of specifics, including locations. 16. Broadcast capabilities are available on an educational channel for transmission of video programming on a real time basis. 17. Institutional networks are not commonly requested by franchising authorities because of the cost to the community for construction and maintenance and subscriber reluctance to providing funding therefor. Accordingly, Time Warner Cable does not currently operate an I-Net service using fiber optics and Road Runner in New York State. 18. At the present time the available capacity would be 386 kbs upstream and 2 mg downstream. 19. Video training programming could be made available to public safety agencies by broadcasting on a PEG channel for transmission on a real time or tape delayed basis. 20. The penetration percentage of 82.8% in year 1, declining to 80% in years 6-10 is based on the year-end subscriber numbers included in the pro forma. The penetration percentages of 78.6% declining to 76% in years 6-10 was calculated based on average basic subscribers. Both are correct. Regardless of the percentage measure used, as indicated in Exhibit 13 Page 1, the Penetration Percentage decrease in years 6-10 is due to competitive effects of Direct Broadcast Service. The penetration difference has nothing to do with the seasonality of the subscriber base. 21. Line extension decisions are not based on homes per plant mile averages but upon, among other things, return on capital invested to construct the line extension. Time Warner Cable's proposal to extend cable to areas where there are 20 homes per mile well exceeds New York State PSC requirements and demonstrates our commitment to maximize the provision of service to customers taking into our business objectives. 4 TIME WARNER ®� ' -�� CABLE , � iji FEB I OW February 9,2000 DEPARTMENT OF Mayor Alan Cohen pLAN NG&DEVELOPMENT City of Ithaca 108 E. Green Street Ithaca,NY 14850 Dear Mayor Cohen: As you know,the City of Ithaca has granted a franchise to provide cable service to a subsidiary of Time Warner Inc.C'TWI")(which subsidiary does business as"Time Warner Cable"). I am writing to inform you of certain developments regarding TWI. As you may have read,America Online,Inc. ("AOL")and TWI have announced a stock-for-stock merger in which each of TWI and AOL will merge with subsidiaries of a newly formed holding company. As a result of the mergers,both TWI and AOL will become wholly owned subsidiaries of the new holding company,AOL Time Warner Inc("AOL Time Warner"). Under the terms of the definitive merger agreement,TWI and AOL stock will be converted to AOL Time Warner stock at fixed exchange ratios. As explained above,both AOL and TWI will continue to exist as wholly owned subsidiaries of AOL Time Warner. It also should be noted that Time Warner Cable and indirect subsidiaries and affiliates of TWI and Time Warner Cable, including the current franchisee in your community,will continue to exist as subsidiaries of AOL Time Warner,Inc. While it is unclear that this transaction requires your approval,if you conclude that it does,we would appreciate the consideration and prompt adoption of the accompanying form of resolution. We have enclosed one(1)original(and two(2)copies)of FCC Form 394 which provides you with the information required by the FCC rules and commences the review period provided for thereunder. I would like to take this opportunity to assure you that the merger of AOL and TWI will have absolutely no adverse impact upon our franchise with your community or the service that we provide. • The franchise will continue to be held by the same entity. There will be no transfer of the franchise. • Time Warner Cable will continue to be solely and exclusively responsible for the day-to-day management and operation of the cable television system. • There will be no change in our commitment to provide our customers with the best in programming choices and customer service at a competitive rate. • The local management and staff will remain the same. • Local management will continue to report to the same executives of Time Warner Cable. We believe this unique new enterprise, the premier global company delivering branded entertainment and information across rapidly converging media platforms can only benefit our customers. AOL Time Warner's creative and journalistic talent,technology assets and expertise,and management experience will enable us to enhance consumer's access to the broadest selection of high quality entertainment and information. Please do not hesitate to contact me should you have any questions or if I can be of any assistance. We certainly value the fine relationship we have with your community. Very truly yours, Mary L. Colter President,Syracuse Division 5015 Campuswood Drive East Syracuse,.NY 13057 • p.0.Box 4733 Syracuse, NY 13221 Tel 315.46.3.22,'8 Fax 31.5.463.6584 RESOLUTION NO. A RESOLUTION PROVIDING FOR THE CHANGE IN CONTROL OF A CABLE TELEVISION FRANCHISEE WHEREAS, the City of Ithaca ("Franchising Authority") has granted a franchise to a subsidiary(the"Franchisee") of Time Warner Inc. ("TWI")to provide cable television service: WHEREAS, TWI and America Online, Inc. ("AOL")have entered into an Agreement and Plan of Merger(the"Merger Agreement") dated as of January 10, 2000; WHEREAS, the Merger Agreement will result in a stock-for-stock merger (the "Transaction") in which TWI and AOL will merge with subsidiaries of a newly formed holding company; and WHEREAS, as a result of the Transaction both TWI and AOL will become wholly owned subsidiaries of the new company, AOL Time Warner Inc.; and WHEREAS, the Franchising Authority has concluded the Transaction will result in a change of control of the Franchisee. NOW, THEREFORE, BE IT RESOLVED BY FRANCHISING AUTHORITY: • To the extent required under the terms of the Franchise, the Franchising Authority authorizes and consents to any change in control of the Franchisee resulting from the Transaction. • The Franchisee shall remain responsible for all obligations under the Franchise. • The foregoing consent shall be effective upon the closing of the Transaction. PASSED, ADOPTED AND APPROVED this day of 12000. By: Title: ATTESTATION AND CERTIFICATION: By: Title: CITY OF ITHACA 108 East Green Street Ithaca, New York 14850-5690 FILE COPY s= %, DEPARTMENT OF PLANNING AND DEVELOPMENT Po� O H. MATTHYS VAN CORT, DIRECTOR OF PLANNING AND DEVELOPMENT DOUGLAS B. McDONALD, DIRECTOR OF ECONOMIC DEVELOPMENT Telephone: Planning R Development-607/274-6550 Community Development/TURA-607/274-6559 Fax: 607/274-6558 February 29, 2000 Mr. Michael Kennedy Vice President of Engineering Syracuse Division Time Warner Cable/AOL Time Warner P.O. Box 4733 Syracuse,NY 13221 Dear Mr. Kennedy: Thank you for emailing the sample digital file of Time Warner's subscriber plant. After reviewing the file and considering our phone conversation of February 16, 2000, we would like to request the following be provided to the Consortium: ❑ Three "E" size plots/maps of Tompkins County showing Time Warner's existing subscriber plant. Please show municipal boundaries,major streets, and if possible indicate coax and fiber. It is understood that the representation of the plant will be generalized, absent of detail. (the map may be larger if needed but not smaller) ❑ One set of"E" size plots/maps showing Time Warner's subscriber plant for each and all municipalities in and out of the Consortium. Each map for each municipality should show all streets and basic/generalized location of the subscriber plant. Please see attached sheet for a list of the municipalities. (the map may be larger if needed but not smaller) ❑ All digital files similar to the sample sent to us. Please provide the files on zip disks or CD. Please coordinate the transfer of the digital files with our Acting Information Systems Manager Ruth Aslanis. We will need the materials requested above no later than March 7, 2000. The Consortium will have to review the material before our next negotiating meeting, to be scheduled prior to March 15, 2000. Thank you for your cooperation and prompt attention to this matter. Sincerely, Jeannie S. Lee Economic Development Planner "An Equal Opportunity Employer with a commitment to workforce diversification." �a 1. :., l cc: Mayor Alan J. Cohen Jean Rice,Rice Williams Associates Ben Curtis,Village of Lansing Patricia Dunn,City of Ithaca Ithaca Area Cable Consortium Municipalities: 1. Town of Ithaca 2. Town of Caroline 3. Village of Trumansburg 4. Village of Dryden 5. Village of Cayuga Heights 6. Village of Freeville 7. Town of Groton 8. Town of Ulysses 9. Village of Lansing 10. Town of Lansing 11. City of Ithaca Municipalities not in the Consortium: 1. Town of Dryden 2. Town of Danby 3. Village of Groton 4. Town of Newfield 5. Town of Enfield -not serviced by Time Warner CITY OF ITHACA 108 East Green Street Ithaca, New York 14850-5690 FILE C fs `0 .,,A. DEPARTMENT OF PLANNING AND DEVELOPMENT Por�'(EO H. MATTHYS VAN CORT, DIRECTOR OF PLANNING AND DEVELOPMENT DOUGLAS B. McDONALD. DIRECTOR OF ECONOMIC DEVELOPMENT Telephone: Planning& Development-607,274-6550 Community Development/LURA- 607,274-6559 Fa: 607/2-4-6558 February 29, 2000 Mr. Tom Doheny General Manager Time Warner Cable 519 W. State Street Ithaca,NY 14850 Dear Tom: I am writing to request that the items outlined in the February 10, 2000 negotiating meeting be provided to the consortium by March 3, 2000. We will need time to review the material before the next negotiating meeting, to be scheduled prior to March 15, 2000. According to my notes the following items are anticipated from Time Warner: ❑ Cost estimate for providing service to the City's Cherry Street Industrial Park and its proposed extension. ❑ I-NET map showing existing plant, drops, and fiber-nodes. (If the map size is 11x17 or smaller please provide 15 copies. If it is larger, such as D or E size plot, please provide 3 copies.) ❑ Data profile for Access usage for the past three years. ❑ List of robotics for the City's Common Council Chambers. ❑ Audio voice over possibilities for subscribers. If there are questions regarding any of the above items please feel free to call me. I am in communication with Michael Kennedy regarding the maps for Time Warner's existing subscriber network in Tompkins County. Thank you. Sincerely, ,, e, n ie S. Lee Economic Development Planner cc: Mayor Alan J. Cohen Jean Rice,Rice Williams Associates Ben Curtis, Village of Lansing Patricia Dunn, City of Ithaca "An Equal Opportunity Employer with a commitment to workforce diversification." C10 rimellftmerCable Time Wamer Cable Phone 315 463 2288 5015 Campuswood Dr. E.Syracuse,NY 12057 Fax 315 463 6584 March 2,2000 � —�1,J--•- "` Ms. Jeannie S. Lee Economic Development Planner � �---- City of Ithaca 108 East Green St. Ithaca, NY 14850 Dear Ms. Lee: Subject: Information Requested Per Feb.29 Letter I have included Item #2 and 3 as we discussed on the telephone. The CD includes all maps in the Tompkins County area, which unfortunately has blank maps included. This was the most expedient way to get them to you. I have included a worksheet that lists all service areas, so you can see associated map numbers that apply. Sincerely, Tim Masterson Design Manager -TIME WARNER CABLE 315.463.2288 EXT.252 FILE COPY TIME WARNER } CABLE March 3, 2000 Jeannie S. Lee t Economic Development Planner tF�� City of Ithaca 108 East Green Street Ithaca, New York 14850-5690 Dear Jeannie, Regarding meeting times, I've talked with Rose Tucker several times about dates and I know she mentioned you would have brought available dates to the Feb 24th meeting. We have been waiting for a list of dates since before the Feb 10th meeting. I think it would be best if you can provide a list of dates for 2 or 3 months. We have heard back from two committee members on the dates proposed today (March 13, 14 or 15) and unfortunately they are unavailable. We are in the process of acquiring dates for several weeks which we should be able to submit to you next week. I'm enclosing the list of robotics equipment we have purchased for the City Hall upgrade. We are still working on the Pegasys utilization reports. Cherry Street Based on figures we analyzed last year there are 5 buildings we do not service in one section of Cherry Street. The 5 buildings passed consist of.12 miles of underground construction and .22 miles of aerial construction. This is the equivalent of 14.6 homes per mile. The construction costs are $7,870.18. The estimate you provided that the park would be expanded by 1300 feet would calculate to an approximately $5000 if the extension is aerial. Inet Map We indicated we could supply a street map of the INET. This map will include locations and have a list identifying them. There are no fiber nodes in the INET. This map is not completed and will follow shortly. .519 11'csl ti1,a, !,—i (t1mo,. A 1 1x-,30 [,4(07,27L.71,75 Video Description Service This service is in the initial stages of development and we have not been able to obtain much information. The FCC is apparently in the process of proposing a service describing the action on the screen designed to benefit the blind. This would be accomplished using BTSC encoders and SAP (second audio program) technology. Although we have many BTSC encoders they do not all provide for SAP. As we obtain more information we will make it available to the consortium. I understand the system maps we discussed from our division office are in route. We are looking forward to our next meeting. Sincerely'_ Thomas P. Doheny General Manager cc: Steve.Miron Trish McCausland George Winner 519 West State Street • MAIL PE6ASYS 612 West Green Street • sruDio Ithaca, New York 14850 Public, Educational and Governmental Access System • Television for Tompkins County PEGASYS Project to Upgrade Ithaca Common Council Coverage Update 3/1/00 In coordination with Ithaca Mayor Alan Cohen, PEGASYS has planned to upgrade the current 2-camera live coverage of Common Council meetings to 4 camera coverage. Our plan calls for 4 robotic cameras, a control console and necessary installation and wiring. Our intent was to coordinate our project with the renovation of Council Chambers planned by the City for October 1999, so that electrical and cabling work would coincide with their project. The City was also considering building a video control room into the back of Council Chambers. Our project will install the following new equipment: 2-Bay Winsted Rack Console $2,795.00 (4) 9" b/w Preview Monitors $636.00 (2) 13" Program Monitor $790.00 (6)Rack Mounts for Monitors $450.00 ' (1) SVHS VCR/rack mount $3,525.00 (1) Videonics MX1 Video Switcher $799.00 (1)Videonics Titlemaker 3000 $549.00 (1) Video DA $225.00 (1)Audio Snake $500.00 (4) SONY EVI-D30 Digital Remote-Control Cameras with 12x1 Zoom Lens $5,980.00 (4) Camera Mounts $316.00 (1)Remote Control Touchscreen $3,500.00 Consultant installation and training package plus all needed cables $3,700.00 Total $23,765.00 Plus sales tax & freight In addition to this new equipment, we plan to incorporate certain elements of our current mobile studio, in particular: Estimated Value Modulator $1,200.00 All new equipment has arrived. We are unable to proceed with installation because the City's construction timetable has changed. We were told by City Engineer Tom West that we should now expect to plan for our installation in June or July because their construction would start in early February. However construction has not yet begun. There now also seems to be uncertainty on the part of City contacts as to whether a control room will be built. phone (607) 272-7272 . TIME WARNER . fax (607) 277-5404 • p C A B L E i 4� 1 °% CITY OF ITHACA FILE COPY 108 East Green Street Ithaca, New York 14850-5690 ` OFFICE OF THE MAYOR • ALAN J.COHEN c4 '•. .......•'`�00 .. Telephone: 607/274-6501 Fax: 607/274-6526 March 9, 2000 Ms. Mary L. Cotter President, Syracuse Division Time Warner Cable P.O. Box 4733 Syracuse,NY 13221 Dear Ms. Cotter: Thank you for the copies of the FCC Form 394 which accompanied your letter dated February 9, 2000 and received in our office on February 10, 2000. We understand we have 120 days from the date of receipt of the FCC Form 394 to review and act on the matter of the America Online, Inc. and Time Warner Inc. merger. Enclosed is a list of questions regarding the pending merger. Answers to these questions are needed to conduct our review. Please feel free to contact our consultant Don Williams of Rice, Williams Associates (202-737-2400), or me if you have any questions regarding the enclosed questions. Your attention and assistance on this matter is greatly appreciated. Yours truly, IdAll Alan J. Cohen Mayor Mp, cc: Tom Doheny, Time Warner MAR - 9 Don Williams, Rice Williams Associates Thys Van Cort, City of Ithaca ---.. DEPART","i.7 i O. n Patricia Dunn, City of Ithaca ,;,3,is,.VEL0PN!r.'!T �- a Jeannie S. Lee, City of Ithaca L_ z 'An Equal Opportunity Employer with an Affirmativc Action Program' QUESTIONS REGARDING THE PROPOSED MERGER OF AMERICA ONLINE,INC. AND TIME WARNER (AOL TIME WARNER INC.) REGARDING THE CABLE TELEVISION SERVICE CURRENTLY SERVING THE CITY OF ITHACA, NY March 8, 2000 1. What representation will Time Warner and AOL have in managing Holdco? Please explain. 2. Will there be any change in rates or charges as a result of the stock-for-stock merger? 3. Will AOL/TW agree to comply with all existing franchise requirements and ordinance provisions? 4. Will the Company agree to incorporate the Memorandum of Understanding between Time Warner, Inc. and America Online, Inc. regarding open access business practices dated February 29, 2000, in the transfer approval resolution? 5. Do you anticipate any changes in the present program lineup? 6. When will Internet access be open to all or several ISP's? What financial, legal or technical requirements will be made for ISP's? 7. What will be the policy regarding Internet user privacy, and the sale of such Internet customer data to third parties? 8. Will the Company charge ISP's for use of cable plant to provide high-speed Internet access? 9. How will this transfer of control affect the development of local telephone service competition? Does the Company intend to provide local telephone service competition? 10. Please indicate if Internet services offered and any access fees related to Internet service or telephony service will be calculated for franchise fees as a part of the system's gross revenues. 11. Does the Company have plans to develop a metropolitan wide telecommunications network? If so,please describe such plans and a time frame for their implementation. 12. What is the Company's position regarding the previous transfer request which was denied by the City of Ithaca in 1995? Please explain. 13. Given the agreement and plan of merger between America Online and Time Warner, is there a stock price at which the merger may be called off by one or another of the parties? This question is asked relative to the decline in the share price of America Online since the merger announcement. 14. How will this transfer of control impact the current Time Warner Internet access service called Roadrunner? 15. Will representatives of AOL fill the positions vacated on the Time Warner Cable Board vacated by MediaOne? 16. Please describe the operation of the Time Warner Cable Management Committee prior to and after this deal. 17. What is the target settlement date of the agreement and plan of merger? 18. What is the percent of cable subscribers involved in the merger that must be transferred in order for the merger to occur? 19. How will this merger affect the financial position of the Franchisee? w • 4�.IT �'.� CITE" OF ITHACA - F1LE COPY 108 East Green Street Ithaca, New York 1480-5690 i• COQ• ,`00 OFFICE OF THE MAYOR ALAN J.COHEN '�iop TEQ Telephones. 607/274-6501 Fax; 607/274-6526 March 9, 2000 Ms. Mary L. Cotter President, Syracuse Division Time Warner Cable P.O. Box 4733 Syracuse, NY 13221 Dear Ms. Cotter: Thank you for the copies of the FCC Form 394 which accompanied your letter dated February 9, 2000 and received in our office on February 10, 2000. We understand we have 120 days from the date of receipt of the FCC Form 394 to review and act on the matter of the America Online, Inc. and Time Warner Inc. merger. Enclosed is a list of questions regarding the pending merger. Answers to these questions are needed to conduct our review. Please feel free to contact our consultant Don Williams of Rice, Williams Associates (202-737-2400), or me if you have any questions regarding the enclosed questions. Your attention and assistance on this matter is greatly appreciated. Yours truly, ld4n Alan J. Cohen Mayor cc: Tom Doheny, Time Warner i ' t MAR - 9 2000 Don Williams, Rice Williams Associates . Thys Van Cort, City of Ithaca � Patricia Dunn, City of Ithaca PLANNING DEPARTMENT EOPMENT > � Jeannie S. Lee, City of Ithaca . 07 orb 'An Equal Opportunity Employcr with an Afflrmativc Action Program' �, QUESTIONS REGARDING THE PROPOSED MERGER OF AMERICA ONLINE, INC. AND TIME WARNER (AOL TIME WARNER INC.) REGARDING THE CABLE TELEVISION SERVICE CURRENTLY SERVING THE CITY OF ITHACA, NY March 8, 2000 1. What representation will Time Warner and AOL have in managing Holdco? Please explain. 2. Will there be any change in rates or charges as a result of the stock-for-stock merger? 3. Will AOL/TW agree to comply with all existing franchise requirements and ordinance provisions? 4. Will the Company agree to incorporate the Memorandum of Understanding between Time Warner, Inc. and America Online, Inc. regarding open access business practices dated February 29, 2000, in the transfer approval resolution? 5. Do you anticipate any changes in the present program lineup? 6. When will Internet access be open to all or several ISP's? What financial, legal or technical requirements will be made for ISP's? 7. What will be the policy regarding Internet user privacy, and the sale of such Internet customer data to third parties? 8. Will the Company charge ISP's for use of cable plant to provide high-speed Internet access? 9. How will this transfer of control affect the development of local telephone service competition? Does the Company intend to provide local telephone service competition? 10. Please indicate if Internet services offered and any access fees related to Internet service or telephony service will be calculated for franchise fees as a part of the system's gross revenues. 11. Does the Company have plans to develop a metropolitan wide telecommunications network? If so, please describe such plans and a time frame for their implementation. 12. What is the Company's position regarding the previous transfer request which was denied by the City of Ithaca in 1995? Please explain. 13. Given the agreement and plan of merger between America Online and Time Warner, is there a stock price at which the merger may be called off by one or another of the parties? This question is asked relative to the decline in the share price of America Online since the merger announcement. 14. How will this transfer of control impact the current Time Warner Internet access service called Roadrunner? 15. Will representatives of AOL fill the positions vacated on the Time Warner Cable Board vacated by MediaOne? 16. Please describe the operation of the Time Warner Cable Management Committee prior to and after this deal. 17. What is the target settlement date of the agreement and plan of merger? 18. What is the percent of cable subscribers involved in the merger that must be transferred in order for the merger to occur? 19. How will this merger affect the financial position of the Franchisee? e Federal Communications Commission Approved By OMB Washington, DC 20554 FCC 394 3060-0573 APPLICATION FOR FRANCHISE AUTHORITY CONSENT TO ASSIGNMENT OR TRANSFER OF CONTROL OF CABLE TELEVISION FRANCHISE FOR FRANCHISE AUTHORITY USE ONLY SECTION I. GENERAL INFORMATION 1.Community Unit Identification Number: DATE: 02/11/2000 NY0092 2. Application for: Assignment of Franchise X Transfer of Control 3. Franchising Authority: Ithaca, City 4. Identify community where the system/franchise that is the subject of the assignment or transfer of control is located: Ithaca, City 5. Date system was acquired or(for system's constructed by the transferor/assignor)the date on which service was provided to the first subscriber in the franchise area: No longer applicable 6. Proposed effective date of closing of the transaction assigning or transferring ownership of the system to transferee/assignee: As soon as practicable 7. Attach as an Exhibit a schedule of any and all additional information or material filed with this Exhibit No. application that is identified in the franchise as required to be provided to the franchising 1 authority when requesting its approval of the type of transaction that is the subject of this application. PART I - TRANSFEROR/ASSIGNOR 1. Indicate the name,mailing address,and telephone number of the transferor/assignor. Legal name of Transferor/Assignor(if individual,list last name first) Time Warner Inc. Assumed name used for doing business(if any) c/o Time Warner Cable Mailing street address or P.O.Box 290 Harbor Drive City State ZIP Code Telephone No.(include area code) Stamford CT 06904-2210 (203) 328-0600 2.(a) Attach as an Exhibit a copy of the contract or agreement that provides for the assignment or Exhibit No. transfer of control(including any exhibits or schedules thereto necessary in order to understand the terms thereof). If there is only an oral agreement,reduce the terms to writing and attach. 2 (Confidential trade,business,pricing or marketing information,or other information not otherwise publicly available,may be redacted). (b) Does the contract submitted in response to(a)above embody the full and complete agreement �i Yes � No between the transferor/assignor and the transferee/assignee? — If No,explain in an Exhibit. Exhibit No. N/A FCC 394(Page 1) September 1996 PART II-TRANSFEREE/ASSIGNEE 1. (a) Indicate the name, mailing address, and telephone number of the transferee/assignee. Legal name of Transferee/Assignee(if individual, list last name first) AOL Time Warner Inc. Assumed name used for doing business(if any) C/O Time Warner Cable Mailing street address or P.O. Box 290 Harbor Drive City State ZIP Code Telephone No. (include area code) Stamford CT 06902 203 328-0600 (b) Indicate the name, mailing address, and telephone number of person to contact, if other than transferee/assignee. Name of contact person (list last name first) Mary Cotter, President Firm or company name(if any) Time Warner Cable-Syracuse Division Mailing street address or P.O. Box 5105 Campuswood Drive City State ZIP Code Telephone No. (include area code) East Syracuse NY 13057 315 463-2288 (c) Attach as an Exhibit the name, mailing address, and telephone number of each additional person Exhibit No. who should be contacted, if any. N/A (d) Indicate the address where the system's records will be maintained. Street Address 5105 Campuswood Drive City State ZIP Code East Syracuse NY 13057 2. Indicate on an attached exhibit any plans to change the current terms and conditions of service and operations of the system as a consequence of the transaction for which approval is sought. Exhibit No. 3 FCC 394(Page 2) September 1996 SECTION II.TRANSFEREE'S/ASSIGNEE'S LEGAL QUALIFICATIONS 1. Transferee/Assignee is: ® Corporation a. Jurisdiction of incorporation: d. Name and address of registered agent in Delaware jurisdiction: b. Date of incorporation: CT Corporation February 7 2000 111 8th Ave., 13th Floor c. For profit or not-for-profit: For profit New York NY 10011 ❑ Limited Partnership a. Jurisdiction in which formed: c. Name and address of registered agent in jurisdiction: b. Date of formation: ❑ General Partnership a. Jurisdiction whose laws govern formation: b. Date of formation: ❑ Individual ❑ Other. Describe in an Exhibit. Exhibit No. N/A 2. List the transferee/assignee, and, if the transferee/assignee is not a natural person, each of its officers, directors, stockholders beneficially holding more than 5%of the outstanding voting shares, general partners, and limited partners holding an equity interest of more than 5%. Use only one column for each individual or entity. Attach additional pages if necessary. (Read carefully-the lettered items below refer to corresponding lines in the following table.) (a) Name, residence, occupation or principal business, and principal place of business. (If other than an individual, also show name, address and citizenship of natural person authorized to vote the voting securities of the applicant that it holds.) List the applicant first, officers, next,then directors and,thereafter, remaining stockholders and/or partners. (b) Citizenship. (c) Relationship to the transferee/assignee(e.g., officer, director, etc.). (d) Number of shares or nature of partnership interest. (e) Number of votes. (f) Percentage of votes. (a)(See Attachment 1) (b) (c) (d) (e) (f) FCC 394(Page 3) September 1996 SECTION II,QUESTION 2-TRANSFEREE- LEGAL QUALIFICATIONS ATTACHMENT 1 (a) (a) (a) (a) (a) (a) AOL Time Warner Inc. Stephen M.Case Gerald M. Levin Robert E.Turner,111 Robert W. Pittman* Richard D. Parsons** 75 Rockefeller Plaza 2200 AOL Way 75 Rockefeller Plaza One CNN Center 2200 AOL Way 75 Rockefeller Plaza New York,NY 10019 Dulles,VA 20166 New York,NY 10019 Box 105366 Dulles,VA 20166 New York,NY 10019 Atlanta,GA 30303 (b)Delaware corporation (b)US citizen (b)US citizen (b)US citizen (b)US citizen (b)US citizen (c)Not applicable (c)Chairman (c)Chief Executive (c)Vice Chairman& (c)Co-Chief (c)Co-Chief Officer&Director Director Operating Officer Operating Officer (d)Not applicable (d)Less than I% (d)Less than 1% (d)Less than 5% (d)Less than 1% (d)Less than 1% (e)Not applicable (e)Less than 1% (e)Less than 1% (e)Less than 5% (e)Less than 1% (e)Less than 1% (f)Not applicable (f)Less than 1% (e)Less than 1% (f)Less than 5% (f)Less than 1% (f)Less than 1% (a) (a) (a) (a) (a) (a) J. Michael Kelly Christopher P. Bogart Paul T.Cappuccio James F.MacGuidwin Thomas W. McEnerney J.Carter Bacot** 2200 AOL Way 75 Rockefeller Plaza 2200 AOL Way 2200 AOL Way 75 Rockefeller Plaza 75 Rockefeller Plaza Dulles,VA 20166 New York,NY 10019 Dulles,VA 20166 Dulles,VA 20166 New York,NY 10019 New York,NY 10019*** (b)US citizen (b)Canadian citizen (b)US citizen (b)US citizen (b)US citizen (b)US citizen (c)Chief Financial (c)Vice President (c)Vice President (c)Vice President (c)Vice President (c)Director Officer&Executive Vice President (d)Less than 1% (d)Less than 1% (d)Less than 1% (d)Less than I% (d)Less than 1% (d)Less than I% (e)Less than I% (e)Less than I% (e)Less than I% (e)Less than I% (e)Less than I% (e)Less than I% (f)Less than I% (f)Less than I% (f)Less than I% (f)Less than I% (f)Less than I% (f)Less than I% *Seven AOL Time Warner directors to be designated from this group. **Six AOL Time Warner directors to be designated from this group. ***Occupation/principal place of business listed on applicable Annual Report. 2 (a) (a) (a) (a) (a) (a) Stephen F.Bollenbach** John C.Danforth** Gerald Greenwald,Jr.** Carla A. Hills** Reuben Mark** Michael Miles** 75 Rockefeller Plaza 75 Rockefeller Plaza 75 Rockefeller Plaza 75 Rockefeller Plaza 75 Rockefeller Plaza 75 Rockefeller Plaza New York,NY 10019*** New York,NY 10019*** New York,NY 10019*** New York,NY 10019*** New York,NY 10019*** New York,NY 10019*** (b)US citizen (b)US citizen (b)US citizen (b)US citizen (b)US citizen (b)US citizen (c)Director (c)Director (c)Director (c)Director (c)Director (c)Director (d)Less than 1% (d)Less than 1% (d)Less than 1% (d)Less than 1% (d)Less than 1% (d)Less than 1% (e)Less than I% (e)Less than I% (e)Less than I% (e)Less than I% (e)Less than I% (e)Less than I% (f)Less than I% (f)Less than I% (f)Less than I% (f)Less than I% (f)Less than I% (f)Less than 1 (a) (a) (a) (a) (a) (a) Francis T.Vincent,Jr.** Daniel F.Akerson* James L. Barksdale* Frank L.Cautield* Alexander M. Haia,Jr.* William N. Melton* 75 Rockefeller Plaza 2200 AOL Way 2200 AOL Way 2200 AOL Way 2200 AOL Way 2200 AOL Way New York,NY 10019*** Dulles,VA 20166*** Dulles,VA 20166*** Dulles,VA 20166*** Dulles,VA 20166*** Dulles,VA 20166*** (b)US citizen (b)US citizen (b)US citizen (b)US citizen (b)US citizen (b)US citizen (c)Director (c)Director (c)Director (c)Director (c)Director (c)Director (d)Less than 1% (d)Less than 1% (d)Less than 1% (d)Less than 1% (d)Less than 1% (d)Less than 1% (e)Less than I% (e)Less than I% (e)Less than I% (e)Less than I% (e)Less than I% (e)Less than I% (f)Less than 1% (f)Less than I% (f)Less than 1% (f)Less than I% (f)Less than I% (f)Less than I% *Seven AOL Time Warner directors to be designated from this group. **Six AOL Time Warner directors to be designated from this group. ***Occupation/principal place of business listed on applicable Annual Report. 3 (a) (a) (a) Colin L.Powell* Franklin D.Raines* Ken Novack* 2200 AOL Way 2200 AOL Way 2200 AOL Way Dulles,VA 20166*** Dulles,VA 20166*** Dulles,VA 20166 (b)US citizen (b)US citizen (b)US citizen (c)Director (c)Director (c)Director (d)Less than I% (d)Less than I% (d)Less than I% (e)Less than I% (e)Less than I% (e)Less than I% (f)Less than I% (f)Less than I% (f)Less than I% 113958.1 *Seven AOL Time Warner directors to be designated from this group. **Six AOL Time Warner directors to be designated from this group. ***Occupation/principal place of business listed on applicable Annual Report. 3. If the applicant is a corporation or a limited partnership, is the transferee/assignee formed under the x❑ Yes F1 No laws of, or duly qualified to transact business in,the State or other jurisdiction in which the system operates? If the answer is No, explain in an Exhibit. Exhibit No. 4 4. Has the transferee/assignee had any interest in or in connection with an applicant which has been F-1 Yes [x] No dismissed or denied by any franchise authority? If the answer is Yes, describe circumstances in an Exhibit. Exhibit No. 5 5. Has an adverse finding been made or an adverse final action been taken by any court or ® Yes F� No administrative body with respect to the transferee/assignee in a civil, criminal or administrative proceeding, brought under the provisions of any law or regulation related to the following: any felony; revocation, suspension or involuntary transfer of any authorization (including cable franchises)to provide video programming services; mass media related antitrust or unfair competition;fraudulent statements to another government unit;or employment discrimination? If the answer is Yes, attach as an Exhibit a full description of the persons and matter(s) involved, Exhibit No. including an identification of any court or administrative body and any proceeding (by dates and file 6 numbers, if applicable), and the disposition of such proceeding. 6.Are there any documents, instruments, contracts or understandings relating to ownership or future F-1 Yes [x] No ownership rights with respect to any attributable interest as described in Question 2 (including, but not limited to, non-voting stock interests, beneficial stock ownership interests, options,warrants, debentures)? Exhibit No. If Yes, provide particulars in an Exhibit. 7. Do documents, instruments, agreements or understandings for the pledge of stock of the ® Yes ❑ No transferee/assignee, as security for loans or contractual performance, provide that: (a)voting rights will remain with the applicant, even in the event of default on the obligation; (b) in the event of default,there will be either a private or public sale of the stock; and (c) prior to the exercise of any ownership rights by a purchaser at a sale described in (b), any prior consent of the FCC and/or of the franchising authority, if required pursuant to federal, state or local law or pursuant to the terms of the franchise agreement will be obtained? If No,attach as an Exhibit a full explanation. Exhibit No. 7 SECTION III. TRANSFEREE'S/ASSIGNEE'S FINANCIAL QUALIFICATIONS 1. The transferee/assignee certifies that it has sufficient net liquid assets on hand or available from Fx I Yes F] No committed resources to consummate the transaction and operate the facilities for three months. 2. Attach as an Exhibit the most recent financial statements, prepared in accordance with generally Exhibit No. accepted accounting principles, including a balance sheet and income statement for at least one full 8 year,for the transferee/assignee or parent entity that has been prepared in the ordinary course of business, if any such financial statements are routinely prepared. Such statements, if not otherwise publicly available, may be marked CONFIDENTIAL and will be maintained as confidential by the franchise authority and its agents to the extent permissible under local law. SECTION IV.TRANSFEREE'S/ASSIGNEE'S TECHNICAL QUALIFICATIONS Set forth in an Exhibit a narrative account of the transferee's/assignee's technical qualifications, experience Exhibit No. and expertise regarding cable television systems, including, but not limited to, summary information about 9 appropriate management personnel that will be involved in the system's management and operations. The transferee/assignee may, but need not, list a representative sample of cable systems currently or formerly owned or operated. FCC 394(Page 4) September 1996 r SECTION V-CERTIFICATIONS Part I-Transferor/Assignor All the statements made in the application and attached exhibits are considered material representations,and all the Exhibits are a material part hereof and are incorporated herein as if set out in full in the application. Signature I CERTIFY that the statements in this application are true, complete and correct to the best of my knowledge and belief and are made in good faith. zzdA Date WILLFUL FALSE STATEMENTS MADE ON THIS FORM ARE x '4 M(t� PUNISHABLE BY FINE AND/OR IMPRISONMENT. U.S.CODE, Printfull name TITLE 18,SECTION 1001. Spencer Hays Check appropriate classification: Individual General Partner Corporate Officer Other.Explain: (Indicate Title) 0 Vice President and Deputy General Counsel Part II-Transferee/Assignee All the statements made in the application and attached Exhibits are considered material representations,and all the Exhibits are a material part hereof and are incorporated herein as if set out in full in the application. The transferee/assignee certifies that he/she: (a) Has a current copy of the FCC's Rules governing cable television systems. (b) Has a current copy of the franchise that is the subject of this application,and of any applicable state laws or local ordinances and related regulations. (c) Will use its best efforts to comply with the terms of the franchise and applicable state laws or local ordinances and related regulations,and to effect changes,as promptly as practicable, in the operation system,if any changes are necessary to cure any violations thereof or defaults thereunder presently in effect or ongoing. Signature I CERTIFY that the statements in this application are true, C�41/ �G�� . complete and correct to the best of my knowledge and belief and are made in good faith. Date r WILLFUL FALSE STATEMENTS MADE ON THIS FORM ARE VES 4 MOV PUNISHABLE BY FINE AND/OR IMPRISONMENT. U.S.CODE, Print full name TITLE 18,SECTION 1001. Thomas McEnerney Check appropriate classification: Individual General Partner X (Indicate Title)Corporate Officer Other.Explain: Vice President FCC 394(Page 5) September 1996 EXHIBIT I The applicable cable franchise does not specify any additional information or material that is required to be provided to the franchising authority in connection with a transfer of control of the franchise. EXHIBIT 2 Attached hereto is the Agreement and Plan of Merger ("Agreement") between America Online, Inc. and Time Warner Inc., dated as of January 10, 2000, including all associated exhibits. The Agreement and exhibits embody the full and complete agreement between America Online, Inc. and Time Warner Inc. with respect to their pending merger, and thus all documents necessary in order to understand the terms of this transaction are being provided. Various schedules referenced in the Agreement contain confidential trade, business, pricing or marketing information, or other information not publicly available, and are not necessary in order to understand the terms of this transaction, are thus are not required to be included. Nevertheless, such documents are available for inspection by appropriate franchising authority officials at any mutually convenient time and in a manner that ensures protection of confidentiality, by contacting the individual listed in Part II, Section I, Question 1(b) of this Form. Pursuant to the Agreement, America Online, Inc. and Time Warner Inc. will each merge into wholly-owned subsidiaries of a new Delaware corporation, AOL Time Warner Inc. Thus, as a result of this merger of equals, AOL Time Warner Inc. will become the new ultimate parent of both America Online, Inc. and Time Warner Inc. The Time Warner related entity that holds the cable franchise for your community will remain in existence and will continue to be the franchise holder and operator of your system, just as before. EXECUTION COPY AGREEMENT AND PLAN OF MERGER DATED AS OF JANUARY 10, 2000 BETWEEN AMERICA ONLINE, INC. AND TIME WARNER INC. 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 CC 37 K--:.c--C-2269-=.01E7-C 9-MGA vi AGREEMENT AND PLAN OF MERGER, dated as of January 10, 2000 (this "Agreement"), between AMERICA ONLINE, INC., a Delaware corporation("America Online"), and TIME WARNER INC., a Delaware corporacion("Time Warner"). WITNESSETH: 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 "VotineAgreement") 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: CC37EC-3007-02269-.kOi„-CH9-Y.Cn 2 (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: 0 3-_ 6C-- :GcS-nC16 5- Gr. 3 (a) Time Warner Merger Sub shall be merged with and into Time Warner (the"Time Warner Merger'). Time Warner shall be the surviving corporation in the Time Warner Merger and shall continue its corporate existence under the laws of the State of Delaware. As a result of the Time Warner Merger, Time Warner shall become a wholly owned subsidiary of Holdco. (b) America Online Merger Sub shall be merged with and into America Online (the "America Online Merl"). 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. 0C37-1C-0007-„226 'ccE..r.9-YGA 4 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 $.O1 per share, of the surviving corporation in the Time Warner Merger. (b) Cancellation of TreasulY 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: v37c C u�— 226°—AO:EEC'r.9—N.GA 5 Each Share of the Specified Number and Class or Series of Shares of Class or Series of Time Warner Capital Stock Holdco 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 Common . . . . . 1.5 shares of Series LMCN-V Common Stock,par value$0.01 per share Stock,par value $0.01 per share, of Holdco ("Time Warner Series LMCN-V ("Holdco Series LMCN-V Common Stock")• Common Stock") provided that the"Formula Number"(as defined in the Certificate of Designations for the Time Warner Series LMCN-V Common Stock(the"Series LMCN-V Certificate")) in effect immediately prior to the Effective Time shall be the Formula Number for the Holdco Series LMCN-V Common Stock issued pursuant to the Mergers and no adjustment to the Formula Number or conversion rights of such stock shall be made pursuant to the terms of the Series LMCN-V Certificate, including Section 3.6 thereof Time Warner Series LMC Common . . . . . . . . 1.5 shares of Series LMC Common Stock,par Stock,par value$0.01 per share value $0.01 per share, of Holdco ("Holdco ("Time Warner Series LMC Common Series LMC Common Stock'); provided that Stock") 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 Preferred Stock, Stock, par value $0.10 per share, of Holdco par value $0.10 per share ("Holdco Series E Preferred Stock") ("Time Warner Series E Preferred Stock") 0337- C-oca--Cz_E.- =-XGA 6 Each Share of the Specified Number and Class or Series of Shares of Class or Series of Time Warner Capital Stock Holdco Capital Stock Into Which Converted Time Warner Series F Convertible . . . . . . . . . One share of Series F Convertible Preferred Preferred Stock, Stock,par value$0.10 per share, of Holdco par value$0.10 per share ("Holdco Series F Preferred Stock") ("Time Warner Series F Preferred Stock") Time Warner Series I Convertible . . . . . . . . . . One share of Series I Convertible Preferred Preferred Stock, Stock,par value$0.10 per share, of Holdco par value$0.10 per share ("Holdco Series I Preferred Stock") ("Time Warner Series F Preferred Stock") Time Warner Series J Convertible . . . . . . . . . . One share of Series J Convertible Preferred Preferred Stock, Stock,par value$0.10 per share, of Holdco par value$0.10 per share ("Time ("Holdco Series J Preferred Stock"and, Warner Series J Preferred Stock"and together with Holdco Common Stock,Holdco together, with Time Warner Series E Series LMCN-V Common Stock,Holdco Preferred Stock, Time Warner Series F Series LMC Common Stock,Holdco Series E Preferred Stock and Time Warner Preferred Stock, Holdco Series F Preferred Series I Preferred Stock, the "Time Stock and Holdco Series I Preferred Stock, Warner 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 ,.C3%°C-000--02269-r._:BECH9-YGA 7 dividends or other distributions to which holders of Time Warner Capital Stock become entitled all in accordance with Article III upon the surrender of such Time Warner Certificate. 2.8 Time Warner Stock Options and Other Equity-Based Awards. (a) Each Time Warner Stock Option(as defined in Section 4.2(b)) granted prior to the Effective Time and which remains outstanding immediately prior to the Effective Time shall cease to represent a right to acquire shares of Time Warner Common Stock and shall be converted(each, as so converted, a"Time Warner Converted Option"), at the Effective Time, into an option to acquire, on the same terms and conditions as were applicable under the Time Warner Stock Option(but taking into account any changes thereto, including the acceleration thereof,provided for in the Time Warner Stock Option Plans(as defined in Section 4.2(b)), in any award agreement or in such option by reason of this Agreement or the transactions contemplated hereby), that number of shares of 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 003- -03 -02267-;,Clee_je-MGA 8 Merger and to the extent provided by the terms of the Time Warner Stock Option Plans,the Time Warner Stock Options have become fully vested and exercisable) and stating that such Time Warner Stock Options and agreements shall be assumed by Holdco and shall continue in effect on the same terms and conditions (subject to the adjustments required by this Section 2.8 after giving effect to the Time Warner Merger and the terms of the Time Warner Stock Option Plans). To the extent permitted by law, Holdco shall comply with the terms of the Time Warner Stock Option Plans and shall take such reasonable steps as are necessary or required by, and subject to the provisions of, such Time Warner Stock Option Plans, to have the Time Warner Stock Options which qualified as incentive stock options prior to the Effective Time continue to qualify as incentive stock options of 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 2.1 l(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 Rim. (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 DissentingS ") 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 003763-0007-02265-A016ECH9-MGA 9 failed to perfect their right of appraisal under applicable law, but, instead, the holders thereof shall be entitled to payment of the appraised value of such Time Warner Dissenting Shares in accordance with Section 262 of the DGCL. If any such holder shall have failed to perfect or shall have effectively withdrawn or lost such right of appraisal, each share of Time Warner Series Common Stock and Time Warner Preferred Stock held by such stockholder shall thereupon be deemed to have been converted into the right to receive and become exchangeable for, at the Effective Time, the applicable Time Warner Merger Consideration with respect thereto, in the manner provided for in Section 2.7. (b) Time Warner shall give America Online(i)prompt notice of any demands for appraisal filed pursuant to Section 262 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"). 003790-0007-02269-A018ECH9-MGA 10 As a result of the America Online Merger and without any action on the part of the holders thereof, at the Effective Time, all shares of America Online Common Stock shall cease to be outstanding and shall be canceled and retired and shall cease to exist, and each holder of a certificate which immediately prior to the Effective Time represented any such shares of America Online Common Stock(an"America Online Certificate"and,together with the Time Warner Certificates,the"Certificates") shall thereafter cease to have any rights with respect to such shares of America Online Common Stock, except the right to receive the America Online Merger Consideration to be issued in consideration therefor and any dividends or other distributions to which holders of America Online Common Stock become entitled all in accordance with Article III upon the surrender of such America Online Certificate. 2.12 America Online Stock Options and Other Equity-Based Awards. (a) Each America Online Stock Option(as 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. OO J7EC-060-0226?-A^iELC' .9-XJ", 11 (c) As soon as practicable after the Effective Time, Holdco shall deliver to the holders of America Online Stock Options appropriate notices setting forth such holders' rights pursuant to the respective America Online Stock Option Plans and agreements evidencing the grants of such America Online Stock Options (including that, in connection with the America Online Merger and to the extent provided by the terms of the America Online Stock Option Plans, the America Online Stock Options have become fully vested) and stating that such America Online Stock Options and agreements shall be assumed by Holdco and shall continue in effect on the same terms and conditions (subject to the adjustments required by this Section 2.12 after giving effect to the America Online Merger and the terms of the America Online Stock Option Plans). To the extent permitted by law,Holdco shall comply with the terms of the America Online Stock Option Plans and shall take such reasonable steps as are necessary or required by, and subject to the provisions of, such America Online Stock Option Plans, to have the America Online Stock Options which qualified as incentive stock options prior to the Effective Time continue to qualify as incentive stock options of 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 003'50-OCC 02269-ACi_=C49-MGA 12 distributions pursuant to Section 3.3. Any cash and certificates representing Holdco Capital Stock deposited with the Exchange Agent shall hereinafter be referred to as the"Bxchanye 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 003780-0007-02269-%018ECH9-X`! A 13 effect of applicable laws, following surrender of any such Certificate, there shall be paid to the record holder thereof without interest, (a)promptly after the time of such surrender, the amount of any cash payable in lieu of fractional shares of 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 14 Time Warner Capital Stock or America Online Common Stock formerly represented thereby to which such holders are entitled pursuant to Sections 2.7,2.11 and 3.2,any cash in lieu of fractional shares of 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. CC378C-0007-02269-ACi86CY.9-,�'A 15 3.11 Further Assurances. At and after the Effective Time, the officers and directors of Holdco will be authorized to execute and deliver, in the name and on behalf of America Online,America Online Merger Sub, Time Warner or Time Warner Merger Sub, any deeds,bills of sale, assignments or assurances and to take and do, in the name and on behalf of America Online,America Online Merger Sub, Time Warner or Time Warner Merger Sub, any other actions and things to vest,perfect or confirm of record or otherwise in Holdco any and all right, title and interest in, to and under any of the rights,properties or assets acquired or to be acquired by Holdco as a result of, or in connection with, the Mergers. 3.12 Stock Transfer Books. The stock transfer books of Time Warner and America Online shall be closed immediately upon the Effective Time and there shall be no further registration of transfers of shares of Time Warner Capital Stock or America Online Common Stock thereafter on the records of Time Warner or America Online. On or after the Effective Time, any Certificates presented to the Exchange Agent or Holdco for any reason shall be converted into the right to receive the applicable Merger Consideration with respect to the shares of Time Warner Capital Stock or America Online Common Stock formerly represented thereby(including any cash in lieu of fractional shares of Holdco Capital Stock to which the holders thereof are entitled pursuant to Section 3.5 and any dividends or other distributions to which the holders thereof are entitled pursuant to Section 3.3). ARTICLE IV REPRESENTATIONS AND WARRANTIES 4.1 Representations and Warranties of America Online. Except as disclosed in the America Online Filed SEC Reports (as defined in Section 4.1(d)(ii))or as set forth in the America Online Disclosure Schedule delivered by America Online to Time Warner prior to the execution of this Agreement(the"America Online Disclosure Schedule"), America Online represents and warrants to Time Warner as follows: (a) Organization. Standin 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 O.;3?32- -2269-AG:8cCr.9-::GA 16 in the aggregate, would not reasonably be expected to have a Material Adverse Effect on America Online. The copies of the certificate of incorporation and bylaws of America Online which were previously furnished or made available to Time Warner are true, complete and correct copies of such documents as in effect on the date of this Agreement. (ii) Exhibit 21 to America Online's Annual Report on Form 10-K for the fiscal year ended June 30, 1999 includes all the Subsidiaries of America Online which as of the date of this Agreement are Significant Subsidiaries(as defined in Rule 1-02 of Regulation S-X of the Securities and Exchange Commission(the"SEC")). All the outstanding shares of capital stock of, or other equity interests in, each such Significant Subsidiary have been validly issued and are fully paid and nonassessable and are, except as set forth in such Exhibit 21, owned directly or indirectly by America Online, free and clear of all pledges, claims, liens, charges, encumbrances and security interests of any kind or nature whatsoever(collectively"Liens") and free of any other restriction(including any restriction on the right to vote, sell or otherwise dispose of such capital stock or other ownership interests), except for restrictions imposed by applicable securities laws. Except as disclosed in Section 4.1(a) of the America Online Disclosure Schedule, as of the date of this Agreement, neither America Online nor any of its Subsidiaries directly or indirectly owns any equity or similar interest in, or any interest convertible into or exchangeable or exercisable for, any corporation,partnership,joint venture or other business association or entity(other than Subsidiaries), that is or would reasonably be expected to be material to America Online and its Subsidiaries taken as a whole. (b) Capital Structure. (i) As of January 5, 2000, the authorized capital stock of America Online consists of(A) 6,000,000,000 shares of America Online Common Stock, of which 2,274,045,973 shares were outstanding and(B) 5,000,000 shares of Preferred Stock,par value$0.01 per share, none of which were outstanding and 500,000 of which have been designated Series A-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 003780-CCC'-022E?-�.0'E=C 9-MGA 17 issued by America Online after the date hereof in accordance with the America Online Stock Option Plans and Section 5.1, collectively, the "America Online Stock Options') under America Online's Employee Stock Purchase Plan, 1992 Employee,Director and Consultant Stock Option Plan, Quantum Computer Services, Inc. 1987 Stock Incentive Plan and Quantum Computer Services, Inc. Incentive Stock Option Plan (1985) and other option plans assumed by America Online(collectively, the "America Online Stock Option Plans") and(z)the 4% Convertible Subordinated Notes due November 15, 2002 of America Online and the Convertible Subordinated Notes due 2019 of America Online. Except in connection with new hire grants of America Online Stock Options made in a manner consistent with past practice to purchase, in the aggregate, not more than 100,000 shares of America Online Common Stock, Section 4.1(b)of the America Online Disclosure Schedule sets forth a complete and correct list, as of January 5, 2000, of the number of shares of America Online Common Stock subject to America Online Stock Options or other rights to purchase or receive America Online Common Stock granted under the America Online Benefit Plans or otherwise and the weighted average exercise price of the outstanding America Online Stock Options referenced therein. Except in connection with new hire grants of America Online Stock Options made in a manner consistent with past practice to purchase, in the aggregate,not more than 100,000 shares of America Online Common Stock, no options or warrants or other rights to acquire capital stock from America Online have been issued or granted since January 5, 2000 to the date of this Agreement. (ii) No bonds, debentures, notes or other indebtedness of America Online having the right to vote on any matters on which holders of capital stock of America Online may vote ("America Online Voting_Deb t") 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 e3-c007-1!22E9-.,C:8-ECa9-^G;. 18 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 Enti ") 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 CC37c0-0007-02269—AC:9ECH9—M-,A 19 Merger and the other transactions contemplated hereby and thereby, except for those required under or in relation to (A)the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended(the "HSR Act"), Council Regulation No. 4064/89 of the European Community, as amended (the"EC Merger Regulation"), the Competition Act(Canada)and the Investment Canada Act of 1985 (Canada) ("Canadian Investment Regulations"), (B) state securities or"blue sky" laws (the"Blue Sky Laws"), (C)the Securities Act of 1933, as amended(the"Securities Act"), (D) the Securities Exchange Act of 1934, as amended(the"Exchange Act"), (E)the DGCL with respect to the filing of the Certificates of Merger, (F)the rules and regulations of the NYSE, (G)antitrust or other competition laws of other jurisdictions, (H)the Communications Act of 1934, as amended, and the rules and regulations of the Federal Communications Commission or any successor entity(the"FCC")thereunder(the"Communications Act"), (I) rules and regulations of(x)the cable franchising authorities having jurisdiction over the cable systems of Time Warner and its Subsidiaries and Affiliates(the"Franchising Authorities") and (y) the state public service commissions having jurisdiction over the assets of Time Warner and its Subsidiaries and Affiliates ("PUCs") and(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 00376C-CC07-02269-A018--CH9-MGA 20 the applicable requirements of the Securities Act and the Exchange Act and the rules and regulations promulgated thereunder. (ii) Except as disclosed in the America Online SEC Reports filed and publicly available prior to the date hereof(the"America Online Filed SEC 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 A,p rp oval', 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 CO3'c0- �J?-C2265-AJiScC-a_p;�_. 21 stockholders at the America Online Stockholders Meeting. The America Online Board Approval constitutes approval of this Agreement, the America Online Stock Option Agreement and the America Online Merger for purposes of Section 203 of the DGCL and Article EIGHTH of the Restated Certificate 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 003763-0001.-02269-A018E-r.9-XGA 22 accordance with this Agreement or the transactions contemplated hereby, since September 30, 1999, America Online and its Subsidiaries have conducted their business only in the ordinary course and in a manner consistent with past practice and, since December 31, 1998, there have not been any changes, circumstances or events which, individually or in the aggregate, have had, or would reasonably be expected to have, a Material Adverse Effect on America Online. 6) Intellectual Property: Year 2000. (i) Except as would not, individually or in the aggregate,reasonably be expected to have a Material Adverse Effect on America Online: (a)America Online and each of its Subsidiaries owns, or is licensed to use(in each case, free and clear of any Liens), all Intellectual Property(as defined below)used in or necessary for the conduct of its business as currently conducted; (b) to the knowledge of America Online, the use of any Intellectual Property by America Online and its Subsidiaries does not infringe on or otherwise violate the rights of any Person, (c)the use of the Intellectual Property is in accordance with applicable licenses pursuant to which America Online or any Subsidiary acquired the right to use any Intellectual Property; and(d) to the knowledge of America Online, no Person is challenging, infringing on or otherwise violating any right of America Online or any of its Subsidiaries with respect to any Intellectual Property owned by and/or licensed to America Online or its Subsidiaries. As of the date of this Agreement, except as would not reasonably be expected, individually or in the aggregate,to have a Material Adverse Effect on America Online,neither America Online nor any of its Subsidiaries has knowledge of any pending claim, order or proceeding with respect to any Intellectual Property used by America Online and its Subsidiaries and to its knowledge no Intellectual Property owned and/or licensed by America Online or its Subsidiaries is being used or enforced in a manner that would reasonably be expected to result in the abandonment,cancellation or unenforceability of such Intellectual Property. For purposes of this Agreement, "Intellectual Property" shall mean trademarks, service marks,brand names, certification marks,trade dress and other indications of origin,the goodwill associated with the foregoing and registrations in any jurisdiction of, and applications in any jurisdiction to register, the foregoing, including any extension, modification or renewal of any such registration or application; inventions, discoveries and ideas, whether patentable or not, in any jurisdiction;patents, applications for patents(including, without limitation,divisions,continuations, continuations in part and renewal applications), and any renewals, extensions or reissues thereof, in any jurisdiction; nonpublic information, trade secrets and confidential information and rights in any jurisdiction to limit the use or disclosure thereof by any person; writings and other works, whether copyrightable or not, in any jurisdiction; and registrations or applications for registration of copyrights in any jurisdiction, and any renewals or extensions thereof: any similar intellectual property or proprietary rights. (ii) Prior to the date of this Agreement,America Online and its Subsidiaries have undertaken a concerted effort to ensure that all of the computer software, computer firmware, computer hardware, and other similar or related items of automated, computerized, and/or software system(s) that are used or relied on by America Online or any or its Subsidiaries 00378C-0007-02269-A018?CH9-MGA 23 in the conduct of their respective businesses will not malfunction, will not cease to function, will not generate incorrect data, and will not provide incorrect results when processing,providing and/or receiving(a) date-related data into and between the years 1999 and 2000 and(b)date- related data in connection with any valid date in the twentieth and twenty-first centuries. As of the date of this Agreement, except as would not reasonably be expected, individually or in the aggregate, America Online reasonably believes that such effort will be successful. (k) Brokers or Finders. No agent,broker, investment banker, 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. (1) Qpinion 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 CO3iBO-C007-02205-nC".9.C'r.9-N^?. 24 601(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. 0037-3-Oc07-02269-A,':6ec_4-vca 25 4.2 Representations and Warranties of Time Warner. Except as disclosed in the Time Warner Filed SEC Reports(as defined in Section 4.2(d)(ii)) or as set forth in the Time Warner Disclosure Schedule delivered by Time Warner to America Online prior to the execution of this Agreement(the "Time Warner Disclosure Schedule"), Time Warner represents and warrants to America Online as follows: (a) Organization. Standing and Power: Subsidiaries. (i) Each of Time Warner and each of its Subsidiaries is a corporation or other organization duly organized,validly existing and in good standing under the laws of its jurisdiction of incorporation or organization,has the requisite power and authority to own, lease and operate its properties and to carry on its business as now being conducted, except where the failure to be so organized, existing and in good standing or to have such power and authority, individually or in the aggregate, would not reasonably be expected to have a Material Adverse Effect on Time Warner, and is duly qualified and in good standing to do business in each jurisdiction in which the nature of its business or the ownership or leasing of its properties makes such qualification necessary other than in such jurisdictions where the failure so to qualify or to be in good standing, individually or in the aggregate, would not reasonably be expected to have a Material Adverse Effect on Time Warner. The copies of the certificate of incorporation and bylaws of Time Warner which were previously furnished or made available to America Online are true, complete and correct copies of such documents as in effect on the date of this Agreement and the copy of the Agreement of Limited Partnership, dated as of October 29, 1991, as amended, of Time Warner Entertainment Company, L.P. ("TWE") which was previously furnished to America Online is a true, complete and correct copy of such agreement as in effect on the date of this Agreement(the"TWE Partnership Agreement"). (ii) Exhibit 21 to Time Warner's Annual Report on Form 10-K for the year ended December 31, 1998 includes all the Subsidiaries of Time Warner which as of the date of this Agreement are Significant Subsidiaries(as defined in Rule 1-02 of Regulation S-X of the SEC and including TWE). All the outstanding shares of capital stock of, or other equity interests in, each such Significant Subsidiary have been validly issued and are fully paid and nonassessable and are, except as set forth in such Exhibit 21 and in the TWE Partnership Agreement, owned directly or indirectly by Time Warner, free and clear of all Liens and free of any other restriction(including any restriction on the right to vote, sell or otherwise dispose of such capital stock or other ownership interests), except for restrictions imposed by applicable securities laws. As of the date of this Agreement,neither Time Warner nor any of its Subsidiaries directly or indirectly owns any equity or similar interest in,or any interest convertible into or exchangeable or exercisable for, any corporation,partnership,joint venture or other business association or entity (other than Subsidiaries), that is or would reasonably be expected to be material to Time Warner and its Subsidiaries taken as a whole. 003780-0007-02269-A018=CH9-NGG 26 Time Warner indirectly owns a 74.49%priority capital and residual equity interest in TWE as described in the TWE Partnership Agreement, free and clear of all Liens(except under the TWE Partnership Agreement). (b) Capital Structure. (i) As of November 30, 1999, the authorized capital stock of Time Warner consists of(a) 5,000,000,000 shares of Time Warner Common Stock of which 1,172,176,909 shares were outstanding, (B) 600,000,000 shares of Series Common Stock,par value$.01 per share, of which(1) 140,000,000 shares have been designated as Time Warner Series LMC Common Stock, of which no shares are outstanding and(2) 140,000,000 shares have been designated as Time Warner Series LMCN-V Common Stock, of which 114,123,884 shares are outstanding, and(C) 250,000,000 shares of preferred stock,par value$.10 per share, of which (1) 8,000,000 shares have been designated Series A Participating Cumulative Preferred Stock and reserved for issuance upon exercise of the rights(the"Time Warner Rights") distributed to holders of Time Warner Common Stock pursuant to the Rights Agreement,dated as of October 10, 1996 between Time Warner and ChaseMellon Shareholder Services, LLC, as Rights Agent, as amended(together with any substitute rights agreement entered into pursuant to Section 6.10(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 C.7.i75„-000%-,^'2269-AC2dEC'ri9-MGA 27 Stock Incentive Plan of Time Warner Inc., Time Warner 1989 Stock Incentive Plan,Time Warner 1994 Stock Option Plan, Time Warner Corporate Group Stock Incentive Plan, Time Warner 1997 Stock Option Plan, Time Warner 1996 Stock Option Plan for Non-Employee Directors, Time Warner 1989 WCI Replacement Stock Option Plan, 1989 Lorimar Non- Employee Replacement Stock Option Plan, Time Warner 1993 Stock Option Plan, Time Warner Filmed Entertainment Group Stock Incentive Plan, Time Warner Music Group Stock Incentive Plan, Time Warner Programming Group Stock Incentive Plan,Time Warner Publishing Group Stock Incentive Plan, Time Warner Cable Group Stock Incentive Plan, Subsidiary 1988 Stock Option Plan, Subsidiary 1993 Stock Option and Equity-Based Award Plan, Subsidiary 1986 Stock Option Plan, Subsidiary 1990 Stock Option Plan, Subsidiary 1991 Stock Option Plan and Subsidiary Nonqualified Stock Option Agreements, the Time Warner 1999 Restricted Stock Plan, the Time Warner 1988 Restricted Stock Plan for Non-Employee Directors and the Time Warner 1999 International Employees Restricted Stock Plan(collectively, the"Time Warner Stock Q12tion Plans"). Except in connection with pre-employment grants of Time Warner Stock Options made in a manner consistent with past practice to purchase, in the aggregate,not more than 100,000 shares of Time Warner Common Stock, Section 4.2(b)(i)of the Time Warner Disclosure Schedule sets forth a complete and correct list, as of December 31, 1999, of the number of shares of Time Warner Common Stock subject to Time Warner Stock Options or other rights to purchase or receive Time Warner Common Stock granted under the Time Warner Benefit Plans or otherwise and the weighted average exercise price of the outstanding Time Warner Stock Options referenced therein. Except in connection with pre-employment grants of Time Warner Stock Options made in a manner consistent with past practice to purchase, in the aggregate, not more than 100,000 shares of Time Warner Common Stock, no options or warrants or other rights to acquire capital stock from Time Warner have been issued or granted since December 31, 1999 to the date of this Agreement. (ii) No bonds, debentures, notes or other indebtedness of Time Warner having the right to vote on any matters on which holders of capital stock of Time Warner may vote ("Time Warner Voting,Deb t") 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. 3' 007-02269-A0:6cC'r,S-^VA 28 (c) Authority: No Conflicts. (i) Time Warner has all requisite corporate power and authority to enter into this Agreement and the Stock Option Agreements and to consummate the transactions contemplated hereby and thereby, subject in the case of the consummation of the Time Warner Merger to the adoption of this Agreement by the Required Time Warner Vote (as defined in Section 4.2(g)). The execution and delivery of this Agreement and the Stock Option Agreements and the consummation of the transactions contemplated hereby and thereby have been duly authorized by all necessary corporate action on the part of Time Warner and no other corporate proceedings on the part of Time Warner are necessary to authorize the execution and delivery of the Agreement or-to consummate the Time Warner Merger and the other transactions contemplated hereby, subject in the case of the consummation of the Time Warner Merger to the adoption of this Agreement by the Required Time Warner Vote. This Agreement and the Stock Option Agreements have been duly executed and delivered by Time Warner and constitute valid and binding agreements of Time Warner, enforceable against Time Warner in accordance with their respective terms, except as such enforceability may be limited by bankruptcy, insolvency, reorganization, moratorium and similar laws relating to or affecting creditors generally or by general equity principles (regardless of whether such enforceability is considered in a proceeding in equity or at law). (ii) The execution and delivery of this Agreement and the Stock Option Agreements by Time Warner do not, and the consummation by Time Warner of the Time Warner Merger and the other transactions contemplated hereby and thereby will not, conflict with,or result in a Violation pursuant to: (A) any provision of the certificate of incorporation or bylaws or similar organizational document of Time Warner or any Significant Subsidiary of Time Warner(including the TWE Partnership Agreement) or(B) except(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 003790-cc07-02269-AC!8-c-9-Nc,A 29 the aggregate, would not reasonably be expected to have a Material Adverse Effect on Time Warner. (d) Reports and Financial Statements. (i) Each of Time Warner and TWE have filed all required registration statements,prospectuses, reports, schedules, forms, statements and other documents required to be filed by each of them with the SEC since December 31, 1996 (collectively, including all exhibits thereto, the"Time Warner SEC Reports"). Except as set forth in Section 4.2(d)(i)of the Time Warner Disclosure Schedule,no Subsidiary of Time Warner is required to file any form, report,registration statement,prospectus or other document with the SEC. None of the Time Warner SEC Reports, as of their respective dates (and, if amended or superseded by a filing prior to the date of this Agreement, then on the date of such filing), contained or will contain any untrue statement of a material fact or omitted or will omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made,not misleading. Each of the financial statements(including the related notes) included in the Time Warner SEC Reports presents fairly, in all material respects,the consolidated financial position and consolidated results of operations and cash flows of Time Warner or TWE, as the case may be, and its consolidated Subsidiaries as of the respective dates or for the respective periods set forth therein, all in conformity with GAAP consistently applied during the periods involved except as otherwise noted therein, and subject, in the case of the unaudited interim financial statements, to the absence of notes and normal year-end adjustments that have not been and are not expected to be material in amount. All of such Time Warner SEC Reports, as of their respective dates (and as of the date of any amendment to the respective Time Warner SEC Report), complied as to form in all material respects with the applicable requirements of the Securities Act and the Exchange Act and the rules and regulations promulgated thereunder. (ii) Except as disclosed in the Time Warner SEC Reports filed and publicly available prior to the date hereof(the "Time Warner Filed SEC Reports"),Time Warner and its Subsidiaries have not incurred any liabilities that are of a nature that would be required to be disclosed on a balance sheet of Time Warner and its Subsidiaries or the footnotes thereto prepared in conformity with GAAP, other than(A) liabilities incurred in the ordinary course of business, (B) liabilities incurred in accordance with Section 5.2, (C) liabilities for Taxes or (D) liabilities that, individually or in the aggregate, would not reasonably be expected to have a Material Adverse Effect on Time Warner. (e) Information Supplied. (i) None of the information supplied or to be supplied by Time Warner for inclusion or incorporation by reference in(A) the Form S-4 will, at the time the Form S-4 is filed with the SEC, at any time it is amended or supplemented or at the time it becomes effective under the Securities Act, contain any untrue statement of a material fact or omit to state any 00376.,-0007-02265-AC:2EC'r.9->9GA 30 material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading, and(B) the Joint Proxy 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. OC3'' -0007-02269-AC 18 C'r.c_p;,A 31 (h) Litigation: Compliance with Laws. (i) There are no Actions pending or, to the knowledge of Time Warner, threatened, against or affecting Time Warner or any Subsidiary of Time Warner or any property or asset of Time Warner or any Subsidiary of Time Warner which, individually or in the aggregate,would reasonably be expected to have a Material Adverse Effect on Time Warner, nor are there any judgments,decrees, injunctions, rules or orders of any Governmental Entity or arbitrator outstanding against Time Warner or any Subsidiary of Time Warner which, individually or in the aggregate, would reasonably be expected to have a Material Adverse Effect on Time Warner. (ii) Except as individually or in the aggregate would not reasonably be expected to have a Material Adverse Effect on Time Warner, Time Warner and its Subsidiaries hold all permits, licenses, franchises, variances, exemptions, orders and approvals of all Governmental Entities which are necessary for the operation of the businesses as now being conducted of Time Warner and its Subsidiaries, taken as a whole(the"Time Warner Permits"), and no suspension or cancellation of any of the Time Warner Permits is pending or,to the knowledge of Time Warner, threatened. Time Warner and its Subsidiaries are in compliance with the terms of the Time Warner Permits, except where the failure to so comply, individually or in the aggregate, would not reasonably be expected to have a Material Adverse Effect on Time Warner. Neither Time Warner nor its Subsidiaries is in violation of, and Time Warner and its Subsidiaries have not received any notices of violations with respect to, any laws, statutes, ordinances, rules or regulations of any Governmental Entity, except for violations which, individually or in the aggregate, would not reasonably be expected to have a Material Adverse Effect on Time Warner. (i) Absence of Certain Changes or Events. Except as disclosed in Section 4.2(i) of the Time Warner Disclosure Schedule and for liabilities permitted to be incurred in accordance with this Agreement or the transactions contemplated hereby, since September 30, 1999,Time Warner and its Subsidiaries have conducted their business only in the ordinary course and in a manner consistent with past practice and, since December 31, 1998,there have not been any changes, circumstances or events which, individually or in the aggregate,have had, or would reasonably be expected to have, a Material Adverse Effect on Time Warner. (j) Intellectual Property: Year 2000. (i) Except as would not, individually or in the aggregate,reasonably be expected to have a Material Adverse Effect on Time Warner: (a) Time Warner and each of its Subsidiaries owns, or is licensed to use (in each case, free and clear of any Liens), all Intellectual Property used in or necessary for the conduct of its business as currently conducted; (b)to the knowledge of Time Warner, the use of any Intellectual Property by Time Warner and its Subsidiaries does not infringe on or otherwise violate the rights of any Person, (c) the use of the Intellectual Property is in accordance with applicable licenses pursuant to which Time Warner or „037,90-0007-02269-X0'_9-cc:F 9-XGA 32 any Subsidiary acquired the right to use any Intellectual Property; and(d)to the knowledge of Time Warner, no Person is challenging, infringing on or otherwise violating any right of Time Warner or any of its Subsidiaries with respect to any Intellectual Property owned by and/or licensed to Time Warner or its Subsidiaries. As of the date of this Agreement, except as would not reasonably be expected, individually or in the aggregate,to have a Material Adverse Effect on Time Warner, neither Time Warner nor any of its Subsidiaries has knowledge of any pending claim, order or proceeding with respect to any Intellectual Property used by Time Warner and its Subsidiaries and to its knowledge no Intellectual Property owned and/or licensed by Time Warner or its Subsidiaries is being used or enforced in a manner that would reasonably be expected to result in the abandonment, cancellation or unenforceability of such Intellectual Property. (ii) Prior to the date of this Agreement,Time Warner and its Subsidiaries have undertaken a concerted effort to ensure that all of the computer software, computer firmware, computer hardware, and other similar or related items of automated,computerized, and/or software system(s) that are used or relied on by Time Warner or any or its Subsidiaries in the conduct of their respective businesses will not malfunction, will not cease to function, will not generate incorrect data, and will not provide incorrect results when processing,providing and/or receiving(a) date-related data into and between the years 1999 and 2000 and(b)date- related data in connection with any valid date in the twentieth and twenty-first centuries. As of the date of this Agreement, except as would not reasonably be expected, individually or in the aggregate, to have a Material Adverse Effect on Time Warner, Time Warner reasonably believes that such effort will be successful. (k) Brokers or Finders. No agent, broker, investment banker, 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. (1) 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. 003,e^,—CCC--02269-z,c:a_c-9-MGA 33 Neither Time Warner nor any of its Subsidiaries has taken any action or knows of any fact that is reasonably likely to prevent the Mergers from qualifying as exchanges within the meaning of Section 351 of the Code and as reorganizations within the meaning of Section 368(a) of the Code. (n) Certain Contracts. As of the date hereof, except as disclosed in Section 4.2(n) of the Time Warner Disclosure Schedule,neither Time Warner nor any of its Subsidiaries is a party to or bound by(i) any"material contracts" (as such term is 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. 3' -vCC7-G22E9-+0'_eec9-v �. 34 (iii) Time Warner and its Subsidiaries are in compliance with all Federal, state, local and foreign requirements regarding employment, except for any failures to comply that are not reasonably likely, individually or in the aggregate, to have a Material Adverse Effect on Time Warner. As of the date of this Agreement,there is no labor dispute, strike or work stoppage against Time Warner or any of its 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 -CCC C22o5-AC1B=CH9-MGA 35 dividends on or make other distributions in respect of any of its capital stock, except than as permitted by Section 5.1(b)(ii), (ii)split,combine or reclassify any of its capital stock or issue or authorize or propose the issuance of any other securities in respect of, in lieu of or in substitution for, shares of its capital stock, except for(x) any such transaction by a wholly owned Subsidiary of America Online which remains a wholly owned Subsidiary after consummation of such transaction or(y) a stock split of the America Online Common Stock or(iii)repurchase, redeem or otherwise acquire any shares of its capital stock or any securities convertible into or exercisable for any shares of its capital stock except for the purchase from time to time by America Online of America Online Common Stock(and the associated America Online Rights) in connection with the America Online Benefit Plans in the ordinary course of business consistent with past practice. (c) Issuance of Securities. America Online shall not, and shall not permit any of its Subsidiaries to, issue, deliver or sell, or authorize or propose the issuance, delivery or sale of, any shares of its capital stock of any class, any America Online Voting Debt or any securities convertible into or exercisable for, or any rights, warrants, calls or options to acquire, any such shares or America Online Voting Debt, or enter into any commitment, arrangement, undertaking or agreement with respect to any of the foregoing, other than(i)the issuance of America Online Common Stock(and the associated America Online Rights) upon the exercise of America Online Stock Options in accordance with their present terms or pursuant to America Online Stock Options or other stock based awards granted pursuant to clause(ii) below, (ii)the granting of America Online Stock Options or other stock based awards of or to acquire shares of America Online Common Stock granted under Benefit Plans outstanding on the date hereof in the ordinary course of business consistent with past practice, (iii) issuances by a wholly owned Subsidiary of America Online of capital stock to such Subsidiary's parent or another wholly owned Subsidiary of America Online, (iv)pursuant to acquisitions and investments as disclosed in Section 5.1(e) or 5.1(g) of the America Online Disclosure Schedule or the financings therefor or as disclosed in Section 5.1(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 CC378C- CzzE9-AO.6Ec59-MGA 36 approval or authorization required in connection with the Mergers under applicable Laws, America Online shall not, and shall not permit any of its Subsidiaries to, acquire or agree to acquire by merger or consolidation, or by purchasing a substantial equity interest in or a substantial portion of the assets of, or by any other manner, any business or any corporation, partnership, association or other business organization or division thereof or otherwise acquire or agree to acquire any assets (excluding the acquisition of assets used in the operations of the business of America Online and its Subsidiaries in the ordinary course, which assets do not constitute a business unit, division or all or substantially all of the assets of the transferor); provided, however, that the foregoing shall not prohibit(x)internal reorganizations or consolidations involving existing Subsidiaries of America Online or(y)the creation of new Subsidiaries of America Online organized to conduct or continue activities otherwise permitted by this Agreement. (f) No Dispositions. Other than(i) internal reorganizations or consolidations involving existing Subsidiaries of America Online, (ii)dispositions referred to in the America Online 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' ")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;12rovi ,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. 0) 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 003720-0007-,02269-n^v'_67-CH9-Y,GA 38 Online's independent public accountants. America Online shall not(i)change its fiscal year (other than to the calendar year)or(ii)make any tax election that, individually or in the aggregate, would have a Material Adverse Effect on America Online. (k) Certain Agreements and Arrangements. Except as disclosed in Section 5.1(k) of the America Online Disclosure Schedule, America Online shall not, and shall not permit any of its Subsidiaries to, enter into any America Online Internet Restrictions or any agreements or arrangements (x)that limit or otherwise restrict America Online or any of its Subsidiaries or any of their respective Affiliates or any successor thereto or that could, after the Effective Time, limit or restrict America Online or any of its Affiliates(including Holdco) or any successor thereto, from engaging or competing in any line of business or in any geographic area which agreements or arrangements, individually or in the aggregate, would reasonably be expected to have a Material Adverse Effect on Holdco and its Subsidiaries, taken together, after giving effect to the Mergers or(y) of a type described in Section 5.1 (k) of the Time Warner Disclosure Schedule. (1) Satisfaction of Closing Conditions. Except as required by law, America Online shall not, and shall not permit any of its Subsidiaries to, take any action that would,or would reasonably be expected to, result in(i) any of the conditions to the Mergers set forth in Article VII not being satisfied or(ii) a material delay in the satisfaction of such conditions. (m) No Related Actions. America Online will not, and will not permit any of its Subsidiaries to, agree or commit to do any of the foregoing. 5.2 Covenants of Time Warner. During the period from the date of this Agreement and continuing until the Effective Time, Time Warner agrees as to itself and its Subsidiaries that(except as expressly contemplated or permitted by this Agreement, the Stock Option Agreements or Section 5.2 (including its subsections) of the Time Warner Disclosure Schedule or as required by a Governmental Entity or to the extent that America Online shall otherwise consent in writing, which consent shall not be unreasonably withheld or delayed): (a) Ordinary Course. (i) Time Warner and its Subsidiaries shall carry on their respective businesses in the usual, regular and ordinary course in all material respects, in substantially the same manner as heretofore conducted, and shall use its reasonable best efforts to preserve intact their present lines 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. 0037 02269—A01c_..'*9-M!GA 39 (ii) Other than in connection with acquisitions permitted by Section 5.2(e) or investments permitted by Section 5.2(g), Time Warner shall not, and shall not permit any of its Subsidiaries to, (A) enter into any new material line of business or(B) incur or commit to any capital expenditures or any obligations or liabilities in connection therewith other than capital expenditures and obligations or liabilities in connection therewith as disclosed in Section 5.2(a)of the Time Warner Disclosure Schedule or incurred or committed to in the ordinary course of business consistent with past practice. (b) Dividends: Changes in Share Capital. Time Warner shall not, and shall not permit any of its Subsidiaries to, and shall not propose to,(i)declare or pay any dividends on or make other distributions in respect of any of its capital stock, except(A)the declaration and payment of regular quarterly cash dividends not in excess of$0.045 per share of Time Warner Common Stock, $0.045 per share of Series LMCN-V Common Stock, $0.9375 per share of Time Warner Series E Preferred Stock, $0.1874 per share of Time Warner Series F Preferred Stock, $0.9375 per share of Time Warner Series I Preferred Stock or$0.9375 per share of Series J Preferred Stock, in each case, with usual record and payment dates for such dividends in accordance with past dividend practice and, in the case of Time Warner Series Common Stock or Time Warner Preferred Stock, the certificate of designations therefor, and(B) for dividends by wholly owned Subsidiaries of Time Warner, distributions by TWE or TWE-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 CO3%eo-COC7-02269-r,o_eeca4-X., 40 of business consistent with past practice, (iii) issuances by a wholly owned Subsidiary of Time Warner of capital stock to such Subsidiary's parent or another 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);12rovided,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. CC37EC-,C.--C22o9-AC.@=CE9-?SGA 41 (g) Investments: Indebtedness. Time Warner shall not, and shall not permit any of its Subsidiaries to, (i) other than in connection with acquisitions permitted by Section 5.2(e) or as disclosed in Section 5.1(g)of the Time Warner Disclosure Schedule, make any loans, advances or capital contributions to, or investments in, any other Person, other than(x) loans or investments by Time Warner or a Subsidiary of Time Warner to or in Time Warner or any Subsidiary of Time Warner, (y) employee loans or advances made in the ordinary course of business or(z) in the ordinary course of business consistent with past practice which are not, individually or in the aggregate,material to Time Warner and its Subsidiaries taken as a whole (provided that none of such transactions referred to in this clause(z)presents a material risk of making it more difficult to obtain any approval or authorization required in connection with the Mergers under Regulatory Law or(ii) without regard to anything contained in the Time Warner Disclosure Schedule, incur any indebtedness for borrowed money or guarantee any such indebtedness of another Person, issue or sell any debt securities or warrants or other rights to acquire any debt securities of Time Warner or any of its Subsidiaries, guarantee any debt securities of another person, enter into any"keep well"or other agreement to maintain any financial statement condition of another Person(other than any wholly owned Subsidiary)or enter into any arrangement having the economic effect of any of the foregoing(collectively, "Time Warner Indebtedness"), except for(A) any Time Warner Indebtedness so long as (x)after the incurrence or issuance of such Time Warner Indebtedness Time Warner's consolidated indebtedness would not exceed 125% of the consolidated indebtedness of Time Warner as of the date hereof and(y) no Time Warner credit rating would be downgraded by either Moody's or S&P (provided that the consummation of this Agreement or any of the transactions contemplated hereby shall not give rise to, cause or result in, a default or event of default under the agreement or instrument governing any such indebtedness or, an obligation to pay any amount thereunder solely as a result of the consummation of this Agreement or any of the transactions contemplated hereby) and(B) intercompany indebtedness between Time Warner and any of its wholly owned Subsidiaries or between such wholly owned Subsidiaries. (h) Tax-Free Qualification. Time Warner shall use its reasonable best efforts not to, and shall use its reasonable best efforts not to permit any of its Subsidiaries to, take any action(including any action otherwise permitted by this Section 5.2)that would prevent or impede the Mergers from qualifying as exchanges under Section 351 of the Code and as reorganizations under Section 368 of the Code;,provided, however,that nothing hereunder shall limit the ability of Time Warner to exercise its rights and/or fulfill its obligations under the Stock Option Agreements. (i) Compensation. Except(x) as set forth in Section 5.2(c) or 5.2 (i)of the Time Warner Disclosure Schedule, (y) as required by law or by the terms of any collective bargaining agreement or other agreement currently in effect between Time Warner or any Subsidiary of Time Warner and any executive officer or employee thereof or(z) in the ordinary course of business consistent with past practice, Time Warner shall not increase the amount of compensation of any director, executive officer or key employee of Time Warner or any material Subsidiary or business unit of Time Warner, or make any increase in or commitment to increase cc3,sa-cco;-or6�-,c.s c-5-�c 42 any employee benefits, issue any additional Time Warner Stock Options, adopt or amend or make any commitment to adopt or amend any Benefit Plan or make any contribution, other than regularly scheduled contributions, to any Time Warner Benefit Plan. Any option granted or committed to be granted after the date hereof shall not accelerate as a result of the approval or consummation of any transaction contemplated by this Agreement. Should any modification of the Time 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. (1) Satisfaction of Closing Conditions. Except as required by law,Time Warner shall not, and shall not permit any of its Subsidiaries to, take any action that would, or would reasonably be expected to, result in (i) any of the conditions to the Mergers set forth in Article VII not being satisfied or(ii) a material delay in the satisfaction of such conditions. (m) No Related Actions. Time Warner will not, and will not permit any of its Subsidiaries to, agree or commit to do any of the foregoing. 5.3 Governmental 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 c037ec-oCC--c22E9-Pc sscH9-VGA 43 Governmental Entities) between the date of this Agreement and the Effective Time and shall, if requested by the other party and to the extent permitted by law or regulation or any applicable confidentiality agreement, deliver to the other party copies of all such reports, announcements and publications promptly after such request. 5.4 Control of Other Party's Business. Nothing contained in this Agreement shall give Time Warner, directly or indirectly, the right to control or direct America Online's operations and nothing contained in this Agreement shall give America Online, directly or indirectly, the right to control or direct Time Warner's operations prior to the Effective Time. Prior to the Effective Time, each of Time Warner and America Online shall exercise, consistent with the terms and conditions of this Agreement, complete control and supervision over its respective operations. ARTICLE VI ADDITIONAL AGREEMENTS 6.1 Preparation of Proxy Statement: Stockholders Meeting. (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- 0C37?^-0007-n�z269-Ac:9Ec-9-�'�;A 44 4 shall be made without the approval of both parties, which approval shall not be unreasonably withheld or delayed;provided that with respect to documents filed by a party which are incorporated by reference in the Form S-4 or Joint Proxy 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 "Oualifving 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. C',379 2- 02269-ao 6ecs9-v,�,a 45 (b) Time Warner shall duly take all lawful action to call,give notice of, convene and hold a meeting of its stockholders on a date determined in accordance with the mutual agreement of Time Warner and America Online (the"Time Warner Stockholders Meetin ") 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 CC3780-0007-02269-AC18--059-XGA 46 deemed a Change in the America Online Recommendation provided(I) such action or statement is taken or made pursuant to advice from Simpson Thacher&Bartlett, counsel to America Online, to the effect that such action or statement is required by applicable Law, (II) if an America Online Public Proposal has been made and not rescinded, such action or statement shall not relate to such America Online Public Proposal other than any factual statement required by any regulatory authority(including the SEC) and shall in any event include a rejection of such America Online Public Proposal and(III) such action or statement also includes a reaffirmation of the America Online Board of Directors' approval of the Mergers and the other transactions contemplated hereby and recommendation to the America Online stockholders to adopt this Agreement;provided further, however,that the Board of Directors of America Online may make a Change in the America Online Recommendation pursuant to Section 6.5 hereof. Notwithstanding any Change in the America Online Recommendation,this Agreement shall be submitted to the stockholders of America Online at the America Online Stockholders Meeting for the purpose of adopting this Agreement and nothing contained herein shall be deemed to relieve America Online of such obligation. 6.2 Holdco Board of Directors: Executive Officers. (a) At or prior to the Effective Time, each party hereto will take all action necessary to (i) cause the Board of Directors of 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 00378C-CCC7-02269-ACi27cCH9-X.'A 47 Governmental Entity applicable to such party or any contract requires such party or its Subsidiaries to restrict or prohibit access to any such properties or information or(ii) the information is subject to confidentiality obligations to a third party. The parties will hold any such information obtained pursuant to this Section 6.3 in confidence in accordance with, and shall otherwise be subject to, the provisions of the confidentiality letter dated December 10, 1999, between Time Warner and America Online(the"Confidentialily 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 CC3ic"C-CCCi-0226:-nC!6 C'r.9-Y.GA 48 Mergers. Neither party shall take or agree to take any action identified in clause(i) or(ii) of the immediately preceding sentence without the prior written consent of the other party(which shall not be unreasonably withheld or delayed). (b) Each of Time Warner and America Online shall, in connection with the efforts referenced in Section 6.4(a)to obtain all Required Approvals,use its reasonable best efforts to (i) cooperate in all respects with each other in connection with any filing or submission and in connection with any investigation or other inquiry, including any proceeding initiated by a private party, (ii)promptly inform the other party of any communication received by such party from, or given by such party to, the FCC, Franchising Authorities, PUCs, the Antitrust Division of the Department of Justice(the"DQJ"), 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) 00--78C-0007-02269-AC16ECH9-Y,vA 49 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 O03730-0007-C2269-A016°Cw9-XGA 50 equity securities of such party that, if consummated, would result in any Person(or the stockholders of such Person) beneficially owning securities representing 20%or more of the total voting power of such party(or of the surviving parent entity in such transaction) or any of its Significant Subsidiaries (any such proposal, offer or transaction(other than a proposal or offer made by the other party or an Affiliate thereof)being hereinafter referred to as an`sAc uisition 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,12rovide 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 00.3730-CCC7-32269-n0'_E7-Cr9-XGA 51 the status and terms of any such proposals or offers and the status and terms of any such discussions or negotiations. Each of America Online and Time Warner agrees that it will, and will cause its officers, directors and representatives to, immediately cease and cause to be terminated any activities, discussions or negotiations existing as of the date of this Agreement with any parties conducted heretofore with respect to any Acquisition Proposal. Each of America Online and Time Warner agrees that it will use reasonable best efforts to promptly inform its directors, officers,key employees, agents and representatives of the obligations undertaken in this Section 6.5. Nothing in this Section 6.5 shall(x)permit America Online or Time Warner to terminate this Agreement(except as specifically provided in Article VIII hereof) or(y) affect any other obligation of America Online or Time Warner under this Agreement. Neither America Online nor Time Warner shall submit to the vote of its stockholders any Acquisition Proposal other than the America Online Merger or Time Warner Merger, respectively. "Superior Proposal"means with respect to America Online or Time Warner, as the case may be, a bona fide written proposal made by a Person other than either such party which is (I) for a merger, reorganization, consolidation, share exchange,business combination, recapitalization, or similar transaction involving such party as a result of which the other party thereto or its stockholders will own 40%or more of the combined voting power of the entity surviving or resulting from such transaction(or the ultimate parent entity thereof), and(II) is on terms which the Board of Directors of such party in good faith concludes(following receipt of the advice of its financial advisors and outside counsel), taking into account,among other things, all legal, financial, regulatory and other aspects of the proposal and the Person making the proposal, (x)would, if consummated, result in a transaction that is more favorable to its stockholders(in their capacities as stockholders), from a financial point of view, than the transactions contemplated by this Agreement and(y) is reasonably capable of being completed. 6.6 Fees and Expenses. Subject to Section 8.2,whether or not the Mergers are consummated, all Expenses (as defined below) incurred in connection with this Agreement and the transactions contemplated hereby shall be paid by the party incurring such Expenses, except(a) if the Mergers are consummated,the surviving corporation of each Merger 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. Co„_ 3co czzou-ao:aE_c9-M,a 52 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 rovided 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 0037EC-0007-02269-+OlEE�H9-?1GA 53 officers, directors and employees and advancement of expenses which are, in the aggregate, no less advantageous to the intended beneficiaries than the corresponding provisions contained in the current certificate of incorporation and bylaws of America Online and(iii)cause to be maintained for a period of six years after the Effective Time the current policies of directors' and officers' liability insurance and fiduciary liability insurance maintained by America Online (provided that Holdco (or any successor) may substitute therefor one or more policies of at least the same coverage and amounts containing tenons 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 54 Agreements. Except in connection with the foregoing sentence, the Board of Directors of America Online shall not, without the prior written consent of Time Warner, (i) amend the America Online Rights Agreement or(ii) take any action with respect to, or make any determination under, the America Online Rights Agreement, including a redemption of the America Online Rights, in each case in order to facilitate any Acquisition Proposal with respect to America Online. (b) The Board of Directors of Time Warner shall take all action to the extent necessary(including amending the Time Warner Rights Agreement) in order to render the Time Warner Rights inapplicable to the Time Warner Merger and the other transactions contemplated by this Agreement and the Stock Option Agreements. Except in connection with the foregoing sentence, the Board of Directors of Time Warner shall not, without the prior written consent of America Online, (i) amend the Time Warner Rights Agreement or(ii)take any action with respect to, or make any determination under, the Time Warner Rights Agreement, including a redemption of the Time Warner Rights, in each case in order to facilitate any Acquisition Proposal with respect to Time Warner. Notwithstanding the preceding sentence, Time Warner may, in its sole discretion, either resolve to redeem the Time Warner Rights effective as of, or amend the expiration date of the Time Warner Rights Agreement to provide that it terminates on, the close of business on the date of Time Warner's 2000 annual meeting of stockholders; provided, however, that if prior to, on, or following such date a person has(i) indicated(either publicly or in a manner which becomes known to America Online or Time Warner) its intention to accumulate Time Warner Capital Stock other than for investment 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 Wamer 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 003760-0007-C2269-A016--CE9- GA 55 Effective Time, a written agreement substantially in the form attached as Exhibit 6.11 hereto (an "Affiliate A.nreement"). (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. 56 ARTICLE VII CONDITIONS PRECEDENT 7.1 Conditions to Each Party's Obligation to Effect its Respective Merger. The respective obligations of Time Warner and America Online to effect the Time Warner Merger and America Online Merger are subject to the satisfaction or waiver on or prior to the Closing Date of the following conditions: (a) Stockholder Approval. (i) Time Warner shall have obtained the Required Time Warner Vote in connection with the adoption of this Agreement by the stockholders of Time Warner and(ii)America Online shall have obtained the America Online Stockholder Approval in connection with the adoption of this Agreement by the stockholders of America Online. (b) No 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. 0037�C-CC07-02269-n01.8ECH9-:: (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 convect 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 OQinion. 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(0)(1), 7.2(0)(2) and 7.2(0)(3) (allowing for 0^3750-0007-02269-a0:e-c-9-�:G;, 58 such amendments to the representations as counsel to America Online deems reasonably necessary). (d) Time Warner Conditions. The conditions set forth in Section 7.3 (other than Section 7.3(d)) shall have been satisfied or waived by Time Warner. ',.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. OQ37c -�ODi- 2=c=-h0'_6EC35- GA 59 ARTICLE VIII TERMINATION AND AMENDMENT 8.1 Termination. This Agreement may be terminated at any time prior to the Effective Time, by action taken or authorized by the Board of Directors of the terminating party or parties, and except as provided below, whether before or after approval of the matters presented in connection with the Mergers by the stockholders of Time Warner or America Online: (a) By mutual written consent of America Online and Time Warner; (b) By either Time Warner or America Online, if the Effective Time shall not have occurred on or before May 31, 2001 (the"Termination Date");provided,however, that the right to terminate this Agreement under this Section 8.1(b) shall not be available to any party whose failure to fulfill any obligation under this Agreement(including without limitation such party's obligations set forth in Section 6.4)has been the cause of, or resulted in, the failure of the Effective Time to occur on or before the Termination Date; (c) By either Time Warner or America Online, if any Governmental Entity (i) shall have issued an order, decree or ruling or taken any other action(which the parties shall have used their reasonable best efforts to resist, resolve or lift, as applicable, in accordance with Section 6.4)permanently restraining, enjoining or otherwise prohibiting the transactions contemplated by this Agreement, and such order, decree, ruling or other action shall have become final and nonappealable or(ii) shall have failed to issue an order, decree or ruling or to take any other action, and such denial of a request to issue such order, decree,ruling or take such other action shall have become final and nonappealable(which order, decree, ruling or other action the parties shall have used their reasonable best efforts to obtain, in accordance with Section 6.4), in the case of each of(i) and(ii) which is necessary to fulfill the conditions set forth in Sections 7.1(c), (d) or(e),as applicable;provided, however,that the right to terminate this Agreement under this Section 8.1(c) shall not be available to any party whose failure to comply with Section 6.4 has been the cause of such action or inaction; (d) By either Time Warner or America Online, if the approvals of the stockholders of either America Online or Time Warner contemplated by this Agreement shall not have been obtained by reason of the failure to obtain the required vote at a duly held meeting of stockholders or of any adjournment thereof at which the vote was taken; (e) By America Online, if Time Warner shall have(i) failed to make the Time Warner Recommendation or effected a Change in the Time Warner Recommendation(or resolved to take any such action), whether or not permitted by the terms hereof, or(ii)materially breached its obligations under this Agreement by reason of a failure to call the Time Warner Stockholders Meeting in accordance with Section 6.1(b) or a failure to prepare and mail to its stockholders the Joint Proxy Statement/Prospectus in accordance with Section 6.1(a); 003780-0007-02269-=O7EECH9-XGP. 60 M 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 perforin 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 0037?0-0007-02269-AO:E-cCE9-M.GA 61 Warner Termination Fee, by wire transfer of immediately available funds(less any amounts previously paid or payable by Time Warner pursuant to Section 8.2(d)). The"Time Warner Termination Fee"shall be an amount equal to 2.75%of the product of(x)the number of shares of Time Warner Common Stock outstanding as of the date hereof(assuming the exercise of all outstanding options (other than the option granted pursuant to the Time Warner Stock Option Agreement) and the conversion into Time Warner Common Stock of all securities of Time Warner convertible into Time Warner Common Stock)multiplied by(y)the Exchange Ratio multiplied by(z)the last sale price of America Online Common Stock on the NYSE on January 7, 2000(such product, the "Time Warner Amount"). (c) If(A) (I) either party shall terminate this Agreement pursuant to Section 8.1(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 CC3'?C-CCC'-02269-AC?6-C^9-PzGA 62 Warner an amount equal to one percent of the America Online Amount,payable by wire transfer of immediately available funds; provided that no payment shall be made pursuant to this sentence if the America Online Termination Fee has been paid pursuant to Section 8.2(c). (e) The parties acknowledge that the agreements contained in this Section 8.2 are an integral part of the transactions contemplated by this Agreement, and that, without these agreements, neither party would enter into this Agreement; accordingly, if either party fails promptly to pay any amount due pursuant to this Section 8.2, and, in order to obtain such payment, the other party commences a suit which results in a judgment against such party for the fee set forth in this Section 8.2, such party shall pay to the other party its costs and expenses (including attorneys' fees and expenses) in connection with such suit, together with interest on the amount of the fee at the prime rate of Citibank,N.A. in effect on the date such payment was required to be made notwithstanding the provisions of Section 6.6. The parties agree that any remedy or amount payable pursuant to this Section 8.2 shall not preclude any other remedy or amount payable hereunder and shall not be an exclusive remedy for any breach of any representation, warranty, covenant or agreement contained in this Agreement. 8.3 Amendment. This Agreement may be amended by the parties hereto, by action taken or authorized by their respective Boards of Directors, at any time before or after approval of the matters presented in connection with the Mergers by the stockholders of Time Warner and America Online, but, after any such approval, no amendment shall be made which by law or in accordance with the rules of any relevant stock exchange requires further approval by such stockholders without such further approval. This Agreement may not be amended except by an instrument in writing signed on behalf of each of the parties hereto. 8.4 Extension; Waiver. At any time prior to the Effective Time,the parties hereto,by action taken or authorized by their respective Boards of Directors,may,to the extent legally allowed, (i) extend the time for the performance of any of the obligations or other acts of the other parties hereto, (ii) waive any inaccuracies in the representations and warranties contained herein or in any document delivered pursuant hereto and(iii) waive compliance with any of the agreements or conditions contained herein. Any agreement on the part of a party hereto to any such extension or waiver shall be valid only if set forth in a written instrument signed on behalf of such party. The failure of any party to this Agreement to assert any 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 003790-0007-02269-AOIEECH9-Mr-A 63 Effective Time, except for those covenants, agreements and other provisions contained herein (including Section 6.7, Section 6.2 and Schedule 6.2(a)) that by their terms apply or are to be performed in whole or in part after the Effective Time and this Article IX. 9.2 Notices. All notices and other communications hereunder shall be in writing and shall be deemed duly given(a) on the date of delivery if delivered personally,or by telecopy or telefacsimile, upon confirmation of receipt, (b) on the first Business Day following the date of dispatch if delivered by a recognized next-day courier service,or(c) on the tenth Business Day following the date of mailing if delivered by registered or certified mail, return receipt requested,postage prepaid. All notices hereunder shall be delivered as set forth below, or pursuant to such other instructions as may be designated in writing by the party to receive such notice: (a) if to America Online to: America Online, Inc. 22000 AOL Way 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. 37S - C0 -X2269-Fv1SEC 9->:GA 64 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 Govemin_e 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). C013760-0007-02269-A018CCH9-MGA 65 9.7 Severability. If any term or other provision of this Agreement is invalid, illegal or incapable of being enforced by any law or public policy, all other terms and provisions of this Agreement shall nevertheless remain in full force and effect so long as the economic or legal substance of the transactions contemplated hereby is not affected in any manner materially adverse to any party. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the parties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in an acceptable manner in order that the transactions contemplated hereby are consummated as originally contemplated to the greatest extent possible. 9.8 Assignment. Neither this Agreement nor any of the rights, interests or obligations hereunder shall be assigned by any of the parties hereto, in whole or in part(whether by operation 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. CC3'EC-CCO'-C2269-AC:EEC 9-MGA 66 9.11 Definitions. As used in this Agreement: (a) "beneficial ownership"or"beneficially own"shall have the meaning under Section 13(d)of the Exchange Act and the rules and regulations thereunder. (b) "Benefit Plans"means, with respect to any Person, each employee benefit plan,program, arrangement and contract(including, without limitation, any"employee benefit plan,"as defined in Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended("ERISA") and any bonus, deferred compensation, stock bonus, stock purchase, restricted stock, stock option, employment, termination, stay agreement or bonus, change in control and severance plan,program, arrangement and contract) in effect on the date of this Agreement or disclosed on the Time Warner Disclosure Schedule or the America Online Disclosure Schedule, as the case may be, to which such Person or its Subsidiary is a party, which is maintained or contributed to by such Person, or with respect to which such Person could incur material liability under Sections 4069,4201 or 4212(c) of ERISA. (c) "Board of Directors"means the Board of Directors of any specified Person and any committees thereof. (d) "Business Day"means any day on which banks are not required or authorized to close in the City of New York. (e) "known"or"knowledge"means, with respect to any party,the knowledge of such party's executive officers after reasonable inquiry. (f) "Material Adverse Effect"means, with respect to any entity any event, change, circumstance or effect that is or is reasonably likely to be materially adverse to (i)the business, financial condition or results of operations of such entity and its Subsidiaries taken as a whole, other than any event, change, circumstance or effect relating(x)to the economy or financial markets in general or(y) in general to the industries in which such entity operates and not specifically relating to (or having the effect of specifically relating to or having a materially disproportionate effect(relative to most other industry participants)on) such entity or(ii)the ability of such entity to consummate the transactions contemplated by this Agreement. (g) "the other paM"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 CC37e0-CC07-02269-ACIEECH9-MGA 67 Board of Directors or others performing similar functions with respect to such corporation or other organization is directly or indirectly owned or controlled by such party or by 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. 68 IN WITNESS WHEREOF, America Online and Time Warner have caused this Agreement to be signed by their respective officers thereunto duly authorized, all as of the date first written above. AMERICA ONL , INC. By: Name: Stephen M. Case Title: Chairman & Chief Executive Officer TIME WARNER INC. By: Name: Title: IN WIP,ESS WHEREOF, America Online and Time "arner have caused this Ao greement to be siped by their respectve officers thereunto duly authorized, all as of the date fin,r written above. AMERICA ONLINE,INC. Bv: Name: Title: TIME WARNER INC. By: Name: Title: EXECUTION COPY STOCK OPTION AGREEMENT, dated as of January 10, 2000 (the "Agreement"), between America Online, Inc., a Delaware corporation (" rantee"), and Time Warner Inc., a Delaware corporation ("Issuer"). WITNESSETH: WHEREAS, Grantee and Issuer are, concurrently with the execution and delivery of this Agreement, entering into an Agreement and Plan of Merger, dated as of the date hereof (the"Merger Agreement;"capitalized terms used without definition herein having the meanings assigned to them in the Merger Agreement),pursuant to which the parties will engage in a business combination in a merger of equals (the"Mgrger"); and WHEREAS, as a condition to their willingness to enter into the Merger Agreement, Grantee has required that Issuer agree, and believing it to be in the best interests of Issuer, Issuer has agreed, among other things, to grant to Grantee the Option(as hereinafter defined) to purchase shares of common stock, par value S.01 per share, of Issuer("Issuer Common Stock") at a price per share equal to the Exercise Price(as hereinafter defined). NOW THEREFORE, in consideration of the foregoing and the mutual representations, warranties, covenants and agreements herein contained, and intending to be legally bound hereby, the parties hereto agree as follows: ARTICLE I OPTION TO PURCHASE SHARES 1.1 Grant of Option. (a) Issuer hereby grants to Grantee an irrevocable option to purchase, in whole or in part, an aggregate of up to 233,263,204 duly authorized, validly issued, fully paid and nonassessable shares of Issuer Common Stock(representing 19.9%of the outstanding shares of Issuer Common Stock as of November 30, 1999) on the terms and subject to the conditions set forth herein (the"Option"); provided, however, that in no event shall the number of shares of Issuer Common Stock for which this Option is exercisable exceed 19.9%of the issued and outstanding shares of Issuer Common Stock at the time of exercise without giving effect to the issuance of any Option Shares (as hereinafter defined). The number of shares of Issuer Common Stock that may be received upon the exercise of the Option and the Exercise Price are subject to adjustment as herein set forth. (b) In the event that any additional shares of Issuer Common Stock are issued or otherwise become outstanding after the date of this Agreement (other than pursuant to this Agreement and other than pursuant to an event described in Section 3.1 hereof), the number of shares of Issuer Common Stock subject to the Option shall be increased so that, after such issuance, such number together with any shares of Issuer Common Stock previously issued 2 pursuant hereto, equals 19.9% of the number of shares of Issuer Common Stock then issued and outstanding without giving effect to any shares subject or issued pursuant to the Option. Nothing contained in this Section 1.1(b)or elsewhere in this Agreement shall be deemed to authorize Issuer to breach or fail to comply with any provision of the Merger Agreement. As used herein, the term "Option Shares"means the shares of Issuer Common Stock issuable pursuant to the Option, as the number of such shares shall be adjusted pursuant to the terms hereof. 1.2 Exercise of Option. (a) The Option may be exercised by Grantee, in whole or in part, at any time, or from time to time, commencing upon the Exercise Date and prior to the Expiration Date. As used herein, the term "Exercise Date"means the date on which Grantee becomes unconditionally entitled to receive the Time Warner Termination Fee pursuant to Section 8.2(b) of the Merger Agreement. As used herein, the term"Expiration Date"means the first to occur prior to Grantee's exercise of the Option pursuant to Section 1.2(b) of: (i) the Effective Time; (ii) written notice of termination of this Agreement by Grantee to Issuer; (iii) 12 months after the first occurrence of an Exercise Date; or (iv) the date of termination of the Merger Agreement,unless, in the case of this clause (iv), Grantee has the right to receive the Time Warner Termination Fee either(x) upon or(y) following such termination upon the occurrence of certain events, in which case the Option will not terminate until the later of(x) 15 business days following the time the Time Warner Termination Fee becomes unconditionally payable and (y) the expiration of the period in which Grantee has such right to receive the Time Warner Termination Fee. Notwithstanding the termination of the Option, Grantee shall be entitled to purchase those Option Shares with respect to which it may have exercised the Option by delivery of an Option Notice(as defined below) prior to the Expiration Date, and the termination of the Option will not affect any rights hereunder which by their terms do not terminate or expire prior to or at the Expiration Date. (b) In the event Grantee wishes to exercise the Option, Grantee shall send a written notice to Issuer of its intention to so exercise the Option(an"Option Notice"), specifying the number of Option Shares to be purchased (and the denominations of the certificates, if more than one), whether the aggregate Exercise Price will be paid in cash or by surrendering a portion of the Option in accordance with Section 1.3(b) or a combination thereof, and the place in the United States, time and date of the closing of such purchase(the"Option Closing" and the date of such Closing, the"Option Closing Date"), which date shall not be less than two Business Days nor more than ten Business Days from the date on which an Option 3 Notice is delivered; provided that the Option Closing shall be held only if(i) such purchase would not otherwise violate or cause the violation of, any applicable material law, statute, ordinance, rule or regulation(collectively, "Laws") (including the HSR Act and the Communications Act), and (ii) no material judgment, order, writ, injunction,ruling or decree of any Governmental Entity(collectively, "Orders")shall have been promulgated, enacted, entered into, or enforced by any Governmental Entity which prohibits delivery of the Option Shares, whether temporary,preliminary or permanent; provided, however, that the parties hereto shall use their reasonable best efforts to (x)promptly make and process all necessary filings and applications and obtain all consents, approvals, Orders, authorizations, registrations and declarations or expiration or termination of any required waiting periods(collectively, "Approvals") and to comply with any such applicable Laws and (y)have any such Order vacated or reversed. In the event the Option Closing is delayed pursuant to clause(i)or(ii)above, the Option Closing shall be within ten Business Days following the cessation of such restriction, violation, Law or Order or the receipt of any necessary Approval, as the case may be(so long as the Option Notice was delivered prior to the Expiration Date);providedfurther that, notwithstanding any prior Option Notice, Grantee shall be entitled to rescind such Option Notice and shall not be obligated to purchase any Option Shares in connection with such exercise upon written notice to such effect to Issuer. (c) At any Option Closing, (i) Issuer shall deliver to Grantee all of the Option Shares to be purchased by delivery of a certificate or certificates evidencing such Option Shares in the denominations designated by Grantee in the Option Notice, and(ii) if the Option is exercised in part and/or surrendered in part to pay the aggregate Exercise Price pursuant to Section 1.3(b), Issuer and Grantee shall execute and deliver an amendment to this Agreement reflecting the Option Shares for which the Option has not been exercised and/or surrendered. If at the time of issuance of any Option Shares pursuant to an exercise of all or part of the Option hereunder, Issuer shall have issued any rights or other securities which are attached to or otherwise associated with the Issuer Common Stock, then each Option Share issued pursuant to such exercise shall also represent such rights or other securities with terns substantially the same as and at least as favorable to Grantee as are provided under any shareholder rights agreement or similar agreement of Issuer then in effect. At the Option Closing, Grantee shall pay to Issuer by wire transfer of immediately available funds to an account specified by Issuer to Grantee in writing at least two Business Days prior to the Option Closing an amount equal to the Exercise Price multiplied by the number of Option Shares to be purchased for cash pursuant to this Article I; provided that the failure or refusal of Issuer to specify an account shall not affect Issuer's obligation to issue the Option Shares. (d) Upon the delivery by Grantee to Issuer of the Option Notice and the tender of the applicable aggregate Exercise Price in immediately available funds or the requisite portion of the Option in accordance with Section 1.3, Grantee shall be deemed to be the holder of record of the Option Shares issuable upon such exercise, notwithstanding that the stock transfer books of Issuer may then be closed, that certificates representing such Option Shares may not then have been actually delivered to Grantee, or Issuer may have failed or refused to take any action required of it hereunder. Issuer shall pay all expenses that may be payable in connection with the preparation, issuance and delivery of stock certificates or an amendment to 4 this Agreement under this Section 1.2 and any filing fees and other expenses arising from the performance of the transactions contemplated hereby. 1.3 Payments. (a) The purchase and sale of the Option Shares pursuant to Section 1.2 of this Agreement shall be at a purchase price equal to $110.63 per Share(as such amount may be adjusted pursuant to the terms hereof, the"Exercise Price"), payable at Grantee's option in cash, by surrender of a portion of the Option in accordance with Section 1.3(b), or a combination thereof. (b) Grantee may elect to purchase Option Shares issuable, and pay some or all of the aggregate Exercise Price payable, upon an exercise of the Option by surrendering a portion of the Option with respect to such number of Option Shares as is determined by dividing(i)the aggregate Exercise Price payable in respect of the number of Option Shares being purchased in such manner by(ii) the excess of the Fair Market Value(as defined below) per share of Issuer Common Stock as of the last trading day preceding the date Grantee delivers its Option Notice(such date, the"Option Exercise Date") over the per share Exercise Price. The "Fair Market Value"per share of Issuer Common Stock shall be(i)if the Issuer Common Stock is listed on the New York Stock Exchange, Inc. (the"N)LSE")or any other nationally recognized exchange or trading system as of the Option Exercise Date,the average of last reported sale prices per share of Issuer Common Stock thereon for the 10 trading days commencing on the 12`h trading day immediately preceding the Option Exercise Date, or(ii) if the Issuer Common Stock is not listed on the NYSE or any other nationally recognized exchange or trading system as of the Option Exercise Date, the amount determined by a mutually acceptable independent investment banking firm as the value per share the Issuer Common Stock would have if publicly traded on a nationally recognized exchange or trading system(assuming no discount for minority interest, illiquidity or restrictions on transfer). That portion of the Option so surrendered under this Section 1.3(b) shall be canceled and shall thereafter be of no further force and effect. (c) Certificates for the Option Shares delivered at an Option Closing will have typed or printed thereon a restrictive legend which will read substantially as follows: "THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY BE REOFFERED OR SOLD ONLY IF SO REGISTERED OR IF AN EXEMPTION FROM SUCH REGISTRATION IS AVAILABLE. SUCH SECURITIES ARE ALSO SUBJECT TO ADDITIONAL RESTRICTIONS ON TRANSFER AS SET FORTH IN THE STOCK OPTION AGREEMENT DATED AS OF JANUARY 10, 2000, A COPY OF 'vNr IICH MAY BE OBTAINED FROM THE SECRETARY OF TIME WARNER INC. AT ITS PRINCIPAL EXECUTIVE OFFICES." It is understood and agreed that (i) the reference to restrictions arising under the Securities Act in the above legend will be removed by delivery of substitute certificate(s) without such reference if 5 such Option Shares have been registered pursuant to the Securities Act, such Option Shares have been sold in reliance on and in accordance with Rule 144 under the Securities Act or Grantee has delivered to Issuer a copy of a letter from the staff of the SEC, or an opinion of counsel in form and substance reasonably satisfactory to Issuer and its counsel, to the effect that such legend is not required for purposes of the Securities Act and (ii) the reference to restrictions pursuant to this Agreement in the above legend will be removed by delivery of substitute certificate(s) without such reference if the Option Shares evidenced by certificate(s) containing such reference have been sold or transferred in compliance with the provisions of this Agreement under circumstances that do not require the retention of such reference. ARTICLE II REPRESENTATIONS AND WARRANTIES 2.1 Representations and Warranties of Grantee. Grantee hereby represents and warrants to Issuer that any Option Shares or other securities acquired by Grantee upon exercise of the Option will not be taken with a view to the public distribution thereof and will not be transferred or otherwise disposed of except in a transaction registered or exempt from registration under the Securities Act. 2.2 Representations and Warranties of Issuer. Issuer hereby represents and warrants to Grantee as follows: (a) Option Shares. Issuer has taken all necessary corporate and other action to authorize and reserve for issuance, and, subject to receipt of any Approvals, to permit it to issue, the Option Shares and all additional shares or other securities which may be issued pursuant to Section 3.1 upon exercise of the Option, and, at all times from the date hereof until such time as the obligation to deliver Option Shares hereunder terminates, will have reserved for issuance upon exercise of the Option the Option Shares and such other additional shares or securities, if any. All of the Option Shares and all additional shares or other securities or property which may be issuable pursuant to Section 3.1, upon exercise of the Option and issuance pursuant hereto, shall be duly authorized,validly issued, fully paid and nonassessable, shall be delivered free and clear of all Liens of any nature whatsoever, and shall not be subject to any preemptive or similar right of any Person. (b) No Restrictions. No Delaware law or other takeover statute or similar Law and no provision of the Restated Certificate of Incorporation or Bylaws of Issuer or any agreement to which Issuer is a party(a) would or would purport to impose restrictions which might adversely affect or delay the consummation of the transactions contemplated by this Agreement, or(b) as a result of the consummation of the transactions contemplated by this Agreement, (i) would or would purport to restrict or impair the ability of Grantee to vote or otherwise exercise the rights of a shareholder with respect to securities of Issuer or any of its Subsidiaries that may be acquired or controlled by Grantee or(ii) would or would purport to entitle any Person to acquire securities of Issuer. 6 ARTICLE III ADJUSTMENT UPON CHANGES IN CAPITALIZATION 3.1 Adjustment Upon Changes in Capitalization. In addition to the adjustment in the number of shares of Issuer Common Stock that may be purchased upon exercise of the Option pursuant to Section 1.1 of this Agreement, the number of shares of Issuer Common Stock that may be purchased upon the exercise of the Option and the Exercise Price shall be subject to adjustment from time to time as provided in this Section 3.1. In the event of any change in the number of issued and outstanding shares of Issuer Common Stock by reason of any stock dividend, split-up,merger, recapitalization, combination, conversion, exchange of shares, spin- off or other change in the corporate or capital structure of Issuer which would have the effect of diluting or otherwise diminishing Grantee's rights hereunder, the number and kind of Option Shares or other securities subject to the Option and the Exercise Price therefor shall be appropriately adjusted so that Grantee shall receive upon exercise of the Option(or, if such a change occurs between exercise and the Option Closing, upon the Option Closing)the number and kind of shares or other securities or property that Grantee would have received in respect of the Option Shares that Grantee is entitled to purchase upon exercise of the Option if the Option had been exercised (or the purchase thereunder had been consummated, as the case may be) immediately prior to such event or the record date for such event, as applicable. The rights of Grantee under this Section shall be in addition to, and shall in no way limit, its rights against Issuer for breach of or the failure to perform any provision of the Merger Agreement. ARTICLE IV REGISTRATION RIGHTS 4.1 Registration of Option Shares Under the Securities Act. (a) If requested by Grantee at any time and from time to time within two years after receipt by Grantee of Option Shares(the"Registration Period"), Issuer shall use its reasonable best efforts, as promptly as practicable, to effect the registration under the Securities Act and any applicable state law(a"Demand Registration") of such number of Option Shares or such other Issuer securities owned by or issuable to Grantee in accordance with the method of sale or other disposition contemplated by Grantee, including a"shelf'registration statement under Rule 415 of the Securities Act or any successor provision, and to obtain all consents or waivers of other parties that are required therefor. Grantee agrees to use reasonable best efforts to cause, and to use reasonable best efforts to cause any underwriters of any sale or other disposition to cause, any sale or other disposition pursuant to such registration statement to be effected on a widely distributed basis so that upon consummation thereof no purchaser or transferee will own beneficially more than 3%of the then-outstanding voting power of Issuer. Except with respect to such a"shelf' registration, Issuer shall keep such Demand Registration effective for a period of not less than 150 days, unless, in the written opinion of counsel to Issuer, which opinion shall be delivered to Grantee and which shall be satisfactory in form and substance to Grantee and its counsel, such registration under the Securities Act is not required in order to lawfully sell and distribute such Option Shares or other Issuer securities in the manner contemplated by Grantee. Issuer shall only have the obligation to effect three Demand Registrations pursuant to this Section 4.l; rp ovided that only requests relating to a registration statement that has become effective under the Securities Act shall be counted for purposes of determining the number of Demand Registrations made. Issuer shall be entitled to postpone for up to 150 days from receipt of Grantee's request for a Demand Registration the filing of any registration statement in connection therewith if the Board of Directors of Issuer determines in its good faith reasonable judgment that such registration would materially interfere with or require premature disclosure of, any material acquisition, reorganization, pending or proposed offering of Issuer Securities or other transaction involving Issuer or any other material contract under active negotiation by Issuer; and provided further that Issuer shall not have postponed any Demand Registration pursuant to this sentence during the twelve month period immediately preceding the date of delivery of Grantee's request for a Demand Registration. (b) If Issuer effects a registration under the Securities Act of Issuer Common Stock for its own account or for any other stockholders of Issuer(other than on Form S-4 or Form S-8, or any successor form), Grantee shall have the right to participate in such registration and include in such registration the number of shares of Issuer Common Stock or such other Issuer securities as Grantee shall designate by notice to Issuer(an"Incidental Registration" and, together with a Demand Registration, a"Re,gistration"); provided,however, that, if the managing underwriters of such offering advise Issuer in writing that in their opinion the number of shares of Issuer Common Stock or other securities requested to be included in such Incidental Registration exceeds the number which can be sold in such offering, Issuer shall include therein(i) first, all shares proposed to be included therein by Issuer, (ii) second, subject to the rights of any other holders of registration rights in effect as of the date hereof, the shares requested to be included therein by Grantee and (iii)third, shares proposed to be included therein by any other stockholder of Issuer. Participation by Grantee in any Incidental Registration shall not affect the obligation of Issuer to effect Demand Registrations under this Section 4.1. Issuer may withdraw any registration under the Securities Act that gives rise to an Incidental Registration without the consent of Grantee. (c) In connection with any Registration pursuant to this Section 4.1, (i) Issuer and Grantee shall provide each other and any underwriter of the offering with customary representations,warranties, covenants, indemnification and contribution obligations in connection with such Registration, and(ii) Issuer shall use reasonable best efforts to cause any Option Shares included in such Registration to be approved for listing on the NYSE or any other nationally recognized exchange or trading system upon which Issuer's securities are then listed, subject to official notice of issuance, which notice shall be given by Issuer upon issuance. Grantee will provide all information reasonably requested by Issuer for inclusion in any registration statement to be filed hereunder. The costs and expenses incurred by Issuer in connection with any Registration pursuant to this Section 4.1 (including any fees related to qualifications under Blue Sky Laws and SEC filing fees) (the"Registration Expenses") shall be 8 borne by Issuer, excluding legal fees of Grantee's counsel and undernriting discounts or commissions with respect to Option Shares to be sold by Grantee included in a Registration. 4.2 Transfers of Option Shares. The Option Shares may not be sold, assigned, transferred, or otherwise disposed of except(i) in an underwritten public offering as provided in Section 4.1 or(ii) to any purchaser of transferee who would not, to the knowledge of the Grantee after reasonable inquiry, immediately following such sale, assignment,transfer or disposal beneficially own more than 3% of the then-outstanding voting power of the Issuer; provided, however, that Grantee shall be permitted to sell any Option Shares if such sale is made pursuant to a tender or exchange offer that has been approved or recommended by a majority of the members of the Board of Directors of Issuer(which majority shall include a majority of directors who were directors as of the date hereof). ARTICLE V REPURCHASE RIGHTS; SUBSTITUTE OPTIONS 5.1 Repurchase Rights. (a) Subject to Section 6.1, at any time on or after the Exercise Date and prior to the Expiration Date, Grantee shall have the right(the"Repurchase Right")to require Issuer to repurchase from Grantee(i)the Option or any part thereof as Grantee shall designate at a price(the"Option Repurchase Price") equal to the amount, subject to reduction at the sole discretion of Grantee pursuant to clause(iii) of Section 6.1(a),by which(A) the Market/Offer Price(as defined below) exceeds (B) the Exercise Price, multiplied by the number of Option Shares as to which the Option is to be repurchased and (ii) such number of Option Shares as Grantee shall designate at a price (the"Option Share Repurchase Price") equal to the Market/Offer Price multiplied by the number of Option Shares so designated. The term "Market/Offer Price" shall mean the highest of(i)the highest price per share of Issuer Common Stock offered or paid in any Acquisition Proposal, or(ii) the highest closing price for shares of Issuer Common Stock during the six-month period immediately preceding the date Grantee gives the Repurchase Notice(as hereinafter defined). In determining the Market/Offer Price, the value of consideration other than cash shall be determined by a nationally recognized investment banking firm selected by Grantee and reasonably acceptable to Issuer, which determination, absent manifest error, shall be conclusive for all purposes of this Agreement. (b) Grantee shall exercise its Repurchase Right by delivering to Issuer written notice(a"Repurchase Notice") stating that Grantee elects to require Issuer to repurchase all or a portion of the Option and/or the Option Shares as specified therein. The closing of the Repurchase Right (the"Repurchase Closing") shall take place in the United States at the place, time and date specified in the Repurchase Notice, which date shall not be less than two Business Days nor more than ten Business Days from the date on which the Repurchase Notice is delivered. At the Repurchase Closing, subject to the receipt of a writing evidencing the surrender of the Option and/or certificates representing Option Shares, as the case may be, Issuer shall 9 deliver to Grantee the Option Repurchase Price therefor or the Option Share Repurchase Price therefor, as the case may be, or the portion thereof that Issuer is not then prohibited under applicable Law from so delivering. At the Repurchase Closing, (i)Issuer shall pay to Grantee the Option Repurchase Price for the portion of the Option which is to be repurchased or the Option Shares Repurchase Price for the number of Option Shares to be repurchased, as the case may be, by wire transfer of immediately available funds to an account specified by Grantee at least 24 hours prior to the Repurchase Closing and (ii)if the Option is repurchased only in part, Issuer and Grantee shall execute and deliver an amendment to this Agreement reflecting the Option Shares for which the Option is not being repurchased. (c) To the extent that Issuer is prohibited under applicable Law from repurchasing the portion of the Option or the Option Shares designated in such Repurchase Notice, Issuer shall immediately so notify Grantee and thereafter deliver, from time to time, to Grantee the portion of the Option Repurchase Price and the Option Share Repurchase Price, respectively, that it is no longer prohibited from delivering, within five Business Days after the date on which Issuer is no longer so prohibited; provided, however, that if Issuer at any time after delivery of a Repurchase Notice is prohibited under applicable Law from delivering to Grantee the full amount of the Option Repurchase Price and the Option Share Repurchase Price for the Option or Option Shares to be repurchased, respectively, Grantee may rescind the exercise of the Repurchase Right, whether in whole, in part or to the extent of the prohibition, and,to the extent rescinded, no part of the amounts, terms or the rights with respect to the Option or Repurchase Right shall be changed or affected as if such Repurchase Right were not exercised. Issuer shall use its reasonable best efforts to obtain all required regulatory and legal approvals and to file any required notices to permit Grantee to exercise its Repurchase Right and shall use its reasonable best efforts to avoid or cause to be rescinded or rendered inapplicable any prohibition on Issuer's repurchase of the Option or the Option Shares. 5.2 Substitute Option. (a) In the event that Issuer enters into an agreement(i) to consolidate with or merge into any Person, other than Grantee or any Subsidiary of Grantee(each an "Excluded Person"), and Issuer is not the continuing or surviving corporation of such consolidation or merger, (ii)to permit any Person, other than an Excluded Person, to merge into Issuer and Issuer shall be the continuing or surviving or acquiring corporation,but, in connection with such merger, the then outstanding shares of Issuer Common Stock shall be changed into or exchanged for stock or other securities of any other Person or cash or any other property or the then outstanding shares of Issuer Common Stock shall after such merger represent less than 50% of the outstanding voting securities of the merged or acquiring company, or(iii)to sell or otherwise transfer all or substantially all of its assets to any Person, other than an Excluded Person, then, and in each such case, the agreement governing such transaction shall make proper provision so that, unless earlier exercised by Grantee, the Option shall, upon the consummation of any such transaction and upon the terms and conditions set forth herein, be converted into, or exchanged for, an option with identical terms appropriately adjusted to acquire the number and class of shares or other securities or property that Grantee would have received in respect of Issuer Common Stock if the Option had been exercised immediately prior to such consolidation, -0.?-'2539 10 merger, sale, or transfer, or the record date therefor, as applicable and make any other necessary adjustments; provided, however, that if such a conversion or exchange cannot,because of applicable Law be the same as the Option, such terms shall be as similar as possible and in no event less advantageous to Grantee than the Option. (b) In addition to any other restrictions or covenants, Issuer agrees that it shall not enter or agree to enter into any transaction described in Section 5.2(a)unless the Acquiring Corporation(as hereinafter defined) and any Person that controls the Acquiring Corporation assume in writing all the obligations of Issuer hereunder and agree for the benefit of Grantee to comply with this Article V. (c) For purposes of this Section 5.2,the term"Acquiring Corporation" shall mean(i)the continuing or surviving Person of a consolidation or merger with Issuer(if other than Issuer), (ii) Issuer in a consolidation or merger in which Issuer is the continuing or surviving or acquiring Person, and (iii)the transferee of all or substantially all of Issuer's assets. ARTICLE VI MISCELLANEOUS 6.1 Total Profit. (a) Notwithstanding any other provision of this Agreement, in no event shall Grantee's Total Profit(as hereinafter defined) plus any Time Warner Termination Fee paid pursuant to Section 8.2(b) and any fees paid by Issuer pursuant to Section 8.2(d)of the Merger Agreement(such Time Warner Termination Fee and such fees paid pursuant to Section 8.2(d) of the Merger Agreement, collectively, the"Total Issuer Fees") exceed in the aggregate an amount(the"Limitation Amount") equal to 2.75%of the product of(x)the number of shares of Issuer Common Stock outstanding as of the date hereof(assuming the exercise of all outstanding options (other than the Option) and the conversion into Issuer Common Stock of all securities of the Issuer convertible into Issuer Common Stock)multiplied by(y)the Exchange Ratio multiplied by(z) the last sale price of the common stock, par value$0.01 per share, of Grantee on the NYSE on January 7, 2000, and, if the total amount that would otherwise be received by Grantee otherwise would exceed such amount, Grantee, at its sole election, shall either(i)reduce the number of shares of Issuer Common Stock subject to this Option, (ii) deliver to Issuer for cancellation Option Shares previously purchased by Grantee, (iii)reduce the amount of the Option Repurchase Price or the Option Share Repurchase Price, (iv)pay cash to Issuer, or(v) any combination thereof, so that Grantee's actually realized Total Profit, when aggregated with the Total Issuer Fees so paid to Grantee, shall not exceed the Limitation Amount after taking into account the foregoing actions. (b) Notwithstanding any other provision of this Agreement, the Option may not be exercised for a number of Option Shares as would, as of the date of exercise, result in a Notional Total Profit (as defined below) which, together with the Total Issuer Fees theretofore .. w- ',2319-993=?DJS-A',R 11 paid to Grantee, would exceed the Limitation Amount; provided, that nothing in this sentence shall restrict any exercise of the Option permitted hereby on any subsequent date. (c) As used herein, the term "Total Profit"shall mean the aggregate amount(before taxes)of the following: (i) the amount received by Grantee pursuant to Issuer's repurchase of the Option(or any portion thereof)pursuant to Section 5.1, (ii) (x) the amount received by Grantee pursuant to Issuer's repurchase of Option Shares pursuant to Section 5.1, less (y) Grantee's purchase price for such Option Shares, (iii)(x)the net cash amounts or the fair market value of any property received by Grantee pursuant to any consummated arm's-length sales of Option Shares (or any other securities into which such Option Shares are converted or exchanged) to any unaffiliated party, less (y) Grantee's purchase price of such Option Shares. (d) As used herein, the term"Notional Total Profit"with respect to any number of Option Shares as to which Grantee may propose to exercise the Option shall be the Total Profit determined as of the date of such proposal assuming that the Option was exercised on such date for such number of Option Shares and assuming that such Option Shares, together with all other Option Shares held by Grantee and its affiliates as of such date, were sold for cash at the closing market price (less customary brokerage commissions) for shares of Issuer Common Stock on the preceding trading day on the NYSE (or on any other nationally recognized exchange or trading system on which shares of Issuer Common Stock are then so listed or traded). 6.2 Further Assurances: Listing. (a) From time to time, at the other party's request and without further consideration, each party hereto shall execute and deliver such additional documents and take all such further action as may be necessary or desirable to consummate the transactions contemplated by this Agreement, including, without limitation, to vest in Grantee good and marketable title, free and clear of all Liens, to any Option Shares purchased hereunder. Issuer agrees not to avoid or seek to avoid (whether by charter amendment or through reorganization, consolidation, merger, issuance of rights or securities, the Time Warner Rights Agreement or similar agreement, dissolution or sale of assets, or by any other voluntary act)the observance or performance of any of the covenants, agreements or conditions to be observed or performed hereunder by it. (b) If the Issuer Common Stock or any other securities to be acquired upon exercise of the Option are then listed on the NYSE(or any other national securities exchange or trading system), Issuer, upon the request of Grantee, will promptly file an application to list the shares of Issuer Common Stock or such other securities to be acquired upon exercise of the Option on the NYSE (and any other national securities exchange or trading system) and will use reasonable best efforts to obtain approval of such listing as promptly as practicable. 6.3 Division of Option: Lost Options. The Agreement(and the Option granted hereby) are exchangeable, without expense, at the option of Grantee, upon presentation and 12 surrender of this Agreement at the principal office of Issuer, for other agreements providing for Options of different denominations entitling Grantee to purchase, on the same terms and subject to the same conditions as are set forth herein, in the aggregate the same number of Option Shares purchasable hereunder. Upon receipt by Issuer of evidence reasonably satisfactory to it of the loss, theft or destruction or mutilation of this Agreement, and(in the case of loss, theft or destruction) of reasonably satisfactory indemnification, and upon surrender and cancellation of this Agreement, if mutilated, Issuer will execute and deliver a new agreement of like tenor and date. 6.4 Amendment. This Agreement may not be amended except by an instrument in writing signed on behalf of each of the parties hereto. 6.5 Notices. All notices and other communications hereunder shall be in writing and shall be deemed duly given(a) on the date of delivery if delivered personally, or by telecopy or telefacsimile, upon confirmation of receipt, (b) on the first Business Day following the date of dispatch if delivered by a recognized next-day courier service, or(c)on the tenth Business Day following the date of mailing if delivered by registered or certified mail, return receipt requested, postage prepaid. All notices hereunder shall be delivered as set forth below, or pursuant to such other instructions as may be designated in writing by the party to receive such notice: (a) if to Grantee to: America Online, Inc. 22000 AOL Way Dulles, Virginia 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 Issuer to: Time Warner Inc. 75 Rockefeller Plaza New York, NY 10019 Fax: (212) 265-2646 Attention: Christopher P. Bogart, Esq. CC? o,-GCC7-��"c39-993cr7JS-AGS 13 with a copy to: Cravath, Swaine& Moore Worldwide Plaza 825 Eighth Avenue New York,New York 10019 Fax: (212)474-3700 Attention: Robert A. Kindler, Esq. 6.6 Inter2retation. When a reference is made in this Agreement to Articles, Sections, Exhibits or Schedules, such reference shall be to an Article or Section of or Exhibit or Schedule to this Agreement unless otherwise indicated. The headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. Whenever the words "include,""includes"or"including"are used in this Agreement, they shall be deemed to be followed by the words"without limitation." 6.7 Counterparts. This Agreement may be executed in one or more counterparts, all of which shall be considered one and the same agreement and shall become effective when one or more counterparts have been signed by each of the parties and delivered to the other party, it being understood that both parties need not sign the same counterpart. 6.8 Entire Agreement: No Third Party Beneficiaries. (a) This Agreement and the other agreements of the parties referred to herein constitute the entire agreement and supersede all prior agreements and understandings, both written and oral, among the parties with respect to the subject matter hereof. (b) This Agreement shall be binding upon and inure solely to the benefit of each party hereto, and nothing in this Agreement, express or implied, is intended to or shall confer upon any other Person any right, benefit or remedy of any nature whatsoever under or by reason of this Agreement. 6.9 Governing Law. This Agreement shall be governed and construed in accordance with the laws of the State of Delaware(without giving effect to choice of law principles thereof). 6.10 Severability. If any term or other provision of this Agreement is invalid, illegal or incapable of being enforced by any law or public policy, all other terms and provisions of this Agreement shall nevertheless remain in full force and effect so long as the economic or legal substance of the transactions contemplated hereby is not affected in any manner materially adverse to any party. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the parties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in an acceptable manner in order that the transactions contemplated hereby are consummated as originally contemplated to the greatest extent possible. °°s==n.;4-:.c'R 14 6.11 Assignment. Neither this Agreement nor any of the rights, interests or obligations hereunder shall be assigned by any of the parties hereto, in whole or in part(whether by operation of law or otherwise), without the prior written consent of the other party, and any attempt to make any such assignment without such consent shall be null and void. Subject to the preceding sentence, this Agreement will be binding upon, inure to the benefit of and be enforceable by the parties and their respective successors and assigns. 6.12 Submission to Jurisdiction: Waivers. Each of Grantee and Issuer irrevocably agrees that any legal action or proceeding with respect to this Agreement or for recognition and enforcement of any judgment in respect hereof brought by the other party hereto or its successors or assigns may be brought and determined in the Chancery or other Courts of the State of Delaware, and each of Grantee and Issuer hereby irrevocably submits with regard to any such action or proceeding for itself and in respect to its property, generally and unconditionally, to the nonexclusive jurisdiction of the aforesaid courts. Each of Grantee and Issuer hereby irrevocably waives, and agrees not to assert,by way of motion, as a defense, counterclaim or otherwise, in any action or proceeding with respect to this Agreement, (a) any claim that it is not personally subject to the jurisdiction of the above-named courts for any reason other than the failure to lawfully serve process (b) that it or its property is exempt or immune from jurisdiction of any such court or from any legal process commenced in such courts(whether through service of notice, attachment prior to judgment, attachment in aid of execution of judgment, execution of judgment or otherwise), (c) to the fullest extent permitted by applicable law, that(i)the suit, action or proceeding in any such court is brought in an inconvenient forum, (ii)the venue of such suit, action or proceeding is improper and (iii)this Agreement, or the subject matter hereof,may not be enforced in or by such courts and(d) any right to a trial by jury. 6.13 Enforcement. The parties agree that irreparable damage would occur in the event that any of the provisions of this Agreement were not performed in accordance with their specific terms. It is accordingly agreed that the parties shall be entitled to specific performance of the terms hereof, this being in addition to any other remedy to which they are entitled at law or in equity. 6.14 Failure or Indulgence Not Waiver: Remedies Cumulative. No failure or delay on the part of any party hereto in the exercise of any right hereunder will impair such right or be construed to be a waiver of, or acquiescence in, any breach of any representation,warranty or agreement herein,nor will any single or partial exercise of any such right preclude other or further exercise thereof or of any other right. All rights and remedies existing under this Agreement are cumulative to, and not exclusive to, and not exclusive of, any rights or remedies otherwise available. [Remainder of this page intentionally left blank] IN WITNESS WHEREOF, Grantee and Issuer have caused this Agreement to be duly executed as of the date first above written. AMERICA ONLIN C. By: Nam . tephen M. Case Title: Chairman& Chief Executive Officer TIME WARNER INC. By: Name: Title: IN %1 f'NESS %VHEREOF, Grantee and Issue:have caused this Agreement to be dul- executed as of the date flat above wrirtcn. AMERICA ONLINE, INC. By: Name: Title: TIME WARNER NC. By: /QA Name: Title: EXECUTION COPY STOCK OPTION AGREEMENT, dated as of January 10,2000(the "Agreement"), between Time Warner Inc., a Delaware corporation ("Grantee"), and America Online, Inc., a Delaware corporation("Issuer"). WITNESSETH: WHEREAS, Grantee and Issuer are, concurrently with the execution and delivery of this Agreement, entering into an Agreement and Plan of Merger, dated as of the date hereof (the"Merger Aereement;" capitalized terms used without definition herein having the meanings assigned to them in the Merger Agreement), pursuant to which the parties will engage in a business combination in a merger of equals (the"Merger"); and WHEREAS, as a condition to their willingness to enter into the Merger Agreement, Grantee has required that Issuer agree, and believing it to be in the best interests of Issuer, Issuer has agreed, among other things, to grant to Grantee the Option(as hereinafter defined) to purchase shares of common stock, par value S.01 per share, of Issuer("Issuer Common Stock") at a price per share equal to the Exercise Price(as hereinafter defined). NOW THEREFORE, in consideration of the foregoing and the mutual representations, warranties, covenants and agreements herein contained, and intending to be legally bound hereby, the parties hereto agree as follows: ARTICLE I OPTION TO PURCHASE SHARES 1.1 Grant of Option. (a) Issuer hereby grants to Grantee an irrevocable option to purchase, in whole or in part, an aggregate of up to 452,535,148 duly authorized, validly issued, fully paid and nonassessable shares of Issuer Common Stock(representing 19.9%of the outstanding shares of Issuer Common Stock as of January 5, 2000) on the terms and subject to the conditions set forth herein (the"Option"); provided, however, that in no event shall the number of shares of Issuer Common Stock for which this Option is exercisable exceed 19.9%of the issued and outstanding shares of Issuer Common Stock at the time of exercise without giving effect to the issuance of any Option Shares (as hereinafter defined). The number of shares of Issuer Common Stock that may be received upon the exercise of the Option and the Exercise Price are subject to adjustment as herein set forth. (b) In the event that any additional shares of Issuer Common Stock are issued or othernvise become outstanding after the date of this Agreement (other than pursuant to this Agreement and other than pursuant to an event described in Section 3.1 hereof), the number of shares of Issuer Common Stock subject to the Option shall be increased so that, after such 2 issuance, such number together with any shares of Issuer Common Stock previously issued pursuant hereto, equals 19.9% of the number of shares of Issuer Common Stock then issued and outstanding without giving effect to any shares subject or issued pursuant to the Option. Nothing contained in this Section 1.1(b) or elsewhere in this Agreement shall be deemed to authorize Issuer to breach or fail to comply with any provision of the Merger Agreement. As used herein, the term "Option Shares"means the shares of Issuer Common Stock issuable pursuant to the Option, as the number of such shares shall be adjusted pursuant to the terms hereof. 1.2 Exercise of O to ion. (a) The Option may be exercised by Grantee, in whole or in part, at any time, or from time to time, commencing upon the Exercise Date and prior to the Expiration Date. As used herein, the term "Exercise Date"means the date on which Grantee becomes unconditionally entitled to receive the America Online Termination Fee pursuant to Section 8.2(c) of the Merger Agreement. As used herein, the term "Expiration Date"means the first to occur prior to Grantee's exercise of the Option pursuant to Section 1.2(b) of- (i) f(i) the Effective Time; (ii) written notice of termination of this Agreement by Grantee to Issuer; (iii) 12 months after the first occurrence of an Exercise Date; or (iv) the date of termination of the Merger Agreement,unless, in the case of this clause(iv), Grantee has the right to receive the America Online Termination Fee either(x)upon or(y) following such termination upon the occurrence of certain events, in which case the Option will not terminate until the later of(x) 15 business days following the time the America Online Termination Fee becomes unconditionally payable and (y) the expiration of the period in which Grantee has such right to receive the America Online Termination Fee. Notwithstanding the termination of the Option, Grantee shall be entitled to purchase those Option Shares with respect to which it may have exercised the Option by delivery of an Option Notice(as defined below) prior to the Expiration Date, and the termination of the Option will not affect any rights hereunder which by their terms do not terminate or expire prior to or at the Expiration Date. (b) In the event Grantee wishes to exercise the Option, Grantee shall send a written notice to Issuer of its intention to so exercise the Option (an"Option Notice"), specifying the number of Option Shares to be purchased (and the denominations of the certificates, if more than one), whether the aggregate Exercise Price will be paid in cash or by surrendering a portion of the Option in accordance with Section 1.3(b) or a combination thereof, and the place in the United States, time and date of the closing of such purchase (the"Option Closing" and the date of such Closing, the"Option Closing Date"), which date shall not be less _ _7E __-09- ?52:..-AC-?. 3 than two Business Days nor more than ten Business Days from the date on which an Option Notice is delivered;provided that the Option Closing shall be held only if(i) such purchase would not otherwise violate or cause the violation of, any applicable material law, statute, ordinance, rule or regulation (collectively, "Laws") (including the HSR Act and the Communications Act), and (ii) no material judgment, order, writ, injunction, ruling or decree of any Governmental Entity(collectively, "Orders") shall have been promulgated, enacted, entered into, or enforced by any Governmental Entity which prohibits delivery of the Option Shares, whether temporary, preliminary or permanent; provided, however, that the parties hereto shall use their reasonable best efforts to (x)promptly make and process all necessary filings and applications and obtain all consents, approvals, Orders, authorizations, registrations and declarations or expiration or termination of any required waiting periods (collectively, "Approvals") and to comply with any such applicable Laws and (y) have any such Order vacated or reversed. In the event the Option Closing is delayed pursuant to clause(i)or(ii)above, the Option Closing shall be within ten Business Days following the cessation of such restriction, violation, Law or Order or the receipt of any necessary Approval, as the case may be(so long as the Option Notice was delivered prior to the Expiration Date); provide further that, notwithstanding any prior Option Notice, Grantee shall be entitled to rescind such Option Notice and shall not be obligated to purchase any Option Shares in connection with such exercise upon written notice to such effect to Issuer. (c) At any Option Closing, (i) Issuer shall deliver to Grantee all of the Option Shares to be purchased by delivery of a certificate or certificates evidencing such Option Shares in the denominations designated by Grantee in the Option Notice, and(ii)if the Option is exercised in part and/or surrendered in part to pay the aggregate Exercise Price pursuant to Section 1.3(b), Issuer and Grantee shall execute and deliver an amendment to this Agreement reflecting the Option Shares for which the Option has not been exercised and/or surrendered. If at the time of issuance of any Option Shares pursuant to an exercise of all or part of the Option hereunder, Issuer shall have issued any rights or other securities which are attached to or otherwise associated with the Issuer Common Stock,then each Option Share issued pursuant to such exercise shall also represent such rights or other securities with terms substantially the same as and at least as favorable to Grantee as are provided under any shareholder rights agreement or similar agreement of Issuer then in effect. At the Option Closing, Grantee shall pay to Issuer by wire transfer of immediately available funds to an account specified by Issuer to Grantee in writing at least two Business Days prior to the Option Closing an amount equal to the Exercise Price multiplied by the number of Option Shares to be purchased for cash pursuant to this Article I; provided that the failure or refusal of Issuer to specify an account shall not affect Issuer's obligation to issue the Option Shares. (d) Upon the delivery by Grantee to Issuer of the Option Notice and the tender of the applicable aggregate Exercise Price in immediately available funds or the requisite portion of the Option in accordance with Section 1.3, Grantee shall be deemed to be the holder of record of the Option Shares issuable upon such exercise, notwithstanding that the stock transfer books of Issuer may then be closed, that certificates representing such Option Shares may not then have been actually delivered to Grantee, or Issuer may have failed or refused to take any action required of it hereunder. Issuer shall pay all expenses that may be payable in �v.7 o..-„_..7-02269-r.0':A521M-AGR 4 connection with the preparation, issuance and delivery of stock certificates or an amendment to this Agreement under this Section 1.2 and any filing fees and other expenses arising from the performance of the transactions contemplated hereby. 1.3 Payments. (a) The purchase and sale of the Option Shares pursuant to Section 1.2 of this Agreement shall be at a purchase price equal to $73.75 per Share(as such amount may be adjusted pursuant to the terms hereof, the"Exercise Price"),payable at Grantee's option in cash, by surrender of a portion of the Option in accordance with Section 1.3(b), or a combination thereof. (b) Grantee may elect to purchase Option Shares issuable, and pay some or all of the aggregate Exercise Price payable, upon an exercise of the Option by surrendering a portion of the Option with respect to such number of Option Shares as is determined by dividing(i)the aggregate Exercise Price payable in respect of the number of Option Shares being purchased in such manner by(ii) the excess of the Fair Market Value(as defined below) per share of Issuer Common Stock as of the last trading day preceding the date Grantee delivers its Option Notice(such date, the"Option Exercise Date") over the per share Exercise Price. The"Fair Market Value"per share of Issuer Common Stock shall be(i) if the Issuer Common Stock is listed on the New York Stock Exchange, Inc. (the"NYSE") or any other nationally recognized exchange or trading system as of the Option Exercise Date, the average of last reported sale prices per share of Issuer Common Stock thereon for the 10 trading days commencing on the 12`h trading day immediately preceding the Option Exercise Date, or(ii)if the Issuer Common Stock is not listed on the NYSE or any other nationally recognized exchange or trading system as of the Option Exercise Date, the amount determined by a mutually acceptable independent investment banking firm as the value per share the Issuer Common Stock would have if publicly traded on a nationally recognized exchange or trading system(assuming no discount for minority interest, illiquidity or restrictions on transfer). That portion of the Option so surrendered under this Section 1.3(b) shall be canceled and shall thereafter be of no further force and effect. (c) Certificates for the Option Shares delivered at an Option Closing will have typed or printed thereon a restrictive legend which will read substantially as follows: "THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY BE REOFFERED OR SOLD ONLY IF SO REGISTERED OR IF AN EXEMPTION FROM SUCH REGISTRATION IS AVAILABLE. SUCH SECURITIES ARE ALSO SUBJECT TO ADDITIONAL RESTRICTIONS ON TRANSFER AS SET FORTH IN THE STOCK OPTION AGREEMENT DATED AS OF JANUARY 10, 2000, A COPY OF WHICH MAY BE OBTAINED FROM THE SECRETARY OF AMERICA ONLINE, INC. AT ITS PRINCIPAL EXECUTIVE OFFICES." ,226:-AC1A52:..-AG.=. 5 It is understood and agreed that(i) the reference to restrictions arising under the Securities Act in the above legend will be removed by delivery of substitute certificate(s) without such reference if such Option Shares have been registered pursuant to the Securities Act, such Option Shares have been sold in reliance on and in accordance with Rule 144 under the Securities Act or Grantee has delivered to Issuer a copy of a letter from the staff of the SEC, or an opinion of counsel in form and substance reasonably satisfactory to Issuer and its counsel, to the effect that such legend is not required for purposes of the Securities Act and (ii) the reference to restrictions pursuant to this Agreement in the above legend will be removed by delivery of substitute certificate(s) without such reference if the Option Shares evidenced by certificate(s) containing such reference have been sold or transferred in compliance with the provisions of this Agreement under circumstances that do not require the retention of such reference. ARTICLE II REPRESENTATIONS AND WARRANTIES 2.1 Representations and Warranties of Grantee. Grantee hereby represents and warrants to Issuer that any Option Shares or other securities acquired by Grantee upon exercise of the Option will not be taken with a view to the public distribution thereof and will not be transferred or otherwise disposed of except in a transaction registered or exempt from registration under the Securities Act. 2.2 Representations and Warranties of Issuer. Issuer hereby represents and warrants to Grantee as follows: (a) Option Shares. Issuer has taken all necessary corporate and other action to authorize and reserve for issuance, and, subject to receipt of any Approvals, to permit it to issue, the Option Shares and all additional shares or other securities which may be issued pursuant to Section 3.1 upon exercise of the Option, and, at all times from the date hereof until such time as the obligation to deliver Option Shares hereunder terminates, will have reserved for issuance upon exercise of the Option the Option Shares and such other additional shares or securities, if any. All of the Option Shares and all additional shares or other securities or property which may be issuable pursuant to Section 3.1, upon exercise of the Option and issuance pursuant hereto, shall be duly authorized, validly issued, fully paid and nonassessable, shall be delivered free and clear of all Liens of any nature whatsoever, and shall not be subject to any preemptive or similar right of any Person. (b) No Restrictions. No Delaware law or other takeover statute or similar Law and no provision of the Restated Certificate of Incorporation or Bylaws of Issuer or any agreement to which Issuer is a party(a) would or would purport to impose restrictions which might adversely affect or delay the consummation of the transactions contemplated by this Agreement, or(b) as a result of the consummation of the transactions contemplated by this Agreement, (i) would or would purport to restrict or impair the ability of Grantee to vote or otherwise exercise the rights of a shareholder with respect to securities of Issuer or any of its CCC7-C2259-AC1AS21M-AGR 6 Subsidiaries that may be acquired or controlled by Grantee or(ii) would or would purport to entitle any Person to acquire securities of Issuer. ARTICLE III ADJUSTMENT UPON CHANGES IN CAPITALIZATION 3.1 Adjustment Upon Changes in Capitalization. In addition to the adjustment in the number of shares of Issuer Common Stock that may be purchased upon exercise of the Option pursuant to Section 1.1 of this Agreement, the number of shares of Issuer Common Stock that may be purchased upon the exercise of the Option and the Exercise Price shall be subject to adjustment from time to time as provided in this Section 3.1. In the event of any change in the number of issued and outstanding shares of Issuer Common Stock by reason of any stock dividend, split-up, merger, recapitalization, combination, conversion, exchange of shares, spin- off or other change in the corporate or capital structure of Issuer which would have the effect of diluting or otherwise diminishing Grantee's rights hereunder, the number and kind of Option Shares or other securities subject to the Option and the Exercise Price therefor shall be appropriately adjusted so that Grantee shall receive upon exercise of the Option(or, if such a change occurs between exercise and the Option Closing,upon the Option Closing)the number and kind of shares or other securities or property that Grantee would have received in respect of the Option Shares that Grantee is entitled to purchase upon exercise of the Option if the Option had been exercised (or the purchase thereunder had been consummated, as the case may be) immediately prior to such event or the record date for such event, as applicable. The rights of Grantee under this Section shall be in addition to, and shall in no way limit, its rights against Issuer for breach of or the failure to perform any provision-of the Merger Agreement. ARTICLE IV REGISTRATION RIGHTS 4.1 Registration of Option Shares Under the Securities Act. (a) If requested by Grantee at any time and from time to time within two years after receipt by Grantee of Option Shares (the"Registration Period"), Issuer shall use its reasonable best efforts, as promptly as practicable, to effect the registration under the Securities Act and any applicable state law(a"Demand Registration") of such number of Option Shares or such other Issuer securities owned by or issuable to Grantee in accordance with the method of sale or other disposition contemplated by Grantee, including a"shelf'registration statement under Rule 415 of the Securities Act or any successor provision, and to obtain all consents or waivers of other parties that are required therefor. Grantee agrees to use reasonable best efforts to cause, and to use reasonable best efforts to cause any underwriters of any sale or other disposition to cause, any sale or other disposition pursuant to such registration statement to be effected on a widely distributed basis so that upon consummation thereof no purchaser or transferee will own beneficially more than 3%of the then-outstanding voting power of Issuer. Except with respect to such a"shelf'registration, Issuer shall keep such Demand Registration effective for a period of not less than 150 days, unless, in the written opinion of counsel to Issuer, which opinion shall be delivered to Grantee and which shall be satisfactory in form and substance to Grantee and its counsel, such registration under the Securities Act is not required in order to lawfully sell and distribute such Option Shares or other Issuer securities in the manner contemplated by Grantee. Issuer shall only have the obligation to effect three Demand Registrations pursuant to this Section 4.l; provided that only requests relating to a registration statement that has become effective under the Securities Act shall be counted for purposes of determining the number of Demand Registrations made. Issuer shall be entitled to postpone for up to 150 days from receipt of Grantee's request for a Demand Registration the filing of any registration statement in connection therewith if the Board of Directors of Issuer determines in its good faith reasonable judgment that such registration would materially interfere with or require premature disclosure of, any material acquisition, reorganization,pending or proposed offering of Issuer Securities or other transaction involving Issuer or any other material contract under active negotiation by Issuer; and provided further that Issuer shall not have postponed any Demand Registration pursuant to this sentence during the twelve month period immediately preceding the date of delivery of Grantee's request for a Demand Registration. (b) If Issuer effects a registration under the Securities Act of Issuer Common Stock for its own account or for any other stockholders of Issuer(other than on Form S-4 or Form S-8, or any successor form), Grantee shall have the right to participate in such registration and include in such registration the number of shares of Issuer Common Stock or such other Issuer securities as Grantee shall designate by notice to Issuer(an"Incidental Registration"and, together with a Demand Registration, a"Registration"); r vided,howeyer, that, if the managing underwriters of such offering advise Issuer in writing that in their opinion the number of shares of Issuer Common Stock or other securities requested to be included in such Incidental Registration exceeds the number which can be sold in such offering, Issuer shall include therein(i) first, all shares proposed to be included therein by Issuer, (ii) second, subject to the rights of any other holders of registration rights in effect as of the date hereof,the shares requested to be included therein by Grantee and (iii)third, shares proposed to be included therein by any other stockholder of Issuer. Participation by Grantee in any Incidental Registration shall not affect the obligation of Issuer to effect Demand Registrations under this Section 4.1. Issuer may withdraw any registration under the Securities Act that gives rise to an Incidental Registration without the consent of Grantee. (c) In connection with any Registration pursuant to this Section 4.1, (i) Issuer and Grantee shall provide each other and any underwriter of the offering with customary representations, warranties, covenants, indemnification and contribution obligations in connection with such Registration, and (ii) Issuer shall use reasonable best efforts to cause any Option Shares included in such Registration to be approved for listing on the NYSE or any other nationally recognized exchange or trading system upon which Issuer's securities are then listed, subject to official notice of issuance, which notice shall be given by Issuer upon issuance. Grantee will provide all information reasonably requested by Issuer for inclusion in any registration statement to be filed hereunder. The costs and expenses incurred by Issuer in C:1712: :2269-AOin52ir!-AGR 8 connection with any Registration pursuant to this Section 4.1 (including any fees related to qualifications under Blue Sky Laws and SEC filing fees) (the"Registration Expenses") shall be borne by Issuer, excluding legal fees of Grantee's counsel and underwriting discounts or commissions with respect to Option Shares to be sold by Grantee included in a Registration. 4.2 Transfers of Option Shares. The Option Shares may not be sold, assigned, transferred, or otherwise disposed of except(i) in an underwritten public offering as provided in section 4.1 or(ii) to any purchaser of transferee who would not,to the knowledge of the Grantee after reasonable inquiry, immediately following such sale, assignment, transfer or disposal beneficially own more than 3% of the then-outstanding voting power of the Issuer;provided, however, that Grantee shall be permitted to sell any Option Shares if such sale is made pursuant to a tender or exchange offer that has been approved or recommended by a majority of the members of the Board of Directors of Issuer(which majority shall include a majority of directors who were directors as of the date hereof). ARTICLE V REPURCHASE RIGHTS; SUBSTITUTE OPTIONS 5.1 Repurchase Rights. (a) Subject to Section 6.1, at any time on or after the Exercise Date and prior to the Expiration Date, Grantee shall have the right (the"Repurchase Right")to require Issuer to repurchase from Grantee(i) the Option or any part thereof as Grantee shall designate at a price (the"Option Repurchase Price") equal to the amount, subject to reduction at the sole discretion of Grantee pursuant to clause(iii)of Section 6.1(a),by which(A) the Market/Offer Price(as defined below) exceeds (B) the Exercise Price, multiplied by the number of Option Shares as to which the Option is to be repurchased and (ii) such number of Option Shares as Grantee shall designate at a price (the"Option Share Repurchase Price") equal to the Market/Offer Price multiplied by the number of Option Shares so designated. The term "Market/Offer Price" shall mean the highest of(i) the highest price per share of Issuer Common Stock offered or paid in any Acquisition Proposal, or(ii) the highest closing price for shares of Issuer Common Stock during the six-month period immediately preceding the date Grantee gives the Repurchase Notice (as hereinafter defined). In determining the Market/Offer Price,the value of consideration other than cash shall be determined by a nationally recognized investment banking firm selected by Grantee and reasonably acceptable to Issuer, which determination, absent manifest error, shall be conclusive for all purposes of this Agreement. (b) Grantee shall exercise its Repurchase Right by delivering to Issuer written notice (a"Repurchase Notice") stating that Grantee elects to require Issuer to repurchase all or a portion of the Option and/or the Option Shares as specified therein. The closing of the Repurchase Right (the "Repurchase Closing") shall take place in the UnitedStates at the place, time and date specified in the Repurchase Notice, which date shall not be less than two Business Days nor more than ten Business Days from the date on which the Repurchase Notice is C; 9 delivered. At the Repurchase Closing, subject to the receipt of a writing evidencing the surrender of the Option and/or certificates representing Option Shares, as the case may be, Issuer shall deliver to Grantee the Option Repurchase Price therefor or the Option Share Repurchase Price therefor, as the case may be, or the portion thereof that Issuer is not then prohibited under applicable Law from so delivering. At the Repurchase Closing, (i) Issuer shall pay to Grantee the Option Repurchase Price for the portion of the Option which is to be repurchased or the Option Shares Repurchase Price for the number of Option Shares to be repurchased, as the case may be, by wire transfer of immediately available funds to an account specified by Grantee at least 24 hours prior to the Repurchase Closing and(ii) if the Option is repurchased only in part, Issuer and Grantee shall execute and deliver an amendment to this Agreement reflecting the Option Shares for which the Option is not being repurchased. (c) To the extent that Issuer is prohibited under applicable Law from repurchasing the portion of the Option or the Option Shares designated in such Repurchase Notice, Issuer shall immediately so notify Grantee and thereafter deliver, from time to time, to Grantee the portion of the Option Repurchase Price and the Option Share Repurchase Price, respectively, that it is no longer prohibited from delivering, within five Business Days after the date on which Issuer is no longer so prohibited; r�ovided, however, that if Issuer at any time after delivery of a Repurchase Notice is prohibited under applicable Law from delivering to Grantee the full amount of the Option Repurchase Price and the Option Share Repurchase Price for the Option or Option Shares to be repurchased, respectively, Grantee may rescind the exercise of the Repurchase Right, whether in whole, in part or to the extent of the prohibition, and, to the extent rescinded, no part of the amounts, terms or the rights with respect to the Option or Repurchase Right shall be changed or affected as if such Repurchase Right were not exercised. Issuer shall use its reasonable best efforts to obtain all required regulatory and legal approvals and to file any required notices to permit Grantee to exercise its Repurchase Right and shall use its reasonable best efforts to avoid or cause to be rescinded or rendered inapplicable any prohibition on Issuer's repurchase of the Option or the Option Shares. 5.2 Substitute Option. (a) In the event that Issuer enters into an agreement(i)to consolidate with or merge into any Person, other than Grantee or any Subsidiary of Grantee(each an "Excluded Person"), and Issuer is not the continuing or surviving corporation of such consolidation or merger, (ii) to permit any Person, other than an Excluded Person, to merge into Issuer and Issuer shall be the continuing or surviving or acquiring corporation,but, in connection with such merger, the then outstanding shares of Issuer Common Stock shall be changed into or exchanged for stock or other securities of any other Person or cash or any other property or the then outstanding shares of Issuer Common Stock shall after such merger represent less than 50% of the outstanding voting securities of the merged or acquiring company, or(iii)to sell or otherwise transfer all or substantially all of its assets to any Person, other than an Excluded Person. then, and in each such case, the agreement governing such transaction shall make proper provision so that, unless earlier exercised by Grantee, the Option shall, upon the consummation of any such transaction and upon the terms and conditions set forth herein, be converted into, or exchanged for, an option with identical terms appropriately adjusted to acquire the number and .,3752-^,,, 7-02269-AC:A5-IK-AG3 10 class of shares or other securities or property that Grantee would have received in respect of Issuer Common Stock if the Option had been exercised immediately prior to such consolidation, merger, sale, or transfer, or the record date therefor, as applicable and make any other necessary adjustments; provided, however, that if such a conversion or exchange cannot,because of applicable Law be the same as the Option, such terms shall be as similar as possible and in no event less advantageous to Grantee than the Option. (b) In addition to any other restrictions or covenants, Issuer agrees that it shall not enter or agree to enter into any transaction described in Section 5.2(a)unless the Acquiring Corporation(as hereinafter defined) and any Person that controls the Acquiring Corporation assume in writing all the obligations of Issuer hereunder and agree for the benefit of Grantee to comply with this Article V. (c) For purposes of this Section 5.2,the term"Aaluiring Corporation" shall mean(i) the continuing or surviving Person of a consolidation or merger with Issuer(if other than Issuer), (ii) Issuer in a consolidation or merger in which Issuer is the continuing or surviving or acquiring Person, and (iii) the transferee of all or substantially all of Issuer's assets. ARTICLE VI MISCELLANEOUS 6.1 Total Profit. (a) Notwithstanding any other provision of this Agreement, in no event shall Grantee's Total Profit (as hereinafter defined)plus any America Online Termination Fee paid pursuant to Section 8.2(c) and any fees paid by Issuer pursuant to Section 8.2(d) of the Merger Agreement(such America Online Termination Fee and such fees paid pursuant to Section 8.2(d) of the Merger Agreement, collectively, the"Total Issuer Fees") exceed in the aggregate an amount (the"Limitation Amount") equal to 2.75%of the product of(x)the number of shares of Issuer Common Stock outstanding as of the date hereof(assuming the exercise of all outstanding options (other than the Option) and the conversion into Issuer Common Stock of all securities of the Issuer convertible into Issuer Common Stock)multiplied by(y)the last sale price of Issuer Common Stock on the NYSE on January 7, 2000, and,if the total amount that would otherwise be received by Grantee otherwise would exceed such amount, Grantee, at its sole election, shall either(i) reduce the number of shares of Issuer Common Stock subject to this Option, (ii) deliver to Issuer for cancellation Option Shares previously purchased by Grantee, (iii) reduce the amount of the Option Repurchase Price or the Option Share Repurchase Price, (iv) pay cash to Issuer, or(v) any combination thereof, so that Grantee's actually realized Total Profit, when aggregated with the Total Issuer Fees so paid to Grantee, shall not exceed the Limitation Amount after taking into account the foregoing actions. (b) Notwithstanding any other provision of this Agreement, the Option may not be exercised for a number of Option Shares as would, as of the date of exercise, result in 11 a Notional Total Profit (as defined below) which, together with the Total Issuer Fees theretofore paid to Grantee, would exceed the Limitation Amount; provided, that nothing in this sentence shall restrict any exercise of the Option permitted hereby on any subsequent date. (c) As used herein, the term "Total Profit"shall mean the aggregate amount (before taxes) of the following: (i) the amount received by Grantee pursuant to Issuer's repurchase of the Option(or any portion thereof)pursuant to Section 5.1, (ii) (x) the amount received by Grantee pursuant to Issuer's repurchase of Option Shares pursuant to Section 5.1, less (y) Grantee's purchase price for such Option Shares, (iii) (x)the net cash amounts or the fair market value of any property received by Grantee pursuant to any consummated arm's-length sales of Option Shares (or any other securities into which such Option Shares are converted or exchanged) to any unaffiliated party, less (y) Grantee's purchase price of such Option Shares. (d) As used herein, the term "Notional Total Profit"with respect to any number of Option Shares as to which Grantee may propose to exercise the Option shall be the Total Profit determined as of the date of such proposal assuming that the Option was exercised on such date for such number of Option Shares and assuming that such Option Shares, together with all other Option Shares held by Grantee and its affiliates as of such date, were sold for cash at the closing market price(less customary brokerage commissions) for shares of Issuer Common Stock on the preceding trading day on the NYSE (or on any other nationally recognized exchange or trading system on which shares of Issuer Common Stock are then so listed or traded). 6.2 Further Assurances; Listing. (a) From time to time, at the other party's request and without further consideration, each party hereto shall execute and deliver such additional documents and take all such further action as may be necessary or desirable to consummate the transactions contemplated by this Agreement, including, without limitation,to vest in Grantee good and marketable title, free and clear of all Liens, to any Option Shares purchased hereunder. Issuer agrees not to avoid or seek to avoid (whether by charter amendment or through reorganization, consolidation, merger, issuance of rights or securities, the America Online Rights Agreement or similar agreement, dissolution or sale of assets, or by any other voluntary act)the observance or performance of any of the covenants, agreements or conditions to be observed or performed hereunder by it. (b) If the Issuer Common Stock or any other securities to be acquired upon exercise of the Option are then listed on the NYSE (or any other national securities exchange or trading system), Issuer, upon the request of Grantee, will promptly file an application to list the shares of Issuer Common Stock or such other securities to be acquired upon exercise of the Option on the NYSE (and any other national securities exchange or trading system) and will use reasonable best efforts to obtain approval of such listing as promptly as practicable. '2373:- 02269-A3ln52:M-AGR 12 6.3 Division of Option: Lost Options. The Agreement(and the Option granted hereby) are exchangeable, without expense, at the option of Grantee, upon presentation and surrender of this Agreement at the principal office of Issuer, for other agreements providing for Options of different denominations entitling Grantee to purchase, on the same terms and subject to the same conditions as are set forth herein, in the aggregate the same number of Option Shares purchasable hereunder. Upon receipt by Issuer of evidence reasonably satisfactory to it of the loss, theft or destruction or mutilation of this Agreement, and (in the case of loss, theft or destruction) of reasonably satisfactory indemnification, and upon surrender and cancellation of this Agreement, if mutilated, Issuer will execute and deliver a new agreement of like tenor and date. 6.4 Amendment. This Agreement may not be amended except by an instrument in writing signed on behalf of each of the parties hereto. 6.5 Notices. All notices and other communications hereunder shall be in writing and shall be deemed duly given (a) on the date of delivery if delivered personally, or by telecopy or telefacsimile, upon confirmation of receipt, (b) on the first Business Day following the date of dispatch if delivered by a recognized next-day courier service, or(c) on the tenth Business Day following the date of mailing if delivered by registered or certified mail, return receipt requested, postage prepaid. All notices hereunder shall be delivered as set forth below, or pursuant to such other instructions as may be designated in writing by the party to receive such notice: (a) if to Grantee to: Time Warner Inc. 75 Rockefeller Plaza New York,NY 10019 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. 13 (b) if to Issuer to: America Online, Inc. 22000 AOL Way Dulles, Virginia Fax: (703) 265-1495 Attention: Paul T. Cappuccio, Esq. with a copy to: Simpson Thacher&Bartlett 425 Lexington Avenue New York, New York 10017 Fax: (212)455-2502 Attention: Richard I. Beattie, Esq. 6.6 Interpretation. When a reference is made in this Agreement to Articles, Sections, Exhibits or Schedules, such reference shall be to an Article or Section of or Exhibit or Schedule to this Agreement unless otherwise indicated. The headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. Whenever the words "include,""includes"or"including" are used in this Agreement, they shall be deemed to be followed by the words"without limitation." 6.7 Counterparts. This Agreement may be executed in one or more counterparts, all of which shall be considered one and the same agreement and shall become effective when one or more counterparts have been signed by each of the parties and delivered to the other party, it being understood that both parties need not sign the same counterpart. 6.8 Entire Agreement, No Third Party Beneficiaries. (a) This Agreement and the other agreements of the parties referred to herein constitute the entire agreement and supersede all prior agreements and understandings, both written and oral, among the parties with respect to the subject matter hereof. (b) This Agreement shall be binding upon and inure solely to the benefit of each party hereto, and nothing in this Agreement, express or implied, is intended to or shall confer upon any other Person any right, benefit or remedy of any nature whatsoever under or by reason of this Agreement. 6.9 Governing Law. This Agreement shall be governed and construed in accordance with the laws of the State of Delaware(without giving effect to choice of law principles thereof). C 370_-OC_7-3«69-AC!A521Y-Y.C.z 14 6.10 Severability. If any term or other provision of this Agreement is invalid, illegal or incapable of being enforced by any law or public policy, all other terms and provisions of this Agreement shall nevertheless remain in full force and effect so long as the economic or legal substance of the transactions contemplated hereby is not affected in any manner materially adverse to any party. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the parties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in an acceptable manner in order that the transactions contemplated hereby are consummated as originally contemplated to the greatest extent possible. 6.11 Assignment. Neither this Agreement nor any of the rights, interests or obligations hereunder shall be assigned by any of the parties hereto, in whole or in part(whether by operation of law or otherwise), without the prior written consent of the other party, and any attempt to make any such assignment without such consent shall be null and void. Subject to the preceding sentence, this Agreement will be binding upon, inure to the benefit of and be enforceable by the parties and their respective successors and assigns. 6.12 Submission to Jurisdiction; Waivers. Each of Grantee and Issuer irrevocably agrees that any legal action or proceeding with respect to this Agreement or for recognition and enforcement of any judgment in respect hereof brought by the other party hereto or its successors or assigns may be brought and determined in the Chancery or other Courts of the State of Delaware, and each of Grantee and Issuer hereby irrevocably submits with regard to any such action or proceeding for itself and in respect to its property, generally and unconditionally, to the nonexclusive jurisdiction of the aforesaid courts. Each of Grantee and Issuer hereby irrevocably waives, and agrees not to assert, by way of motion, as a defense, counterclaim or otherwise, in any action or proceeding with respect to this Agreement, (a) any claim that it is not personally subject to the jurisdiction of the above-named courts for any reason other than the failure to lawfully serve process (b)that it or its property is exempt or immune from jurisdiction of any such court or from any legal process commenced in such courts (whether through service of notice, attachment prior to judgment, attachment in aid of execution of judgment, execution of judgment or otherwise), (c)to the fullest extent permitted by applicable law,that(i) the suit, action or proceeding in any such court is brought in an inconvenient forum, (ii)the venue of such suit, action or proceeding is improper and (iii) this Agreement, or the subject matter hereof,may not be enforced in or by such courts and (d) any right to a trial by jury. 6.13 Enforcement. The parties agree that irreparable damage would occur in the event that any of the provisions of this Agreement were not performed in accordance with their specific terms. It is accordingly agreed that the parties shall be entitled to specific performance of the terms hereof, this being in addition to any other remedy to which they are entitled at law or in equity. 6.14 Failure or Indulgence Not Waiver: Remedies Cumulative. No failure or delay on the part of any party hereto in the exercise of any right hereunder will impair such right or be construed to be a waiver of, or acquiescence in, any breach of any representation, warranty or agreement herein, nor will any single or partial exercise of any such right preclude other or X03750-0007-02259-A0:A521-M-;A'R 15 further exercise thereof or of any other right. All rights and remedies existing under this Agreement are cumulative to, and not exclusive to, and not exclusive of, any rights or remedies otherwise available. [Remainder of this page intentionally left blank] 59-:..,_-52IM-AGR IN WITNESS WHEREOF, Grantee and Issuer have caused this Agreement to be duly executed as of the date first above written. AMERICA ONLINE INC. By: CNI- e: Stephen M. Case Title: Chairman & Chief Executive Officer TIME WARNER INC. By: Name: Title: IV %VITvT-SS I'VHEREOE, Grantee and Issuer have caused this Agreement to be duly executed as of the date first above i;t,rinen. ,kNIERICA. ONLNE, INC. By: N ame: TitIc: TIME WARNER INC. By: "U m . r Name: Tide: EXECUTION COPY VOTING AGREEMENT, dated as of January 10, 2000(this "Agreement"), among America Online, Inc., a Delaware corporation ("America Online"), and the stockholders of Time Warner Inc., a Delaware corporation ("Time Warner"), that are parties hereto (each, a "Stockholder"and, collectively, the"Stockholders"). WITNESSETH: WHEREAS,America Online and Time Warner are, concurrently with the execution and delivery of this Agreement, entering into an Agreement and Plan of Merger, dated as of the date hereof(the"Merger Agreement;"capitalized terms used without definition herein having the meanings assigned to them in the Merger Agreement),pursuant to which Time Warner will engage in a business combination in a merger of equals with America Online(the "Time Warner Merger'); and WHEREAS, as of the date hereof, each Stockholder is the record and beneficial owner of the number of shares of common stock,par value$0.01 per share, of Time Warner ("Time Warner Common Stock"), as set forth on the signature page hereof beneath such Stockholder's name(with respect to each Stockholder, such Stockholder's "Existing Shares" and, together with any shares of Time Warner Common Stock or other voting capital stock of Time Warner acquired after the date hereof, whether upon the exercise of warrants, options, conversion of convertible securities or otherwise, such Stockholder's "Shares"); NOW THEREFORE, in consideration of the foregoing and the mutual representations, warranties, covenants and agreements herein contained, and intending to be legally bound hereby, the parties hereto agree as follows: _ ARTICLE I VOTING 1.1 Agreement to Vote. Each Stockholder hereby agrees that it shall, and shall cause the holder of record on any applicable record date to, from time to time, at the request of America Online, at any meeting(whether annual or special and whether or not an adjourned or postponed meeting) of stockholders of Time Warner, however called, or in connection with any written consent of the holders of Time Warner Common Stock, (a) if a meeting is held, appear at such meeting or otherwise cause the Shares to be coLnted as present thereat for purposes of establishing a quorum, and (b) vote or consent(or cause to be voted or consented), in person or by proxy, all Shares, and any other voting securities of Time Warner(whether acquired heretofore or hereafter) that are beneficially owned or held of record by such Stockholder or as to which such Stockholder has, directly or indirectly, the right to vote or direct the voting, in favor of the approval and adoption of the Merger Agreement, the Time Warner Merger and any action required in furtherance thereof. 003780-0007-02839-99BG134A-AGR 2 1.2 No Ownership Interest. Nothing contained in this Agreement shall be deemed to vest in America Online any direct or indirect ownership or incidence of ownership of or with respect to any Shares. All rights, ownership and economic benefits of and relating to the Shares shall remain vested in and belong to the Stockholders, and America Online shall have no authority to manage, direct, superintend, restrict, regulate, govern, or administer any of the policies or operations of Time Warner or exercise any power or authority to direct the Stockholders in the voting of any of the Shares, except as otherwise provided herein, or in the performance of the Stockholders' duties or responsibilities as stockholders of Time Warner. 1.3 No Inconsistent Agreements. Each Stockholder hereby covenants and agrees that, except as contemplated by this Agreement and the Merger Agreement, the Stockholder(a)has not entered, and shall not enter at any time while this Agreement remains in effect, into any voting agreement or voting trust with respect to the Shares and (b) has not granted, and shall not grant at any time while this Agreement remains in effect, a proxy or power of attorney with respect to the Shares, in either case,which is inconsistent with such Stockholder's obligations pursuant to this Agreement. ARTICLE II REPRESENTATIONS AND WARRANTIES OF EACH STOCKHOLDER Each Stockholder hereby, severally and not jointly, represents and warrants to America Online as follows: 2.1 Authorization: Validity of Agreement:Necessary Action. Such Stockholder has full power and authority to execute and deliver this Agreement, to perform such Stockholder's obligations hereunder and to consummate the transactions contemplated hereby. The execution, delivery and performance by such Stockholder of this Agreement and the consummation by it of the transactions contemplated hereby have been duly and validly authorized by such Stockholder and no other actions or proceedings on the part of such Stockholder are necessary to authorize the execution and delivery by it of this Agreement and the consummation by it of the transactions contemplated hereby. This Agreement has been duly executed and delivered by such Stockholder, and, assuming this Agreement constitutes a valid and binding obligation of America Online, constitutes a valid and binding obligation of such Stockholder, enforceable against it in accordance with its terms. 2.2 Shares. Such Stockholder's Existing Shares are, and all of its Shares from the date hereof through and on the Closing Date will be, owned beneficially and of record by such Stockholder(subject to any dispositions of Shares permitted by Section 3.1(a)hereof). As of the date hereof, such Stockholder's Existing Shares constitute all of the shares of Time Warner Common Stock owned of record or beneficially by such Stockholder. Such Stockholder has or will have sole voting power, sole power of disposition, sole power to issue instructions with respect to the matters set forth in Article I hereof, and sole power to agree to all of the matters set 003780-0007-02839-99BG134A-AGR 3 forth in this Agreement, in each case with respect to all of such Stockholder's Existing Shares and with respect to all of such Stockholder's Shares on the Closing Date, with no limitations, qualifications or restrictions on such rights, subject to applicable federal securities laws, the terms of this Agreement and the terms of the Loan Agreement (as defined below in Section 3.1(a)). ARTICLE III OTHER COVENANTS 3.1 Further Agreements of Stockholders. (a) Each Stockholder, severally and not jointly,hereby agrees, while this Agreement is in effect, and except as contemplated hereby,not to sell, transfer,pledge, encumber, assign or otherwise dispose of(collectively, a"Transfer') or enforce or permit the execution of the provisions of any redemption, share purchase or sale, recapitalization or other agreement with Time Warner or enter into any contract, option or other arrangement or understanding with respect to the offer for sale, sale, transfer, pledge, encumbrance, assignment or other disposition of, any of its Existing Shares, any Shares acquired after the date hereof, any securities exercisable for or convertible into Time Warner Common Stock, any other capital stock of Time Warner or any interest in any of the foregoing with any Person, except to a Person who agrees in writing, in an instrument reasonably acceptable to America Online, to be bound by this Agreement as a Stockholder and be subject to Section 1.1; provide ,however, that the Stockholders collectively may Transfer an aggregate of up to five percent of the Existing Shares held of record by the Stockholders collectively as of the date hereof without compliance with this Section 3.1(a); and provided further that the restrictions contained in this Section 3.1(a) do not apply to Existing Shares now pledged by Stockholders to Merrill Lynch International Bank Limited (the"Ba ") to secure a revolving credit facility to R.E. Turner pursuant to that certain Loan and Collateral Account Agreement dated April 4, 1996, as amended,between the Bank and R.E. Turner(the"Loan Agreement"). (b) In the event of a stock dividend or distribution, or any change in Time Warner Common Stock by reason of any stock dividend or distribution, or any change in Time Warner Common Stock by reason of any stock dividend, split-up,recapitalization, combination, exchange of shares or the like,the term"Shares"shall be deemed to refer to and include the Shares as well as all such stock dividends and distributions and any securities into which or for which any or all of the Shares may be changed or exchanged or which are received in such transaction. (c) Each Stockholder covenants and agrees with the other Stockholders and for the benefit of Time Warner(which shall be a third party beneficiary of this Section 3.1(c)) to comply with and perform all its obligations under this Agreement. 003780-0007-02839-99BG134A-AGR 4 ARTICLE IV MISCELLANEOUS 4.1 Termination. This Agreement shall terminate and no party shall have any rights or duties hereunder upon the earlier of(a)the Effective Time or(b)termination of the Merger Agreement pursuant to Section 8.1 thereof. Nothing in this Section 4.1 shall relieve or otherwise limit any party of liability for breach of this Agreement. 4.2 Further Assurances. From time to time, at the other party's request and without further consideration, each party hereto shall execute and deliver such additional documents and take all such further action as may be necessary or desirable to consummate the transactions contemplated by this Agreement. 4.3 Notices. All notices and other communications hereunder shall be in writing and shall be deemed duly given(a) on the date of delivery if delivered personally, or by telecopy or telefacsimile, upon confirmation of receipt, (b)on the first Business Day following the date of dispatch if delivered by a recognized next-day courier service, or(c)on the tenth Business Day following the date of mailing if delivered by registered or certified mail, return receipt requested, postage prepaid. All notices hereunder shall be delivered as set forth below, or pursuant to such other instructions as may be designated in writing by the party to receive such notice: (a) if to America Online to: 22000 AOL Way , Dulles, Virginia 20166 Fax: (703) 265-1495 Attention: Paul T. Cappuccio, Senior Vice President and General Counsel with a copy to: Simpson Thacher& Bartlett 425 Lexington Avenue New York,New York 10017 Fax: (212)455-2502 Attention: Richard I. Beattie, Esq. (b) if to a Stockholder, as provided on the signature page hereof. 4.4 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 003780-0007-02839-99BG134A-AGR 5 effective when one or more counterparts have been signed by each of the parties and delivered to the other party, it being understood that both parties need not sign the same counterpart. 4.5 Governin_e Law. This Agreement shall be governed and construed in accordance with the laws of the State of Delaware(without giving effect to choice of law principles thereof). 4.6 Amendment. This Agreement may not be amended except by an instrument in writing signed on behalf of each of the parties hereto. 4.7 Enforcement. The parties agree that irreparable damage would occur in the event that any of the provisions of this Agreement were not performed in accordance with their specific terms. It is accordingly agreed that the parties shall be entitled to specific performance of the terms hereof, this being in addition to any other remedy to which they are entitled at law or in equity. [Remainder of this page intentionally left blank] 003780-0007-02839-99BG134A-AGR IN WITNESS WHEREOF, America Online and each of the Stockholders have caused this Agreement to be signed by their respective officers or other authorized person thereunto duly authorized as of the date first written above. AMERICA ONLINE, INC. By: e: Stephen M. Case Title: Chairman& Chief Executive Officer R.E. Turner III Number of Existing Shares: 95,843,076 Notices Address: One CNN Center Box 105366 Atlanta, GA 30348-5366 Fax: (404) 827-3000 Attention: R.E. Turner III TURNER PARTNERS, L.P. By: Its General Partner By: Name: Title: Number of Existing Shares: 6,028,896 Notices Address: One CNN Center Box 105366 Atlanta, GA 30348-5366 Fax: (404) 827-3000 Attention: R.E. Turner III 6 IN WITi\'ESS WHEREOF,America Online and each or the Stockholder`have caused this Agreement to be signed by their respective officers or other authorized person thereunto duly autborized as of the date first written above. AMERICA ONLINE, INC. By: Name: Title: R. mer II Number of Existing Shares: 95,543,076 Nojis Address: One CNN Center Box 105366 Atlanta, GA 30348-5366 Fax: (404)827-3000 Attention_: R.E. Turner III TURNER/t By: Its eneral Parte By: Name: Title: Number of Existing Shares: 6,028,896 Ngo Address: One CNN Center Box 105366 Atlanta,G.A.30348-5366 Fax: (404) 827-3000 Attention: R.E. 'Turner III 003780-0097-0.839-345G334A-AZ ROBERT E. TURNER CH. TABLE REMAII�D T UST 2 By: – /' ow Name: Title: Number of Existing Shares:2,600,998 otices Address: One CNN Center Box 105366 Atlanta, GA 30348-5366 Fax: (404) 827-3000 Attention: R.E. Turner:QI TURNER OUTDOOR, C. By: — 9z 1 e: Title: Number of Existing Shares: 579,884 Notices Address: One CNN Center Box 105366 Atlanta, GA 30348-5366 Fax: (404) 827-3000 Attention: R.E.Turner III 0�7-07235-39;15 u- P. EXHIBIT D-1 TO THE MERGER AGREEMENT RESTATED CERTIFICATE OF INCORPORATION OF AOL TIME WARNER INC. ARTICLE I The name of the corporation (hereinafter called the "Corporation") is AOL TIME WARNER INC. ARTICLE II The address of the corporation' s registered office in the State of Delaware is 1013 Centre Road, City of Wilmington, County of New Castle. The name of the Corporation' s registered agent at such address is Corporation Service Company. . ARTICLE III The purpose of the Corporation is to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of the State of Delaware. ARTICLE IV SECTION 1. The total number of shares of all classes of stock which the Corporation shall have authority to issue is 27.55 billion shares, consisting of (1) 750 million shares of Preferred Stock, par value $0.10 per share ("Preferred Stock" ) , (2) 25 billion shares of Common Stock, par value $0 . 01 per share ("Common Stock") , and (3) 1.8 billion shares of Series Common Stock, par value $0 . 01 per share ("Series Common Stock") . The number of authorized shares of any of the Preferred Stock, the Common Stock or the Series Common Stock may be increased or decreased (but not below the number of shares thereof then outstanding) by the affirmative vote of the holders of a majority in voting power of the stock of the Corporation entitled to vote thereon irrespective of the provisions of Section 242 (b) (2) of the General Corporation Law of the State of Delaware (or any successor provision thereto) , and no vote of the holders of any of the Preferred Stock, the Common Stock or the Series Common Stock voting separately as a class shall be required therefor. [NYCorp;987710.4:46758:01/12/2000--1:06p] 2 SECTION 2 . The Board of Directors is hereby expressly authorized, by resolution or resolutions, to provide, out of the unissued shares of Preferred Stock, for series of Preferred Stock and, with respect to each such series, to fix the number of shares constituting such series and the designation of such series, the voting powers (if any) of the shares of such series, and the preferences and relative, participating, optional or other special rights, if any, and any qualifications, limitations or restrictions thereof, of the shares of such series. The powers, preferences and relative, participating, optional and other special rights of each series of Preferred Stock, and the qualifications, limitations or restrictions thereof, if any, may differ from those of any and all other series at any time outstanding. SECTION 3 . The Board of Directors is hereby expressly authorized, by resolution or resolutions, to provide, out of the unissued shares of Series Common Stock, for series of Series Common Stock and, with respect to each such series, to fix the number of shares constituting such series and the designation of such series, the voting powers (if any) of the shares of such series, and the preferences and relative, participating, optional or other special rights, if any, and any qualifications, limitations or restrictions thereof, of the shares of such series. The powers, preferences and relative, participating, optional and other special rights of each series of Series Common Stock, and the qualifications, limitations or restrictions thereof, if any, may differ from those of any and all other series at any time outstanding. SECTION 4 . (a) Each holder of Common Stock, as such, shall be entitled to one vote for each share of Common Stock held of record by such holder on all matters on which stockholders generally are entitled to vote; provided, however, that, except as otherwise required by law, holders of Common Stock, as such, shall not be entitled to vote on any amendment to this Restated Certificate of Incorporation (including any Certificate of Designation relating to any series of Preferred Stock or Series Common Stock) that relates solely to the terms of one or more outstanding series of Preferred Stock or Series Common Stock if the holders of such affected series are entitled, either separately or together with the holders of one or more other such series, to vote thereon pursuant to this Restated Certificate- of Incorporation (including any Certificate of Designation relating to any series of Preferred Stock or Series Common Stock) or pursuant to the General Corporation Law of the State of Delaware. [NYCorp;987710.4:4675B:01/12/2000--1:06pJ 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 [NYCorp;987710.4:46758:01/12/2000--1:06p) 4 redemption shall be as follows: (a) the redemption price of the shares to be redeemed pursuant to this Section 5 shall be equal to the Fair Market Value of such shares; (b) the redemption price of such shares may be paid in cash, Redemption Securities or any combination thereof; (c) if less than all the shares held by Disqualified Holders are to be redeemed, the shares to be redeemed shall be selected in such manner as shall be determined by the Board of Directors, which may include selection first of the most recently purchased shares thereof, selection by lot or selection in any other manner determined by the Board of Directors; (d) at least 30 days ' written notice of the Redemption Date shall be given to the record holders of the shares selected to be redeemed (unless waived in writing by such holder) ; provided that the Redemption Date may be the date on which written notice shall be given to record holders if the cash or Redemption Securities necessary to effect the redemption shall have been deposited in trust for the benefit of such record holders and subject to immediate withdrawal by them upon surrender of the stock certificates for their shares to be redeemed; (e) from and after the Redemption Date, any and all rights of whatever nature, which may be held by the owners of shares selected for redemption (including without limitation any rights to vote or participate in dividends declared on stock of the same class or series as such shares) , shall cease and terminate and they shall thenceforth be entitled only to receive the cash or Redemption Securities payable upon redemption; and (f) such other terms and conditions as the Board shall determine. For purposes of this Section 5: (i) "Disqualified Holder" shall mean any holder of shares of stock of the Corporation of any class or series whose holding of such stock may result in the loss of any license or franchise from any governmental agency held by the Corporation or any Subsidiary to conduct any portion of the business of the Corporation or any Subsidiary. ENYCorps987710.4:4575s:01/12/2000--1:06p] 5 (ii) "Fair Market Value" of a share of the Corporation' s stock of any class or series shall mean the average (unweighted) Closing Price for such a share for each of the 45 most recent days on which shares of stock of such class or series shall have been traded preceding the day on which notice of redemption shall be given pursuant to paragraph (d) of this Section 5; provided, however, that if shares of stock of such class or series are not traded on any securities exchange or in the over-the-counter market, "Fair Market Value" shall be determined by the Board of Directors in good faith; and provided further, however, that "Fair Market Value" as to any stockholder who purchased his stock within 120 days of a Redemption Date need not (unless otherwise determined by the Board of Directors) exceed the purchase price paid by him. "Closing Price" on any day means the reported last sales price regular way or, in case no such sale takes place, the average of the reported closing bid and asked prices regular way on the New York Stock Exchange Composite Tape, or, if stock of the class or series in question is not quoted on such Composite Tape, on the New York Stock Exchange, or, if such stock is not listed on such exchange, on the principal United States registered securities exchange on which such stock is listed, or, if such stock is not listed on any such exchange, the highest closing sales price or bid quotation for such stock on The Nasdaq Stock Market or any system then in use, or if no such prices or quotations are available, the fair market value on the day in question as determined by the Board of Directors in good faith. (iii) "Redemption Date" shall mean the date fixed by the Board of Directors for the redemption of any shares of stock of the Corporation pursuant to this Section 5 . (iv) "Redemption Securities" shall mean any debt or equity securities of the Corporation, any Subsidiary or any other corporation, or any combination thereof, having such terms and 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 [NYCorp;987710.4:4675B:01/12/2000--1:06p) 6 to this Section 5 (assuming, in the case of Redemption Securities to be publicly traded, such Redemption Securities were fully distributed and subject only to normal trading activity) . (v) "Subsidiary" shall mean any corporation more than 50Ps of whose outstanding stock having ordinary voting power in the election of directors is owned by the Corporation, by a Subsidiary or by the Corporation and one or more Subsidiaries. ARTICLE V SECTION 1. Except as otherwise fixed by or pursuant to the provisions of Article IV of this Restated Certificate of Incorporation relating to the rights of the holders of any series of Preferred Stock or Series Common Stock or any class or series of stock having a preference over the Common Stock as to dividends or upon liquidation, the number of the directors of the Corporation shall be fixed from time to time by or pursuant to the By-laws of the Corporation. The directors, other than those who may be elected by the holders of any series of Preferred Stock or Series Common Stock or any class or series of stock having a preference over the Common Stock as to dividends or upon liquidation pursuant to the terms of this Restated Certificate of Incorporation or any resolution or resolutions providing for the issue of such class or series of stock adopted by the Board of Directors, shall be elected by the stockholders entitled to vote thereon at each annual meeting of stockholders and shall hold office until the next annual meeting of stockholders and until each of their successors shall have been elected and qualified. The term of office of each director in office at the time this Section 1 of Article V becomes effective shall expire at the next annual meeting of stockholders held after the time this Section 1 of Article V becomes effective. The election of directors need not be by written ballot. No decrease in the number of directors constituting the Board of Directors shall shorten the term of any incumbent director. SECTION 2 . Advance notice of nominations for the election of directors shall be given in the manner and to the extent provided in the By-laws of the Corporation. SECTION 3 . Except as otherwise provided for or fixed by or pursuant to the provisions of Article IV of this Restated Certificate of Incorporation relating to the rights of the holders of any series of Preferred Stock or Series Common Stock or any class or series of stock having a [NYCorp;987710.4:4675B:01/12/2000--1:06p] 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 ENYcorp:9e7710.4:4675s:01/12/2000--1:06p) 8 be specified by law, this Restated Certificate of Incorporation or any such resolution or resolutions) , the affirmative vote of the holders of 80% or more of the combined voting power of the then outstanding shares of Voting Stock, voting together as a single class, shall be required for stockholders to adopt, amend, alter or repeal any provision of the By-laws. ARTICLE VIII In addition to any requirements of law and any other provisions of this Restated Certificate of Incorporation or any resolution or resolutions of the Board of Directors adopted pursuant to Article IV of this Restated Certificate of Incorporation (and notwithstanding the fact that a lesser percentage may be specified by law, this Restated Certificate of Incorporation or any such resolution or resolutions) , the affirmative vote of the holders of 80% or more of the combined voting power of the then outstanding shares of Voting Stock, voting together as a single class, shall be required to amend, alter or repeal, or adopt any provision inconsistent with, this Article VIII or Article VII, or Section 5 of Article IV, of this Restated Certificate of Incorporation. Subject to the foregoing provisions of this Article VIII, the Corporation reserves the right to amend, alter or repeal any provision contained in this Restated Certificate of Incorporation, in the manner now or hereafter prescribed by statute, and all rights conferred upon stockholders herein are subject to this reservation. ARTICLE IX SECTION 1. To the fullest extent that the General Corporation Law of the State of Delaware or any other law of the State of Delaware as it exists or as it may hereafter be amended permits the limitation or elimination of the liability of directors, no director of the Corporation shall be liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a director. No amendment to or repeal of this Article IX shall apply to or have any effect on the liability or alleged liability of any director of the Corporation for or with respect to any acts or omissions of such director occurring prior to such amendment or repeal. SECTION 2 . In addition to any requirements of law and any other provisions of this Restated Certificate of Incorporation or any resolution or resolutions of the Board [NYCorp1987710.4:46758:01/12/2000--1:06pI 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. [NYCorpr987710.6:4675B:01/12/2000--1:06p) 10 [The provisions of the certificates of designations filed with respect to Time Warner' s Series E Convertible Preferred Stock, Series F Convertible Preferred Stock, Series I Convertible Preferred Stock, Series J Convertible Preferred Stock, Series LMC Common Stock and Series LMCN-V Common Stock will be incorporated into AOL Time Warner Inc. ' s Restated Certificate of Incorporation mutatis mutandis. It being understood that the conversion ratio with respect to each such series of Convertible Preferred Stock shall be appropriately adjusted prior to the Effective Time of the Mergers by multiplying the number of shares issuable upon conversion of each share of each such series of Convertible Preferred Stock by the Exchange Ratio.] [N4corp;987710.4:4675B:01/12/2000--1:06p] EXHIBIT D-2 TO THE MERGER AGREEMENT AOL TIME WARNER INC. BY-LAWS ARTICLE I Offices SECTION 1. Registered Office. The registered office of AOL TIME WARNER INC. (hereinafter called the Corporation) in the State of Delaware shall be at 1013 Centre Road, City of Wilmington, County of New Castle, and the registered agent shall be Corporation Service Company, or such other office or agent as the Board of Directors of the Corporation (the "Board") shall from time to time select. SECTION 2 . Other Offices . The Corporation may also have an office or offices, and keep the books and records of the Corporation, except as may otherwise be required by law, at such other place or places, either within or without the State of Delaware, as the Board may from time to time determine or the business of the Corporation may require. ARTICLE II 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 [NYCorp;954809.8:4605B:01/10/2000--3:45p1 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. Ouorum. Except as otherwise provided by law or by the Certificate, the holders of a majority of the votes entitled to be cast by the stockholders entitled to vote generally, present in person or by proxy, shall constitute a quorum at any meeting of the stockholders; provided, however, that in the case of any vote to be taken by classes or series, the holders of a majority of the votes entitled to be cast by the stockholders of a particular class or series, present in person or by proxy, shall constitute a quorum of such class. SECTION 6. Adjournments. The chairman of the meeting or the holders of a majority of the votes entitled to be cast by the stockholders who are present in person or by proxy may adjourn the meeting from time to time whether or not a quorum is present. In the event that a quorum does not exist with respect to any vote to be taken by a particular class or series, the chairman of the meeting or the holders of a majority of the votes entitled to be cast by the stockholders of such class or series who are present in person or by proxy may adjourn the meeting with respect (NYCozp;954809.8:4605B:01/10/2000--3:45p] 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 [NYCorpt954809.8:46058:01/10/2000--3:45p] 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; Rrovided, 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 (NYCorpt954809.8:46058:01/10/2000--3:45pJ 5 fixed in the Certificate or in the resolution or resolutions adopted by the Board providing for the issuance of such stock, and each stockholder of record of Common Stock shall be entitled at each meeting of stockholders to one vote for each share of such stock, in each case, registered in such stockholder's name on the books of the Corporation: (1) on the date fixed pursuant to Section 6 of Article VII of these By-laws as the record date for the determination of stockholders entitled to notice of and to vote at such meeting; or (2) if no such record date shall have been so fixed, then at the close of business on the day next preceding the day on which notice of such meeting is given, or, if notice is waived, at the close of business on the day next preceding the day on which the meeting is held. Each stockholder entitled to vote at any meeting of stockholders may authorize not in excess of three persons to act for such stockholder by proxy. Any such proxy shall be delivered to the secretary of such meeting at or prior to the time designated for holding such meeting, but in any event not later than the time designated in the order of business for so delivering such proxies. No such proxy shall be voted or acted upon after three years from its date, unless the proxy provides for a longer period. At each meeting of the stockholders, all corporate actions to be taken by vote of the stockholders (except as otherwise required by law and except as otherwise provided in the Certificate or these By-laws) shall be authorized by a majority of the votes cast by the stockholders entitled to vote thereon who are present in person or represented by proxy, and where a separate vote by class or series is required, a majority of the votes cast by the stockholders of such class or series who are present in person or represented by proxy shall be the act of such class or series. Unless required by law or determined by the chairman of the meeting to be advisable, the vote on any matter, including the election of directors, need not be by written ballot. SECTION 10 . Inspectors . The chairman of the meeting shall appoint two or more inspectors to act at any meeting of stockholders . Such inspectors shall perform such duties as shall be required by law or specified by the chairman of the meeting. Inspectors need not be [NYCorp;954809.8:4605B:01/10/2000--3:45p] 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 ENYCorpr954809.8:46058:01/10/2000--3:45p] 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 [NYCozp;954809.8:46058:01/10/2000--3:45p] 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 [NYCorpj954809.8:4605B:01/10/2000--3:45pJ 9 the event that the number of directors to be elected to the Board of Directors of the Corporation at an annual meeting of stockholders is increased and there is no public announcement naming all of the nominees for directors or specifying the size of the increased Board of Directors made by the Corporation at least 90 days prior to the first anniversary of the date of the immediately preceding annual meeting, a stockholder' s notice required by this Section 3 shall also be considered timely, but only with respect to nominees for any new positions created by such increase, if it shall be delivered to or mailed to and received by the secretary at the principal executive offices of the Corporation not later than the close of business on the 10th day following the day on which such public announcement is first made by the Corporation. SECTION 4 . Ouorum and Manner of Acting. Except as otherwise provided by law, the Certificate or these By- laws, a majority of the Whole Board shall constitute a quorum for the transaction of business at any meeting of the Board, and, except as so provided, the vote of a majority of the directors present at any meeting at which a quorum is present shall be the act of the Board. The chairman of the meeting or a majority of the directors present may adjourn the meeting to another time and place whether or not a quorum is present. At any adjourned meeting at which a quorum is present, any business may be transacted which might have been transacted at the meeting as originally called. _ SECTION 5 . Place of Meeting. The Board may hold its meetings at such place or places within or without the State of Delaware as the Board may from time to time determine or as shall be specified or fixed in the respective notices or waivers of notice thereof. SECTION 6 . Regular Meetings. No fewer than six regular meetings per year of the Board shall be held at such times as the Board shall from time to time by resolution determine, such meetings to be held seriatim (sequentially) in New York City and Northern Virginia. If any day fixed for a regular meeting shall be a legal holiday under the laws of the place where the mAeting is to be held, the meeting which would otherwise be held on that day shall be held at the same hour on the next succeeding business day. SECTION 7. Special Meetings. Special meetings of the Board shall be held whenever called by the Chairman of the Board, the Chief Executive Officer or by a majority of the directors, and shall be held at such place, on such date and at such time as he or they, as applicable, shall fix. CNYCorpr954809.8:4605B:01/10/2000--3:45p) 10 SECTION 8 . Notice of Meetings. Notice of regular meetings of the Board or of any adjourned meeting thereof need not be given. Notice of each special meeting of the Board shall be given by overnight delivery service or mailed to each director, in either case addressed to such director at such director's residence or usual place of business, at least two days before the day on which the meeting is to be held or shall be sent to such director at such place by telecopy or by electronic transmission or be given personally or by telephone, not later than the day before the meeting is to be held, but notice need not be given to any director who shall, either before or after the meeting, submit a signed waiver of such notice or who shall attend such meeting without protesting, prior to or at its commencement, the lack of notice to such director. Every such notice shall state the time and place but need not state the purpose of the meeting. SECTION 9 . Rules and Regulations. The Board may adopt such rules and regulations not inconsistent with the provisions of law, the Certificate or these By-laws for the conduct of its meetings and management of the affairs of the Corporation as the Board may deem proper. SECTION 10. Participation in Meeting by Means of Communications Equipment. Any one or more members of the Board or any committee thereof may participate in any meeting of the Board or of any such committee by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other or as otherwise permitted by law, and such participation in a meeting shall constitute presence in person at such meeting. SECTION 11. Action Without Meeting. Any action required or permitted to be taken at any meeting of the Board or any committee thereof may be taken without a meeting if all of the members of the Board or of any such committee consent thereto in writing or as otherwise permitted by law and, if required by law, the writing or writings are filed with the minutes or proceedings of the Board or of such committee. SECTION 12 . Resignations. Any director of the Corporation may at any time resign by giving written notice to the Board, the Chairman of the Board, the Chief Executive Officer or the Secretary. Such resignation shall take effect at the time specified therein or, if the time be not specified therein, upon receipt thereof; and, unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective. [NYCospt954809.8:46055:01/10/2000--3:45p1 11 SECTION 13 . Vacancies. Subject to the rights of the holders of any series of Preferred Stock or Series Common Stock or any class or series of stock having a preference over the Common Stock of the Corporation as to dividends or upon dissolution, liquidation or winding up any vacancies on the Board resulting from death, resignation, removal or other cause shall only be filled by the Board, and not by the stockholders, by the affirmative vote of a majority of the remaining directors then in office, even though less than a quorum of the Board, or by a sole remaining director, and newly created directorships resulting from any increase in the number of directors, which increase shall be subject to Section 15 of this Article III, shall only be filled by the Board, or if not so filled, by the stockholders at the next annual meeting thereof or at a special meeting called for that purpose in accordance with Section 3 of Article II of these By-laws. Any director elected in accordance with the preceding sentence of this Section 13 shall hold office until the next annual meeting of stockholders and until such director' s successor shall have been elected and qualified. SECTION 14 . Compensation. Each director, in consideration of such person serving as a director, shall be entitled to receive from the Corporation such amount per annum and such fees (payable in cash or stock) for attendance at meetings of the Board or of committees of the Board, or both, as the Board shall from time to time determine. In addition, each director 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. Notwith- standing anything to the contrary contained in these By-laws, the following actions taken either directly or indirectly by the Board shall require the affirmative vote of not less than 75°s 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. (NYCorpr954809.8:46058:01/10/2000--3:45p) 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 [NYCorpr954809.8:4605B:01/10/2000--3:45pJ 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 [NYCorpi954809.8:46058:01/10/2000--3:45p] 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: Ouorum. Regular meetings of committees of the Board, of which no notice shall be necessary, may be held at such times and places as shall be fixed by resolution adopted by a majority of the authorized members thereof. Special meetings of any committee of the Board shall be called at the request of any member thereof. Notice of each special meeting of any committee of the Board shall be sent by overnight delivery service, or mailed to each member thereof, in either case addressed to such member at such member's residence or usual place of business, at least two days before the day on which the meeting is to be held or shall be sent to such member at such place by telecopy or by electronic transmission or be given personally or by telephone, not later than the day before the meeting is to be held, but notice need not be given to any member who shall, either before or after the meeting, submit a signed waiver of such notice or who shall attend such meeting without 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 (NYCorpr954809.8:46058:01/10/2000--3:45p) 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. (NYCorpr954809.8:46058:01/10/2000--3:45p1 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 (NYCorpj954809.8:4605B:01/10/2000--3:45p] 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 Corooration 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 [NYCozpr954809.8:4605B:01/10/2000--3:45p] 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°s 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. [NYCorpt954809.8:4605B:01/10/2000--3:45pI 19 ARTICLE VI Indemnification SECTION 1. Right to Indemnification. The Corporation, to the fullest extent permitted or required by Delaware General Corporation Law or other applicable law, as the same exists or may hereafter be amended (but, in the case of any such amendment and unless applicable law otherwise requires, only to the extent that such amendment permits the Corporation to provide broader indemnification rights than such law permitted the Corporation to provide prior to such amendment) , shall indemnify and hold harmless any person who is or was a director or officer of the Corporation and who is or was involved in any manner (including, without limitation, as a party or a witness) or is threatened to be made so involved in any threatened, pending or completed investigation, claim, action, suit or proceeding, whether civil, criminal, administrative or investigative (including, without limitation, any action, suit or proceedings by or in the right of the Corporation to procure a judgment in its favor) (a "Proceeding") by reason of the fact that such person is or was a director, officer, employee or agent of the Corporation, or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise (including, without limitation, any employee benefit plan) (a "Covered Entity") against all expenses (including attorneys, fees) , judgments, fines and amounts paid in settlement actually and reasonably incurred by such person in connection with such Proceeding; provided, however, that the foregoing shall not apply to a director or officer of the Corporation with respect to a Proceeding that was commenced by such director or officer unless the proceeding was commenced after a Change in Control (as hereinafter defined in Section 4 (e) of this Article) . Any director or officer of the Corporation entitled to indemnification as provided in this Section 1 is hereinafter called an "Indemnitee" . Any right of an Indemnitee to indemnification shall be a contract right and shall include the right to receive, prior to the conclusion of any Proceeding, payment of any expenses incurred by the Indemnitee in connection with such proceeding, consistent with the provisions of applicable law as then in effect and the other provisions of this Article. SECTION 2 . Insurance Contracts and Fundincr. 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 [NYCorpt954809.8:4605B:01/10/2000--3:45p] 20 in Section 1 of this Article or incurred by any such director, officer, employee or agent in connection with any Proceeding referred to in Section 1 of this Article, whether or not the Corporation would have the power to indemnify such person against such expense, liability or loss under the DGCL. The Corporation may enter into contracts with any director, officer, employee or agent of the Corporation or of any Covered Entity in furtherance of the provisions of this Article and may create a trust fund, grant a security interest or use other means (including, without limitation, a letter of credit) to ensure the payment of such amounts as may be necessary to effect indemnification as provided or authorized in this Article. SECTION 3 . Indemnification Not Exclusive Right . The right of indemnification provided in this Article shall not be exclusive of any other rights to which an Indemnitee may otherwise be entitled, and the provisions of this Article shall inure to the benefit of the heirs and legal representatives of any Indemnitee under this Article and shall be applicable to Proceedings commenced or continuing after the adoption of this Article, whether arising from acts or omissions occurring before or after such adoption. SECTION 4 . Advancement of 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 [NYCorp;954809.8:46058:01/10/2000--3:45p] 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 (NYCorpr954809.8:46058:01/10/2000--3:45PJ 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 W 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 arnitration 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) . [NYCorpt954809.8:46058:01/10/2000--3:45p] 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 [NYCozpl954809.8:4605B:01/10/2000--3:45p1 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 INYCozp;954809.8:46058:01/10/2000--3:45p1 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 CNYCorpt954809.8:46058:01/10/2000--3:45pJ 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 [NYCorpj954809.8:4605H:01/10/2000--3:45p] 27 or registrar before such certificate has been issued, it may nevertheless be issued by the Corporation with the same effect as if such officer, transfer agent or registrar were still such at the date of its issue. The stock ledger and blank share certificates shall be kept by the Secretary or by a transfer agent or by a registrar or by any other officer or agent designated by the Board. SECTION 2 . Transfer of Shares. Transfers of shares of stock of each class of the Corporation shall be made only on the books of the Corporation upon authorization by the registered holder thereof, or by such holder's attorney thereunto authorized by a power of attorney duly executed and filed with the Secretary or a transfer agent for such stock, if any, and if such shares are represented 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. [NYCozp7954809.8:46058:01/10/2000--3:45p) 28 Each stockholder shall designate to the Secretary or transfer agent of the Corporation an address at which notices of meetings and all other corporate notices may be given to such person, and, if any stockholder shall fail to designate such address, corporate notices may be given to such person by mail directed to such person at such person's post office address, if any, as the same appears on the stock record books of the Corporation or at such person's last known post office address . SECTION 4 . Lost, Destroyed and Mutilated Certificates. The holder of any certificate representing any shares of stock of the Corporation shall immediately notify the Corporation of any loss, theft, destruction or mutilation of such certificate; the Corporation may issue to such holder a new certificate or certificates for shares, upon the surrender of the mutilated certificate or, in the case of loss, theft or destruction of the certificate, upon satisfactory proof of such loss, theft or destruction; the Board, or a committee designated thereby, or the transfer agents and registrars for the stock, may, in their discretion, require the owner of the lost, stolen or destroyed certificate, or such person's legal representative, to give the Corporation a bond in such sum and with such surety or sureties as they may direct to indemnify the Corporation and said transfer agents and registrars against any claim that may be made on account of the alleged loss, theft or destruction of 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 [NYCorpt954809.8:46058:01/10/2000--3:45p] 29 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 Accents 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. [NYCorp,954809.8:4605B:01/10/2000--3:45pJ 30 ARTICLE XI Amendments These By-laws may be altered, amended or repealed, in whole or in part, or new By-laws may be adopted by the stockholders or by the Board at any meeting thereof; provided, however, that notice of such alteration, amendment, repeal or adoption of new By-laws is contained in the notice of such meeting of stockholders or in the notice of such meeting of the Board and, in the latter case, such notice is given not less than twenty-four hours prior to the meeting. Unless a higher percentage is required by the Certificate, all such amendments must be approved by either the holders of eighty percent (80U 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•°6 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 [NYCorpr954809.8:4605B:01/10/2000--3:45p) 31 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. [NYCorpr954809.8:4605B:01/10/2000--3:45p] EXHIBIT 6.11 [FORM OF AFFILIATE LETTER] , 200- [Holdco] [Address] Ladies and Gentlemen: Pursuant to the terms of the Agreement and Plan of Merger, dated as of January 10, 2000(the"Merger Agreement"), between America Online, Inc. ("America Online") and Time Warner Inc. ("Time Warner"), a subsidiary of a newly organized Delaware corporation ("Holdco')will merge with and into America Online with America Online surviving as a wholly owned subsidiary of Holdco, and another subsidiary of Holdco will merge with and into Time Warner with Time Warner surviving as a wholly owned subsidiary of Holdco (the "Mergers"). Capitalized terms used herein and not defined have the meanings assigned to them in the Merger Agreement. The undersigned has been advised that as of the date the Mergers are submitted to stockholders of America Online or Time Warner, as applicable, for approval, the undersigned may be an"affiliate"of America Online or Time Warner, as applicable, as the term is defined for purposes of paragraphs (c) and(d)of Rule 145 of the Securities and Exchange Commission(the "Commission") under the Securities Act of 1933, as amended(the"Securities Act"), although nothing contained herein shall be construed as an admission of such fact, or as a waiver of any rights that the undersigned may have to object to any claim that the undersigned is such an affiliate on or after the date of this letter. As a result of the Mergers, the undersigned may receive Holdco Capital Stock or Time Warner Converted Options or America Online Converted Options(collectively, "Holdco Securities"). In respect of shares of Holdco Capital Stock, the undersigned would receive such shares in exchange for shares owned by the undersigned of Time Warner Capital Stock or America Online Common Stock, as applicable. In respect of the options, the undersigned would receive such options in exchange for options held by the undersigned under the Time Warner Stock Option Plans or the America Online Stock Option Plans. 003780-0007-09143-AOIBD5X2-AGR The undersigned hereby represents, warrants and covenants with and to Holdco that in the event the undersigned receives any Holdco Capital Stock as a result of either Merger: (A) The undersigned will not sell, transfer or otherwise dispose of such Holdco Capital Stock unless(i) such sale, transfer or other disposition has been registered under the Securities Act, (ii) such sale, transfer or other disposition is made in conformity with the provisions of Rule 145 under the Securities Act(as such rule may hereafter from time to time be amended), or(iii) in the opinion of counsel in form and substance reasonably satisfactory to Holdco, or under a"no-action"or interpretive letter obtained by the undersigned from the Commission specifically issued with respect to a transaction to be engaged in by the undersigned, such sale,transfer or other disposition will not violate or is otherwise exempt from registration under the Securities Act. (B) The undersigned understands that Holdco is under no obligation to register the sale, transfer or other disposition of shares of Holdco Capital Stock by the undersigned or on the undersigned's behalf under the Securities Act or to take any other action necessary in order to make compliance with an exemption from such registration available solely as a result of the Mergers. (C) The undersigned understands and agrees that this letter agreement shall apply to all shares of the capital stock of Time Warner and America Online that are deemed to be beneficially owned by the undersigned pursuant to applicable federal securities laws. (D) The undersigned has carefully read this letter and discussed its requirements and other applicable limitations upon the undersigned's ability to sell, transfer or otherwise dispose of the capital stock of Holdco, to the extent the undersigned felt necessary,with the undersigned's counsel or counsel for Time Warner and America Online, as applicable. 003790-0007-08143-AOIB05X2-AGR This letter agreement shall be governed by and construed in accordance with the laws of the State of Delaware. This letter agreement shall terminate if and when the Merger Agreement is terminated according to its terms. Very truly yours, Name: [add below the signatures of all registered owners of shares deemed beneficially owned by the affiliate] Name: Name: Name: 003780-0007-08143-A019D5X2-AGR EXHIBIT 7.2(c)(1) [FORM OF REPRESENTATION LETTER] [LETTERHEAD OF HOLDCO(AMERICA ONLINE MERGER)] [Date] Re: The Merger of America Online Merger Sub with and into America Online Simpson Thacher& Bartlett 425 Lexington Avenue New York, New York 10017 Cravath, Swaine& Moore Worldwide Plaza 825 Eighth Avenue New York, New York 10019 Ladies and Gentlemen: In connection with the opinions to be delivered pursuant to the Agreement and Plan of Merger(the"Merger Agreement") dated as of January 10, 2000, between America Online, Inc. ("America Online") and Time Warner Inc. ("Time Warner"), in which America Online Merger Sub("Sub I"),a subsidiary of a newly organized Delaware corporation - ("Holdco"), shall be merged with and into America Online with America Online surviving as a wholly owned subsidiary of Holdco, and Time Warner Merger Sub("Sub 2"), another subsidiary of Holdco, shall be merged with and into Time Warner with Time Warner surviving as a wholly owned subsidiary of Holdco, the undersigned certifies and represents on behalf of Holdco and Sub 1, after due inquiry and investigation,as follows (any capitalized term used but not defined herein shall have the meaning given to such term in the Merger Agreement): 1. The facts relating to the contemplated merger(the"Merger")of Sub 1 with and into America Online pursuant to the Merger Agreement, as described in the Merger Agreement, and the documents described in the Merger Agreement, are, insofar as such facts pertain to Holdco and Sub 1,true, correct and complete in all material respects. The Merger will be consummated in accordance with the Merger Agreement, and as described in the Proxy Statement and the Form S4, and none of the material terms and conditions therein has been or will be waived or modified. The Merger is being effected for bona fide business reasons. 003780-0007-00143-A018CNJ9-0TH Simpson Thacher& Bartlett -2- [Date] Cravath, Swaine& Moore 2. The fair market value of the Holdco Common Stock received by each holder of America Online Common Stock in the Merger will be approximately equal to the fair market value of the America Online Common Stock surrendered by such holders in the Merger. 3. Following the Merger, America Online will hold at least 90% of the fair market value of the net assets and at least 70%of the fair market value of the gross assets held by America Online and Sub 1, as the case may be, immediately prior to the Merger. For purposes of this representation,amounts paid by America Online or Sub 1 to dissenting stockholders of America Online, amounts used by America Online and Sub 1 to pay reorganization expenses incurred in connection with the Merger and all redemptions and distributions (except for regular,normal dividends)made by America Online will be considered assets held by America Online or Sub 1, as the case may be, immediately prior to the Merger. 4. Neither Holdco nor any corporation related to Holdco will, in connection with the Merger, (i)be under any obligation or will have entered into any agreement or understanding to redeem or repurchase any of the Holdco Capital Stock issued to stockholders of America Online in the Merger or to make any extraordinary distributions in respect of such Holdco Capital Stock or(ii)have any plan or intention to reacquire any of the Holdco Capital Stock issued in the Merger; provided,however, that Holdco may adopt an open market stock repurchase program that satisfies the requirements of Revenue Ruling 99-58. After the Merger, no dividends or distributions will be made to the former America Online stockholders by Holdco other than regular,normal dividends or distributions made to all holders of Holdco Capital Stock. For purposes of this representation letter,two corporations shall be treated as related to one another if immediately prior to or immediately after the Merger, (a)the corporations are members of the same affiliated group(within the meaning of section 1504 of the Internal Revenue Code of 1986, as amended(the"Code"), but determined without regard to the exclusions of section 1504(b)of the Code) or(b)one corporation owns 50%or more of the total combined voting power of all classes of stock of the other corporation that are entitled to vote or 50% or more of the total value of shares of all classes of stock of the other corporation(applying the attribution rules of section 318 of the Code as modified pursuant to section 304(c)(3)(B) of the Code). For purposes of this representation, a corporation that is a partner in a partnership will be treated as owning or acquiring any stock owned or acquired, as the case may be, by the partnership and as having furnished its share of any consideration fiunished by the partnership to acquire the stock, in each case, in accordance with its interest in the partnership. 5. Holdco has no present plan or intention to(i)liquidate America Online, (ii)merge America Online with or into another corporation, (iii) sell or otherwise dispose of the stock of America Online, except for transfers (including successive transfers)of such stock to corporations controlled by the transferor or(iv) cause America Online to sell or otherwise dispose of any of its assets, or any assets that it acquired from Sub 1, except for dispositions in the ordinary course of its business or transfers (including successive transfers) of assets to one or more corporations controlled in each transfer by the transferor. Holdco has no plan or intention to (i) cause America Online to issue additional shares of stock following the Merger or(ii) 003780-0007-00143-AOIBCNJ9-07H Sir-r�on Thacher& Bartlett -3- [Date] Cravath, Swaine& Moore otherwise take any action that could result in Holdco losing control of America Online following the Merger. For purposes of this representation letter, control with respect to a corporation shall mean ownership of at least (i) 80%of the total combined voting power of all classes of stock entitled to vote and(ii) 80%of the total number of shares of each other class of stock of the corporation. 6. Following the Merger, America Online or another member of America Online's"qualified group"will continue America Online's historic business or use a significant portion of America Online's historic business assets in a business. For purposes of this representation,America Online's "qualified group"means,pursuant to Treasury Regulation section 1.368-1(dx4)(ii), one or more chains of corporations connected through stock ownership with America Online, but only if America Online owns directly stock representing control in at least one other corporation, and stock representing control in each of the corporations (except America Online) is owned directly by one of the other corporations. In addition, America Online will be treated as owning its proportionate share of America Online's business assets used in a business of any partnership in which members of America Online's qualified group either own a significant interest or have active and substantial management functions as a partner with respect to that partnership business. 7. Prior to the Merger and through the Effective Time, Holdco will own all of the outstanding stock of Sub 1. Holdco has no plan or intention to cause Sub 1 to, and Sub 1 has no plan or intention to, issue additional shares of its stock that would result in Holdco owning less than all of the capital stock of Sub 1 in the Merger. 8. Sub 1 is being formed solely to effect the Merger and it will not conduct any business or other activities other than the issuance of its stock to Holdco prior to the Merger. Sub 1 will have no liabilities that will be assumed by America Online and it will not transfer any assets to America Online in the Merger that are subject to any liabilities. 9. Pursuant to the Merger, at least(i) 80% of the total combined voting power of all classes of America Online stock entitled to vote and(ii) 80% of the total number of shares of each other class of stock of America Online will be exchanged solely for the America Online Merger Consideration. For purposes of this representation, shares of America Online Common Stock exchanged for cash or other property originating with Holdco or Sub 1 will be treated as outstanding America Online Common Stock at the Effective Time. 10. Holdco, Sub 1, America Online and the stockholders of America Online will pay their respective expenses, if any, incurred in connection with or as part of the Merger, except that expenses incurred in connection with the filing,printing and mailing of the Joint Proxy Statement/Prospectus and Form S-4 will be shared equally by America Online and Time Warner. Neither Holdco nor Sub 1 has agreed to assume,nor will it directly or indirectly assume, any expense or other liability, whether fixed or contingent, of any holder of America Online Common Stock in connection with or as part of the Merger or any related transaction. 003780-0007-00143-A018CNJ9-0TH Simpson Thacher& Bartlett -4- [Date] Cravath, Swaine& Moore Notwithstanding the foregoing, all liability for transfer taxes incurred by a holder of America Online Common Stock will be paid by America Online or stockholders of America Online, and in no event by Holdco. 11. There is no intercorporate indebtedness existing between Holdco or its subsidiaries and America Online or its subsidiaries that was issued, acquired or will be settled at a discount. 12. Neither Holdco nor Sub 1 will(i)elect, or have in effect an election, to be treated as a"regulated investment company"or as a"real estate investment trust"or file any tax return consistent with such treatment or(ii)be a corporation 50% or more of the fair market value of whose total assets are stock or securities and 80%or more of the fair market value of whose total assets are assets held for investment. In making the determinations described in(ii) above, (x)the stock and securities of any subsidiary of Holdco or Sub 1 shall be disregarded and Holdco or Sub 1, as the case may be,shall be deemed to own its ratable share of such subsidiary's assets and(y)a corporation shall be considered to be a subsidiary of Holdco or Sub 1, as the case may be, if Holdco and/or Sub 1 owns 50%or more of the combined voting power of all classes of the stock of such subsidiary that are entitled to vote, or 50%or more of the total value of all of the outstanding stock of such subsidiary. In addition, in determining the fair market value of Holdco's and Sub 1's total assets for the purposes of making this representation, Holdco and Sub 1 shall exclude any cash and cash items (such as receivables), government securities and any assets acquired(through incurring indebtedness or otherwise) for the purposes of causing Holdco or Sub 1 to not be characterized as an entity described in(i)or(ii)of the first sentence of this paragraph or causing Holdco or Sub 1 to meet the requirements of section 368(a)(2XF)(ii) of the Code. 13. As of the Effective Time,neither Holdco nor any corporation related to Holdco will own beneficially, or will have owned beneficially during the five years preceding the Effective Time, any shares of stock of America Online or other securities, options, warrants or instruments giving the holder thereof the right to acquire stock of America Online or other securities issued by America Online other than the stock option held by Holdco pursuant to the stock option agreement attached to the Merger Agreement as Exhibit A. 14. The Holdco Common Stock into which America Online Common Stock will be converted in the Merger is entitled to vote in the election of directors of Holdco. 15. None of the compensation to be received by any stockholder-employees of America Online for services rendered after the Effective Time will be separate consideration for, or allocable to, any of their shares of America Online Common Stock;none of the Holdco Capital Stock to be received by any stockholder-employees of America Online in connection with the Merger will be separate consideration for, or allocable to, any employment, consulting or similar agreement with respect to services performed after the Effective Time; and the compensation paid to any stockholder-employees of America Online for services rendered after 003780-0007-00143-A018CNJ9-0TH Simpson Thacher& Bartlett -5- [Date] Cravath, Swaine& Moore the Effective Time will be for services actually rendered and will be based upon arm's length agreements. 16. After taking into account(a)any issuance of Holdco stock in connection with the Mergers, including(i) stock issued for services, (ii)stock issued upon the the exercise of any Holdco stock rights, options,warrants or subscriptions or(iii)stock issued by public offering or otherwise and(b)to the knowledge of the management of Holdco, America Online and Time Warner,the sale, exchange,transfer by gift or other disposition,pursuant to an obligation, commitment or understanding binding at the Effective Time of the Mergers, of any Holdco Capital Stock received by holders of Time Warner Capital Stock or America Online Common Stock in the Mergers,the holders of Time Warner Capital Stock and America Online Common Stock will collectively be in control of Holdco within the meaning of section 351 of the Code immediately after the Mergers. 17. Holdco will not take any position, and,to the best knowledge of the management of Holdco, there is no plan or intention of any holders of Time Warner or America Online stock to take, any position on any Federal, state or local income or franchise tax return, or to take any other tax reporting position,that is inconsistent with the treatment of the Merger as an exchange within the meaning of Section 351 of the Code and the regulations promulgated thereunder and as a reorganization within the meaning of Section 368(a)of the Code and the regulations promulgated thereunder. 18. Holdco is not an"investment company"within the meaning of Treasury Regulations section 1.351-1(c). 19. The Merger Agreement, the documents described in the Merger Agreement, the Proxy Statement, and the Form S-4 represent the entire understanding between or among(i)Holdco and its subsidiaries, (ii)Time Warner and its subsidiaries and(iii) America Online and its subsidiaries and, to the best knowledge of the management of Holdco, between or among such entities and the affiliates and stockholders of Holdco,Time Warner and America Online with respect to the Merger, and there are no other written or oral agreements regarding the Merger other than those expressly referred to in the Merger Agreement,the Proxy Statement and the Form S-4. 20. The undersigned are authorized to make all the representations set forth herein on behalf of Holdco. Very truly yours, Holdco 003780-0007-00143-A018CNJ9-0TH Simpson Thacher& Bartlett -6- [Date] Cravath, Swaine& Moore By: Title: By: Title: 0037$0-0007-00243-AOISCNJ9-OTH EXHIBIT 7.2(c)(1) [FORM OF REPRESENTATION LETTER] [LETTERHEAD OF HOLDCO (TIME WARMER MERGER)] [Date] Re: The Merger of Time Warner Merger Sub with and into Time Warner Simpson Thacher& Bartlett 425 Lexington Avenue New York, New York 10017 Cravath, Swaine & Moore Worldwide Plaza 825 Eighth Avenue New York, New York 10019 Ladies and Gentlemen: In connection with the opinions to be delivered pursuant to the Agreement and Plan of Merger(the"Merger Agreement") dated as of January 10, 2000, between America Online, Inc. ("America Online") and Time Warner Inc. ("Time Warner"),in which America Online Merger Sub ("Sub 1"), a subsidiary of a newly organized Delaware corporation ("Holdco"), shall be merged with and into America Online with America Online surviving as a wholly owned subsidiary of Holdco, and Time Warner Merger Sub ("Sub 2"), another subsidiary of Holdco, shall be merged with and into Time Warner with Time Warner surviving as a wholly owned subsidiary of Holdco, the undersigned certifies and represents on behalf of Holdco and Sub 2, after due inquiry and investigation, as follows (any capitalized term used but not defined herein shall have the meaning given to such term in the Merger Agreement): 1. The facts relating to the contemplated merger(the"Merger") of Sub 2 with and into Time Warner pursuant to the Merger Agreement, as described in the Merger Agreement, and the documents described in the Merger Agreement, are, insofar as such facts pertain to Holdco and Sub 2, true, correct and complete in all material respects. The Merger will be consummated in accordance with the Merger Agreement, and as described in the Proxy Statement and the Form S-4, and none of the material terms and conditions therein has been or will be waived or modified. The Merger is being effected for bona fide business reasons. 2. The fair market value of the Holdco Common Stock and cash in lieu of a fractional share of Holdco Common Stock received by each holder of Time Warner Common 003780-0007-00143-AO.BCVA4-Oru Simpson Thacher& Bartlett -2- [Date] Cravath, Swaine & Moore Stock in the Merger will be approximately equal to the fair market value of the Time Warner Common Stock surrendered by such holders in the Merger. The fair market value of Holdco Series LMCN-V Common Stock and cash in lieu of a fractional share of Holdco Series LMCN-V Common Stock received by each holder of Time Warner Series LMCN-V Common Stock in the Merger will be approximately equal to the fair market value of the Time Warner Series LMCN-V Common Stock surrendered by such holders in the Merger. The fair market value of Holdco Series LMC Common Stock and cash in lieu of a fractional share of Holdco Series LMC Common Stock received by each holder of Time Warner Series LMC Common Stock in the Merger will be approximately equal to the fair market value of the Time Warner Series LMC Common Stock surrendered by such holders in the Merger. The fair market value of Holdco Series E Preferred Stock received by each holder of Time Warner Series E Preferred Stock in the Merger will be approximately equal to the fair market value of the Time Warner Series E Preferred Stock surrendered by such holders in the Merger. The fair market value of Holdco Series F Preferred Stock received by each holder of Time Warner Series F Preferred Stock in the Merger will be approximately equal to the fair market value of the Time Warner Series F Preferred Stock surrendered by such holders in the Merger. The fair market value of Holdco Series I Preferred Stock received by each holder of Time Warner Series I Preferred Stock in the Merger will be approximately equal to the fair market value of the Time Warner Series I Preferred Stock surrendered by such holders in the Merger. The fair market value of Holdco Series J Preferred Stock received by each holder of Time Warner Series J Preferred Stock in the Merger will be approximately equal to the fair market value of the Time Warner Series J Preferred Stock surrendered by such holders in the Merger. The Holdco Common Stock, Holdco Series LMCN-V Common Stock, Holdco Series LMC Common Stock, Holdco Series E Preferred Stock, Holdco Series F Preferred Stock, Holdco Series I Preferred Stock and Holdco Series J Preferred Stock are referred to collectively herein as the"Holdco Capital Stock". The Time Warner Common Stock,Time Warner Series LMCN-V Common Stock, Time Warner Series LMC Common Stock, Time Warner Series E Preferred Stock,Time Warner Series F Preferred Stock,Time Warner Series I Preferred Stock and Time Warner Series J Preferred Stock are referred to collectively herein as the"Time Warner Capital Stock". The Merger Consideration to be received in the Merger by holders of Time Warner Capital Stock was determined by arm's length negotiations between the managements of Alpha and Time Warner. In connection with the Merger, no holder of Time Warner Capital Stock will receive in exchange for Time Warner Capital Stock, directly or indirectly, any consideration from Holdco or Sub 2 other than Holdco Capital Stock and cash in lieu of a fractional share thereof. 3. Following the Merger,Time Warner will hold at least 90%of the fair market value of the net assets and at least 70%of the fair market value of the gross assets held by Time Warner and Sub 2, as the case may be, immediately prior to the Merger. For purposes of this representation, amounts paid by Time Warner or Sub 2 to dissenting stockholders of Time Warner, amounts used by Time Warner and Sub 2 to pay reorganization expenses incurred in connection with the Merger and all redemptions and distributions (except for regular, normal dividends) made by Time Warner will be considered assets held by Time Warner or Sub 2, as the case may be, immediately prior to the Merger. 003780-0007-00143-A018CVA4-0TH Simpson Thacher& Bartlett -3- [Date] Cravath, Swaine & Moore 4. Neither Holdco nor any corporation related to Holdco will, in connection with the Merger, (i) be under any obligation or will have entered into any agreement or understanding to redeem or repurchase any of the Holdco Capital Stock issued to stockholders of Time Warner in the Merger or to make any extraordinary distributions in respect of such Holdco Capital Stock or(ii)have any plan or intention to reacquire any of the Holdco Capital Stock issued in the Merger; provided,however, that Holdco may adopt an open market stock repurchase program that satisfies the requirements of Revenue Ruling 99-58 and may redeem Holdco preferred stock issued in the Merger pursuant to the terms of such preferred stock. After the Merger, no dividends or distributions will be made to the former Time Warner stockholders by Holdco other than regular, normal dividends or distributions made to all holders of Holdco Capital Stock. For purposes of this representation letter, two corporations shall be treated as related to one another if immediately prior to or immediately after the Merger, (a)the corporations are members of the same affiliated group (within the meaning of section 1504 of the Internal Revenue Code of 1986,as amended(the "Code"), but determined without regard to the exclusions of section 1504(b) of the Code) or(b) one corporation owns 50% or more of the total combined voting power of all classes of stock of the other corporation that are entitled to vote or 50%or more of the total value of shares of all classes of stock of the other corporation(applying the attribution rules of section 318 of the Code as modified pursuant to section 304(c)(3)(B) of the Code). For purposes of this representation, a corporation that is a partner in a partnership will be treated as owning or acquiring any stock owned or acquired, as the case may be,by the partnership and as having furnished its share of any consideration furnished by the partnership to acquire the stock, in each case, in accordance with its interest in the partnership. 5. Holdco has no present plan or intention to (i) liquidate Time Warner, (ii) merge Time Warner with or into another corporation, (iii) sell or otherwise dispose of the stock of Time Warner, except for transfers(including successive transfers) of such stock to corporations controlled by the transferor or(iv) cause Time Warner to sell or otherwise dispose of any of its assets, or any assets that it acquired from Sub 2, except for dispositions in the ordinary course of its business or transfers (including successive transfers) of assets to one or more corporations controlled in each transfer by the transferor. Holdco has no plan or intention to (i)cause Time Warner to issue additional shares of stock following the Merger or(ii) otherwise take any action that could result in Holdco losing control of Time Warner following the Merger. For purposes of this representation letter, control with respect to a corporation shall mean ownership of at least(i) 80% of the total combined voting power of all classes of stock entitled to vote and(ii) 80% of the total number of shares of each other class of stock of the corporation. 6. Following the Merger, Time Warner or another member of Time Warner's "qualified group"will continue Time Warner's historic business or use a significant portion of Time Warner's historic business assets in a business. For purposes of this representation, Time Warner's "qualified group"means, pursuant to Treasury Regulation section 1.368-1(d)(4)(ii), one or more chains of corporations connected through stock ownership with Time Warner, but only if Time Warner owns directly stock representing control in at least one other corporation, 003780-0007-00143-A018CVA4-0TH Sim-son Thacher& Bartlett -4- [Date] Cravath, Swaine& Moore and stock representing control in each of the corporations (except Time Warner) is owned directly by one of the other corporations. In addition, Time Warner will be treated as owning its proportionate share of Time Warner's business assets used in a business of any partnership in which members of Time Warner qualified group either own a significant interest or have active and substantial management functions as a partner with respect to that partnership business. 7. Prior to the Merger and through the Effective Time, Holdco will own all of the outstanding stock of Sub 2. Holdco has no plan or intention to cause Sub 2 to, and Sub 2 has no plan or intention to, issue additional shares of its stock that would result in Holdco owning less than all of the capital stock of Sub 2 in the Merger. 8. Sub 2 is being formed solely to effect the Merger and it will not conduct any business or other activities other than the issuance of its stock to Holdco prior to the Merger. Sub 2 will have no liabilities that will be assumed by Time Warner and it will not transfer any assets to Time Warner in the Merger that are subject to any liabilities. 9. Pursuant to the Merger, at least(i) 80%of the total combined voting power of all classes of Time Warner stock entitled to vote and(ii) 80%of the total number of shares of each other class of stock of Time Warner will be exchanged solely for the Time Warner Merger Consideration. For purposes of this representation, shares of Time Warner Capital Stock exchanged for cash or other property originating with Holdco or Sub 2 will be treated as outstanding Time Warner Capital Stock at the Effective Time. 10. Holdco, Sub 2,Time Warner and the stockholders of Time Warner will pay their respective expenses, if any, incurred in connection with or as part of the Merger, except that expenses incurred in connection with the filing,printing and mailing of the Joint Proxy Statement/Prospectus and Form S-4 will be shared equally by Alpha and Time Warner. Neither Holdco nor Sub 2 has agreed to assume, nor will it directly or indirectly assume, any expense or other liability, whether fixed or contingent, of any holder of Time Warner Capital Stock in connection with or as part of the Merger or any related transaction. Notwithstanding the foregoing, all liability for transfer taxes incurred by a holder of Time Warner Capital Stock will be paid by Time Warner or stockholders of Time Warner, and in no event by Holdco. 11. There is no intercorporate indebtedness existing between Holdco or its subsidiaries and Time Warner or its subsidiaries that was issued, acquired or will be settled at a discount. 12. Neither Holdco nor Sub 2 will (i) elect, or have in effect an election, to be treated as a"regulated investment company"or as a"real estate investment trust"or file any tax return consistent with such treatment or(ii)be a corporation 50%or more of the fair market value of whose total assets are stock or securities and 80% or more of the fair market value of whose total assets are assets held for investment. In making the determinations described in(ii) above, (x)the stock and securities of any subsidiary of Holdco or Sub 2 shall be disregarded and 003780-0007-00143-A018CVA4-0TH Simpson Thacher& Bartlett -5- [Date] Cravath, Swaine& Moore Holdco or Sub 2, as the case may be, shall be deemed to own its ratable share of such subsidiary's assets and(y) a corporation shall be considered to be a subsidiary of Holdco or Sub 2, as the case may be, if Holdco and/or Sub 2 owns 50%or more of the combined voting power of all classes of the stock of such subsidiary that are entitled to vote, or 50%or more of the total value of all of the outstanding stock of such subsidiary. In addition, in determining the fair market value of Holdco's and Sub 2's total assets for the purposes of making this representation, Holdco and Sub 2 shall exclude any cash and cash items (such as receivables),government securities and any assets acquired(through incurring indebtedness or otherwise) for the purposes of causing Holdco or Sub 2 to not be characterized as an entity described in(i) or(ii)of the first sentence of this paragraph or causing Holdco or Sub 2 to meet the requirements of section 368(a)(2)(F)(ii)of the Code. 13. As of the Effective Time, neither Holdco nor any corporation related to Holdco will own beneficially, or will have owned beneficially during the five years preceding the Effective Time, any shares of stock of Time Warner or other securities, options, warrants or instruments giving the holder thereof the right to acquire stock of Time Warner or other securities issued by Time Warner other than the stock option held by Holdco pursuant to the stock option agreement attached to the Merger Agreement as Exhibit A. 14. Each class of Holdco Capital Stock into which Time Warner Capital Stock will be converted in the Merger is entitled to vote in the election of directors of Holdco. 15. None of the compensation to be received by any stockholder-employees of Time Warner for services rendered after the Effective Time will be separate consideration for, or allocable to, any of their shares of Time Warner Capital Stock;none of the Holdco Capital Stock to be received by any stockholder-employees of Time Warner in connection with the Merger will be separate consideration for, or allocable to, any employment, consulting or similar agreement with respect to services rendered after the Effective Time; and the compensation paid to any stockholder-employees of Time Warner for services rendered after the Effective Time will be for services actually rendered and will be based upon arms-length agreements. 16. The payment of cash in lieu of fractional shares of Holdco is solely for the purpose of avoiding the expense and inconvenience to Holdco of issuing fractional shares and does not represent separately bargained-for consideration. 17. After taking into account(a) any issuance of Holdco stock in connection with the Mergers, including(i) stock issued for services, (ii)stock issued upon the the exercise of any Holdco stock rights, options, warrants or subscriptions or(iii) stock issued by public offering or otherwise and(b)to the knowledge of the management of Holdco,Time Warner and Alpha, the sale, exchange,transfer by gift or other disposition,pursuant to an obligation,commitment or understanding binding at the Effective Time of the Mergers, of any Holdco Capital Stock received by holders of Time Warner Capital Stock or Alpha Common Stock in the Mergers, the 003780-0007-00143-A018CVA4-0TH Simpson Thacher& Bartlett -6- [Date] Cravath, Swaine & Moore holders of Time Warner Capital Stock and Alpha Common Stock will collectively be in control of Holdco within the meaning of section 351 of the Code immediately after the Mergers. 18. Holdco will not take any position, and, to the best knowledge of the management of Holdco, there is no plan or intention of any holders of Time Warner or Alpha stock to take, any position on any Federal, state or local income or franchise tax return, or to take any other tax reporting position, that is inconsistent with the treatment of the Merger as an exchange within the meaning of Section 351 of the Code and the regulations promulgated thereunder and as a reorganization within the meaning of Section 368(a)of the Code and the regulations promulgated thereunder. 19. Holdco is not an"investment company"within the meaning of Treasury Regulations section 1.351-1(c). 20. The Merger Agreement, the documents described in the Merger Agreement, the Proxy Statement, and the Form S-4 represent the entire understanding between or among(i) Holdco and its subsidiaries, (ii)Alpha and its subsidiaries and(iii)Time Warner and its subsidiaries and, to the best knowledge of the management of Holdco, between or among such entities and the affiliates and stockholders of Holdco,Alpha and Time Warner with respect to the Merger, and there are no other written or oral agreements regarding the Merger other than those expressly referred to in the Merger Agreement, the Proxy Statement and the Form S-4. 21. The undersigned are authorized to make all the representations set forth herein on behalf of Holdco. Very truly yours, Holdco By: Title: By: Title: 003780-0007-00143-A018CVA4-0TH EXHIBIT 7.2(c)(2) [FORM OF REPRESENTATION LETTER] [LETTERHEAD OF AMERICA ONLINE, INC.] [Date] Re: The Merger of America Online Merger Sub with and into America Online, Inc. Simpson Thacher& Bartlett 425 Lexington Avenue New York, New York 10017 Cravath, Swaine& Moore Worldwide Plaza 825 Eighth Avenue New York,New York 10019 Ladies and Gentlemen: In connection with the opinions to be delivered pursuant to the Agreement and Plan of Merger(the"Merger Agreement") dated as of January 10, 2000, between America Online, Inc. ("America Online") and Time Warner Inc. ("Time Warner"), in which America Online Merger Sub ("Sub I"), a subsidiary of a newly organized Delaware corporation ("Holdco"), shall be merged with and into America Online with America Online surviving as a wholly owned subsidiary of Holdco, and Time Warner Merger Sub ("Sub 2"), another subsidiary of Holdco, shall be merged with and into Time Warner with Time Warner surviving as a wholly owned subsidiary of Holdco,the undersigned certifies and represents on behalf of America Online, after due inquiry and investigation, as follows(any capitalized term used but not defined herein shall have the meaning given to such term in the Merger Agreement): 1. The facts relating to the contemplated merger(the"Merger") of Sub 1 with and into America Online pursuant to the Merger Agreement, as described in the Merger . Agreement, and the documents described in the Merger Agreement, are, insofar as such facts pertain to America Online, true, correct and complete in all material respects. The Merger will be consummated in accordance with the Merger Agreement, and as described in the Proxy Statement and the Form S-4, and none of the material terms and conditions therein has been or will be waived or modified. The Merger is being effected for bona fide business reasons. 2. The fair market value of the Holdco Common Stock received by each holder of America Online Common Stock in the Merger will be approximately equal to the fair 003790-0007-OC!43-AC19C.,vX-O,H Simpson Thacher& Bartlett -2- [Date] Cravath, Swaine & Moore market value of the America Online Common Stock surrendered by such holders in the Merger. The America Online Merger Consideration to be received in the Merger by holders of America Online Common Stock was determined by arm's length negotiations between the managements of Time Warner and America Online. In connection with the Merger, no holder of America Online Common Stock will receive in exchange for America Online Common Stock, directly or indirectly, any consideration from Holdco or Sub lother than Holdco Common Stock. 3. America Online,prior to and in connection with the Merger, has not redeemed any of its stock or made any distributions with respect to its stock. Additionally, prior to and in connection with the Merger, no corporation related to America Online has acquired America Online's stock with consideration other than stock of either America Online or Holdco. For purposes of this representation letter, two corporations shall be treated as related to one another if immediately prior to or immediately after the Merger, (a) the corporations are members of the same affiliated group (within the meaning of section 1504 of the Internal Revenue Code of 1986, as amended(the"Code"), but determined without regard to the exclusions of section 1504(b) of the Code) or(b) one corporation owns 50%or more of the total combined voting power of all classes of stock of the other corporation that are entitled to vote or 50%or more of the total value of shares of all classes of stock of the other corporation(applying the attribution rules of section 318 of the Code as modified pursuant to section 304(c)(3)(B) of the Code). For purposes of this representation, a corporation that is a partner in a partnership will be treated as owning or acquiring any stock owned or acquired, as the case may be, by the partnership and as having furnished its share of any consideration furnished by the partnership to acquire the stock, in each case, in accordance with its interest in the partnership. 4. To the best knowledge of the management of America Online, there is no plan or intention on the part of holders of America Online Common Stock to sell, exchange or otherwise transfer ownership (including by derivative transactions such as an equity swap which would have the economic effect of a transfer of ownership) to Holdco, America Online or any person related to Holdco or America Online, directly or indirectly(including through partnerships or through third parties in connection with a plan to so transfer ownership), of any shares of Holdco Common Stock. 5. Following the Effective Time of the Merger, America Online will hold at least 90%of the fair market value of the net assets and at least 70% of the fair market value of the gross assets held by America Online immediately prior to the Merger. For purposes of this representation, amounts paid by America Online or Sub 1 to dissenting stockholders of America Online, amounts used by America Online and Sub 1 to pay reorganization expenses and all redemptions and distributions(except for regular,normal dividends) made by America Online will be considered assets held by America Online or Sub 1, as the case may be, immediately prior to the Merger. Any dispositions of assets held by America Online prior to the Merger which are made in contemplation of, or as part of, the Merger will be for fair market value, and the proceeds thereof will be retained by America Online. 003780-0007-00143-A018CJMX-OT'r{ Simpson Thacher& Bartlett -3- [Date] Cravath, Swaine& Moore 6. At the Effective Time of the Merger, America Online will be conducting America Online's historic business or using a significant portion of America Online's historic business assets in a business. 7. Pursuant to the Merger, at least(i) 80%of the total combined voting power of all classes of America Online stock entitled to vote and(ii) 80%of the total number of shares of each other class of stock of America Online will be exchanged solely for the America Online Merger Consideration. For purposes of this representation, shares of America Online Common Stock exchanged for cash or other property originating with Holdco or Sub 1 will be treated as outstanding America Online Common Stock at the Effective Time. 8. At the Effective Time,America Online will not have any warrants, options, convertible securities or any other type of right pursuant to which any person could acquire any stock of America Online which, if exercised or converted, would affect Holdco's ability to acquire or retain control of America Online. For purposes of this representation letter, "control"with respect to a corporation shall mean ownership of at least(i) 80%of the total combined voting power of all classes of stock entitled to vote and(ii) 80% of the total number of shares of each other class of stock of the corporation. 9. Prior to the Effective Time, America Online has no plan or intention to issue any additional shares of stock that would cause Holdco to own less than(i) 80% of the total combined voting power of all classes of America Online stock entitled to vote or(ii) 80%of the total number of shares of each other class of stock of America Online. 10. Holdco, Sub 1, America Online and the stockholders of America Online will pay their respective expenses, if any, incurred in connection with or as part of the Merger, except that expenses incurred in connection with the filing,printing and mailing of the Joint Proxy Statement/Prospectus and Form S-4 will be shared equally by America Online and Time Warner. America Online has not agreed to assume, nor will it directly or indirectly assume, any expense or other liability,whether fixed or contingent, of any holder of America Online Common Stock in connection with or as part of the Merger or any related transactions. Notwithstanding the foregoing, all liability for transfer taxes incurred by a holder of America Online Common Stock will be paid by America Online or stockholders of America Online, and in no event by Holdco. 11. There is no intercorporate indebtedness existing between Holdco or its subsidiaries and America Online or its subsidiaries that was issued, acquired or will be settled at a discount. 12. America Online will not(i) elect, or have in effect an election, to be treated as a"regulated investment company"or as a"real estate investment trust"or file any tax return consistent with such treatment or(ii) be a corporation 50% or more of the fair market value of whose total assets are stock or securities and 80%or more of the fair market value of 003780-0007-00143-A018CJI-D(-0TH Simpson Thacher& Bartlett -4- [Date] Cravath, Swaine & Moore whose total assets are assets held for investment. In making the determinations described in (ii) above, (x) the stock and securities of any subsidiary of America Online shall be disregarded and America Online shall be deemed to own its ratable share of such subsidiary's assets and(y) a corporation shall be considered to be a subsidiary of America Online, if America Online owns 50%or more of the combined voting power of all classes of the stock of such subsidiary that are entitled to vote, or 50%or more of the total value of all of the outstanding stock of such subsidiary. In addition, in determining the fair market value of America Online's total assets for the purposes of making this representation,America Online shall exclude any cash and cash items(such as receivables), government securities and any assets acquired(through incurring indebtedness or otherwise) for the purposes of causing America Online to not be characterized as an entity described in(i) or(ii)of the first sentence of this paragraph or causing America Online to meet the requirements of section 368(a)(2)(F)(ii) of the Code. 13. At the Effective Time, America Online will not be under the jurisdiction of a court in a"Title 11 or similar case." For purposes of the foregoing, a"Title 11 or similar case"means a case under title 11 of the United States Code or a receivership, foreclosure or similar preceding in a federal or state court. 14. The fair market value of the assets of America Online will exceed its liabilities. 15. To the knowledge of America Online, none of the compensation to be received by any stockholder-employees of America Online for services rendered prior to the Effective Time was or will be separate consideration for, or allocable to, any of their shares of America Online Common Stock; none of the Holdco Common Stock to be received in the Merger by any stockholder-employees of America Online will be separate consideration for, or allocable to, any employment, consulting or similar agreement with respect to services rendered prior to the Effective Time; and the compensation paid to any stockholder-employees of America Online for services rendered prior to the Effective Time was or will be for services actually rendered and was or will be based upon arms-length agreements. 16. America Online is not currently, and during the five years preceding the Effective Time will not have been, a"United States real property holding corporation." For purposes of the foregoing, a United States real property holding corporation means a corporation in which the fair market value of its United States real property interests equals or exceeds fifty percent of the fair market value of its (i) United States real property interests, (ii) its interests in real property located outside the United States, and(iii) any other of its assets which are used or held for use in a trade or business. 17. As of the Effective Time, neither America Online nor any corporation related to America Online will own beneficially,or will have owned beneficially, during the five years preceding the Effective Time, any shares of stock of Time Warner or other securities, options, warrants or instruments giving the holder thereof the right to acquire stock of Time 003780-0007-00143-A018CJMX-0TH Simpson Thacher& Bartlett -5- [Date] Cravath, Swaine & Moore Warner or other securities issued by Time Warner other than the stock option held by America Online pursuant to the stock option agreement attached to the Merger Agreement as Exhibit A. 18. The only capital stock of America Online issued and outstanding is America Online Common Stock. 19. America Online will not take, and, to the best knowledge of the management of America Online, there is no plan or intention of any holders of America Online Common Stock to take, any position on any Federal, state or local income or franchise tax return, or to take any other tax reporting position, that is inconsistent with the treatment of the Merger as an exchange within the meaning of Section 351 of the Code and the regulations thereunder and as a reorganization within the meaning of Section 368(a)of the Code and the regulations thereunder. 20. The Merger Agreement, the documents described in the Merger Agreement, the Proxy Statement, and the Form S-4 represent the entire understanding between or among(i)Holdco and its subsidiaries, (ii) America Online and its subsidiaries and(iii)Time Warner and its subsidiaries and, to the best knowledge of the management of America Online, between or among such entities and the affiliates and stockholders of Holdco, Time Warner and America Online with respect to the Merger and there are no other written or oral agreements regarding the Merger other than those expressly referred to in the Merger Agreement, the Proxy Statement and the Form S-4. 21. The undersigned is authorized to make all the representations set forth herein on behalf of America Online. Very truly yours, America Online By: Title: 003780-0007-00143-A018CJM-0TH EXHIBIT 7.2(c)(3) [FORM OF REPRESENTATION LETTER] [LETTERHEAD OF TIME WARNER] [Date] Re: The Merger of Time Warner Merger Sub with and into Time Warner Simpson Thacher& Bartlett 425 Lexington Avenue New York, New York 10017 Cravath, Swaine & Moore Worldwide Plaza 825 Eighth Avenue New York, New York 10019 Ladies and Gentlemen: In connection with the opinions to be delivered pursuant to the Agreement and Plan of Merger(the "Merger Agreement") dated as of January 10, 2000, between America Online, Inc. ("America Online") and Time Warner Inc. ("Time Warner"), in which America Online Merger Sub ("Sub 1'), a subsidiary of a newly organized Delaware corporation ("Holdco"), shall be merged with and into America Online with America Online surviving as a wholly owned subsidiary of Holdco, and Time Warner Merger Sub("Sub 2"), another subsidiary of Holdco, shall be merged with and into Time Warner with Time Warner surviving as a wholly owned subsidiary of Holdco, the undersigned certifies and represents on behalf of Time Warner, after due inquiry and investigation, as follows(any capitalized term used but not defined herein shall have the meaning given to such term in the Merger Agreement): 1. The facts relating to the contemplated merger(the"Merger")of Sub 2 with and into Time Warner pursuant to the Merger Agreement, as described in the Merger Agreement, and the documents described in the Merger Agreement, are, insofar as such facts pertain to Time Warner, true, correct and complete in all material respects. The Merger will be consummated in accordance with the Merger Agreement, and as described in the Proxy Statement and the Form S-4, and none of the material terms and conditions therein has been or will be waived or modified. The Merger is being effected for bona fide business reasons. 003740-0007-00143-A018CJMX-0TH Simpson Thacher& Bartlett -2- [Date] Cravath, Swaine &Moore 2. The fair market value of the Holdco Common Stock and cash in lieu of a fractional share of Holdco Common Stock received by each holder of Time Warner Common Stock in the Merger will be approximately equal to the fair market value of the Time Warner Common Stock surrendered by such holders in the Merger. The fair market value of Holdco Series LMCN-V Common Stock and cash in lieu of a fractional share of Holdco Series LMCN-V Common Stock received by each holder of Time Warner Series LMCN-V Common Stock in the Merger will be approximately equal to the fair market value of the Time Warner Series LMCN-V Common Stock surrendered by such holders in the Merger. The fair market value of Holdco Series LMC Common Stock and cash in lieu of a fractional share of Holdco Series LMCN-V Common Stock received by each holder of Time Warner Series LMC Common Stock in the Merger will be approximately equal to the fair market value of the Time Warner Series LMC Common Stock surrendered by such holders in the Merger. The fair market value of Holdco Series E Preferred Stock received by each holder of Time Warner Series E Preferred Stock in the Merger will be approximately equal to the fair market value of the Time Warner Series E Preferred Stock surrendered by such holders in the Merger. The fair market value of Holdco Series F Preferred Stock received by each holder of Time Warner Series F Preferred Stock in the Merger will be approximately equal to the fair market value of the Time Warner Series F Preferred Stock surrendered by such holders in the Merger. The fair market value of Holdco Series I Preferred Stock received by each holder of Time Warner Series I Preferred Stock in the Merger will be approximately equal to the fair market value of the Time Warner Series I Preferred Stock surrendered by such holders in the Merger. The fair market value of Holdco Series J Preferred Stock received by each holder of Time Warner Series J Preferred Stock in the Merger will be approximately equal to the fair market value of the Time Warner Series J Preferred Stock surrendered by such holders in the Merger. The Holdco Common Stock, Holdco Series LMCN-V Common Stock,Holdco Series LMC Common Stock,Holdco Series E Preferred Stock, Holdco Series F Preferred Stock, Holdco Series I Preferred Stock and Holdco Series J Preferred Stock are referred to collectively herein as the "Holdco Capital Stock". The Time Warner Common Stock, Time Warner Series LMCN-V Common Stock, Time Warner Series LMC Common Stock,Time Warner Series E Preferred Stock,Time Warner Series F Preferred Stock,Time Warner Series I Preferred Stock and Time Warner Series J Preferred Stock are referred to collectively herein as the"Time Warner Capital Stock". The Time Warner Merger Consideration to be received in the Merger by holders of Time Warner Capital Stock was determined by arm's length negotiations between the managements of America Online and Time Warner. In connection with the Merger,no holder of Time Warner Capital Stock will receive in exchange for Holdco Capital Stock, directly or indirectly, any consideration from Holdco or Sub 2 other than Holdco Capital Stock and cash in lieu of a fractional share thereof. 3. Time Warner, prior to and in connection with the Merger, has not redeemed any of its stock or made any distributions with respect to its stock. Additionally,prior to and in connection with the Merger, no corporation related to Time Warner has acquired Time Warner's stock with consideration other than stock of either Time Warner or Holdco. For purposes of this representation letter, two corporations shall be treated as related to one another if immediately prior to or immediately after the Merger, (a) the corporations are members of the 003780-0007-00143-A018CJMX-0TH Simpson Thacher& Bartlett -3- [Date] Cravath, Swaine & Moore same affiliated group (within the meaning of section 1504 of the Internal Revenue Code of 1986, as amended(the"Code"), but determined without regard to the exclusions of section 1504(b) of the Code) or(b) one corporation owns 50% or more of the total combined voting power of all classes of stock of the other corporation that are entitled to vote or 50%or more of the total value of shares of all classes of stock of the other corporation(applying the attribution rules of section 318 of the Code as modified pursuant to section 304(c)(3)(B) of the Code). For purposes of this representation, a corporation that is a partner in a partnership will be treated as owning or acquiring any stock owned or acquired,as the case may be, by the partnership and as having furnished its share of any consideration furnished by the partnership to acquire the stock, in each case, in accordance with its interest in the partnership. 4. To the best knowledge of the management of Time Warner, there is no plan or intention on the part of holders of Time Warner Capital Stock to sell, exchange or otherwise transfer ownership(including by derivative transactions such as an equity swap which would have the economic effect of a transfer of ownership)to Holdco, Time Warner or any person related to Holdco or Time Warner, directly or indirectly(including through partnerships or through third parties in connection with a plan to so transfer ownership), of any shares of Holdco Capital Stock(other than fractional shares of Holdco Capital Stock for which holders of Holdco Capital Stock receive cash in the Merger). 5. Following the Effective Time of the Merger, Time Warner will hold at least 90%of the fair market value of the net assets and at least 70%of the fair market value of the gross assets held by Time Warner immediately prior to the Merger. For purposes of this representation, amounts paid by Time Warner or Sub 2 to dissenting stockholders of Time Warner, amounts used by Time Warner and Sub 2 to pay reorganization expenses and all redemptions and distributions(except for regular, normal dividends) made by Time Warner will be considered assets held by Time Warner or Sub 2, as the case may be, immediately prior to the Merger. Any dispositions of assets held by Time Warner prior to the Merger which are made in contemplation of,or as part of, the Merger will be for fair market value, and the proceeds thereof will be retained by Time Warner. 6. At the Effective Time of the Merger, Time Warner will be conducting Time Warner's historic business or using a significant portion of Time Warner's historic business assets in a business. 7. Pursuant to the Merger, at least(i) 80%of the total combined voting power of all classes of Time Warner stock entitled to vote and(ii) 80%of the total number of shares of each other class of stock of Time Warner will be exchanged solely for the Time Warner Merger Consideration. For purposes of this representation, shares of Time Warner Capital Stock exchanged for cash or other property originating with Holdco or Sub 2 will be treated as outstanding Holdco Capital Stock at the Effective Time. 003780-0007-00143-A018CjM-0TH Sh..t,son Thacher&Bartlett -4- [Date] Cravath, Swaine &Moore 8. At the Effective Time,Time Warner will not have any warrants, options, convertible securities or any other type of right pursuant to which any person could acquire any stock of Time Warner which, if exercised or converted, would affect Holdco's ability to acquire or retain control of Time Warner. For purposes of this representation letter, "control"with respect to a corporation shall mean ownership of at least(i) 80%of the total combined voting power of all classes of stock entitled to vote and(ii) 80%of the total number of shares of each other class of stock of the corporation. 9. Prior to the Effective Time,Time Warner has no plan or intention to issue any additional shares of stock that would cause Holdco to own less than(i) 80%of the total combined voting power of all classes of Time Warner stock entitled to vote or(ii) 80%of the total number of shares of each other class of stock of Time Warner. 10. Holdco, Sub 2,Time Warner and the stockholders of Time Warner will pay their respective expenses, if any, incurred in connection with or as part of the Merger, except that expenses incurred in connection with the filing,printing and mailing of the Joint Proxy Statement/Prospectus and Form S-4 will be shared equally by America Online and Time Warner. Time Warner has not agreed to assume,nor will it directly or indirectly assume, any expense or other liability, whether fixed or contingent,of any holder of Time Warner Capital Stock in connection with or as part of the Merger or any related transactions. Notwithstanding the foregoing, all liability for transfer taxes incurred by a holder of Time Warner Capital Stock will be paid by Time Warner or stockholders of Time Warner, and in no event by Holdco. 11. There is no intercorporate indebtedness existing between Holdco or its subsidiaries and Time Warner or its subsidiaries that was issued, acquired or will be settled at a discount. 12. Time Warner will not(i) elect, or have in effect an election, to be treated as a"regulated investment company"or as a"real estate investment trust"or file any tax return consistent with such treatment or(ii)be a corporation 50%or more of the fair market value of whose total assets are stock or securities and 80% or more of the fair market value of whose total assets are assets held for investment. In making the determinations described in(ii) above, (x) the stock and securities of any subsidiary of Time Warner shall be disregarded and Time Warner shall be deemed to own its ratable share of such subsidiary's assets and(y) a corporation shall be considered to be a subsidiary of Time Warner, if Time Warner owns 50%or more of the combined voting power of all classes of the stock of such subsidiary that are entitled to vote,or 50%or more of the total value of all of the outstanding stock of such subsidiary. In addition, in determining the fair market value of Time Warner's total assets for the purposes of making this representation,Time Warner shall exclude any cash and cash items (such as receivables), government securities and any assets acquired(through incurring indebtedness or otherwise)for the purposes of causing Time Warner to not be characterized as an entity described in(i) or(ii) of the fust sentence of this paragraph or causing Time Warner to meet the requirements of section 368(a)(2)(F)(ii)of the Code. 003780-0007-00143-A018CJMX-0TH Simpson Thacher& Bartlett -5- [Date] Cravath, Swaine& Moore 13. At the Effective Time,Time Warner will not be under the jurisdiction of a court in a"Title 11 or similar case." For purposes of the foregoing, a"Title 11 or similar case" means a case under title 11 of the United States Code or a receivership, foreclosure or similar preceding in a federal or state court. 14. The fair market value of the assets of Time Warner will exceed its liabilities. 15. To the knowledge of Time Warner, none of the compensation to be received by any stockholder-employees of Time Warner for services rendered prior to the Effective Time was or will be separate consideration for, or allocable to, any of their shares of Time Warner Capital Stock;none of the Holdco Capital Stock to be received in the Merger by any stockholder-employees of Time Warner will be separate consideration for, or allocable to, any employment,consulting or similar agreement with respect to services rendered prior to the Effective Time; and the compensation paid to any stockholder-employees of Time Warner for services rendered prior to the Effective Time was or will be for services actually rendered and was or will be based upon arms-length agreements. 16. Time Warner is not currently, and during the five years preceding the Effective Time will not have been, a"United States real property holding corporation." For purposes of the foregoing, a United States real property holding corporation means a corporation in which the fair market value of its United States real property interests equals or exceeds fifty percent of the fair market value of its(i) United States real property interests, (ii) its interests in real property located outside the United States, and(iii) any other of its assets which are used or held for use in a trade or business. 17. The only capital stock of Time Warner issued and outstanding is Time Warner Capital Stock. 18. As of the Effective Time, neither Time Warner nor any corporation related to Time Warner will own beneficially,or will have owned beneficially,during the five years preceding the Effective Time, any shares of stock of America Online or other securities, options, warrants or instruments giving the holder thereof the right to acquire stock of America Online or other securities issued by America Online other than the stock option held by Time Warner pursuant to the stock option agreement attached to the Merger Agreement as Exhibit A. 19. Time Warner will not take, and,to the best knowledge of the management of Time Warner,there is no plan or intention of any holders of Time Warner Capital Stock to take, any position on any Federal, state or local income or franchise tax return,or to take any other tax reporting position, that is inconsistent with the treatment of the Merger as an exchange within the meaning of Section 351 of the Code and the regulations promulgated thereunder and 003780-0007-00143-A018CJMX-0TH Simpson Thacher& Bartlett -6- [Date] Cravath, Swaine & Moore as a reorganization within the meaning of Section 368(a) of the Code and the regulations promulgated thereunder. 20. The Merger Agreement, the documents described in the Merger Agreement, the Proxy Statement, and the Form S-4 represent the entire understanding between or among(i)Holdco and its subsidiaries, (ii)Time Warner and its subsidiaries and(iii)America Online and its subsidiaries and, to the best knowledge of the management of Time Warner, between or among such entities and the affiliates and stockholders of Holdco,America Online and Time Warner with respect to the Merger and there are no other written or oral agreements regarding the Merger other than those expressly referred to in the Merger Agreement, the Proxy Statement and the Form S-4. 21. The undersigned is authorized to make all the representations set forth herein on behalf of Time Warner. Very truly yours, Time Warner By: Title: 003780-0007-00143-AO18CJI-IX-0TH EXHIBIT 3 As explained in Exhibit 2, the entity that currently holds the franchise and operates the cable system in your community will continue to do so notwithstanding this transaction. Moreover, the transaction will have no adverse consequences on the current terms and conditions of service and operation of the system. EXHIBIT 4 As explained in Exhibit 2, the pending transaction will not change the legal entity which operates the cable system in your community, and hence such entity will continue to be duly qualified to transact business in the state or other jurisdiction in which the system operates. EXHIBIT 5 Transferee will not continence business operations until consummation of the proposed transaction, and thus has never had an application for a cable franchise transfer or renewal dismissed or denied by any franchise authority. To the extent the question seeks such information as to an affiliated entity, any affiliate of either Time Warner Inc. or American Online Inc., the answer to question 4 is no, except as set forth below. We are aware of no instance in which an application by Time Warner Cable or its affiliates for renewal of a cable television franchise has been finally denied. Described below are the only instances, to the best of our knowledge, where applications for consent to transfer a franchise have been denied: (1) In early 1995, the City of Ithaca, New York determined to "withhold its authorization and consent" to a cable television transfer from Time Warner Entertainment Company, L.P. ("TWE")to an affiliated entity, Time Warner Entertainment - Advance/Newhouse Partnership, until certain issues in dispute between the TWE and the City are resolved. (2) In early 1995, the City of Winter Springs, Florida voted not to approve the application for consent to transfer of a franchise from TWE to Time Warner Entertainment - Advance/Newhouse Partnership. In each situation described above, TWE continues to hold the franchise and operate the system pending receipt of authorization to transfer the franchise to TWE's affiliate, Time Warner Entertainment - Advance/Newhouse Partnership. EXHIBIT 6 Time Warner Inc.holds direct and indirect partnership interests in Time Warner Entertainment Company, L.P. ("TWE"). In Connie Haschmann v. Time Warner Entertainment Company, L.P., U.S.D.C. E.D. Wisconsin, Case No. 97-3333, 97-3708, a jury found that TWE had violated the Americans With Disabilities Act ("ADA") and the Family Medical Leave Act ("FMLA")by failing to provide the plaintiff both with FMLA leave and reasonable accommodation under the ADA. r EXHIBIT 7 There are no documents, instruments, agreements or understandings for the pledge of stock of the transferee as security for loans or contractual performance. EXHIBIT 8 Attached are the most recent SEC Form 10-K and SEC Form 10-Q, as submitted to the Securities and Exchange Commission by each of Time Warner Inc. and America Online, Inc., as well as the respective Annual Reports of each company. s- r.. ). Y "4�'=3 � r - +� f..-'h' ..r v ` ,mow _''c�y /` � �1 x _ > _ .•_ ..$�'1i YL^w Our mission is to build a global medium as central to people's lives 1 as the telephone or television...and even more valuable 11z�' i7`;�I'. i�ili.5 Year Ended June 30 IN miLums uxi.Fss OYHLkMISE NOTED 1999 1998 1997 Subscription Services Revenues $ 3,321 $ 2,183 $ 1,475 Advertising,Commerce and Other Revenues 1,000 543 308 Enterprise Solutions Revenues 456 365 411 Total Revenues $ 4,777 $ 3,091 $ 2,197 Uperating Illcolnc' $ 578 $ GG S G Net Income' $ 396 $ 59 $ 10 EPS(rN IX11JA s)* $ 0.34 $ 0.06 $ 0.01 EBITDA" S 968 $ 302 $ lIl AOL Members (IN THOUSANDS) 17,619 12,535 8,636 Employees (IN WHOLE NuerRElcS) 12,100 8,500 7,400 on fi folly tared basis before one time charger, EBITDA:Etrni„S'Before!nuns;Tare.,Depmiarian find Anm tiention Year Ended June 30 Advertising,Commerce Total Revenues and Other Revenues EPS' EBIDTA• IN 61WONS IN MILLIONS 1N nOIJARS 1\MILLIONS S 1,000 .35 1,000 .30 4 S00 800 .25 3 600 20 f 600 L F� 2 400 AS S i; 400 I 200 .10 200 97 98 99 97 9S 99 97 98 99 97 98 9.9 As of June 30 Member Usage AOL Membership per Day' Netcenter Registrants ICQ Registrants 1 IN 1111uJONS IN ALI\UTFS IN MILLION'S 1\MILLIONS 20 60 16 40 ' 16 s0 is 12 30 12 40 r 30g E+ 8 t•: P F 20 20 1 x is 4 10 � � � 4 10 97 98 99 97 98 99 97 98 99 97 98 99 on o folly tared basis beim one time eha,ges ••Axmge dsning the fosnth goaeter of each yea, I July 1998 015AOL Mdhib&ship AOL • ► exceed 13 million >partner on a person- I.politics area >Web site and > launched by AOL t to-person online launched by AOL video launched and Bertelsmann auction service on for kids AG AOL 10 ULL1 [—S h a r eh oiderso The interactive medium has already charigpd our lives in remarkable ways,and it will become even more central to people and businesses around the world with the dawn of:he ' ro.o new millennium.At AOL we are helping to lead the way—as we have for the)as t 15 }'cars. fro The interactive experience is becoming inercasingly embedded in consumers' everyday 1011E Iles—everything from communicating,shopping, and keeping informed to investing, "< lrarnrng and just having fun.And nearly every company already has,or wi)l, put its business online—seeking the benefits of the medium's efficiencies, convenience and reach. s.," America Online is Icading this interactive revolution with our multiple brands. From the p ceminent mass-market interactive brand—our flagship AOL service—to Netscape,CompuServe, i 'Q,Digital City and MovicFone,we are able to target a wide range of opportunities.And to .upport all these brands,we have built a cost-efficient,shared infrastructure. x , '�• W.0 believe the success of our Company grows from our direct and focused relationships with [_ our customers—both members and partners.As our members'satisfaction and retention _ both reached all-time highs this past year,we are confident this focus on consumers will drive our continued leadership of the Internet industry. - Steve Case Ghfwr:.r: f:r,.: The Company's record financial and operational performance across our brands,as well as Chief Errrert.. )r:., the steps we took to broaden and deepen our capabilities,have generated tremendous momentum for the-coming year. In short,we are pleased to say that America Online has nc%•cr been stronger. Our fiscal 1999 highlights included: Revenues re.;:i:;,'. S., billion,a 55%increase over the previous fiscal year.Advertising,commerce and other revenues climbed 84SI:tt, c 1 brlho::,with a backlog of committed revenues of$1.5 billion.The operating margin,before special charges,reachc.i )6•,': in the fourth quarter. AOIs memh:r,hii-r.r.-%% frum 12.5 million to 17.6 million during fiscal 1999.Together with CompuServe,paying members totaled nearl%•?J nuli,on. m:luding more than 3 million combined AOL and CompuServe members outside the U.S. Registrants o'oar W'', l,t,e.l brands rounded out our multi-brand strategy with ICQ(38 million),Netscape Netcenter (17 million)an fl AOL L Inst.rnt Messenger(25 million). ►America O::lr:e ;,rcr r: with Netscape Communications,and joined forces with Sun Microsystems to create the Sun- Netscape Alli:n:c, tr,de%Llr,p comprehensive e-commerce solutions for companies seeking to join the Net Economy. .3 ►We introdu:crd:snl. rrr Australia,and prepared for AOL launches in Latin America and Hong Kong in FY 2000. These achievement,-and many more—strengthened our Company and kept up our momentum.More importantly,thc%.helped us build on our core strengths: -a •The most pov.crful collection of interactive brands-The largest base of paying customers in .� cyberspace-Th;strongest financial position in our history,sustained by multiple revenue streams i� •Alliances already in place to deliver services nationwide over broadband connectivity and other devices• Industry-Icading technological expertise that makes interactivity simple and accessible for consumers•Strong international joint venture partners -Leadership focus on key public policy issues•A nimble and quick management team-A world-class organization of more than 12,000 experienced employees. Taken together,these strengths position us to continue to deliver on our mission and to lead our s] industry into the exciting future of interactive services. Today,we are seting the next wave of Internet growth on the horizon.Interactiviry is fast moving beyond PCs tethered to narrowband telephone lines.Consumers will have the ability to connect anytime from anywhere,as well as enjoy robust new high-speed online services,from interactive TV Bob Pittman and handheld devices to broadband access. Presidett and _ Chief Operating Officer F surpasses connected co AOL according to nearly half of is formed as a joint venture and Meg Ryan s- 20 million Internet users in the with the Cisneros Group in You've Got M., i ! 5 registrants AOLJRoper Starch Cyberstudy Ai4 This new ,vo;ld of interactivirl is drivint;several significant n•cncls that -,ve beli.%•c will AMER MER ICA future of the medium. _4Worlds.#I;Internet First, online consumers are demanding new interactive tools and features to enh-1 `:online"service their online experience and make it even more convenient and valuable to everyday life_ Record meinbe�ship growth in Central to fulfilling this demand are the cliversc acquisitions we made over dw past year to r, cal 1.99.9 with more than 5... .•; broaden and enhance our offerings. Several of our newly acquired companies are hdpin`; ti, million new members ; build usage around key functions or categories,creating deeper and stickier relationships with '•; our members and other Internet consumers. `Members average moretthan >; 52 minutes a da g %X/c have moved quickly to maetruize Netscape's talent and technologies. For example,Nerseape's y'' s 15:7 expertise.has enabled the development of an enhanced Web-based Quick Checkout "wallet" technology.And,with more than 17 million registrants, the addition of Netscape Netcenter to o--;:.87%of members upgrado--;:. AOL 4.0 after successful (aune�i y � portfolio of brands now gives the Company the#I reach in the work and hones audiences. in September 1998 . Extending our leadership in the fast-browing Internet music sector,we acquired Spinner Network: � . 'AOL S.O,aaunches Fall 1999 and Nullsoft's Winamp and SHOUTcasr brands to provide the tools for our services and partncs with major innovations <� �! to develop customized music experiences.In addition,we bought MovicFone, the nation's larges; online movie guide and ticketing service,and When.eom,which allows us to offer the increasingl, Over 1 000 advertising popular application of online calendaring. .� me'r"ge_ar d.]"eontent partners During the year,we enhanced our core AOL service to provide even more personalization and build on its value proposition. Following the success of AOL 4.0,which experienced the fastest member adoption rate of any previous sofrware, we are introducing AOL 5.0, our next-gen- H eration client.Among its many exciting innovations is"You've Got Pictures!"—enabling our members to easily share photos online. We also successfully introduced CompuServe 2000,and starred growing that service's L '�>'60`6iarkets membership for the first time in years.We have positioned CompuServe as our value brand to digitaleity enlarge the overall online audience by attracting price-sensitive consumers.We are continuing nationwideto grow ICQ and extend its communicauans functionality with services like free Web-based k, fi ►s(ot# a-mail and ICQ-branded Internet telephony for its 38 million registrants.Also, Digital City _ oi ;tfian.;5:millio,"riunique O 9�.-µ'- offers local content in 60 markets nationwide,and has more than five million unique visitors *207m monthl We will continue to use our shared infrastructure to grow our brands and tar et :x:8h'r ' strate is market segments. aveg• '''les.•:-+,.�. �stio ped ;nline�jn:•�_Yr ..;;- Second,many Internet consumers are seeking to extend their interactive experience beyond - is sr..a,�•,w rr�QL�[�1e:�last�'b onths": : � the PC in an integrated,affordable and simple way. �-+�• .r �-.•k .t �. ate, LL We believe consumers are looking to AOL to pull all these interactive experiences together into a seamless and convenient package that requires,for example,just one e-mail address for any device or network.Over the past year,we extended our"AOL Anywhere"strategy with critical alliances oviefon and investments in interactive television,handheld connected devices and broadband connectivity. 0 *-� F.- V, %in Making real progress toward developing AOL TV for launch in the coming year,we concluded �►-POrr Ii•., ovle�ynfar��iia o a tel ` . . key partnering agreements with Philips Electronics for advanced set-top boxes enabled for AOL and tidCe�iig brand TV;Liberate Technologies for a comprehensive software platform;and Gemstar International �►Available in more than for electronic programming guides,which will be the cornerstone of the AOL TV experience. leets,nationwide;covenn o We also formed a strategic alliance with Hughes Electronics to offer AOL TV to Hughes' gm DIRECTV subscribers. F:' �s than 19,000 movie screens- MServesµl`out of a ems"? Taking a first step to extend AOL-branded interconnectivity to handheld devices,we are making: AOL e-mail available via personal organizers and we are exploring ways to develop a more full- AOL featured version of AOL software for other portable devices. Also,we are continuing to make progress in our commitment to embrace all technologies for "r= high-speed access as they become ready for the mass market.Such a broadband"tapestry"of Suppliers using multiple technologies will provide us with the broadest footprint in the market and help make broadband access a reality for mainstream consumers. January 1999 `\ �> 1, „�'`l-� O • • • • • • • • • • a to provide exclusive >exceeds 15 million > driven in >alliances formed ►launches broadcast news across 1998 holiday with Bell Atlantic, CompuServe 20. multiple brands sales by AOL SBC,Ameritech and GTE to pro- vide high-speed DSL access We have formed alliances with Bell Atlantic,SBC Conimunicailons,Ameritech and GTE to . ...... make our high-speed AOL Plus service available to our members Ehrow,h their DSL ij coIIIICc(IVI To ty.. gether, those companies cover 65%of all U.S. households. Contriburina to our Netcenter"ThrouQ' Netscape gh broadband tapestry is our strategic alliance with Hughes Electronics. li Hu�lies' DireclIC' 0 0 0 satelliteystcm,we will he able to offer broadband access to AOL members nationwide. 'illi on registrants Third, doing business and shopping online will become even more efficient and i-of-the _$W 6 e sites f xhii.Fortu ne:f6b convenient as e-commerce reaches the next level of success. EVCII as our Company scr Internet records for advcrEISIn<.,'and commerce revenLICS and for the total eompani's.are', Netscape sales of goods and service:,we continued to make it easier for bLISiI1CS.S,- 0 s t go online and consumers to make Internet purchases. rZ During fiscal 1999,we signed 58 mulri-year advertising and commerce agreements, each worth In excess of$1 million. In the Internet's largest ever advertising and marketing partnership,we reached a five-year agreement worth Lip to$500 million with First USA. CompuServe. Designed to enhance the shopping-experience across our brands,our Sliop0,7AOL initiative is serving a new industry standard for consumer convenience.Sl)op@A0L provides seamless �- "g-2 a-16 16)ran .1 1 on to our commerce partners sit ' 7 W integration sites new Web-based tools to help them promote their products even more effectively on the service. In the coming year, we will also introduceN. V;iWMrC- f 111-Mad n*c. Shop@Nccscapc and Shop@CoinpuScrvc. cs� r The Sun-Netscape Alliance has introduced"iPlanct"as its new product brand for its comprehensive,easy-to-deploy Internet infrastructure and c-commerce SOILIE1011S. By fiscal year's end, more than 300 companies,including over half of the Fortune 100, turned to the Alliance } rs i s to help put their businesses online. Fourth, Internet use worldwide will explode with the increasing availability of connected devices. Our multiple-brand strategy has strongly positioned us to take advantage of new opportunities cq 0 0 around the world,as well as support our long-term global growth and leadership. Over thepast year,AOL International (including AOL and Com uServe)to 3 million p members outside the US,just 2-1/2 years after the first AOL International service was founded in 19 Germany. Our strongest international brand,ICQ,continued its rapid overseas growth—with ;:. comm Gatto s,portal. nearly two-thirds of its 38 million registrants based outside the US. In addition,Netscape Mone n ton J] Netcenter also boasts a significant international audience. tee, ts We are pleased with the momentum this past year in our AOL Japan service, and our new Australian service is making inroads into that market.With the Cisneros Group,AOL Latin America is gearing up to launch localized AOL services in Brazil,Mexico and Argentina.We also made a strategic investment in China.com to strengthen our role in the AOL Hong Kong ON service to be launched in the coming year. .7 In Europe,we extended our leadership as the largest pan-European Internet service with our AOL and CompuServe brands. In one new initiative,we are employing our multiple-brand strategy to launch Netscape Online,a new Internet service,for the emerging"subscription-free" value market in the UK,where regulations allow ISPs to fund their basic operations with a share of local telephone tolls. Finally,as the medium becomes more central to people's lives,it will become increasingly critical that we build public trust and ensure that the medium serves the public interest. We are continuing to take the lead on the full range of public policy and social issues surrounding the growth of the Internet both in the United States and abroad. Many of the policy issues are ultimately centered on creating a' better environment for online consumers. Safeguarding children,protecting privacy,enforcing security and ensuring fair tax treatment of online purchases are just some of the issues on which America Online has led forge the Internet's largest 16 million 30 ►�dlaun�ches strategic alliance calendaring service advertising partnership— million with Sun Microsystems acquired by AOL 5 y=rs, up to$500 million registrants rr!. coalitions of industry rcnresrntatives,consumer advocates and government officials to hulk! effective, medium-wide soluEions. Shareholder Value At the same time,we arc also working hard Eo maximize the medium's positive impacE• }:or example,we will soon introduce exciting new tools that will enable people to donate their Elm- AOL vs.S&P 500 or money online and connect to the hundreds of thousands of nonprofit organizations and (X.csealESAS1.000INTUTMEm.) charities.We are also working to use this medium to reinvigorarc Elie political process and ilei. $700,000 1 more people connect more easily with 'governmenE services, and have invested significantly in empowering students, teachers and parents m use interactive services as a tool for greater learning achievement. Perhaps most important is our work on bridging the"digital divide" between the information technology"haves"and "have-nots"so the interactive revolution docs $600,000 not leave behind Elie very populations who need the empowerment of these cools the most.Th AOL Foundation, now in its third year,plays a leadership role on all these issues,and we are excited about its promise for the future. $$00,000 To bring the frill benefits of this medium to all people as quickly as possible, the Internet Hurst also continue to grow in an open environment,where competition,choice,and innovation can contin'. to flourish.We support a policy of open access for high-speed connectivity—over cable or phone $400,000 lines—for just this reason,because we believe that's the best way to ensure the online medium can grow to its full potential in a way chat benefits everyone. $$00,000 The Best Is Yet To Come If you walk the halls and through the workspaces-at America Online,yrnt'll see a core of dedicated, committed employees who come to work every day determined to make a different. $200,000 We're proud to work with them and share their excitement about the future. On walls throughout our buildings around the world,our mission statement reminds us all what that future holds: "To build a global medium as central to people's lives as the telephone or $100,000 television...and even more valuable." As we prepare to usher in the new century,we are excited about the future of the interactive medium and our Company.To prepare for the coining opportunities of a more connected work .....-.• we are working hard to broaden and deepen our capabilities.We will remain opportunistic as 1 1 1 1 1 1 1 1 1 the industry consolidates. Using our shared infrastructure,we will continue to drive the rapid development of AOL and our other brands,our"AOL Anywhere"strategy,and our s E .; international presence to make us even more central to the lives of our members and other Internet consumers. All of the past year's successes underscore that America Online has never been in a better financia: '— AOL operational and strategic position.We fully expect to accelerate this momentum on all frons in t;: -- S&P Soo coming year.America Online will be better positioned than ever to lead the emergence of the connected society,create even more shareholder value,and build a medium that we can be proud of. Warm regards, �C Steve Case� Bob Pittman Chairman and Chief Executive Officer President and Chief Operating Officer w co r� For more information about America Online,Inc.,visit our corporate XVeb site. June !S tops 17 million exceeds 17 million > the nation's#1 movie guide >form' s alliances with >Spmner.com, registrants and ticketing company Gemstar,DIREM Winamp,and Hughes Network SHOUTcast— Systems,Philips acquired by AOL Electronics,and Liberate Technologies Board of Directors A ' America Online,Inc. Senior Corporate Executives Senior Operating Executives Stephen M.Case Steve Case Barry Ariko Chairman of the Board Chairman&Chief Executive Officer Senior Vice President,Nctsat e Fnicr ttsc Gro &Chief)=xecutive Officer, `� P 1 America O line,Inc. Bob Pittman Mycr Berlow �' President&Chief Operating Officer President,Interactive Marketin� Daniel F.Akerson Ken Novack Ann Brackbill Chairman of the Board, .3 Nexrel Communications Inc. Vice Chairman Senior Vice President,Comm till lions Co-Chairman, Bill Raduehel Jan Brandt 9 F.agle Rivcr,L.L.C. Chief Teehnology Officer President,Marketing James L.Barksdale Kathy Bushkin Marshall Cohen Partner, Senior Vice President&Chief Senior Vice President,Brand Developntcnt Barksclale Group Communications Officer David Colburn Frank J.Caufield Paul Cappuecio President,}rosiness Affairs 3 Partner, Senior Vice President&General Counsel Jack Davies Kleiner Perkin Caurield&Byers President,International a General Alexander M.Haig Jr. Sheila Clark a� Senior Vice President,Legal&Corpora te Secretary Donn Davis Chairman&President, Chief Operating Officer,Interactive Properties C Worldwide Associates,Inc. Miles Gilburne _ Senior Vice President,Corporate Development Ted Leonsis William N.Melton President,Interactive Properties Group Chairman&Chief Executive Officer, Mike Kelly CyberCash,Inc. Senior Vice President&Chief Financial Officer Jim Martin Senior Vice President&General Manager,Net: Dr.Thomas Middelhoff Len Lcadcr d Chairman&Chief Executive Officer, President,Iti estntents Ray OaIethorpe Bertelsmann AG President,Technologies _ Jim MacGuidwin e Robert W.Pittman Scnior Vice President,Controller,Chief Jonathan Sachs President&Chief Operating OSenior Vice President&General Manager, Officer, Accounting&Budgeting Officer America Online,Inc. AOL Service Ray Murphy Steve Savignano f General Colin L.Powell Senior Vice President&"treasurer Senior Vice President,Netscape Enterprise Grot USA(Rct) George Vradenburg,III Barry Schuler Franklin D.Raines Senior Vice President for Global and President,Interactive Services Group Chairman&Chief Executive Officer, Strategic Policy Fannie Mae Mask Stavish sSenior Vice President,Human Resources Mayo Stuntx,Jr. Chief Operating Officer,Interactive Services Gro Audrey Weil q Senior Vice President&General Manager, CompuServe Service j� Shareholder Information Transfer Agent and Registrar America Online,Inc BankBoston,NA. i! do EquiScrve ® Form I" P.O.Box 8040 6 Copies of the Companys Annual Report on Form 10-K for the year ended June 30,1999 Boston,MA 022668040 !1 : (excluding exhibits hereto)are available without charge.upon request to the Corporate Investor Relations Number: (781)575-3400 Secretary,America Online,Inc.,22000 AOL Way,Dulles,VA 20166. Internet Address: http://www.equiscrve.com qj America Online,Inc.Web Site 1 Market Price of Common Stock For more information on the Company,please The following table sets forth the range of high and low sale prices for the Company's visit its Web Site at vvvow aoLwm/corp. Common Stock for the periods indicated and reflects allstock splits effacod by the Compar Forward-Looking Statements 1 Please refer to the section entitled'Forward-Looking Statements"under Managcment's For the glluror ended: High Iaw L Discussion and Analysis of Financial Condition and Results of Operations on Form 10-K for September 31,1997 S 10.06 $ 7.06 the year ended June 30,1999,which accompanies rt and is paof this Annual Report,fora December 31,1997 S 11.41 $ 8.00 discussion related to forward-looking statements contained in this Annual Report. Maw 31,1998 S 17.47 $ 1031 June 30,1998 S 27.41 S 1731 member 30,1998 S 35.13 S 17.50 :PJ 22000rue Headquarter December 31,1998 $ 80.00 $ 20.66 Du l les AOL Way,VA 20166 March 31,1999 $ 153.75 $ 67.00 Dulles June 30,1999 $ 175.00 $ 89.50 j Trademark Information The Company has never declared,nor has it paid,any cash dividends on its Common ! America Online,AOL,AOLnct,Buddy List,and the company's triangle logo are registered Stock.The Company currently intends to retain its earnings to finance future growth trademarks of Ameba Online,Inc AOLCOM,AOLNetMail,ICQ,Instant Messenger, and,therefore,does not anticipate paying cash dividends on its Common Stoll in the Digital City,AOL Itsstant Messenger,AOL NetFnd,Instant Message,and Parental Controls, foreseeable future. 1' are trademarks of America Online,Inc As of August 11,1999,the approximate number of stockholders of record of Compton Netscape is a registered trademark of Netscape Communications Corporation,a subsidiary of Stock was 25,006.This does not include the number of persons whose stock is in nom; America Online,Inc nee or"street name"accounts through brokers. CompuServe is a registered trademark of CompuServe Interactive Services,Inc.,a subsidiary of America Online,Inc. xchange Information c The Company's Common Stock is traded on the New York Stock Exchange under the Certain other names and logos that are protected by trademark appear throughout this symbol AOL" report.Rather than list the names and entities that own those trademarks or insert a trademark symbol with each mention of the name protected by trademark,America Online, Options on the Company's stock arc traded on the Chicago Board of Options Exchang: i Inc.states that it is using the names only for editorial purposes and to the benefit of the the American Stock Exchange,and the Pacific Stock Exchange. 7 trademark owner with no intention of infringing upon that trademark. Independent Auditors Legal Counsel Ernst&Young LLP Mintz,Levin,Cohn,Ferris,Glovslty,and Popeo,P. Vicnna,VA Boston,MA CITY OF ITHACA 108 East Green Street Ithaca,New York 14850-5690 O `J� OFFICE OF THE MAYOR ALAN J.COHEN CgPoO Telephone: 607/274-6501 Fax: 607/274-6526 t MAR 1 4 DEPART iwtc OF March 10, 2000 F'1'N(NG&DEVELOPMEW Mr. Tom Doheny General Manager Time Warner Cable 519 W. State Street Ithaca,NY 14850 Re: Extension of the informal Franchise Renewal Procedures Dear Mr. Doheny: I am writing, on behalf of the Consortium, to propose an extension of the informal negotiation period beyond the March 15, 2000 deadline. It is the Consortium's position that an additional two (2)months and no more, would be sufficient to develop an agreement regarding Time Warner's refranchise. This letter confirms that both parties desire and are in agreement with the proposed extension. It also confirms that all periods within which action must be taken under the Cable Act are tolled for the duration of this temporary suspension. Neither the Franchisors nor Time Warner waive any right to the formal franchise renewal process under Section 626 of the Cable Act during the time that the parties are engaged in informal franchise renewal negotiations. The parties hereby agree that the formal renewal procedures under Section 626 will be suspended until May 15,2000. Prior to that time, either the Franchisor or Time Warner may reactivate the formal renewal proceedings at any time upon written notice to the other. The parties agree to reserve the right to proceed with the formal renewal process upon written notice to the other party or parties. The Consortium and Time Warner agree to use their best efforts to have negotiation personnel available in a timely manner, as needed to complete negotiations. If this letter accurately reflects our understanding,please sign one of the enclosed copies and return it to my office. Thank you. Respectfully, Alan J Cohen Tom Do ey- Mayor General Manager *An Equal Opportunity Employer with an Affirmative Action Program" �a cc: Jean Rice,Rice Williams Associates Ben Curtis,Village of Lansing Patricia Dunn,City of Ithaca Jeannie Lee,City of Ithaca Cable Franchise Negotiating Team 290 Harbor Drive Gary R.Matz Stamford, CT 06902 Assistant General Counsel Tel 203-328-4865 Fax 203-328-4840 E-mail garv.matZ@tivcable.com > TIME WARNER vri`�?'s c FFICE CABLE March 27, 2000 Alan J. Cohen, MayorHA City of Ithaca G�� V A� 108 East Green St Ithaca,NY 14850-5690 RE: Merger of America Online, Inc. and Time Warner Inc. Dear Mr Cohen: I am writing in response to your letter of March 9, 2000 regarding our cable television franchise in the City of Ithaca (the "City"), and the proposed merger of America Online, Inc. ("AOL") and Time Warner Inc. ("Time Warner"). In your letter,you request responses to 19 questions,regarding the proposed merger and the new AOL Time Warner Inc., which I address individually below. 1) What representation will Time Warner and AOL have in managing Holdco? Please explain. As explained in the Agreement and Plan of Merger, included in the FCC Form 394 already provided to the City, the directors and officers of Holdco shall consist of equal numbers of representatives of AOL and Time Warner. Please see page 2 of the Merger Agreement. 2) Will there be any changes in rates or charges as a result of the stock-for-stock merger? No,there will be no changes in our rates or charges as a result of the stock-for-stock merger. 3) Will AOL/TW agree to comply with all existing franchise requirements and ordinance provisions? AOL/TW will not become the franchisee, but rather the ultimate parent of the franchisee. The Franchisee will remain the same entity following the merger as exists today, its obligations will not change. 4) Will the Company agree to incorporate the Memorandum of Understanding between Time Warner Inc.and America Online,Inc.regarding open access business practices dated February 29, 2000, in the transfer approval resolution. A Division of Time Warier Entertainment,L.P. foiS While AOL and Time Warner have had different views in the past on the legal authority of local franchising authorities("LFAs")to enact open access conditions, the companies firmly believe that, given the announcement of our MOU on Open Access Business Practices, given the commitments made by Steve Case and Jerry Levin on this subject,and given the dramatic movement in the marketplace to enact open access—placing such a condition on our merger at this time is unnecessary as we are committed to providing consumer choice in the provision of broadband Internet service throughout our franchise areas. 5) Do you anticipate any changes in the present program lineup? We do not anticipate any changes in the present program lineup as a result of the merger. 6) When will Internet access be open to all or several ISP's? What financial, legal or technical requirements will be made for ISP's? While AOL and Time Warner's MOU is subject to existing Time Warner obligations, such as its contracts with Road Runner(an ISP in which Time Warner has a minority interest),AOL and Time Warner are committed to providing a choice of ISPs over Time Warner Cable as quickly as possible. Time Warner will work with its Road Runner partners to try to achieve that goal even before its current obligations expire at the end of 2001. The MOU is the framework upon which commercially negotiated business contracts will be entered into between AOL Time Warner and ISPs. Specific financial, legal or technical terms have not yet been developed. 7) What will be the policy regarding Internet user privacy,and the sale of such Internet customer data to third parties? Both AOL and Time Warner have been, and remain, committed to ensuring consumer privacy. The combined company will jointly develop privacy policies that meet or exceed any particular legal requirement in order to ensure consumer trust and confidence. 8) Will the Company charge ISP's for use of cable plant to provide high-speed Internet access? AOL and Time Warner have made clear in their MOU that consumers will be offered a choice of ISPs on the Time Warner cable systems. As noted above,however,the specific terms of implementing the MOU have not yet been developed. 9) How will this transfer of control affect the development of local telephone service competition? Does the Company intend to provide local telephone service competition? The merger will not affect the development of local telephone service competition. We do not currently have plans to provide local telephone service in the Ithaca area. 10) Please indicate if Internet services offered and any access fees related to Internet service or telephony service will be calculated for franchise fees as a part of the system's gross revenues. Time Warner offers Internet service to subscribers via Road Runner. Time Warner pays franchise fees with respect to revenues derived from the provision of Road Runner, and will continue to do so unless this service is deemed not to be a"cable service." As you know, federal law limits the imposition of a franchise fee to revenue derived from"cable service." 11) Does the Company have plans to develop a metropolitan wide telecommunications network? If so,please describe such plans and a time frame for their implementation. We are unsure about what you mean by a"metropolitan wide telecommunications network." 12) What is the Company's position regarding the previous transfer request which was denied by the City of Ithaca in 1995? Please explain. The City of Ithaca denied the request for transfer from Time Warner Entertainment Company, L.P. ("TWE") to Time Warner Entertainment - Advance/Newhouse Partnership. We did not agree with the City's previous action, including the purported basis for that action,but in the hope of maintaining a positive constructive working relationship with the City,we chose not to contest that action but rather to abide by the City's decision not to transfer the franchise. The franchise is held by Time Warner Entertainment Company,L.P. 13) Given the agreement and plan of merger between America Online and Time Warner, is there a stock price at which the merger may be called off by one or another of the parties? This question is asked relative to the decline in the share price of America Online since the merger announcement. No.There is no agreement on a stock price at which the merger may be called off by one or another of the parties. 14) How will this transfer of control impact the current Time Warner Internet access service called Road Runner? Road Runner, which provides high-speed Internet access and content over cable systems including Time Warner cable systems, is a joint venture in which Time Warner holds an indirect 40 percent ownership interest. It is not yet known whether or how this merger will impact Road Runner. 15) Will representatives of AOL fill the positions vacated on the Time Warner Cable Board vacated by MediaOne? Please note that there is no Time Warner Cable Board. We assume you are referring to the Management Committee of TWE. To the extent necessary,representatives of AOL Time Warner Inc. will fill the positions on the TWE Management Committee vacated by MediaOne. 16) Please describe the operation of the Time Warner Cable Management Committee prior to and after this deal. There will be no impact on the Time Warner Cable Management Committee as a result of this pending transaction. 17) What is the target settlement date of the agreement and plan of merger. We will close upon the receipt of required shareholder and regulatory approvals, which we hope will occur not later than this fall. 18) What is the percent of cable subscribers involved in the merger that must be transferred in order for the merger to occur. This information is confidential and is not relevant to the City's review of the Applicant's legal,technical and financial qualifications. 19) How will this merger affect the financial position of the Franchisee? The FCC Form 394 submitted to the Cities included copies of the most recent annual report,SEC Form 10-K and SEC Form 10-Q filed by each Time Warner and America Online. Thus,the Cities have adequate financial information to determine that the AOUTWI merger will have absolutely no adverse consequences on the franchisee's continued financial qualifications to operate the respective cable system(s) after consummation of the AOUTWI merger. Additional financial information is contained in the pro forma consolidated financial statements for AOL Time Warner Inc.contained on SEC Form 8-K filed on January 10,2000 and the S-4 filed by AOL Time Warner Inc.on February 11,2000 attached. Further evidence of the combined financial strength of the merged AOL Time Warner entity is set forth in the independent in-depth reports prepared by Merrill Lynch& Co., Paine Webber and Goldman Sachs,which are also attached. I trust that you will find this letter and the Attachment responsive to the questions posed in your March 9, 2000 letter. Very truly yours, 4 fatz cc: Mary Cotter Tom Doheny RICE, WILLIAMS ASSOCIATES JUN 19 20 June 16, 2000 ppftTl`�riVT 0 pLpt�NiNG&DEVELOPMENT Ms. Rose Tucker Planning & Development Dept. City of Ithaca 108 East Green Street Ithaca, NY 14850 Dear Rose: Enclosed are additional questions for Time Warner regarding the proposed transfer of the cable television franchise. These questions concern the response the Company may have regarding previous issues raised by the City in a previous transfer of ownership request. These questions should be forwarded as quickly as possible to the local manager. If you have any questions, please do not hesitate to call. Sincerely, nC. i!Iiji, .hD Partner DCW/jms Enclosure cc: Mr. Thys Van Cort, Director of Planning& Development Mr. Alan J. Cohen, Mayor FILE COPY 2121 K Street,NW 209 Elden Street Suite 800 Suite 200 Washington,DC 20037 Herndon,VA 20170 Phone:(202)737.2400 Phone:(703)467-9833 r �� THE ITHACA AREA CABLE CONSORTIUM,NY QUESTIONS TO TIME WARNER CABLE June 16, 2000 On October 25, 1994 three resolutions were unanimously passed by the Ithaca City Cable Commission. In addition, in 1995 the City of Ithaca denied a request for transfer of the cable television franchise. During these past several years, the City has had no response from the franchisee regarding any of the above resolutions. 1. Please indicate if Time Warner Cable has ever refunded the $1.74 per month,pro-rated for partial months, to all customers charged for service prior to September 12, 1994 regarding the new Cable Plus service. 2. The Assistant Deputy Director of the New York State Cable Commission of Cable Television at a public hearing held in Ithaca on July 13th, 1994, advised Time Warner Cable's General Manager that the "PEG access franchise fee cannot legally be charged as a franchise fee." What action has Time Warner Cable taken on this issue,? Please indicate what resolution to this issue Time Warner Cable plans on pursuing. 3. Please indicate for the years 1995 through 1999 that the pool of capital funds for PEG access equipment has been at least 2% of gross City revenues derived from the operation of the cable system. The City looks forward to your responses on these three questions so that the City may take action upon the latest request for transfer. CITY OF ITHACA Cr=r =,rt 108 East Green Street Ithaca, New York 14850-5690 fs •'� DEPARTMENT OF PLANNING AND DEVELOPMENT H. MATTHYS VAN CORT, DIRECTOR OF PLANNING AND DEVELOPMENT DOUGLAS B. McDONALD, DIRECTOR OF ECONOMIC DEVELOPMENT Telephone: Planning& Development-607/274-6550 Community Development/IURA-'607/274-6559 Fax: 607/274-6558 FAX TRANSMITTAL DATE: June 26,2000 NO. PAGES: 3 (including cover sheet) TO: FAX# 703-467-9849 ATTENTION Jean Rice (Individual/Department) COMPANY Rice,Williams Associates FROM: Rosemarie Tucker FAX#(607)274-6558 SUBJECT: Correspondence from Time Warner Cable (Tom Doheny) REMARKS: At the request of H. Matthys Van Cort,the following letter is being sent to you by this fax: • Letter dated June 26, 2000, from Tom Doheny, General Manager,responding to letter from Rice, Williams Associates (June 19, 2000)regarding the transfer of cable television franchise from Time Warner Entertainment Company,L.P. to Time Warner Entertainment- Advance/Newhouse Partnership in 1994. A copy of the Time Warner Cable letter has been given to Patricia Dunn, Assistant City Attorney, City of Ithaca,New York. High Priority X Confidential Normal P4100 h:\faxes\jean rice.doc(06/26/00) /-- Ye, �`- "An Equal Opportunity Employer with a commitment to workforce diversification." .or A) � JUN 2-6 200Q `s TIME WARNER (1 CABLE �� CCL L June 26, 2000 �'`� H. Matthys Van Cort Director of Planning&Development City Of Ithaca 108 East Green Street Ithaca,New York 14850 Dear Mr. Van Cort: I am writing in response to your June 19, 2000 letter regarding the transfer of our cable television franchise from Time Warner Entertainment Company,L.P. to Time Warner Entertainment-Advance/Newhouse Partnership in 1994. With respect to the first question,refunds were credited to customer accounts in August of 1995. I am enclosing three letters between Time Warner Cable and Anne Dalton,then Director of The Consumer Service Unit for the then New York State Commission on Cable Television. All three letters were copied to then Mayor, Benjamin Nichols, and Jean Finley,then head of the City Cable Commission. With respect to the second question,in response to the Ithaca City Cable Commission resolution passed on October 25, 1994, Time Warner corrected the wording of the itemization to read"PEG Access Fee." You should note that our basic service rate, inclusive of the PEG Access Fee, are well below that permitted under Section 19.1 of our contract with the City. Below is a chart itemizing our permissible rate under the contract and the actual rate charged our customers for the years 1994 through 2000. Basic Service Rate Franchise Permitted Rate (including PEG Access Fee) & 5%Franchise fee) 1994 $ 14.31 $16.14 1995 $ 14.97 $16.95 1996 $ 14.71 $17.80 1997 $ 15.21 $18.69 1998 $ 14.97 $19.62 1999 $ 14.96 $20.60 2000 $ 17.69 $21.63 With respect to the third question,because we cannot determine in advance what our actual revenues will be for any given year, in July of each year,during the Time Warner Cable Budget Process for the next calendar year, we estimate the 2% capital fund for PEG Access. In January of each year after actual revenues are determined for the previous calendar year,the total expenditures from the PEG Access capital fund are tallied and an adjustment is made and added to the July projection to"true up"in the following calendar year. Each year, because of the expansion of programming services, particularly in 1998, with the unanticipated launch of RoadRunner,our July budget projection was off to a greater extent than in previous years. Nonetheless, as you J0Il"It.�/11/1' ilirrf 1/h,1,'11. Af 14.�50 Ta!6017.2 7-2,7X 7 75 r � - June 26,2000 H. Matthys Van Cort Page 2 will note below, we have kept records of actual expenditures which reflect the amount budgeted, and the 2% capital fund. To reconcile actual expenditures with the two percent requirement, in July, 1999 we budgeted $85,000 ($72,000(2%estimate)+$13,000 reconciliation for previous years)for 2000. Actual Expenditure 2%Obligation 1995 $60,721 $60,993 1996 $62,049 $65,316 1997 $63,253 $67,816 1998 $65,891 $70,682 1999 $67,818 $82,675 I trust this helps to clarify matters. If you have any further questions,please do not hesitate to call me. Very trul s, Thomas P. Doheny General Manager cc: Trish McCausland Henry Pearl �••° I CITY OF ITHACA 108 East Green Street Ithaca, New York 14850-5690 i 1 �'p�ti,�••• ,%� DEPARTMENT OF PLANNING AND DEVELOPMENT PoIy�O H. MATTHYS VAN CORT, DIRECTOR OF PLANNING AND DEVELOPMENT DOUGLAS B. McDONALD, DIRECTOR OF ECONOMIC DEVELOPMENT Telephone: Planning& Development-607/274-6550 Community Development/IURA- 607/274-6559 Fax: 607/274-6558 FAX TRANSMITTAL DATE: June 27,2000 NO. PAGES: 6 (including cover sheet) TO: FAX# 703-467-9849 ATTENTION Jean Rice (Individual/Department) COMPANY Rice,Williams Associates FROM: Rosemarie Tucker FAX#(607) 274-6558 SUBJECT: Attachments from Time Warner Cable(Tom Doheny) REMARKS: I contacted Tom Doheny at Time Warner Cable on June 26h to tell him he did not include the three attachments with his letter dated June 26, 2000,regarding the transfer of cable television franchise from Time Warner Entertainment Company,L.P. to Time Warner Entertainment- Advance/Newhouse Partnership in 1994. He faxed those attachments to me yesterday afternoon. I am now sending them on to you. I will also give a copy to Patricia Dunn,Assistant City Attorney, City of Ithaca,New York. High Priority X Confidential Normal h:\faxes\jean rice.doc(06/27/00) -'a r a An Equal Opportunity Employer with a commitment to workforce diversification." Z7 C� J �.::td�..+..r.......,,. ...... +16ear 5404 TIME WARNER CABLE 484 P02 JUN 26 100 16:26 T f M E W A R N I R C A B L E June 29, 1995 Ms. Anne V. Dalton, Director Consumer Service Unit New York State Commission on Cable Television 5 Empire State Plaza Albany, NY 12223-1552 Re: Cable Plus Service Tier Dear Ms. Dalton: As requested in your June 8, 1995 correspondence, the following subscriber numbers and dollar amounts represents total customers and credits that are being issued to our existing qualifying customers. We have two billing cycles in which subscribers were charged. Cycle A represents billing from the 1st through the 31st of each month,while Cycle B subscribers are billed from the 15th to the 15th of each month. We are crediting 3722 Cycle A subscribers that were billed for CablePlus from 7/31/94- 9/12/94, each $2.44. The total for Cycle A credits represents 59081.68 We have credited 5194 Cycle B subscribers that were billed for CablePlus from 7/15/94 - 9/12/94, each 53.31. The total for Cycle B represents $17, 192.14. Total existing subscribers credited is 8916. Total credits amount to $269273.82. The Cycle A credit of$2.44 was determined by taking the subscribers billed for the period of 7/31/94- 8/31/94 and crediting back the f M 51.74 per (month charge for CablePlus. The additional S.70 is a prorate for the service from . 9/1194- 9/12/94. 272.34x6 519 West State Street Ithaca, Now York 11$50 1-800-676-2223 +16072775404 TIME WARNER CABLE 584 P03 JUN 26 '00 16: 6 The Cycle B credit of$3.31 was determined by taking the subscribers billed for period of 7/15/94-8/15194 and crediting back the full $1.74 per month charge for CablePlus. The additional $1.57 is a prorate for the service from 8/15/94- 9/12/94. Due to the extensive manual labor involved in determining the start date of service for each individual subscribers, we have credited all subscribers in each cycle, the same amounts. We will begin applying the credits upon written approval from you. We appreciate your time and patience in this matter. Sincerely, �I boc McQuade Business Manager cc: The Honorable Benjamin Nichols, Mayor, City of Ithaca Jean Finley, Chairperson, Ithaca Cable Commission John L. Grow, Counsel Steven A. Shaye, Director Municipal Assistance +16072775404 TIME WARNER CABLE 984 PO4 JUN 26 100 16:27 NEW YORK STATE ' COIV MSSION ON CABLE TELEVISION Yrp(N� 5 EMPIRE STATE PLAZA ALBANY, NEW YORK 12223-1552 (518)474-2212 FAX (518)473-2365 July 25, 1995 Mr. Ray McCabe Manager American Community Cable 519 West State Street Ithaca, New York 14850 Dear Mr. McCabe: This is to acknowledge receipt of your June 29, 1995 correspondence, outlining the amount of credit and number of qualified Cable Plus subscribers to receive said credit for the periods, July 31, 1994 -- August 31, 1994 and September 1, 1994 - September 12, 1994. These credits address the concerns raised by the Commission relative to the introduction of Cable plus service last July. American Community Cable is directed to process the appropriate credits as expeditiously as possible and to provide the Commission with a statement and/or documents indicating issuance of refunds to all affected subscribers. Sincerely, AlV. Dalton Director, Consumer Services AVD;glr cc: The Honorable Benjamin Nichols, Mayor, City of Ithaca Jean Finley, Chairperson, Ithaca Cable Commission John L. Grow, Counsel, CCTV Steven A.Shaye, Director Municipal Assistance, CCTV