As filed with the Securities and Exchange Commission on June 24, 1998
Registration No. 333-57153
SECURITIES AND EXCHANGE COMMISSION
AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
AMERICA ONLINE, INC.
(Exact name of registrant as specified in its charter)
Delaware 54-1322110
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
22000 AOL Way, Dulles, Virginia 20166-9323 (703) 448-8700
(Address, including zip code, and telephone, including area code, of
registrant's principal executive offices)
Stephen M. Case
Chief Executive Officer
America Online, Inc.
22000 AOL Way
Dulles, Virginia 20166-9323
(703) 448-8700
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
Copy to:
Sheila A. Clark, Esquire
Vice President and
Deputy General Counsel
America Online, Inc.
22000 AOL Way
Dulles, Virginia 20166-9323
(703) 448-8700
Approximate date of commencement of proposed sale to public: As soon as
practicable after the effective date of this Registration Statement.
If the only securities being registered on this Form are being offered pursuant
to dividend or interest reinvestment plans, please check the following box. |_|
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. |X|
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, please check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering. |_|
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier registration statement for the same
offering. |_|
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. |_|
The Registrant hereby amends this Registration Statement on such date
or dates as may be necessary to delay its effective date until the Registrant
shall file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
Information contained herein is subject to completion or amendment. A
registration statement related to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any state in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such state.
PROSPECTUS (Subject to Completion)
$1,000,000,000
AMERICA ONLINE, INC.
Debt Securities
Preferred Stock
Common Stock
America Online, Inc., a Delaware corporation (the "Company," "AOL" or
"America Online") may offer from time to time (i) unsecured debt securities in
one or more series ("Debt Securities"), (ii) shares of preferred stock, par
value $.01 per share ("Preferred Stock"), in one or more series, or (iii) shares
of common stock, par value $.01 per share ("Common Stock") (the Debt Securities,
Preferred Stock and Common Stock are collectively referred to as "Securities"),
or any combination of the foregoing, at an aggregate initial public offering
price not to exceed $1,000,000,000 (or the equivalent thereof if Debt Securities
are denominated in one or more foreign currencies or foreign currency units), at
prices and on terms to be determined at or prior to the time of sale.
Specific terms of the Securities in respect of which this Prospectus is
being delivered will be set forth in an accompanying Prospectus Supplement (a
"Prospectus Supplement"), together with the terms of the offering of the
Securities, the initial public offering price and the net proceeds to the
Company from the sale thereof. The Prospectus Supplement will set forth, among
other matters, the following with respect to the particular Securities: (i) in
the case of Debt Securities, the specific designation, aggregate principal
amount, premium, authorized denominations, maturity, rate or method of
calculation of interest, if any, and dates for payment thereof, any redemption,
prepayment or sinking fund provisions, and the currency, currencies or currency
units in which principal, premium, if any, or interest, if any, is payable, (ii)
in the case of Preferred Stock, the designation, number of shares, liquidation
preference, dividend rate (or method of calculation thereof), dates on which
dividends shall be payable and dates from which dividends shall accrue, any
redemption or sinking fund provisions, any conversion or exchange rights, and
(iii) in the case of Common Stock, the number of shares of Common Stock offered.
The Company may sell Securities directly to purchasers or through
agents designated from time to time by the Company or to or through
underwriters. If any agents of the Company or any underwriters are involved in
the sale of Securities in respect of which this Prospectus is being delivered,
the names of such agents or underwriters and any applicable commission or
discount will be set forth in the applicable Prospectus Supplement. The net
proceeds to the Company from the sale of Securities will be the initial public
offering price of such Securities less such discount, in the case of an offering
through an underwriter, or the purchase price of such Securities less such
commission, in the case of an offering through an agent, and less, in each case,
other expenses of the Company associated with the issuance and distribution of
such Securities.
This Prospectus may not be used to consummate the sale of any
Securities unless accompanied by a Prospectus Supplement.
THE SECURITIES OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK.
SEE "RISK FACTORS" BEGINNING ON PAGE 10 OF THIS PROSPECTUS.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR
HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
The date of this Prospectus is ____________________ , 1998.
No person is authorized in connection with any offering made hereby to
give any information or to make any representations other than as contained or
incorporated by reference in this Prospectus, and, if given or made, such
information or representations must not be relied upon as having been authorized
by the Company. This Prospectus is not an offer to sell, or a solicitation of an
offer to buy, any Securities to any person in any jurisdiction in which it is
unlawful to make such an offer or solicitation. Neither the delivery of this
Prospectus nor any sales made hereunder shall under any circumstances create any
implication that the information contained herein is correct as of any time
subsequent to the date hereof.
AVAILABLE INFORMATION
The Company is subject to certain informational reporting requirements
of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith files reports and other information with the Securities and
Exchange Commission (the "Commission"). These reports, proxy statements and
other information can be inspected and copied at the public reference facilities
maintained by the Commission at Room 1024 of the Commission's office at 450
Fifth Street, N.W., Judiciary Plaza, Washington, DC 20549, and at its regional
offices located at 7 World Trade Center, Suite 1300, New York, NY 10048 and
Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, IL 60661. Copies
of such reports, proxy statements and other information can be obtained from the
Public Reference Section of the Commission at 450 Fifth Street, N.W., Judiciary
Plaza, Washington, DC 20549 at prescribed rates. The Commission also maintains a
Web site that contains reports, proxy and information statements and other
information regarding registrants (including America Online) that file
electronically with the Commission. The address of this site is
http://www.sec.gov. The Company's Common Stock is listed on the New York Stock
Exchange (the "NYSE") under the symbol "AOL" and reports, proxy and information
statements and other information concerning the Company may also be inspected at
the offices of the NYSE at 20 Broad Street, New York, NY 10005.
The Company has filed with the Commission in Washington, DC a
registration statement (herein, together with all amendments and exhibits,
referred to as the "Registration Statement") under the Securities Act with
respect to the securities offered or to be offered hereby. This Prospectus does
not contain all of the information included in the Registration Statement,
certain items of which are omitted in accordance with the rules and regulations
of the Commission. For further information about the Company and the securities
offered hereby, reference is made to the Registration Statement and the exhibits
thereto. Any statements contained in this Prospectus concerning the provisions
of any document are not necessarily complete and, in each instance, reference is
made to the copy of such document filed as an exhibit to the Registration
Statement or otherwise filed with the Commission. Each such statement is
qualified in its entirety by such reference.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
The following documents filed by the Company with the Commission are
incorporated herein by reference:
(a) The Company's Annual Report on Form 10-K for the fiscal
year ended June 30, 1997 (File Number 0-19836).
(b) The Company's Quarterly Reports on Form 10-Q for the
quarters ended September 30, 1997, December 31, 1997 (as amended) and
March 31, 1998 (File Number 0-19836).
(c) The Company's Current Reports on Forms 8-K for events
dated September 7, 1997, November 12, 1997, November 17, 1997, January
31, 1998 (as amended on April 17, 1998), February 13, 1998 and June 5,
1998 (File No.
0-19836).
(d) The description of the Company's capital stock, including
preferred share purchase rights, which is contained in registration
statements on Form 8-A under the Exchange Act, including any amendments
or reports filed for the purpose of updating such description.
All reports and other documents subsequently filed by the Company with
the Commission pursuant to Sections 13(a), 13(c), 14 or 15(d) of the Exchange
Act, prior to the termination of this offering, shall be deemed to be
incorporated by reference herein and to be a part hereof from the date of the
filing of such reports and documents. Any statement contained herein or in a
document incorporated or deemed incorporated by reference herein shall be deemed
to be modified or superseded for purposes of this Prospectus to the extent that
a statement contained herein, or in any subsequently filed document that also is
or is deemed to be incorporated by reference herein, modifies or supersedes such
statement. Any statement so modified or superseded will not be deemed, except as
so modified or superseded, to constitute a part of this Prospectus or the
Registration Statement.
The Company hereby undertakes to provide without charge to each person
to whom this Prospectus is delivered, on the written or oral request of such
person, a copy of any or all documents incorporated by reference herein, other
than exhibits to such documents (unless such exhibits are specifically
incorporated by reference therein). Requests for such copies should be directed
to: Sheila A. Clark, Vice President and Deputy General Counsel, America Online,
Inc., 22000 AOL Way, Dulles, Virginia 20166-9323, telephone number (703)
448-8700.
CERTAIN PERSONS PARTICIPATING IN AN OFFERING MAY ENGAGE IN TRANSACTIONS THAT
STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE SECURITIES, INCLUDING
OVER-ALLOTMENT, STABILIZING AND SHORT-COVERING TRANSACTIONS IN SUCH SECURITIES,
AND THE IMPOSITION OF A PENALTY BID, AND BIDDING FOR AND PURCHASING SHARES OF
THE COMMON STOCK IN THE OPEN MARKET DURING AND AFTER AN OFFERING.
THE COMPANY
The following summary of the business of the Company is qualified in its
entirety by and should be read together with the more detailed information and
financial statements included or incorporated by reference in this Prospectus.
America Online, including its subsidiaries, is a global leader in
interactive services, with over $1.6 billion in revenues during fiscal 1997. The
Company's AOL Internet online service has approximately 12 million members
worldwide as of April 1998, a 100% increase from two years earlier. The Company
has acquired the worldwide online services businesses of CompuServe Corporation,
which has more than 2 million members worldwide as of April 1998. The Company
generates revenues principally through subscription fees, as well as
increasingly from advertising, commerce and other revenues. The Company offers
its AOL Internet online services in the U.S. and Canada and, through joint
ventures, in Austria, France, Germany, Japan, Sweden, Switzerland and the United
Kingdom, and offers access to its AOL service in over 100 countries.
The Company's mission is to become the recognized leader in the global
interactive medium that is changing the way people communicate, stay informed,
are entertained, learn, shop and do business. To accomplish this mission, the
Company's strategy is to continue to improve and expand its service by building
unique and engaging programming and other content and services for delivery into
every home through every distribution means available. The Company seeks to
establish and build its brand names, among others, America Online, AOL, AOL
Studios, CompuServe, AOL.COM and AOL Instant Messenger. By offering a broad
range of high quality Internet online branded content, products and services,
the Company seeks to build its subscriber base as a platform for increasing
subscription revenues and revenues from advertising and electronic commerce.
The Company has reorganized its operations into three interactive
service and content brand groups, AOL Interactive Services, CompuServe
Interactive Services and AOL Studios. Through its AOL Interactive Services
group, which oversees the Company's AOL Internet online service as well as the
AOL.COM website and AOL Instant Messenger, the Company offers its members a
broad range of original programming, features and tools. The AOL service
includes five screennames for each account, member service and support 24 hours
a day, 7 days a week and personal tools designed to encourage members to share
information and ideas and to customize the AOL service to best suit their
individual and business needs. Offerings include electronic mail, Buddy Lists,
Instant Messages, interactive news and magazines, entertainment, weather,
sports, games, stock quotes, financial services transactions, online shopping,
Internet access with search capabilities, software files, computing support,
online classes and auditorium events, online meeting rooms and conversations
(chat), and parental, mail and marketing controls.
On January 31, 1998, the Company completed the acquisition of the
worldwide online services businesses of CompuServe Corporation, and entered into
a joint venture agreement to operate the CompuServe European online business in
partnership with Bertelsmann AG. The Company operates the CompuServe online
services businesses for the United States and the rest of the world (other than
Europe) through a wholly-owned subsidiary, CompuServe Interactive Services,
Inc., a Delaware corporation, which comprises the Company's CompuServe
Interactive Services group. The AOL Bertelsmann joint venture is operated
through CompuServe Interactive Services Ltd., an Irish company, owned 50% each
by the Company and Bertelsmann.
Through its AOL Studios unit, the Company creates and builds original
content for current AOL online services (AOL Interactive Services and CompuServe
Interactive Services), future AOL services and AOL web based service offerings
(AOL.COM), focusing on branded properties in categories such as local content,
multiplayer games, entertainment, romance, sports and women's issues. AOL
Studios manages AOL's interest in Digital City, Inc. ("DCI"), which is owned
approximately 80% by the Company and 20% by the Tribune Company. DCI provides
local, community-based interactive content and services.
America Online was incorporated in Delaware on May 24, 1985. The
Company's principal executive offices are located at 22000 AOL Way, Dulles,
Virginia 20166-9323. Its telephone number at that address is (703) 448-8700.
Recent Developments
New Shareholder Rights Plan
The Company adopted a new shareholder rights plan on May 12, 1998 (the
"New Plan") that has been implemented by declaring a dividend, distributable to
shareholders of record on June 1, 1998, of one preferred share purchase right (a
"Right") for each outstanding share of Common Stock. All rights granted under
the Company's former shareholder rights plan were redeemed in conjunction with
the implementation of the New Plan. The Rights have the anti-takeover effect of
causing substantial dilution to a person or group that attempts to acquire the
Company on terms not approved by the Company's Board of Directors. The Rights
will expire on May 12, 2008 unless redeemed by the Company prior to that date.
See "Risk Factors--Anti-Takeover Defense Provisions" and "Description of Capital
Stock--New Shareholder Rights Plan."
Investment in the FamilyEducation Company
In April 1998, the Company and the FamilyEducation Company announced
that they entered into a strategic relationship to build online school
communities. The Company will invest in the FamilyEducation Company, and the
FamilyEducation Network (FEN) will become an anchor tenant within the Company's
Research & Learn and Families channels under a four-year exclusive carriage
agreement. The Company will promote FEN online and conduct a local parental
awareness campaign designed to involve Company members nationwide. See "Risk
Factors--Relationships with Providers."
NetChannel Acquisition
In May 1998, the Company announced that it will acquire NetChannel,
Inc., a Web-enhanced television company. The acquisition, which was consummated
on June 16, 1998, will allow the Company to use NetChannel's programming
development experience and technology in connection with the development of an
AOL-branded service to offer interactive content developed for the television
medium. The total purchase price was approximately $29 million, comprised of
approximately $17 million in cash and $12 million of net assumed liabilities.
NetChannel, Inc. is a Web-based personalized television company that
was founded in 1996. The NetChannel service, launched in September 1997, was
discontinued on May 3, 1998. It had approximately 10,000 subscribers. Its
hardware partner was Thomson Consumer Electronics, which supported the
NetChannel service on its RCA Network Computers. See "Risk
Factors--Acquisitions."
Mirabilis Acquisition
The Company acquired Mirabilis Ltd, an Israel-based company, on June 5,
1998 pursuant to an Agreement of Purchase and Sale under which AOL acquired the
assets of Mirabilis, including its ICQ instant communications and chat
technology, for $287 million in cash and contingent payments starting in AOL's
fiscal year 2001 of up to $120 million over three years based on certain
specified growth performance standards. A substantial portion of the $287
million purchase payment is expected to be accounted for as in-process R&D in
the Company's fourth quarter ending June 30, 1998. The business will continue to
be based largely in Tel Aviv and operated as a free Web-based service with its
own brand identity. Launched in November 1996, ICQ's instant communications and
chat technology informs users when family, friends and business colleagues are
online and enables them to exchange messages in real-time. As of June 1998, more
than 12 million users have registered to use the technology. See "Risk
Factors--Acquisitions."
PRO FORMA FINANCIAL INFORMATION
The following represents an update to the unaudited pro forma
information previously disclosed in the Company's Current Report on Form 8-K
dated January 31, 1998, as amended by the Form 8-K/A filed on April 17, 1998
(the "Form 8-K"), in connection with the transactions related to the Company's
previously-reported acquisition of the worldwide interactive services division
of CompuServe Corporation (the "COLS Business") and disposition of the Company's
network services subsidiary, ANS Communications, Inc. ("ANS"), pursuant to a
Purchase and Sale Agreement dated as of September 7, 1997 by and among the
Company, ANS and WorldCom, Inc. (such transactions, the "Purchase and Sale").
The information includes the unaudited pro forma combined statement of
operations data for the nine month period ended March 31, 1998, reflecting the
pro forma adjustments for the transactions discussed in the notes thereto.
The pro forma combined statement of operations is presented for
illustrative purposes only and does not purport to be indicative of the
operating results that would have actually occurred if the transactions
reflected therein had been in effect on the dates indicated, nor is it
indicative of the future operating results of the Company. The pro forma
adjustments are based upon information and assumptions available at the time of
the filing of this Form S-3. The pro forma information should be read in
conjunction with the Company's June 30, 1997 financial statements and notes
thereto contained in its Form 10-K dated September 29, 1997 and the description
of the Purchase and Sale contained in the Form 8-K.
<TABLE>
America Online, Inc.
Pro Forma Combined Statement of Operations
For the nine month period ended March 31, 1998
(In thousands, except per share data)
(Unaudited)
Historical Pro Forma
---------------------------- ------------------------------------------
Less
-----------------------
COLS
COLS European
AOL Business 1 ANS 2 Business 3 Subtotal
-------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Revenues $ 1,807,274 276,378 $ 28,356 $ 93,393 $ 1,961,903
Costs and expenses:
Cost of revenues 1,170,742 220,754 5,928 74,326 1,311,242
Marketing 278,810 60,443 17,437 15,355 306,461
Product development 66,751 7,734 - - 74,485
General and administrative 164,509 35,224 4,854 14,251 180,628
Amortization of goodwill 8,064 629 2,569 - 6,124
Restructuring charge 33,796 - - - 33,796
Acquired research & development 9,700 - - - 9,700
Settlement charge (1,009) - - - (1,009)
-------------------------------------------------------------------------
Total costs and expenses 1,731,363 324,784 30,788 103,932 1,921,427
-------------------------------------------------------------------------
Income (loss) from operations 75,911 (48,406) (2,432) (10,539) 40,476
Other income, net 8,832 - 507 - 8,325
-------------------------------------------------------------------------
Income (loss) before provision
for income taxes 84,743 (48,406) (1,925) (10,539) 48,801
Provision for income taxes - - 228 - (228)
-------------------------------------------------------------------------
Net income (loss) $ 84,743 $ (48,406) $ (1,697) $ (10,539) $ 48,573
=========================================================================
Net income per common share - diluted $ 0.35
Net income per common share - basic $ 0.41
Weighted average shares outstanding - diluted (5) 243,109
Weighted average shares outstanding - basic (5) 208,793
See accompanying notes
Pro Forma
-------------------------------
Other Pro Forma
Adjustments 4 Combined
-------------------------------
<S> <C> <C>
Revenues $ (20,189) A $ 1,941,714
Costs and expenses:
Cost of revenues (112,345) A,C,D 1,198,897
Marketing (3,512) A 302,949
Product development (175) A 74,310
General and administrative (4,002) A 176,626
Amortization of goodwill 10,242 B 16,366
Restructuring charge - 33,796
Acquired research & development - 9,700
Settlement charge - (1,009)
---------------------------------
Total costs and expenses (109,792) 1,811,635
---------------------------------
Income (loss) from operations 89,603 130,079
Other income, net - 8,325
---------------------------------
Income (loss) before provision
for income taxes 89,603 138,404
Provision for income taxes 228 E -
---------------------------------
Net income (loss) $ 89,831 $ 138,404
=================================
Net income per common share - diluted $ 0.56
Net income per common share - basic $ 0.65
Weighted average shares outstanding - diluted (5) 243,109
Weighted average shares outstanding - basic (5) 208,793
See accompanying notes
</TABLE>
Notes to Unaudited Pro Forma Combined Statement of Operations
1. Reflects the results of operations of the COLS Business acquired by AOL.
The statement of operations of the COLS Business includes the results of
operations of CompuServe Corporation's worldwide interactive services
division including the results of operations of its wholly-owned subsidiary
Spry, Inc. (Spry).
Depreciation and amortization on the COLS Business statement of
operations has been included in general and administrative expense for
purposes of these pro formas.
2. Reflects the results of operations of the ANS business sold to WorldCom.
The pro forma statement of operations reflect the elimination of all
operating costs associated with the ANS business sold except for an
estimate of the costs associated with operating the network which provides
access to the Company's interactive service and which the Company expects
to be an ongoing cost of its business.
In generating third party revenues ANS primarily used the same personnel
and network infrastructure that it used to provide access to AOL's
internet/online service. Management has made its best estimate of the
incremental variable costs it believes ANS incurred to generate third party
revenues. General and administrative expenses incurred at ANS, including
compensatory stock option charges related to the sale of ANS of
approximately $8.9 million, have been allocated to AOL based on the ratio
that ANS revenues generated from AOL bear to total ANS revenues on a
standalone basis.
3. Reflects the results of operations of the European component of the COLS
Business (the "COLS European Business"), a 50% interest in which was sold
to Bertelsmann, AG, AOL's European partner, concurrent with the Purchase
and Sale.
The statement of operations has been prepared as if the COLS European
Business had operated as an independent standalone entity for the period
presented. The financial statement includes allocations of corporate
administrative and network service costs. Management believes that these
allocations are reasonable. This financial statement is not necessarily
indicative of the financial position and results of operations that would
have occurred had the COLS European Business been an independent standalone
entity.
4. For purposes of these pro formas, the COLS Business has been valued at
approximately $280 million. The $280 million valuation is allocated $130
million to the domestic and rest-of-world online business, including the
assets of Spry, and $150 million to the COLS European Business, 50% of
which was sold by AOL to Bertelsmann concurrent with the Purchase and Sale.
A. Management intends to dispose of the net assets of Spry within
one year of the date of acquisition. Accordingly, the results
of operations of Spry have been eliminated from the pro forma
statements of operations. A portion of the $130 million
purchase price has been allocated to Spry's net assets based
upon the estimated net realizable value, including the
expected operating results of Spry for the period prior to
disposition
B. Reflects the excess of the fair market value of the domestic
and rest-of-world interactive service business (other than the
COLS European Business) over the net book value of its
historical assets and liabilities, after the recording of
valuation adjustments. This excess represents intangible
assets and goodwill of $80,904. The goodwill and intangible
assets will be amortized on a straight line basis over five
years.
C. Reflects the impact of the pricing contained in a Master
Agreement for Data Communications (the "Services Agreement")
entered into in connection with the Purchase and Sale, as well
as the impact of the amortization of the deferred network
services credit. See Note 4D. The Company has retroactively
applied the pricing it obtained in the Services Agreement by
removing ANS's estimated historical cost of operating its
portion of AOL's dial up network and applying the pricing from
the Services Agreement as if the transaction was consummated
at the beginning of each period presented as required by Rule
11-02(b)(6) of Regulation S-X. The Company does not believe
that the benefit reflected in the cost of revenues is
indicative of the impact the Services Agreement will have on
the future operations of the Company because the Services
Agreement is conditioned upon volume commitments substantially
greater than the Company's volume requirements in the pro
forma periods presented.
D. Reflects the amortization of the deferred network service
credit on a straight-line basis over the term of the Services
Agreement as a reduction to network service expense, which is
included in cost of revenues. The deferred network service
credit reflects the excess of the fair market value of assets
received over the book value of the ANS business sold.
E. Reflects the adjustment of the pro forma combined tax
provision to conform the effective tax rate of the pro forma
combined results of operations to equal the effective tax rate
of AOL on a standalone basis.
5. Certain amounts in the pro forma combined statement of operations for
the year ended June 30, 1997 have been reclassified to conform to
current year presentation. On March 16, 1998 the Company effected a
two-for-one stock split of the outstanding shares of common stock that
was effected by dividending one additional share for each share owned
as of the record date, February 23, 1998. Accordingly, all data shown
in the accompanying unaudited pro forma combined financial statements
has been adjusted to effect the stock split.
RISK FACTORS
An investment in the Securities being offered by this Prospectus
involves a high degree of risk. In addition to the other information contained
in this Prospectus or incorporated herein by reference, prospective investors
should carefully consider the following risk factors before purchasing the
Securities offered hereby. This Prospectus contains and incorporates by
reference forward-looking statements within the "safe harbor" provisions of the
Private Securities Litigation Reform Act of 1995. Reference is made in
particular to the discussion set forth under "Management's Discussion and
Analysis of Financial Condition and Results of Operations" in the Company's
Annual Report on Form 10-K for the fiscal year ended June 30, 1997 (the "Form
10-K") and in the Company's quarterly reports on Form 10-Q for the quarters
ended September 30, 1997, December 31, 1997 and March 31, 1998 and in "Business"
in the Company's Form 10-K, incorporated by reference into this Prospectus. Such
statements are based on current expectations that involve a number of
uncertainties including those set forth in the risk factors below. Actual
results could differ materially from those projected in the forward-looking
statements.
Competition
The Company competes in a rapidly-changing marketplace with a wide
range of other companies in the communications, advertising, entertainment and
information, media, direct mail and commerce fields. Current competitors of the
Company for usage, subscribers, advertising and electronic commerce include
online services (for example, the Microsoft Network and Prodigy Services
Company), various national and local Internet service providers using
industry-standard browser and navigational software, long distance and regional
telephone companies who may offer competing services directly to their customers
as part of their telephone service (among others, AT&T Corp., MCI Communications
Corporation and various regional Bell operating companies), cable companies, and
suppliers of operating systems or personal computer manufacturers who may
incorporate functional equivalents to the Company's services in their products.
The Company also competes for usage and advertising and electronic commerce
revenues with major Web sites operated by search services and other companies
such as Yahoo! Inc., Netscape Communications Corporation, Infoseek Corporation,
CNET, Inc., Lycos, Inc. and Excite, Inc. Recently announced strategic alliances
among certain of the Company's competitors (for example, Yahoo! with MCI, Excite
with each of AT&T and Netscape, and Lycos with AT&T) could strengthen the
Company's competition. On a broader scale, the Company competes with global
media companies such as newspapers, radio and television stations and content
providers, such as CBS Corporation, The Walt Disney Company and Time Warner
Inc., and with direct marketing and telemarketing companies.
The development of midband and broadband distribution technologies,
including cable Internet access services offered by @Home Network, Road Runner
Group (owned by Time Warner Inc.) and MediaOne, Inc. (a subsidiary of US WEST
Media Group), advanced telephone-based access services offered through digital
subscriber line (DSL) technologies offered by local telecommunications companies
and other advanced digital services offered by broadcast and satellite
companies, is intensifying the competition to which the Company is subject.
Emerging convergent technologies offering combinations of television and
interactive computer services, such as those offered by WebTV, offer yet an
additional competitive alternative to the offerings of the Company. The Company
has recently announced that it has agreed to acquire NetChannel, Inc., but there
can be no assurance that the acquisition will be consummated or that its
technology will become commercially successful.. See "Summary--Recent
Developments" and "Risk Factors--Changing Technologies."
Some of the present competitors and potential future competitors of the
Company may have greater financial, technical, marketing and/or personnel
resources than the Company. The competitive environment could (i) require price
reductions and increased spending on marketing, network capacity, content
procurement and product development, (ii) limit the Company's opportunities to
enter into and/or renew agreements with content providers and distribution
partners, (iii) limit its ability to develop new products and services, (iv)
limit its ability to continue to grow its subscriber base, (v) result in
increased attrition in the Company's subscriber base and (vi) negatively impact
the Company's ability to meet its business objective of changing its business
model into one in which increasingly more revenues and profits are generated
from sources other than online service subscription revenues, such as
advertising and electronic commerce. Any of the foregoing events could have an
impact on revenues or result in an increase in costs as a percentage of
revenues, which could have a material adverse effect on the Company's business,
financial condition and operating results.
Network Capacity and Operations
Among other pricing plans, the Company has adopted a flat-rate pricing
plan which provides access to AOL for a flat monthly fee with no additional
hourly charges (the "Flat-Rate Plan"). Due to the rapid growth in subscriber
usage resulting from flat-rate pricing, the Company and its data communications
access providers have at times experienced difficulty in providing adequate
server and network capacity, respectively. As a result, members at times have
encountered difficulty in accessing and using the AOL service. In response to
such difficulties, the Company has increased its investments in system capacity,
including constructing a new data center and adding network modems, but there
can be no assurance that access problems will not recur.
America Online employs a diversified portfolio approach in designing,
structuring and operating its network services. America Online manages AOLnet, a
TCP/IP network of third-party network service providers, including Sprint
Corporation, BBN Corporation, a part of GTE Internetworking, and WorldCom,
Inc.'s wholly-owned subsidiaries ANS Communications, Inc. (acquired from the
Company) and UUNET Technologies, Inc. The Company anticipates continuing to
build AOLnet, in order to increase its network capacity, provide its members
with higher speed access, and reduce data network costs on a per-hour basis.
There can be no assurance that the AOLnet build-out or other efforts to expand
server and network capacity will be successful, or if they are successful, that
customer demand will develop for the capacity created, and the failure to do so
could have a material adverse effect on the Company's business, financial
condition and operating results. Also, a substantial majority of the Company's
network services are provided on a fixed cost or minimum commitments basis.
Accordingly, if the number of subscribers or usage significantly decreases,
network costs will not correspondingly decrease; as a result, any such decrease
in subscribers or usage could cause a material adverse effect on the Company's
business, financial condition and operating results.
In addition, supply shortages exist from time to time for local
exchange carrier lines from local telephone companies that the Company requires
to expand network capacity. The buildout of AOLnet requires a substantial
investment in telecommunications equipment, which the Company is financing
principally through leasing and asset-backed debt financing. Supply shortages or
the failure to obtain the necessary financing for the buildout of AOLnet could
have a material adverse effect on the Company's ability to expand network
capacity.
The CompuServe Interactive Service relies on data network services
provided pursuant to a Network Services Agreement between AOL, CompuServe
Incorporated, a wholly-owned subsidiary of WorldCom, and UUNet Technologies,
Inc., with an initial term ending December 31, 2002, subject to possible
extension by AOL under certain circumstances. AOL has committed to use
exclusively the network services for the CompuServe service provided under such
agreement through 1999 and for at least 66% of the usage under the CompuServe
service for the remainder of the initial term of the agreement. The smooth
operation of and access capacity on the CompuServe service are dependent on the
network services provided under the agreement and are subject to disruptions
resulting from service failures by the network services provider.
The Company's operations are dependent on its ability to protect its
computer equipment and the information stored in its data centers against damage
by fire, power loss, telecommunications failures, service failures by third
party network service providers, unauthorized intrusions and other events.
Although the Company believes it has taken prudent measures to reduce the risk
of interruption in its operations for such causes, there can be no assurance
that these measures will be sufficient. Any damage or failure that causes
interruptions in the Company's operations could have a material adverse effect
on its business, financial condition and operating results. Although the Company
carries property and business interruption insurance to cover its operations,
the coverage may not be adequate to compensate for losses that may occur.
Software defects and server and network expansion could also cause service
outages, and although the Company has made efforts to reduce outages, there can
be no assurance that its efforts to reduce outages will be successful, and the
failure to do so could have a material adverse effect on the Company's business,
financial condition and operating results.
Increasing Usage and Costs; Effects of Price Increase on Costs, Margins and
Revenues
The Company's business model relies both on online service revenues
from subscription fees and on revenues generated from non-subscription based
sources such as advertising, electronic commerce and sales of merchandise. Since
the adoption of the Flat-Rate Plan in December 1996, the Company has experienced
greater increases than anticipated in the average total usage hours per member
per month (from less than 17 hours per member per month in the third quarter of
fiscal 1997 to over 23 hours per member per month in the third quarter of fiscal
1998). While the growth and management of AOLnet have provided overall lower per
hour data communications costs, such lower costs have been and are expected to
continue to be offset by the additional costs of network services resulting from
increased total usage hours.
In response to increasing usage and consequent data communications
costs, the Company has, effective April 1, 1998, increased the monthly fee under
the Flat-Rate Plan by $2.00 per month (the "Price Increase"), in an effort to
increase subscription-based revenues in an amount sufficient to offset the
additional costs associated with additional usage and to fund continuing
additional investments needed to maintain and enhance the member experience. Any
resulting increase in subscription-based revenues may not be sufficient to
offset increasing usage and data communications costs or to fund the investments
necessary to maintain and enhance the member experience.
The Price Increase may result in new competitive pricing actions or
offerings or cause existing competitive offerings to the AOL service to become
more attractive to AOL members. The Price Increase may have a material adverse
effect on the Company's performance by reducing demand for the AOL service among
existing or prospective subscribers, slowing or reversing subscriber growth or
reducing subscriber retention rates. If subscriber growth slows or reverses or
retention rates decrease, growth in the advertising, commerce and other revenues
may slow and may require that the Company increase its marketing expenses beyond
what may otherwise be anticipated. The Company believes that reduced growth in
advertising, commerce and other revenues or that increases in marketing expenses
would cause a reduction in gross and operating margins. Therefore, there can be
no assurance that the Price Increase will increase subscription-based revenues
or that the Price Increase will not lead to a significant decrease in
non-subscription based revenues. The described effects of the Price Increase on
costs, margins, revenues and competitive conditions could have a material
adverse effect on the Company's business, financial condition and operating
results.
Changing Business Conditions
The changing business model and resulting expansion of its business and
changes in its operations have placed significant demands on the Company's
administrative, operational and financial resources. The Company's future
performance will depend in part on its ability to manage its growth and to adapt
its administrative, operational and financial control systems to the needs of an
expanded and evolving entity. The failure of management to anticipate, respond
to and manage changing business conditions could have a material adverse effect
on the Company's business, financial condition and results of operations.
Seasonality
The growth in subscriber acquisitions and usage appears to be highest
in the second and third fiscal quarters, when sales of new computers and
computer software are highest due to the holiday season, and following the
holiday season, when new computer and software owners are discovering Internet
online services while spending more time indoors due to winter weather. However,
because of the Company's limited history with the Flat-Rate Plan (which was
adopted effective as of December 1, 1996), the Company does not know whether
such increases in subscriber acquisitions and usage are primarily attributable
to seasonal factors or to increased demand for Internet online services as a
result of the growing market demand and utility for such services.
Beginning with the second quarter of fiscal 1998, the Company believes
it has begun to see the effects of seasonality in securing advertising
commitments. The Company expects that advertising commitments will be highest in
the second fiscal quarter each year due to calendar-year budgeting cycles of
many advertisers. However, because of the Company's recent focus on developing
advertising revenues, the Company does not know whether increases in securing
advertising commitments are due to seasonal factors or to increased interest by
advertisers in the Company's medium and distribution channels or other factors.
Relationships with Providers
As the marketplace in which the Company operates changes and as
competition intensifies in the online services markets, it may become more
difficult or expensive to secure and maintain relationships with electronic
commerce, advertising, marketing, technology and content providers. Although the
Company does not believe that any single relationship is material to its
business, financial condition, or results of operations, there can be no
assurance that the failure to establish new relationships or that the loss of a
number of relationships or significantly increased costs or decreased revenues,
as the case may be, to maintain relationships would not have a material adverse
effect on the Company's business, financial condition and operating results. In
addition, the Company faces risks associated with accepting warrants in lieu of
cash in certain electronic commerce agreements, as the value of such warrants is
dependent upon the common stock price of the issuer at the time the warrants are
earned.
Acquisitions
Since the beginning of January 1996, the Company has acquired or merged
with, among others, the Johnson-Grace Company, the ImagiNation Network, Inc.
(doing business as WorldPlay Entertainment), LightSpeed Media, Inc., Extreme
Fans, Inc., Personal Library Software, Total New York, Inc. (which was acquired
by Digital City, Inc., an approximately 80%-owned subsidiary of the Company)
and, on January 31, 1998, the worldwide online services businesses of CompuServe
Corporation ("CompuServe Interactive"). The Company announced in May, 1998 that
it had agreed to acquire NetChannel, Inc., a Web-enhanced television company and
announced on June 8, 1998 that it had acquired the assets of Mirabilis,
including its ICQ instant communications and chat technology. There can be no
assurance that CompuServe Interactive, NetChannel and Mirabilis can be
successfully managed and operated by the Company. See "Summary--Recent
Developments." Acquisitions by the Company involve risks, including successful
integration and management of acquired technology, operations and personnel. The
integration of acquired businesses may also lead to the loss of key employees of
the acquired companies and diversion of the attention of existing management
from other ongoing business concerns. In addition, acquisitions may result in
significant charges for in-process research and development or other matters.
Any of these factors could have a material adverse effect on the Company's
business, financial condition and operating results.
New Businesses, Operations and International Ventures
The Company pursues new products and services to leverage its
technological and other competencies. There can be no assurance that the Company
will be able to successfully develop, or achieve commercial acceptance for,
these new products and services. Demand for and market acceptance of new
products and services are subject to a high degree of uncertainty.
Critical issues concerning commercial activities via the Internet,
including security, reliability, cost, ease of use and access, remain unresolved
and may adversely impact the growth and development of the Company's business.
The Company offers its online services in the United States and Canada,
and through joint ventures, in Austria, France, Germany, Japan, Sweden,
Switzerland, and the United Kingdom. The Company has recently announced its
intention to offer online services, through a joint venture, in Australia and,
through a license and distribution arrangement, in Hong Kong in 1998. In
addition, the Company's acquisition of CompuServe's business has significantly
expanded its presence in Europe and Japan. There can be no assurance that the
Company or its partners will be able to, or to continue to, successfully market,
sell and deliver its services in these markets. In addition, there are certain
significant risks inherent in doing business on an international level, such as
laws governing content that differ greatly from those in the United States,
unexpected changes in regulatory requirements, political risks, export
restrictions, export controls relating to encryption technology, tariffs and
other trade barriers, fluctuations in currency exchange rates, issues regarding
intellectual property and potentially adverse tax consequences, any or all of
which could impact the Company's international operations. See "Risk
Factors--Government Regulation; Legal Uncertainties."
Changing Technologies
As the marketplace in which the Company operates continues to evolve,
the Company will be required to offer its existing services through advanced
distribution technologies such as cable, satellite, broadcast and enhanced
telephone distribution, and to offer advanced services such as voice and
full-motion video. Currently, Internet online services are accessed primarily
through standard telephone systems by personal computers via modems. As online
and interactive digital services, including Internet access, entertainment and
information services become accessible by cable, satellite, television or other
consumer electronic devices, and become commercially deliverable over other
wired conduits such as digital subscriber lines, coaxial and fiber optic cable,
the Company may have to develop new technology or modify its existing technology
to keep pace with these developments. Competitors of the Company have better
access to those technologies and could gain advantage by implementing new access
technologies more quickly and at lower cost than the Company. Pursuit of these
technological advances will require substantial expenditures, and there can be
no assurance that the Company will succeed in adapting its online service
business to alternate access devices and conduits as rapidly or successfully as
its competitors.
See "Risk Factors--Competition."
Government Regulation; Legal Uncertainties
In the United States and most countries in which the Company conducts
its major operations, the Company is not currently subject to direct regulation
other than pursuant to laws applicable to businesses generally. Adverse changes
in the legal or regulatory environment relating to the interactive online
services and Internet industry in the United States, Europe, Japan or elsewhere
could have a material adverse effect on the Company's business, financial
condition and operating results. A number of legislative and regulatory
proposals from various international bodies and foreign and domestic governments
in the areas of telecommunication regulation, access charges, encryption
standards, content regulation, consumer protection, intellectual property,
privacy, electronic commerce, and taxation, among others, are now under
consideration. The Company is unable at this time to predict which, if any, of
such proposals may be adopted and, if adopted, whether such proposals would have
an adverse effect on the Company's business, financial condition and operating
results. See also "Risk Factors--New Businesses, Operations and International
Ventures."
Moreover, the manner in which existing domestic and foreign laws
(including Directive 95/46/EC of the European Parliament and of the European
Council on the protection of individuals with regard to the processing of
personal data and on the free movement of such data, to become effective in the
individual member states by October 24, 1998) will or may be applied to online
service and Internet access providers is uncertain, as is the effect on the
Company's business given different possible applications. Similarly, the Company
is unable to predict the effect on the Company from the potential future
application of various domestic and foreign laws governing content, export
restrictions, privacy, consumer protection, export controls on encryption
technology, tariffs and other trade barriers, intellectual property and taxes.
Reliance on Key Personnel
The Company's success depends in part upon the performance of its
executive officers and other key employees. The loss of the services of one or
more of its key personnel could have a material adverse effect on the Company's
business, financial condition and operating results. The Company depends on its
continued ability to attract and retain highly skilled and qualified personnel.
Competition for such personnel is intense, and there can be no assurance that
the Company will be successful in attracting and retaining such personnel.
Volatility of Share Price
The market price of the Company's Common Stock has a history of
volatility. Factors such as quarterly variations in financial results and
membership growth and usage, new pricing strategies, the announcement of
technological innovations, mergers, acquisitions, strategic partnerships or new
product offerings by the Company or its competitors, the entrance of new
competitors into the online services market and changes in content providers may
have a significant impact on the market price of the Common Stock. Moreover, the
Common Stock could experience price volatility based on market conditions.
Litigation and Other Proceedings
The Company is a party to various litigation matters, investigations
and proceedings, including a lawsuit filed on behalf of shareholders against the
Company and its chief executive officer and chief financial officer alleging
violations of the federal securities laws. Such class action lawsuit was filed
in federal court in Alexandria, Virginia against the Company, its officers,
outside directors and its auditors in February 1997. In July 1997, the court
dismissed the complaint, finding that the allegations of the complaint were not
sufficiently specific. The plaintiffs filed an amended complaint in September
1997, this time naming the Company, its chief executive officer and its chief
financial officer as defendants. Although the case is scheduled to be tried in
1998, the Company has entered into a preliminary agreement to settle the action,
subject to negotiation of final documentation and approval by the court. As part
of the settlement, the Company will make up to $35 million in payments, a
substantial portion of which it expects to be covered by insurance. A
shareholder derivative suit related to such class action lawsuit has also been
filed in Delaware chancery court against certain current and former directors of
the Company and remains pending. The Company has entered into a preliminary
agreement to settle the shareholder derivative suit, subject to negotiation of
final documentation and approval by the Delaware chancery court, on terms that
will not have a material adverse effect on the financial condition or results of
operations of the Company.
The Company, one of its subsidiaries and two officers are named in a
lawsuit alleging, among other matters, that the Company breached an agreement
and has monopolized and attempted to monopolize an alleged market for online
games. While the complaint originally sought more than $100 million in damages
and requested injunctive relief, the parties are now engaged in settlement
discussions, the trial date has been deferred, and it appears likely that the
case will be settled on terms that will not have a material adverse effect on
the financial condition or results of operations of the Company.
In late May 1998, the Company entered into an Assurance of Voluntary
Compliance with representatives of the offices of 44 State Attorneys General
regarding the Company's advertising, consumer and marketing practices. The
settlement provides that the Company will provide additional disclosures in its
advertising and marketing materials and individualized notice to members of
material changes in the member agreement or increases in member fees. The
Assurance also requires the Company to make a $2.6 million payment to the states
to cover investigative costs and fund future Internet consumer protection and
education efforts and contains other terms which will not have a material
adverse effect on the financial condition or results of operations of the
Company.
The costs and other effects of pending or future litigation,
governmental investigations, legal and administrative cases and proceedings
(whether civil or criminal), settlements, judgments and investigations, claims
and changes in those matters (including those matters described above), and
developments or assertions by or against the Company relating to intellectual
property rights and intellectual property licenses, could have a material
adverse effect on the Company's business, financial condition and operating
results.
Year 2000 Potential Problems
The Company utilizes a significant number of computer software programs
and operating systems across its entire organization, including applications
used in operating the AOL Service, the CompuServe Service, their proprietary
software, member services, network access, content providers, joint ventures and
various administrative and billing functions. To the extent the Company's and
CompuServe's software applications contain source codes that are unable to
appropriately interpret the upcoming calendar year 2000, some level of
modification, or even possibly replacement of such applications, may be
necessary. The Company has appointed a Year 2000 Task Force to perform an audit
to assess the scope of the Company's risks and bring its applications into
compliance. This Task Force is currently in the process of completing its
identification of applications that are not Year 2000 compliant. In addition,
the Company has begun to ask its vendors, joint venture partners and content
partners about their progress in identifying and addressing problems that their
computer systems may face in correctly processing date information related to
the Year 2000.
The Company is conducting its Year 2000 audit, and is unable to make a
reasonable estimate of the costs associated with Year 2000 compliance.
Accordingly, no assurance can be given that any or all of the Company's or third
party systems are or will be Year 2000 compliant or that the costs required to
address the Year 2000 issue or the impact of a failure to achieve substantial
Year 2000 compliance will not have a material adverse effect on the Company's
business, financial condition or results of operations.
Future Sales of Common Stock
Sales of substantial amounts of Common Stock in the public market could
adversely affect prevailing market prices of the Common Stock. Shareholders of
approximately 5,419,834 shares of America Online Common Stock (outstanding or
issuable upon exercise of certain rights), as well as approximately 6,705,790
shares, subject to adjustment, issuable upon conversion of the Company's 4%
Convertible Subordinated Notes, have rights of registration of their shares for
resale. In connection with a master data communications agreement, the Company
has issued a warrant to purchase 7,200,000 restricted shares of the Company's
common stock under the terms of which the Company would be required to register
such shares on Form S-3 within 45 days of a full exercise. Additional shares are
subject to registration statements on Form S-8 in connection with the Company's
stock option plans. The sales of any of the foregoing shares could have a
material adverse effect on the then-prevailing market price of Common Stock.
Anti-Takeover Defense Provisions
The Company's Restated Certificate of Incorporation and Restated
By-laws contain certain provisions that could have the effect of making it more
difficult for a third party to acquire, or of discouraging a third party from
attempting to acquire, control of the Company. Certain of such provisions allow
the Company to issue preferred stock with rights senior to those of its Common
Stock and impose various procedural and other requirements which could make it
more difficult for stockholders to effect certain corporate actions. In
addition, the Company has a new shareholder rights plan pursuant to which
holders of Common Stock are entitled to one preferred share purchase right for
each outstanding share of Common Stock they hold, exercisable under certain
defined circumstances involving a potential change of control. The Rights have
the anti-takeover effect of causing substantial dilution to a person or group
that attempts to acquire the Company in terms not approved by the Company's
Board of Directors. See "Description of Capital Stock--New Shareholder Rights
Plan." The foregoing provisions could limit the price that certain investors
might be willing to pay in the future for shares of Common Stock.
USE OF PROCEEDS
Except as set forth in the Prospectus Supplement for a specific
offering, the net proceeds from the sale of Securities will be applied by the
Company for general corporate purposes.
RATIO OF EARNINGS TO FIXED CHARGES
The following table sets forth the ratio of earnings to fixed charges for the
nine months ended March 31, 1998 and for each of the last five fiscal years.
<TABLE>
Nine Months Ended March
March 31, Fiscal Year ended June 30,
<S> <C> <C> <C> <C> <C> <C>
1998 1997 1996 1995 1994 1993
Ratio of Earnings to
Fixed Charges....... 1.88x -- 4.63x -- 4.98x 4.39x
</TABLE>
For purposes of computing the ratio of earnings to fixed charges,
earnings represent earnings from continuing operations before income taxes plus
interest expense on indebtedness, amortization of debt discount and premium and
the portion of rent expense deemed representative of an interest factor. Fixed
charges include interest on indebtedness (whether expensed or capitalized),
amortization of debt discount and premium and the portion of rent expense deemed
representative of an interest factor. For the years ended June 30, 1997 and
1995, the deficiency of earnings to fixed charges totaled $448.3 million and
$16.0 million, respectively.
DESCRIPTION OF DEBT SECURITIES
The following statements with respect to the Debt Securities are
summaries of, and are subject to, the detailed provisions of an indenture (the
"Indenture") to be entered into by the Company and one or more commercial banks,
as trustee (the "Trustee"), a copy of which is filed as an exhibit to the
Registration Statement. The following summary of certain provisions of the
Indenture does not purport to be complete and is subject to, and is qualified in
its entirety by reference to, all of the provisions of the Indenture, including
the definitions therein of certain terms. Wherever defined terms of the
Indenture are referred to herein or in a Prospectus Supplement, such defined
terms are incorporated herein or therein by reference.
The Debt Securities may be issued from time to time in one or more
series. The particular terms of each series of Debt Securities will be described
in a Prospectus Supplement relating to such series.
General
The Indenture does not limit the aggregate principal amount of Debt
Securities that can be issued thereunder. The Debt Securities may be issued in
one or more series as may be authorized from time to time by the Company. The
Debt Securities will be senior unsecured obligations of the Company.
The applicable Prospectus Supplement will describe the following terms
of the series of Debt Securities with respect to which this Prospectus is being
delivered:
(a) The title of the Debt Securities of the series;
(b) Any limit on the aggregate principal amount of the Debt Securities
of the series that may be authenticated and delivered under the Indenture;
(c) The person to whom any interest on a Debt Security shall be
payable, if other than the person in whose name that Debt Security is registered
on the Regular Record Date;
(d) The date or dates on which the principal and premium, if any, of
the Debt Securities of the series are payable;
(e) The rate or rates (which may be fixed or variable) at which the
Debt Securities will bear interest, if any, or the method of determining the
rate or rates, the date or dates from which such interest will accrue, the
Interest Payment Dates on which any such interest will be payable or the method
by which the dates will be determined, the Regular Record Date for any interest
payable on any Interest Payment Date and the basis upon which interest will be
calculated if other than that of a 360-day year of twelve 30-day months;
(f) The place or places where the principal of and any premium and
interest on the Debt Securities of the series will be payable if other than the
Borough of Manhattan, The City of New York;
(g) The period or periods within which, the price or prices at which
and the terms and conditions upon which the Debt Securities of the series may be
redeemed, in whole or in part, at the option of the Company or otherwise;
(h) The obligation of the Company, if any, to redeem, purchase or repay
the Debt Securities of the series pursuant to any sinking fund or analogous
provisions or at the option of the holders and the period or periods within
which, the price or prices at which and the terms and conditions upon which such
Debt Securities shall be redeemed, purchased or repaid, in whole or in part,
pursuant to such obligation, and any provisions for the remarketing of such Debt
Securities;
(i) The terms, if any, upon which the Debt Securities of the series may
be convertible into or exchanged for other Debt Securities of the Company and
the terms and conditions upon which the conversion or exchange shall be
effected, including the initial conversion or exchange price or rate, the
conversion or exchange period and any other additional provisions;
(j) The denominations in which any Debt Securities will be issuable,
if other than denominations of $1,000 and any integral multiple thereof;
(k) The currency, currencies or currency units in which payment of
principal of and any premium and interest on Debt Securities of the series shall
be payable if other than United States dollars;
(l) Any index, formula or other method used to determine the amount of
payments of principal of and any premium and interest on the Debt Securities;
(m) If the principal amount payable at the stated maturity of Debt
Securities of the series will not be determinable as of any one or more dates
prior to the stated maturity, the amount that will be deemed to be the principal
amount as of any date for any purpose, including the principal amount thereof
which will be due and payable upon any maturity other than the stated maturity
or which will be deemed to be outstanding as of any date (or, in any such case,
the manner in which the deemed principal amount is to be determined), and if
necessary, the manner of determining the equivalent thereof in United States
currency;
(n) If the principal of or any premium or interest on any Debt
Securities is to be payable, at the election of the Company or the holders, in
one or more currencies or currency units other than that or those in which such
Debt Securities are stated to be payable, the currency, currencies or currency
units in which payment of the principal of and any premium and interest on such
Debt Securities shall be payable, and the periods within which and the terms and
conditions upon which such election is to be made;
(o) If other than the principal amount thereof, the portion of the
principal amount of the Debt Securities which will be payable upon declaration
of the acceleration of the maturity thereof or provable in bankruptcy;
(p) The applicability of, and any addition to or change in, the
covenants and definitions then set forth in the Indenture or in the terms then
set forth in the Indenture relating to permitted consolidations, mergers or
sales of assets;
(q) Any changes or additions to the provisions of the Indenture dealing
with defeasance, including the addition of additional covenants that may be
subject to the Company's covenant defeasance option;
(r) Whether any of the Debt Securities are to be issuable in permanent
global form and, if so, the Depositary or Depositaries for such Global Security
and the terms and conditions, if any, upon which interests in such Debt
Securities in global form may be exchanged, in whole or in part, for the
individual Debt Securities represented thereby in definitive registered form,
and the form of any legend or legends to be borne by the Global Security in
addition to or in lieu of the legend referred to in the Indenture;
(s) The Trustee and any authenticating or paying agents, transfer
agents or registrars;
(t) The terms, if any, of any guarantee of the payment of principal,
premium and interest with respect to Debt Securities of the series and any
corresponding changes to the provisions of the Indenture as then in effect;
(u) The terms, if any, of the transfer, mortgage, pledge or assignment
as security for the Debt Securities of the series of any properties, assets,
moneys, proceeds, securities or other collateral, including whether certain
provisions of the Trust Indenture Act are applicable and any corresponding
changes to provisions of the Indenture as then in effect;
(v) Any addition to or change in the Events of Default with respect to
the Debt Securities of the series and any change in the right of the Trustee or
the holders to declare the principal, premium and interest with respect to the
Debt Securities due and payable; and
(w) Any other terms of the Debt Securities not inconsistent with the
provisions of the Indenture.
Debt Securities may be issued as Original Issue Discount Securities to
be sold at a substantial discount from their principal amount. United States
federal income tax consequences and other special considerations applicable to
any such Original Issue Discount Securities will be described in the Prospectus
Supplement relating thereto.
If any of the Debt Securities are sold for any foreign currency or
currency unit or if principal of, premium, if any, or interest, if any, on any
of the Debt Securities is payable in any foreign currency or currency unit, the
restrictions, elections, tax consequences, specific terms and other information
with respect to such Debt Securities and such foreign currency or currency unit
will be specified in the Prospectus Supplement relating thereto.
Exchange, Registration, Transfer and Payment
Unless otherwise indicated in the applicable Prospectus Supplement,
payment of principal, premium, if any, and interest, if any, on the Debt
Securities will be payable, and the exchange of and the transfer of Debt
Securities will be registrable, at the office or agency of the Company
maintained for such purpose in the Borough of Manhattan, The City of New York
and at any other office or agency maintained for such purpose. Unless otherwise
indicated in the applicable Prospectus Supplement, the Debt Securities will be
issued in denominations of $1,000 or integral multiples thereof. No service
charge will be made for any registration of transfer or exchange of Debt
Securities, but the Company may require payment of a sum sufficient to cover any
tax or other governmental charge imposed in connection therewith.
All moneys paid by the Company to a Paying Agent for the payment of
principal, premium, if any, or interest, if any, on any Debt Security which
remain unclaimed for two years after such principal, premium or interest has
become due and payable may be repaid to the Company, and thereafter the holder
of such Debt Security may look only to the Company for payment thereof.
In the event of any redemption, the Company shall not be required to
(a) issue, register the transfer of or exchange Debt Securities of any series
during a period beginning at the opening of business 15 days before the day of
the mailing of a notice of redemption of Debt Securities of that series to be
redeemed and ending at the close of business on the day of such mailing or (b)
register the transfer of or exchange any Debt Security, or portion thereof,
called for redemption, except the unredeemed portion of any Debt Security being
redeemed in part.
Book-Entry System
The provisions set forth below in this section headed "Book-Entry
System" will apply to the Debt Securities of any series if the Prospectus
Supplement relating to such series so indicates.
Unless otherwise indicated in the applicable Prospectus Supplement, the
Debt Securities of such series will be represented by one or more global
securities (collectively, a "Global Security") registered in the name of The
Depository Trust Company (the "Depositary") or a nominee of the Depositary
identified in the Prospectus Supplement relating to such series. Except as set
forth below, a Global Security may be transferred, in whole but not in part,
only to the Depositary or another nominee of the Depositary.
Upon the issuance of a Global Security, the Depositary will credit, on
its book-entry registration and transfer system, the respective principal
amounts of the Debt Securities represented by such Global Security to the
accounts of institutions that have accounts with the Depositary or its nominee
("participants"). The accounts to be credited will be designated by the
underwriters, dealers or agents. Ownership of beneficial interests in a Global
Security will be limited to participants or persons that may hold interests
through participants. Ownership of interests in such Global Security will be
shown on, and the transfer of those ownership interests will be effected only
through, records maintained by the Depositary (with respect to participants'
interests) and such participants (with respect to the owners of beneficial
interests in such Global Security). The laws of some jurisdictions may require
that certain purchasers of securities take physical delivery of such securities
in definitive form. Such limits and laws may impair the ability to transfer
beneficial interests in a Global Security.
So long as the Depositary, or its nominee, is the registered holder and
owner of such Global Security, the Depositary or such nominee, as the case may
be, will be considered the sole owner and holder of the related Debt Securities
for all purposes of such Debt Securities and for all purposes under the
Indenture. Except as set forth below or as otherwise provided in the applicable
Prospectus Supplement, owners of beneficial interests in a Global Security will
not be entitled to have the Debt Securities represented by such Global Security
registered in their names, will not receive or be entitled to receive physical
delivery of Debt Securities in definitive form and will not be considered to be
the owners or holders of any Debt Securities under the Indenture or such Global
Security. Accordingly, each person owning a beneficial interest in a Global
Security must rely on the procedures of the Depositary and, if such person is
not a participant, on the procedures of the participant through which such
person owns its interest, to exercise any rights of a holder of Debt Securities
under the Indenture of such Global Security. The Company understands that under
existing industry practice, in the event the Company requests any action of
holders of Debt Securities or if an owner of a beneficial interest in a Global
Security desires to take any action that the Depositary, as the holder of such
Global Security is entitled to take, the Depositary would authorize the
participants to take such action, and that the participants would authorize
beneficial owners owning through such participants to take such action or would
otherwise act upon the instructions of beneficial owners owning through them.
The Depositary has advised the Company as follows: The Depositary is a
limited purpose trust company organized under the laws of the State of New York,
a member of the Federal Reserve System, a "clearing corporation" within the
meaning of the New York Uniform Commercial Code and a "clearing agency"
registered under the Exchange Act. The Depositary was created to hold securities
of its participants and to facilitate the clearance and settlement of securities
transactions among its participants in such securities through electronic
book-entry changes in accounts of the participants, thereby eliminating the need
for physical movement of securities certificates. The Depositary's participants
include securities brokers and dealers, banks, trust companies, clearing
corporations and certain other organizations, some of whom (or their
representatives) own the Depositary. Access to the Depositary's book-entry
system is also available to others such as banks, brokers, dealers and trust
companies that clear through or maintain a custodial relationship with a
participant, either directly or indirectly. The Depositary agrees with and
represents to its participants that it will administer its book-entry system in
accordance with its rules and by-laws and requirements of law.
Payment of principal of and premium, if any, and interest, if any, on
Debt Securities represented by a Global Security will be made to the Depositary
or its nominee, as the case may be, as the registered owner and holder of such
Global Security.
The Company expects that the Depositary, upon receipt of any payment of
principal, premium, if any, or interest, if any, in respect of a Global
Security, will credit immediately participants' accounts with payments in
amounts proportionate to their respective beneficial interests in the principal
amount of such Global Security as shown on the records of the Depositary. The
Company expects that payments by participants to owners of beneficial interests
in a Global Security held through such participants will be governed by standing
instructions and customary practices, as is now the case with securities held
for the accounts of customers in bearer form or registered in "street name," and
will be the responsibility of such participant. Neither the Company nor the
Trustee nor any agent of the Company or the Trustee will have any responsibility
or liability for any aspect of the records relating to, or payments made on
account of, beneficial ownership interests in a Global Security or for
maintaining, supervising or reviewing any records relating to such beneficial
ownership interests or for any other aspect of the relationship between the
Depositary and its participants or the relationship between such participants
and the owners of beneficial interests in such Global Security owning through
such participants.
Unless and until it is exchanged in whole or in part for Debt
Securities in definitive form, a Global Security may not be transferred except
as a whole by the Depositary to a nominee of such Depositary or by a nominee of
such Depositary to such Depositary or another nominee of such Depositary.
Unless otherwise provided in the applicable Prospectus Supplement, Debt
Securities represented by a Global Security will be exchangeable for Debt
Securities in definitive form of like tenor as such Global Security in
denominations of $1,000 and in any greater amount that is an integral multiple
thereof if (a) the Depositary notifies the Company and the Trustee that it is
unwilling or unable to continue as Depositary for such Global Security or if at
any time the Depositary ceases to be a clearing agency registered under the
Exchange Act and a successor Depositary is not appointed by the Company within
90 days, (b) the Company in its sole discretion determines not to have all of
the Debt Securities represented by a Global Security and notifies the Trustee
thereof or (c) there shall have occurred and be continuing an Event of Default
or an event which, with the giving of notice or lapse of time, or both, would
constitute an Event of Default with respect to the Debt Securities. Any Debt
Security that is exchangeable pursuant to the preceding sentence is exchangeable
for Debt Securities registered in such names as the Depositary shall instruct
the Trustee. It is expected that such instructions may be based upon directions
received by the Depositary from its participants with respect to ownership of
beneficial interests in such Global Security. Subject to the foregoing, a Global
Security is not exchangeable except for a Global Security or Global Securities
of the same aggregate denominations to be registered in the name of the
Depositary or its nominee.
Covenants of the Company
The covenants, if any, that will apply to a particular series of Debt
Securities will be set forth in the Prospectus Supplement relating to such
series of Debt Securities. Except as otherwise provided in the applicable
Prospectus Supplement with respect to any series of Debt Securities, the Company
is not restricted by the Indenture from incurring, assuming or becoming liable
for any type of debt or other obligations, from paying dividends or making
distributions on its capital stock or purchasing or redeeming its capital stock.
The Indenture does not require the maintenance of any financial ratios or
specified levels of net worth or liquidity. In addition, the Indenture does not
contain any provision that would require the Company to repurchase or redeem or
otherwise modify the terms of any of its Debt Securities upon a change in
control or other events involving the Company that may adversely affect the
creditworthiness of the Debt Securities.
Defeasance and Covenant Defeasance
The Indenture provides that, if such provision is made applicable to
the Debt Securities of any series pursuant to the provisions of the Indenture,
the Company may elect (a) to defease and be discharged from any and all
obligations in respect of such Debt Securities except for certain obligations to
register the transfer or exchange of such Debt Securities, to replace temporary,
destroyed, stolen, lost or mutilated Debt Securities, to maintain paying
agencies and to hold monies for payment in trust ("defeasance") or (b) (i) not
to comply with certain restrictive covenants (including the covenants to be set
forth in the Prospectus Supplement relating to such Debt Securities) and (ii) to
deem the occurrence of any event referred to in clauses (d) and (e) under
"Events of Default" below not to be or result in an Event of Default if, in each
case with respect to the Outstanding Debt Securities of such series on or after
the date certain conditions are satisfied ("covenant defeasance"), in either
case upon the deposit with the Trustee (or other qualifying trustee), in trust,
of money or U.S. Government Obligations, which through the payment of interest
and principal with respect thereto in accordance with their terms will provide
money in an amount sufficient to pay the principal of and any premium and
interest on the Debt Securities of such series on the respective stated
maturities and any mandatory sinking fund payments or analogous payments on the
days payable, in accordance with the terms of the Indenture and the Debt
Securities of such series. Such a trust may only be established if, among other
things, the Company has delivered to the Trustee an opinion of counsel to the
effect that the holders of the outstanding Debt Securities of such series will
not recognize income, gain or loss for federal income tax purposes as a result
of such deposit, defeasance or covenant defeasance and will be subject to
federal income tax on the same amount, and in the same manner and at the same
times as would have been the case if such deposit, defeasance or covenant
defeasance had not occurred. Such opinion, in the case of defeasance under
clause (a) above, must refer to and be based upon a ruling of the Internal
Revenue Service or a change in applicable federal income tax laws occurring
after the date of the Indenture. The Prospectus Supplement relating to a series
may further describe the provisions, if any, permitting such defeasance or
covenant defeasance with respect to the Debt Securities of a particular series.
Events of Default
The following events are defined in the Indenture as "Events of
Default" with respect to a series of Debt Securities (unless such event is
specifically inapplicable to a particular series as described in the Prospectus
Supplement relating thereto): (a) failure to pay any interest on any Debt
Security of that series when due, continued for 30 days; (b) failure to pay
principal of or any premium on any Debt Security of that series when due; (c)
failure to deposit any sinking fund payment, when due, in respect of any Debt
Security of that series; (d) with respect to each series of Debt Securities,
failure to perform any other covenant of the Company applicable to that series,
continued for 90 days after written notice to the Company by the Trustee or to
the Company and the Trustee by the Holders of at least 25% in principal amount
of the outstanding Debt Securities of that series specifying such failure,
requiring it to be remedied and stating that such notice is a "Notice of
Default"; (e) (i) failure of the Company to make any payment by the end of any
applicable grace period after maturity of indebtedness, which term as used in
the Indenture means obligations (other than Nonrecourse Obligations or the Debt
Securities of such series) of the Company for borrowed money or evidenced by
bonds, debentures, notes or similar instruments ("Indebtedness") in an amount in
excess of $10,000,000 and continuance of such failure, or (ii) the acceleration
of Indebtedness in an amount in excess of $10,000,000 because of a default with
respect to such Indebtedness without such Indebtedness having been discharged or
such acceleration having been cured, waived, rescinded or annulled, in the case
of (i) or (ii) above, for a period of 30 days after written notice to the
Company by the Trustee or to the Company and the Trustee by the holders of at
least 25% in principal amount of the outstanding Debt Securities of that series
specifying such failure or acceleration, requiring it to be remedied and stating
that such notice is a "Notice of Default"; provided, however, that if any such
failure or acceleration referred to in (i) or (ii) above shall cease or be
cured, waived, rescinded or annulled, then the Event of Default by reason
thereof shall be deemed not to have occurred; (f) certain events of bankruptcy,
insolvency or reorganization involving the Company; and (g) any other Event of
Default provided with respect to Debt Securities of that series.
Subject to the provisions of the Indenture relating to the duties of
the Trustee during default to act with the required standard of care, the
Trustee will be under no obligation to exercise any of its rights or powers
under the Indenture at the request or direction of any of the holders, unless
such holders shall have offered to the Trustee reasonable indemnity. Subject to
such provisions for the indemnification of the Trustee, the holders of a
majority in principal amount of the outstanding Debt Securities of any series
will have the right to direct the time, method and place of conducting any
proceeding for any remedy available to the Trustee, or exercising any trust or
power conferred on the Trustee, with respect to the Debt Securities of that
series.
The Indenture provides that the Company will deliver to the Trustee,
within 120 days after the end of each fiscal year, a brief certificate from the
principal executive, financial or accounting officer or treasurer of the Company
as to his or her knowledge of the Company's compliance (without regard to any
period of grace or requirement of notice) with all conditions and covenants of
the Indenture.
If an Event of Default with respect to Debt Securities of any series at
the time outstanding occurs and is continuing, either the Trustee or the holders
of at least 25% in principal amount of the outstanding Debt Securities of that
series by notice as provided in the Indenture may declare the principal amount
(or, if the Debt Securities of that series are Original Issue Discount
Securities, such portion of the principal amount as may be specified in the
terms of that series) of all the Debt Securities of that series to be due and
payable immediately. At any time after a declaration of acceleration with
respect to Debt Securities of any series has been made, but before a judgment or
decree for payment of money has been obtained by the Trustee, the holders of a
majority in principal amount of the outstanding Debt Securities of that series
may, under certain circumstances, rescind and annul such acceleration.
No holder of any Debt Security of any series will have any right to
institute any proceeding with respect to the Indenture or for any remedy
thereunder, unless such holder shall have previously given to the Trustee
written notice of a continuing Event of Default and unless the holders of at
least 25% in principal amount of the outstanding Debt Securities of that series
shall have made written request, and offered reasonable indemnity, to the
Trustee to institute such proceeding as trustee, and the Trustee shall not have
received from the holders of a majority in principal amount of the outstanding
Debt Securities of that series a direction inconsistent with such request and
shall have failed to institute such proceeding within 60 days. Such limitations
generally do not apply, however, to a suit instituted by a holder of a Debt
Security for the enforcement of payment of the principal or interest on such
Debt Security on or after the respective due dates expressed in such Debt
Security.
Modification, Waiver and Meetings
The Company and the Trustee may enter into supplemental indentures
without the consent of the holders of Debt Securities for one or more of the
following purposes:
(a) To evidence the succession of another person to the Company
pursuant to the provisions of the Indenture relating to consolidations, mergers
and sales of assets and the assumption by the successor of the covenants,
agreements and obligations of the Company in the Indenture and in the Debt
Securities;
(b) To surrender any right or power conferred upon the Company by the
Indenture, to add to the covenants of the Company such further covenants,
restrictions, conditions or provisions for the protection of the holders of all
or any series of Debt Securities as the Board of Directors of the Company shall
consider to be for the protection of the holders of the Debt Securities, and to
make the occurrence, or the occurrence and continuance, of a default in any of
the additional covenants, restrictions, conditions or provisions a default or an
Event of Default under the Indenture (provided, however, that with respect to
any such additional covenant, restriction, condition or provision, the
supplemental indenture may provide for a period of grace after default, which
may be shorter or longer than that allowed in the case of other defaults, may
provide for an immediate enforcement upon the default, may limit the remedies
available to the Trustee upon the default, or may limit the right of holders of
a majority in aggregate principal amount of any or all series of Debt Securities
to waive the default);
(c) To cure any ambiguity or omission or to correct or supplement any
provision contained in the Indenture, in any supplemental indenture or in any
Debt Securities that may be defective or inconsistent with any other provision
contained therein, to convey, transfer, assign, mortgage or pledge any property
to or with the Trustee, or to make such other provisions in regard to matters or
questions arising under the Indenture, in each case as shall not adversely
affect the interests of any holders of Debt Securities of any series in any
material respect;
(d) To modify or amend the Indenture in such a manner as to permit the
qualification of the Indenture or any supplemental indenture under the Trust
Indenture Act as then in effect;
(e) To add guarantees with respect to any or all of the Debt Securities
or to secure any or all of the Debt Securities;
(f) To make any change that does not adversely affect the rights of any
holder;
(g) To add to, change or eliminate any of the provisions of the
Indenture with respect to one or more series of Debt Securities, so long as any
such addition, change or elimination not otherwise permitted under the Indenture
shall (1) neither apply to any Debt Security of any series created prior to the
execution of the supplemental indenture and entitled to the benefit of the
provision nor modify the rights of the holders of any Debt Security with respect
to the provision, or (2) become effective only when there is no such Debt
Security outstanding;
(h) To evidence and provide for the acceptance of appointment by a
successor or separate Trustee with respect to the Debt Securities of one or more
series and to add to or change any of the provisions of the Indenture as shall
be necessary to provide for or facilitate the administration of the Indenture by
more than one Trustee;
(i) To establish the form or terms of Debt Securities of any series;
and
(j) To provide for uncertificated Debt Securities in addition to or in
place of certificated Debt Securities (provided that the uncertificated Debt
Securities are issued in registered form for purposes of Section 163(f) of the
Internal Revenue Code or in a manner such that the uncertificated Debt
Securities are described in Section 163(f)(2)(B) of such code).
Modifications and amendments of the Indenture may be made by the
Company and the Trustee with the consent of the holders of a majority in
principal amount of the outstanding Debt Securities of each series affected by
such modification or amendment; provided, however, that no such modification or
amendment may, without the consent of the holder of each outstanding Debt
Security affected thereby, (a) change the stated maturity of the principal of,
or any installment of principal of or interest on, any Debt Security, (b) reduce
the principal amount of, rate of interest on or any premium payable upon the
redemption of any Debt Security, (c) reduce the amount of principal of an
Original Issue Discount Security payable upon acceleration of the maturity
thereof, (d) change the place of payment where, or the coin or currency in
which, any Debt Security or any premium or interest thereon is payable, (e)
impair the right to institute suit for the enforcement of any payment on or with
respect to any Debt Security after the stated maturity, redemption date or
repayment date, (f) reduce the percentage in principal amount of outstanding
Debt Securities of any series, the consent of whose holders is required for
modification or amendment of the Indenture or for waiver of compliance with
certain provisions of the Indenture or for waiver of certain defaults or (g)
modify any of the provisions set forth in this paragraph except to increase any
such percentage or to provide that certain other provisions of the Indenture may
not be modified or waived without the consent of the holder of each outstanding
Debt Security affected thereby.
The holders of a majority in principal amount of the outstanding Debt
Securities of each series may, on behalf of the holders of all the Debt
Securities of that series, waive, insofar as that series is concerned,
compliance by the Company with certain restrictive provisions of the Indenture.
The holders of a majority in principal amount of the outstanding Debt Securities
of each series may, on behalf of all holders of Debt Securities of that series
and any coupons appertaining thereto, waive any past default under the Indenture
with respect to Debt Securities of that series, except a default (a) in the
payment of principal of or any premium or interest on any Debt Security of such
series or (b) in respect of a covenant or provision of the Indenture which
cannot be modified or amended without the consent of each holder of outstanding
Debt Securities of the affected series.
The Indenture provides that in determining whether the holders of the
requisite principal amount of the outstanding Debt Securities have given any
request, demand, authorization, direction, notice, consent or waiver thereunder
or whether a quorum is present at a meeting of holders of Debt Securities (a)
the principal amount of an Original Issue Discount Security that shall be deemed
to be outstanding shall be the amount of the principal thereof that would be due
and payable as of the date of such determination upon acceleration of the
maturity thereof, (b) the principal amount of a Debt Security denominated in
other than U.S. dollars shall be the U.S. dollar equivalent, determined on the
date of original issuance of such Debt Security, of the principal amount of such
Debt Security (or, in the case of an Original Issue Discount Security, the U.S.
dollar equivalent on the date of original issuance of such Debt Security of the
amount determined as provided in (a) above of such Debt Security) and (c) Debt
Securities owned by the Company or any Subsidiary of the Company shall be
disregarded and deemed not to be Outstanding.
Consolidation, Merger and Sale of Assets
The Company may not consolidate with or merge with or into any person,
or convey, transfer or lease all or substantially all of its assets, or permit
any person to consolidate with or merge into the Company, unless the following
conditions have been satisfied:
(a) Either (1) the Company shall be the continuing person in the case
of a merger or (2) the resulting, surviving or transferee person, if other than
the Company (the "Successor Company"), shall be a corporation organized and
existing under the laws of the United States, any State or the District of
Columbia and shall expressly assume all the obligations of the Company under the
Debt Securities and the Indenture;
(b) Immediately after giving effect to the transaction (and treating
any indebtedness that becomes an obligation of the Successor Company or any
Subsidiary of the Company as a result of the transaction as having been incurred
by the Successor Company or the Subsidiary at the time of the transaction), no
default, Event of Default or event that, after notice or lapse of time, would
become an Event of Default under the Indenture would occur or be continuing; and
(c) The Company shall have delivered to the Trustee an officers'
certificate and an opinion of counsel, each stating that the consolidation,
merger, transfer or lease complies with the Indenture.
Upon any consolidation by the Company with, or merger by the Company
into, any other person or any conveyance, transfer or lease of the properties
and assets of the Company as an entirety or substantially as an entirety as
described in the preceding paragraph, the Successor Company resulting from such
consolidation or into which the Company is merged or the transferee or lessee to
which such conveyance, transfer or lease is made, will succeed to, and be
substituted for, and may exercise every right and power of, the Company under
the Indenture, and thereafter, except in the case of a lease, the predecessor
(if still in existence) will be released from its obligations and covenants
under the Indenture and all outstanding Debt Securities.
Notices
Except as otherwise provided in the Indenture, notices to holders of
Debt Securities will be given by mail to the addresses of such holders as they
appear in the Debt Security Register.
Title
Prior to due presentment of a Debt Security for registration of
transfer, the Company, the Trustee and any agent of the Company or the Trustee
may treat the person in whose name such Debt Security is registered as the owner
of such Debt Security for the purpose of receiving payment of principal of and
any premium and any interest (other than defaulted interest or as otherwise
provided in the applicable Prospectus Supplement) on such Debt Security and for
all other purposes whatsoever, whether or not such Debt Security be overdue, and
neither the Company, the Trustee nor any agent of the Company or the Trustee
shall be affected by notice to the contrary.
Replacement of Debt Securities
Any mutilated Debt Security will be replaced by the Company at the
expense of the Holder upon surrender of such Debt Security to the Trustee. Debt
Securities that become destroyed, stolen or lost will be replaced by the Company
at the expense of the Holder upon delivery to the Trustee of the Debt Security
or evidence of the destruction, loss or theft thereof satisfactory to the
Company and the Trustee. In the case of a destroyed, lost or stolen Debt
Security, an indemnity satisfactory to the Trustee and the Company may be
required at the expense of the holder of such Debt Security before a replacement
Debt Security will be issued.
Governing Law
The Indenture and the Debt Securities will be governed by, and
construed in accordance with, the laws of the State of New York.
Regarding the Trustee
The Company may appoint a separate Trustee for any series of Debt
Securities. As used herein in the description of a series of Debt Securities,
the term "Trustee" refers to the Trustee appointed with respect to the series of
Debt Securities.
The Indenture contains certain limitations on the right of the Trustee,
should it become a creditor of the Company, to obtain payment of claims in
certain cases or to realize for its own account on certain property received in
respect of any such claim as security or otherwise. The Trustee will be
permitted to engage in certain other transactions; however, if it acquires any
conflicting interest and there is a default under the Debt Securities of any
series for which the Trustee serves as trustee, the Trustee must eliminate such
conflict or resign.
The Trustee or its affiliate may provide certain banking and financial
services to the Company in the ordinary course of business.
DESCRIPTION OF CAPITAL STOCK
The statements set forth under this heading with respect to AOL's
Restated Certificate of Incorporation (the "AOL Charter"), AOL's Restated
By-laws (the "AOL By-laws") and the Delaware General Corporation Law (the
"DGCL") are brief summaries thereof and do not purport to be complete. Such
statements are subject to the detailed provisions of the AOL Charter, the AOL
By-laws and the DGCL.
The authorized capital stock of the Company consists of 600,000,000
shares of Common Stock, $.01 par value ("Common Stock"), and 5,000,000 shares of
Preferred Stock, $.01 par value ("Preferred Stock"). As of June 5, 1998, there
were 218,903,661 shares of Common Stock outstanding and no shares of Preferred
Stock outstanding.. In May 1998, the Board of Directors designated 500,000
shares of the Company's Preferred Stock as Series A-1 Junior Participating
Preferred Stock in connection with the establishment of a new shareholder rights
plan. See "--New Shareholder Rights Plan."
Common Stock
Holders of Common Stock are entitled to one vote for each share held on
all matters submitted to a vote of stockholders and do not have cumulative
voting rights. Stockholders casting a plurality of votes of the stockholders
entitled to vote in an election of directors may elect those directors standing
for election. Holders of Common Stock are entitled to receive ratably such
dividends, if any, as may be declared by the Board of Directors out of funds
legally available therefore, subject to any preferential dividend rights of
Preferred Stock that may be issued at such future time or times. Upon the
liquidation, dissolution or winding up of the Company the holders of Common
Stock are entitled to receive ratably, according to the number of shares of
Common Stock held by them, the net assets of the Company available after the
payment of all debts and other liabilities and subject to the prior rights of
Preferred Stock that may be issued at such time. Holders of Common Stock have no
preemptive, subscription, redemption or conversion rights. The outstanding
shares of Common Stock are fully paid and nonassessable. The rights, preferences
and privileges of holders of Common Stock are subject to the rights of the
holders of shares of any series of Preferred Stock which the Company may
designate and issue in the future.
Preferred Stock
The Board of Directors is authorized, subject to any limitations
prescribed by law, without further stockholder approval, to issue from time to
time up to an aggregate of 5,000,000 shares of the Company's authorized class of
undesignated Preferred Stock, in one or more series. Each such series of
Preferred Stock shall have such number of shares, designations, preferences,
powers, qualifications and special or relative rights or privileges as shall be
determined by the Board of Directors, which may include, among others, dividend
rights, voting rights, redemption and sinking fund provisions, liquidation
preferences, conversion rights and preemptive rights.
The stockholders of the Company have granted the Board of Directors
authority to issue Preferred Stock and to determine its rights and preferences
to eliminate delays associated with a stockholder vote on specific issuances.
The rights of the holders of Common Stock will be subject to the rights of
holders of any Preferred Stock issued in the future. The issuance of Preferred
Stock, while providing desirable flexibility in connection with possible
acquisitions and other corporate purposes, could have the effect of making it
more difficult for a third party to acquire, or of discouraging a third party
from acquiring, a majority of the outstanding voting stock of the Company.
Terms
The specific terms of any Preferred Stock being offered (the "Offered Preferred
Stock") will be described in the Prospectus Supplement relating to such Offered
Preferred Stock. The preceding summaries of certain provisions of the Preferred
Stock are subject to, and are qualified in their entirety by reference to, the
Certificate of Incorporation and the Certificate of Designation relating to the
particular class or series of Preferred Stock. Reference is made to the
Prospectus Supplement relating to the Offered Preferred Stock offered thereby
for specific terms, including:
(a) The designation of such Preferred Stock.
(b) The number of shares of such Preferred Stock offered, the
liquidation preference per share and the initial offering price of such
Preferred Stock.
(c) The dividend rate(s), period(s) and/or payment date(s) or method(s)
of calculation thereof applicable to such Preferred Stock.
(d) The date from which dividends on such Preferred Stock shall
accumulate, if applicable.
(e) The procedures for any auction and remarketing, if any, of such
Preferred Stock.
(f) The provision of a sinking fund, if any, for such Preferred Stock.
(g) The provision for redemption, if applicable, of such Preferred
Stock.
(h) Any listing of such Preferred Stock on any securities exchange.
(i) The terms and conditions, if applicable, upon which such Preferred
Stock will be convertible into or exchangeable for Common Stock, and whether at
the option of the holder thereof or the Company.
(j) Whether such Preferred Stock will rank senior or junior to or on a
parity with any other class or series of Preferred Stock.
(k) The voting rights, if any, of such Preferred Stock.
(l) Any other specific terms, preferences, rights, limitations or
restrictions of such Preferred Stock.
(m) A discussion of Federal income tax considerations applicable to
such Preferred Stock.
Warrant
In connection with an agreement with one of the Company's
communications providers, the Company has issued an outstanding warrant,
exercisable through March 31, 1999, subject to certain performance standards
specified in the agreement, to purchase 7,200,000 shares of Common Stock at a
price of approximately $1.95 per share.
Charter Provisions
The Company's Restated Certificate of Incorporation and Restated
By-Laws provide for a classified Board of Directors. The Board of Directors
currently consists of eight members, classified into three classes. At each
annual meeting of stockholders, directors are elected for a full term of three
years to succeed those directors whose terms are expiring.
The Company's Restated Certificate of Incorporation includes provisions
eliminating the personal liability of the Company's directors for monetary
damages resulting from breaches of their fiduciary duty to the extent permitted
by Delaware law. The Company's Restated Certificate of Incorporation and
Restated By-Laws include provisions indemnifying the Company's directors and
officers to the fullest extent permitted by Delaware law, including under
circumstances in which indemnification is otherwise discretionary, and
permitting the Board of Directors to grant indemnification to employees and
agents to the fullest extent permitted by Delaware law.
The Company's Restated By-Laws require that nominations for the Board
of Directors made by the stockholder and proposals by stockholders seeking to
have any business conducted at a stockholders' meeting comply with particular
notice procedures. A notice by a stockholder of a planned nomination or of
proposed business must generally be given not later than 60 days nor earlier
than 90 days prior to the date of the meeting. A stockholder's notice of
nomination must include particular information about the stockholder, the
nominee and any beneficial owner on whose behalf the nomination is made, and a
notice from a stockholder proposing business to be brought before the meeting
must describe such business and include information about the stockholder making
the proposal, any beneficial owner on whose behalf the proposal is made, and any
other stockholder known to be supporting the proposal.
In addition, the Restated Certificate of Incorporation contains a "fair
price" provision (the "Fair Price Provision") providing that certain "Business
Combinations" with any "Interested Stockholder" (as each term is defined in the
Fair Price Provision) may not be consummated without an 80% stockholder vote,
unless either approved by at least a majority of the Disinterested Directors (as
defined in the Fair Price Provision) or certain minimum price and procedural
requirements are met. An "Interested Stockholder" is defined to include any
individual or entity who is, or is an affiliate and during the prior two years
was, the beneficial owner of more than 15% of the voting stock of the Company. A
"Business Combination" includes, among other things, (i) a merger or
consolidation, (ii) the sale or other disposition of 10% or more of the
Company's assets, (iii) the issuance of stock having a value in excess of 10% of
the fair market value of the Company's Common Stock, (iv) any reclassification
or recapitalization which increases the proportionate share holdings of an
Interested Stockholder and (v) the adoption of a plan of liquidation or
dissolution proposed by or on behalf of an Interested Stockholder. A significant
purpose of the Fair Price Provision is to deter a purchaser from using
two-tiered pricing and similar unfair or discriminatory tactics in an attempt to
acquire the Company. The affirmative vote of the holders of 80% of the voting
power of the Company is required to amend or repeal the Fair Price Provision or
adopt any provision inconsistent with it.
The Company's Restated Certificate of Incorporation and Restated
By-Laws provide that any action required or permitted to be taken by the
stockholders of the Company shall be taken only at a duly called annual or
special meeting of the stockholders, or by the unanimous written consent of all
stockholders entitled to vote. Special meetings may be called only by the Board
of Directors or the Chief Executive Officer of the Company. In addition, the
Restated Certificate of Incorporation provides that the Board of Directors may,
from time to time, fix the number of directors constituting the Board of
Directors, and only the directors are permitted to fill vacancies on the Board
of Directors.
The General Corporation Law of Delaware provides generally that the
affirmative vote of a majority of the shares entitled to vote on any matter is
required to amend a corporation's certificate of incorporation or by-laws,
unless a corporation's certificate of incorporation or by-laws, as the case may
be, requires a greater percentage. The affirmative vote of the holders of at
least 80% of the outstanding voting stock of the Company is required to amend or
repeal certain provisions of the Company's Restated Certificate of
Incorporation, and to reduce the number of authorized shares of Common Stock and
Preferred Stock. Such 80% vote is also required for stockholders to amend or
repeal the Company's Restated By-Laws.
The provisions of the Restated Certificate of Incorporation and
Restated By-Laws discussed above could make more difficult or discourage a proxy
contest or the acquisition of control by substantial block of the Company's
stock or the removal of any incumbent member of the Board of Directors. Such
provisions could also have the effect of discouraging a third party from making
a tender offer or otherwise attempting to obtain control of the Company, even
though such an attempt might be beneficial to the Company and its stockholders.
New Shareholder Rights Plan
The Company adopted a new shareholder rights plan on May 12, 1998 (the
"New Plan"). The New Plan was implemented by declaring a dividend, distributable
to shareholders of record on June 1, 1998, of one preferred share purchase right
(a "Right") for each outstanding share of Common Stock. All rights granted under
the Company's former shareholder rights plan were redeemed in conjunction with
the implementation of the New Plan. Each Right under the New Plan will initially
entitle registered holders of the Common Stock to purchase one one-thousandth of
a share of the Company's new Series A-1 Junior Participating Preferred Stock
("Series A-1 Preferred Stock") at a purchase price of $900 per one
one-thousandth of a share of Series A-1 Preferred Stock, subject to adjustment.
The Rights will be exercisable only if a person or group (i) acquires 15% or
more of the Common Stock or (ii) announces a tender offer that would result in
that person or group acquiring 15% or more of the Common Stock. Once
exercisable, and in some circumstances if certain additional conditions are met,
the New Plan allows shareholders (other than the acquiror) to purchase Common
Stock or securities of the acquiror having a then-current market value of two
times the exercise price of the Right. The Rights are redeemable for $.001 per
Right (subject to adjustment) at the option of the Board of Directors. Until a
Right is exercised, the holder of the Right, as such, has no rights as a
shareholder of the Company. The Rights will expire on May 12, 2008 unless
redeemed by the Company prior to that date.
The Rights have certain anti-takeover effects. The Rights will cause
substantial dilution to a person or group that attempts to acquire the Company
on terms not approved by the Company's Board of Directors. The Rights should not
interfere with any merger or other business combination approved by the Board of
Directors since the Rights may be redeemed by the Company at $.001 per Right
prior to the earlier of (i) the time prior to such time as any person has become
an Acquiring Person (as defined in the Rights Agreement), or (ii) May 12, 2008.
The New Plan and the Rights will replace the rights issued pursuant to
a shareholder rights plan adopted by the Company in fiscal 1993. The Board of
Directors has approved the termination of such plan and the redemption of the
rights under the former plan effective as of June 1, 1998, as permitted under
the terms of the former plan. The former rights plan provided the registered
holders of Common Stock the right, in certain limited circumstances involving a
potential business combination or change of control transaction of the Company,
to acquire additional shares of Common Stock at a reduced price.
Change of Control
Section 203 of the DGCL prohibits generally a public Delaware
corporation, including AOL, from engaging in a Business Combination (as defined
below) with an Interested Stockholder (as defined below) for a period of three
years after the date of the transaction in which an Interested Stockholder
became such, unless: (i) the board of directors of such corporation approved,
prior to the date such Interested Stockholder became such, either such Business
Combination or such transaction; (ii) upon consummation of such transaction,
such Interested Stockholder owns at least 85% of the voting shares of such
corporation (excluding specified shares); or (iii) such Business Combination is
approved by the board of directors of such corporation and authorized by the
affirmative vote (at an annual or special meeting and not by written consent) of
at least 66 2/3% of the outstanding voting shares of such corporation (excluding
shares held by such Interested Stockholder). A "Business Combination" includes
(i) mergers, consolidations and sales or other dispositions of 10% or more of
the assets of a corporation to or with an Interested Stockholder, (ii) certain
transactions resulting in the issuance or transfer to an Interested Stockholder
of any stock of such corporation or its subsidiaries and (iii) certain other
transactions resulting in a financial benefit to an Interested Stockholder. An
"Interested Stockholder" is a person who owns (or, if such person is an
affiliate or associate of the corporation, within a three-year period did own)
15% or more of a corporation's stock entitled to vote generally in the election
of directors and, the affiliates and associates of such person.
PLAN OF DISTRIBUTION
The Company may sell the Securities: (i) through underwriters or
dealers; (ii) directly to a limited number of purchasers or to a single
purchaser; or (iii) through agents. The Prospectus Supplement with respect to
the Securities being offered (the "Offered Securities") will set forth the terms
of the offering of the Offered Securities, including the name or names of any
underwriters or agents, the purchase price of the Offered Securities and net
proceeds to the Company from such sale, any underwriting discounts and other
items constituting underwriters' compensation, any initial public offering price
and any discounts or concessions allowed or reallowed or paid to dealers.
If underwriters are used in the sale, the Offered Securities will be
acquired by the underwriters for their own account and may be resold from time
to time in one or more transactions, including negotiated transactions, at a
fixed public offering price or at varying prices determined at the time of sale.
The Offered Securities may be offered to the public either through underwriting
syndicates represented by one or more managing underwriters or directly by one
or more underwriters. The underwriter or underwriters with respect to a
particular underwritten offering of Securities, or, if an underwriting syndicate
is used, the managing underwriter or underwriters, will be set forth on the
cover of the applicable Prospectus Supplement. Unless otherwise set forth in the
Prospectus Supplement relating thereto, the obligations of the underwriters to
purchase the Offered Securities will be subject to conditions precedent and the
underwriters will be obligated to purchase all of the Offered Securities if any
are purchased. Morgan Stanley & Co. Incorporated and Lehman Brothers Inc. may
act as underwriters in connection with offerings of shares of Common Stock sold
at varying prices determined at the time of sale.
If dealers are utilized in the sale of Offered Securities in respect of
which this Prospectus is delivered, and if so specified in the applicable
Prospectus Supplement, the Company will sell such Offered Securities to the
dealers as principals. The dealers may then resell such Offered Securities to
the public at varying prices to be determined by such dealers at the time of
resale. The names of the dealers and the terms of the transaction will be set
forth in the applicable Prospectus Supplement.
The Offered Securities may be sold directly by the Company or through
agents designated by the Company from time to time. Any agent involved in the
offer or sale of the Offered Securities in respect to which this Prospectus is
delivered will be named, and any commissions payable by the Company to such
agent will be set forth, in the Prospectus Supplement.
Underwriters, dealers and agents may be entitled under agreements
entered into with the Company to indemnification by the Company against certain
civil liabilities, including liabilities under the Securities Act, or to
contribution with respect to payments which the underwriters, dealers or agents
may be required to make in respect thereof. Underwriters, dealers and agents may
be customers of, may engage in transactions with, or perform services for, the
Company in the ordinary course of business.
LEGAL MATTERS
The validity of the Securities offered hereby is being passed upon for
the Company by Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C. An attorney
at Mintz Levin, who is vice chairman of the Company in an honorary capacity,
owns an aggregate of 200 shares of Common Stock and options to purchase 344,000
shares of Common Stock.
EXPERTS
The consolidated financial statements of America Online, Inc. appearing
in its Annual Report (Form 10-K) for the year ended June 30, 1997, have been
audited by Ernst & Young LLP, independent auditors, as set forth in their report
thereon included therein and incorporated herein by reference. Such consolidated
financial statements are incorporated herein by reference in reliance upon such
report given upon the authority of such firm as experts in accounting and
auditing.
The financial statements of Interactive Services Division of CompuServe
Corporation at April 30, 1997 and for the year then ended appearing in America
Online, Inc.'s Current Report on Form 8-K/A dated January 31, 1998 and filed
April 17, 1998 have been audited by Ernst & Young LLP, independent auditors, as
set forth in their report thereon included therein and incorporated herein by
reference. Such financial statements are incorporated herein by reference in
reliance upon such report given upon the authority of such firm as experts in
accounting and auditing.
II-9
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution
The following sets forth the expenses in connection with the issuance
and distribution of the Securities being registered, other than underwriting
discounts and commissions. All such expenses shall be borne by the Company. All
amounts set forth below are estimates, other than the SEC registration fee.
SEC Registration Fee $295,000
Legal Fees and Expenses 45,000
Accounting Fees and Expenses 20,000
Trustee Fees 10,000
Rating Agency Fees 100,000
Miscellaneous 10,000
---------
TOTAL $480,000
Item 15. Indemnification of Officers and Directors
Section 145(a) of the General Corporation Law of the State of Delaware
("Delaware Corporation Law") provides, in general, that a corporation shall have
the power to indemnify any person who was or is a party or is threatened to be
made a party to any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative (other than an action
by or in the right of the corporation), by reason of the fact that he is or was
a director or officer of the corporation. Such indemnity may be against expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by him in connection with such action, suit or
proceeding, if the indemnified party acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
corporation and if, with respect to any criminal action or proceeding, the
indemnified party did not have reasonable cause to believe his conduct was
unlawful.
Section 145(b) of the Delaware Corporation Law provides, in general,
that a corporation shall have the power to indemnify any person who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action or suit by or in the right of the corporation to procure a
judgment in its favor by reason of the fact that he is or was a director or
officer of the corporation, against any expenses (including attorneys' fees)
actually and reasonably incurred by him in connection with the defense or
settlement of such action or suit if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
corporation.
Section 145(g) of the Delaware Corporation law provides, in general,
that a corporation shall have the power to purchase and maintain insurance on
behalf of any person who is or was a director or officer of the corporation
against any liability asserted against him in any such capacity, or arising out
of his status as such, whether or not the corporation would have the power to
indemnify him against such liability under the provisions of the law.
Pursuant to Section 102(b)(7) of the Delaware General Corporation Law
(the "Delaware Statute"), Article Ninth of the Registrant's Restated Certificate
of Incorporation (the "Certificate of Incorporation") provides that:
To the fullest extent permitted by the Delaware General
Corporation Law as the same now exists or may hereafter be amended, the
Corporation shall indemnify, and advance expenses to, its directors and
officers and any person who is or was serving at the request of the
Corporation as a director or officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise. The
Corporation, by action of its board of directors, may provide
indemnification or advance expenses to employees and agents of the
Corporation or other persons only on such terms and conditions and to
the extent determined by the board of directors in its sole and
absolute discretion.
The indemnification and advancement of expenses provided by,
or granted pursuant to, this Article Ninth shall not be deemed
exclusive of any other rights to which those seeking indemnification or
advancement of expenses may be entitled under any by-law, agreement,
vote of stockholders or disinterested directors or otherwise, both as
to action in his official capacity and as to action in another capacity
while holding such office.
The Corporation shall have the power to purchase and maintain
insurance on behalf of any person who is or was a director, officer,
employee or agent of the Corporation, or is or was serving at the
request of the Corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other
enterprise, against any liability asserted against him and incurred by
him in any such capacity, or arising out of his status as such, whether
or not the Corporation would have the power to indemnify him against
such liability under this Article Ninth.
The indemnification and advancement of expenses provided by,
or granted pursuant to, this Article Ninth shall, unless otherwise
provided when authorized or ratified, continue as to a person who has
ceased to be a director or officer and shall inure to the benefit of
the heirs, executors and administrators of such officer or director.
The indemnification and advancement of expenses that may have been
provided to an employee or agent of the Corporation by action of the
board of directors, pursuant to the last sentence of Paragraph 1 of
this Article Ninth, unless otherwise provided when authorized or
ratified, continue as to a person who has ceased to be an employee or
agent of the Corporation and shall inure to the benefit of the heirs,
executors and administrators of such a person, after the time such
person has ceased to be an employee or agent of the Corporation, only
on such terms and conditions and to the extent determined by the board
of directors in its sole discretion.
In addition, Article Five of the Registrant's Restated By-Laws
(Incorporated by reference herein) provides that:
Right to Indemnification. Each person who was or is made a
party or is threatened to be made a party to or is otherwise involved
in any action, suit or proceeding, whether civil, criminal,
administrative or investigative, by reason of the fact that he is or
was a director or an officer of the Corporation or is or was serving at
the request of the Corporation as a director, officer, employee or
agent of another corporation or of a partnership, joint venture, trust
or other enterprise, including service with respect to an employee
benefit plan (hereinafter an "Indemnitee"), whether the basis of such
proceeding is alleged action in an official capacity as a director,
officer, employee or agent or in any other capacity while serving as a
director, officer, employee or agent, shall be indemnified and held
harmless by the Corporation to the fullest extent authorized by the
Delaware General Corporation Law, as the same exists or may hereafter
be amended (but, in the case of any such amendment, only to the extent
that such amendment permits the Corporation to provide broader
indemnification rights than such law permitted the Corporation to
provide prior to such amendment), against all expense, liability and
loss (including attorney's fees, judgments, fines, ERISA excise taxes
or penalties and amounts paid in settlement) reasonably incurred or
suffered by such Indemnitee in connection therewith; provided, however,
that, except as provided in the section "Right of Indemnitees to Bring
Suit" of this Article with respect to proceedings to enforce rights to
indemnification, the Corporation shall indemnify any such Indemnitee in
connection with a proceeding (or part thereof) initiated by such
Indemnitee only if such proceeding (or part thereof) was authorized by
the board of directors of the Corporation.
Right to Advancement of Expenses. The right to indemnification
conferred in Section 1 of this Article shall include the right to be
paid by the Corporation the expenses (including attorney's fees)
incurred in defending any such proceeding in advance of its final
disposition; provided, however, that, if the Delaware General
Corporation Law requires, an advancement of expenses incurred by an
Indemnitee in his capacity as a director or officer (and not in any
other capacity in which service was or is rendered by such Indemnitee,
including, without limitation, service to an employee benefit plan)
shall be made only upon delivery to the Corporation of an undertaking,
by or on behalf of such Indemnitee, to repay all amounts so advanced if
it shall ultimately be determined by final judicial decision from which
there is no further right to appeal that such Indemnitee is not
entitled to be indemnified for such expenses under this section or
otherwise. The rights to indemnification and to the advancement of
expenses conferred in this section and the section "Right to
Indemnification" of this Article shall be contract rights and such
rights shall continue as to an Indemnitee who has ceased to be a
director, officer, employee or agent and shall inure to the benefit of
the Indemnitee's heirs, executors and administrators. Any repeal or
modification of any of the provisions of this Article shall not
adversely affect any right or protection of an Indemnitee existing at
the time of such repeal or modification.
Right of Indemnitees to Bring Suit. If a claim under the
sections "Right to Indemnification" and "Right to Advancement of
Expenses" of this Article is not paid in full by the Corporation within
sixty (60) days after a written claim has been received by the
Corporation, except in the case of a claim for an advancement of
expenses, in which case the applicable period shall be twenty (20)
days, the Indemnitee may at any time thereafter bring suit against the
Corporation to recover the unpaid amount of the claim. If successful in
whole or in part in any such suit, or in a suit brought by the
Corporation to recover an advancement of expenses pursuant to the terms
of an undertaking, the Indemnitee shall also be entitled to be paid the
expenses of prosecuting or defending such suit. In (i) any suit brought
by the Indemnitee to enforce a right to indemnification hereunder (but
not in a suit brought by the Indemnitee to enforce a right to an
advancement of expenses) it shall be a defense that, and (ii) in any
suit brought by the Corporation to recover an advancement of expenses
pursuant to the terms of an undertaking, the Corporation shall be
entitled to recover such expenses upon a final adjudication that, the
Indemnitee has not met any applicable standard for indemnification set
forth in the Delaware General Corporation Law. Neither the failure of
the Corporation (including its board of directors, independent legal
counsel, or its stockholders) to have made a determination prior to the
commencement of such suit that indemnification of the Indemnitee is
proper in the circumstances because the Indemnitee has met the
applicable standard of conduct set forth in the Delaware General
Corporation Law, nor an actual determination by the Corporation
(including its board of directors, independent legal counsel, or its
stockholders) that the Indemnitee has not met such applicable standard
of conduct, shall create a presumption that the Indemnitee has not met
the applicable standard of conduct or, in the case of such a suit
brought by the Indemnitee, be a defense to such suit. In any suit
brought by the Indemnitee to enforce a right to indemnification or to
an advancement of expenses hereunder, or brought by the Corporation to
recover an advancement of expenses pursuant to the terms of an
undertaking, the burden of proving that the Indemnitee is not entitled
to be indemnified, or to such advancement of expenses, under this
Article or otherwise shall be on the Corporation.
Non-Exclusivity of Rights. The rights to indemnification and
to the advancement of expenses conferred in this Article shall not be
exclusive of any other right which any person may have or hereafter
acquire under any statute, the Corporation's Certificate of
Incorporation as amended from time to time, these By-Laws, any
agreement, any vote of stockholders or disinterested directors or
otherwise.
Insurance. The Corporation may maintain insurance, at its
expense, to protect itself and any director, officer, employee or agent
of the Corporation or another corporation, partnership, joint venture,
trust or other enterprise against any expense, liability or loss,
whether or not the Corporation would have the power to indemnify such
person against such expense, liability or loss under the Delaware
General Corporation Law.
Indemnification of Employees and Agents of the Corporation.
The Corporation may, to the extent authorized from time to time by the
board of directors, grant rights to indemnification and to the
advancement of expenses to any employee or agent of the Corporation to
the fullest extent of the provisions of this Article with respect to
the indemnification and advancement of expenses of directors and
officers of the Corporation.
The directors and officers of the Registrant are covered by a policy of
liability insurance.
Item 16. Exhibits.
<TABLE>
<S> <C> <C>
Exhibit Description
No.
1.1 -- Form of Underwriting Agreement
2.1 -- Agreement and Plan of Reorganization dated as of May 11, 1994, as amended, among the Registrant, RCC
Acquisition Corporation and RCC Communications Corporation (Filed as Annex A to the Registrant's
Registration Statement on Form S-4, Registration No. 33-82030, and incorporated herein by reference.)
2.2 -- Agreement and Plan of Reorganization dated as of November 8, 1994, among the Registrant, BLT
Acquisition Corporation, CMG Information Services, Inc. and Booklink Technologies, Inc. (Filed as
Exhibit 1 to the Registrant's Report on Form 8-K, filed January 9, 1995 and incorporated herein by
reference.)
2.3 -- Asset Purchase Agreement by and between the Registrant and Advanced Network & Services, Inc.
dated as of November 25, 1994 (Filed as Exhibit 1 to the Registrant's Report on Form 8-K, filed
February 28, 1995 and incorporated herein by reference.)
2.4 -- Agreement and Plan of Merger dated as of December 20, 1995, among the Registrant, Santa's
Acquisition Corp. and Johnson-Grace Company and its Principal Shareholders (Filed as Exhibit
2.1 to the Registrant's Report on Form 8-K, filed February 14, 1996 and incorporated herein by
reference.)
2.5 -- Stock Purchase Agreement, dated as of August 5, 1996, among the Registrant, The ImagiNation Network,
Inc. and AT&T Corp. (Filed as Exhibit 10 to the Registrant's Report on Form 8-K, filed August 5,
1996, and incorporated herein by reference.)
2.6 -- Purchase and Sale Agreement dated as of September 7, 1997 by and among America Online, Inc., ANS
Communications, Inc. and WorldCom, Inc. (Filed as Exhibit 2 to the Company's Current Report on Form
8-K, dated September 19, 1997, and incorporated herein by reference.)
2.7 -- Agreement of Purchase and Sale dated as of June 5, 1998 by and among America Online, Inc., AOL
Acquisition Corp., R.G.A.O. Holdings Ltd., and Mirabilis Ltd and the Principal Stockholders
(Confidential treatment has been requested with respect to certain portions of the Agreement) (Filed
as Exhibit 2 to the Registrant's Report on Form 8-K, dated June 5, 1998 and incorporated herein by
reference.)
4.1 -- Amendment of Section A of Article 4 of the Restated
Certificate of Incorporation of America Online, Inc. (Filed as
Exhibit 4.1 to the Registrant's Registration Statement on Form
S-3, Registration No.
333-46633 and incorporated herein by reference.)
4.2 -- Section B of Article 4, Article 6 and Article 8 of the Restated Certificate of Incorporation of the
Registrant (Filed as part of Exhibit 3.1 to the Registrant's Annual Report on Form 10-K for the year
ended June 30, 1997, and incorporated herein by reference.)
4.3 -- Rights Agreement dated as of May 12, 1998, between America Online, Inc. and BankBoston, N.A., as
Rights Agent (Filed as Exhibit 4.1 to the Registrant's Quarterly Report on Form 10-Q for the quarter
ended March 31, 1998 and incorporated herein by reference.)
4.4 -- Form of Indenture between the Registrant and one or more commercial banks to be named, as trustee
(Previously filed)
4.5 -- Form of Debt Security (to be filed by amendment)
5.1 -- Opinion of Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C., with respect to the legality of the
securities being registered
12.1 -- Computation of Ratio of Earnings to Fixed Charges (Previously filed)
23.1 -- Consents of Ernst & Young LLP
23.2 -- Consent of Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C. (included in Exhibit 5.1)
24.1 -- Powers of Attorney (Previously filed)
25.1 -- Form T-1, Statement of Eligibility and Qualification under the Trust Indenture Act of 1939 of Trustee
(to be filed by amendment)
</TABLE>
Item 17. Undertakings.
A. Rule 415 Offering
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3 of
the Securities Act of 1933, as amended (the "Securities Act");
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the registration statement (or the most
recent post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the registration statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than a 20% change in the
maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration statement.
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in the registration
statement or any material change to such information in the
registration statement;
Provided, however, that paragraphs (1)(i) and (1)(ii) do not
apply if the registration statement is on Form S-3 or Form
S-8, and the information required to be included in a
post-effective amendment by those paragraphs is contained in
periodic reports filed by the registrant pursuant to Section
13 or Section 15(d) of the 1934 Act that are incorporated by
reference in the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the termination o
the offering.
B. Filings Incorporating Subsequent Exchange Act Documents by Reference
The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
registrant's annual report pursuant to section 13(a) or section 15(d) of the
Securities Exchange Act of Exchange Act, as amended (the "Exchange Act") (and,
where applicable, each filing of an employee benefit plan's annual report
pursuant to section 15(d) of the Exchange Act) that is incorporated by reference
in the registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
C. Request for Acceleration of Effective Date Insofar as
indemnification for liabilities arising under the Securities Act may be
permitted to directors, officers and controlling persons of the registrant
pursuant to the foregoing provisions, or otherwise, the registrant has been
advised that in the opinion of the Commission such indemnification is against
public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the registrant of expenses incurred or
paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
D. Rule 430A Undertaking
The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as part of
this registration statement in reliance upon Rule 430A and contained in a form
of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act shall be deemed to be part of this registration
statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of prospectus
shall be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
E. Qualification of Trust Indentures Under the Trust Indenture Act of
1939
The undersigned registrant hereby undertakes to file an application for
the purpose of determining the eligibility of the trustee to act under
subsection (a) of Section 310 of the Trust Indenture Act in accordance with the
rules and regulations prescribed by the Commission under Section 305(b)(2) of
the Securities Act.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
the Registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form S-3 and has duly caused this
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the County of Loudoun, Commonwealth of Virginia on June 24 ,
1998.
AMERICA ONLINE, INC.
By:/s/Lennert J. Leader
Lennert J. Leader
Senior Vice President and Chief
Financial Officer
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<S> <C> <C>
Signatures Title Date
* Chairman of the Board and Chief June 24, 1998
Stephen M. Case Executive Officer (principal executive officer)
* President, Chief Operating Officer and Director June 24, 1998
Robert W. Pittman
Senior Vice President and Chief Financial June 24, 1998
/s/Lennert J. Leader Officer (principal financial and accounting
Lennert J. Leader officer)
* Director June 24, 1998
Daniel F. Akerson
* Director June 24, 1998
Frank J. Caufield
* Director June 24, 1998
Robert J. Frankenberg
* Director June 24, 1998
Alexander M. Haig, Jr.
* Director June 24, 1998
William N. Melton
* Director June 24, 1998
Thomas Middelhoff
*By: /s/Lennert J. Leader
Lennert J. Leader, Attorney-in-Fact
</TABLE>
EXHIBIT INDEX
Exhibit Description
No.
1.1 -- Form of Underwriting Agreement
5.1 -- Opinion of Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.
23.1 -- Consents of Ernst & Young LLP
[ ] Shares
AMERICA ONLINE, INC.
COMMON STOCK, $.01 PAR VALUE
UNDERWRITING AGREEMENT
June __, 1998
June __, 1998
Morgan Stanley & Co. Incorporated
Lehman Brothers Inc.
c/o Morgan Stanley & Co. Incorporated
1585 Broadway
New York, New York 10036
Dear Sirs and Mesdames:
America Online, Inc., a Delaware corporation (the "Company"), proposes
to issue and sell to the several Underwriters named in Schedule I hereto (the
"Underwriters") an aggregate of [ ] shares of the Common Stock of the Company,
$.01 par value (the "Firm Shares"). The Company also proposes to issue and sell
to the several Underwriters not more than an additional [ ] shares of its Common
Stock, $.01 par value (the "Additional Shares") if and to the extent that Morgan
Stanley & Co. Incorporated shall have determined to exercise, on behalf of the
Underwriters, the right to purchase such shares of common stock granted to the
Underwriters in Section 2 hereof. The Firm Shares and the Additional Shares are
hereinafter collectively referred to as the "Shares." The shares of Common
Stock, $.01 par value, of the Company to be outstanding after giving effect to
the sales contemplated hereby are hereinafter referred to as the "Common Stock."
The Company entered into a Rights Agreement with Bank Boston, N.A., as
Rights Agent, dated as of May 12, 1998. Pursuant to the Rights Agreement, the
Common Stock, including the Shares, has attached thereto rights (the "Rights")
to purchase additional equity securities under certain defined circumstances.
None of such rights are currently exercisable.
The Company has filed with the Securities and Exchange Commission (the
"Commission") a registration statement, including a prospectus, relating to Debt
Securities, Preferred Stock and Common Stock (the "Shelf Securities") to be
issued from time to time by the Company and shall promptly hereafter file with
or transmit for filing to, the Commission a prospectus supplement, specifically
relating to the Shares pursuant to Rule 424 under the Securities Act of 1933, as
amended (the "Securities Act"). The term "Registration Statement" means the
registration statement, including the exhibits thereto, as amended to the date
of this Underwriting Agreement. The term "Basic Prospectus" means the related
prospectus covering the Shelf Securities in the form first used to confirm sales
of the Shares. The term "Prospectus" means the Basic Prospectus as supplemented
by the prospectus supplement specifically relating to the Shares in the form
first used to confirm sales of the Shares (the "Prospectus Supplement"). The
term "preliminary prospectus" means the Basic Prospectus as supplemented by any
preliminary form of the Prospectus Supplement. As used herein, the terms "Basic
Prospectus", "Prospectus" and "preliminary prospectus" shall include in each
case the documents, if any, incorporated by reference therein. The terms
"supplement" and "amendment" or "amend" as used herein shall include all
documents deemed to be incorporated by reference in the Prospectus that are
filed subsequent to the date of the Basic Prospectus by the Company with the
Commission pursuant to the Securities Exchange Act of 1934, as amended (the
"Exchange Act").
1. Representations and Warranties of the Company. The Company
represents and warrants to and agrees with each of the Underwriters that:
(a) The Registration Statement has become effective; no stop
order suspending the effectiveness of the Registration Statement is in
effect, and no proceedings for such purpose are pending before or, to
the Company's knowledge, threatened by the Commission.
(b) (i) Each document, if any, filed or to be filed pursuant
to the exchange Act, and incorporated by reference in the Prospectus,
complied or will comply when so filed in all material respects with the
Exchange Act and the applicable rules and regulations of the Commission
thereunder, (ii) each part of the Registration Statement, when such
part became effective, did not contain and each such part, as amended
or supplemented, if applicable, will not contain any untrue statement
of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein not
misleading, (iii) the Registration Statement and the Prospectus comply
and, as amended or supplemented, if applicable, will comply in all
material respects with the Securities Act and the applicable rules and
regulations of the Commission thereunder and (iv) the Prospectus does
not contain and, as amended or supplemented, if applicable, will not
contain any untrue statement of a material fact or omit to state a
material fact necessary to make the statements therein, in the light of
the circumstances under which they were made, not misleading, except
that the representations and warranties set forth in this paragraph do
not apply to statements or omissions in the Registration Statement or
the Prospectus based upon information relating to any Underwriter
furnished to the Company in writing by such Underwriter through you
expressly for use therein.
(c) The Company has been duly incorporated, is validly
existing as a corporation in good standing under the laws of the
jurisdiction of its incorporation, has the corporate power and
authority to own its property and to conduct its business as described
in the Prospectus and is duly qualified to transact business and is in
good standing in each jurisdiction in which the conduct of its business
or its ownership or leasing of property requires such qualification,
except to the extent that the failure to be so qualified or be in good
standing would not have a material adverse effect on the Company and
its subsidiaries, taken as a whole.
(d) Each subsidiary of the Company has been duly incorporated,
is validly existing as a corporation in good standing under the laws of
the jurisdiction of its incorporation, has the corporate power and
authority to own its property and to conduct its business as described
in the Prospectus and is duly qualified to transact business and is in
good standing in each jurisdiction in which the conduct of its business
or its ownership or leasing of property requires such qualification,
except to the extent that the failure to be so qualified or be in good
standing would not have a material adverse effect on the Company and
its subsidiaries, taken as a whole; all of the issued shares of capital
stock of each subsidiary of the Company have been duly and validly
authorized and issued, are fully paid and non-assessable and are owned
directly by the Company, free and clear of all liens, encumbrances,
equities or claims.
(e) This Agreement has been duly authorized, executed and
delivered by the Company.
(f) The authorized capital stock of the Company conforms as to
legal matters to the description thereof contained or incorporated by
reference in the Prospectus.
(g) The shares of Common Stock outstanding prior to the
issuance of the Shares have been duly authorized and are validly
issued, fully paid and non-assessable.
(h) The Shares have been duly authorized and, when issued and
delivered in accordance with the terms of this Agreement, will be
validly issued, fully paid and non-assessable, and the issuance of such
Shares will not be subject to any preemptive or similar rights.
(i) (1) The Rights to be attached to the Shares have been duly
authorized and, when the Shares have been duly and validly issued in
accordance with the terms of this Agreement, will be validly issued.
(2) The Rights attached to the shares of Common Stock
outstanding prior to the issuance of the Shares have been duly
authorized and are validly issued.
(j) The execution and delivery by the Company of, and the
performance by the Company of its obligations under, this Agreement
will not contravene any provision of applicable law or the certificate
of incorporation or by-laws of the Company or any agreement or other
instrument binding upon the Company or any of its subsidiaries that is
material to the Company and its subsidiaries, taken as a whole, or any
judgment, order or decree of any governmental body, agency or court
having jurisdiction over the Company or any subsidiary, and no consent,
approval, authorization or order of, or qualification with, any
governmental body or agency is required for the performance by the
Company of its obligations under this Agreement, except such as may be
required by the Securities Act and the applicable rules and regulations
of the Commission thereunder and the securities or Blue Sky laws of the
various states in connection with the offer and sale of the Shares.
(k) There has not occurred any material adverse change, or any
development, which insofar as can reasonably be foreseen, involves a
prospective material adverse change, in the condition, financial or
otherwise, or in the earnings, business or operations of the Company
and its subsidiaries, taken as a whole, from that set forth in the
Prospectus (exclusive of any amendments or supplements thereto
subsequent to the date of this Agreement).
(l) There are no legal or governmental proceedings pending or,
to the Company's knowledge, threatened to which the Company or any of
its subsidiaries is a party or to which any of the properties of the
Company or any of its subsidiaries is subject that are required to be
described in the Registration Statement or the Prospectus and are not
so described or any statutes, regulations, contracts or other documents
that are required to be described in the Registration Statement or the
Prospectus or to be filed as exhibits to the Registration Statement
that are not described or filed as required.
(m) The Company and each of its subsidiaries have all
necessary consents, authorizations, approvals, orders, certificates and
permits of and from, and have made all declarations and filings with,
all federal, state, local and other governmental authorities, all
self-regulatory organizations and all courts and other tribunals, to
own, lease, license and use their respective properties and assets and
to conduct their business in the manner described in the Prospectus,
except to the extent that the failure to obtain such consents,
authorizations, approvals, orders, certificates and permits or make
such declarations or filings would not have a material adverse effect
on the Company and its subsidiaries, taken as a whole.
(n) Each Preliminary Prospectus filed as part of the
registration statement as originally filed or as part of any amendment
thereto, or filed pursuant to Rule 424 under the Securities Act,
complied when so filed in all material respects with the Securities Act
and the applicable rules and regulations of the Commission thereunder.
(o) The Company is not and, after giving effect to the
offering and the sale of the Shares and the application of the proceeds
thereof as described in the Prospectus, will not be an "investment
company" as such term is defined in the Investment Company Act of 1940,
as amended.
(p) The Company and its subsidiaries (i) are in compliance
with any and all applicable foreign, federal, state and local laws and
regulations relating to the protection of human health and safety, the
environment or hazardous or toxic substances or wastes, pollutants or
contaminants (collectively, the "Environmental Laws"), (ii) have
received all permits, licenses or other approvals required of them
under applicable Environmental Laws to conduct their respective
businesses and (iii) are in compliance with all terms and conditions of
any such permit, license or approval, except where such noncompliance
with Environmental Laws, failure to receive required permits, licenses
or other approvals or failure to comply with the terms and conditions
of such permits, licenses or approvals would not, singly or in the
aggregate, have a material adverse effect on the Company and its
subsidiaries, taken as a whole.
(q) There are no contracts, agreements or understandings
between the Company and any person granting such person the right to
require the Company to file a registration statement under the
Securities Act with respect to any securities of the Company or to
require the Company to include such securities with the Shares
registered pursuant to the Registration Statement.
2. Agreements to Sell and Purchase. The Company hereby agrees to
issue and sell to the several Underwriters, and each Underwriter, upon the basis
of the representations and warranties herein contained, but subject to the
conditions hereinafter stated, agrees, severally and not jointly, to purchase
from the Company at $[ ] per share (the "Purchase Price") the respective numbers
of Firm Shares set forth in Schedule I hereto opposite the name of such
Underwriter.
On the basis of the representations and warranties contained in this
Agreement, and subject to its terms and conditions, the Company agrees to sell
to the Underwriters the Additional Shares, and the Underwriters shall have a
one-time right to purchase, severally and not jointly, up to [ ] Additional
Shares at the Purchase Price. If you, on behalf of the Underwriters, elect to
exercise such option, you shall so notify the Company in writing not later than
30 days after the date of this Agreement, which notice shall specify the number
of Additional Shares to be purchased by the Underwriters and the date on which
such shares are to be purchased. Such date may be the same as the Closing Date
(as defined below) but not earlier than the Closing Date nor later than ten
business days after the date of such notice. Additional Shares may be purchased
as provided in Section 4 hereof solely for the purpose of covering
over-allotments made in connection with the offering of the Firm Shares. If any
Additional Shares are to be purchased, each Underwriter agrees, severally and
not jointly, to purchase the number of Additional Shares (subject to such
adjustments to eliminate fractional shares as you may determine) that bears the
same proportion to the total number of Additional Shares to be purchased as the
number of Firm Shares set forth in Schedule I hereto opposite the name of such
Underwriter bears to the total number of Firm Shares.
The Company hereby agrees that, without the prior written consent of
Morgan Stanley & Co. Incorporated on behalf of the Underwriters, it will not,
during the period ending [ ] days after the date of the Prospectus, (i) offer,
pledge, sell, contract to sell, sell any option or contract to purchase,
purchase any option or contract to sell, grant any option, right or warrant to
purchase, lend, or otherwise transfer or dispose of, directly or indirectly, any
shares of Common Stock or any securities convertible into or exercisable or
exchangeable for Common Stock or (ii) enter into any swap or other arrangement
that transfers to another, in whole or in part, any of the economic consequences
of ownership of the Common Stock, whether any such transaction described in
clause (i) or (ii) above is to be settled by delivery of Common Stock or such
other securities, in cash or otherwise. The foregoing sentence shall not apply
to (A) the sale of the Shares hereunder or (B) the issuance by the Company of
shares of Common Stock upon the exercise of an option or warrant or the
conversion of a security outstanding on the date hereof of which the
Underwriters have been advised in writing.
3. Terms of Public Offering. The Company is advised by you that the
Underwriters propose to make a public offering of the Shares as soon after the
Registration Statement and this Agreement have become effective as in your
judgment is advisable. The Company is further advised by you that the Shares are
to be offered to the public in the manner set forth under the caption
"Underwriters" in the Prospectus Supplement.
4. Payment and Delivery. Payment for the Firm Shares shall be made to
the Company in Federal or other funds immediately available in New York City
against delivery of such Firm Shares for the respective accounts of the several
Underwriters at 10:00 a.m., New York City time, on July __, 1998, or at such
other time on the same or such other date, not later than ________, 1998, as
shall be designated in writing by you. The time and date of such payment are
hereinafter referred to as the "Closing Date."
Payment for any Additional Shares shall be made to the Company in
Federal or other funds immediately available in New York City against delivery
of such Additional Shares for the respective accounts of the several
Underwriters at 10:00 a.m., local time, on the date specified in the notice
described in Section 2 or at such other time on the same or such other date, in
any event not later than ________, 1998, as shall be designated in writing by
you. The time and date of such payment are hereinafter referred to as the
"Option Closing Date."
Certificates for the Firm Shares and Additional Shares shall be in
definitive form and registered in such names and in such denominations as you
shall request in writing not later than one full business day prior to the
Closing Date or the Option Closing Date, as the case may be. The certificates
evidencing the Firm Shares and Additional Shares shall be delivered to you on
the Closing Date or the Option Closing Date, as the case may be, for the
respective accounts of the several Underwriters, with any transfer taxes payable
in connection with the transfer of the Shares to the Underwriters duly paid,
against payment of the Purchase Price therefor.
5. Conditions to the Underwriters' Obligations. The obligations of
the Company to sell the Shares to the Underwriters and the several obligations
of the Underwriters to purchase and pay for the Shares on the Closing Date are
subject to the condition that the Registration Statement shall have become
effective not later than 4:30 p.m. (New York City time) on the date hereof.
The several obligations of the Underwriters are subject to the
following further conditions:
(a) Subsequent to the execution and delivery of this Agreement
and prior to the Closing Date:
(i) there shall not have occurred any downgrading, nor
shall any notice have been given of any intended or potential
downgrading or of any review for a possible change that does not
indicate the direction of the possible change, in the rating accorded
any of the Company's securities by any "nationally recognized
statistical rating organization," as such term is defined for purposes
of Rule 436(g)(2) under the Securities Act; and
(ii) there shall not have occurred any change, or any
development involving a prospective change (insofar as it can be
reasonably foreseen), in the condition, financial or otherwise, or in
the earnings, business or operations of the Company and its
subsidiaries, taken as a whole, from that set forth in the Prospectus
(exclusive of any amendments or supplements thereto subsequent to the
date of this Agreement) that, in your judgment, is material and adverse
and that makes it, in your judgment, impracticable to market the Shares
on the terms and in the manner contemplated in the Prospectus.
(b) The Underwriters shall have received on the Closing Date a
certificate, dated the Closing Date and signed by an executive officer
of the Company, to the effect set forth in Section 5(a)(i) above and to
the effect that the representations and warranties of the Company
contained in this Agreement are true and correct in all material
respects as of the Closing Date and that the Company has complied with
all of the agreements and satisfied all of the conditions on its part
to be performed or satisfied hereunder on or before the Closing Date.
The officer signing and delivering such certificate may rely upon the
best of his or her knowledge as to proceedings threatened.
(c) The Underwriters shall have received on the Closing Date
an opinion of Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.,
counsel for the Company, dated the Closing Date, to the effect that:
(i) the Company has been duly incorporated, is
validly existing as a corporation in good standing under the
laws of the jurisdiction of its incorporation, has the
corporate power and authority to own its property and to
conduct its business as described in the Prospectus;
(ii) the Shares have been duly authorized and, when
issued and delivered in accordance with the terms of this
Agreement, will be validly issued, fully paid and
non-assessable, and the issuance of such Shares will not be
subject to any preemptive rights;
(iii) the Rights to be attached to the Shares have been
duly authorized and, when the Shares have been duly and
validly issued in accordance with the terms of this Agreement,
will have been validly issued;
(iv) this Agreement has been duly authorized, executed
and delivered by the Company;
(v) the statements (A) in the Prospectus under the
captions "Description of Capital Stock," "Risk
Factors,Litigation and Other Proceedings", [other captions]
and (B) in the Registration Statement in Item 15, in each case
insofar as such statements constitute summaries of the legal
matters, documents or proceedings referred to therein, fairly
present the information called for with respect to such legal
matters, documents and proceedings and fairly summarize the
matters referred to therein;
(vi) based solely upon such counsel's participation in
the preparation of the Registration Statement and Prospectus
and review and discussion of the contents thereof with Sheila
A. Clark, Vice President and Deputy General Counsel of the
Company, such counsel does not know of any legal or
governmental proceedings pending or threatened to which the
Company or any of its subsidiaries is a party or to which any
of the properties of the Company or any of its subsidiaries is
subject that are required to be described in the Registration
Statement or the Prospectus and are not so described or of any
statutes, regulations, contracts or other documents that are
required to be described in the Registration Statement or the
Prospectus or to be filed as exhibits to the Registration
Statement that are not described or filed as required;
(vii) the Company is not and, after giving effect to
the offering and sale of Shares and the application of the
proceeds thereof as described in the Prospectus, will not be
an "investment company" as such term is defined in the
Investment Company Act of 1940, as amended; and
(viii) such counsel (A) is of the opinion that each
document filed pursuant to the Exchange Act and incorporated
by reference in the Registration Statement and the Prospectus
(except for financial statements and schedules and other
financial and statistical information included therein as to
which such counsel need not express any opinion) complied when
so filed as to form in all material respects with the Exchange
Act and the applicable rules and regulations of the Commission
thereunder and (B) is of the opinion that the Registration
Statement and Prospectus (except for financial statements and
schedules and other financial and statistical information
included therein as to which such counsel need not express any
opinion) comply as to form in all material respects with the
Securities Act and the rules and regulations of the Commission
thereunder.
In addition to the matters set forth above, such opinion shall
also include a statement to the effect that nothing has come
to the attention of such counsel which leads them to believe
that the Registration Statement or the Prospectus included
therein, as of the time the Registration Statement became
effective or on the date of this Agreement, contains an untrue
statement of a material fact or omits to state a material fact
required to be stated therein or necessary to make the
statements therein not misleading, or the Prospectus, as
amended or supplemented, as of the Closing Date, contains an
untrue statement of a material fact or omits to state a
material fact necessary in order to make the statements
therein, in the light of the circumstances under which they
were made, not misleading (except that such counsel need
express no view as to financial statements and schedules and
other financial and statistical information included therein).
In addition, such opinion shall also include a statement that
nothing has come to the attention of such counsel which would
lead it to believe that the Company and its subsidiaries are
not in compliance with all applicable Environmental Laws,
non-compliance with which would have a material adverse effect
on the Company and its subsidiaries, taken as a whole. With
respect to such statements, Mintz, Levin, Cohn, Ferris,
Glovsky and Popeo, P.C. may state that their belief is based
upon their participation in the preparation of the
Registration Statement and Prospectus and any amendments or
supplements thereto and documents incorporated therein by
reference and review and discussion of the contents thereof,
but is without independent check or verification except as
specified.
The opinion of Mintz, Levin, Cohn, Ferris, Glovsky and Popeo,
P.C. described in this Section 5(c) shall be rendered to you at the
request of the Company and shall so state therein.
(d) The Underwriters shall have received an opinion of Sheila
A. Clark, Vice President and Deputy General Counsel of the Company, to
the effect that:
(i) the Company is duly qualified to transact
business and is in good standing in each jurisdiction in which
the conduct of its business or its ownership or leasing of
property requires such qualification, except to the extent
that the failure to be so qualified or be in good standing
would not have a material adverse effect on the Company and
its subsidiaries, taken as a whole;
(ii) each subsidiary of the Company has been duly
incorporated, is validly existing as a corporation in good
standing under the laws of the jurisdiction of its
incorporation, has the corporate power and authority to own
its property and to conduct its business as described in the
Prospectus and is duly qualified to transact business and is
in good standing in each jurisdiction in which the conduct of
its business or its ownership or leasing of property requires
such qualification, except to the extent that the failure to
be so qualified or be in good standing would not have a
material adverse effect on the Company and its subsidiaries,
taken as a whole;
(iii) the authorized capital stock of the Company
conforms in all material respects as to legal matters to the
description thereof incorporated by reference in the
Prospectus as of the dates indicated therein;
(iv) the shares of Common Stock outstanding prior to
the issuance of the Shares have been duly authorized and are
validly issued, fully paid and non-assessable, and the Rights
attached to the shares of Common Stock outstanding prior to
the issuance of the Shares have been duly authorized and are
validly issued;
(v) all of the issued shares of capital stock of each
subsidiary of the Company have been duly and validly
authorized and issued, are fully paid and non-assessable and
are owned directly by the Company, free and clear of all
liens, encumbrances, equities or claims;
(vi) the execution and delivery by the Company of, and
the performance by the Company of its obligations under, this
Agreement will not contravene (A) the certificate of
incorporation or by-laws of the Company or (B) any agreement
or other instrument known to such counsel to be binding upon
the Company or any of its subsidiaries that is material to the
Company and its subsidiaries, taken as a whole, or (C) any
judgment, order or decree known to such counsel to be
applicable to the Company of any governmental body, agency or
court having jurisdiction over the Company or any subsidiary
that is material for the Company or its subsidiaries, taken as
a whole; and no consent, approval, authorization or order of,
or qualification with, any governmental body or agency is
required for the performance by the Company of its obligations
under this Agreement, except such as may be required by the
Securities Act and the applicable rules and regulations of the
Commission thereunder and the securities or Blue Sky laws of
the various states in connection with the offer and sale of
the Shares;
(vii) the statements (A) in the Prospectus under the
captions "Risk Factors , Litigation and Other Proceedings" and
"Description of Capital Stock", (B) in "Item 3 , Legal
Proceedings" of the Company's most recent report on Form 10-K
incorporated by reference in the Prospectus, (C) in "Item 1 ,
Legal Proceedings" of Part II of the Company's quarterly
reports on Form 10-Q, if any, filed since such annual report,
and (D) in the Company's Registration Statement on Form 8-A
registering the Company's Common Stock (including any
amendments and reports filed for the purpose of updating such
Registration Statement) setting forth a description of the
Company's capital stock, in each case insofar as such
statements constitute summaries of the legal matters,
documents or proceedings referred to therein, fairly present
the information called for with respect to such legal matters,
documents and proceedings and fairly summarize the matters
referred to therein;
(viii) after due inquiry, such counsel does not know of
any legal or governmental proceedings pending or threatened to
which the Company or any of its subsidiaries is a party or to
which any of the properties of the Company or any of its
subsidiaries is subject that are required to be described in
the Registration Statement or the Prospectus and are not so
described or of any statutes, regulations, contracts or other
documents that are required to be described in the
Registration Statement or the Prospectus or to be filed as
exhibits to the Registration Statement that are not described
or filed as required.
In addition to the matters set forth above, such
opinion shall also include a statement to the effect that
nothing has come to the attention of such counsel which leads
such counsel to believe that the Registration Statement or the
Prospectus included therein, as of the time the Registration
Statement became effective or on the date of this Agreement,
contains an untrue statement of a material fact or omits to
state a material fact required to be stated therein or
necessary to make the statements therein not misleading, or
the Prospectus, as amended or supplemented, as of the Closing
Date, contains an untrue statement of a material fact or omits
to state a material fact necessary in order to make the
statements therein, in the light of the circumstances under
which they were made, not misleading (except that such counsel
need express no view as to financial statements and schedules
and other financial and statistical information included
therein). In addition, such opinion shall also include a
statement that nothing has come to the attention of such
counsel which would lead such counsel to believe that the
Company and its subsidiaries are not in compliance with all
applicable Environmental Laws, non-compliance with which would
have a material adverse effect on the Company and its
subsidiaries, taken as a whole. With respect to such
statements, Sheila A. Clarke may state that her opinion and
belief are based upon her participation in the preparation of
the Registration Statement and Prospectus and any amendments
or supplements thereto and documents incorporated therein by
reference and review and discussion of the contents thereof,
but is without independent check or verification except as
specified.
The opinion of Sheila A. Clark described in this
Section 5(d) shall be rendered to the Underwriters at the
request of the Company and shall so state therein.
(e) The Underwriters shall have received on the Closing Date
an opinion of Davis Polk & Wardwell, counsel for the Underwriters,
dated the Closing Date, covering the matters referred to in Sections
5(c)(ii), 5(c)(iv), 5(c)(v) (but only as to the statements in the
Prospectus under "Underwriters") and 5(c)(viii)(B) above. In addition
to the matters set forth above, such opinion shall also state that such
counsel has no reason to believe that (except for financial statements
and schedules and other financial and statistical information as to
which such counsel need not express any belief) the Registration
Statement or the prospectus included therein, on the date of this
Agreement contained any untrue statement of a material fact or omitted
to state a material fact required to be stated therein or necessary to
make the statements therein not misleading, and has no reason to
believe that (except for financial statements and schedules and other
financial and statistical information as to which such counsel need not
express any belief) the Prospectus, as amended or supplemented, as of
the Closing Date contains any untrue statement of a material fact or
omits to state a material fact necessary in order to make the
statements therein, in light of the circumstances under which they were
made, not misleading.
With respect to the foregoing statment and Section
5(c)(viii)(B) above, Davis Polk & Wardwell may state that
their opinion and belief are based upon their participation in
the preparation of the Registration Statement and Prospectus
and any amendments or supplements thereto (other than the
documents incorporated by reference therein) and review and
discussion of the contents thereof (including the documents
incorporated by reference therein), but are without
independent check or verification, except as specified.
(f) The Underwriters shall have received, on each of the date
hereof and the Closing Date, a letter dated the date hereof or the
Closing Date, as the case may be, in form and substance satisfactory to
the Underwriters, from Ernst & Young LLP, independent public
accountants, containing statements and information of the type
ordinarily included in accountants' "comfort letters" to underwriters
with respect to the financial statements and certain financial
information contained in or incorporated by reference into the
Registration Statement and the Prospectus; provided that the letter
delivered on the Closing Date shall use a "cut-off date" not earlier
than the date hereof.
(g) The Shares shall have been duly listed, subject to notice
of issuance, on the New York Stock Exchange.
[(h) The "lock-up" agreements, each substantially in the form
of Exhibit A hereto, between you and executive officers and directors
of the Company relating to sales and certain other dispositions of
shares of Common Stock or certain other securities, delivered to you on
or before the date hereof, shall be in full force and effect on the
Closing Date.] [To be discussed.]
The several obligations of the Underwriters to purchase Additional
Shares hereunder are subject to the delivery to you on the Option Closing Date
of such documents as you may reasonably request with respect to the good
standing of the Company, the due authorization and issuance of the Additional
Shares and other matters related to the issuance of the Additional Shares.
6. Covenants of the Company. In further consideration of the
agreements of the Underwriters herein contained, the Company covenants with each
Underwriter as follows:
(a) To furnish to you, without charge, three signed copies of
the Registration Statement (including exhibits thereto and documents
incorporated by reference) and for delivery to each Underwriter a
conformed copy of the Registration Statement (without exhibits thereto
but including, at your request, documents incorporated by reference)
and to use its best efforts to furnish to you in New York City, without
charge, prior to 5:00 P.M. local time on the business day following the
date of this Agreement and during the period mentioned in Section 6(c)
below, as many copies of the Prospectus, any documents incorporated
therein by reference and any supplements and amendments thereto or to
the Registration Statement as you may reasonably request.
(b) Before amending or supplementing the Registration
Statement or the Prospectus, to furnish to you a copy of each such
proposed amendment or supplement and not to file any such proposed
amendment or supplement to which you reasonably object, and to file
with the Commission within the applicable period specified in Rule
424(b) under the Securities Act any prospectus required to be filed
pursuant to such Rule.
(c) If, during such period after the first date of the public
offering of the Shares as in the opinion of counsel for the
Underwriters the Prospectus is required by law to be delivered in
connection with sales by an Underwriter or dealer, any event shall
occur or condition exist as a result of which it is necessary to amend
or supplement the Prospectus in order to make the statements therein,
in the light of the circumstances when the Prospectus is delivered to a
purchaser, not misleading, or if, in the opinion of counsel for the
Underwriters, it is necessary to amend or supplement the Prospectus to
comply with applicable law, forthwith to prepare, file with the
Commission and furnish, at its own expense, to the Underwriters and to
the dealers (whose names and addresses you will furnish to the Company)
to which Shares may have been sold by you on behalf of the Underwriters
and to any other dealers upon request, either amendments or supplements
to the Prospectus so that the statements in the Prospectus as so
amended or supplemented will not, in the light of the circumstances
when the Prospectus is delivered to a purchaser, be misleading or so
that the Prospectus, as amended or supplemented, will comply with law.
(d) To endeavor to qualify the Shares for offer and sale under
the securities or Blue Sky laws of such jurisdictions as you shall
reasonably request.
(e) To make generally available to the Company's security
holders and to you as soon as practicable an earning statement covering
the twelve-month period ending June 30, 1999 that satisfies the
provisions of Section 11(a) of the Securities Act and the rules and
regulations of the Commission thereunder.
(f) Whether or not the transactions contemplated in this
Agreement are consummated or this Agreement is terminated, to pay or
cause to be paid all expenses incident to the performance of its
obligations under this Agreement, including: (i) the fees,
disbursements and expenses of the Company's counsel and the Company's
accountants in connection with the registration and delivery of the
Shares under the Securities Act and all other fees or expenses in
connection with the preparation and filing of the Registration
Statement, any preliminary prospectus, the Prospectus and amendments
and supplements to any of the foregoing, including all printing costs
associated therewith, and the mailing and delivering of copies thereof
to the Underwriters and dealers, in the quantities hereinabove
specified, (ii) all costs and expenses related to the transfer and
delivery of the Shares to the Underwriters, including any transfer or
other taxes payable thereon, (iii) the cost of printing, producing and
delivering to the Underwriters any Blue Sky or Legal Investment
memorandum in connection with the offer and sale of the Shares under
state securities laws and all expenses in connection with the
qualification of the Shares for offer and sale under state securities
laws as provided in Section 6(d) hereof, including filing fees and the
reasonable fees and disbursements of counsel to the Underwriters in
connection with such qualification and in connection with the Blue Sky
or Legal Investment memorandum, (iv) all filing fees and disbursements
of counsel to the Underwriters incurred in connection with the review
and qualification of the offering of the Shares by the National
Association of Securities Dealers, Inc., (v) the costs and expenses of
the Company relating to investor presentations on any "road show"
undertaken in connection with the marketing of the offering of the
Shares, including, without limitation, expenses associated with the
production of road show slides and graphics, fees and expenses of any
consultants engaged in connection with the road show presentations with
the prior approval of the Company, travel and lodging expenses of the
representatives and officers of the Company and any such consultants,
and the cost of any aircraft chartered in connection with the road
show, (vi) all document production charges and expenses of Davis Polk &
Wardwell, special counsel for the Underwriters (but not including their
fees for professional services), in connection with the preparation of
this Agreement, (vii) the cost of printing certificates representing
the Shares, (viii) the costs and charges of any transfer agent,
registrar or depositary, and (ix) all other costs and expenses incident
to the performance of the obligations of the Company hereunder for
which provision is not otherwise made in this Section. It is
understood, however, that except as provided in this Section, Section 7
entitled "Indemnity and Contribution", and the last paragraph of
Section 9 below, the Underwriters will pay all of their costs and
expenses, including fees and disbursements of their counsel, stock
transfer taxes payable on resale of any of the Shares by them and any
advertising expenses connected with any offers they may make.
7. Indemnity and Contribution. (a) The Company agrees to indemnify
and hold harmless each Underwriter and each person, if any, who controls any
Underwriter within the meaning of either Section 15 of the Securities Act or
Section 20 of the Exchange Act, from and against any and all losses, claims,
damages and liabilities (including, without limitation, any legal or other
expenses reasonably incurred in connection with defending or investigating any
such action or claim) caused by any untrue statement or alleged untrue statement
of a material fact contained in the Registration Statement or any amendment
thereof, any preliminary prospectus or the Prospectus (as amended or
supplemented if the Company shall have furnished any amendments or supplements
thereto), or caused by any omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein, in the light of the circumstances under which they were made, not
misleading, except insofar as such losses, claims, damages or liabilities are
caused by any such untrue statement or omission or alleged untrue statement or
omission based upon information relating to any Underwriter furnished to the
Company in writing by such Underwriter through you expressly for use therein.
Notwithstanding the foregoing, the Company will not be liable to any Underwriter
or controlling person thereof in any such case to the extent that such losses,
claims, damages, liabilities or expenses arise out of or are based upon an
untrue statement or alleged untrue statement, or omission or alleged omission
made in any Preliminary Prospectus if (i) such Underwriter failed to send or
deliver the Prospectus with or prior to the delivery of written confirmation of
the sale of Shares to the person asserting such loss, claim, damage, liability
or expense, and who purchased such Shares from such Underwriter and (ii) such
untrue statement or alleged untrue statement or omission or alleged omission was
corrected in the Prospectus.
(b) Each Underwriter agrees, severally and not jointly, to indemnify
and hold harmless the Company, its directors, its officers who sign the
Registration Statement and each person, if any, who controls the Company within
the meaning of either Section 15 of the Securities Act or Section 20 of the
Exchange Act to the same extent as the foregoing indemnity from the Company to
such Underwriter, but only with reference to information relating to such
Underwriter furnished to the Company in writing by such Underwriter through you
expressly for use in the Registration Statement, any preliminary prospectus, the
Prospectus or any amendments or supplements thereto.
(c) In case any proceeding (including any governmental investigation)
shall be instituted involving any person in respect of which indemnity may be
sought pursuant to Section 7(a) or 7(b), such person (the "indemnified party")
shall promptly notify the person against whom such indemnity may be sought (the
"indemnifying party") in writing and the indemnifying party, upon request of the
indemnified party, shall retain counsel reasonably satisfactory to the
indemnified party to represent the indemnified party and any others the
indemnifying party may designate in such proceeding and shall pay the fees and
disbursements of such counsel related to such proceeding. In any such
proceeding, any indemnified party shall have the right to retain its own
counsel, but the fees and expenses of such counsel shall be at the expense of
such indemnified party unless (i) the indemnifying party and the indemnified
party shall have mutually agreed to the retention of such counsel or (ii) the
named parties to any such proceeding (including any impleaded parties) include
both the indemnifying party and the indemnified party and representation of both
parties by the same counsel would be inappropriate due to actual or potential
differing interests between them. It is understood that the indemnifying party
shall not, in respect of the legal expenses of any indemnified party in
connection with any proceeding or related proceedings in the same jurisdiction,
be liable for the fees and expenses of more than one separate firm (in addition
to any local counsel) for all such indemnified parties and that all such fees
and expenses shall be reimbursed as they are incurred. Such firm shall be
designated in writing by Morgan Stanley & Co. Incorporated, in the case of
parties indemnified pursuant to Section 7(a), and by the Company, in the case of
parties indemnified pursuant to Section 7(b). The indemnifying party shall not
be liable for any settlement of any proceeding effected without its written
consent, but if settled with such consent or if there be a final judgment for
the plaintiff, the indemnifying party agrees to indemnify the indemnified party
from and against any loss or liability by reason of such settlement or judgment.
Notwithstanding the foregoing sentence, if at any time an indemnified party
shall have requested an indemnifying party to reimburse the indemnified party
for fees and expenses of counsel as contemplated by the second and third
sentences of this paragraph, the indemnifying party agrees that it shall be
liable for any settlement of any proceeding effected without its written consent
if (i) such settlement is entered into more than 30 days after receipt by such
indemnifying party of the aforesaid request and (ii) such indemnifying party
shall not have reimbursed the indemnified party in accordance with such request
prior to the date of such settlement; provided that the indemnified party has
produced evidence of such fees and expenses. No indemnifying party shall,
without the prior written consent of the indemnified party, effect any
settlement of any pending or threatened proceeding in respect of which any
indemnified party is or could have been a party and indemnity could have been
sought hereunder by such indemnified party, unless such settlement includes an
unconditional release of such indemnified party from all liability on claims
that are the subject matter of such proceeding.
(d) To the extent the indemnification provided for in Section 7(a) or
7(b) is unavailable to an indemnified party or insufficient in respect of any
losses, claims, damages or liabilities referred to therein, then each
indemnifying party under such paragraph, in lieu of indemnifying such
indemnified party thereunder, shall contribute to the amount paid or payable by
such indemnified party as a result of such losses, claims, damages or
liabilities (i) in such proportion as is appropriate to reflect the relative
benefits received by the Company on the one hand and the Underwriters on the
other hand from the offering of the Shares or (ii) if the allocation provided by
clause 7(d)(i) above is not permitted by applicable law, in such proportion as
is appropriate to reflect not only the relative benefits referred to in clause
7(d)(i) above but also the relative fault of the Company on the one hand and of
the Underwriters on the other hand in connection with the statements or
omissions that resulted in such losses, claims, damages or liabilities, as well
as any other relevant equitable considerations. The relative benefits received
by the Company on the one hand and the Underwriters on the other hand in
connection with the offering of the Shares shall be deemed to be in the same
respective proportions as the net proceeds from the offering of the Shares
(before deducting expenses) received by the Company and the total underwriting
discounts and commissions received by the Underwriters bear to the aggregate
public offering price of the Shares. The relative fault of the Company on the
one hand and the Underwriters on the other hand shall be determined by reference
to, among other things, whether the untrue or alleged untrue statement of a
material fact or the omission or alleged omission to state a material fact
relates to information supplied by the Company or by the Underwriters and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such statement or omission. The Underwriters' respective
obligations to contribute pursuant to this Section 7 are several in proportion
to the respective number of Shares they have purchased hereunder, and not joint.
(e) The Company and the Underwriters agree that it would not be just
or equitable if contribution pursuant to this Section 7 were determined by pro
rata allocation (even if the Underwriters were treated as one entity for such
purpose) or by any other method of allocation that does not take account of the
equitable considerations referred to in Section 7(d). The amount paid or payable
by an indemnified party as a result of the losses, claims, damages and
liabilities referred to in the immediately preceding paragraph shall be deemed
to include, subject to the limitations set forth above, any legal or other
expenses reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim. Notwithstanding the
provisions of this Section 7, no Underwriter shall be required to contribute any
amount in excess of the amount by which the total price at which the Shares
underwritten by it and distributed to the public were offered to the public
exceeds the amount of any damages that such Underwriter has otherwise been
required to pay by reason of such untrue or alleged untrue statement or omission
or alleged omission. No person guilty of fraudulent misrepresentation (within
the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. The remedies provided for in this Section 7 are not exclusive
and shall not limit any rights or remedies which may otherwise be available to
any indemnified party at law or in equity.
(f) The indemnity and contribution provisions contained in this
Section 7 and the representations, warranties and other statements of the
Company contained in this Agreement shall remain operative and in full force and
effect regardless of (i) any termination of this Agreement, (ii) any
investigation made by or on behalf of any Underwriter or any person controlling
any Underwriter or by or on behalf of the Company, its officers or directors or
any person controlling the Company and (iii) acceptance of and payment for any
of the Shares.
8. Termination. This Agreement shall be subject to termination by
notice given by you to the Company, if (a) after the execution and delivery of
this Agreement and prior to the Closing Date (i) trading generally shall have
been suspended or materially limited on or by, as the case may be, any of the
New York Stock Exchange, the American Stock Exchange, the National Association
of Securities Dealers, Inc., the Chicago Board of Options Exchange, the Chicago
Mercantile Exchange or the Chicago Board of Trade, (ii) trading of any
securities of the Company shall have been suspended on any exchange or in any
over-the-counter market, (iii) a general moratorium on commercial banking
activities in New York shall have been declared by either Federal or New York
State authorities or (iv) there shall have occurred any outbreak or escalation
of hostilities or any change in financial markets or any calamity or crisis
that, in your judgment, has a material and adverse effect on the securities
markets and (b) in the case of any of the events specified in clauses 8(a)(i)
through 8(a)(iv), such event, singly or together with any other such event,
makes it, in your judgment, impracticable to market the Shares on the terms and
in the manner contemplated in the Prospectus.
9. Effectiveness. This Agreement shall become effective upon the
execution and delivery hereof by the parties hereto.
If this Agreement shall be terminated by the Underwriters, or any of
them, because of any failure or refusal on the part of the Company to comply
with the terms or to fulfill any of the conditions of this Agreement, or if for
any reason the Company shall be unable to perform its obligations under this
Agreement, the Company will reimburse the Underwriters or such Underwriters as
have so terminated this Agreement with themselves, severally, for all
out-of-pocket expenses (including the fees and disbursements of their counsel)
reasonably incurred by such Underwriters in connection with this Agreement or
the offering contemplated hereunder, but the Company shall not in any event be
liable to any of the Underwriters for damages on account of loss of anticipated
profits from the sale by them of the Shares.
10. Counterparts. This Agreement may be signed in two or more
counterparts, each of which shall be an original, with the same effect as if the
signatures thereto and hereto were upon the same instrument.
11. Applicable Law. This Agreement shall be governed by and construed
in accordance with the internal laws of the State of New York.
12. Headings. The headings of the sections of this Agreement have bee
inserted for convenience of reference only and shall not be deemed a part of
this Agreement.
Very truly yours,
AMERICA ONLINE, INC.
By:____________________________
Name:
Title:
Accepted as of the date hereof
Morgan Stanley & Co. Incorporated
Lehman Brothers Inc.
Acting severally on behalf of thermselves
And the serveral Underwriters named in
Schedule I hereto
B:________________________
Name:
Title:
SCHEDULE I
Underwriters Number of Shares
Morgan Stanley & Co. Incorporated. . . . .
Lehman Brothers Inc. . . . . . . . . . . . _______________
Total Firm Shares. . . . . . . . .
EXHIBIT A
[FORM OF LOCK-UP LETTER]
[to be discussed]
_____________, 199_
Morgan Stanley & Co. Incorporated
1585 Broadway
New York, NY 10036
Dear Sirs and Mesdames:
The undersigned understands that Morgan Stanley & Co. Incorporated ("Morgan
Stanley") as representative of the several Underwriters (the "Underwriters")
proposes to enter into an Underwriting Agreement (the "Underwriting Agreement")
with America Online, Inc., a Delaware corporation (the "Company"), providing for
the public offering (the "Public Offering") by the Underwriters of ___ shares
(the "Shares") of the Common Stock, $.01 par value of the Company (the "Common
Stock").
To induce Morgan Stanley to continue its efforts in connection with the
Public Offering, the undersigned hereby agrees that, without the prior written
consent of Morgan Stanley, it will not, during the period commencing on the date
hereof and ending [ ] days after the date of the final prospectus relating to
the Public Offering (the "Prospectus"), (1) offer, pledge, sell, contract to
sell, sell any option or contract to purchase, purchase any option or contract
to sell, grant any option, right or warrant to purchase, lend, or otherwise
transfer or dispose of, directly or indirectly, any shares of Common Stock or
any securities convertible into or exercisable or exchangeable for Common Stock
or (2) enter into any swap or other arrangement that transfers to another, in
whole or in part, any of the economic consequences of ownership of the Common
Stock, whether any such transaction described in clause (1) or (2) above is to
be settled by delivery of Common Stock or such other securities, in cash or
otherwise. The foregoing sentence shall not apply to transactions relating to
shares of Common Stock or other securities acquired in open market transactions
after the completion of the Public Offering. In addition, the undersigned agrees
that, without the prior written consent of Morgan Stanley, it will not, during
the period commencing on the date hereof and ending [ ] days after the date of
the Prospectus, make any demand for or exercise any right with respect to, the
registration of any shares of Common Stock or any security convertible into or
exercisable or exchangeable for Common Stock.
Whether or not the Public Offering actually occurs depends on a number
of factors, including market conditions. Any Public Offering will only be made
pursuant to an Underwriting Agreement, the terms of which are subject to
negotiation between the Company and Morgan Stanley.
Very truly yours,
(Name)
(Address)
June 24, 1998
America Online, Inc.
22000 AOL way
Dulles, Virginia 20166-9323
Ladies and Gentlemen:
We have acted as counsel to America Online, Inc., a Delaware
corporation (the "Company"), in connection with the preparation of a
Registration Statement on Form S-3 (the "Registration Statement") filed by the
Company with the Securities and Exchange Commission (the "Commission") on June
18, 1998. The Registration Statement relates to the issuance and sale from time
to time, pursuant to Rule 415 of the General Rules and Regulations promulgated
under the Securities Act of 1933, as amended (the "Securities Act"), of the
following securities of the Company with an aggregate initial public offering
price of up to $1,000,000,000: (i) common stock, par value $.01 per share
("Common Stock"), (ii) one or more series of preferred stock, par value $.01 per
share ("Preferred Stock"), and (iii) one or more series of unsecured debt
securities consisting of senior debentures, notes, bonds and/or other evidences
of indebtedness ("Debt Securities"; together with the Common Stock and Preferred
Stock, the "Securities"). The Debt Securities may be issued under an Indenture
in the form filed as an exhibit to the Registration Statement, as amended or
supplemented from time to time (the "Indenture"), proposed to be entered into
between the Company and one or more commercial banking institutions, as trustee,
chosen by the Company and qualified to act as such under the Trust Indenture Act
of 1939, as amended ( the "Trustee").
In connection with this opinion, we have examined (i) the form of
Registration Statement relating to the Securities; (ii) the form of Indenture;
(iii) the Company's Restated Certificate of Incorporation, as amended and
currently in effect (the "Certificate of Incorporation"); (iv) the Company's
Bylaws, as amended and currently in effect (the "Bylaws"); and (v) resolutions
adopted by the Board of Directors of the Company (the "Board") relating to the
filing of the Registration Statement with respect to the Securities and related
matters (the "Board Resolutions"). We have also examined originals or copies,
certified or otherwise identified to our satisfaction, of such records of the
Company and such agreements, certificates of public officials, certificates of
officers or other representatives of the Company and others, and such other
documents, certificates and records as we have deemed necessary or appropriate
as a basis for the opinions set forth herein.
In our capacity as counsel to the Company in connection with such
registration, we are familiar with the proceedings taken and proposed to be
taken by the Company in connection with the authorization and issuance of the
Securities. For purposes of this opinion, we have assumed that such proceedings
will be timely and properly completed, in accordance with all requirements of
applicable federal, Delaware and New York laws, in the manner presently
proposed.
In our examination, we have assumed the genuineness of all signatures,
the legal capacity of natural persons, the authenticity of all documents
submitted to us as originals, the conformity to original documents of all
documents submitted to us as certified or photostatic copies and the
authenticity of the originals of such copies.
Members of our firm are admitted to the Bar of the Commonwealth of
Massachusetts, and we do not express any opinion as to the laws of any other
jurisdiction other than the General Corporation Law of the State of Delaware
(the "DGCL"). With respect to the opinion set forth in paragraph 1 below, we
have assumed for all purposes that the laws of the State of New York are
identical to the laws of the Commonwealth of Massachusetts. No opinion is
expressed herein with respect to the qualification of the Securities under the
securities or blue sky laws of any state or any foreign jurisdiction. The
Securities may be issued from time to time on a delayed or continuous basis, but
this opinion is limited to the laws, including the rules and regulations
thereunder, as in effect on the date hereof.
Based upon and subject to the foregoing, we are of the opinion that:
1. With respect to any series of Debt Securities, when (i) the
Registration Statement, as finally amended (including all post-effective
amendments), has become effective; (ii) an appropriate Prospectus Supplement
with respect to the applicable Debt Securities has been prepared, delivered and
filed in compliance with the Securities Act and the applicable rules and
regulations thereunder; (iii) if the applicable Debt Securities are to be sold
pursuant to a purchase, underwriting or similar agreement (an "Underwriting
Agreement"), such Underwriting Agreement with respect to the Debt Securities in
the form filed as an exhibit to the Registration Statement, or any
post-effective amendment thereto, has been duly authorized, executed and
delivered by the Company and the other parties thereto; (iv) the Board,
including any appropriate committee appointed thereby, and the appropriate
officers of the Company have taken all necessary corporate action to approve the
issuance and terms of the applicable Debt Securities and all matters related
thereto; (v) the terms of the applicable Debt Securities and of their issuance
and sale have been duly established in conformity with the Indenture so as not
to violate any applicable law, the Certificate of Incorporation or Bylaws of the
Company or result in a default under or breach of any agreement or instrument
binding upon the Company and so as to comply with any requirement or restriction
imposed by any court or governmental body having jurisdiction over the Company;
(vi) the Indenture has been qualified under the Trust Indenture Act of 1939, as
amended, and duly executed and delivered by the Company and the Trustee and duly
delivered by the Company to the Trustee; and (vii) the applicable Debt
Securities have been duly executed and authenticated in accordance with the
provisions of the Indenture, have been offered, issued and sold in accordance
with the terms of the Registration Statement, or any post-effective amendment
thereto, and any Prospectus and Prospectus Supplement relating thereto, have
been issued and sold in accordance with the Indenture, and have been delivered
to the purchasers thereof upon payment of the agreed upon consideration therefor
in accordance with the Underwriting Agreement with respect to the applicable
Debt Securities, or as otherwise contemplated by the Registration Statement, or
any post-effective amendment thereto, and any Prospectus and Prospectus
Supplement relating thereto, the applicable Debt Securities will be valid and
binding obligations of the Company, enforceable against the Company in
accordance with their respective terms.
2. The Company has the authority pursuant to its Certificate of
Incorporation to issue up to 5,000,000 shares of Preferred Stock in one or more
series. With respect to any series of Preferred Stock, when (i) the Registration
Statement, as finally amended (including all post-effective amendments), has
become effective; (ii) an appropriate Prospectus Supplement with respect to the
applicable Preferred Stock has been prepared, delivered and filed in compliance
with the Securities Act and the applicable rules and regulations thereunder;
(iii) if the applicable Preferred Stock is to be sold pursuant to a purchase,
underwriting or similar agreement (an "Underwriting Agreement"), such
Underwriting Agreement with respect to the applicable Preferred Stock in the
form filed as an exhibit to the Registration Statement, or any post-effective
amendment thereto, has been duly authorized, executed and delivered by the
Company and the other parties thereto; (iv) the Board, including any appropriate
committee appointed thereby, and appropriate officers of the Company have taken
all necessary corporate action to approve the issuance and terms of the
applicable Preferred Stock and all matters related thereto, including the
adoption of a Certificate of Designation relating to the applicable Preferred
Stock in accordance with the applicable provisions of DGCL (the "Certificate of
Designation"); (v) the filing of the Certificate of Designation with the
Secretary of State of the State of Delaware has duly occurred; (vi) the terms of
the applicable Preferred Stock and of its issuance and sale have been duly
established in conformity with the Certificate of Incorporation, including the
Certificate of Designation, relating to the applicable Preferred Stock and the
Bylaws of the Company so as not to violate any applicable law, the Certificate
of Incorporation or Bylaws of the Company or result in default under or breach
of any agreement or instrument binding upon the Company and so as to comply with
any requirement or restriction imposed by any court or governmental body having
jurisdiction over the Company; (vii) the applicable Preferred Stock has been
offered, issued and sold in accordance with the terms of the Registration
Statement, or any post-effective amendment thereto, and any Prospectus and
Prospectus Supplement relating thereto; and (viii) certificates representing the
shares of the applicable Preferred Stock have been duly executed, countersigned,
registered and delivered upon payment of the agreed upon consideration therefor
in accordance with the Underwriting Agreement with respect to the Preferred
Stock, or as otherwise contemplated by the Registration Statement, or any
post-effective amendment thereto, and any Prospectus and Prospectus Supplement
relating thereto, (A) the shares of the applicable Preferred Stock will be duly
authorized, validly issued, fully paid and nonassessable, and (B) if the
applicable Preferred Stock is convertible or exchangeable into Common Stock, the
Common Stock issuable upon conversion or exchange of the applicable Preferred
Stock will be duly authorized, validly issued, fully paid and nonassessable,
assuming the execution, authentication, issuance and delivery of the applicable
Preferred Stock and the conversion or exchange thereof in accordance with the
terms of the Certificate of Designation.
3. The Company has the authority pursuant to its Certificate of
Incorporation to issue up to 600,000,000 shares of Common Stock. With respect to
the issuance of any shares of Common Stock, when (i) the Registration Statement,
as finally amended (including all post-effective amendments) has become
effective; (ii) an appropriate Prospectus Supplement with respect to the
applicable shares of Common Stock has been prepared, delivered and filed in
compliance with the Securities Act and the applicable rules and regulations
thereunder; (iii) if the applicable shares of Common Stock are to be sold
pursuant to a purchase, underwriting or similar agreement (an "Underwriting
Agreement"), such Underwriting Agreement with respect to the applicable shares
Common Stock has been duly authorized, executed and delivered by the Company and
the other parties thereto; (iv) the Board, including any appropriate committee
appointed thereby, and appropriate officers of the Company have taken all
necessary corporate action to approve the issuance of the applicable shares of
Common Stock and all matters related thereto; (v) the terms of the issuance and
sale of the applicable shares of Common Stock have been duly established in
conformity with the Certificate of Incorporation and Bylaws so as not to violate
any applicable law, the Certificate of Incorporation or Bylaws of the Company or
result in a default under or breach of any agreement or instrument binding upon
the Company and so as to comply with any restriction imposed by any court or
governmental body having jurisdiction over the Company; (vi) the applicable
shares of Common Stock have been offered, issued and sold in accordance with the
terms of the Registration Statement, or any post-effective amendment thereto,
and any Prospectus and Prospectus Supplement relating thereto; and (viii)
certificates representing the applicable shares of Common Stock have been duly
executed, countersigned, registered and delivered upon payment of the agreed
upon consideration therefor in accordance with the Underwriting Agreement with
respect to the Common Stock, or as otherwise contemplated by the Registration
Statement, or any post-effective amendment thereto, and any Prospectus and
Prospectus Supplement relating thereto, the applicable shares of Common Stock
will be duly authorized, validly issued, fully paid and nonassessable.
The opinion set forth above in paragraph 1 is subject to the following
exceptions, limitations and qualifications: (i) the effect of bankruptcy,
insolvency, reorganization, fraudulent conveyance, moratorium or other similar
laws now or hereafter in effect relating to or affecting the rights and remedies
of creditors; (ii) the effect of general principles of equity, whether
enforcement is considered in a proceeding in equity or at law, and the
discretion of the court before which any proceeding therefor may be brought;
(iii) the unenforceability under certain circumstances under law or court
decisions of provisions providing for the indemnification of, or contribution
to, a party with respect to a liability where such indemnification or
contribution is contrary to public policy; (iv) we express no opinion concerning
the enforceability of any waiver of rights or defenses with respect to stay,
extension or usury laws; and (v) we express no opinion with respect to whether
acceleration of any Debt Securities may affect the ability to collect any
portion of the stated principal amount thereof which might be determined to
constitute unearned interest thereon.
For purposes of the opinions rendered above, we have assumed that the
Company will at all times in the future be duly incorporated and validly
existing as a corporation under the laws of the State of Delaware and have the
corporate power and authority to issue and sell the Securities. To the extent
that the obligations of the Company under the Indenture may be dependent upon
such matters, we assume for purposes of the opinion in paragraph 1 above the
following facts at the time of the execution and delivery of the Indenture: that
the Trustee for such Indenture is duly organized, validly existing and in good
standing under the laws of its jurisdiction of organization; that the Trustee is
duly qualified to engage in the activities contemplated by the Indenture; that
the Indenture has been duly authorized, executed and delivered by the Trustee
and constitutes a legally valid, binding and enforceable obligation of the
Trustee, enforceable against the Trustee in accordance with its terms; that the
Trustee is in compliance, generally and with respect to acting as Trustee under
the Indenture, with all applicable laws and regulations; and that the Trustee
has the requisite organizational and legal power and authority to perform its
obligations under the Indenture.
We hereby consent to the filing of this opinion with the Commission as
Exhibit 5 to the Registration Statement. We also consent to the reference to our
firm under the heading "Legal Matters" in the Registration Statement.
Very truly yours,
/s/Mintz, Levin, Cohn, Ferris,
Glovsky and Popeo, P.C.
Mintz, Levin, Cohn, Ferris,
Glovsky and Popeo, P.C.
Exhibit 23.1
Consent of Independent Auditors
We consent to the reference to our firm under the caption "Experts" in Amendment
No. 1 to the Registration Statement (Form S-3 No. 333-57153 ) and related
Prospectus of America Online, Inc. for the registration of its debt securities,
its preferred stock and its common stock and to the incorporation by reference
therein of our report dated September 10, 1997, with respect to the consolidated
financial statements of America Online, Inc. included in its Annual Report (Form
10-K) for the year ended June 30, 1997, filed with the Securities and Exchange
Commission.
/s/Ernst & Young LLP
Vienna, Virginia
June 24, 1998
Consent of Independent Auditors
We consent to the reference to our firm under the caption "Experts" in Amendment
No. 1 to the Registration Statement (Form S-3 No. 333-57153 ) and related
Prospectus of America Online, Inc. for the registration of its debt securities,
its preferred stock and its common stock and to the incorporation by reference
therein of our report dated March 26, 1998, with respect to the financial
statements of Interactive Services Division of CompuServe Corporation for the
year ended April 30, 1997 included in America Online, Inc.'s Current Report on
Form 8-K/A dated April 17, 1998, filed with the Securities and Exchange
Commission.
/s/Ernst & Young LLP
Columbus, Ohio
June 24, 1998
