SCHEDULE 14A
(Rule 14A-101)
Information Required in Proxy Statement
Schedule 14A Information
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934
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Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Under Rule 14a-12
AOL TIME WARNER INC.
(Name of Registrant as Specified In Its Certificate)
--------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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[AOL TIME WARNER LOGO]
March 27, 2001
Dear Stockholder:
You are cordially invited to attend the 2001 Annual Meeting of Stockholders
of AOL Time Warner Inc. on Thursday, May 17, 2001, beginning at 10:00 A.M.,
local time, at the Apollo Theatre, 253 West 125th Street, New York, New York
10027. We look forward to greeting those of you who are able to attend this
first meeting of stockholders of AOL Time Warner.
Please vote on all the matters listed in the enclosed Notice of Annual
Meeting of Stockholders. Your Board of Directors recommends a vote "FOR" the
proposals listed as items 1 and 2 in the Notice and described in the enclosed
Proxy Statement.
Whether or not you plan to attend in person, it is important that your
shares be represented and voted at the Meeting. After reading the enclosed
Notice and Proxy Statement, please submit your proxy or voting instructions by
telephone, over the Internet or by using a traditional proxy or instruction
card. If you submit your proxy over the Internet, you will have the
opportunity to agree to receive future stockholder documents electronically,
via e-mail, and we encourage you to do so. If you choose to vote this year by
traditional proxy or instruction card, please sign, date and mail the card in
the envelope provided.
All stockholders of record on March 23, 2001 are invited to attend the
Annual Meeting. No ticket is required for admission. The Annual Meeting will
be audiocast live on the Internet at http://www.aoltimewarner.com/investors.
Sincerely,
/s/ Stephen M. Case /s/ Gerald M. Levin
Stephen M. Case Gerald M. Levin
Chairman of the Board Chief Executive Officer
YOUR VOTE IS IMPORTANT. PLEASE PROMPTLY SUBMIT YOUR PROXY
BY MAIL, TELEPHONE OR INTERNET.
AOL TIME WARNER INC.
75 Rockefeller Plaza
New York, NY 10019
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To be held May 17, 2001
The Annual Meeting (the "Annual Meeting") of Stockholders of AOL Time Warner
Inc. (the "Company") will be held:
Date: Thursday, May 17, 2001
Place: The Apollo Theatre
253 West 125th Street
New York, New York 10027
Time: 10:00 A.M., local time
for the following purposes:
1. To elect 16 directors for a term of one year and until their successors
are duly elected and qualified;
2. To approve the appointment by the Board of Directors of the firm of
Ernst & Young LLP as independent auditors of the Company for 2001; and
3. To transact such other business as may properly come before the Annual
Meeting.
Only holders of the Company's common stock and series common stock at the
close of business on March 23, 2001, the record date, are entitled to vote on
some or all of the matters listed in this Notice of Annual Meeting.
AOL Time Warner Inc.
Paul T. Cappuccio
Secretary
March 27, 2001
THE ANNUAL MEETING WILL START PROMPTLY AT 10:00 A.M. TO AVOID DISRUPTION,
ADMISSION MAY BE LIMITED ONCE THE MEETING STARTS. PLEASE SIGN AND DATE THE
ENCLOSED PROXY AND RETURN IT PROMPTLY IN THE ENCLOSED PRE-ADDRESSED REPLY
ENVELOPE OR SUBMIT YOUR PROXY BY TELEPHONE OR THE INTERNET, WHETHER OR NOT
YOU PLAN TO ATTEND THE ANNUAL MEETING. ANY RECORD HOLDER WHO IS PRESENT AT
THE MEETING MAY VOTE IN PERSON INSTEAD OF BY PROXY, THEREBY CANCELLING ANY
PREVIOUS PROXY. YOU MAY NOT APPOINT MORE THAN THREE PERSONS TO ACT AS YOUR
PROXY AT THE MEETING.
AOL TIME WARNER INC.
75 Rockefeller Plaza
New York, NY 10019
PROXY STATEMENT
This Proxy Statement is being furnished in connection with the solicitation
of proxies by the Board of Directors of AOL Time Warner Inc., a Delaware
corporation (the "Company"), for use at the Annual Meeting of the Company's
stockholders (the "Annual Meeting") to be held on Thursday, May 17, 2001, at
the Apollo Theatre, 253 West 125th Street, New York, New York 10027,
commencing at 10:00 A.M., local time, and at any adjournment or postponement,
for the purpose of considering and acting upon the matters set forth in the
accompanying Notice of Annual Meeting of Stockholders.
This Proxy Statement and accompanying forms of proxy and voting instructions
are first being mailed on or about March 30, 2001 to stockholders entitled to
vote at the Annual Meeting.
This is AOL Time Warner's first proxy statement and annual meeting of
stockholders since the completion of the merger (the "AOL-TW Merger") of
America Online, Inc. ("America Online") and Time Warner Inc. ("Time Warner")
on January 11, 2001 (the "Merger Date"). Thus, certain information in this
proxy statement necessarily pertains to those two companies prior to the AOL-
TW Merger.
Voting at the Annual Meeting; Record Date
Only holders of record of the Company's voting stock at the close of
business on March 23, 2001, the record date, are entitled to notice of and to
vote at the Annual Meeting. At that time, the number of shares entitled to
vote and their voting rights were:
. 4,245,674,807 shares of Common Stock, par value $.01 per share ("Common
Stock"), each of which is entitled to one vote on all matters properly
submitted at the Annual Meeting; and
. 171,185,826 shares of Series LMCN-V Common Stock, par value $.01 per
share ("Series LMCN-V Stock"), each of which is entitled to 1/100 of a
vote on the election of directors.
The presence, in person or by proxy, of the holders of a majority of the
votes entitled to be cast at the Annual Meeting is necessary to constitute a
quorum.
Required Vote
. A plurality of the votes duly cast is required for the election of
directors.
. The affirmative vote of a majority of the votes duly cast by the holders
of Common Stock is required to approve the other matters to be acted
upon at the Annual Meeting.
An abstention is deemed "present" but is not deemed a "vote cast." As a
result, abstentions and broker "non-votes" are not included in the tabulation
of the voting results on the election of directors or issues requiring
approval of a majority of the votes cast and, therefore, do not have the
effect of votes in opposition. A broker "non-vote" occurs when a nominee
holding shares for a beneficial owner does not vote on a particular proposal
because the nominee does not have discretionary voting power on that item and
has not received instructions from the beneficial owner. Broker "non-votes"
and the shares as to which a stockholder abstains are included in determining
whether a quorum is present.
Proxies and Voting Procedures
All shares entitled to vote and represented by properly executed proxies
received prior to the Annual Meeting, and not revoked, will be voted as
instructed on those proxies. If no instructions are indicated, the shares will
be voted as recommended by the Board of Directors. No stockholder of record
may appoint more than three persons to act as his or her proxy at the Annual
Meeting.
If any other matters are properly presented at the Annual Meeting for
consideration, the persons named in the enclosed form of proxy will have
discretion to vote on those matters in accordance with their own judgment to
the same extent as the person signing the proxy would be entitled to vote. In
accordance with the Company's By-laws, the Annual Meeting may be adjourned,
including by the Chairman, in order to permit the solicitation of additional
proxies. The Company does not currently anticipate that any other matters will
be raised at the Annual Meeting.
Many stockholders will have the option to submit their proxies or voting
instructions electronically through the Internet or by telephone. Stockholders
should check their proxy card or voting instructions forwarded by their
broker, bank or other holder of record to see which options are available.
Stockholders submitting proxies or voting instructions via the Internet should
understand that there may be costs associated with electronic access, such as
usage charges from Internet access providers and telephone companies, that
would be borne by the stockholder.
Any stockholder of record may revoke a proxy at any time before it is voted
by (i) filing with the Secretary of the Company, at or before the taking of
the vote at the Annual Meeting, a written notice of revocation or a duly
executed proxy, in either case dated later than the prior proxy relating to
the same shares or (ii) attending the Annual Meeting and voting in person
(although attendance at the Annual Meeting will not of itself revoke a proxy).
Any written notice of revocation or subsequent proxy should be delivered to
AOL Time Warner Inc., 75 Rockefeller Plaza, New York, NY 10019, Attention:
Secretary, or hand delivered to the Secretary, before the taking of the vote
at the Annual Meeting. To revoke a proxy previously submitted electronically
through the Internet or by telephone, a stockholder may simply submit a new
proxy at a later date before the taking of the vote at the Annual Meeting, in
which case, the later submitted proxy will be recorded and the earlier proxy
will be revoked.
A copy of the Company's Annual Report to Stockholders for the year 2000,
including financial statements, has been sent simultaneously with this Proxy
Statement or has been previously provided to all stockholders entitled to vote
at the Annual Meeting.
Recommendations of the Board of Directors
The Board of Directors recommends a vote FOR the election of the nominees
for election as directors and FOR approval of the appointment of Ernst & Young
LLP as independent auditors of the Company for 2001.
2
CORPORATE GOVERNANCE
Election of Directors
The nominees for director at the Annual Meeting will be elected to serve for
a one-year term until the next annual meeting of stockholders and until their
successors have been duly elected and qualified or until their earlier death
or resignation. Each of the nominees is currently a director of the Company,
having been appointed upon completion of the AOL-TW Merger on January 11,
2001. Pursuant to the agreement governing the AOL-TW Merger, Time Warner and
America Online each designated eight members of the Board of Directors.
The Company believes that, in the best interest of its stockholders, a
majority of the members of its Board of Directors should, in the Board's
judgment, be classified as "independent" pursuant to the Company's By-laws,
which generally require the absence of any direct or indirect material
economic relationship with the Company other than as a result of customary
directors' compensation or stock ownership (such directors, the "Independent
Directors" and all other directors, the "Affiliated Directors"). Under the
Company's By-laws, when the Board sets the slate of director nominees for
election at an annual meeting of stockholders, it must determine that a
majority of its members will be Independent Directors, assuming the election
of such slate. The Board of Directors has determined that, assuming the
election of these nominees, there will be 16 directors, of whom nine will be
Independent Directors and seven will be Affiliated Directors.
The persons named in the enclosed proxy intend to vote such proxy for the
election of each of the 16 nominees named below, unless the stockholder
indicates on the proxy that the vote should be withheld from any or all of the
nominees.
The Company expects each nominee for election as a director at the Annual
Meeting to be able to accept such nomination. If any nominee is unable to
accept such nomination, proxies will be voted in favor of the remainder of
those nominated and may be voted for substitute nominees.
Set forth below is the principal occupation of, and certain other
information regarding, the 16 nominees.
Nominees for Election at the Annual Meeting
Principal Occupation
Name Age During the Past Five Years
---- --- --------------------------
Daniel F. Akerson................ 52 Chairman and Chief Executive Officer of
XO Communications, Inc. Mr. Akerson
served as a director of America Online
from 1997 until the Merger Date. Mr.
Akerson has served as Chairman and
Chief Executive Officer of XO
Communications, Inc., a provider of
broadband communications services,
since September 1999. Prior to his
current role, he served as Chairman
and CEO of Nextel Communications,
Inc., a mobile phone operator, from
March 1996 until July 1999, when he
became an investor in and co-chairman
of Eagle River, Inc., a holding
company. Prior to joining Nextel in
1996, Mr. Akerson served as general
partner of Forstmann Little & Company,
a private investment firm, from 1993
to March 1996. While at Forstmann
Little, he also held the position of
chairman of the board and chief
executive officer of General
Instrument Corporation, a technology
company acquired by Forstmann Little.
Mr. Akerson is also a director of
American Express Company and Nextel
Communications, Inc. Mr. Akerson is an
Independent Director.
3
Principal Occupation
Name Age During the Past Five Years
---- --- --------------------------
James L. Barksdale............... 58 General Partner of the Barksdale Group,
LLC. Mr. Barksdale served as a
director of America Online from March
1999 until the Merger Date. Mr.
Barksdale has been a General Partner
of the Barksdale Group, a venture
capital firm, since it was founded in
April 1999. He served as the President
and Chief Executive Officer of
Netscape Communications Corporation, a
provider of software, services and
Website resources using the Internet,
from January 1995 until its
acquisition by America Online in March
1999 and also served as a director
starting in October 1994. Mr.
Barksdale is also a director of FedEx
Corporation, Sun Microsystems, Inc.
and Webvan Group, Inc. Mr. Barksdale
is an Independent Director.
Stephen F. Bollenbach............ 58 President and Chief Executive Officer
of Hilton Hotels Corporation. Mr.
Bollenbach served as a director of
Time Warner from 1997 until the Merger
Date. Mr. Bollenbach has served as
President and Chief Executive Officer
of Hilton Hotels Corporation since May
1996. Prior to that, Mr. Bollenbach
was Senior Executive Vice President
and Chief Financial Officer of The
Walt Disney Company, an entertainment
company, from April 1995 until
February 1996. He is also a director
of Catellus Development Corporation,
Hilton Hotels Corporation and Park
Place Entertainment Corporation
(Chairman). Mr. Bollenbach is an
Independent Director.
Stephen M. Case.................. 42 Chairman of the Board of the Company.
Mr. Case, a co-founder of America
Online, served as Chairman of the
Board and Chief Executive Officer of
America Online from 1995 until his
appointment as Chairman of the Board
of the Company on the Merger Date,
having served in other executive
positions at America Online since
1985. He served as a director of
America Online from September 1992
until the Merger Date. Mr. Case is
also a member of the Board of
Representatives of Time Warner
Entertainment Company, L.P. ("TWE").
Mr. Case is an Affiliated Director.
Frank J. Caufield................ 61 General Partner of Kleiner Perkins
Caufield & Byers. Mr. Caufield served
as a director of America Online from
1991 until the Merger Date. Mr.
Caufield has served as a General
Partner of Kleiner Perkins Caufield &
Byers, a venture capital partnership,
since 1978. Mr. Caufield is an
Independent Director.
4
Principal Occupation
Name Age During the Past Five Years
---- --- --------------------------
Miles R. Gilburne................ 49 Principal in ZG Ventures, L.L.C. Mr.
Gilburne served as a director of
America Online from October 1999 until
the Merger Date. Mr. Gilburne has been
a principal in ZG Ventures, a venture
capital and investment company, since
2000. He served as Senior Vice
President, Corporate Development of
America Online from February 1995
until December 1999. Mr. Gilburne is
also a director of America Online
Latin America, Inc. and Pharmacyclics,
Inc. Mr. Gilburne is an Affiliated
Director.
Carla A. Hills................... 67 Chairman and Chief Executive Officer of
Hills & Company and Former United
States Trade Representative.
Ambassador Hills served as a director
of Time Warner from 1993 until the
Merger Date. Ambassador Hills became
Chairman and Chief Executive Officer
of Hills & Company, an international
trade and investment consulting firm,
in January 1993, having served as the
United States Trade Representative
from February 1989 to January 20,
1993. Ambassador Hills is also a
director of American International
Group, Inc., Chevron Corporation,
Lucent Technologies Inc. and TCW Group
Inc. Ambassador Hills is an
Independent Director.
Gerald M. Levin.................. 61 Chief Executive Officer of the Company.
Mr. Levin served as Chairman of the
Board and Chief Executive Officer of
Time Warner from January 1993 until
the Merger Date, having served in
other executive positions at Time
Warner prior to that. He was appointed
as Chief Executive Officer of the
Company at the time of its
incorporation in February 2000 and
continues to serve in that position.
He served as a director of Time Warner
from 1983 until January 1987 and from
1988 until the Merger Date. He is also
a member of the Board of
Representatives of TWE and a director
of the New York Stock Exchange, Inc.
Mr. Levin is an Affiliated Director.
Reuben Mark...................... 62 Chairman and Chief Executive Officer of
Colgate-Palmolive Company. Mr. Mark
served as a director of Time Warner
from 1993 until the Merger Date. Mr.
Mark has served as the Chief Executive
Officer of Colgate-Palmolive Company,
a consumer products company, since May
1984. In May 1986, he was elected
Chairman. Mr. Mark is also a director
of Citigroup Inc. and Pearson plc. Mr.
Mark is an Independent Director.
5
Principal Occupation
Name Age During the Past Five Years
---- --- --------------------------
Michael A. Miles................. 61 Former Chairman of the Board and Chief
Executive Officer of Philip Morris
Companies Inc. Mr. Miles served as a
director of Time Warner from 1995
until the Merger Date. Mr. Miles
served as Chairman of the Board and
Chief Executive Officer of Philip
Morris Companies Inc., a consumer
products company, from September 1991
until July 1994. He is also a
director of The Allstate Corporation,
AMR Corporation, Community Health
Systems, Inc., Dell Computer
Corporation, Exult, Inc., The
Interpublic Group of Companies, Inc.,
Morgan Stanley Dean Witter & Co. and
Sears, Roebuck and Co. and is a
Special Limited Partner in Forstmann
Little & Co. Mr. Miles is an
Independent Director.
Kenneth J. Novack................ 59 Vice Chairman of the Company. Mr.
Novack served as Vice Chairman of
America Online from May 1998 and as a
director of America Online from
January 2000 until his appointment as
Vice Chairman of the Company on the
Merger Date. He became Of Counsel to
the Boston-based law firm of Mintz,
Levin, Cohn, Ferris, Glovsky and
Popeo, PC after his retirement as a
member of that firm in August 1998.
Mr. Novack joined Mintz Levin in 1966
and served on its executive committee
from 1970 until his retirement. Mr.
Novack is also a member of the Board
of Representatives of TWE. Mr. Novack
is an Affiliated Director.
Richard D. Parsons............... 52 Co-Chief Operating Officer of the
Company. Mr. Parsons served as
President of Time Warner from
February 1995 until his appointment
as Co-Chief Operating Officer of the
Company on the Merger Date. Prior to
February 1995, Mr. Parsons served as
the Chairman and Chief Executive
Officer of The Dime Savings Bank of
New York, FSB from January 1991. He
served as a director of Time Warner
from 1991 until the Merger Date and
is currently also a director of
Citigroup Inc. and Estee Lauder
Companies, Inc. and a member of the
Board of Representatives of TWE. Mr.
Parsons is an Affiliated Director.
6
Principal Occupation
Name Age During the Past Five Years
---- --- --------------------------
Robert W. Pittman................ 47 Co-Chief Operating Officer of the
Company. Mr. Pittman served as
President and Chief Operating Officer
of America Online from February 1998
and as director from 1995 until his
appointment as Co-Chief Operating
Officer of the Company on the Merger
Date. He was President and Chief
Executive Officer of AOL Networks, a
division of America Online, from
November 1996 until February 1998.
Prior to that, he held the positions
of Managing Partner and Chief
Executive Officer of Century 21 Real
Estate Corp. from October 1995 to
October 1996 and President and Chief
Executive Officer of Time Warner
Enterprises, a division of TWE, and
Chairman and Chief Executive Officer
of Six Flags Entertainment Corporation
prior to that. Mr. Pittman is also a
director of America Online Latin
America, Inc. and Cendant Corporation
and a member of the Board of
Representatives of TWE. Mr. Pittman is
an Affiliated Director.
Franklin D. Raines............... 52 Chairman and Chief Executive Officer of
Fannie Mae. Mr. Raines served as a
director of America Online from
September 1998 until the Merger Date.
Mr. Raines has served as Chairman and
Chief Executive Officer of Fannie Mae,
a non-bank financial services company,
since January 1999. Prior to rejoining
Fannie Mae in May 1998, he served as
Director of the U.S. Office of
Management and Budget from 1996 to
1998. From 1991 to 1996, Mr. Raines
was Vice Chairman of Fannie Mae, in
charge of the company's legal, credit
policy, finance and corporate
development functions. Mr. Raines is
also a director of PepsiCo, Inc. and
Pfizer, Inc. Mr. Raines is an
Independent Director.
R.E. Turner...................... 62 Vice Chairman of the Company. Mr.
Turner served as Vice Chairman and a
director of Time Warner from the
consummation of Time Warner's merger
with Turner Broadcasting System, Inc.
("TBS") on October 10, 1996 until his
appointment as Vice Chairman and
Senior Advisor of the Company on the
Merger Date. Prior to 1996, Mr. Turner
served as Chairman of the Board and
President of TBS from 1970. Mr. Turner
is an Affiliated Director.
Francis T. Vincent, Jr........... 62 Chairman of Vincent Enterprises. Mr.
Vincent served as a director of Time
Warner from 1993 until the Merger
Date. Mr. Vincent has been a private
investor at Vincent Enterprises since
January 1995. Prior to that, Mr.
Vincent served as the Commissioner of
Major League Baseball from September
1989 until September 1992. He is also
a director of Oakwood Homes
Corporation and Westfield America
Corporation. Mr. Vincent is an
Independent Director.
7
Committees of the Board of Directors
The Company's By-laws currently establish four principal standing committees
of the Board of Directors. The Company believes that it is in the best
interest of the Company's stockholders that each of the Audit and Finance,
Compensation and Nominating and Governance Committees be composed of at least
a majority of Independent Directors. Because the committees were not created
and the Board and committee members were not appointed until the Merger Date
in early 2001, no Board of Directors or committee meetings were held during
2000. During 2000, the board of directors of each of Time Warner and America
Online met eight and six times, respectively, and no incumbent director
attended fewer than 75% of the total number of meetings of the board of
directors and the committees of which he or she was a member.
The current members and functions of the Board's committees are as follows:
Audit and Finance Committee. The Audit and Finance Committee is composed
entirely of Independent Directors who are also "independent" directors under
the rules of the New York Stock Exchange. Its members are Messrs. Akerson,
Bollenbach (Chair), Raines and Vincent. The authority of the Audit and Finance
Committee is set forth in more detail in its Charter, which is reprinted in
its entirety as Annex A to this Proxy Statement, and includes the review of
(i) the professional services provided by, independence and qualifications of
the Company's independent auditors; (ii) material changes in accounting
policies and financial reporting practices and material developments in
financial reporting standards in consultation with the independent auditors
and management; (iii) the plan and scope of the annual external audit as
recommended by the independent auditors; (iv) the adequacy of the Company's
internal accounting controls and the results of material internal audits in
consultation with the independent auditors and the Company's chief internal
auditor; (v) the Company's financial statements and the results of each
external audit in consultation with management and the independent auditors;
(vi) the auditing and accounting principles and practices to be used in the
preparation of the Company's financial statements in consultation with the
Company's independent auditors and the Company's principal financial officer
and principal accounting officer; and (vii) the financial structure, condition
and strategy of the Company, including making recommendations with respect
thereto and approving such matters that are consistent with the general
financial policies and direction from time to time determined by the Board of
Directors. The Audit and Finance Committee also oversees the Company's
compliance program. See "Report of the Audit and Finance Committee."
Compensation Committee. The Compensation Committee is composed entirely of
Independent Directors. Its members are Messrs. Barksdale, Caufield (Chair),
Mark and Miles. The Compensation Committee has authority, as delegated by the
Board of Directors, to review and approve the Company's employee benefit plans
and administer its executive compensation plans. The Compensation Committee,
or a subcommittee thereof, approves the salaries and incentive compensation
(including the grant of stock options) and employment arrangements of the
executive officers of the Company. See "Compensation Committee Report on
Compensation of Executive Officers of the Company."
Nominating and Governance Committee. The Nominating and Governance Committee
is composed of a majority of Independent Directors. Its members are Messrs.
Caufield and Gilburne, Ambassador Hills and Mr. Vincent (Chair). The
Nominating and Governance Committee has authority (i) to review the size,
composition, individual performance and level of compensation of the Board of
Directors and to recommend changes thereto; (ii) to evaluate and recommend
candidates for Chief Executive Officer and for election as directors; (iii) to
assess the performance of the Board of Directors; and (iv) to review the
Company's corporate governance profile. Nominees to the Board of Directors are
selected on the basis of recognized achievements and their ability to bring
various skills, experience and diverse perspectives to the deliberations of
the Board of Directors. In carrying out its responsibilities, the Nominating
and Governance Committee will consider candidates recommended
8
by other directors, employees and stockholders. Written suggestions for
nominees should be sent to the Secretary of the Company.
The Company's By-laws provide that any stockholder of record who is entitled
to vote for the election of directors may nominate persons for election as
directors only if timely written notice in proper form of the intent to make a
nomination at a meeting of stockholders is received by the Secretary of AOL
Time Warner at 75 Rockefeller Plaza, New York, NY 10019. To be timely and in
proper form under the By-laws, the notice generally must be delivered not less
than 90 nor more than 120 days prior to the date of the meeting at which
directors are to be elected and must contain prescribed information about the
proponent and each nominee, including such information about each nominee as
would have been required to be included in a proxy statement filed pursuant to
the rules of the Securities and Exchange Commission had such nominee been
nominated by the Board of Directors.
Values and Human Development Committee. The members of the Values and Human
Development Committee are Messrs. Barksdale, Case (Chair), Mark and Parsons.
The Committee has the mandate to provide guidance and oversight to the
Company's management in its (i) development and articulation of the Company's
core values, commitments and social responsibilities; (ii) development of
strategies for ensuring the Company's involvement in the communities in which
it does business; (iii) establishment of a strategy for developing the
Company's human resources and leadership for the future; (iv) efforts to find
practical ways to increase workforce diversity; and (v) monitoring and
measuring the Company's performance in advancing these goals.
Director Compensation
During 2000, the current directors did not serve as directors of the Company
but instead served either on the board of directors of America Online or Time
Warner. During 2000, the non-employee directors of America Online did not
receive compensation for such service and the non-employee directors of Time
Warner were compensated pursuant to Time Warner's director compensation
policy, as previously discussed in its proxy statement in connection with its
2000 annual meeting of stockholders. Directors of America Online or Time
Warner who were employees of such companies were not additionally compensated
for their board activities. All of the individuals who served as directors of
the Company prior to the Merger Date were employees of America Online or Time
Warner and received no additional compensation for service as a director of
the Company.
On January 18, 2001, the Company's Board of Directors determined the
Company's director compensation structure and amended the AOL Time Warner Inc.
1999 Stock Plan (the "AOLTW 1999 Plan") to establish initial and annual awards
of stock options to compensate the Company's non-employee directors. Under the
AOLTW 1999 Plan, each non-employee director who was serving on the Board of
Directors as of January 18, 2001 received an award of options to purchase
52,000 shares of Common Stock representing the award for 2001 annualized for
the longer than usual period until the next annual grant. Beginning in 2002,
the AOLTW 1999 Plan provides for an annual grant of an option to purchase
40,000 shares of Common Stock on the date following each annual meeting of
stockholders of the Company to each non-employee director (who has served for
at least six months as a director) after giving effect to the election of
directors at such annual meeting. Pursuant to the AOLTW 1999 Plan, each new
non-employee director will receive an initial grant of options to purchase
40,000 shares of Common Stock (or such higher number of options as is
determined by the Compensation Committee for recruitment purposes) upon first
being elected or appointed to the Board of Directors. All of such options will
have an exercise price equal to the fair market value of the Common Stock on
the date of grant, will have a term of ten years and will vest in installments
of 25% over a four-year period and immediately if the director does not stand
for re-election or is not re-elected, unless the Board determines otherwise.
No additional compensation is paid for service as a committee chair or member
or for attendance at special meetings of the Board or a Board committee.
9
Non-employee directors are reimbursed for expenses incurred in attending Board
and committee meetings, including those for travel, food and lodging.
Directors who are officers of or employed by the Company or any of its
subsidiaries are not additionally compensated for their Board and committee
activities.
Report of the Audit and Finance Committee
In accordance with a written charter adopted by the Company's Board of
Directors, the Audit and Finance Committee of the Company's Board of Directors
(the "Committee") assists the Board of Directors in fulfilling its
responsibility for oversight of the quality and integrity of the Company's
financial reporting processes. Management has the primary responsibility for
the financial statements and the reporting process, including the system of
internal controls. The independent auditors are responsible for performing an
independent audit of the Company's consolidated financial statements in
accordance with generally accepted auditing standards and for issuing a report
thereon.
In this context, the Committee has met and held discussions with management
and the independent auditors. Management represented to the Committee that the
Company's consolidated financial statements were prepared in accordance with
generally accepted accounting principles, and the Committee has reviewed and
discussed the consolidated financial statements with management and the
independent auditors. The Committee discussed with the independent auditors
matters required to be discussed by Statement on Auditing Standards No. 61
(Communications with Audit Committees), as amended.
In addition, the Committee has discussed with the independent auditors the
auditors' independence from the Company and its management, including the
matters in the written disclosures required by the Independence Standards
Board Standard No. 1 (Independence Discussions with Audit Committees) and also
considered whether the provision of the non-audit related services included
below under "Fees of Accountants" is compatible with maintaining their
independence.
The Committee discussed with the Company's internal and independent auditors
the overall scope and plans for their respective audits. The Committee meets
with the internal and independent auditors, with and without management
present, to discuss the results of their examinations, the evaluations of the
Company's internal controls and the overall quality of the Company's
accounting principles.
The aggregate fees billed by the principal auditors (Ernst & Young LLP) to
each of America Online and Time Warner for the year ended December 31, 2000
are as follows:
Fees of Accountants
America Online Time Warner
-------------- -----------
Audit Fees.................................... $1,353,000 $ 6,507,000
Financial Information Systems Design and
Implementation Fees(1)....................... - 7,226,000
All Other Fees
Audit-Related............................... 1,561,000 13,264,000(2)
Other....................................... 597,000 28,408,000(3)
---------- -----------
Total All Other Fees...................... 2,158,000 41,672,000
---------- -----------
Total Fees.................................... $3,511,000 $55,405,000
========== ===========
--------
(1) Consists of fees billed by the Ernst & Young LLP consulting group
prior to its sale on May 23, 2000 to Cap Gemini S.A., a separate
French public company.
(2) Consists principally of fees related to outsourcing the
implementation of Time Warner's internal audit plan and
international statutory audit requirements.
(3) Consists principally of fees related to tax compliance and
planning.
10
In reliance on the reviews and discussions referred to above, the Committee
recommended to the Board of Directors, and the Board has approved, that the
audited financial statements of America Online, as the predecessor to AOL Time
Warner Inc. for accounting purposes, for the three years ended December 31,
2000 be included in the Company's Annual Report on Form 10-K for the period
ended December 31, 2000 for filing with the Securities and Exchange
Commission. The Committee has also recommended to the Board of Directors,
subject to stockholder ratification, the selection of Ernst & Young LLP as the
Company's independent auditors for 2001, and the Board concurred in its
recommendation.
Members of the Audit and Finance Committee
Daniel F. Akerson
Stephen F. Bollenbach (Chair)
Franklin D. Raines
Francis T. Vincent, Jr.
SECURITY OWNERSHIP
Security Ownership of the Board of Directors and Executive Officers
The following table sets forth as of January 31, 2001 for each current
director, each nominee for election as a director, each of the executive
officers named in the Summary Compensation Table below and for all current
directors and executive officers as a group, information concerning the
beneficial ownership of Common Stock.
Common Stock Beneficially
Owned(1)
---------------------------------
Number of Option Percent of
Name Shares Shares(2) Class
---- ----------- ---------- ----------
Daniel F. Akerson....... 3,356 323,918 *
James L. Barksdale (3).. 6,673,334 0 *
Stephen F. Bollenbach... 4,687 13,500 *
Stephen M. Case (4)..... 10,829,473 19,973,700 *
Frank J. Caufield (5)... 33,435 1,882,200 *
Miles R. Gilburne....... 0 2,259,053 *
Carla A. Hills.......... 16,039 18,000 *
Gerald M. Levin (6)(12). 2,654,536 9,066,254 *
Reuben Mark............. 38,239 18,000 *
Michael A. Miles........ 34,780 18,000 *
Kenneth J. Novack (7)... 4,196 5,093,969 *
Richard D. Parsons
(8)(12)................ 38,020 3,250,003 *
Robert W. Pittman (9)... 14,601 6,572,255 *
Franklin D. Raines...... 0 250,000 *
R.E. Turner (10)(12).... 155,081,921 6,475,003 3.80%
Francis T. Vincent, Jr.
(11)................... 60,890 18,000 *
All current directors
and executive officers
(23 persons) as a group
(2)-(12)............... 176,092,917 62,443,132 5.54%
--------
* Represents beneficial ownership of less than one percent of issued and
outstanding Common Stock on January 31, 2001.
(1) Beneficial ownership as reported in the above table has been determined
in accordance with Rule 13d-3 of the Securities Exchange Act of 1934.
Unless otherwise indicated, beneficial ownership represents both sole
voting and sole investment power. This table does not include, unless
otherwise indicated, any shares of Common Stock or other equity
securities of the Company which may be held by pension and profit-sharing
11
plans of other corporations or endowment funds of educational and
charitable institutions for which various directors and officers serve as
directors or trustees. As of January 31, 2001, the only equity securities
of the Company beneficially owned by the named persons or group were shares
of Common Stock and options to purchase Common Stock.
(2) Reflects shares of Common Stock subject to options to purchase Common
Stock issued by the Company which, on January 31, 2001, were unexercised
but were exercisable on or within 60 days after that date. These shares
are excluded from the column headed "Number of Shares." 2,297,255 of the
stock options shown for Mr. Pittman have been transferred to a limited
partnership owned by members of his family.
(3) Includes 1,200 shares of Common Stock held by a limited partnership of
which Mr. Barksdale and his wife are the sole general partners and 11,100
shares of Common Stock held by a trust of which Mr. Barksdale and his
wife are the sole trustees and beneficiaries.
(4) Includes 243,752 shares of Common Stock held by Mr. Case's wife and
1,323,080 shares of Common Stock held by the Stephen M. Case Foundation.
Mr. Case and his wife are the sole directors of this Foundation but do
not exercise day-to-day investment authority. Mr. Case disclaims
beneficial ownership of shares held by his wife and the Stephen M. Case
Foundation.
(5) Includes 465 shares of Common Stock held by the Caufield Family
Foundation of which Mr. Caufield is the President. Mr. Caufield disclaims
beneficial ownership of the shares held by the Caufield Family
Foundation.
(6) Includes 45,000 shares of Common Stock held by Mr. Levin's wife and
327,000 shares of Common Stock held by The Barbara J. and Gerald M. Levin
Family Foundation of which Mr. Levin and his wife are the co-trustees.
Mr. Levin disclaims beneficial ownership of shares held by his wife and
The Barbara J. and Gerald M. Levin Family Foundation.
(7) Includes 750 shares of Common Stock held by an irrevocable trust for the
benefit of Mr. Novack's children, one of whom is a minor, and 525 shares
of Common Stock held by the Novack Family Foundation of which Mr. Novack
and his wife are two of seven trustees. Mr. Novack disclaims beneficial
ownership of shares held by the trust and the Novack Family Foundation.
(8) Includes 200 shares of Common Stock held by Mr. Parsons' wife and 2,000
shares of Common Stock held by The Parsons Family Foundation, Inc. of
which Mr. Parsons is one of six directors. Mr. Parsons disclaims
beneficial ownership of shares held by his wife and The Parsons Family
Foundation, Inc.
(9) Includes 1,920 shares of Common Stock held by the Pittman Family
Foundation of which Mr. Pittman is the sole trustee. Mr. Pittman
disclaims beneficial ownership of the shares held by the Pittman Family
Foundation.
(10) Includes (a) 869,826 shares of Common Stock owned by a corporation wholly
owned by Mr. Turner, (b) 3,691,011 shares of Common Stock held by a trust
over which Mr. Turner has sole voting and dispositive control, (c)
9,043,344 shares of Common Stock held by a limited partnership of which
Mr. Turner is the sole general partner, and (d) 4,394,750 shares of
Common Stock held by the Turner Foundation, Inc., of which Mr. Turner is
one of seven trustees. Mr. Turner disclaims beneficial ownership of
shares held by the Turner Foundation, Inc.
(11) Includes 1,650 shares of Common Stock held by Mr. Vincent's wife, as to
which Mr. Vincent disclaims beneficial ownership.
(12) Includes (a) an aggregate of approximately 41,829 shares of Common Stock
held by a trust under the AOL Time Warner Savings Plan for the benefit of
current directors and executive officers of the Company (including 33,261
shares for Mr. Levin, 531 shares for Mr. Parsons and 390 shares for Mr.
Turner), (b) an aggregate of 305,752 shares of Common Stock beneficially
owned by certain relatives of such person and (c) an aggregate of
3,097,255 stock options that have been transferred to entities for the
benefit of relatives of such persons.
12
Security Ownership of Certain Beneficial Owners
Set forth below is the name, address, stock ownership and voting power of
each person or group of persons known by the Company to own beneficially more
than 5% of the outstanding shares of Common Stock or Series LMCN-V Stock, and,
unless otherwise indicated, is based on information provided to the Company as
of January 31, 2001 by the beneficial owner.
Shares of
Stock Percent of
Beneficially Percent of Voting
Name and Address of Beneficial Owner Owned Class(1) Power(2)
------------------------------------ ------------ ---------- ----------
Common Stock
Janus Capital Corporation (3).............. 260,719,334 6.1% 6.0%
100 Fillmore Street
Denver, CO 80206
Series LMCN-V Stock
Liberty Media Corporation (4).............. 171,185,826 100.0% *
9197 South Peoria Street
Englewood, CO 80112
--------
* Less than 1%
(1) Under certain circumstances, each share of Series LMCN-V Stock is
convertible into one share of Common Stock; such circumstances are not
currently present.
(2) Each share of Series LMCN-V Stock currently has 1/100 of a vote on certain
limited matters.
(3) Beneficial ownership is as of December 31, 2000, adjusted to reflect the
exchange ratios of common stock of Time Warner and America Online for
Company Common Stock on the Merger Date. Janus Capital Corporation, an
investment adviser, has filed with the Securities and Exchange Commission
("SEC") Amendment No. 3, dated February 15, 2001, to its statement on
Schedule 13G with respect to Time Warner to the effect that (a) because it
acts as an investment adviser to several investment companies and
individual and institutional clients, it may be deemed the beneficial
owner of these shares, which are held by its clients, (b) it may be deemed
to share dispositive and voting power over all these shares with Thomas H.
Bailey, Chairman of the Board, President and owner of approximately 12.2%
of Janus Capital Corporation and (c) the shares of Common Stock reported
as beneficially owned include 6,795,595 shares of Common Stock reported as
issuable upon conversion of convertible securities (these shares have been
excluded from the calculation of voting power). In addition, Janus Capital
Corporation has filed with the SEC a Form 13F Holdings Report indicating
holdings of common stock of America Online as of December 31, 2000; these
shares are included in the total.
(4) Consists of shares beneficially owned by Liberty Media Corporation,
through its direct and indirect subsidiaries. In March 1999, AT&T Corp.
acquired Tele-Communications, Inc., and Liberty Media Corporation (its
subsidiary), but incumbent management of Liberty Media Corporation has
voting and investment control over the Series LMCN-V Stock.
EXECUTIVE COMPENSATION
Compensation Committee Report on Compensation of Executive Officers of the
Company
The Compensation Committee of the Board of Directors furnished the following
report on executive compensation.
The Compensation Committee was formed following the consummation of the AOL-
TW Merger in early 2001. A subcommittee (the "Subcommittee") of the
Compensation Committee that excludes Mr. Barksdale due to his prior service
with a company that became a subsidiary of the Company was
13
also created with authority over limited executive compensation matters. The
respective compensation committees of America Online and Time Warner made
stock option awards in 2000 and established 2000 salary levels, but had not
approved the annual bonus compensation for executive officers of Time Warner
for 2000 and of America Online for the Transition Period (as defined below)
prior to the AOL-TW Merger. The members of the Compensation Committee,
therefore, in certain instances, are reporting about determinations made by
the prior compensation committees. In making the bonus compensation
determinations after the AOL-TW Merger, the Company's Compensation Committee
primarily considered the compensation philosophies and practices of each of
Time Warner and America Online.
During 2000, both America Online and Time Warner focused their attention on
finalizing their transformative combination and laying the strategic
groundwork for the successful integration of their businesses. Simultaneously,
each company continued to attend to achieving its respective financial and
strategic goals. In the Committee's view, each company's continuing emphasis
on financial discipline and cash flow generation and continuing implementation
of initiatives begun in prior years as well as new ones contributed
significantly to their financial results. By the time of the closing of the
AOL-TW Merger, each company had successfully positioned itself so that the
combined AOL Time Warner was able to immediately begin operating successfully
as a combined company with strong momentum and a strategic implementation
plan. The 2000 compensation for the Company's senior management is primarily
attributable to these accomplishments, as discussed in greater detail below,
and is consistent with each company's established executive compensation
philosophy and paves the way for the focus of the compensation philosophy for
the combined company in the future.
Compensation Philosophies
Both America Online's and Time Warner's executive compensation programs were
principally designed to give executives strong incentives to focus on and
achieve the company's business objectives. Key elements of each of the
incentive compensation programs were an annual performance-based bonus and
stock options, to provide substantial long-term financial reward to an
executive only if the stockholders also realize long-term stock price
appreciation. America Online emphasized company-wide performance goals and
long-term, equity-based incentives in the form of stock options, more than
annual cash bonuses, as a method to link compensation to improvements in
financial and operational performance reflected in stock-price performance.
Each company viewed its compensation practices as critical tools to retain and
recruit key executive talent. The Compensation Committee expects to continue
to emphasize stock-based compensation and company-wide performance goals.
During 2000, Messrs. Levin, Turner and Parsons were employed under
employment agreements with Time Warner and Mr. Pittman was employed under an
employment agreement with America Online, each of which was assumed by the
Company in connection with the AOL-TW Merger. While a minimum salary is
contractually specified in the agreements, the largest elements of executive
compensation, the annual bonus and stock option awards, are generally subject
to the discretion of the Compensation Committee.
With respect to America Online, Time Warner and the Company, the
Compensation Committee, with the assistance of a leading outside compensation
consultant, reviewed total compensation levels, structure and design for the
executive officers in the context of the established compensation philosophy
and compensation packages awarded to similarly situated executives. The
Compensation Committee believes that the Company's most direct competitors for
executive talent are composed of large capitalization and new technology
companies that constitute a broader range of companies than those with which
the Company might be compared for stock performance purposes. Thus, the
compensation comparison group included companies beyond the Time Warner peer
group index in the performance graph relating to Time Warner common stock that
appears below.
14
The Compensation Committee believes the Company's size, success and high
profile have made its employees and executives targets for competitors seeking
to recruit talented employees. Consequently, the Compensation Committee has
concluded the Company must actively manage compensation levels to ensure they
are fully competitive and capable of retaining top performers over the long
term. As a result of the competitive reviews and compensation actions, the
Committee believes that the base salary, total cash compensation and stock
appreciation opportunities for senior management, as well as those of the
broad employee population, are consistent with competitive market levels and
the Company's broader objectives.
2000 Annual Bonus Determinations
--------------------------------
2000 Accomplishments. The Compensation Committee considered a variety of
--------------------
factors in making its bonus compensation decisions, and no specific weighting
was assigned to any one of those factors. America Online's and Time Warner's
accomplishments that the Committee thinks contributed to a successful 2000, in
light of general stock market conditions, included:
. The substantial achievement of each company's financial targets while
continuing to grow their operating businesses.
. Creating the world's first Internet-powered media and communications
company and building a solid foundation to ensure the successful
combination of America Online's and Time Warner's vast array of
complementary businesses. This achievement entailed:
. Successfully obtaining approvals of the stockholders of each company
and numerous foreign, federal and local regulatory bodies, including
the Federal Trade Commission and the Federal Communications
Commission;
. Establishing working groups that focused on integration, planning
and budgeting so the Company developed a concrete strategy and plan
to implement it upon consummation of the merger; and
. Effectively organizing groups charged with identifying cross-
divisional value opportunities, including promotions for
subscriptions, advertising sales and purchases, music and film
promotions and brand promotions, with some of these types of
transactions occurring during 2000 and several more such
transactions announced just weeks after the AOL-TW Merger was
finalized.
. Both Time Warner and America Online continued to develop and communicate
their core values, commitments and social responsibilities. As part of
integration planning, the companies worked together to define a Mission
and Values platform for the Company, which will be overseen by the
Values and Human Development Committee of the Board of Directors.
Annual Bonuses for Executive Officers other than the Chief Executive
--------------------------------------------------------------------
Officer. The Subcommittee's determination of the annual incentive bonus for
-------
each of Messrs. Levin, Turner and Parsons, and certain other executive
officers who were Time Warner employees during 2000, started with the
calculation of the 2000 maximum bonus under Time Warner's stockholder-approved
Annual Bonus Plan. This calculation was based on a percentage of the amount by
which Time Warner's 2000 earnings before interest, taxes, depreciation and
amortization ("EBITDA"), as adjusted pursuant to the Annual Bonus Plan,
exceeded Time Warner's average EBITDA for the preceding three years. This
calculation resulted in maximum individual annual bonuses substantially in
excess of the actual bonuses paid as shown in the Summary Compensation Table
below. The Chief Executive Officer reviewed with the Compensation Committee
the 2000 performance of the other executive officers of Time Warner and
recommended annual bonuses primarily reflecting individual qualitative
executive contributions based upon the level of the executive's
responsibilities, the efficiency and effectiveness
15
with which he oversaw the matters under his supervision and the degree to
which he contributed to the accomplishment of Time Warner's goals.
The Subcommittee's determination of the incentive bonus for the Transition
Period for each of Messrs. Case, Novack and Pittman was based on calculations
under America Online's stockholder-approved Executive Incentive Plan ("EIP").
The incentive bonuses for the other executive officers of the Company were
determined pursuant to either the EIP or America Online's Management Incentive
Plan ("MIP"), which is similar to the EIP. These Plans provided for cash
bonuses based on a personal target bonus percentage and company financial
performance goals. Each individual has a target bonus based on base salary,
which cannot exceed 250% of salary. With respect to America Online's fiscal
2001, performance goals were established based on America Online's pre-tax
earnings performance. America Online exceeded the earnings objectives and
accomplished significant other goals. Consequently, the Subcommittee approved
bonuses for all participants in the EIP other than Mr. Case equal to 110% of
the target bonus under the EIP and the Compensation Committee approved funding
under the MIP at 110% of the target awards. Mr. Case requested that he not
receive a bonus for the Transition Period and requested that the Subcommittee
award additional bonuses totaling the amount he could have received among
other executive officers. The Subcommittee approved additional cash bonuses in
accordance with Mr. Case's request.
Mr. Levin's Annual Bonus. Mr. Levin's 2000 annual incentive bonus as
------------------------
Chairman of the Board and Chief Executive Officer of Time Warner was
determined by the Subcommittee. In determining his bonus, the Subcommittee
reviewed the calculation of the maximum bonus payable to Mr. Levin under Time
Warner's Annual Bonus Plan, the level of achievement of his 2000 financial
performance goals (based on operational targets for divisional and aggregate
EBITA and cash flow) and Time Warner's other accomplishments during 2000.
Based on its overall evaluation of Mr. Levin's stewardship of Time Warner
during 2000, the leadership he provided and his role in positioning AOL Time
Warner, its management, product lines and services for the future, the
Subcommittee determined that Mr. Levin's performance warranted placing his
total cash compensation for 2000 in the upper quartile of compensation paid to
the chief executive officers in a comparison group comprised of public
companies in consumer product, technology, entertainment and media industries.
Base Salaries
-------------
During 2000, the respective compensation committees of America Online and
Time Warner reviewed the salary of each executive officer. In determining
appropriately competitive salary levels, the committees considered the
officer's impact level, scope of responsibility, prior experience, past
accomplishments and data on prevailing compensation levels in relevant
executive labor markets. Based on the findings, the America Online
compensation committee approved base salary increases for certain executive
officers that were effective in September 2000 which, in conjunction with cash
incentive awards, maintained total cash compensation levels in line with
competitive levels and with America Online's compensation philosophy. The base
salaries of Messrs. Levin, Turner and Parsons did not increase in 2000.
Stock Option Awards
-------------------
During 2000, each of America Online's and Time Warner's executive officers
was awarded stock options by the respective compensation committees. These
awards were made after a review of their previous option awards and the option
awards made to other executives at Time Warner and America Online,
respectively, and in the comparison groups. The compensation committees of
Time Warner and America Online believed that the higher the level of an
executive's responsibilities, the larger the stock-based component of his
compensation should be, and that compensation based on stock price performance
should be paid via stock-based compensation. Each of Messrs. Levin, Turner and
Parsons
16
was awarded a regular annual grant of stock options in March 2000, one quarter
of which have exercise prices 25% above the fair market value of the Common
Stock on the date of grant and one quarter of which have exercise prices 50%
above such fair market value. Each of Messrs. Case, Novack and Pittman were
awarded a regular annual grant of stock options in September 2000, with an
exercise price at fair market value on the date of grant.
Section 162(m) Considerations
-----------------------------
The Company expects that the compensation paid to executive officers under
the Time Warner Annual Bonus Plan and the America Online Executive Incentive
Plan, both of which have been assumed by the Company, will qualify for income
tax deductibility under Section 162(m) of the Internal Revenue Code. In
addition, the Company has adopted a general policy of awarding stock options
to its executive officers only pursuant to plans that the Company believes
will satisfy the requirements of Section 162(m). In 2000, Time Warner and
America Online did not pay its executive officers compensation that would not
be deductible as a result of the Section 162(m) deductibility limit.
Members of the Compensation Committee
James L. Barksdale
Frank J. Caufield (Chair)
Reuben Mark
Michael A. Miles
Executive Compensation Summary Table
Prior to the Merger Date, the Company's executive officers functioned as
executive officers of, and were compensated by, America Online or Time Warner,
as the case may be. The following table presents information concerning total
compensation paid to the Chief Executive Officer and certain other executive
officers of the Company (collectively, the "named executive officers") by
either America Online or Time Warner. Messrs. Levin, Turner and Parsons,
currently the Chief Executive Officer, Vice Chairman and Co-Chief Operating
Officer of the Company, respectively, served as Chairman and Chief Executive
Officer, Vice Chairman and President, respectively, of Time Warner prior to
the AOL-TW Merger. Messrs. Case, Novack and Pittman, currently the Chairman,
Vice Chairman and Co-Chief Operating Officer of the Company, respectively,
served as Chairman and Chief Executive Officer, Vice Chairman and President
and Chief Operating Officer, respectively, of America Online prior to the AOL-
TW Merger. This compensation information relates to compensation received by
the named executive officer while employed by America Online or Time Warner
prior to the AOL-TW Merger. Prior to the AOL-TW Merger, America Online's
fiscal year ended on June 30. In connection with the AOL-TW Merger, America
Online changed its fiscal year to a calendar year. As a result, the
compensation shown for Messrs. Case, Pittman and Novack is that paid with
respect to America Online's last three fiscal years and the last six months of
2000 (the "Transition Period"). All information related to common stock has
been adjusted to reflect the exchange ratios of common stock
17
of Time Warner and America Online for Company Common Stock and the Company's
assumption of the relevant America Online and Time Warner stock-based benefit
plans on the Merger Date.
SUMMARY COMPENSATION TABLE
Long-Term
Anuual Compensation Compensation(8)
----------------------------------------- ---------------
Other Securities
Name and Principal Annual Underlying All Other
Postion Year Salary Bonus Compensation(7) Options Awarded Compensation(9)
------------------ ----- ---------- ----------- --------------- --------------- ---------------
Stephen M. Case (1)..... T.P.* $ 383,333 $ 0(1) $ -- 1,750,000 $ 0
Chairman of the Board 2000 725,000 1,125,000 -- 3,000,000 5,165
1999 575,000 1,000,000 -- 1,800,000 4,932
1998 426,667 750,000 -- 10,400,000 2,923
Gerald M. Levin (2)..... 2000 $1,000,000 $10,000,000 $ 226,620 750,000 $571,277
Chief Executive Officer 1999 1,000,000 9,000,000 218,477 656,251 590,167
1998 1,000,000 7,800,000 186,861 2,100,000 597,885
Kenneth J. Novack (3)... T.P.* $ 258,333 $ 275,000 $ -- 1,000,000 $ 0
Vice Chairman 2000 433,333 506,000 -- 1,000,000 6,620
1999 350,000 400,000 -- 2,560,000 5,666
1998 49,053 950,000 34,167 1,600,000 20
R.E. Turner (4)......... 2000 $ 700,000 $ 8,000,000 $ -- 637,500 $570,986
Vice Chairman and 1999 700,000 6,900,000 -- 562,500 619,657
Senior Advisor 1998 700,000 6,000,000 -- 900,000 637,339
Richard D. Parsons(5)... 2000 $ 750,000 $ 6,000,000 $ 146,535 525,000 $476,935
Co-Chief Operating
Officer 1999 750,000 4,750,000 170,695 375,000 498,245
1998 600,000 3,300,000 122,907 450,000 398,650
Robert W. Pittman(6).... T.P.* $ 358,333 $ 550,000 $ 56,520 1,500,000 $ 0
Co-Chief Operating
Officer 2000 683,334 1,050,000 60,965 2,500,000 810
1999 591,667 1,000,000 1,380,000 1,440,000 955
1998 541,665 750,000 127,698 7,200,000 690
--------
* Transition Period--July 1, 2000 through December 31, 2000
(1) Mr. Case became Chairman of the Board of the Company on the Merger Date.
Prior to that, he served as Chairman of the Board and Chief Executive
Officer of America Online. At Mr. Case's request, Mr. Case did not receive
any bonus for the Transition Period. Under America Online's Executive
Incentive Plan, he could have received $426,000.
(2) Mr. Levin became Chief Executive Officer of the Company in February 2000.
He served as Chairman of the Board and Chief Executive Officer of Time
Warner from January 1993 to the Merger Date.
(3) Mr. Novack became Vice Chairman of the Company on the Merger Date. Prior
to that, he served as Vice Chairman of America Online from May 1998,
having served as a consultant to America Online and received compensation
as such prior to that, which is reflected herein.
(4) Mr. Turner became Vice Chairman and Senior Advisor of the Company on the
Merger Date. Prior to that, he served as Vice Chairman of Time Warner.
(5) Mr. Parsons became Co-Chief Operating Officer of the Company on the Merger
Date. Prior to that, he served as President of Time Warner.
(6) Mr. Pittman became Co-Chief Operating Officer of the Company on the Merger
Date. Prior to that, he served as President and Chief Operating Officer of
America Online from February 1998 and President and Chief Executive
Officer of AOL Networks prior to that.
(7) In accordance with SEC rules, amounts totalling less than $50,000 have
been omitted. The amounts of personal benefits shown in this column for
2000 for Messrs. Levin and Parsons and the Transition Period for Mr.
Pittman that represent more than 25% of the applicable executive's total
Other Annual Compensation include financial services of $90,000 to each of
Messrs. Levin and Parsons, transportation-related benefits (including an
automobile allowance for Messrs. Levin and Parsons) of $116,699 to Mr.
Levin, $50,815 to Mr. Parsons and $56,520 to Mr. Pittman.
18
(8) None of the options indicated was awarded with tandem stock appreciation
rights. None of such executive officers was awarded restricted stock
during the relevant period and, as of December 31, 2000, no named
executive officer held any such shares.
(9) The amounts shown in this column for 2000 for Messrs. Levin, Turner and
Parsons include the following:
(a) In lieu of supplemental retirement plan benefits, Time Warner, as
required by individual employment agreements, credited to an account for
each of Messrs. Levin, Turner and Parsons an amount equal to one-half of
the total shown under the "salary" column. These credits were terminated in
January 2001. See "Non-Current Compensation Accounts."
(b) Pursuant to the AOL Time Warner Savings Plan (the "Savings Plan"), a
defined contribution plan available generally to employees of the Company,
for the 2000 plan year, each of Messrs. Levin, Turner and Parsons deferred
a portion of his annual compensation and Time Warner contributed $2,000 for
the first $3,000 so deferred by the executive ("Matching Contribution").
These Matching Contributions were invested under the Savings Plan in a
Common Stock fund. In addition, pursuant to a profit-sharing component of
the Savings Plan, the Company may make annual contributions for the benefit
of eligible employees of up to 12% of total eligible compensation; for
2000, the Company will contribute 10%, including $17,000 for the account of
each of Messrs. Levin, Turner and Parsons. The Company has announced that
it does not intend to make those profit-sharing contributions in future
years.
(c) The Company maintains a program of life and disability insurance
generally available to all salaried employees on the same basis. This group
term life insurance coverage was reduced to $50,000 for each of Messrs.
Levin, Turner and Parsons who were given a cash payment equal to the cost
of replacing such reduced coverage under a voluntary group program
available to employees generally. Such payments are included in the "Other
Annual Compensation" column. In addition, during 2000, Time Warner
maintained for certain members of senior management, including Messrs.
Levin, Turner and Parsons, certain supplemental life insurance benefits and
paid premiums for this supplemental coverage of approximately $250 each.
Time Warner also maintained split-dollar life insurance policies on the
lives of Messrs. Levin, Turner and Parsons and paid the following amounts
allocated to the term portion of the split-dollar coverage for 2000: Mr.
Levin, $20,302; Mr. Turner, $18,900; and Mr. Parsons, $4,459. The actuarial
equivalent of the value of the premiums paid by Time Warner for 2000 based
on certain assumptions regarding interest rates and periods of coverage
are: Mr. Levin, $52,027; Mr. Turner, $201,736; and Mr. Parsons, $82,685. It
is anticipated that the Company will recover the net after-tax cost of the
premiums on these policies or the cash surrender value thereof. For a
description of life insurance coverage for certain executive officers
provided pursuant to the terms of their employment agreements, see
"Employment Arrangements."
Stock Option Grants During 2000
The following table sets forth certain information with respect to employee
options to purchase shares of Common Stock ("options") awarded during 2000 by
America Online and Time Warner, as the case may be, to the named executive
officers. All such options were nonqualified options. No stock appreciation
rights ("SARs"), alone or in tandem with such stock options, were awarded in
2000. The number of shares covered by the options and the exercise prices have
been adjusted to reflect the
19
exchange ratios of common stock of America Online and Time Warner for Company
Common Stock on the Merger Date.
STOCK OPTION GRANTS IN 2000
Individual Grants(1)
------------------------------------------
Percent
Number of of Total
Securities Options Exercise
Underlying Granted to or Base Grant Date
Options Employees Price Expiration Present
Name Granted in 2000(2) ($/sh) Date Value(3)
---- ----------- ---------- -------- ---------- -----------
Stephen M. Case.......... 1,750,000 1.9% $57.38 9/01/10 $37,957,500
Gerald M. Levin.......... 375,000 .4% $57.79 3/14/10 $ 8,190,000
187,500 .2% 72.24 3/14/10 3,249,375
187,500 .2% 86.69 3/14/10 2,608,125
Kenneth J. Novack........ 1,000,000 1.1% $57.38 9/01/10 $21,690,000
R.E. Turner.............. 318,750 .4% $57.79 3/14/10 $ 6,961,500
159,375 .2% 72.24 3/14/10 2,761,969
159,375 .2% 86.69 3/14/10 2,216,906
Richard D. Parsons....... 262,500 .3% $57.79 3/14/10 $ 5,733,000
131,250 .1% 72.24 3/14/10 2,274,563
131,250 .1% 86.69 3/14/10 1,825,688
Robert W. Pittman........ 1,500,000 1.7% $57.38 9/01/10 $32,535,000
--------
(1) Options for executive officers have been awarded pursuant to plans
approved by the stockholders of either America Online or Time Warner and
assumed by the Company as of the Merger Date. The terms are governed by
the plans and the recipient's option agreement. The option exercise price
is the fair market value of the Common Stock on the date of grant except
for the awards to Messrs. Levin, Turner and Parsons of which one quarter
of the total award has an exercise price 25% above the fair market value
of the Common Stock on the date of grant and one quarter of which has an
exercise price 50% above such fair market value. The options shown in the
table held by Messrs. Levin, Turner and Parsons become exercisable in
installments of one-third on the first three anniversaries of the date of
grant, subject to acceleration upon the occurrence of certain events. The
options shown in the table held by Messrs. Case, Novack and Pittman were
awarded during the Transition Period and become exercisable in
installments of one-quarter on the first four anniversaries of the date of
grant, subject to acceleration upon the occurrence of certain events.
Payment of the exercise price of an option may be made in cash or, in
whole or in part, in full shares of Common Stock already owned by the
holder of the option. The payment of withholding taxes due upon exercise
of an option may generally be made with shares of Common Stock.
(2) Indicates the percentage of all options granted to employees of America
Online and Time Warner during 2000.
(3) These amounts represent the estimated present value of stock options at
the date of grant calculated using the Black-Scholes option pricing model,
based upon the following assumptions used in developing the grant
valuations: an expected volatility of 46.3% based on the historical
volatility of America Online common stock adjusted for the anticipated
impact of the AOL-TW Merger; an expected term to exercise of three years;
a risk-free rate of return based on the average three-year Treasury bill
rate for 2000 of 6.22%; and a dividend yield of 0%. The actual value of
the options, if any, realized by an officer will depend on the extent to
which the market value of the Common Stock exceeds the exercise price of
the option on the date the option is exercised. Consequently, there is no
assurance that the value realized by an officer will be at or near the
value estimated above. These amounts should not be used to predict stock
performance.
20
Option Exercises and Values in 2000
The following table sets forth as to each of the named executive officers
information on option exercises during 2000 and the status of his options on
December 31, 2000: (i) the number of shares of Common Stock underlying options
exercised during 2000; (ii) the aggregate dollar value realized upon exercise
of such options; (iii) the total number of shares of Common Stock underlying
exercisable and nonexercisable stock options held on December 31, 2000; and
(iv) the aggregate dollar value of in-the-money exercisable and nonexercisable
stock options on December 31, 2000. The number of shares covered and the
option exercise prices have been adjusted to reflect the exchange ratios of
common stock of America Online and Time Warner for Company Common Stock on the
Merger Date and the Company's assumption on the Merger Date of the option
plans and agreements under which the options were awarded.
AGGREGATE OPTION EXERCISES DURING 2000
and
OPTION VALUES ON DECEMBER 31, 2000
Dollar Value of
Number of Number of Shares Unexercised
Shares Underlying Unexercised In-the-Money
Underlying Dollar Value Options on 12/31/00(4) Options on 12/31/00*(4)
Options Realized on -------------------------- ---------------------------
Name Exercised Exercise Exercisable Nonexercisable Exercisable Nonexercisable
---- ---------- ------------ ----------- -------------- ------------ --------------
Stephen M. Case......... 1,286,300 $ 71,170,337 8,723,700 13,500,000 $256,311,815 $268,057,000
Gerald M. Levin(1)...... 3,000,000 $152,590,000 8,816,251 750,000 $144,796,050 $ 0
Kenneth J. Novack(2).... 96,634 $ 5,154,759 1,313,930 4,914,000 $ 28,400,486 $ 76,995,670
R.E. Turner............. -- -- 6,262,500 637,500 $ 92,513,250 $ 0
Richard D. Parsons...... -- -- 3,075,000 525,000 $ 46,996,875 $ 0
Robert W. Pittman(3).... 394,745 $ 21,227,412 6,572,255 10,095,000 $182,241,004 $189,144,000
--------
* Calculated using the closing price of $34.80 per share of America Online
common stock on December 31, 2000 minus the option exercise price.
(1) The options exercised by Mr. Levin would have expired in 2000. After
making charitable contributions and paying the exercise price and related
taxes using Common Stock, Mr. Levin retained the remaining 996,931 shares
of Common Stock issued upon exercise of these options.
(2) Includes 133,961 exercisable options that Mr. Novack transferred to
grantor retained annuity trusts for the benefit of members of his family.
At December 31, 2000, these options had a value of $3,081,886.
(3) Includes 2,297,255 exercisable options that Mr. Pittman transferred to a
family-owned limited partnership. At December 31, 2000 these options had a
value of $76,363,304.
(4) All options awarded prior to 2000 held by Messrs. Levin, Turner and
Parsons became immediately exercisable in full upon the approval by Time
Warner's Board of Directors of the AOL-TW Merger on January 9, 2000.
The option exercise price of all the options held by the named executive
officers is the fair market value of the Common Stock on the date of grant
except for (1) half of the regular annual options awarded to Messrs. Levin,
Turner and Parsons in 1996 through 2000 (see "Stock Option Grants in 2000")
and 1,500,000 of Mr. Levin's options awarded in 1993, half of which have an
exercise price 25% above the fair market value of the common stock on the date
of grant and the other half of which have an exercise price 50% above such
fair market value and (2) options awarded to Messrs. Case and Pittman in 1997
which have an exercise price 30% above the fair market value of the common
stock on the date of grant. All such nonqualified options permit a portion of
each award to be transferred by gift directly or indirectly to members of the
holder's immediate family. The stock option agreements
21
may permit optionees to defer receipt of the shares of Common Stock receivable
upon exercise of options governed by such stock option agreements to a future
date elected by the optionee, thereby deferring the recognition of income by
the optionee (and the Company's tax deduction) until such future date. During
the deferral period, the shares are not outstanding, do not vote and do not
pay dividends, however, the Company has agreed to pay the optionee dividend
equivalents during the deferral period, to the extent dividends are paid.
The options held by the named executive officers remain exercisable for
three months to three years in the event their employment is terminated
without cause or as a result of the Company's breach of an employment
agreement. For some executive officers, some of their options remain
exercisable for the full term of the options if their employment is terminated
for any reason other than for cause, including death. Otherwise, options may
generally be exercised for one or three years after death or total disability
(depending on their date of grant) and five years after retirement. All
options terminate either immediately or one month after the holder's
employment is terminated for cause. The terms of the options shown in the
chart are generally ten years, although 960,000 options held by Mr. Levin have
a term of 15 years from the date of their award in 1989.
Employment Arrangements
The Company is a party to employment agreements with Messrs. Levin, Turner,
Parsons and Pittman. These agreements have been filed with the SEC as exhibits
to the Company's periodic filings.
Among other things, the agreements with Messrs. Levin, Turner and Parsons
provide for: a fixed term of employment in a specified executive post; minimum
annual salary; an annual bonus in the discretion of the Compensation
Committee; and life insurance benefits to be provided by split dollar
policies, generally for the life of the executive and pursuant to which the
Company recovers an amount equal to the net after-tax cost to the Company of
the premiums on such policy or the cash surrender value thereof, as well as
$50,000 of group term life insurance under an insurance program generally
provided by the Company to its employees and a cash payment equal to the
premium for the coverage that would have otherwise been provided under the
general terms of such program. The agreements also include provisions for the
executive's participation in Company stock option and other compensation and
benefit plans.
Such agreements include a narrow definition of the "cause" for which an
executive's employment may be terminated and in that event, the executive will
only receive earned and unpaid base salary accrued through such date of
termination.
These agreements provide that in the event of the Company's material breach
or termination of the executive's employment during the term of employment
without cause, the executive will be entitled to elect either (a) to receive a
lump-sum payment equal to the present value of the compensation otherwise
payable during the remaining portion of the executive's term of employment or
(b) to remain an employee of the Company through the end of such period and,
without having to perform any services, receive such compensation as if there
had been no breach or termination. These executives are not required to
mitigate damages after such a termination, other than as necessary to prevent
the Company from losing any tax deductions to which it otherwise would have
been entitled for any payments deemed to be "contingent on a change" under the
Internal Revenue Code.
If an executive becomes disabled during the term of his employment
agreement, the executive will receive full salary for six months and 75%
thereof through the end of the employment term. Any such payments will be
reduced by amounts received from Worker's Compensation, Social Security and
disability insurance policies maintained by the Company.
22
If an executive dies during the term of an employment agreement, the
executive's beneficiaries will receive the executive's earned and unpaid
salary to the last day of the month in which the death occurs.
The expiration dates of these agreements and the amounts of the individual
life insurance coverage for the lifetime of such persons are: Mr. Levin --
December 31, 2003 and $6 million; Mr. Turner -- December 31, 2001 and $6
million; and Mr. Parsons -- January 31, 2005 and $5 million. Mr. Levin's
agreement allows him, effective no earlier than June 30, 2002 and with not
less than six months' prior notice to the Company, to give up his executive
positions and become an advisor to the Company for the remainder of the
agreement term. In that case, his advisory compensation would be equal to his
annual salary. Mr. Parsons' agreement allows him, effective on or after
January 1, 2002 and with not less than six months' prior notice to the
Company, to give up his executive positions and become an advisor to the
Company for the remainder of the agreement term. In that case his advisory
compensation would be equal to $500,000 per year. Pursuant to the terms of
their employment agreements, so long as each of Messrs. Levin, Turner and
Parsons, respectively, is employed by the Company, the Company has agreed to
include him in management's slate for election as a director and to use its
best efforts to cause his election.
In October 1996, America Online entered into an employment agreement with
Robert W. Pittman, which the Company has assumed. In the event Mr. Pittman's
employment is terminated by him for a good reason or by the Company other than
for cause or a permanent and total disability, he will become a consultant of
the Company for a term of two years, subject to the terms and conditions of a
consulting agreement. In the Company's discretion, Mr. Pittman will become a
consultant of the Company for two years if the Company terminates his
employment for cause or if he terminates his employment for other than a good
reason. Mr. Pittman is subject to the terms of a confidentiality/non-
competition/proprietary rights agreement that remains in effect for the term
of the consulting agreement.
Non-Current Compensation Accounts
Pursuant to their employment agreements, Time Warner deposited non-current
compensation contributions for each of Messrs. Levin, Turner and Parsons in
2000 into separate accounts in a grantor trust established by Time Warner. An
investment advisor is appointed for each such account subject to approval by
the relevant executive. Funds are invested in securities as directed by the
investment advisor, with the assumed after-tax effect upon the Company of
gains, losses and income, and distributions thereof, and of interest expenses
and brokerage commissions and other direct expenses attributed thereto, being
credited or charged to the account. Payments are made to the officer from the
account in installments to liquidate the account over a period of ten years,
or such shorter period as the officer elects, commencing on the later of the
end of the employment term or the date the executive ceases to be an employee.
Such payments include an amount equal to the assumed tax benefit to the
Company of the compensation deduction available for tax purposes for the
portion of the account represented by the net appreciation in such account,
even though the Company might not actually receive such tax benefit.
Commencing in 1999, Time Warner's executive officers could elect to have half
or all of these non-current compensation contributions credited to the
Deferred Compensation Plan instead of the grantor trust accounts. This Plan,
which has been assumed by the Company, is an unfunded, nonqualified plan that
permits higher-paid employees to make tax-deferred savings of certain
compensation that exceeds the federal law limits for tax qualified benefit
plans. Participants select crediting rates for their amounts credited to the
Plan. These rates are based on the actual returns of mutual funds and other
investments offered under the Savings Plan.
Amounts paid by Time Warner to the non-current compensation accounts of the
named executive officers for 2000 and the portion, if any, of the 2000 annual
bonus elected to be deferred by any such
23
officer are included in the amounts shown in the Summary Compensation Table
above. Effective January 4, 2001, the Company terminated the contributions to
non-current compensation accounts on behalf of its executive officers.
Existing accounts will continue to be invested and paid out in accordance with
their terms.
Time Warner Pension Plan-AOLTW
The Time Warner Employees' Pension Plan, as amended (the "Old Pension
Plan"), which provides benefits to eligible employees, including officers, of
the Company and certain of its subsidiaries, was amended effective as of
January 1, 2000, as described below, and was renamed and assumed by the
Company in connection with the AOL-TW Merger (the "Amended Pension Plan" and,
together with the Old Pension Plan, the "Pension Plans"). In addition, new
employees of the Company hired on and after January 1, 2001, or employees
transferring on or after that date from a division of the Company without a
pension plan, will not be eligible to participate in the Pension Plans. As a
result, Messrs. Case, Novack and Pittman, and other employees who were
employees of America Online, are not eligible to receive benefits under the
Pension Plans. Because of certain grandfathering provisions, the benefit of
participants with a minimum of ten years of benefit service whose age and
years of benefit service equal or exceed 65 years as of January 1, 2000,
including Mr. Levin, will be determined under either the provisions of the Old
Pension Plan or the Amended Pension Plan, whichever produces the greater
benefit. Directors who are not also employees of the Company are not eligible
to participate in the Pension Plans.
Under the Old Pension Plan, a participant accrued benefits on the basis of 1
2/3% of the average annual compensation (defined as the highest average annual
compensation for any five consecutive full and partial calendar years of
employment, which includes regular salary, overtime and shift differential
payments, and non-deferred bonuses paid according to a regular program) for
each year of service up to 30 years and 1/2% for each year of service over 30.
Compensation for purposes of calculating average annual compensation under the
Pension Plans is limited to $200,000 per year for 1988 through 1993 and
$150,000 per year for 1994 and thereafter (each subject to adjustments
provided in the Internal Revenue Code of 1986, as amended). Eligible employees
become vested in all benefits under the Pension Plans on the earlier of five
years of service or certain other events.
Under the Amended Pension Plan, a participant accrues benefits equal to the
sum of 1.25% of a participant's average annual compensation not in excess of
his covered compensation up to the average Social Security wage base and 1.67%
of his average annual compensation in excess of such covered compensation
multiplied by his years of benefit service (not in excess of 30).
Under the Old Pension Plan, employees who are at least 60 years old and have
completed at least ten years of service may elect early retirement and receive
the full amount of their annual pension ("early retirement"). An early
retirement supplement is payable to an employee terminating employment at age
55 and before age 60, after 20 years of service, equal to the actuarial
equivalent of such person's accrued benefit, or, if greater, an annual amount
equal to the lesser of 35% of such person's average compensation determined
under the Old Pension Plan or such person's accrued benefit at age 60 plus
Social Security benefits at age 65. The supplement ceases when the regular
pension commences at age 60. Under the Amended Pension Plan, employees who are
at least 62 years old and have completed at least ten years of service may
elect early retirement and receive the full amount of their annual pension.
Annual pension benefits under the Old Pension Plan are reduced by a Social
Security offset determined by a formula that takes into account benefit
service up to 35 years, covered compensation up to the average Social Security
wage base and a disparity factor based on the age at which Social Security
benefits are payable (the "Social Security Offset"). Under both of the Pension
Plans, the pension benefit of participants on December 31, 1977 in the former
Time Employees' Profit-Sharing
24
Savings Plan (the "Profit Sharing Plan") is further reduced by a fixed amount
attributable to a portion of the employer contributions and investment
earnings credited to such employees' account balances in the Profit Sharing
Plan as of such date (the "Profit Sharing Plan Offset").
Federal law limits both the amount of compensation that is eligible for the
calculation of benefits and the amount of benefits derived from employer
contributions that may be paid to participants under both of the Pension
Plans. However, as permitted by the Employee Retirement Income Security Act of
1974, as amended ("ERISA"), Time Warner adopted the Time Warner Excess Benefit
Pension Plan (the "Excess Plan"), which provided for payments by the Company
of certain amounts which employees of the Company would have received under
the Pension Plan if eligible compensation were limited to $250,000 in 1994
(increased 5% per year thereafter) and there were no payment restrictions. For
purposes of the Excess Plan, the $200,000 limit (as indexed for years after
1989) on eligible compensation will only apply to compensation received in
1988 through 1993; the $250,000 limit (as adjusted) will apply to compensation
received in 1994 through 2000. The benefit payable under the Excess Plan was
frozen for employees of the Company, as described below, effective December
31, 2000. No employee will receive less than the total accrued benefit under
the Pension Plans and the Excess Plan as of December 31, 2000. However, going
forward, the total benefit will not increase until such time as the qualified
portion under the Pension Plans exceeds the total benefit accrued as of
December 31, 2000 under the Pension Plans and the Excess Plan.
The following table shows the estimated annual pension payable upon
retirement to employees in specified remuneration and years-of-service
classifications under the Amended Pension Plan. The amounts shown in the table
do not reflect the effect of the previously-described (1) Profit Sharing Plan
Offset or (2) early retirement supplements. The amount of the estimated annual
pension is based upon a pension formula which applies to all participants in
both the Amended Pension Plan and the Excess Plan. The estimated amounts are
based on the assumption that payments under the Amended Pension Plan will
commence upon normal retirement (generally age 65) or early retirement, that
the Amended Pension Plan will continue in force in its present form and that
no joint and survivor annuity will be payable (which would on an actuarial
basis reduce benefits to the employee but provide benefits to a surviving
beneficiary). Amounts calculated under the pension formula which exceed ERISA
limits will be paid under the Excess Plan from the Company's assets and are
included in the amounts shown in the following table.
Estimated Annual Pension for
Highest Consecutive Years of Benefit Service
Five Year Average --------------------------------------------
Compensation 10 15 20 25 30
------------------- -------- -------- -------- -------- --------
$200,000...................... $ 31,870 $ 47,800 $ 63,740 $ 79,670 $ 95,610
400,000...................... 65,200 97,800 130,410 163,010 195,610
600,000...................... 98,530 147,800 197,070 246,340 295,610
800,000...................... 131,870 197,810 263,740 329,680 395,620
The amount of covered compensation that would be considered in the
determination of the highest five consecutive full or partial years of
compensation under the Pension Plans and the Excess Plan for each of Messrs.
Levin, Turner and Parsons is limited as a result of the imposition of the
limitations on eligible compensation. However, because combined payments under
the Pension Plans and the Excess Plan are based on the highest average annual
compensation for any five consecutive full or partial calendar years of
employment (taking into account the compensation limits only for 1988 and
thereafter), the compensation used for determining benefits under such Plans
for Mr. Levin (and employees who participated in the Pension Plan prior to
1988) will include eligible compensation in years prior to 1988 which exceeded
these limits. The estimated annual benefits payable under the Amended Pension
Plan and the Excess Plan, as of February 1, 2001, would be based on average
compensation of $729,248 for Mr. Levin; $311,844 for Mr. Turner; and $304,600
for Mr. Parsons; with 28.8, 4.4 and 6.2 years of credited benefit service,
respectively. In addition, pursuant to his
25
employment agreement, Mr. Parsons will be entitled to receive supplemental
payments from the Company that will achieve a total retirement benefit equal
to what he would have received if he had five additional years of benefit
service under the Amended Pension Plan. As stated above, Messrs. Case, Novack
and Pittman are not eligible to participate in the Pension Plans. However, as
a result of Mr. Pittman's previous employment by Time Warner, at age 65, he is
entitled to start receiving an annual benefit of $21,978 under the Amended
Pension Plan and the Excess Plan. The estimated annual pension payable to Mr.
Levin under the Old Pension Plan and the Excess Plan upon his retirement based
on the indicated remuneration and years of service would be $337,889, without
reflecting the effect of the previously-described Social Security or Profit
Sharing Plan Offsets.
Comparisons of Five-Year Cumulative Total Returns
The chart below compares the performance of America Online common stock with
the performance of the Standard & Poor's 500 Composite Stock Price Index ("S&P
500 Index"), the total return index for the New York Stock Exchange ("NYSE
Market Index") and the total return index for the New York Stock Exchange,
American Stock Exchange and the Nasdaq National Market U.S and foreign
Computer and Data Processing Services Stocks (the "C&DP Index") by measuring
the changes in common stock prices from December 31, 1995 plus reinvested
dividends and distributions. The chart assumes $100 was invested on
December 31, 1995 in each of America Online common stock, the S&P 500 Index,
the NYSE Market Index and the C&DP Index and reflects reinvestment of
dividends. It should be noted that America Online did not pay dividends during
the period indicated.
[CHART APPEARS HERE]
Value at December 31,
----------------------------------------------
1995 1996 1997 1998 1999 2000
------ ------ ------ ------ ------ ------
America Online
Common Stock ....... $ 100 $ 89 $ 241 $1,674 $3,274 $1,502
NYSE/AMEX/Nasdaq
C&DP Index ......... 100 123 159 271 521 262
S&P 500 Index ........ 100 123 164 211 255 232
NYSE Market Index .... 100 121 161 193 212 221
26
The chart below compares the performance of Time Warner common stock with
the performance of the S&P 500 Index and a peer group index (the "Time Warner
Peer Group Index") by measuring the changes in common stock prices from
December 31, 1995, plus reinvested dividends and distributions. Pursuant to
the SEC's rules, Time Warner created a peer group index with which to compare
its own stock performance since a relevant published industry or line-of-
business index, such as the C&DP Index, does not exist. Time Warner attempted
to select a grouping of companies that have lines of business similar to its
own. Because of Time Warner's involvement in a broad mix of several major
media and entertainment businesses and the fact that no other public companies
are engaged in all of these businesses, no grouping could closely mirror Time
Warner's businesses or weight those businesses to match the relative
contributions of each of the Time Warner's business units to Time Warner's
performance. All of the companies included in the Time Warner Peer Group Index
are engaged in only some of the businesses in which Time Warner is engaged and
some are also engaged in businesses in which Time Warner does not participate.
The common stocks of the following companies have been included in the Time
Warner Peer Group Index: Cablevision Systems Corporation, Comcast Corporation,
McGraw-Hill Inc., Meredith Corporation, The News Corporation Limited, Viacom
Inc. and The Walt Disney Company. The chart assumes $100 was invested on
December 31, 1995 in each of Time Warner's common stock, the S&P 500 Index and
the Time Warner Peer Group Index and reflects reinvestment of dividends and
distributions on a monthly basis and annual market capitalization weighting.
[CHART APPEARS HERE]
Value at December 31,
----------------------------------------------
1995 1996 1997 1998 1999 2000
------ ------ ------ ------ ------ ------
Time Warner
Common Stock ....... $ 100 $ 100 $ 166 $ 335 $ 391 $ 283
Time Warner Peer
Group Index ........ 100 102 142 171 223 201
S&P 500 Index ........ 100 123 164 211 255 232
27
Additional Information
A company wholly owned by Mr. Turner is reimbursed by TBS for Mr. Turner's
business use of a plane owned and operated by such company. During 2000, TBS
reimbursed such company for an aggregate of $514,802 relating to Mr. Turner's
business use of such plane during 1999 and 2000. Kenneth J. Novack, an
executive officer and director of the Company currently and of America Online
during 2000, is Of Counsel to the law firm of Mintz, Levin, Cohn, Ferris,
Glovsky and Popeo, PC. Mintz Levin was retained by America Online and Time
Warner during fiscal year 2000. Fees paid to Mintz Levin were less than 5% of
the firm's gross revenues for the relevant period.
APPROVAL OF APPOINTMENT OF INDEPENDENT AUDITORS
The Board of Directors has appointed Ernst & Young LLP as independent
auditors of the Company to audit its consolidated financial statements for
2001 and has determined that it would be desirable to request that the
stockholders approve such appointment.
Ernst & Young LLP has served America Online and Time Warner and their
subsidiaries as independent auditors for many years. Representatives of Ernst
& Young LLP will be present at the Annual Meeting with the opportunity to make
a statement if they desire to do so and to respond to appropriate questions
from stockholders.
Vote Required for Approval
Stockholder approval is not required for the appointment of Ernst & Young
LLP, since the Board of Directors has the responsibility for selecting
auditors. However, the appointment is being submitted for approval at the
Annual Meeting. No determination has been made as to what action the Board of
Directors would take if stockholders do not approve the appointment.
The Board of Directors recommends a vote FOR approval of the appointment of
Ernst & Young LLP as independent auditors.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act") requires the Company's officers and directors, and persons who
own more than ten percent of a registered class of the Company's equity
securities, to file reports of ownership and changes in ownership with the SEC
and the New York Stock Exchange. Officers, directors and greater than ten-
percent stockholders are required by SEC regulations to furnish the Company
with copies of all Section 16(a) forms they file. Based solely on a review of
the copies of such forms furnished to the Company, or written representations
that no Forms 5 were required, the Company believes that during 2000, its
officers, directors and greater than ten-percent beneficial owners complied
with all applicable Section 16(a) filing requirements.
EXPENSES OF SOLICITATION
All expenses of this solicitation, including the cost of preparing and
mailing this Proxy Statement, will be borne by the Company. In addition to
solicitation by use of the mails, proxies and voting instructions may be
solicited by directors, officers and employees of the Company in person or by
telephone, telegram or other means of communication. Such directors, officers
and employees will not be additionally compensated but may be reimbursed for
reasonable out-of-pocket expenses in connection with such solicitation. The
Company has retained Corporate Investor Communications Inc.
28
at an estimated cost of $18,000, plus reimbursement of expenses, to assist in
its solicitation of proxies from brokers, nominees, institutions and
individuals. Arrangements will also be made with custodians, nominees and
fiduciaries for forwarding proxy solicitation materials to beneficial owners
of shares held of record by such custodians, nominees and fiduciaries, and the
Company will reimburse such custodians, nominees and fiduciaries for
reasonable expenses incurred in connection therewith.
PROCEDURE FOR SUBMITTING STOCKHOLDER PROPOSALS
Pursuant to Rule 14a-8 under the Exchange Act, stockholders may present
proper proposals for inclusion in the Company's proxy statement and for
consideration at the next annual meeting of its stockholders by submitting
their proposals to the Company in a timely manner. In order to be so included
for the 2002 Annual Meeting, stockholder proposals must be received by the
Company no later than November 26, 2001, and must otherwise comply with the
requirements of Rule 14a-8. In addition, the Company's By-laws establish an
advance notice procedure with regard to certain matters, including stockholder
proposals not included in the Company's proxy statement, to be brought before
an annual meeting of stockholders. In general, notice must be received by the
Secretary of the Company not less than 90 days nor more than 120 days prior to
the anniversary date of the immediately preceding annual meeting and must
contain specified information concerning the matters to be brought before such
meeting and concerning the stockholder proposing such matters. Therefore, to
be presented at the Company's 2002 Annual Meeting, such a proposal must be
received by the Company after January 16, 2002 but no later than February 15,
2002. If the date of the annual meeting is more than 30 days earlier or more
than 60 days later than such anniversary date, notice must be 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. If a stockholder who has notified the Company of
his intention to present a proposal at an annual meeting does not appear or
send a qualified representative to present his proposal at such meeting, the
Company need not present the proposal for a vote at such meeting.
All notices of proposals by stockholders, whether or not to be included in
the Company's proxy materials, should be sent to the attention of the
Secretary of the Company at 75 Rockefeller Plaza, New York, New York 10019.
General
The Board of Directors does not currently know of any other matters to be
presented at the Annual Meeting. If any additional matters are properly
presented, the persons named in the proxy will have discretion to vote in
accordance with their own judgment on such matters.
BY ORDER OF THE BOARD OF DIRECTORS,
Paul T. Cappuccio
Secretary
March 27, 2001
29
Annex A
AOL TIME WARNER INC.
AUDIT AND FINANCE COMMITTEE CHARTER
This Charter supplements the authority of the committee of the Board of
Directors (the "Board") known as the Audit and Finance Committee (the
"Committee") as such delegation of authority is set forth from time to time in
the By-laws of AOL Time Warner Inc. (the "Company"). The Committee shall
review and reassess this Charter at least annually. The Committee has
oversight responsibilities regarding (1) the integrity of the Company's
financial reporting functions and related financial information provided to
the public and (2) the Company's external and internal audit processes and
systems of internal control and compliance. The Committee also has
responsibilities related to the Company's financial structure and policies.
Statement of Policy and Responsibilities
The Committee shall provide assistance to the directors in fulfilling their
responsibility to the shareholders, potential shareholders, and investment
community relating to the oversight and monitoring of the accounting practices
of the Company, as well as the quality and integrity of financial reports of
the Company. While the Committee has the responsibilities and powers set forth
in this Charter, it is not the duty of the Committee to plan or conduct audits
or to determine that the Company's financial statements are complete and
accurate and are in accordance with generally accepted accounting principles.
Nor is it the duty of the Committee to conduct investigations, to resolve
disagreements, if any, between management and the independent auditors or to
assure compliance with laws and regulations and the Company's compliance
program. In performing its functions, the Committee will endeavor to
facilitate free and open communication between the directors, the independent
auditors, the internal auditors and the management of the Company. The
Committee's policies and procedures should remain flexible in order to best
assist the Board in fulfilling its oversight responsibilities.
Composition
The Committee shall be comprised of at least three directors each of whom
has been appointed and determined by the Board to be independent and
financially literate and at least one of whom has been found to have
accounting or related financial management expertise, each as prescribed by
the New York Stock Exchange.
Meetings
The Committee will meet at such times as deemed necessary to perform its
required duties. The Committee may ask members of management or others to
attend meetings and provide pertinent information as necessary.
Authority of the Committee
In carrying out its responsibilities, the Committee has the authority to:
Finance Matters
. Review and make recommendations to the Board concerning the financial
structure, condition and strategy of the Company and its subsidiaries,
including with respect to annual budgets, long-term financial plans,
corporate borrowings, investments, capital expenditures, long-term
commitments and the issuance and/or repurchase of stock.
A-1
. Approve such matters that are consistent with the general financial
policies and direction from time to time determined by the Board.
Financial Reporting and Related Financial Information
. In consultation with the independent auditors and management, review the
Company's interim financial statements and, prior to filing each of the
Company's Quarterly Reports on Form 10-Q with the Securities and
Exchange Commission, discuss the results of the quarter covered by the
Report on Form 10-Q and any other matters required to be communicated to
the Committee by the independent auditors under generally accepted
auditing standards. The chair of the Committee may represent the entire
Committee for purposes of this review and discussion.
. In consultation with management and the independent auditors, review the
Company's annual financial statements and the auditor's opinion and MD&A
to be contained in the annual report on Form 10-K (or the annual report
to shareholders if distributed prior to the filing of the Form 10-K)
prior to the filing of the Form 10-K.
. Review with management and the independent auditors (a) the results of
their analysis of significant financial reporting issues and practices,
including material changes in, or adoptions of, accounting principles
and disclosure practices and standards and (b) material questions of
choice with respect to the appropriate accounting principles and
practices used and to be used in the preparation of the Company's
financial statements, including judgments about the quality, not just
acceptability, of accounting principles, the reasonableness of
significant judgments and the clarity of the disclosure in the financial
statements. In addition, discuss any other matters required to be
communicated to the Committee by the outside auditors under generally
accepted auditing standards.
External and Internal Audit Processes and Internal Controls
. Review and recommend to the Board the selection (and, when appropriate,
replacement) of the independent auditors to audit the financial
statements of the Company and have a clear understanding with the
independent auditors that they are ultimately accountable to the Board
of Directors and the Committee, as the shareholders' representatives.
. Review with the independent auditors and management of the Company the
plan and scope of the proposed annual external audit and quarterly
reviews for the current year, including the procedures to be utilized
and the independent auditor's compensation.
. In consultation with the independent auditors and management, review the
results of the annual external audit of the Company, significant
findings thereof, and any other matters required to be communicated by
the independent auditors under generally accepted auditing standards,
including, if applicable, the independent auditors' summary of any
significant accounting, auditing and internal control issues, along with
recommendations and management's corrective action plans, if applicable
(management letter). Such review should also address any significant
changes to the original audit plan and any significant disputes with
management during the audit or review. Management should notify the
Committee when it seeks a second opinion on a significant accounting
issue.
. Review at least annually the overall professional services, independence
and qualifications of the independent auditors, including the periodic
receipt from the independent auditors of a written communication
delineating any and all relationships between the Company and such
auditors (including any significant fees for any anticipated non-audit
services), most importantly, those required by Independence Standards
Board Standard No. 1, Independence Discussions with Committees. In
addition, review with the independent auditors the nature
A-2
and scope of any disclosed relationships or professional services and
their impact on, and compatibility with, such auditors' objectivity and
independence and, if it finds it advisable, take, or recommend that the
Board take, appropriate action to satisfy itself of the independence of
the auditors.
. In consultation with the Company's independent auditors and chief
internal auditor, review the plan and scope of the internal audit
function and the adequacy of the Company's internal accounting controls
and the significant findings of the Company's internal audits and meet
separately with the Company's internal auditors and independent
auditors, with and without management present, to discuss the results of
their reviews.
. Oversee the Company's Corporate Compliance Program, including any
significant compliance findings.
Reporting by the Committee and Other Matters
. If required by the rules and regulations of the Securities and Exchange
Commission, provide a report that complies with such rules and
regulations to be included in the Company's proxy statement.
. Report the results of the annual external audit to the Board.
. Investigate any matter within the scope of its responsibilities that it
determines appropriate.
A-3
[AOL TIME WARNER LOGO]
3860-PS-01
PROXY
AOL TIME WARNER INC.
Proxy Solicited on Behalf of the Board of Directors of
AOL Time Warner Inc. for the Annual Meeting on May 17, 2001
The undersigned hereby acknowledges receipt of the AOL Time Warner Inc. Notice
of Annual Meeting and Proxy Statement and hereby constitutes and appoints Paul
T. Cappuccio, J. Michael Kelly and John A. LaBarca, and each of them, its true
and lawful agents and proxies, with full power of substitution in each, to
attend the Annual Meeting of Stockholders of AOL TIME WARNER INC. on Thursday,
May 17, 2001, and any adjournment thereof, and to vote on the matters indicated
all the shares of Common Stock which the undersigned would be entitled to vote
if personally present. This card shall also serve as a voting instruction to
EquiServe, as exchange agent, to vote on the matters indicated with respect to
shares of Common Stock that the undersigned is entitled to receive upon exchange
by the undersigned of certificates formerly representing shares of common stock
of America Online, Inc. or Time Warner Inc. as a result of the America
Online/Time Warner merger.
Please mark, sign and date this Proxy Card on the reverse side and return it
promptly using the enclosed reply envelope or submit your proxy by telephone or
the Internet.
Continued, and to be completed, on reverse side
--------------------------------------------------------------------------------
SUBMIT YOUR PROXY BY TELEPHONE OR INTERNET
--------------------------------------------------------------------------------
By Telephone By Internet
------------ -----------
It's fast, convenient, and immediate! It's fast, convenient, and immediate!
Call Toll-Free on a Touch-Tone Phone
1-877-PRX-VOTE (1-877-779-8683)
Follow these four easy steps: Follow these four easy steps:
1. Read the accompanying Proxy 1. Read the accompanying Proxy
Statement and Proxy Card. Statement and Proxy Card.
2. Call the toll-free number 2. Go to the Web site
1-877-PRX-VOTE (1-877-779-8683). http://www.eproxyvote.com/aol
-------------------------------
3. Enter your 14 digit Voter 3. Enter your 14 digit Voter
Control Number located on your Control Number located on your
Proxy Card above your name. Proxy Card above your name.
4. Follow the recorded instructions. 4. Follow the instructions provided.
--------------------------------------------------------------------------------
Your vote is important! Your vote is important!
Call 1-877-PRX-VOTE Go to http://www.eproxyvote.com/aol.
-------------------------------
NOTE: If you submit a proxy by Internet or telephone,
there is no need to mail back your Proxy Card.
THANK YOU FOR VOTING.
This proxy when properly executed will be voted in the manner directed herein.
If no direction is made, this proxy will be voted FOR all nominees listed and
FOR proposal 2.
The Board of Directors recommends a vote FOR
all nominees in Item 1 and FOR proposal 2.
1. Election of Directors.
Nominees: (01) Daniel F. Akerson, (02) James L. Barksdale, (03) Stephen F.
Bollenbach, (04) Stephen M. Case, (05) Frank J. Caufield, (06) Miles R.
Gilburne, (07) Carla A. Hills, (08) Gerald M. Levin, (09) Reuben Mark, (10)
Michael A. Miles, (11) Kenneth J. Novack, (12) Richard D. Parsons, (13)
Robert W. Pittman, (14) Franklin D. Raines, (15) R.E. Turner and (16)
Francis T. Vincent, Jr.
FOR ALL NOMINEES [ ] WITHHOLD AUTHORITY [ ]
(except as marked to vote for all
to the contrary) nominees
[ ] For, except vote withheld from the following nominee(s):
---------------
2. Approval of Auditors. FOR [ ] AGAINST [ ] ABSTAIN [ ]
3. In their discretion, upon such other matters as may properly come before
the meeting.
***If you wish to submit your proxy by telephone or Internet,
see the instructions above.***
MEETING ATTENDANCE
Please mark this box if you plan to
attend the Meeting. [ ]
ADDRESS CHANGE
Please mark this box if you have
indicated an address change. [ ]
Signature Signature Date
-------------------- -------------------- --------------
NOTE: Please sign exactly as name appears hereon. Joint owners should each sign.
When signing as attorney, executor, administrator, trustee or guardian, please
give full title as such.
=====================================================
Please mark, sign and date this Proxy and return it
promptly using the enclosed reply envelope.
=====================================================
PROXY
AOL TIME WARNER INC.
Proxy Solicited on Behalf of the Board of Directors of
AOL Time Warner Inc. for the Annual Meeting on May 17, 2001
The undersigned hereby constitutes and appoints Paul T. Cappuccio, J.
Michael Kelly and John A. LaBarca, and each of them, its true and lawful agents
and proxies, with full power of substitution in each, to attend the Annual
Meeting of Stockholders of AOL TIME WARNER INC. on Thursday, May 17, 2001, and
any adjournment thereof, and to vote on the matters indicated all the shares of
Series LMCN-V Common Stock which the undersigned would be entitled to vote if
personally present.
This proxy when properly executed will be voted in the manner directed
herein. If no direction is made, this proxy will be voted FOR all nominees
listed in item 1.
--------------------- ----------------
Name of Holder Number of Shares
The AOL Time Warner Inc. Board of Directors recommends a vote FOR all
---
nominees in item 1.
1. Election of Directors for terms expiring in 2002 - Daniel F. Akerson, James
L. Barksdale, Stephen F. Bollenbach, Stephen M. Case, Frank T. Caufield,
Miles R. Gilburne, Carla A. Hills, Gerald M. Levin, Reuben Mark, Michael
A. Miles, Kenneth J. Novack, Richard D. Parsons, Robert W. Pittman,
Franklin D. Raines, R. E. Turner and Francis T. Vincent, Jr., nominees.
FOR [ ] WITHHELD [ ]
[ ] FOR, except vote withheld from the following nominee(s):
---------------
---------------------------------------------------------------------------
2. In their discretion, upon such other matters as may properly come before
the meeting.
Please check this box if you plan to attend the meeting. [ ]
Signature(s)
-----------------------------------
----------------------------------- --------
Note: Please sign exactly as name Date
appears hereon. When signing
as attorney, officer, administrator
or trustee, please give full title
as such.
AOL TIME WARNER SAVINGS PLAN
AOL TIME WARNER THRIFT PLAN
TWC SAVINGS PLAN
BOOKSPAN SAVINGS PLAN
SUBMIT YOUR CONFIDENTIAL VOTING INSTRUCTIONS
BY TELEPHONE, INTERNET OR MAIL
You may send your voting instructions to the Trustee over the telephone, on the
Internet or by mail, as follows:
. By telephone: dial 1-888-221-0697 from a touch tone phone in the United
States, Canada or Puerto Rico, 24 hours a day, 7 days a week. There is NO
CHARGE to you for this call. You will be asked to enter a control number,
which is located on the reverse side above the perforation. Follow the
prompts.
. By Internet: visit the website at www.401kproxy.com and follow the
instructions. You will be asked to enter a control number, which is located
on the reverse side above the perforation.
. By mail: complete and return the instruction card set out below.
You must provide instructions to the Trustee by May 14, 2001 for your
instructions to be tabulated. You may issue instructions by telephone or the
Internet until 12:00 Midnight (eastern time) on that day. If you are sending
instructions by mail, the Trustee must receive your executed instruction card by
May 14, 2001. If you submit your instructions by telephone or the Internet,
there is no need to mail back your instruction card. If you do not provide
instructions to the Trustee, the Trustee will vote your interests as required by
the terms of the Plans and described below.
please fold and detach card at perforation before mailing
--------------------------------------------------------------------------------
CONFIDENTIAL VOTING INSTRUCTIONS
Instructions solicited by Fidelity Management Trust Company on behalf of the
Board of Directors for the AOL Time Warner Inc. Annual Meeting on May 17, 2001.
Under the provisions of the Trusts relating to these Plans, Fidelity Management
Trust Company ("Fidelity"), as Trustee, is required to request your confidential
instructions as to how your proportionate interest in the shares of AOL Time
Warner Common Stock held in the AOL Time Warner Common Stock fund under those
Plans (an "interest") is to be voted at the Annual Meeting of Stockholders
scheduled to be held on May 17, 2001. Your instructions to Fidelity will not be
divulged or revealed to anyone at AOL Time Warner Inc. If Fidelity does not
receive your instructions on or prior to May 14, 2001, your interest, if any,
attributable to (a) accounts transferred from the Time Incorporated Payroll-
Based Employee Stock Ownership Plan ("PAYSOP") and the WCI Employee Stock
Ownership Plan ("WCI ESOP") will not be voted and (b) the remainder of your Plan
accounts, if any, will be voted at the Annual Meeting in the same proportion as
other participants' interests in each such respective Plan for which Fidelity
has received voting instructions (excluding PAYSOP and WCI ESOP accounts).
This instruction card must be
signed exactly as name appears
hereon.
----------------------------------
----------------------------------
Signature(s) Date
(CONTINUED ON REVERSE SIDE)
SUBMIT YOUR INSTRUCTIONS BY TELEPHONE OR INTERNET
-------------------------------------------------
QUICK**** EASY**** IMMEDIATE
----------------------------
INTERNET VOTING: www.401kproxy.com
-----------------------------------
TOUCH TONE TELEPHONE VOTING: 1-888-221-0697
--------------------------------------------
The undersigned hereby instructs Fidelity, as Trustee, to vote as follows by
proxy at the Annual Meeting of Stockholders of AOL Time Warner Inc. to be held
on May 17, 2001 and at any adjournment thereof, the undersigned's proportionate
interest in the shares of AOL Time Warner Common Stock held in the AOL Time
Warner Common Stock fund under each of the Plans.
1. Election of Directors for terms expiring in 2002 - Daniel F. Akerson, James
L. Barksdale, Stephen F. Bollenbach, Stephen M. Case, Frank J. Caufield,
Miles R. Gilburne, Carla A. Hills, Gerald M. Levin, Reuben Mark, Michael A.
Miles, Kenneth J. Novack, Richard D. Parsons, Robert W. Pittman, Franklin
D. Raines, R.E. Turner and Francis T. Vincent, Jr., nominees.
FOR [ ] WITHHELD [ ]
[ ] FOR, except vote withheld from the following nominee(s):
___________________________________
2. Approval of Auditors.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
3. To grant discretionary voting authority to management persons regarding
such other matters as may properly come before the meeting.
Please check this box if you plan to attend the meeting. [ ]
PLEASE SIGN AND DATE ON REVERSE SIDE