As filed with the Securities and Exchange Commission on November 2, 1999
Registration No. 333-79489
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 incorporation or organization)
(I.R.S. Employer Identification No.)
22000 AOL Way, Dulles, Virginia 20166-9323 (703) 265-1000
(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) 265-1000
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
Copy to:
Sheila A. Clark, Esquire
Senior Vice President, Legal
America Online, Inc.
22000 AOL Way
Dulles, Virginia 20166-9323
(703) 265-1000
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. [ ]
This amended Registration Statement, which amends a new Registration
Statement, also constitutes Post-Effective Amendment No. 1 to Registration
Statement No. 333-57153, which was declared effective on June 26, 1998. Such
Post-Effective Amendment No. 1 shall hereafter become effective concurrently
with the effectiveness of this Registration Statement and in accordance with
Section 8(c) of the Securities Act of 1933. Pursuant to Rule 429 under the
Securities Act of 1933, the Prospectus filed as part of this Registration
Statement also relates to $450,220,000 of securities previously registered but
not sold under the registrant's Registration Statement No. 333-57153. The
$450,220,000 of securities remaining unsold from Registration Statement No.
333-57153 is hereby combined with the $4,549,780,000 of securities registered
pursuant to this Registration Statement to enable the registrant to offer an
aggregate amount of $5,000,000,000 of securities pursuant to the combined
prospectus.
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.
The information in this prospectus is not complete and may be changed. We may
not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an offer
to sell these securities and it is not soliciting an offer to buy these
securities in any state where the offer or sale is not permitted.
PROSPECTUS
(Subject to completion, dated November 2, 1999)
$5,000,000,000
AMERICA ONLINE, INC.
[AMERICA ONLINE LOGO]
Debt Securities, Common Stock, Preferred Stock
Depositary Shares, Warrants and Stock Purchase
Contracts to Purchase Common Stock or Preferred Stock
We may sell, from time to time, in one or more offerings:
- - our debt securities
- - shares of our common stock
- - shares of our preferred stock
- - shares of our preferred stock represented by depositary shares
- - warrants exercisable for our debt securities, common stock, preferred stock
or depositary shares
- - stock purchase contracts to purchase common stock or preferred stock
The total offering price of these securities, in the aggregate, will
not exceed $5,000,000,000. We will provide the specific terms of any securities
we actually offer for sale in supplements to this prospectus. You should read
this prospectus and the supplements carefully before you decide to invest in
any of these securities.
Our common stock is listed on the New York Stock Exchange, under the
symbol "AOL." Any common stock sold pursuant to a prospectus supplement will be
listed on the New York Stock Exchange.
You should carefully consider the risk factors beginning on page 3 of
this prospectus before purchasing any of the securities offered by this
prospectus.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities, or determined if
this prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
This prospectus may not be used to consummate the sale of any
securities unless accompanied by a prospectus supplement.
The date of this prospectus is , 1999.
The Company
Founded in 1985, America Online, Inc., based in Dulles, Virginia, is the
world's leader in interactive services, Web brands, Internet technologies, and
electronic commerce services.
America Online has two major lines of businesses organized into four
product groups:
- - the Interactive Online Services business, comprised of the Interactive
Services Group, the Interactive Properties Group and the AOL International
Group, and
- - the Enterprise Solutions business, comprised of the Netscape Enterprise
Group.
The product groups are described below.
The Interactive Services Group develops and operates branded interactive
services, including:
- - the AOL service, a worldwide Internet online service with more than 19
million members
- - the CompuServe service, a worldwide Internet online service with more than
2 million members
- - the Netscape Netcenter, an Internet portal with more than 20 million
registered users
- - the AOL.COM Internet portal
- - the Netscape Communicator client software, including the Netscape Navigator
browser
The Interactive Properties Group is built around branded properties that
operate across multiple services and platforms, such as:
- - Digital City, Inc., the No. 1 branded local content network and community
guide on the AOL service and the Internet
- - ICQ, the world's leading communications portal that provides instant
communications and chat technology
- - MovieFone, Inc., the nation's No. 1 movie guide and ticketing service
provided through an interactive telephone service and on the AOL service
and the Internet
- - Internet music brands Spinner.com, Winamp and SHOUTcast
The AOL International Group oversees the AOL and CompuServe services and
operations outside the United States, as well as the Netscape Online service,
which was launched in the United Kingdom.
The Netscape Enterprise Group focuses on providing businesses a range of
software products, technical support, consulting and training services. These
products and services enable businesses and users to share information, manage
networks and facilitate electronic commerce.
In November 1998, America Online entered into a strategic alliance with
Sun Microsystems, Inc. ("Sun"), a leader in network computing products and
services, to accelerate the growth of electronic commerce. The strategic
alliance provides that, over a three-year period, we will develop and market,
together with Sun, client software and network application and server software
for electronic commerce, extended communities and connectivity, including
software based in part on the Netscape Enterprise Group code base, on Sun code
and technology and on certain America Online services features, to business
enterprises.
During the last fiscal year, America Online entered into a number of
strategic mergers. In March 1999, America Online completed its merger with
Netscape Communications Corporation and in May 1999, America Online completed
its merger with MovieFone, Inc. America Online also completed mergers with
Nullsoft, Inc. and Spinner Networks Incorporated, companies that provide music
over the Internet, When Inc., a company that provides a personalized event
directory and calendar services, AtWeb, Inc., and PersonaLogic, Inc.
America Online was incorporated in Delaware on May 24, 1985. The principal
executive offices are located at 22000 AOL Way, Dulles, Virginia 20166-9323. Our
telephone number at that address is (703) 265-1000. Inquiries may also be sent
to America Online's Internet address: AOL [email protected], or to the America Online
address, AOL IR.
Ratio of Earnings To Fixed Charges
The following table sets forth the ratio of earnings to fixed charges for
the three months ended September 30, 1999 and for each of the last five fiscal
years.
<TABLE>
Three Months Ended
September 30, Fiscal Year Ended June 30,
---------------------------------------
1999 1999 1998 1997 1996 1995
----------------------- --------- --------- --------- --------- -------
Ratio of Earnings to Fixed
<S> <C> <C> <C> <C>
Charges........................ 7.14x 7.72x 0.25x - 5.06x -
</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 $420 million and $36
million, respectively.
Risk Factors
Before purchasing the shares offered by this prospectus, you should
carefully consider the risks described below, in addition to the other
information presented in this prospectus or incorporated by reference into this
prospectus. If any of the following risks actually occur, they could seriously
harm our business, financial condition or results of operations. In such case,
the trading price of our common stock could decline and you may lose all or part
of your investment.
We Face Competition for Subscription Revenues and the Development and Sale of
Electronic Commerce Infrastructure and Applications
We compete with a wide range of other companies in the communications,
advertising, entertainment, information, media, Web-based services, software,
technology, direct mail and electronic commerce fields for subscription,
advertising, and commerce revenues, and in the development of distribution
technologies and equipment in our Interactive Online Services business. We also
compete with a wide range of companies in the development and sale of electronic
commerce infrastructure and applications in our Enterprise Solutions business.
- Competitors for subscription revenues include:
-- online services such as the Microsoft Network, AT&T Worldnet and
Prodigy Classic
-- national and local Internet service providers, such as MindSpring
and EarthLink (who have announced their intention to combine)
-- long distance and regional telephone companies offering access as
part of their telephone service, such as AT&T Corp., MCI WorldCom,
Inc., Sprint Corporation and regional Bell operating companies
-- cable television companies
-- cable Internet access services offered by companies such as
Excite@Home and Road Runner Group
- Competitors for advertising and commerce revenues include:
-- online services such as the Microsoft Network, AT&T Worldnet and
Prodigy Classic
-- Web-based navigation and search service companies such as Yahoo!
Inc., Infoseek Corporation (to be acquired by the Walt Disney
Company), Lycos, Inc. and Excite@Home.
-- global media companies including newspapers, radio and television
stations and content providers, such as the National Broadcasting
Corporation, CBS Corporation, The Walt Disney Company, Time Warner
Inc., The Washington Post Company and Conde Nast Publications, Inc.
-- cable Internet access services offered by companies such as
Excite@Home and Road Runner Group -- Web sites focusing on content,
commerce, community and similar features such as Amazon.com and
eBay
- Competition in the development of distribution technologies and
equipment includes:
-- broadband distribution technologies used in cable Internet access
services offered by companies such as Excite@Home and Road Runner
Group
-- advanced telephone-based access services offered through digital
subscriber line technologies offered by local telecommunications
companies
-- other advanced digital services offered by broadcast, satellite and
wireless companies
-- television-based interactive computer services, such as those
offered by Microsoft's WebTV
-- personal digital assistants or handheld computers, enhanced mobile
phones and other equipment offering functional equivalents to our
features
- Competitors in the development and sale of electronic commerce
infrastructure and applications include:
-- providers of electronic commerce infrastructure such as server
software, including International Business Machines Corporation,
Microsoft Corporation, Oracle Corporation, Novell, Inc.,
Software.com, Inc., BEA Systems, Inc. and the provider of the
Apache Web Server
-- providers of electronic commerce applications including
International Business Machines Corporation, Oracle Corporation,
General Electric Information Systems, Microsoft Corporation,
PeopleSoft, Inc., SAP A.G., Open Market, Inc., Ariba Technologies,
CommerceOne, Sterling Commerce, Inc. and BroadVision, Inc.
Some of our present competitors and potential future competitors may have
greater financial, technical, marketing or personnel resources than we do. In
addition, as a result of acquisitions, certain competitors are able to offer
both Internet access and other services, such as cable television or telephone
service, and such consolidation may continue. The competitive environment could
have a variety of adverse effects on us. For example, it could:
- negatively impact our ability to generate greater revenues and
profits from sources other than online service subscription
revenues, such as advertising and electronic commerce
- limit our opportunities to enter into or renew agreements with
content providers and distribution partners
- limit our ability to develop new products and services
- limit our ability to continue to grow or sustain our subscriber
base
- require price reductions in the subscription fees for online
services and require increased spending on marketing, network
capacity, content procurement and product and features development
- require price reductions in our enterprise software products
- result in a loss of our market share in the enterprise software
industry
- require an increase in our sales and marketing expenditures
Any of the foregoing events could have an adverse impact on revenues or
result in an increase in costs as a percentage of revenues, either of which
could have a material adverse effect on our business, financial condition and
operating results.
We Need to Manage Integration of Our Mergers and Acquisitions
In March 1999 we completed the merger with Netscape Communications
Corporation, a leading provider of software and services for Internet users,
including Netscape Netcenter, and the Netscape Navigator and Netscape
Communicator browsers. The Netscape merger involves risks, including successful
integration and management of the acquired technology, operations and personnel
of Netscape. The integration of America Online and Netscape will be a complex,
time consuming process and may result in a disruption of the combined company if
not completed in a timely and efficient manner. The combined company must
operate as a combined organization utilizing common information and
communications systems, operating procedures, financial controls, human
resources practices and other shared infrastructure. There may be substantial
difficulties, costs and delay involved in integrating America Online and
Netscape, including potential incompatibility of business cultures, perceived
adverse changes in client service standards or business focus, potential sales
channel conflicts, the loss of key employees and diversion of attention of
management from other ongoing business concerns. There can be no assurance we
will be able to successfully manage and operate Netscape. Any of these factors
could have a material adverse effect on our business, financial condition and
operating results.
Additionally, we have acquired and merged with several smaller
companies over the last several years. The integration of these 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.
Potential Year 2000 Problems May Have an Adverse Effect on Our Operations and
Ability to Offer Products and Services Without Interruption
America Online utilizes a significant number of computer software
programs and operating systems across its entire organization, including
applications used in operating its online services and Web sites, the
proprietary software of the AOL and CompuServe services, Netscape software
products, member and customer services, network access, content providers, joint
ventures and various administrative and billing functions. To the extent that
these applications contain source codes that are unable to appropriately
interpret the upcoming calendar year 2000, some level of modification, or even
possibly replacement may be necessary.
In 1997, America Online appointed a Year 2000 Task Force to perform an
audit to assess the scope of America Online's risks and bring its applications
into compliance. This Task Force has overseen testing and is continuing its
assessment of America Online's company-wide compliance. America Online's system
hardware components, client and host software, current versions of Netscape
software products and corporate business and information systems have been
tested and continue to be reviewed. To date, America Online has experienced few
problems related to Year 2000 testing, and the problems that have been
identified either have been addressed or are in the process of being addressed.
America Online has made Year 2000 compliant certain versions of the client
software for the AOL service and the CompuServe service that are available on
the Windows and Macintosh operating systems, as well as certain versions of
Netscape software products that are currently shipped. While the majority of AOL
and CompuServe members use proprietary client software that is compliant, a
third-party internet browser utilized in most versions of the client software
may not be Year 2000 compliant. A free patch or upgrade will be required for
members using some versions of the client software or browser to achieve Year
2000 compliance. America Online is encouraging members of its online services to
upgrade their browser and/or their software to versions that are Year 2000
compliant, if they have not already done so. America Online is making available
to members, and is communicating that availability, free patches or upgrades
that can be downloaded from the online services. America Online has not tested,
and does not expect to certify as Year 2000 compliant, certain older versions of
the AOL and CompuServe software. America Online has developed, and is
implementing over the remainder of the year, a communication program that
informs members how to obtain the free patch or upgrade to a Year 2000 compliant
version of the client software or browser. With respect to America Online's
Netscape software business, testing has been completed on currently shipped
products and the review and analysis of the testing results continues. America
Online is making available, at no additional cost to customers, any required
patch or upgrade to the versions of Netscape software products currently being
shipped to customers and communicate their availability. In addition, America
Online is encouraging customers to upgrade to versions of the software that are
expected to be Year 2000 compliant, if they have not already done so.
In addition, America Online is continuing to gather information from 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. America Online
intends to continue its efforts to seek reassurances regarding the Year 2000
compliance of vendors, joint venture partners and content partners. In the event
any third parties cannot timely provide America Online with content, products,
services or systems that meet the Year 2000 requirements, the content on America
Online's services, access to America Online's services, the ability to offer
products and services and the ability to process sales could be materially
adversely affected.
The costs incurred through September 30, 1999 to address Year 2000
compliance were approximately $16 million. America Online currently estimates it
will incur a total of approximately $20 million in costs to support its
compliance initiatives. America Online cannot predict the outcome of its Year
2000 program, whether third party systems and component software are, or will be
Year 2000 compliant, the costs required to address the Year 2000 issue, or
whether a failure to achieve substantial Year 2000 compliance will have a
material adverse effect on America Online's business, financial condition or
results of operations. Failure to achieve Year 2000 compliance could result in
some interruptions in the work of some employees, the inability of some members
and customers to access America Online's online services and Web sites or errors
and defects in the Netscape products. This, in turn, may result in the loss of
subscription services revenue, advertising and commerce revenue or enterprise
solution revenue, the inability to deliver minimum guaranteed levels of traffic,
diversion of development resources, or increased service and warranty costs.
Occurrence of any of these may also result in additional remedial costs and
damage to reputation.
America Online has developed a contingency plan to address possible Year
2000 risks to its systems. The plan identifies a hierarchy of critical
functions, acceptable delay times, recovery strategies to return functions to
operational status and defines the core team for managing this recovery process.
America Online will continue to modify this plan to address systems of its
recent acquisitions.
The Price of Our Common Stock is Volatile
The trading price of our common stock has been and may continue to be
subject to wide fluctuations over short and long periods of time. During the
twelve months ending October 31, 1999, the closing sale prices of our common
stock on the New York Stock Exchange ranged from $33.75 to $167.50. These prices
have been adjusted to reflect 2-for-1 stock splits effected on November 17, 1998
and February 22, 1999, but do not reflect the 2-for-1 stock split announced on
October 28, 1999 and to be effected on November 22, 1999. Our stock price may
fluctuate in response to a number of events and factors, such as:
- - quarterly variations in financial results and membership growth and usage
- - the announcement of technological innovations, mergers, acquisitions,
strategic partnerships or new product offerings by America Online or its
competitors
- - the entrance of new competitors into the online services market
- - changes in financial estimates and recommendations by securities analysts
and news reports relating to trends in the Internet-related markets
- - the operating and stock price performance of other companies that investors
may deem comparable
In addition, the market prices for Internet-related companies have
experienced volatility that often has not been directly related to the operating
performance of such companies. Market and industry fluctuations may adversely
affect the price of our common stock, regardless of our operating performance.
Where You Can Find More Information
We file annual, quarterly and special reports, proxy statements and
other information with the Securities and Exchange Commission. You may read and
copy any document we file with the Commission at the Commission's public
reference room at 450 Fifth Street, N.W., Washington, D.C. 20549. Please call
the Commission at 1-800-SEC-0330 for further information on the public reference
room. Our Commission filings are also available to the public at the
Commission's web site at http://www.sec.gov.
The Commission allows us to "incorporate by reference" the information
we file with them, which means that we can disclose important information to you
by referring you to those documents. The information incorporated by reference
is considered to be part of this prospectus, and information that we file later
with the Commission will automatically update and supersede this information. We
incorporate by reference the documents listed below and any future filings we
will make with the Commission under Sections 13(a), 13(c ), 14 or 15(d) of the
Securities Exchange Act prior to the termination of the offerings described in
this prospectus:
(a) Annual Report on Form 10-K for the fiscal year ended June 30, 1999 (SEC
file number 001-12143 and filing date of August 13, 1999);
(b) Proxy Statement on Schedule 14A for the 1999 Annual Meeting (SEC file
number 001-12143 and filing date of September 24, 1999);
(c) Quarterly Report on Form 10-Q, for the quarterly period ended September 30,
1999 (SEC file number 001-12143 and filing date of November 2, 1999);
(d) The descriptions of our capital stock, including preferred share purchase
rights, which are contained in registration statements on Form 8-A under
the Exchange Act, including any amendments or reports filed for the purpose
of updating such descriptions.
You may request a copy of these filings, at no cost, by writing or
telephoning as follows:
America Online, Inc.
Attention: Investor Relations
22000 AOL Way
Dulles, VA 20166
(703) 265-2741
[email protected]
This prospectus is part of a registration statement on Form S-3 we
filed with the SEC under the Securities Act. You should rely only on the
information or representations provided in this prospectus. We have authorized
no one to provide you with different information. We are not making an offer of
these securities in any state where the offer is not permitted. You should not
assume that the information in this prospectus is accurate as of any date other
than the date on the front of the document.
Forward-Looking Statements
This prospectus and the documents incorporated by reference in this
prospectus contain forward-looking statements. These forward-looking statements
are based on our current expectations, estimates and projections about our
industry, management's beliefs and certain assumptions made by us. Words such as
"anticipates," "expects," "intends," "plans," "believes," "seeks," "estimates"
and variations of these words or similar expressions are intended to identify
forward-looking statements. These statements are not guarantees of future
performance and are subject to certain risks, uncertainties and assumptions that
are difficult to predict. Therefore, our actual results could differ materially
from those expressed or forecasted in any forward-looking statements as a result
of a variety of factors, including those set forth in "Risk Factors" above and
elsewhere in, or incorporated by reference into, this prospectus. We undertake
no obligation to update publicly any forward-looking statements for any reason,
even if new information becomes available or other events occur in the future.
Use of Proceeds
Except as set forth in an accompanying prospectus supplement, we expect
to use the net proceeds from the sale of the securities for general corporate
purposes, which may include, among other things:
- - working capital
- - capital expenditures
- - acquisitions
- - the repayment of outstanding indebtedness
- - strategic investments
When we offer a particular series of offered securities, the prospectus
supplement relating to that offering will set forth the intended use of the net
proceeds received from that offering.
The Securities We May Offer
We may sell from time to time, in one or more offerings:
- - our debt securities
- - shares of our common stock
- - shares of our preferred stock
- - shares of our preferred stock represented by depositary shares
- - warrants exercisable for our debt securities, common stock, preferred
stock or depositary shares
- - stock purchase contracts to purchase common stock or preferred stock
The total dollar amount of all securities that we may issue will not
exceed $5,000,000,000. If we issue debt securities at a discount from their
original stated principal amount, then, for purposes of calculating the total
dollar amount of all securities issued under this prospectus, we will treat the
aggregate initial offering price of the debt securities as the total dollar
amount of those debt securities.
This prospectus may not be used to consummate a sale of securities
unless it is accompanied by a prospectus supplement.
The particular terms of the securities offered in any prospectus
supplement will be described in the applicable prospectus supplement. If
indicated in the prospectus supplement, the terms of any such securities may
differ from the terms summarized below. The prospectus supplement will also
contain information, where applicable, about material United States Federal
income tax considerations relating to the securities offered in that prospectus
supplement, and the securities exchange, if any, on which the securities will be
listed.
Description of Debt Securities
Introduction
The debt securities we may issue will be in one or more distinct
series. The debt securities may include debentures, notes or other kinds of debt
obligations. The debt securities may be denominated in United States dollars or
in one or more foreign currencies or currency units.
The following description of the terms of the debt securities sets
forth general terms that we expect will apply to any series of the debt
securities. Most of the financial terms and other specific terms of any series
of debt securities that we offer will be described in a prospectus supplement to
be attached to this prospectus. Since the terms of specific debt securities may
differ from the general information that we have provided below, you should rely
on the information in the prospectus supplement instead of the information in
this prospectus if the information in the prospectus supplement is different
than the information below.
We will issue the debt securities under a contract called the
"Indenture" between us and a Trustee, who will be determined later. Unless we
tell you otherwise in the applicable prospectus supplement, the Indenture and
the debt securities will be governed by New York law. The terms of the debt
securities include those stated in the debt securities and the Indenture, those
provided for in any supplemental indenture with respect to the particular series
of debt securities, and those made part of the Indenture by reference to the
Trust Indenture Act of 1939. (Section 1.11 of the Indenture.) The form of the
Indenture is contained in the registration statement that we have filed with the
Commission. Supplemental indentures will also be filed with the Commission. See
"Where You Can Find More Information" on pages 6 and 7 for information on how to
obtain a copy of the Indenture and any supplemental indenture from the
Commission.
Unless we say otherwise, in an applicable prospectus supplement, the
debt securities will be unsecured obligations of America Online. In an
applicable prospectus supplement, we will set forth the seniority of the debt
securities relative to any of our other existing or future indebtedness. The
Indenture does not limit the total amount of debt securities that we can issue
under it, nor does it limit us from incurring or issuing other unsecured or
secured debt. The Indenture moreover does not contain any provisions that
protect you in the event we issue a large amount of debt or are acquired by
another entity.
Because this description is a summary, it does not describe every
aspect of the debt securities or the Indenture. This summary is subject to and
qualified in its entirety by reference to all the provisions of the Indenture
and of the debt securities. For example, in this description we use capitalized
words to signify defined terms that have been given special meaning in the
Indenture. We describe the meaning for only some of the more important terms. We
also include references in parentheses to certain sections of the Indenture.
Whenever we refer to particular sections or defined terms of the Indenture in
this prospectus or in any prospectus supplement, such sections or defined terms
are incorporated by reference here or in the prospectus supplement.
This description also is subject to and qualified by reference to the
description of the particular terms of any particular series of debt securities
described in a prospectus supplement.
Specific Terms of Debt Securities
The prospectus supplement relating to a particular series of debt
securities will describe specific terms relating to each series of debt
securities then being offered. These terms will include some or all of the
following:
- - the title and type of the debt securities
- - any limit on the aggregate principal amount of the debt securities
- - the date or dates on which the principal, if any, of such debt
securities will be payable, or the method of determining or extending
such date(s), and the amount or amounts or the method of determination
of such principal payments
- - the date or dates from which any interest will accrue, or the method
of determining such date(s)
- - any rate or rates, which may be fixed or variable, that such debt
securities will bear interest, or the method of determining or
resetting such rate or rates, and the interest payment dates, if any,
for such debt securities
- - the place or places where any principal, premium or interest payments
may be made
- - the terms of warrants, options or other rights to purchase or sell
securities issued by America Online in connection with or for the
purchase of debt securities
- - any optional redemption provisions, including the period(s) within
which, the price(s) at which, the currency or currencies or currency
units in which, and the terms and conditions upon which, we may redeem
such debt securities, whether in whole or in part
- - any provisions obligating us to repurchase or otherwise redeem such
debt securities pursuant to sinking fund provisions, upon the
occurrence of a specified event or at the Holder's option
- - if other than $1,000 denominations for Registered Securities, or
$5,000 denominations for Bearer Securities, the denominations in which
such debt securities are issuable
- - if other than U.S. dollars, the currency or currencies or currency
units in which payment of the principal of and any premium or interest
on the debt securities will be payable, and the terms and conditions
of any elections that may be made available with respect thereto
- - the terms and conditions, if any, pursuant to which the debt
securities are convertible into or exchangeable for common stock or
other securities
- - any index, formula or other method to be used for determining the
amount of any payments of principal, premium of or interest on such
debt securities
- - if the maturity of such debt securities is accelerated, the portion of
the principal amount that will be payable if other than the
outstanding principal amount, and the method of determining such
amount
- - the person to whom any interest on such debt securities will be
payable (if other than the registered Holder of such debt securities
on the applicable record date)
- - the manner of determining the principal amount outstanding prior to
maturity if such amount is not otherwise determinable
- - any provisions granting special rights to the Holders of such debt
securities
- - any changes to or additional Events of Default or covenants
- - any provisions for the payment of additional amounts on debt
securities held by non-U.S. persons in respect of taxes or similar
charges withheld or deducted, and for the optional redemption of such
debt securities in lieu of paying such additional amounts
- - any provisions modifying the defeasance or covenant defeasance
provisions that apply to such debt securities
- - whether the debt securities will be issued in fully registered form
without coupons or in bearer form, with or without coupons, or any
combination of these
- - the terms, if any, of any guarantee of the payment of principal,
premium and interest with respect to the debt securities
- - whether such debt securities will be issued in whole or in part in the
form of one or more temporary or permanent global securities, and, if
so, the identity of the depository for such global security or
securities
- - if other than the Trustee, the identity of the Registrar and Paying
Agent
- - the subordination, if any, of the debt securities
- - the terms of any additional security for the debt securities
- - if other than the laws of New York, the law governing such debt
securities and the extent to which such other law governs
- - any other specific terms of the debt securities
(Section 3.1 of the Indenture.)
Unless we tell you otherwise in the applicable prospectus supplement,
debt securities will not be listed on any securities exchange.
Unless we tell you otherwise in the applicable prospectus supplement,
debt securities will be issued in fully registered form without coupons. If debt
securities of any series are issued in bearer form, the applicable prospectus
supplement will describe special restrictions and considerations, including
special offering restrictions and special federal income tax considerations,
applicable to such debt securities and to payments on and transfer and exchange
of such debt securities. Bearer debt securities generally will be transferable
by delivery. (Section 3.5 of the Indenture.) The Indenture refers to each Person
who is the bearer of a bearer Debt Security as the "Holder" of that Debt
Security. (Section 1.1 of the Indenture.)
If we issue debt securities at an "original issue discount", the
applicable prospectus supplement will describe special federal income tax and
other considerations applicable to such debt securities.
If the purchase price of any debt securities is payable in foreign
currencies or currency units, or if any debt securities are denominated in
foreign currencies or currency units, or if any debt securities are payable in
foreign currencies or currency units, the applicable prospectus supplement will
describe the special restrictions, elections, federal income tax considerations
and certain other important information with respect to such debt securities and
such foreign currencies or currency units.
The principal, premium, interest or other payments on debt securities
may be determined by reference to an index, formula or other method. Such an
index, formula or other method may be based, without limitation, on the price of
one or more commodities, derivatives or securities; one or more securities,
derivatives or commodities exchange indices or other indices; a foreign currency
or currencies; or any other variable or variables. If we issue debt securities
the payments on which are based on such an index, formula or other method, the
applicable prospectus supplement will describe that index, formula or other
method and special federal income tax and other considerations applicable to
such debt securities.
No debt security or coupon will be entitled to any benefits under the
Indenture or be valid or obligatory for any purpose until the debt security or
coupon is authenticated by the manual signature of one of the Trustee's
authorized signatories or an authenticating agent. No coupon will be valid until
the debt security to which it pertains has been authenticated. We may deliver
debt securities to the Trustee for authentication, together with a company order
for the authentication and delivery of the securities. The Trustee will then, in
accordance with the company order, authenticate and deliver the securities,
subject to special provisions for authentication of debt securities offered in a
periodic offering. If the form or terms of the debt securities of a series have
been established by board resolutions as permitted by the Indenture, when
authenticating the securities the Trustee will be entitled to receive, and
(subject to the Trust Indenture Act) shall be fully protected in relying upon an
opinion of counsel as to certain matters. The Trustee has the right to decline
to authenticate the securities if it receives an opinion of counsel reasonably
acceptable to us that states that the issue of the debt securities will
adversely affect the Trustee's own rights, duties, or immunities under the
Indenture or otherwise in a manner which is not reasonably acceptable to the
Trustee. If all of the debt securities of any series are not to be issued at one
time, the documents required to be delivered in connection with the
authentication of each debt security of the series, only need be delivered at or
prior to the authentication of the first debt security of the series.
Registered Securities
As noted above, unless we tell you in a prospectus supplement that the
specific debt securities described in that prospectus supplement are bearer debt
securities, the debt securities will be "registered securities". We and the
Trustee may treat the Person in whose name a registered Debt Security is
registered under the Indenture as the owner of that Debt Security for all
purposes, including for the purpose of receiving payments on that Debt Security.
(Section 3.8 of the Indenture.) The Indenture refers to each Person in whose
name a registered Debt Security is registered as the "Holder" of that Debt
Security. (Section 1.1 of the Indenture.)
Except as described below under "Global Debt Securities" or in the
applicable prospectus supplement, a Holder can exchange or transfer debt
securities in registered form at the office of the Trustee. Unless we tell you
otherwise in a prospectus supplement, the Trustee will act as our agent for
registering such debt securities in the names of Holders and transferring such
debt securities. We may appoint another entity at any time to perform this role
or we may perform it ourselves. The entity performing the role of maintaining
the list of registered Holders and performing transfers is called the
"Registrar". (Sections 3.5 and 9.2 of the Indenture.)
Unless we tell you otherwise in the applicable prospectus supplement, a
Holder seeking to transfer or exchange a registered Debt Security will not be
required to pay a service charge to us, the Registrar or the Trustee, but such
Holder may be required to pay any tax or other governmental charge associated
with the transfer or exchange. (Section 3.5 of the Indenture.)
If you are not the Holder of any debt securities in registered form,
your rights relating to those debt securities will be governed in part by
applicable laws and by the account rules and policies of the broker, bank or
financial intermediary through which you invest in such debt securities and any
other financial intermediary that holds interests directly or indirectly in such
debt securities (including any Depository referred to below under "Global Debt
Securities"). Neither we nor the Trustee has any responsibility for the account
rules, policies, actions or records of any broker, bank or other financial
intermediary through which you hold, directly or indirectly, your beneficial
interest in a Debt Security in registered form.
If you are not the holder of any debt securities in registered form,
you should consult the broker, bank or other financial intermediary through
which you invest in the debt securities for information on your rights in
respect of the debt securities. In particular, you should ask how you will
receive payments, and whether you will be able to provide instructions as to how
such broker, bank or other financial intermediary should exercise the rights of
a "Holder" under the Indenture.
Global Debt Securities
Registered Global Securities. We may specify in the applicable
prospectus supplement that the debt securities of a series will be issued in the
form of fully registered global securities, which we will refer to in this
prospectus as "Registered Global Securities". Registered Global Securities will
be registered in the name of a financial institution we select. This financial
institution, which will be the sole direct Holder of the Registered Global
Securities, is called the "Depository". We will identify any Depository in the
applicable prospectus supplement. Any person wishing to own a Debt Security
represented by a Registered Global Security must do so indirectly by virtue of
an account with a broker, bank or other financial intermediary that in turn has
an account with the Depository, or with another financial intermediary that
itself has an account with the Depository. The debt securities represented by
the Registered Global Securities may not be transferred to the name of any other
Holder unless the special circumstances described below occur.
Special Investor Considerations for Registered Global Securities. Our
obligations with respect to Registered Global Securities, as well as the
obligations of the Trustee and those of any third parties employed by us or the
Trustee, run only to Persons who are registered Holders of those debt
securities. For example, once a payment on a Registered Global Security is made
to the Depository, as sole Holder of that Registered Global Security, neither we
nor the Trustee has any further responsibility for that payment even if it is
not passed along to the correct owners of the beneficial interests in that
Registered Global Security.
As long as the debt securities are represented by Registered Global
Securities:
- - You cannot have debt securities registered in your name under the
Indenture.
- - You cannot receive physical certificates from us for your interest in
the debt securities.
- - You must look to your own bank or broker or other financial
intermediary for payments on the debt securities.
- - You will have no rights as a "Holder" under the Indenture. This means
that, among other things, you will have no right to give any
direction, approval or instruction directly to the Trustee under the
Indenture.
- - You may not be able to sell interests in the debt securities to some
insurance companies and other institutions that are required by law to
own their debt securities in the form of physical certificates.
- - The Depository's policies will govern payments, transfers, exchanges
and other matters relating to the Registered Global Security. We and
the Trustee have no responsibility for any aspect of the Depository's
actions or for its records of ownership interests in the Registered
Global Security. We and the Trustee also do not supervise the
Depository in any way. In addition, we and the Trustee have no
responsibility for the actions or records of any broker, bank, or
other financial intermediary through which you hold, directly or
indirectly, your beneficial interest in the Registered Global
Security.
- - Payment for purchases and sales in the market of corporate debentures
and notes is generally made in next-day funds. In contrast, the
Depository will usually require that interests in a Registered Global
Security be purchased or sold within its system using same-day funds.
This difference could have some effect on how Registered Global
Security interests trade, but we do not know what that effect will be.
- - You should consult the broker, bank or other financial intermediary
through which you invest in debt securities represented by Registered
Global Securities for information on your rights in respect of the
debt securities. In particular, you should ask how you will receive
payments and whether you will be able to provide instructions as to
how the Depository should exercise the rights of a "Holder" under the
Indenture.
Special Situations When Registered Global Security Will Be Terminated.
In the special situations described in the next paragraph, a Registered Global
Security will terminate and interests in it will be exchanged for physical
certificates representing debt securities. After that exchange, we believe that
you likely will be able to choose whether to hold debt securities directly in
your own name or indirectly through an account at a bank or broker or other
financial intermediary. However, when a Registered Global Security terminates,
the Depository (and not us or the Trustee) will be responsible for determining
the names of the institutions that will be the initial direct Holders of the
debt securities. You must consult your own bank or broker or other financial
intermediary at such time to find out how to have your interests in debt
securities transferred to your own name, if you wish to become a direct Holder.
The special situations for termination of a Registered Global Security
are:
- - When the Depository notifies us that it is unwilling, unable or no
longer qualified to continue as Depository (unless a replacement
Depository is named)
- - We determine in our sole discretion not to have any of the debt
securities of a series represented by a Registered Global Security
and notify the Trustee of our decision
(Section 3.5 of the Indenture.) In addition, a prospectus supplement
may list situations for terminating a Registered Global Security that would
apply only to the particular series of debt securities covered by that
prospectus supplement.
Bearer Global Securities. The debt securities of a series may also be
issued wholly or partially in the form of one or more bearer global securities
(a "Bearer Global Security") that will be deposited with a Depository, or with a
nominee for such Depository, identified in the applicable prospectus supplement.
Any such Bearer Global Securities may be issued in temporary or permanent form.
(Sections 3.4 and 3.5 of the Indenture.) The applicable prospectus supplement
will describe the specific terms and procedures, including the depository
arrangement, with respect to any portion of a series of debt securities to be
represented by Bearer Global Securities.
Payments
Unless we tell you otherwise in the applicable prospectus supplement,
we will generally deposit interest, principal and any other money due on the
debt securities, in the designated currency, with the Trustee, and the Trustee
will act as our agent for making payments on the debt securities. We may change
this appointment to another entity or perform this role ourselves. The entity
performing the role of making payments is called the "Paying Agent". We may, at
our option, make any interest payments on debt securities in registered form by
having the Trustee mail checks or make wire transfers to the registered Holders
listed in the Registrar's records. (Sections 3.7(a) and 9.2 of the Indenture.)
We may also make any payments required to be deposited with the Trustee by wire
transfer to an account designated by the Trustee on or before the date and time
such payments are due to be paid to the Holders. We may also make any payments
required to be deposited with the Trustee by wire transfer to an account
designated by the Trustee on or before the date and time such payments are due
to be paid to the Holders. If you are not the Holder of any debt securities in
registered form, you must make your own arrangements with the bank, broker or
other financial intermediary through which you invest in the debt securities to
receive payments.
Unless we tell you otherwise in the applicable prospectus supplement,
interest will be payable to each Holder listed in the Registrar's records at the
close of business on a particular day in advance of each due date for interest,
even if such Holder no longer owns the Debt Security on the interest due date.
That particular day is called the "Record Date" and will be stated in the
prospectus supplement. (Section 3.7(a) of the Indenture.) Persons buying and
selling debt securities between a Record Date and an interest payment date must
work out between them how to compensate for the fact that we will pay all the
interest for an interest period to the registered Holder on the Record Date.
Unless we tell you otherwise in the applicable prospectus supplement,
interest payable on any Debt Security in registered form that is not punctually
paid or duly provided for on any interest payment date will cease to be payable
to the Holder in whose name such Debt Security is registered on the relevant
Record Date. Such defaulted interest will instead be payable to the person in
whose name such Debt Security is registered on the special record date or other
specified date determined in accordance with the Indenture. (Section 3.7(b) of
the Indenture.)
We will make payments on debt securities in bearer form in the currency
and in the manner designated in the applicable prospectus supplement, subject to
any relevant laws and regulations, at such paying agencies outside the United
States as we may appoint from time to time. The Paying Agents outside the United
States initially appointed by us for a series of debt securities will be named
in the applicable prospectus supplement.
We may at any time designate additional Paying Agents or rescind the
designation of any Paying Agents, except that, if debt securities of a series
are issuable as Registered Securities, we will be required to maintain at least
one Paying Agent in each Place of Payment for such series and, if debt
securities of a series are issuable as Bearer Securities, we will be required to
maintain a Paying Agent in a Place of Payment outside the United States where
debt securities of such series and any related coupons may be presented and
surrendered for payment. (Section 9.2 of the Indenture.)
Notices
We and the Trustee will send notices regarding debt securities in
registered form only to registered Holders, using their addresses as listed in
the Registrar's records. If you are not the Holder of debt securities in
registered form, you should consult the broker, bank or other financial
intermediary through which you invest in such debt securities for information on
how you will receive such notices. Holders of Bearer debt securities will be
notified by publication as described in the prospectus supplement relating to
the debt securities. (Section 1.6 of the Indenture.)
Consolidation, Merger or Sale
The Indenture generally permits us to consolidate or merge with or into
another company or entity and to sell or otherwise dispose of all or
substantially all of our assets. However, we may not take any of these actions
unless all the following conditions are met:
- - where we merge out of existence or sell or otherwise dispose of our
assets, the surviving or acquiring firm must be a corporation, limited
liability company, partnership, trust or other Person organized and
existing under the laws of the United States of America or a State
thereof, and it must agree to be legally responsible for all of our
obligations under the debt securities and the Indenture
- - the transaction must not cause a default on the debt securities and we
must not already be in default, where a "default" is an event that
with notice or passage of time, or both, would become an Event of
Default as provided in the Indenture
- - we must deliver certificates and documents to the Trustee
The surviving or acquiring Person after any such transaction will be
substituted for America Online under the Indenture and the debt securities, and
all obligations of America Online will terminate. (Section 7.1 of the
Indenture.)
Events of Default, Notice and Rights on Default
Unless we tell you otherwise in a prospectus supplement, the term
"Event of Default" means, with respect to debt securities of any series, any of
the following:
- - We fail to pay interest on a Debt Security of that series within 30
days of its due date
- - We fail to pay principal or any premium on a Debt Security of that
series, or we fail to deposit any mandatory sinking fund payment
- - We remain in breach of a covenant in the Indenture for 90 days after
we receive a notice of default stating we are in breach. The notice
must be sent by either the Trustee or the Holders of at least 25% of
the principal amount of the debt securities of the affected series
- - We file for bankruptcy or other events of bankruptcy, insolvency or
reorganization occur
- - With respect to any particular series of debt securities, any other
"Event of Default" described in the applicable prospectus supplement
occurs
(Section 5.1 of the Indenture.) An Event of Default for a particular
series of debt securities will not necessarily constitute an Event of Default
for any other series of debt securities issued under the Indenture.
The Indenture requires the Trustee to notify Holders of the applicable
series of debt securities of any uncured Default within 90 days after such
Default occurs. The Trustee may withhold notice, however, of any Default, except
for a default in the payment of principal or interest, if it considers such
withholding of notice to be in the Holders' best interests. (Section 6.5 of the
Indenture.)
If an Event of Default has occurred and has not been cured, the Trustee
or the Holders of at least 25% in principal amount of the debt securities of the
affected series may declare the entire principal amount (or, if the debt
securities of that series are original issue discount debt securities or debt
securities payable in accordance with an index, formula or other method, such
portion of the principal amount or other amount specified in the prospectus
supplement) of all the debt securities of that series to be due and immediately
payable. (Section 5.2 of the Indenture.) The Holders of a majority in principal
amount of the debt securities of the affected series may waive, on behalf of the
Holders of all debt securities of such series, any past Event of Default with
respect to that series and its consequences, except an Event of Default in the
payment of the principal of or any premium or interest on any Debt Security and
specified other defaults. (Section 5.7 of the Indenture.)
The Holders of a majority in principal amount of the debt securities of
the affected series (with the debt securities of each such series voting as a
class) may direct the time, method and place of conducting any proceeding for
any remedy available to the Trustee for such series, or exercising any trust or
power conferred on such Trustee with respect to the debt securities of such
series, as long as such direction does not conflict with any law or the
Indenture and subject to other limitations. (Section 5.8 of the Indenture.)
Before a Holder can bypass the Trustee and bring its own lawsuit or
other formal legal action or take other steps to enforce its rights or protect
its interests relating to the debt securities, the following must occur:
- - such Holder must give the Trustee written notice that an Event of
Default has occurred and remains uncured
- - the Holders of at least 25% in principal amount of all debt securities
of the relevant series must request the Trustee in writing to take
action because of the Event of Default, and must offer an indemnity
satisfactory to the Trustee against the cost and other liabilities of
taking that action
- - the Trustee must not have taken action for 60 days after receipt of
the above notice, request and offer of indemnity
- - the Holders of a majority in principal amount of the debt securities
of that series must not have given the Trustee a direction
inconsistent with the above notice
(Section 5.9 of the Indenture.)
However, a Holder is entitled to bring a lawsuit at any time for the
payment of principal, premium, if any, and interest due on its debt securities
after the due date, subject to the provisions of the Indenture regarding payment
of interest and place and manner of payment on debt securities. (Section 5.10 of
the Indenture.)
If you are not the Holder of debt securities in registered form, you
should consult the broker, bank or financial intermediary through which you
invest in such debt securities for information on your rights in respect of
those debt securities following an Event of Default.
We will file annually with the Trustee a certificate as to America
Online's compliance with all conditions and covenants of the Indenture. (Section
9.7 of the Indenture.)
Modification of the Indenture
There are three categories of changes we can make to the Indenture and
the debt securities.
Changes Requiring Approval of Each Affected Holder. First, there are
changes that cannot be made to debt securities of any series without the
approval of each Holder of debt securities of the series affected by such
change. Following is a summary of those changes:
- - to change the time for payment of principal of or interest on a debt
security
- - to reduce the amounts of principal of or interest on a debt security
- - to reduce the amount of any premium payable upon the redemption of a
debt security
- - to reduce the amount payable upon acceleration of the maturity of an
original issue discount debt security or a debt security payable in
accordance with an index, formula or other method
- - to change the place or currency of payment on a debt security on or
after the stated maturity
- - to impair the right to sue for payment on a debt security
- - to reduce the percentage of Holders of debt securities of such series
whose consent is needed to modify or amend the Indenture or to waive
compliance with provisions of the Indenture or to waive defaults
- - to change the obligation of America Online to maintain an office or
agency in the places and for the purposes specified in the Indenture
- - to modify the provisions relating to waiver of defaults or
modifications of the Indenture and debt securities with certain
exceptions related to successor or multiple trustees
- - to release any guarantors, if any, from their guarantees of the debt
securities or change any such guarantee in a manner adverse to Holders
- - to modify the ranking or priority of the debt securities
(Section 8.2 of the Indenture.)
Changes Requiring a Majority Vote. The second category of change to the
Indenture and the debt securities is the kind that requires a vote in favor by
Holders of debt securities owning a majority of the principal amount of each
particular series adversely affected.
Changes Not Requiring Approval. The third category of change does
not require any vote by Holders of debt securities. Following is a summary of
those changes:
- - to reflect that another corporation or entity has succeeded America
Online and assumed its covenants
- - to add to America Online's covenants, to surrender any right or power
of America Online, or to comply with any Commission or other
requirements in connection with the qualification of the Indenture
- - to add additional Events of Default with respect to any series
- - to add or change any provisions to the extent necessary to facilitate
the issuance of debt securities in bearer form or in global form
- - to change or eliminate any provision affecting debt securities not yet
issued
- - to add guarantees or secure the debt securities
- - to add provisions to permit or facilitate defeasance and covenant
defeasance and discharge so long as there is no adverse effect on
Holders of the applicable series of debt securities
- - to establish the form or terms of debt securities
- - to provide for the electronic delivery of supplemental indentures or
debt securities of any series
- - to evidence and provide for successor or additional Trustees
- - if allowed without penalty under applicable laws and regulations, to
permit payment in respect of debt securities in bearer form in the
United States
- - to correct or supplement any inconsistent provisions or to cure any
ambiguity or correct any mistake
- - to make any other provisions with respect to matters or questions
arising under the Indenture, as long as such action does not adversely
affect Holders of the debt securities in any material respect
(Section 8.1 of the Indenture.)
If you are not the Holder of debt securities in registered form, you
should consult with the broker, bank or other financial intermediary through
which you invest in such debt securities for information on how approval will be
granted or denied if we seek to change the Indenture or request a waiver of any
of its terms.
Defeasance
Unless we tell you otherwise in the applicable prospectus supplement,
the following discussion of full defeasance and covenant defeasance will apply
to each series of debt securities. (Article IV of the Indenture.)
Full Defeasance. Under certain circumstances, we can legally release
ourselves from any payment or other obligations on the debt securities of any
series (called "full defeasance") if we put in place the following arrangements
for the Holders of those debt securities to be repaid:
- - we must deposit in trust for the Holders' benefit a combination of
money and Government Obligations that will generate enough money to
pay when due the principal of and any premium or interest on the debt
securities of such series and to make any mandatory sinking fund
payments on such debt securities
- - we must deliver to the Trustee a legal opinion of our counsel
confirming that there has been a change in federal tax law as in
effect on the date of this prospectus or an IRS ruling that lets us
make the above deposit without causing Holders to be taxed on the debt
securities of such series any differently than if we did not make the
deposit and simply repaid such debt securities ourselves
(Sections 4.4 and 4.6 of the Indenture.)
If we were to accomplish full defeasance, as described above, Holders
would have to rely solely on the trust deposit for repayment on the debt
securities of the particular series defeased. Holders could not look to us for
repayment if a shortfall occurred.
We may exercise its full defeasance option even if it has previously
exercised our covenant defeasance option. If we exercise our full defeasance
option, payment of the particular series of debt securities defeased may not be
accelerated because of an Event of Default. (Section 4.4 of the Indenture.)
Covenant Defeasance. Under certain circumstances, we can make the same
type of deposit described above and be released from some of the restrictive
covenants in the debt securities of any series. This is called "covenant
defeasance". In that event, Holders of those debt securities would lose the
protection of those restrictive covenants but would gain the protection of
having money and Government Obligations set aside in trust to repay such debt
securities. To achieve covenant defeasance, we must do the following:
- - we must deposit in trust for the Holders' benefit a combination of
money and Government Obligations that will generate enough money to
pay when due the principal of and any premium or interest on the debt
securities of such series and to make any mandatory sinking fund
payments on such debt securities
- - we must deliver to the Trustee a legal opinion of our counsel
confirming that, under federal tax law as in effect at the time of
such deposit, we may make such deposit without causing Holders to be
taxed on the debt securities of such series any differently than if we
did not make the deposit and simply repaid such debt securities
ourselves
(Sections 4.5 and 4.6 of the Indenture.)
If we exercise our covenant defeasance option with respect to the debt
securities of a series, certain restrictive covenants of the Indenture and
certain Events of Default would no longer apply to such series. (Section 4.5 of
the Indenture.) If one of the remaining Events of Default occurred, however, and
payment of the debt securities of such series were accelerated, there could be a
shortfall between the amount in the trust deposit at that time and the amount
then due on such series. Holders could still look to us for payment of such debt
securities if there were such a shortfall. Depending on the event causing the
default (such as our bankruptcy), however, Holders may not be able to obtain
payment of the shortfall from us.
The Trustee
The Trustee under the Indenture will be set forth in any applicable
prospectus supplement. We will indicate in such prospectus any material
relationships we may have with the Trustee.
Description of Common Stock
General
Our restated certificate of incorporation provides that we have
authority to issue 6,000,000,000 shares of common stock, par value $.01 per
share. As of October 15, 1999, there were 1,117,743,377 shares of common stock
outstanding. Common stockholders are entitled to one vote for each share held on
all matters submitted to a vote of stockholders. They 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. Common stockholders are entitled to receive ratably such
dividends, if any, as may be declared by the board of directors out of funds
that are legally available to pay dividends. However, this dividend right is
subject to any preferential dividend rights of preferred stock that may be
issued at such future time or times. If America Online is dissolved, the holders
of common stock will be entitled to share ratably the net assets of America
Online available after we pay (i) all of our debts and other liabilities and
(ii) any amounts we may owe to the persons who hold our preferred stock, if any
is issued. Common stockholders do not have preemptive, subscription, redemption
or conversion rights. The outstanding shares of common stock are fully paid and
nonassessable. The rights, preferences and privileges of common stockholders are
subject to the rights of the shareholders of any series of preferred stock which
we may designate and issue in the future. We will describe the specific terms of
any common stock we may offer in a prospectus supplement.
Charter Provisions
Our restated certificate of incorporation and restated bylaws provide
for a classified board of directors. The board of directors currently consists
of eleven 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.
Our restated certificate of incorporation includes provisions
eliminating the personal liability of our directors for monetary damages
resulting from breaches of their fiduciary duty to the extent permitted by
Delaware law. Our restated certificate of incorporation and restated bylaws
include provisions indemnifying our 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.
Our restated bylaws require that nominations for the board of directors
made by the stockholders 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 providing that certain "business combinations" with any
"interested stockholder" may not be consummated without an 80% stockholder vote.
The fair price provision defines an "interested stockholder" as 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 America Online. The
business combinations to which the fair price provision applies include: o a
merger or consolidation o the sale or other disposition of 10% or more of
America Online's assets o the issuance of stock having a value in excess of 10%
of the fair market value of our common stock o any reclassification or
recapitalization which increases the proportionate share holdings of an
interested stockholder o 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 America Online. The affirmative vote of the
holders of 80% of the voting power of America Online is required to amend or
repeal the fair price provision or adopt any provision inconsistent with it.
Our restated certificate of incorporation and restated bylaws provide
that any action required or permitted to be taken by the stockholders 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. 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.
Under Delaware law, 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 America
Online is required to amend or repeal certain provisions of our 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 our restated bylaws.
The provisions of the restated certificate of incorporation and
restated bylaws discussed above could make it more difficult or discourage a
proxy contest or the acquisition of control by substantial block of our 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 America Online, even though
such an attempt might be beneficial to America Online and our stockholders.
Stockholder Rights Plan
We adopted a stockholder rights plan on May 12, 1998. The plan was
implemented by declaring a dividend, distributable to stockholders of record on
June 1, 1998, of one preferred share purchase right for each outstanding share
of common stock. The plan provides that each share of common stock outstanding
will have attached to it the right to purchase one one-thousandth of a share of
preferred stock. The purchase price per one one-thousandth of a preferred share
under the plan is $900, 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 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 stockholder of America Online. The rights will
expire on May 12, 2008 unless redeemed by America Online prior to that date.
The rights agreement contains rights that have anti-takeover effects.
The rights will cause substantial dilution to a person or group that attempts to
acquire America Online on terms not approved by the 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 America
Online 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.
Change of Control
We are subject to Section 203 of the Delaware General Corporation Law
which under certain circumstances, may make it more difficult for a person who
would be an "Interested Stockholder," as defined in Section 203, to effect
various business combinations with us for a three-year period. Under Delaware
law, a corporation's certificate of incorporation or bylaws may exclude a
corporation from the restrictions imposed by Section 203. Our certificate of
incorporation and bylaws do not exclude us from the restrictions imposed under
Section 203.
Description of Preferred Stock
General
Our board of directors is authorized by our restated certificate of
incorporation to provide, without further stockholder action, for the issuance
of up to 5,000,000 shares of our preferred stock, $.01 par value per share, in
one or more series. Our board of directors has the power to fix various terms
with respect to each series, including, among other things, voting powers,
dividend rights, liquidation preferences, redemption rights and conversion
privileges. As a result of its broad discretion with respect to the creation and
issuance of preferred stock without stockholder approval, the board of directors
could adversely affect the voting power of the holders of common stock. In
addition, although our board has no intention at the present time of doing so,
it could issue a series of Preferred Stock that could impede the completion of a
merger, tender offer or other takeover attempt. Our board will issue such a
series only if it determines that such an issuance is in the best interests of
America Online and its stockholders. In addition, the terms of a series of
preferred stock might discourage a potential acquirer from attempting to acquire
America Online.
As of October 15, 1999, there were no shares of preferred stock
outstanding. In May 1998, the board of directors designated 500,000 shares of
America Online's Preferred Stock as Series A-1 Junior Participating Preferred
Stock in connection with the establishment of a new stockholder rights plan.
You should refer to the prospectus supplement relating to the series of
preferred stock being offered for the specific terms of that series, including:
- - the designation, number of shares and liquidation preference per share
- - initial public offering price
- - the dividend rate or rates
- - the index, if any, upon which the amount of dividends, if any, is
determined
- - the dates on which dividends, if any, will accrue and be payable and
the designated record dates for determining the holders entitled to
such dividends
- - whether dividends will be cumulative or non-cumulative
- - any auctioning and remarketing procedures
- - any redemption or sinking fund provisions
- - any conversion or exchange provisions
- - provisions for issuance of global securities
- - the securities exchange, if any, on which the preferred stock will be
listed
- - the currency, which may be composite currency, in which payment of
dividends, if any, will be payable if other than U.S. dollars
- - any voting rights
- - any applicable discussion of federal income tax considerations
- - the relative seniority with regard to any other class or series of
preferred stock
- - any limitations on the issuance of any series of preferred stock
ranking senior to or on a parity with the series of preferred stock
being offered
- - any additional terms, preferences, rights, limitations or restrictions
Upon receipt of the purchase price, the shares of preferred stock that
we issue will be fully paid and nonassessable. Unless otherwise specified in the
applicable prospectus supplement, the preferred stock will have no preemptive
rights to subscribe for any additional securities that we may issue.
The transfer agent, registrar, dividend disbursing agent and redemption
agent for each series of preferred stock will be specified in the applicable
prospectus supplement.
Dividends
The holders of each series of our preferred stock will be entitled to
receive, when, as and if declared by our board of directors, out of funds
legally available for that purpose, cumulative or non-cumulative cash or other
dividends. We will describe the rate or rates and payment dates applicable to
each series of preferred stock in the applicable prospectus supplement. Such
rates may be fixed or variable or both. If variable, we will describe the
formula used for determining the dividend rate for each dividend period in the
applicable prospectus supplement. We will pay dividends to the holders of record
as they appear on our stock books on the record dates set by our board of
directors and specified in the applicable prospectus supplement.
Unless otherwise indicated in the applicable prospectus supplement for
a series of preferred stock, no dividends may be declared or paid on other
series of preferred stock which have an equal or junior ranking, unless
dividends are also declared and paid on the offered series. If less than full
dividends can be declared and paid, the offered series of preferred stock will
be paid dividends ratably with other series of preferred stock that rank on a
parity as to receipt of dividends.
Redemption
The shares of any series of our preferred stock will be subject to
mandatory redemption or redemption at our option, under a sinking fund or
otherwise, in each case upon the terms, on the date or dates and at the
redemption price or prices set forth in the applicable prospectus supplement.
The applicable prospectus supplement will describe any restrictions on our
ability to repurchase or redeem shares if we have not paid any dividends on
shares of any series of preferred stock or any sinking fund installments when
due.
Liquidation Preference
Upon our liquidation, dissolution or winding up, the stockholders of
each series of our preferred stock will be entitled to receive, out of our
assets available for distribution to stockholders and before any distribution is
made to or set apart for the holders of common stock or shares of any junior
series, an amount described in the applicable prospectus supplement. If our
assets are insufficient to pay in full the amounts payable with respect to
shares of a series of preferred stock and any other series ranking on a parity
as to the distribution, the holders of shares of that series of preferred stock
and the other parity shares will share ratably in the distribution of our assets
in proportion to the full respective preferential amounts to which they are
entitled. After payment to the stockholders of that series of preferred stock of
the full preferential amounts to which they are entitled, those stockholders
will not be entitled to any further participation in any distribution of assets
by us, unless otherwise provided in the applicable prospectus supplement. Except
as otherwise provided in the applicable prospectus supplement, a consolidation
or merger between us and one or more entities is not, for this purpose, a
liquidation, dissolution or winding up.
Conversion
The terms and conditions, if any, on which shares of any series of
preferred stock are convertible into or exchangeable for debt securities, common
stock or cash will be set forth in the applicable prospectus supplement. These
terms may include provisions for conversion or exchange, either mandatorily, at
the option of the holder, or at our option. The terms may include the conversion
price or manner of calculating the conversion price, the conversion date(s) or
period(s), the events requiring an adjustment of the conversion price, and
provisions affecting conversion in the event of the redemption of the series of
preferred stock. Conversion terms may provide that the number of shares of
common stock or amount of cash to be received by the holders of preferred stock
would be calculated according to the market price of common stock as of a time
stated in the applicable prospectus supplement. Such exchange or conversion
rates may cap or limit the potential appreciation in value of an investment in a
series of preferred stock by reducing the amount of cash or common stock to be
received upon conversion of each share of preferred stock in the event that the
market price of the common stock exceeds a specified price. The exchange or
conversion rate may also place a floor on or limit the depreciation in value of
an investment in a series of preferred stock by increasing the amount of cash or
stock to be received upon conversion of each share of preferred stock in the
event that the market price of the common stock falls below a specified price.
Description of Depositary Shares
General
America Online may issue depositary receipts for depositary shares,
each of which will represent a fractional interest of a share of a particular
series of preferred stock, as specified in the applicable prospectus supplement.
Shares of preferred stock of each series represented by depositary shares will
be deposited under a separate Deposit Agreement among America Online and the
"depositary" named in the Deposit Agreement. Subject to the terms of the Deposit
Agreement, each owner of a depositary receipt will be entitled, in proportion to
the fractional interest of a share of a particular series of preferred stock
represented by the depositary shares evidenced by that depositary receipt, to
all the rights and preferences of the preferred stock represented by those
depositary shares, including dividend, voting, conversion, redemption and
liquidation rights.
The depositary shares will be evidenced by depositary receipts issued
pursuant to the applicable Deposit Agreement. Immediately following the issuance
and delivery of the preferred stock by America Online to the depositary, America
Online will cause the depositary to issue, on behalf of America Online, the
depositary receipts. Copies of the applicable form of Deposit Agreement and
depositary receipt may be obtained from America Online upon request, and the
statements made in this summary relating to the Deposit Agreement and the
depositary receipts to be issued under the Deposit Agreement are summaries of
provisions of the Deposit Agreement and the related depositary receipts. This
summary 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 applicable Deposit
Agreement and related depositary receipts.
Dividends and Other Distributions
The depositary will distribute all cash dividends or other cash
distributions received in respect of the preferred stock to the record holders
of depositary receipts evidencing the related depositary shares in proportion to
the number of such depositary receipts owned by such holders, subject to the
obligations of holders to file proofs, certificates and other information and to
pay some charges and expenses to the depositary.
In the event of a distribution other than in cash, the depositary will
distribute property received by it to the record holders of depositary receipts
entitled to that property, subject to the obligations of holders to file proofs,
certificates and other information and to pay some charges and expenses to the
depositary, unless the depositary determines that it is not feasible to make the
distribution, in which case the depositary may, with the approval of America
Online, sell the property and distribute the net proceeds from the sale to the
holders.
No distribution will be made in respect of any depositary share to the
extent that it represents any preferred stock converted into other securities.
Withdrawal of Stock
Upon surrender of the depositary receipts at the corporate trust office
of the depositary, unless the related depositary shares have previously been
called for redemption or converted into other securities, the holders of those
depositary receipts will be entitled to delivery at the corporate trust office,
to or upon the holder's order, of the number of whole or fractional shares of
the preferred stock and any money or other property represented by the
depositary shares evidenced by the depositary receipts. Holders of depositary
receipts will be entitled to receive whole or fractional shares of the related
preferred stock on the basis of the proportion of preferred stock represented by
the depositary share as specified in the applicable prospectus supplement, but
holders of the shares of preferred stock will not thereafter be entitled to
receive depositary shares therefor. If the depositary receipts delivered by the
holder evidence a number of depositary shares in excess of the number of
depositary shares representing the number of shares of preferred stock to be
withdrawn, the depositary will deliver to the holder at the same time a new
depositary receipt evidencing the excess number of depositary shares.
Redemption of Depositary Shares
Whenever America Online redeems shares of preferred stock held by the
depositary, the depositary will redeem, as of the same redemption date, the
number of depositary shares representing shares of the preferred stock so
redeemed, provided America Online shall have paid in full to the depositary the
redemption price of the preferred stock to be redeemed plus an amount equal to
any accrued and unpaid dividends thereon to the date fixed for redemption. The
redemption price per depositary share will be equal to the corresponding
proportion of the redemption price and any other amounts per share payable with
respect to the preferred stock. If fewer than all the depositary shares are to
be redeemed, the depositary shares to be redeemed will be selected pro rata, as
nearly as may be practicable without creating fractional depositary shares, or
by any other equitable method determined by America Online.
From and after the date fixed for redemption, all dividends in respect
of the shares of preferred stock so called for redemption will cease to accrue,
the depositary shares so called for redemption will no longer be deemed to be
outstanding and all rights of the holders of the depositary receipts evidencing
the depositary shares so called for redemption will cease, except the right to
receive any moneys payable upon the redemption and any money or other property
to which the holders of the depositary receipts were entitled the redemption and
surrender thereof to the depositary.
Voting of the Preferred Stock
Upon receipt of notice of any meeting at which the holders of the
preferred stock are entitled to vote, the depositary will mail the information
contained in the notice of meeting to the record holders of the depositary
receipts evidencing the depositary shares which represent the preferred stock.
Each record holder of depositary receipts evidencing depositary shares on the
record date, which will be the same date as the record date for the preferred
stock, will be entitled to instruct the depositary as to the exercise of the
voting rights pertaining to the amount of preferred stock represented by the
holder's depositary shares. The depositary will vote the amount of preferred
stock represented by the depositary shares in accordance with the instructions,
and America Online will agree to take all reasonable action which may be deemed
necessary by the depositary in order to enable the depositary to do so. The
depositary will abstain from voting the amount of preferred stock represented by
the depositary shares to the extent it does not receive specific instructions
from the holders of depositary receipts evidencing the depositary shares. The
depositary shall not be responsible for any failure to carry out any instruction
to vote, or for the manner or effect of any such vote made, as long as such
action or non-action is in good faith and does not result from negligence or
willful misconduct of the depositary.
Liquidation Preference
In the event of the liquidation, dissolution or winding up of America
Online, whether voluntary or involuntary, the holders of each depositary receipt
will be entitled to the fraction of the liquidation preference accorded each
share of preferred stock represented by the depositary shares evidenced by such
depositary receipt, as set forth in the applicable prospectus supplement.
Conversion of Preferred Stock
The depositary shares, as such, are not convertible into common stock
or any other securities or property of America Online. Nevertheless, if so
specified in the applicable prospectus supplement relating to an offering of
depositary shares, the depositary receipts may be surrendered by their holders
to the depositary with written instructions to the depositary to instruct
America Online to cause conversion of the preferred stock represented by the
depositary shares evidenced by the depositary receipts into whole shares of
common stock, other shares of preferred stock of America Online or other shares
of stock, and America Online has agreed that upon receipt of those instructions
and any amounts payable in respect thereof, it will cause the conversion thereof
utilizing the same procedures as those provided for delivery of preferred stock
to effect such conversion. If the depositary shares evidenced by a depositary
receipt are to be converted in part only, a new depositary receipt or receipts
will be issued for any depositary shares not to be converted. No fractional
shares of common stock will be issued upon conversion, and if such conversion
would result in a fractional share being issued, an amount will be paid in cash
by America Online equal to the value of the fractional interest based upon the
closing price of the common stock on the last business day prior to the
conversion.
Amendment and Termination of the Deposit Agreement
The form of depositary receipt evidencing the depositary shares which
represent the preferred stock and any provision of the Deposit Agreement may at
any time be amended by agreement between America Online and the depositary.
However, any amendment that materially and adversely alters the rights of the
holders of depositary receipts or that would be materially and adversely
inconsistent with the rights granted to the holders of the related preferred
stock will not be effective unless such amendment has been approved by the
existing holders of at least 66% of the depositary shares evidenced by the
depositary receipts then outstanding. No amendment shall impair the right,
subject to certain exceptions in the Deposit Agreement, of any holder of
depositary receipts to surrender any depositary receipt with instructions to
deliver to the holder the related preferred stock and all money and other
property, if any, represented thereby, except in order to comply with law. Every
holder of an outstanding depositary receipt at the time any such amendment
becomes effective shall be deemed, by continuing to hold such receipt, to
consent and agree to such amendment and to be bound by the Deposit Agreement as
amended thereby.
The Deposit Agreement may be terminated by America Online upon not less
than 30 days prior written notice to the depositary if a majority of each series
of preferred stock affected by such termination consents to such termination,
whereupon the depositary shall deliver or make available to each holder of
Depositary Receipts, upon surrender of the depositary receipts held by such
holder, such number of whole or fractional shares of preferred stock as are
represented by the depositary shares evidenced by such depositary receipts
together with any other property held by the depositary with respect to such
depositary receipt. In addition, the Deposit Agreement will automatically
terminate if:
- - all outstanding depositary shares shall have been redeemed
- - there shall have been a final distribution in respect of the related
preferred stock in connection with any liquidation, dissolution or
winding up of America Online and such distribution shall have been
distributed to the holders of depositary receipts evidencing the
depositary shares representing such preferred stock or
- - each share of the related preferred stock shall have been converted
into securities of America Online not so represented by depositary
shares.
Charges of Preferred Stock Depositary
America Online will pay all transfer and other taxes and governmental
charges arising solely from the existence of the Deposit Agreement. In addition,
America Online will pay the fees and expenses of the depositary in connection
with the performance of its duties under the Deposit Agreement. However, holders
of depositary receipts will pay the fees and expenses of the depositary for any
duties requested by such holders to be performed which are outside of those
expressly provided for in the Deposit Agreement.
Resignation and Removal of Depositary
The depositary may resign at any time by delivering to America Online
notice of its election to do so, and America Online may at any time remove the
depositary, any such resignation or removal to take effect upon the appointment
of a successor depositary. A successor depositary must be appointed within 60
days after delivery of the notice of resignation or removal and must be a bank
or trust company having its principal office in the United States and having a
combined capital and surplus of at least $50,000,000.
Miscellaneous
The depositary will forward to holders of depositary receipts any
reports and communications from America Online which are received by the
depositary with respect to the related preferred stock.
Neither the depositary nor America Online will be liable if it is
prevented from or delayed in, by law or any circumstances beyond its control,
performing its obligations under the Deposit Agreement. The obligations of
America Online and the depositary under the Deposit Agreement will be limited to
performing their duties thereunder in good faith and without negligence, in the
case of any action or inaction in the voting of preferred stock represented by
the depositary shares, gross negligence or willful misconduct, and America
Online and the depositary will not be obligated to prosecute or defend any legal
proceeding in respect of any depositary receipts, depositary shares or shares of
preferred stock represented thereby unless satisfactory indemnity is furnished.
America Online and the depositary may rely on written advice of counsel or
accountants, or information provided by persons presenting shares of preferred
stock represented thereby for deposit, holders of depositary receipts or other
persons believed in good faith to be competent to give such information, and on
documents believed in good faith to be genuine and signed by a proper party.
In the event the depositary shall receive conflicting claims, requests
or instructions from any holders of depositary receipts, on the one hand, and
America Online, on the other hand, the depositary shall be entitled to act on
such claims, requests or instructions received from America Online.
Description of Warrants
General
America Online may issue warrants to purchase its debt securities,
common stock, preferred stock, or depositary shares. America Online may issue
warrants independently or together with any offered securities and may be
attached to or separate from those offered securities. America Online will issue
the warrants under Warrant Agreements to be entered into between America Online
and a bank or trust company, as warrant agent, all as shall be set forth in the
applicable prospectus supplement. The warrant agent will act solely as an agent
of America Online in connection with the warrants of the series being offered
and will not assume any obligation or relationship of agency or trust for or
with any holders or beneficial owners of warrants.
The applicable prospectus supplement will describe the following terms,
where applicable, of warrants in respect of which this prospectus is being
delivered:
- - the title of the warrants
- - the designation, amount and terms of the securities for which the
warrants are exercisable
- - the designation and terms of the other securities, if any, with which
the warrants are to be issued and the number of warrants issued with
each such security
- - the price or prices at which the warrants will be issued
- - the aggregate number of warrants
- - any provisions for adjustment of the number or amount of securities
receivable upon exercise of the warrants or the exercise price of the
warrants
- - the price or prices at which the securities purchasable upon exercise
of the warrants may be purchased
- - if applicable, the date on and after which the warrants and the
securities purchasable upon exercise of the warrants will be
separately transferable
- - if applicable, a discussion of the material United States federal
income tax considerations applicable to the exercise of the warrants
- - any other terms of the warrants, including terms, procedures and
limitations relating to the exchange and exercise of the warrants
- - the date on which the right to exercise the warrants shall commence,
and the date on which the right shall expire
- - the maximum or minimum number of warrants which may be exercised at
any time
- - information with respect to book-entry procedures, if any
Exercise of Warrants
Each warrant will entitle the holder of warrants to purchase for cash
the amount of debt securities, shares of preferred stock, shares of common stock
or depositary shares at the exercise price as shall in each case be set forth
in, or be determinable as set forth in, the prospectus supplement relating to
the warrants offered thereby. Warrants may be exercised at any time up to the
close of business on the expiration date set forth in the prospectus supplement
relating to the warrants offered thereby. After the close of business on the
expiration date, unexercised warrants will become void.
Warrants may be exercised as set forth in the prospectus supplement
relating to the warrants offered thereby. Upon receipt of payment and the
warrant certificate properly completed and duly executed at the corporate trust
office of the warrant agent or any other office indicated in the prospectus
supplement, America Online will, as soon as practicable, forward the debt
securities, shares of preferred stock, shares of common stock or depositary
shares purchasable upon such exercise. If less than all of the warrants
represented by the warrant certificate are exercised, a new warrant certificate
will be issued for the remaining warrants.
Description of Stock Purchase Contracts to Purchase
Common Stock or Preferred Stock
Unless otherwise specified in the applicable prospectus supplement,
America Online may issue stock purchase contracts, including contracts
obligating holders to purchase from America Online, and America Online to sell
to the holders, a specified number of shares of common stock or preferred stock
at a future date or dates. The consideration per share of common stock or
preferred stock may be fixed at the time the stock purchase contracts are issued
or may be determined by a specific reference to a formula set forth in the stock
purchase contracts. The stock purchase contracts may require holders to secure
their obligations thereunder in a specified manner.
The securities related to the stock purchase contracts will be pledged
to a collateral agent, for the benefit of America Online, pursuant to a pledge
agreement. The pledged securities will secure the obligations of holders of
stock purchase contracts to purchase common stock or preferred stock under the
related stock purchase contracts. The rights of holders of stock purchase
contracts to the related pledged securities will be subject to America Online's
security interest in those pledged securities. That security interest will be
created by the pledge agreement. No holder of stock purchase contracts will be
permitted to withdraw the pledged securities related to such stock purchase
contracts from the pledge arrangement except upon the termination or early
settlement of the related stock purchase contracts. Subject to that security
interest and the terms of the purchase contract agreement and the pledge
agreement, each holder of a stock purchase contract will retain full beneficial
ownership of the related pledged securities.
Except as described in the applicable prospectus supplement, the
collateral agent will, upon receipt of distributions on the pledged securities,
distribute such payments to America Online or a purchase contract agent, as
provided in the pledge agreement. The purchase contract agent will in turn
distribute payments it receives as provided in the stock purchase contract. The
applicable prospectus supplement will describe the terms of any stock purchase
contracts. The description in the prospectus supplement will not necessarily be
complete and will be qualified in its entirety by reference to the stock
purchase contracts, and, if applicable, collateral arrangements and depositary
arrangements, relating to such stock purchase contracts.
Plan of Distribution
We may sell the securities:
- - through underwriters or dealers
- - directly to a limited number of purchasers or to a single purchaser
- - through agents
The prospectus supplement with respect to the securities being offered
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 America Online 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. Any initial public offering price and any
discounts or concessions allowed or reallowed or paid to dealers may be changed
from time to time.
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.
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, we will sell such offered securities to the dealers as
principals. The dealers may then resell the 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 America Online or
through agents designated by us 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 America Online to such
agent will be set forth, in the prospectus supplement.
Underwriters, dealers and agents may be entitled under agreements
entered into with America Online to indemnification by America Online 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,
America Online in the ordinary course of business.
Unless otherwise specified in the applicable prospectus supplement,
each class or series of offered securities will be a new issue with no
established trading market, other than the common stock, which is listed on the
New York Stock Exchange. We may elect to list any other class or series of
offered securities on any exchange, but we are not obligated to do so. It is
possible that one or more underwriters may make a market in a class or series of
offered securities, but the underwriters will not be obligated to do so and may
discontinue any market making at any time without notice. We cannot give any
assurance as to the liquidity of the trading market for any of the offered
securities.
Any underwriter may engage in over-allotment, stabilizing transactions,
short covering transactions and penalty bids in accordance with Regulation M
under the Exchange Act. Over-allotment involves sales in excess of the offering
size, which create a short position. Stabilizing transactions permit bids to
purchase the underlying security so long as the stabilizing bids do not exceed a
specified maximum. Short covering transactions involve purchases of the offered
securities in the open market after the distribution is completed to cover short
positions. Penalty bids permit the underwriters to reclaim a selling concession
from a dealer when the offered securities originally sold by the dealer are
purchased in a covering transaction to cover short positions. Those activities
may cause the price of the offered securities to be higher than it would
otherwise be. If commenced, the underwriters may discontinue any of the
activities at any time.
Legal Matters
The validity of the Securities offered hereby is being passed upon by
Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C. The Vice Chairman of America
Online also serves as Of Counsel to Mintz, Levin and, as of November 2, 1999,
owns an aggregate of 1,259 shares of common stock and options to purchase
2,683,000 shares of common stock. Attorneys of Mintz Levin and certain members
of their families and trusts for their own benefit, as of November 2, 1999, own
an aggregate of approximately 5,600 shares of America Online common stock.
Experts
Ernst & Young LLP, independent auditors, have audited our consolidated
financial statements included in our Annual Report on Form 10-K for the year
ended June 30, 1999, as set forth in their report, which is incorporated by
reference in this prospectus and elsewhere in the registration statement. Our
financial statements are incorporated by reference in reliance on Ernst & Young
LLP's report, given on their authority as experts in accounting and auditing.
II-5
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 America Online.
All amounts set forth below are estimates, other than the SEC registration fee.
SEC Registration Fee $1,257,185
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 $1,442,185
==========
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), because the person 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 the person in connection with such action, suit or
proceeding, if the person acted in good faith and in a manner the person
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
person did not have reasonable cause to believe the person's 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 because the person is or was a director or officer of the
corporation, against any expenses (including attorneys' fees) actually and
reasonably incurred by the person in connection with the defense or settlement
of such action or suit if the person acted in good faith and in a manner the
person 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 the person in any such capacity, or
arising out of the person's status as such, whether or not the corporation would
have the power to indemnify the person against such liability under the
provisions of the law.
Article Ninth of the Registrant's Restated Certificate of Incorporation
(incorporated by reference herein) provides for indemnification of directors,
officers and other persons as follows:
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, shall, 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.
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, because 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 before 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 the section "Right to Indemnification" 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
section "Right to Indemnification" or "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 (1) 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 (2) 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.
Exhibit Description
No.
2.1 Form of Underwriting Agreement (To be filed by amendment or
incorporated by reference to the extent applicable in connection with
an offering.)
4.1 Article 4, Article 6 and Article 8 of the Restated Certificate of
Incorporation of America Online, Inc. (Filed as Exhibit 3.1 to America
Online's Annual report on Form 10-K for the fiscal Year ended June 30,
1997 and incorporated herein by reference.)
4.2 Amendments of Section A of Article 4 of the Restated Certificate of
Incorporation of America Online, Inc. (Filed as Exhibit 4.1 to America
Online's Registration Statement on Form S-3, Registration No.
333-46633 and as Exhibit 4.1 to America Online's Quarterly Report on
Form 10-Q for the quarter ended September 30, 1999, both of which are
incorporated herein by reference.)
4.3 Restated By-Laws of America Online, Inc. (Filed as Exhibit 3.5 to the
Registrant's Annual Report on Form 10-K for the fiscal year ended June
30, 1998 and incorporated herein by reference.)
4.4 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.)
4.5 Form of Indenture between America Online and one or more trustees to
be named (previously filed)
4.6 Form of Debt Security (To be filed by amendment or incorporated by
reference to the extent applicable in connection with an offering.)
5.1 Opinion of Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.,
regarding the legality of securities being offered (previously filed)
12.1 Computation of Ratio of Earnings to Fixed Charges
23.1 Consent of Ernst & Young LLP
23.2 Consent of Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C.
(included in their opinion filed as Exhibit 5.1 and incorporated
herein by reference)
24.1 Powers of Attorney (previously filed)
25.1 Form T-1, Statements of Eligibility and Qualification under the Trust
Indenture Act of 1939 of Trustee (To be filed by amendment or
incorporated by reference to the extent applicable in connection with
an offering.)
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.
(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 Securities Exchange Act of 1934
that are incorporated by reference in the registration
statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, 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 of
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 of 1933, each filing of the
registrant's annual report pursuant to section 13(a) or section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to section 15(d) of the
Securities Exchange Act of 1934) 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 of 1933 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 Securities and Exchange
Commission such indemnification is against public policy as expressed in the 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 Act and will be governed by the final adjudication of
such issue.
D. Registration Statement Permitted by Rule 430A
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 for Delayed Offerings.
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 Act.
SIGNATURES
Pursuant to the requirements of the Securities Act, the registrant 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 November 2, 1999.
AMERICA ONLINE, INC.
By: *
J. Michael Kelly, Senior Vice President,
Chief Financial Officer, and Assistant Secretary
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated in one or more counter-parts.
<TABLE>
<S> <C> <C>
SIGNATURE TITLE DATE
November 2, 1999
* Chairman of the Board and Chief
Stephen M. Case Executive Officer (principal executive
officer)
November 2, 1999
* President, Chief Operating Officer and
Robert W. Pittman Director
Senior Vice President, Corporate
Miles R. Gilburne Development and Director
November 2, 1999
* Senior Vice President, Chief Financial
J. Michael Kelly Officer, and Assistant Secretary
(principal financial officer)
November 2, 1999
* Vice President, Controller, Chief
James F. MacGuidwin Accounting and Budget Officer (principal
accounting officer)
November 2, 1999
* Director
Daniel F. Akerson
November 2, 1999
* Director
James L. Barksdale
November 2, 1999
* Director
Frank J. Caufield
November 2, 1999
* Director
Alexander M. Haig, Jr.
November 2, 1999
* Director
Thomas Middelhoff
November 2, 1999
* Director
Colin L. Powell
November 2, 1999
* Director
Franklin D. Raines
Director
Marjorie M. Scardino
</TABLE>
*By: /s/ J. Michael Kelly
J. Michael Kelly, Attorney-in-Fact
EXHIBIT INDEX
Exhibit
No. Description
12.1 Computation of Ratio of Earnings to Fixed Charges
23.1 Consent of Ernst & Young LLP
EXHIBIT 12.1
America Online, Inc. and Subsidiaries
Statements RE Computation of Ratios of Earnings to Fixed Charges
Three Months Ended September 30, 1999 and Years Ended
June 30, 1999, June 30, 1998, June 30, 1997, June 30, 1996
and June 30, 1995
<TABLE>
Three months Year Year Year Year Year
ended ended ended ended ended ended
September 30, 1999 June 30, 1999 June 30, 1998 June 30, 1997 June 30, 1996 June 30, 1995
Fixed charges
<S> <C> <C> <C> <C> <C> <C>
Interest expense $ 6 $ 18 $ 13 $ 2 $ 1 $ 1
Amortization of bond
issue costs - 2 1 - - -
Interest portion (1) of
rent expense 43 143 106 53 16 4
Total fixed charges $ 49 $ 163 $ 120 $ 55 $ 17 $ 5
Income (loss) before
income taxes (2) (3) (4)
(5) (6) 302 1,096 (90) (475) 69 (41)
Less interest capitalized (1) - - - - -
Earnings (7) $ 350 $ 1,259 $ 30 $ (420) $ 86 $ (36)
Ratio of earnings to fixed
charges 7.14 7.72 0.25 (7.64) 5.06 (7.20)
</TABLE>
1) The interest portion of the rent expense is estimated to be equal to 28% in
year one, 18% in year two, 7% in year three and 5% in year four
2) Net income in the year ended June 30, 1999 includes special charges of $95
million of expense related to mergers and restructuring, $567 million net
gain on sale of investments and $25 million in transition related expenses
3) Net loss in the fiscal year ended June 30, 1998, includes special charges
of $75 million related to mergers and restructuring, $94 million related to
acquired in-process research and development and $17 million related to
settlements
4) Net loss in the fiscal year ended June 30, 1997, includes special charges
of $385 million for the write-off of deferred subscriber acquisition costs,
$49 million for restructuring, $24 million for a legal settlement, $24
million for contract terminations and $9 million related to acquired
in-process research and development
5) Net income in the fiscal year ended June 30, 1996, includes special charges
of $17 million for acquired in-process research and development and $8
million for the settlement of a class action lawsuit
6) Net loss in the fiscal year ended June 30, 1995, includes special charges
of $50 million for acquired in-process research and development and $2
million for merger expenses
7) Earnings represent income from continuing operations before income taxes
plus interest expense on indebtedness, amortization of debt discount, the
portion of rent expense deemed representative of an interest factor and
interest capitalized during the period is deducted because fixed charges
include all interest, whether capitalized or expensed
EXHIBIT 23.1
Consent of Independent Auditors
We consent to the reference to our firm under the caption "Experts" in the
Registration Statement (Form S-3, No. 333-79489 ) and related prospectus of
America Online, Inc. for the registration of $5,000,000,000 of Debt Securities,
Common Stock, Preferred Stock, Depository Shares, Warrants and Stock Purchase
Contracts to Purchase Common Stock or Preferred Stock and to the incorporation
by reference therein of our report dated July 21, 1999, 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, 1999, filed with the Securities
and Exchange Commission.
/s/ERNST & YOUNG LLP
McLean, Virginia
November 2, 1999
