SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934
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(as permitted by Rule 14a-6(e)(2))
[x] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-12
AOL TIME WARNER INC.
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(Name of Registrant as Specified In Its Charter)
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[AOL TIME WARNER LOGO]
March 26, 2002
Dear Stockholder:
You are cordially invited to attend the 2002 Annual Meeting of Stockholders
of AOL Time Warner Inc. on Thursday, May 16, 2002, beginning at 10:00 am, 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.
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 AGAINST the stockholder
proposal 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 22, 2002 are invited to attend the
Annual Meeting. No ticket is required for admission. As a result of heightened
security, however, to gain admission to the Meeting, you will be required to
present identification containing a photograph. Packages and bags will be
inspected and they may have to be checked, among other security measures that
may be used for the security of those attending the Meeting; please plan
accordingly. 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 16, 2002
The Annual Meeting (the "Annual Meeting") of Stockholders of AOL Time
Warner Inc. (the "Company") will be held:
Date: Thursday, May 16, 2002
Place: The Apollo Theatre
253 West 125th Street
New York, New York 10027
Time: 10:00 am, local time
for the following purposes:
1. To elect 15 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 2002;
3. To consider and vote upon a stockholder proposal as described in the
attached Proxy Statement; and
4. 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 22, 2002, 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 26, 2002
THE ANNUAL MEETING WILL START PROMPTLY AT 10:00 AM. 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 16, 2002, at the
Apollo Theatre, 253 West 125th Street, New York, New York 10027, commencing at
10:00 am, 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 April 1, 2002 to stockholders
entitled to vote at the Annual Meeting.
VOTING AT THE ANNUAL MEETING; RECORD DATE
Only holders of record of the Company's voting stock at the close of
business on March 22, 2002, 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:
- 4,274,370,116 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 with
respect 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 2001,
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.
STOCKHOLDERS SHARING THE SAME ADDRESS
In accordance with notices previously sent to many stockholders who hold
their shares through a bank, broker or other holder of record (a "street-name
stockholder") and share a single address, only one annual report and proxy
statement is being delivered to that address unless contrary instructions from
any stockholder at that address were received. This practice, known as
"householding," is intended to reduce the Company's printing and postage costs.
However, any such street-name stockholder residing at the same address who
wishes to receive a separate copy of this Proxy Statement or accompanying Annual
Report to Stockholders may request a copy by contacting the bank, broker or
other holder of record, or the Company by telephone at: 1-866-INFO-AOL, by
e-mail to: aoltimewarnerir@aol.com or by mail to: AOL Time Warner Inc., 75
Rockefeller Plaza, New York, New York 10019, Attention: Investor Relations. The
voting instruction sent to a street-name stockholder should provide information
on how to request (1) householding of future Company materials or (2) separate
materials if only one set of documents is being sent to a
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household. If it does not, a stockholder who would like to make one of these
requests should contact the Company as indicated above.
RECOMMENDATIONS OF THE BOARD OF DIRECTORS
The Board of Directors recommends a vote FOR the election of the nominees
for election as directors; FOR approval of the appointment of Ernst & Young LLP
as independent auditors of the Company for 2002; and AGAINST the stockholder
proposal described in this Proxy Statement.
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, resignation or retirement. Each of the nominees is currently a director
of the Company, having been elected by the stockholders at the Company's 2001
Annual Meeting of Stockholders, which was the first meeting of its stockholders
after 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"). Gerald M. Levin will not stand for reelection at the Annual
Meeting and will retire from the Board of Directors at the Annual Meeting, at
which time the number of directors constituting the Board of Directors will be
reduced to 15.
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. Assuming the
election of these nominees, of the 15 directors, the Board of Directors has
determined that 9 will be Independent Directors and 6 will be Affiliated
Directors. The Company also has a policy limiting the eligibility for nomination
by the Board of Directors as a director to those under 72 years old.
The persons named in the enclosed proxy intend to vote such proxy for the
election of each of the 15 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 15 nominees.
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NOMINEES FOR ELECTION AT THE ANNUAL MEETING
NAME AND YEAR FIRST BECAME A PRINCIPAL OCCUPATION
DIRECTOR OF THE COMPANY AGE DURING THE PAST FIVE YEARS
---------------------------- --- --------------------------
Daniel F. Akerson...................... 53 CHAIRMAN AND CHIEF EXECUTIVE OFFICER OF XO
2001 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. Mr. Akerson is an Independent
Director.
James L. Barksdale..................... 59 PRESIDENT AND CHIEF EXECUTIVE OFFICER OF BARKSDALE
2001 MANAGEMENT CORPORATION. Mr. Barksdale served as a
director of America Online from March 1999 until the
Merger Date. Mr. Barksdale has served as the Presi-
dent and Chief Executive Officer of Barksdale Man-
agement Corporation, a philanthropic investment
company, since April 1999. Mr. Barksdale is also a
General Partner of the Barksdale Group, LLC, a ven-
ture capital firm that he co-founded in April 1999.
Prior to that, he served as the President and Chief
Executive Officer of Netscape Communications Cor-
poration, a provider of software, services and Web
site resources using the Internet, from January 1995
until its acquisition by America Online in March 1999
and also served as a director of Netscape starting in
October 1994 until its acquisition by America Online.
Mr. Barksdale is also a director of FedEx Corporation
and Sun Microsystems, Inc. and is a Special Advisor to
General Atlantic Partners, a private equity firm. Mr.
Barksdale is an Independent Director.
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NAME AND YEAR FIRST BECAME A PRINCIPAL OCCUPATION
DIRECTOR OF THE COMPANY AGE DURING THE PAST FIVE YEARS
---------------------------- --- --------------------------
Stephen F. Bollenbach.................. 59 PRESIDENT AND CHIEF EXECUTIVE OFFICER OF HILTON
2001 HOTELS CORPORATION. Mr. Bollenbach served as a direc-
tor 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 com-
pany, from April 1995 until February 1996. He is also
a director of Catellus Development Corporation, Hilton
Hotels Corporation and Park Place Entertainment Cor-
poration (Chairman). Mr. Bollenbach is an Indepen-
dent Director.
Stephen M. Case........................ 43 CHAIRMAN OF THE BOARD OF THE COMPANY. Mr. Case,
2001 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 as Chief Executive Officer from April 1993 and
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...................... 62 GENERAL PARTNER OF KLEINER PERKINS CAUFIELD &
2001 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.
Miles R. Gilburne...................... 50 MANAGING MEMBER OF ZG VENTURES, L.L.C.
2001 Mr. Gilburne served as a director of America Online from
October 1999 until the Merger Date. Mr. Gilburne has
been a managing member of 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.
5
NAME AND YEAR FIRST BECAME A PRINCIPAL OCCUPATION
DIRECTOR OF THE COMPANY AGE DURING THE PAST FIVE YEARS
---------------------------- --- --------------------------
Carla A. Hills......................... 68 CHAIRMAN AND CHIEF EXECUTIVE OFFICER OF HILLS &
2001 COMPANY AND FORMER UNITED STATES TRADE REPRE-
SENTATIVE. Ambassador Hills served as a director of
Time Warner from 1993 until the Merger Date. Am-
bassador 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 1993. Ambassador Hills is
also a director of American International Group, Inc.,
ChevronTexaco Corporation, Lucent Technologies Inc.
and TCW Group Inc. Ambassador Hills is an Indepen-
dent Director.
Reuben Mark............................ 63 CHAIRMAN AND CHIEF EXECUTIVE OFFICER OF COLGATE-
2001 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.
Michael A. Miles....................... 62 FORMER CHAIRMAN OF THE BOARD AND CHIEF EXECUTIVE
2001 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.,
Morgan Stanley & Co. and Sears, Roebuck and Co. and is
a Special Limited Partner in Forstmann Little &
Company. Mr. Miles is an Independent Director.
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NAME AND YEAR FIRST BECAME A PRINCIPAL OCCUPATION
DIRECTOR OF THE COMPANY AGE DURING THE PAST FIVE YEARS
---------------------------- --- --------------------------
Kenneth J. Novack...................... 60 VICE CHAIRMAN OF THE COMPANY. Mr. Novack served
2001 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 served as 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 through March 2001. 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..................... 53 CO-CHIEF OPERATING OFFICER OF THE COMPANY.
2001 Mr. Parsons will become Chief Executive Officer of the
Company immediately after the Annual Meeting. Mr.
Parsons served as President of Time Warner from
February 1995 until his appointment as Co-Chief Op-
erating 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.
7
NAME AND YEAR FIRST BECAME A PRINCIPAL OCCUPATION
DIRECTOR OF THE COMPANY AGE DURING THE PAST FIVE YEARS
---------------------------- --- --------------------------
Robert W. Pittman...................... 48 CO-CHIEF OPERATING OFFICER OF THE COMPANY.
2001 Mr. Pittman will become the Chief Operating Officer of
the Company immediately after the Annual Meeting. 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 both President and Chief
Executive Officer of Time Warner Enterprises, a
division of TWE, and Chairman and Chief Executive
Officer of Six Flags Entertainment Corporation, the
theme park operator, 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..................... 53 CHAIRMAN AND CHIEF EXECUTIVE OFFICER OF FANNIE
2001 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........................... 63 VICE CHAIRMAN OF THE COMPANY. Mr. Turner served
2001 as Vice Chairman and a director of Time Warner from the
consummation of Time Warner's merger with Turner
Broadcasting System, Inc. ("TBS") in October 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.
8
NAME AND YEAR FIRST BECAME A PRINCIPAL OCCUPATION
DIRECTOR OF THE COMPANY AGE DURING THE PAST FIVE YEARS
---------------------------- --- --------------------------
Francis T. Vincent, Jr................. 63 CHAIRMAN OF VINCENT ENTERPRISES. Mr. Vincent
2001 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. Mr. Vincent is an Independent Director.
COMMITTEES OF THE BOARD OF DIRECTORS
The Company's By-laws currently establish four principal standing
committees of the Board of Directors. During 2001, the Board of Directors met
nine times, 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 principal 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, which met four times during 2001, is set forth in more detail in its
Charter, which is reviewed annually and was included with the Company's 2001
proxy statement. The Committee's authority 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, which met four times during 2001, 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. A 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 also created with authority over limited executive compensation matters, as
required by Section 162(m) under the Internal Revenue Code. The Compensation
Committee, or a subcommittee
9
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, which met four times during 2001, 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 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, which met four times during 2001, has the authority 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
The Company's directors are eligible to participate in the AOL Time Warner
Inc. 1999 Stock Plan (the "AOLTW 1999 Plan") which provides for initial and
annual awards of stock options to compensate the Company's non-employee
directors. Beginning in 2002, the AOLTW 1999 Plan provides for an annual grant
of options 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
10
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. Non-employee directors are reimbursed for
expenses incurred in attending Board and committee meetings, including those for
travel, food and lodging. As disclosed in the Company's 2001 proxy statement, in
January 2001, each non-employee director received an initial award of options to
purchase 52,000 shares of Common Stock under the AOLTW 1999 Plan.
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, including the quality and
acceptability of the Company's financial reporting process and controls.
The Committee discussed with the Company's internal and independent
auditors the overall scope and plans for their respective audits. The Committee
meets regularly 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.
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.
Since 1997, Ernst & Young LLP has provided services related to the
outsourcing of a portion of the Company's internal audit activities. The Company
and Ernst & Young LLP have agreed to terminate these services. This termination
will occur after an orderly transition period. The transition is expected to be
substantially completed by the end of 2002 and ended by mid-2003. In addition,
during 2001, Ernst & Young LLP did not provide any services to the Company
related to financial information systems design and implementation.
11
The aggregate fees billed by the principal auditors (Ernst & Young LLP) to
the Company for the year ended December 31, 2001 are as follows:
Fees of Accountants
Audit Fees............................. $10,610,000
All Other Fees
Audit-Related(1).................. 16,195,000
Tax-Related(2).................... 25,898,000
-----------
Total All Other Fees........ 42,093,000
-----------
Total Fees............................. $52,703,000
===========
------------
(1) Consists principally of fees related to SEC filings of $1 million;
subsidiary and international statutory audit requirements of $5.2 million;
and internal audit services of $8.2 million.
(2) Consists principally of fees related to tax compliance and planning.
In performing all of these functions, the Committee acts only in an
oversight capacity and necessarily relies on the work and assurances of the
Company's management and independent auditors, which, in their report, express
an opinion on the conformity of the Company's annual financial statements to
generally accepted accounting principles. In reliance on the reviews and
discussions referred to in this Report and in light of its role and
responsibilities, the Committee recommended to the Board of Directors, and the
Board has approved, that the audited financial statements of the Company for the
three years ended December 31, 2001 be included for filing with the Securities
and Exchange Commission in the Company's Annual Report on Form 10-K for the year
ended December 31, 2001. These financial statements include the audited
financial statements of AOL Time Warner for the year ended December 31, 2001 and
the audited financial statements of America Online, as the predecessor to the
Company for accounting purposes, for the two years ended December 31, 2000. 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 2002, 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.
12
SECURITY OWNERSHIP
SECURITY OWNERSHIP OF THE BOARD OF DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth as of January 31, 2002 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................................ 3,356 193,000 *
James L. Barksdale(3)............................ 5,521,082 13,000 *
Stephen F. Bollenbach............................ 4,687 28,000 *
Stephen M. Case(4)(11)........................... 11,471,394 18,328,092 *
Frank J. Caufield................................ 132,970 1,745,200 *
Miles R. Gilburne................................ 250,000 2,842,053 *
Carla A. Hills................................... 16,039 32,500 *
Gerald M. Levin(5)(11)........................... 2,537,679 10,316,254 *
Reuben Mark...................................... 38,239 32,500 *
Michael A. Miles................................. 43,780 32,500 *
Kenneth J. Novack(6)(11)......................... 4,850 5,461,000 *
Richard D. Parsons(7)(11)........................ 38,086 3,600,003 *
Robert W. Pittman(8)(11)......................... 15,308 14,917,255 *
Franklin D. Raines............................... 1,000 263,000 *
R.E. Turner(9)(11)............................... 148,369,441 7,187,503 3.64%
Francis T. Vincent, Jr.(10)...................... 69,890 23,500 *
All current directors and executive officers (25
persons) as a group(2)-(11).................... 168,699,864 75,202,663 5.62%
------------
* Represents beneficial ownership of less than one percent of issued and
outstanding Common Stock on January 31, 2002.
(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 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, 2002, 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, 2002, 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 and 655,812 of the stock
options shown for Mr. Novack and 60,000 of the stock options shown for Mr.
Caufield have been transferred to grantor retained annuity trusts for the
benefit of members of their respective families.
(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, 750,000
shares of Common Stock held by a limited liability company
13
of which Mr. Barksdale and his wife are the sole members 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
1,199,550 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 45,000 shares of Common Stock held by Mr. Levin's wife and
210,000 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.
(6) 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.
(7) 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.
(8) 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.
(9) Includes (a) 869,826 shares of Common Stock owned by a corporation wholly
owned by Mr. Turner, (b) 3,379,263 shares of Common Stock held by a trust
over which Mr. Turner has sole voting and dispositive control, (c)
8,700,000 shares of Common Stock held by a limited partnership of which
Mr. Turner is the sole general partner and (d) 3,589,749 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.
(10) Includes 1,650 shares of Common Stock held by Mr. Vincent's wife, as to
which Mr. Vincent disclaims beneficial ownership.
(11) Includes (a) an aggregate of approximately 42,522 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 115
shares for Mr. Case, 33,404 shares for Mr. Levin, 52 shares for Mr.
Novack, 597 shares for Mr. Parsons, 105 shares for Mr. Pittman and 455
shares for Mr. Turner), (b) an aggregate of 311,402 shares of Common Stock
beneficially owned by certain relatives of such persons and (c) an
aggregate of 3,583,067 stock options that have been transferred to
entities for the benefit of relatives of such persons.
14
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 is
based on information provided to the Company as of January 31, 2002 by the
beneficial owner.
SHARES OF STOCK PERCENT OF
BENEFICIALLY PERCENT OF VOTING
NAME AND ADDRESS OF BENEFICIAL OWNER OWNED CLASS(1) POWER(1)
------------------------------------ --------------- ---------- ----------
SERIES LMCN-V STOCK
Liberty Media Corporation(1)...................... 171,185,826 100.0% *
12300 Liberty Boulevard
Englewood, CO 80112
------------
* Less than 1%
(1) Consists of shares beneficially owned by Liberty Media Corporation, through
its direct and indirect subsidiaries. Under certain circumstances, each
share of Series LMCN-V Stock is convertible into one share of Common Stock;
such circumstances are not currently present. Each share of Series LMCN-V
Stock currently has 1/100 of a vote on certain limited matters.
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.
At the time of the AOL-TW Merger, management, with the assistance of a
leading outside compensation consultant, developed recommendations regarding the
design of executive compensation programs. Following modifications suggested by
the Compensation Committee, the Compensation Committee approved a risk-reward
philosophy, and then approved total compensation levels, structure and design
for the Company's executive officers.
Compensation Philosophy
In developing the compensation philosophy for the newly combined Company,
the Compensation Committee recognized the critical nature of the Company's
compensation practices in retaining and recruiting key executive talent as well
as providing those executives strong incentives to focus on and achieve the
Company's business objectives. Each of America Online's and Time Warner's
executive compensation programs shared these goals. Each of these programs
included as key elements stock options, to provide substantial long-term
financial reward to an executive only if the stockholders also realize long-term
stock price appreciation, and an annual performance-based bonus. The
Compensation Committee believes 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. The Committee, therefore, decided to emphasize
long-term, equity-based incentives in the form of stock options, more than
annual cash bonuses, to link compensation to improvements in financial and
operational performance reflected in stock-price performance.
Consistent with this approach, the Compensation Committee structured the
compensation mix for the six executive officers named in the Summary
Compensation Table below (the "named
15
executive officers"), including the Chief Executive Officer, to reduce
significantly their cash compensation and to substitute therefor a substantially
enhanced stock option award, as discussed in more detail below. In addition, the
Compensation Committee rationalized the cash and equity components of the
compensation of the other executive officers.
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 that the Company must actively manage compensation levels to ensure
they are fully competitive and capable of retaining top performers over the long
term. The Compensation Committee, with the assistance of its outside
compensation consultant, reviewed total compensation levels and compensation
packages awarded to similarly situated executives. The Compensation Committee
also 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 those included in the Company's peer group index
that appears in this Proxy Statement. 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 the Company's executive
officers should be in the upper quartile of its comparison group and that such
opportunities for its senior management, as well as those of the broad employee
population, are consistent with competitive market levels and the Company's
broader objectives.
2001 Compensation of the Named Executive Officers, including the Chief Executive
Officer
Consistent with the Company's newly established compensation philosophy
discussed above, for 2001, each of Mr. Levin (the Chief Executive Officer) and
the other named executive officers received (1) the same annual salary of $1
million, (2) stock options in lieu of a cash bonus and (3) a stock option award
that was intended to cover 2001 and 2002. As a result of this structure, all of
the performance-based compensation for these executive officers is solely
dependent on future stock performance, not on other qualitative and quantitative
performance measures. In addition, to ensure that such executives would not
experience any gain on a portion of the award until stockholders experience
significant stock price appreciation, the exercise price of half of the stock
option award substantially exceeds the fair market value of the Common Stock on
the date of grant. Of the total stock options covered by these awards, 25% have
an option exercise price equal to 125% of the fair market value of the Common
Stock on the date of grant and were awarded in lieu of a 2001 cash bonus and 25%
have an option exercise price equal to 150% of such fair market value.
2001 Compensation of Executive Officers other than the Named Executive Officers
During 2001, the Compensation Committee also reviewed the total
compensation provided by salary, cash bonus and stock options to each executive
officer who is not a named executive officer. As part of this review, and
consistent with its retention goal during 2001, these executive officers entered
into multi-year employment agreements with the Company that provide for a
minimum, contractually specified annual salary, an annual bonus and eligibility
for stock option awards, which, as potentially the largest compensatory element
of compensation, are generally subject to the discretion of the Compensation
Committee, or a subcommittee thereof.
Salary. In establishing appropriately competitive salary levels, the
Committee 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 Compensation
Committee approved salaries for these executive officers, which, in conjunction
with
16
cash bonus awards discussed below, maintained total cash compensation levels in
line with competitive levels.
Stock Option Awards. During 2001, each of the Company's executive officers
was also awarded stock options. These awards were made after a review of their
option holdings and the option awards made to other executives at the Company
and in the comparison groups. In addition, to further the goals of creating a
sense of common purpose throughout the newly-formed Company by giving employees
a stake in the Company's success, stock option awards were made to substantially
all employees of the Company in 2001.
Bonus Determinations. The Chief Executive Officer reviewed with the
Compensation Committee the 2001 performance of the Company's executive officers
other than the named executive officers and his recommendations of their annual
cash bonuses. The Compensation Committee considered a variety of factors in
making the bonus compensation decisions, and no specific weighting was assigned
to any one of those factors. During 2001, the Company focused its attention on
immediately operating successfully as a combined and integrated company with
strong momentum and a strategic implementation plan established prior to the
completion of the AOL-TW Merger. It also worked toward achieving its financial
and strategic goals under challenging economic conditions, including a weakening
advertising market. In light of these difficult conditions, the Company achieved
comparatively strong results as against those of its peers. The bonus payments
also reflected individual qualitative executive contributions based upon the
level of the executive's responsibilities, the efficiency and effectiveness with
which he or she oversaw the matters under his or her supervision and the degree
to which he or she contributed to the accomplishment of the Company's goals. The
Company's senior management were awarded 2001 annual cash bonuses generally
somewhat below target amounts, primarily reflecting the Company's
accomplishments during 2001 and overall and relative financial performance.
Section 162(m) Considerations
The Company expects that the salary and bonus compensation paid to
executive officers 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 2001, the Company did not pay its executive officers compensation
that would not be deductible as a result of the Section 162(m) deductibility
limit except to the extent that the compensation of the named executive officers
that exceeds $1 million is not performance-based.
Members of the Compensation Committee
James L. Barksdale
Frank J. Caufield (Chair)
Reuben Mark
Michael A. Miles
17
EXECUTIVE COMPENSATION SUMMARY TABLE
The following table presents information concerning total compensation paid
to the Chief Executive Officer and each of the five most highly compensated
executive officers of the Company who served in such capacities on December 31,
2001 (collectively, the "named executive officers"). 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. 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 prior to
2001 is that paid with respect to America Online's prior two 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
of Time Warner and America Online for Company Common Stock in the AOL-TW Merger
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
COMPENSATION(9)
ANNUAL COMPENSATION ---------------
------------------------------------------ SECURITIES
NAME AND PRINCIPAL OTHER ANNUAL UNDERLYING ALL OTHER
POSITION YEAR SALARY BONUS(7) COMPENSATION(8) OPTIONS AWARDED COMPENSATION(10)
------------------ ---- ---------- ----------- --------------- --------------- ----------------
Stephen M. Case(1)...................... 2001 $1,000,000 $ 0 -- 4,000,000 $ 2,250
Chairman of the Board T.P.* 383,333 0 -- 1,750,000 0
2000 725,000 1,125,000 -- 3,000,000 5,165
1999 575,000 1,000,000 -- 1,800,000 4,932
Gerald M. Levin(2)...................... 2001 $1,000,000 $ 0 $ 237,602 4,000,000 $ 47,031
Chief Executive Officer 2000 1,000,000 10,000,000 226,620 750,000 571,277
1999 1,000,000 9,000,000 218,477 656,251 590,167
Kenneth J. Novack(3).................... 2001 $1,000,000 $ 0 $ 165,790 2,000,000 $ 250
Vice Chairman T.P.* 258,333 275,000 -- 1,000,000 0
2000 433,333 506,000 -- 1,000,000 6,620
1999 350,000 400,000 -- 2,560,000 5,666
R.E. Turner(4).......................... 2001 $1,000,000 $ 0 $ 112,656 2,000,000 $188,440
Vice Chairman 2000 700,000 8,000,000 -- 637,500 570,986
1999 700,000 6,900,000 -- 562,500 619,657
Richard D. Parsons(5)................... 2001 $1,000,000 $ 0 $ 166,597 3,500,000 $ 77,913
Co-Chief Operating Officer 2000 750,000 6,000,000 146,535 525,000 476,935
1999 750,000 4,750,000 170,695 375,000 498,245
Robert W. Pittman(6).................... 2001 $1,000,000 $ 0 $ 399,611 3,500,000 $504,736
Co-Chief Operating Officer T.P.* 358,333 550,000 56,520 1,500,000 0
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
------------
* 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.
(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.
18
(3) Mr. Novack became Vice Chairman of the Company on the Merger Date. Prior
to that, he served as Vice Chairman of America Online.
(4) Mr. Turner became Vice Chairman 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.
(7) One quarter of the stock option award of each named executive officer in
2001 was made in lieu of a cash bonus for 2001, see "Compensation
Committee Report on Compensation of Executive Officers of the Company."
(8) In accordance with SEC rules, amounts totalling less than $50,000 have
been omitted. The amounts of personal benefits shown in this column for
2001 that represent more than 25% of the applicable executive's total
Other Annual Compensation include financial services of $97,500 to each of
Messrs. Levin and Parsons and $100,000 to each of Messrs. Novack, Turner
and Pittman, transportation-related benefits of $127,446 to Mr. Levin and
$64,787 to Mr. Parsons and $286,346 to Mr. Pittman as reimbursement for
the payment of taxes related to life insurance coverage.
(9) 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, 2001, no named
executive officer held any such shares.
(10) The amounts shown in this column for 2001 include the following:
(a) Pursuant to the AOL Time Warner Savings Plan (the "Savings
Plan"), a defined contribution plan available generally to employees of the
Company, for the 2001 plan year, each of Messrs. Case, Levin, Turner,
Parsons and Pittman deferred a portion of his annual compensation and AOL
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.
(b) 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, Novack, 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 2001, the Company
maintained for certain members of senior management, including the named
executive officers, certain supplemental life insurance benefits and paid
premiums for this supplemental coverage of approximately $250 each. The
Company 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 2001: Mr.
Levin, $22,790; Mr. Turner, $21,420; and Mr. Parsons, $4,787. The actuarial
equivalent of the value of the premiums paid by the Company for 2001 based
on certain assumptions regarding interest rates and periods of coverage
are: Mr. Levin, $44,781; Mr. Turner, $186,190; and Mr. Parsons, $75,663. 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. In
addition, during 2001, the Company maintained a life insurance policy for
Mr. Pittman to insure him against the loss of certain stock option benefits
in the event that he died prior to the full vesting of such options on the
first anniversary of the Merger Date. The Company paid a premium of
$502,486 for such policy and reimbursed Mr. Pittman for the payment of
taxes related thereto, which amount is included under "Other Annual
Compensation." For a description of life insurance coverage for certain
executive officers provided pursuant to the terms of their employment
agreements, see "Employment Arrangements."
19
STOCK OPTION GRANTS DURING 2001
The following table sets forth certain information with respect to employee
options to purchase shares of Common Stock ("options") awarded during 2001 by
the Company to the named executive officers. All such options were nonqualified
options. No stock appreciation rights ("SARs"), alone or in tandem with such
stock options, were awarded in 2001.
STOCK OPTION GRANTS IN 2001
INDIVIDUAL GRANTS(1)
-----------------------------------------------
PERCENT OF
NUMBER OF TOTAL
SECURITIES OPTIONS EXERCISE
UNDERLYING GRANTED TO OR BASE GRANT DATE
OPTIONS EMPLOYEES PRICE EXPIRATION PRESENT
NAME GRANTED IN 2001 ($/SH) DATE VALUE(2)
---- ---------- ---------- -------- ---------- -----------
Stephen M. Case............................. 2,000,000 1.1% $48.96 1/17/11 $42,680,000
1,000,000 .5% $61.20 1/17/11 18,020,000
1,000,000 .5% $73.44 1/17/11 15,390,000
Gerald M. Levin............................. 2,000,000 1.1% $48.96 1/17/11 $42,680,000
1,000,000 .5% $61.20 1/17/11 18,020,000
1,000,000 .5% $73.44 1/17/11 15,390,000
Kenneth J. Novack........................... 1,000,000 .5% $48.96 1/17/11 $21,340,000
500,000 .3% $61.20 1/17/11 9,010,000
500,000 .3% $73.44 1/17/11 7,695,000
R.E. Turner................................. 1,000,000 .5% $48.96 1/17/11 $21,340,000
500,000 .3% $61.20 1/17/11 9,010,000
500,000 .3% $73.44 1/17/11 7,695,000
Richard D. Parsons.......................... 1,750,000 1.0% $48.96 1/17/11 $37,345,000
875,000 .5% $61.20 1/17/11 15,767,500
875,000 .5% $73.44 1/17/11 13,466,250
Robert W. Pittman........................... 1,750,000 1.0% $48.96 1/17/11 $37,345,000
875,000 .5% $61.20 1/17/11 15,767,500
875,000 .5% $73.44 1/17/11 13,466,250
------------
(1) Options for executive officers have been awarded pursuant to plans approved
by the stockholders. 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 that one quarter of
each of the total awards has an exercise price 25% above the fair market
value of the Common Stock on the date of grant and one quarter has an
exercise price 50% above such fair market value. The options shown in the
table become exercisable in installments of 25% 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 and/or 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 in cash and/or full shares of Common Stock.
(2) These amounts represent the estimated present value of stock options at
January 18, 2001, 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 59.3% based on
the historical volatility of America Online and Time Warner 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 of 4.80%; 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
20
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.
OPTION EXERCISES AND VALUES IN 2001
The following table sets forth as to each of the named executive officers
information on option exercises during 2001 and the status of his options on
December 31, 2001: (i) the number of shares of Common Stock underlying options
exercised during 2001; (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, 2001; and (iv)
the aggregate dollar value of in-the-money exercisable and nonexercisable stock
options on December 31, 2001. 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 2001
AND
OPTION VALUES ON DECEMBER 31, 2001
DOLLAR VALUE OF
NUMBER OF NUMBER OF SHARES UNDERLYING UNEXERCISED
SHARES UNEXERCISED OPTIONS ON IN-THE-MONEY
UNDERLYING DOLLAR VALUE 12/31/01(3) OPTIONS ON 12/31/01*(3)
OPTIONS REALIZED ON ---------------------------- ------------------------------
NAME EXERCISED EXERCISE EXERCISABLE NONEXERCISABLE EXERCISABLE NONEXERCISABLE
---- ---------- ------------ ----------- -------------- ------------ --------------
Stephen M. Case......... 2,674,000 $127,289,634 18,237,200 5,312,500 $399,700,945 $ 0
Gerald M. Levin......... -- -- 9,066,254 4,499,997 $127,421,550 $ 0
Kenneth J. Novack....... 696,366 $ 31,554,080 4,961,000(1) 2,750,000 $ 78,825,850(1) $ 0
R.E. Turner............. -- -- 6,475,003 2,424,997 $ 80,468,250 $ 0
Richard D. Parsons...... 700,000 $ 26,958,400 2,550,003 3,849,997 $ 26,793,375 $ 0
Robert W. Pittman....... 1,500,000 $ 66,151,925 8,698,921(2) 9,968,334 $195,120,193(2) $106,059,351
------------
* Calculated using the fair market value of $32.60 per share of Common Stock
on December 31, 2001 minus the option exercise price.
(1) Includes 655,812 exercisable options that Mr. Novack transferred to grantor
retained annuity trusts for the benefit of members of his family. At
December 31, 2001, these options had a value of $13,894,147.
(2) Includes 2,297,255 exercisable options that Mr. Pittman transferred to a
family-owned limited partnership. At December 31, 2001, these options had a
value of $71,309,343.
(3) 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. All options
awarded prior to 2000 held by Messrs. Case and Novack became immediately
exercisable in full on the Merger Date and all such options held by Mr.
Pittman became immediately exercisable on the first anniversary of the
Merger Date.
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, half of the options awarded to each of
the named executive officers in 2001 (see "Stock Option Grants in 2001") 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
21
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 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 some options may be exercised for 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, Novack,
Turner, Parsons and Pittman. The expiration dates of these agreements are: Mr.
Levin -- December 31, 2005; Mr. Novack -- December 31, 2003; Mr.
Turner -- December 31, 2003; and Mr. Parsons -- January 31, 2005. Mr. Pittman's
agreement does not have a fixed term. Mr. Levin has announced his intention to
step down as Chief Executive Officer of the Company effective immediately
following the Annual Meeting and thereafter, consistent with the terms of his
agreement, serve as an advisor to the Company through the end of the agreement
term.
Among other things, the agreements with Messrs. Levin, Novack, Turner and
Parsons each provide for a fixed term of employment in a specified executive
post; minimum annual salary of $1 million and participation in Company stock
option and other compensation and benefit plans, including $50,000 of group term
life insurance. These agreements do not provide for the payment of an annual
cash bonus. In addition, the agreements with Messrs. Levin, Turner and Parsons
provide for (1) life insurance benefits in the amount of $6 million, $6 million
and $5 million, respectively, to be provided by split dollar policies for the
life of the executive under which the Company recovers an amount equal to the
net after-tax cost of the premiums paid by the Company or the policies' cash
surrender value and (2) a cash payment equal to twice the premium for coverage
under the Company's Group Universal Life ("GUL") insurance program in an amount
equal to twice the executive's salary, minus $50,000. Mr. Novack's agreement
provides for a cash payment equal to two times the premium for $4 million of GUL
insurance coverage made available by the Company.
The agreements with Messrs. Levin, Novack and Parsons 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
22
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" of control under the Internal Revenue Code.
If Mr. Levin, Novack or Parsons should become disabled during the term of
his employment agreement, the executive will receive full salary for six months
and then 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.
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.
In October 1996, America Online entered into an employment agreement with
Mr. Pittman which does not have a fixed term and which the Company has assumed.
In the event Mr. Pittman's employment agreement is terminated by him for a good
reason or by the Company other than for cause or as a result of 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 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.
Mr. Levin's agreement allows him, effective on or after May 1, 2002 and
with not less than five months' prior notice to the Company, to terminate his
position as Chief Executive Officer and become an advisor to the Company through
December 31, 2005. His advisory compensation will be equal to his annual salary.
Mr. Levin has delivered this notice to the Company. 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 terminate his executive position 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. Turner and Parsons 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 addition, prior to 2001, pursuant to their
employment agreements then in place, Time Warner made contributions for each of
Messrs. Levin, Turner and Parsons to separate non-current compensation accounts
in a grantor trust or under its deferred compensation plan. Effective beginning
January 2001, the Company terminated these contributions, but existing accounts
will continue to be invested and paid out following termination of employment 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
23
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"). 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 earn 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 accrues 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, $150,000
per year for 1994 through 2001 and $200,000 per year for 2002 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 applicable 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 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
24
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").
The Excess Plan was frozen for employees of the Company, as described below,
effective December 31, 2000. The Excess Plan provides for payments by the
Company of certain amounts which employees of the Company would have received
under the Pension Plans 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. Even though the benefit payable was frozen, 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 benefit payable 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 whose total benefit accrued as of
December 31, 2000 under the Pension Plans and the Excess Plan exceeds the
benefit payable under the Pension Plans. 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 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 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.
HIGHEST CONSECUTIVE ESTIMATED ANNUAL PENSION FOR 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. Because the total benefits accrued under the Pension Plans and the
Excess Plan for Messrs. Levin, Turner and Parsons as of December 31, 2000, the
date the Excess Plan was frozen, exceed the current benefits payable under the
Pension Plans, their total accrued benefits have not changed since December 31,
2000. Thus, the
25
estimated annual benefits payable under the Amended Pension Plan and the Excess
Plan, as of February 1, 2002, are unchanged from those determined as of December
31, 2000 and would be based on average compensation of $729,248 for Mr. Levin;
$311,844 for Mr. Turner; and $304,600 for Mr. Parsons; with 28.6, 4.3 and 6.0
years of credited benefit service, respectively. In addition, pursuant to his
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 CUMULATIVE TOTAL RETURNS
The chart below compares the performance of the Company's Common Stock with
the performance of the S&P 500 Index and a peer group index (the "Peer Group
Index") by measuring the changes in common stock prices from January 12, 2001,
the first day of trading of the Company's Common Stock after the Merger Date,
plus reinvested dividends and distributions through 2001. Pursuant to the SEC's
rules, the Company created a peer group index with which to compare its own
stock performance since a relevant published industry or line-of-business index
does not exist. The Company has selected a grouping of companies that have lines
of business similar to its own. Because of the Company's involvement in a broad
mix of several major media, Internet and entertainment businesses and the fact
that no other public companies are engaged in all of these businesses, no
grouping could closely mirror the Company's businesses or weight those
businesses to match the relative contributions of each of the Company's business
units to the Company's performance. All of the companies included in the Peer
Group Index are engaged in only some of the businesses in which the Company is
engaged and some are also engaged in businesses in which the Company does not
participate. The common stocks of the following companies have been included in
the Peer Group Index: Comcast Corporation, Cox Communications, Inc., The
McGraw-Hill Companies, Inc., The News Corporation Limited, Viacom Inc., The Walt
Disney Company and Yahoo! Inc. The chart assumes $100 was invested on January
12, 2001 in each of the Company's Common Stock, the S&P 500 Index and the Peer
Group Index and
26
reflects reinvestment of dividends and distributions on a monthly basis and
quarterly market capitalization weighting. The Company did not pay dividends
during the period indicated.
[COMPARISONS OF CUMULATIVE TOTAL RETURNS GRAPH]
----------------------------------------------------------------------------------------
COMPANY PEER GROUP S&P 500
VALUE AT COMMON STOCK INDEX INDEX
-------- ------------ ---------- -------
January 12, 2001.............................. $100 $100 $100
March 31, 2001................................ 84 84 88
June 30, 2001................................. 110 93 93
September 30, 2001............................ 69 66 80
December 31, 2001............................. 67 77 88
----------------------------------------------------------------------------------------
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 2001, TBS
reimbursed such company for an aggregate of $396,867 relating to Mr. Turner's
business use of such plane during 2000 and 2001. In addition, during 2001,
entities wholly owned by Mr. Turner ("TTFP") acquired certain
literary/production and intellectual property rights to prospective film
projects from subsidiaries of the Company that were no longer interested in
pursuing those projects and paid such subsidiaries approximately $350,000,
representing the costs they had incurred in connection with acquiring and
developing the property rights. In connection with the transaction, TTFP also
entered into arrangements with other subsidiaries of the Company relating to the
distribution of these projects upon their completion. Mr. Novack was Of Counsel
to the law firm of Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, PC through
March 2001. Mintz Levin was retained by the Company during fiscal year 2001.
During 2001, Kenneth Lerer, an Executive Vice President of the Company, received
a payment from a third party in connection with the sale in 2000 of Robinson,
Lerer & Montgomery, LLC ("RLM"), a corporate communications and consulting firm
of which he was a founder and President prior to his employment by the Company
and which has been and continues to be engaged to provide services to the
Company. Pursuant to the sale agreement, Mr. Lerer will continue to receive
annual payments through 2005 based on RLM's financial results.
27
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 2002
and has determined that it would be desirable to request that the stockholders
approve such appointment.
Ernst & Young LLP has served the Company as independent auditors for 2001
and both America Online and Time Warner and their subsidiaries as independent
auditors for many years prior to that. 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.
STOCKHOLDER PROPOSAL
PROPOSAL REGARDING CHINA BUSINESS PRINCIPLES
John C. Harrington, P.O. Box 6108, Napa, California 94581-1108, the
beneficial owner of 500 shares of Common Stock, has advised the Company that he
intends to propose a resolution at the Annual Meeting. The proposed resolution
and statement in support thereof are set forth below:
WHEREAS: Our company's business practices in China respect human and labor
rights of workers. The eleven principles below were designed to commit a company
to a widely accepted and thorough set of human and labor rights standards for
China. They were defined by the International Labor Organization and the United
Nations Covenants on Economic, Social and Cultural Rights, and Civil, and
Political Rights. They have been signed by the Chinese government and China's
national laws.
(1) No goods or products produced within our company's facilities or those
of suppliers shall be manufactured by bonded labor, forced labor,
within prison camps or as part of reform-through-labor or
reeducation-through-labor programs.
(2) Our facilities and suppliers shall adhere to wages that meet workers'
basic needs, fair and decent working hours, and at a minimum, to the
wage and hour guidelines provided by China's national labor laws.
(3) Our facilities and suppliers shall prohibit the use of corporal
punishment, any physical, sexual or verbal abuse or harassment of
workers.
(4) Our facilities and suppliers shall use production methods that do not
negatively affect the worker's occupational safety and health.
(5) Our facilities and suppliers shall not call on police or military to
enter their premises to prevent workers from exercising their rights.
28
(6) We shall undertake to promote the following freedoms among our
employees and the employees of our suppliers; freedom of association
and assembly, including the rights to form unions and bargain
collectively; freedom of expression, and freedom from arbitrary arrest
or detention.
(7) Company employees and those of our suppliers shall not face
discrimination in hiring, remuneration or promotion based on age,
gender, marital status, pregnancy, ethnicity or region of origin.
(8) Company employees and those of our suppliers shall not face
discrimination in hiring, remuneration or promotion based on labor,
political or religious activity, or on involvement in demonstrations,
past records of arrests or internal exile for peaceful protest, or
membership in organizations committed to non-violent social or
political change.
(9) Our facilities and suppliers shall use environmentally responsible
methods of production that have minimum adverse impact on land, air
and water quality.
(10) Our facilities and suppliers shall prohibit child labor, at a minimum
comply with guidelines on minimum age for employment within China's
national labor laws.
(11) We will issue annual statements to the Human Rights for Workers in
China Working Group detailing our efforts to uphold these principles
and to promote these basic freedoms.
RESOLVED: Stockholders request the Board of Directors to make all possible
lawful efforts to implement and/or increase activity on each of the principles
named above in the People's Republic of China.
SUPPORTING STATEMENT: As U.S. companies import more goods, consumer and
shareholder concern is growing about working conditions in China that fall below
basic standards of fair and humane treatment. We hope that our company can prove
to be a leader in its industry and embrace these principles.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST THIS PROPOSAL FOR THE
FOLLOWING REASONS:
As set forth in the Company's Mission Statement, the Company is founded on
a shared sense of responsibility to the common good and is committed to serving
the public interest by using its unique talents and resources to enrich people's
lives and strengthen communities around the world. This commitment exists in
every country where the Company conducts business, including China. The Company
takes its responsibility as a prominent global media and communications company
very seriously and has a consistent history of integrity as a leader in
corporate citizenship and responsibility.
Recently admitted to the World Trade Organization, China is embarking on
increasing its integration into the global economy. This further integration of
China into global markets is expected not only to open channels of commerce but
also, over time, to introduce into government institutions practices of greater
transparency, procedural fairness and public participation.
After careful review of the proposal, the Company believes that its
adoption is not appropriate and could even be counterproductive for the Company
and the people of China. Indeed, adopting certain elements of the proposal would
cause the Company to violate Chinese law and undermine the Company's ability to
bring its information and entertainment products to the people of China.
Moreover, because the principles are vague and subject to multiple
interpretations, it is unclear how the Company would measure their successful
implementation. Accordingly, since the proposal
29
addresses sensitive and highly complicated issues, the Company believes that
these matters are best entrusted to the responsible discretion of the Company as
it continues to develop its businesses in China within the framework of its
overarching mission and values.
For these reasons, the Company believes that the proposal is not in the
best interests of the Company and its stockholders.
VOTE REQUIRED FOR APPROVAL
The affirmative vote of a majority of the votes duly cast by the holders of
Common Stock is required to adopt this proposal.
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 2001, 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 mail, proxies and voting instructions may be
solicited by directors, officers and employees of the Company in person, by
telephone 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 Georgeson Shareholder Communications, Inc. 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
2003 Annual Meeting, stockholder proposals must be received by the Company no
later than December 2, 2002, 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
30
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 2003 Annual Meeting, such a proposal must be received by the
Company on or after January 16, 2003 but no later than February 17, 2003. 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 26, 2002
31
[AOL TIME WARNER LOGO]
3860-PS-02
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 16, 2002
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, Patricia Fili-Krushel and Wayne H. Pace, 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 16, 2002, 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, if applicable, 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 Control Number 3. Enter your 14-digit Voter Control Number
located on your Proxy Card above your name. located on your 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.
BY MIDNIGHT (EASTERN TIME) ON MAY 15, 2002 ------------------------------
BY MIDNIGHT (EASTERN TIME) ON MAY 15, 2002
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, FOR
PROPOSAL 2 AND AGAINST PROPOSAL 3.
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) Reuben Mark, (9) Michael A. Miles,
(10) Kenneth J. Novack, (11) Richard D. Parsons, (12) Robert W. Pittman, (13) Franklin D. Raines,
(14) R.E. Turner and (15) 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 / /
THE BOARD OF DIRECTORS RECOMMENDS A VOTE AGAINST PROPOSAL 3.
3. Stockholder proposal regarding China business principles. FOR / / AGAINST / / ABSTAIN / /
4. In their discretion, upon such other matters as may properly come before the meeting.
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. / /
***IF YOU WISH TO SUBMIT YOUR PROXY BY TELEPHONE OR INTERNET, SEE THE INSTRUCTIONS ABOVE.***
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 16, 2002
The undersigned hereby constitutes and appoints Paul T. Cappuccio,
Patricia Fili-Krushel and Wayne H. Pace, 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 16,
2002, 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 2003 - Daniel F. Akerson,
James L. Barksdale, Stephen F. Bollenbach, Stephen M. Case, Frank J.
Caufield, Miles R. Gilburne, Carla A. Hills, 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 1-800-597-7657 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. 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.
- BY MAIL: complete and return the instruction card set out below.
You must provide instructions to the Trustee by May 13, 2002 for your
instructions to be tabulated. You may issue instructions by telephone or the
Internet until 5:00 p.m. (eastern time) on that day. If you are sending
instructions by mail, the Trustee must receive your executed instruction card by
May 13, 2002. 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 ON THE REVERSE SIDE OF THE CARD.
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 16, 2002.
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 16, 2002. 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 5:00 p.m. (eastern
time) on May 13, 2002, 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: 1-800-597-7657
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 16, 2002 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 2003 - (01) Daniel F.
Akerson, (2) James L. Barksdale, (3) Stephen F. Bollenbach, (4) Stephen
M. Case, (5) Frank J. Caufield, (6) Miles R. Gilburne, (7) Carla A.
Hills, (8) Reuben Mark, (9) Michael A. Miles, (10) Kenneth J. Novack,
(11) Richard D. Parsons, (12) Robert W. Pittman, (13) Franklin D.
Raines, (14) R.E. Turner and (15) Francis T. Vincent, Jr., nominees.
FOR [ ] WITHHELD [ ]
[ ] FOR, except vote withheld from the following nominee(s):____________
________________________________________________
2. Approval of Auditors.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
3. Stockholder proposal regarding China business principles.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
4. 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