Board of Directors
America Online, Inc.
January 9, 2000
Warner were generally consistent with Morgan Stanley & Co. Incorporated's
research analysts' estimates regarding Time Warner, which was acknowledged by
the managements of AOL and Time Warner. With respect to the anticipated
strategic, financial and operational benefits of the Mergers, we assumed that
the information provided was reasonably prepared on bases reflecting the best
currently available estimates and judgments as to the strategic implications
and operational benefits anticipated to result from the Mergers. We also
assumed that the final form of the Merger Agreement will be substantially the
same as the last draft reviewed by us. In addition, we have assumed, with your
consent, that the Mergers will be treated as a tax-free "reorganization" for
federal income tax purposes.
We are not expressing any opinion as to what the value of the Holdco Common
Stock actually will be when issued to stockholders pursuant to the Mergers or
the price at which the Holdco Common Stock will trade subsequent to the
Mergers. We have not made or been provided with an independent evaluation or
appraisal of the assets or liabilities (contingent or otherwise) of AOL or Time
Warner nor have we made any physical inspection of the properties or assets of
AOL or Time Warner. We have not been asked to consider, and our opinion does
not address, the relative merits of the Mergers as compared to any alternative
business strategies that might exist for AOL or the effect of any other
transaction in which AOL might engage. Our opinion is necessarily based upon
information available to us, and financial, stock market and other conditions
and circumstances existing and disclosed to us, as of the date hereof.
Salomon Smith Barney Inc. has been engaged to render financial advisory
services to AOL in connection with the Mergers and will receive a fee for our
services, a significant portion of which is contingent upon the consummation of
the Mergers. We also will receive a fee upon the delivery of our opinion. In
the ordinary course of our business, we may hold or actively trade the equity
and debt securities of AOL and Time Warner for our own account or for the
account of our customers and, accordingly, may at any time hold a long or short
position in such securities. In addition, we and our affiliates (including
Citigroup Inc. and its affiliates) may maintain business relationships with AOL
and Time Warner.
Our advisory services and the opinion expressed herein are provided for the
use of the Board of Directors of AOL in its evaluation of the proposed Mergers,
and our opinion is not intended to be and does not constitute a recommendation
to any stockholder as to how such stockholder should vote in connection with
the proposed Mergers. Our opinion may not be published or otherwise used or
referred to, nor shall any public reference to Salomon Smith Barney Inc. be
made, without our prior written consent which consent will not be unreasonably
Based upon and subject to the foregoing, our experience as investment
bankers, our work as described above and other factors we deemed relevant, we
are of the opinion that, as of the date hereof, the Exchange Ratio is fair,
from a financial point of view, to AOL.
Very truly yours,
/s/ SALOMON SMITH BARNEY INC.