We cannot assure you that we will obtain all regulatory approvals to
complete the merger or that the granting of these approvals will not involve
the imposition of conditions to the completion of the merger or require changes
to the terms of the merger. These conditions or changes could result in the
conditions to the merger not being satisfied.
Accounting Treatment. We intend to account for the merger under the purchase
method of accounting for business combinations.
Completion and Effectiveness of the Merger. We will complete the merger when
all of the conditions to completion of the merger are satisfied or waived in
accordance with the merger agreement. The merger will become effective when we
file certificates of merger with the State of Delaware. We expect to complete
the merger during the fall of 2000.
Stock Option Agreements (see page 76)
Each of America Online and Time Warner has granted the other company an
option to purchase up to 19.9% of its outstanding shares. An option becomes
exercisable if the grantee becomes entitled to receive the larger of the two
termination fees payable by the grantor of the option under the merger
agreement as described on page 75. The grantee's profit under its stock option
agreement is capped at the amount of the larger of the two termination fees
payable by the grantor under the merger agreement.
Voting Agreement (see page 79)
America Online has entered into a voting agreement with Mr. Turner and his
affiliates who are parties to the agreement pursuant to which these Time Warner
stockholders have agreed to vote substantially all their shares of Time Warner
common stock in favor of the adoption of the merger agreement. As of the record
date, these stockholders owned shares representing approximately [ ]% of the
voting power of Time Warner capital stock entitled to vote at the Time Warner
Market Price Information
Shares of each of America Online and Time Warner common stock are traded on
the New York Stock Exchange. On January 7, 2000, the last trading day before
the public announcement of the merger, America Online common stock closed at
$73.75 per share and Time Warner common stock closed at $64.75 per share. Based
on the Time Warner common stock exchange ratio, 1.5, the pro forma equivalent
per share value of the Time Warner common stock on January 7, 2000 was equal to
approximately $110.63 per share.