This section of the joint proxy statement-prospectus describes material
aspects of the proposed merger, including the merger agreement, the stock
option agreements and the voting agreement. While we believe that the
description covers the material terms of the merger, this summary may not
contain all of the information that is important to you. You should read this
entire joint proxy statement-prospectus and the other documents we refer to
carefully for a more complete understanding of the merger. In addition, we
incorporate important business and financial information about each of us into
this joint proxy statement-prospectus by reference. You may obtain the
information incorporated by reference into this joint proxy statement-
prospectus without charge by following the instructions in the section entitled
"Where You Can Find More Information" that begins on page 131 of this joint
Background of the Merger
In September 1999, Stephen M. Case, Chairman and Chief Executive Officer of
America Online, and Gerald M. Levin, Chairman and Chief Executive Officer of
Time Warner, participated in a meeting of media and technology executives at
the Global Business Dialogue on E-Commerce in Paris. Later in September,
Messrs. Case and Levin participated in a number of meetings at the Fortune
Global Forum and related events, which took place in Shanghai and Beijing.
During the time they spent together at these conferences, Messrs. Case and
Levin discussed a variety of topics related to their businesses. They did not,
however, discuss the possibility of combining their businesses.
In mid-October, Mr. Case spoke with Mr. Levin to suggest that they consider
a business combination involving America Online and Time Warner. Mr. Case
proposed that the combination be accomplished through a stock-for-stock merger
of equals. In addition, Mr. Case proposed that he would serve as chairman of
the combined company and that Mr. Levin would serve as chief executive officer
of the combined company. On October 25, 1999, Messrs. Case and Levin had
another conversation to discuss further these matters.
On November 1, 1999, Messrs. Case and Levin met for dinner and continued
their discussion about a possible business combination, elaborating on the
mutual strategic benefits of a merger of equals and discussing the structure
and implementation of a business combination. That discussion included a
reaffirmation of the fundamental principles of the business combination first
outlined in the mid-October conversation, and ended with a mutual intention to
pursue discussions further.
In conjunction with the initial discussions, the companies began consulting
with various financial and legal advisors about issues raised in the
discussions among their executives. America Online retained Salomon Smith
Barney as its financial advisor and Simpson Thacher & Bartlett and Mintz,
Levin, Cohn, Ferris, Glovsky and Popeo, P.C., as its legal counsel. Time Warner
retained Morgan Stanley as its financial advisor and Cravath, Swaine & Moore as
its legal counsel. Working with these advisors, America Online and Time Warner
began conducting their due diligence investigations using publicly available
materials and began analyses of a possible combination. These consultations
continued throughout the remaining merger discussions.
Following the November 1, 1999 dinner meeting between Messrs. Case and Levin,
Kenneth J. Novack, Vice Chairman of America Online, and Miles Gilburne, then
the Senior Vice President, Corporate Development of America Online, had several
telephone conversations with Richard J. Bressler, Chairman and Chief Executive
Officer of Time Warner Digital Media, to discuss the structure and
implementation of a stock-for-stock merger of America Online and Time Warner.
Over the next two months, Messrs. Novack and Bressler had periodic telephone
conversations to discuss the proposed combination.
On November 9, 1999, Messrs. Novack, Gilburne and Bressler met to continue
to discuss the strategic rationale for a merger, the appropriate exchange ratio
and the governance and management structure of the resulting entity. The
discussions remained at a general level, and no agreement regarding the
specific terms of a possible stock-for-stock merger was reached.