SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended June 30, 2000
Commission File Number - 001-12143
AMERICA ONLINE, INC.
(Exact name of registrant as specified in its charter)
Delaware 54-1322110
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
22000 AOL Way 20166-9323
Dulles, Virginia (Zip code)
(Address of principal executive offices)
Registrant's telephone number, including area code: (703) 265-1000
Securities registered pursuant to section
12(b) of the Act:
(Name of Each Exchange on
(Title of Each Class) Which Registered)
Common Stock, par value $.01 per share New York Stock Exchange
Preferred Share Purchase Rights New York Stock Exchange
Securities registered pursuant to section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No_____
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.
As of August 31, 2000, the aggregate market value of voting stock held by
non-affiliates of the registrant, based upon the closing sales price for the
registrant's common stock, as reported on the New York Stock Exchange, was
approximately $121.5 billion (calculated by excluding shares owned beneficially
by directors and officers).
Number of shares of registrant's common stock outstanding as of August 31,
2000.......2,324,112,291
PART III
Item 10. Directors and Executive Officers of the Registrant
Directors
The Company's Restated Certificate of Incorporation, as amended, and
Restated By-Laws provide for a classified Board of Directors. The Board of
Directors currently consists of eleven members, classified into three classes
each with terms of three years as follows: General Alexander M. Haig, Jr.,
Daniel F. Akerson and Franklin D. Raines constitute a class elected in 1997 (the
"Class I Directors"); James L. Barksdale, Frank J. Caufield, Robert W. Pittman
and General Colin L. Powell constitute a class elected in 1998 (the "Class II
Directors"); and Stephen M. Case, Miles R. Gilburne, Kenneth J. Novack and
Marjorie M. Scardino, constitute a class elected in 1999 (the "Class III
Directors").
The names of the Company's directors and certain information about them are
set forth below:
Name Age Positions with the Company
Stephen M. Case 42 Chairman of the Board and
Chief Executive Officer
Daniel F. Akerson 51 Director
James L. Barksdale 57 Director
Frank J. Caufield 60 Director
Miles R. Gilburne 49 Director
General Alexander M. Haig, Jr. 75 Director
Kenneth J. Novack 59 Vice Chairman and Director
Robert W. Pittman 46 President, Chief Operating
Officer and Director
General Colin L. Powell 63 Director
Franklin D. Raines 51 Director
Marjorie M. Scardino 53 Director
Mr. Case, a co-founder of the Company, has been Chairman of the Board
of Directors since October 1995, Chief Executive Officer of the Company since
April 1993 and a director since September 1992. He also served as an Executive
Vice President from September 1987 to January 1991 and Vice President,
Marketing, from 1985 to September 1987. Mr. Case is a director of the New York
Stock Exchange, Inc.
Mr. Akerson has been a director of the Company since 1997. He is
Chairman and Chief Executive Officer of XO Communications Inc., a provider of
broadband communications services. Prior to his current role, he served as
Chairman and CEO of Nextel Communications, Inc., a mobile phone operator, from
March 1996 until July 1999, when he became an investor in and co-chairman of
Eagle River, Inc., a holding company. He continues to serve as Chairman of
Nextel Communications, Inc. Prior to joining Nextel in 1996, Mr. Akerson served
as general partner of Forstmann Little & Company, a private investment firm,
from 1993 to March 1996. While at Forstmann Little, he also held the position of
chairman of the board and chief executive officer of General Instrument
Corporation, a technology company acquired by Forstmann Little. Mr. Akerson
currently serves as a director of American Express Company, a travel and
financial services company.
Mr. Barksdale has been a director of the Company since March 1999. He
has been the Managing Partner of the Barksdale Group, a venture-capital firm,
since it was founded in April 1999. He served as a director of Netscape
Communications Corporation, a provider of software, services and Website
resources using the Internet, from October 1994 until its acquisition by the
Company in March 1999. He joined Netscape in January 1995 as President and Chief
Executive Officer. Mr. Barksdale serves as a director of 3Com Corporation, a
maker of computer networking products, Robert Mondavi Corporation, a producer of
premium table wines, Liberate Technologies, Inc., a provider of a comprehensive
software platform, Sun Microsystems, Inc., a provider of industrial-strength
hardware, software and services, FDX Corporation, a provider of integrated
transportation, information, and logistics solutions, and Respond.com, Inc., a
"Shop By Request" service that connects customers with sellers through email.
Mr. Caufield has been a director of the Company since 1991. He has held the
position of General Partner of Kleiner Perkins Caufield & Byers, a venture
capital partnership, since 1978.
Mr. Gilburne has been a director of the Company since October 1999. He
served as Senior Vice President, Corporate Development of the Company from
February 1995 until December 1999. Prior to joining the Company, Mr. Gilburne
was a founding attorney of the Silicon Valley office of the law firm of Weil,
Gotshal & Manges. Mr. Gilburne also is a partner in the CGLS Fund, a venture
capital fund. Mr. Gilburne is also a director of America Online Latin America,
Inc., a provider of interactive services in Latin America, and Pharmacyclics,
Inc., a drug development and research company. The Company beneficially owns
approximately 44% of the capital stock of America Online Latin America.
General Haig has been a director of the Company since 1989. He has held
the position of Chairman and President of Worldwide Associates, Inc., an
international consulting company, since 1984. General Haig is the former U.S.
Secretary of State, former Supreme Allied Commander, Europe, former White House
Chief of Staff and former Vice Chief of Staff, Army. General Haig has been
awarded many military decorations, including the Distinguished Service Cross. A
retired full General, U.S. Army, he also served as the President and Chief
Operating Officer of United Technologies Corp., a maker of building systems and
aerospace products, and is currently a director of Interneuron Pharmaceuticals,
Inc., a biopharmaceutical company, MGM Mirage, Inc., an entertainment, hotel and
gaming company, and Metro-Goldwyn-Mayer, Inc., a producer and distributor of
entertainment products. He is host of the weekly television program, World
Business Review.
Mr. Novack was appointed as Vice Chairman of the Company in May 1998 and
as a director in January 2000. He became Of Counsel to the Boston-based law firm
of Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, PC after his retirement as a
member of that firm in August 1998. Mr. Novack joined Mintz Levin in 1966 as an
associate and rose to the position of Managing Partner in 1972. He was President
and Chief Executive Officer of the firm from 1991 to 1994 and served on its
executive committee from 1970 until his retirement.
Mr. Pittman has served as President and Chief Operating Officer of the
Company since February 1998 and as a director since 1995. He was President and
Chief Executive Officer of AOL Networks, a division of the Company, from
November 1996 until February 1998. He held the positions of Managing Partner and
Chief Executive Officer of Century 21 Real Estate Corp. from October 1995 to
October 1996. Mr. Pittman had previously been President and Chief Executive
Officer of Time Warner Enterprises, a division of Time Warner Entertainment
Company, LP, a company engaged in entertainment, cable networks and cable
systems, from 1990 to September 1995, and Chairman and Chief Executive Officer
of Six Flags Entertainment Corporation, the second largest theme park operator
in the United States, from December 1991 to September 1995. Mr. Pittman founded
MTV in 1981, and served as President and Chief Executive Officer of MTV
Networks. Mr. Pittman is also a director of America Online Latin America, Inc.,
a provider of interactive services in Latin America, and Cendant Corporation, a
global provider of real estate, travel and direct marketing related consumer and
business services.
General Colin L. Powell has been a director of the Company since
September 1998. General Powell is Chairman of America's Promise: The Alliance
for Youth, a national not-for-profit organization dedicated to improving the
lives of our nation's more than 15 million at-risk youth. He served as the
Chairman of the Joint Chiefs of Staff from October 1989 to September 1993, and
as National Security Advisor from December 1987 to January 1989.
Mr. Raines has been a director of the Company since September 1998. Mr.
Raines has served as Chairman and Chief Executive Officer of Fannie Mae, a
non-bank financial services company, since January 1999. Prior to re-joining
Fannie Mae in May 1998, he served as Director of the U.S. Office of Management
and Budget from 1996 to 1998. From 1991 to 1996, Mr. Raines was Vice Chairman of
Fannie Mae, in charge of the company's legal, credit policy, finance, and
corporate development functions. Mr. Raines is also a director of Pfizer, Inc.,
a company that discovers, develops, manufactures and markets leading
prescription medicines, and PepsiCo, Inc., a consumer products company.
Ms. Scardino has been a director of the Company since October 1999. Ms.
Scardino has been the Chief Executive Officer and an Executive Director of
Pearson, plc, a global media company, since January 1997. In 1985, she joined
The Economist Newspaper, Ltd. as president of its North American operations and
was its Chief Executive from April 1993 to January 1997. Ms. Scardino currently
serves as a director of ConAgra Inc., a food service manufacturer and retail
food supplier.
Executive Officers
The names of, and certain information regarding, executive officers of the
Company who are not Directors of the Company, are set forth below. The executive
officers serve at the pleasure of the Board of Directors and the Chief Executive
Officer.
Name Age Positions with the Company
Paul T. Cappuccio 39 Senior Vice President, General
Counsel and Assistant Secretary
J. Michael Kelly 44 Senior Vice President, Chief Financial
Officer and Assistant Secretary
Kenneth B. Lerer 48 Senior Vice President
James F. MacGuidwin 44 Senior Vice President, Controller,
Chief Accounting & Budget Officer
and Corporate Compliance Officer
William J. Raduchel 54 Senior Vice President and Chief
Technology Officer
George Vradenburg, III 57 Senior Vice President, Global and
Strategic Policy
Mr. Cappuccio joined the Company as Senior Vice President and General
Counsel in August 1999. Before joining the Company, from 1993 to 1999, Mr.
Cappuccio was a partner at the Washington, D.C. office of the law firm of
Kirkland & Ellis, and from 1991 to 1993, he was Associate Deputy Attorney
General at the United States Department of Justice. Prior to his service at the
Justice Department, Mr. Cappuccio served as a law clerk at the Supreme Court of
the United States, first for Justice Antonin Scalia (1987-1988) and then for
Justice Anthony M. Kennedy (1988-1989).
Mr. Kelly joined the Company in July 1998 as Senior Vice President and
Chief Financial Officer. Prior to joining the Company, he was Executive Vice
President-Finance and Planning and Chief Financial Officer of GTE Corporation, a
telecommunications companies (now part of Verizon Communications). Mr. Kelly was
appointed GTE's Senior Vice President-Finance in 1994, receiving the
responsibility for Corporate Planning and Development during 1997. From 1991 to
1994, he served as Vice President-Controller of GTE. Mr. Kelly is also a
director of America Online Latin America, Inc., a provider of interactive
services in Latin America.
Mr. Lerer joined the Company as Senior Vice President in October 1999. He
is responsible for the corporate communications and investor relations
departments. Prior to that, Mr. Lerer was a founder and served as President of
Robinson Lerer & Montgomery, a corporate communications and consulting firm. He
is a director of Oxygen Media, Inc., an integrated media brand, and
ScreamingMedia Inc., a global infrastructure technology platform.
Mr. MacGuidwin joined the Company in 1995, and serves as Senior Vice
President, Controller, Chief Accounting & Budget Officer and Corporate
Compliance Officer of the Company. Previously, Mr. MacGuidwin served as the
Company's Vice President, Controller and Chief Accounting & Budget Officer
(1998-1999), Senior Vice President of Planning & Budgeting (1996-1998), and as
Vice President, Planning & Budgets (1995-1996). Prior to joining the Company,
Mr. MacGuidwin had a six-month consulting arrangement with Time Warner
Telecommunications and, for the thirteen years before that, was with MCI
Communications Corporation, lastly as Vice President, Finance and Customer
Service for the MultiNational Accounts Division.
Mr. Raduchel joined the Company as Senior Vice President and Chief
Technology Officer in September 1999. He served as Chief Strategy Officer and a
member of the Executive Committee of Sun Microsystems, Inc., a provider of
hardware, software and services that power the Internet, from January 1998 to
September 1999. He joined Sun Microsystems in 1988 and held a variety of
management positions. He is a Director of MIH Limited, a multi-national provider
of pay-television platform services and pay-television technology, OpenTV Corp.,
a developer of software for interactive digital television systems, Niku
Corporation, a provider of innovative, Internet-based, professional services
automation products, and Chordiant Software Inc., a provider of e-business
infrastructure software.
Mr. Vradenburg has held the position of Senior Vice President for Global
and Strategic Policy since January 1999. Mr. Vradenburg served as Senior Vice
President, General Counsel and Secretary from March 1997 to January 1999. He was
a Senior Partner with the law firm of Latham & Watkins and co-chair of its
Entertainment & Media Practice Group from 1995 to 1997. Mr. Vradenburg
previously served as Executive Vice President of Fox, Inc., which owns and
operates a television broadcasting network and produces and distributes
entertainment, news and sports programming, from 1991 to 1995 and as Senior Vice
President and General Counsel of CBS, Inc., a television and radio broadcasting
and cable programming company, from 1985 to 1991.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires the Company's directors and officers, and persons who
own more than ten percent of a registered class of the Company's equity
securities, to file with the Securities and Exchange Commission (the "SEC")
initial reports of ownership and reports of changes in ownership of Common Stock
and other equity securities of the Company. Directors, officers and greater than
ten percent holders are required by SEC regulation to furnish the Company with
copies of all Section 16(a) reports they file.
To the Company's knowledge, except as noted below, based solely on review
of the copies of the above-mentioned reports furnished to the Company and
written representations regarding all reportable transactions, during the fiscal
year ended June 30, 2000, all Section 16(a) filing requirements applicable to
its directors and officers and greater than ten percent beneficial owners were
complied with on time. The following persons filed one late report each: Daniel
F. Akerson (one transaction) and James L. Barksdale (one transaction).
Item 11. Executive Compensation
Summary Compensation Table
The following Summary Compensation Table sets forth summary information as
to compensation received by the Company's Chief Executive Officer and each of
the four other most highly compensated persons who were serving as executive
officers of the Company as of June 30, 2000 (collectively, the "named executive
officers") for services rendered to the Company in all capacities during the
three fiscal years ended June 30, 2000. All of the information presented in the
following table is on a post-split basis.
<TABLE>
Long-Term Compensation
Annual Compensation Awards
Other Restricted Securities
Name and Principal Fiscal Annual Stock Underlying All Other
Position Year Salary Bonus Compensation Awards Options(#) Compensation(1)
<S> <C> <C> <C> <C> <C> <C> <C>
Stephen M. Case........... 2000 $725,000 $1,125,000 $0 $0 3,000,000 $5,165
Chairman of the Board 1999 $575,000 $1,000,000 $0 $0 1,800,000 $4,932
and Chief Executive 1998 $426,667 $750,000 $0 $0 10,400,000 $2,923
Officer
Robert W. Pittman........ 2000 $683,334 $1,050,000 $60,965(2) $0 2,500,000 $810
President and Chief 1999 $591,667 $1,000,000 $1,380,000(2) $0 1,440,000 $955
Operating Officer 1998 $541,665 $750,000 $127,698(2) $0 7,200,000 $690
J. Michael Kelly.......... 2000 $491,667 $563,000 $0 $0 1,000,000 $6,415
Senior Vice President, 1999 $444,886 $500,000 $8,687(3) $5,660,000(4) 0 $544
Chief Financial Officer,
and Assistant Secretary
Kenneth J. Novack(5)..... 2000 $433,333 $506,000 $0 $0 1,000,000 $6,260
Vice Chairman 1999 $350,000 $400,000 $0 $0 2,560,000 $5,666
1998 $ 49,053 $950,000 $34,167 $0 1,600,000 $20
George Vradenburg, III... 2000 $420,000 $478,000 $0 $0 500,000 $6,322
Senior Vice President, 1999 $392,500 $350,000 $231,300(6) $0 560,000 $6,756
Global and Strategic 1998 $380,000 $490,000 $115,000(6) $0 560,000 $1,845
Policy
</TABLE>
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(1) All Other Compensation for Mr. Case, Mr. Pittman, Mr. Kelly, Mr. Novack and
Mr. Vradenburg during fiscal 2000 includes the dollar value of premiums
paid by the Company with respect to term life insurance for their benefit
in the amounts of $540, $810, $540, $2,322 and $2,322, respectively. All
Other Compensation for Mr. Case, Mr. Kelly, Mr. Novack and Mr. Vradenburg
during fiscal 2000 also includes $4,625, $5,875, $3,938 and $4,010,
respectively, of matching contributions made under the Company's 401(k)
Plan.
(2) For fiscal 2000 includes shipping and storage costs of $56,615, for fiscal
1999, includes the purchase of a prior residence for $1,300,000 and a
housing allowance of $80,000, and for fiscal 1998, includes a housing
allowance of $120,000.
(3) Includes relocation costs.
(4) Represents the dollar value of the award of 400,000 shares of the Company's
common stock based on the closing sales price of $14.15 as quoted on the
New York Stock Exchange on July 6, 1998 on a post-split basis. The award
vests in equal annual installments over a three-year period commencing with
July 6, 1999, the first anniversary from the date of grant. The aggregate
market value of the 400,000 shares of restricted stock was $21,100,000,
based on the closing sales price of $52.75 as quoted on the New York Stock
Exchange on June 30, 2000. Mr. Kelly is entitled to receive all dividends
paid on such shares.
(5) Mr. Novack was appointed as Vice Chairman of the Company in May 1998. Prior
to that time, he was a consultant to the Company and received compensation
as such during fiscal 1998, which is reflected herein.
(6) For fiscal 1999, consists of a housing allowance of $231,300, and for
fiscal 1998, includes a housing allowance equal to $110,000.
Option Grants in Last Fiscal Year
The following table provides information regarding the grant of stock
options during fiscal 2000 to the named executive officers.
<TABLE>
Potential Realizable Value
at Assumed Annual Rates of
Stock Price Appreciation
Individual Grants for Option Term(2)
Number of % of Total
Securities Options
Underlying Granted to Exercise
Options Employees in Price Expiration
Name Granted(1) Fiscal Year ($/share) Date 5% 10%
<S> <C> <C> <C> <C> <C> <C>
Stephen M. Case 3,000,000 3.9% $47.94 8/19/09 $90,435,409 $229,192,588
Robert W. Pittman 2,500,000 3.3% $47.94 8/19/09 $75,362,840 $190,993,823
J. Michael Kelly 1,000,000 1.3% $47.94 8/19/09 $30,145,136 $76,397,529
Kenneth J. Novack 1,000,000 1.3% $47.94 8/19/09 $30,145,136 $76,397,529
George Vradenburg 500,000 0.7% $47.94 8/19/09 $15,072,568 $38,198,765
</TABLE>
------------------
(1) Options are non-qualified stock options and generally terminate 90 days
following termination of the executive officer's employment with the
Company or the expiration date, whichever occurs earlier. The exercise
price of each option was determined to be equal to the fair market value
per share of the Common Stock on the grant date. These options become
exercisable over a four-year period, 25% on each anniversary of the grant
date of the option. Except that, as a result of the completion of the
merger with Time Warner Inc., all of these options will vest and become
exercisable upon the earliest to occur of their normal vesting date, the
first anniversary date of the completion of the merger and the employee's
termination without cause or constructive termination. See "Changes in
Control."
(2) Amounts represent hypothetical gains that could be achieved for the
respective options if exercised at the end of the option term. These gains
are based on assumed rates of stock price appreciation of 5% and 10%
compounded annually from the date the respective options were granted to
their expiration date (10 years from grant date). The gains shown are net
of the option exercise price, but do not include deductions for taxes or
other expenses associated with the exercise of the option or the sale of
the underlying shares. The actual gains, if any, on the exercise of stock
options will depend on the future performance of the Common Stock, the
option holder's continued employment throughout the option period, and the
date on which the options are exercised.
Aggregated Option Exercises in Last Fiscal Year and Fiscal Year-End Option
Values
The following table provides information regarding the aggregate exercises
of options by each of the named executive officers. In addition, this table
includes the number of shares covered by both exercisable and unexercisable
stock options as of June 30, 2000, and the values of "in-the-money" options,
which values represent the positive spread between the exercise price of any
such option and the fiscal year-end value of the Company's Common Stock.
<TABLE>
Number of Securities Value of the Unexercised
Shares Underlying Unexercised In-The-Money Options
Acquired Value Options at Fiscal Year-End at Fiscal Year-End(2)
Name on Exercise Realized(1) Exercisable Unexercisable Exercisable Unexercisable
<S> <C> <C> <C> <C> <C> <C>
Stephen M. Case 5,753,300 $326,663,201 7,730,700 13,950,000 $394,310,990 $521,363,000
Robert W. Pittman 2,580,000 $134,279,690 3,492,000 11,980,000 $169,889,410 $457,511,000
J. Michael Kelly 340,000 $15,251,684 560,000 3,700,000 $23,328,200 $117,285,250
Kenneth J. Novack 680,000 $34,025,539 634,000 4,754,000 $29,199,470 $164,078,470
George Vradenburg 340,000 $15,889,000 2,176,000 1,968,000 $110,324,120 $72,627,960
</TABLE>
------------------
(1) The value realized represents the aggregate market value of the shares
covered by the option on the date of exercise less the aggregate exercise
price paid by the executive officer.
(2) The value of unexercised in-the-money options at fiscal year-end assumes a
fair market value for the Company's Common Stock of $52.75, the closing
market price per share of the Company's Common Stock as reported on the New
York Stock Exchange on June 30, 2000.
Employment Contracts
In October 1996, the Company entered into an employment agreement with
Robert W. Pittman, the President and Chief Operating Officer of the Company. In
the event Mr. Pittman's employment is terminated by him for a good reason or by
the Company other than for cause or a permanent and total disability, he will
become a consultant of the Company for a term of two years, subject to the terms
and conditions of a consulting agreement. In the Company's discretion, Mr.
Pittman will become a consultant of the Company for two years if the Company
terminates his employment for cause or if he terminates his employment for other
than a good reason. Mr. Pittman is subject to the terms of a
confidentiality/non-competition/proprietary rights agreement that remains in
effect for the term of the consulting agreement.
In November 1997, the Company entered into a letter agreement with George
Vradenburg, III, who is Senior Vice President, Global and Strategic Policy of
the Company. Pursuant to the terms of the agreement, if Mr. Vradenburg
terminates his employment for a good reason or if the Company terminates his
employment without cause, Mr. Vradenburg will become a consultant of the Company
for two years. In the Company's discretion, Mr. Vradenburg will become a
consultant of the Company for two years if the Company terminates his employment
for cause or if he terminates his employment for other than a good reason. Mr.
Vradenburg is subject to the terms of a
confidentiality/non-competition/proprietary rights agreement that remains in
effect for the term of the consulting agreement. Mr. Vradenburg's employment
agreement provides for the Company to make him certain loans and to advance
certain expenses, as described below under "Certain Relationships and Related
Transactions."
In June 1998, the Company entered into a letter agreement with J. Michael
Kelly, who is Senior Vice President, Chief Financial Officer and Assistant
Secretary of the Company. Pursuant to the terms of the agreement, if Mr. Kelly
terminates his employment for a good reason or if the Company terminates his
employment without cause, Mr. Kelly will receive his base compensation accrued
through the termination date, continuation of his base compensation for a period
of twelve months, payment of his Executive Incentive Plan ("EIP") bonus in full
if his termination occurs after the end of the fiscal year, a pro-rated payout
of his EIP for the fiscal year following his termination for the period he
continues to receive his base compensation and full vesting on his restricted
stock award. Mr. Kelly is subject to the terms of a
confidentiality/non-competition/proprietary rights agreement.
The Company's 1992 Employee, Director and Consultant Stock Option Plan
provides that upon the occurrence of a "Corporate Change in Control" or a
"Transactional Change in Control" (as defined in the 1992 Plan), which include
(i) the acquisition (with certain exceptions) of 30% of the outstanding Common
Stock of the Company by a person, entity or group, (ii) certain changes in the
composition of the Board of Directors, (iii) certain mergers, reorganizations,
recapitalizations or consolidations involving the Company and (iv) the sale of
all or substantially all of the assets of the Company, unless the applicable
stock option agreement provides otherwise, the outstanding options that have not
yet vested will become fully vested upon the earliest of (a) the normal vesting
date, (b) one year from the applicable "Corporate Change in Control" or
"Transactional Change in Control" or (c) an involuntary employment action, such
as termination of employment without cause or a reduction in base compensation,
power, authority, duties or responsibilities. After the completion of the merger
with Time Warner Inc., substantially all stock options and shares of restricted
stock outstanding on January 10, 2000, by their terms, will vest and become
exercisable or free of restrictions, as the case may be, upon the earliest to
occur of their normal vesting date, the first anniversary date of the completion
of the merger and the employee's termination without cause or constructive
termination. See "Changes in Control."
Compensation of Directors
The Company's policy is not to pay cash compensation to members of the
Board for serving as a Director or for their attendance at Board meetings or
Committee meetings.
Directors are eligible to participate in the Company's 1992 Employee,
Director and Consultant Stock Option Plan (the "1992 Plan"). Under the 1992
Plan, each non-employee Director receives an initial grant of an option upon
first being elected or appointed to the Board of Directors to purchase 20,000
shares of Common Stock (or such higher number of options as is determined by the
Committee for recruitment purposes). The 1992 Plan also provides for an annual
grant on the date following the annual meeting of Stockholders of the Company of
each year, after giving effect to the election of any Director or Directors at
such annual meeting of Stockholders, to each non-employee Director (who has
served for at least six months as a Director) of an option to purchase 20,000
shares of Common Stock. Non-employee Directors who serve on the Company's
Compensation and Management Development or Audit Committees (or other committee
designated by the Board) are granted each year an option to purchase 10,000
shares, with the Chair of each such committee receiving an additional option to
purchase another 10,000 shares. Options granted for service on committees are
not cumulative for service on more than one committee. All of such options
granted to non-employee Directors have an exercise price equal to the fair
market value of the Common Stock on such grant date, have a term of ten years,
and are immediately exercisable.
Item 12. Security Ownership of Certain Beneficial Owners and Management
The following table sets forth certain information as of July 31, 2000,
concerning the ownership of Common Stock by (i) each current member of the Board
of Directors of the Company, (ii) each nominee of the Board of Directors of the
Company, (iii) each executive officer of the Company named in the Summary
Compensation Table appearing under "Executive Compensation," above and (iv) all
current Directors and executive officers of the Company as a group. No
Stockholder of the Company is known by the Company to be the beneficial owner of
more than 5% of the outstanding shares of Common Stock.
Shares Beneficially
Owned (1)
Name Number Percent
Current Directors:
Stephen M. Case(2)(3) 19,372,173 *
Daniel F. Akerson(3) 348,356 *
James L. Barksdale(4) 6,664,784 *
Frank J. Caufield(3) 2,015,172 *
Miles R. Gilburne(5) 2,259,053 *
General Alexander M. Haig, Jr.(5) 1,939,663 *
Kenneth J. Novack(3) 1,246,921 *
Robert W. Pittman(3) 4,494,946 *
General Colin L. Powell(5) 320,000 *
Franklin Raines(5) 250,000 *
Marjorie M. Scardino(5) 60,000 *
Named Executive Officers
Who Are Not Directors:
J. Michael Kelly (3) 1,210,370 *
George Vradenburg, III (3)(6) 2,498,929 *
All executive officers and 44,716,903 1.90%
Directors as a group (17 persons)(3)
------------------
* Represents beneficial ownership of less than 1% of the Company's Common Stock.
(1) The number of shares of Common Stock issued and outstanding on July 31,
2000 was 2,320,780,920. The calculation of percentages is based upon the
number of shares of Common Stock issued and outstanding on such date, plus
shares of Common Stock subject to options held by the respective persons on
July 31, 2000 and exercisable within 60 days thereafter. The persons and
entities named in the table have sole voting and dispositive power with
respect to all shares shown as beneficially owned by them, except as
described below. Attached to each share of Common Stock is a Preferred
Share Purchase Right to acquire one one-thousandth of a share of the
Company's Series A-1 Junior Participating Preferred Stock, par value $.01
per share, which Preferred Share Purchase Rights are not presently
exercisable.
(2) Includes 243,742 shares held by Mr. Case's spouse and 1,358,080 shares held
by the Stephen M. Case Foundation as to which he shares beneficial
ownership.
(3) Includes shares issuable within 60 days of July 31, 2000 upon the exercise
of options to purchase Common Stock as follows: Mr. Case-9,010,700; Mr.
Akerson-348,000; Mr. Caufield-1,982,200; Mr. Novack-1,244,000; Mr.
Pittman-4,482,265; Mr. Kelly-810,000; Mr. Vradenburg-2,481,000; and all
Directors and executive officers as a group-27,044,381.
(4) Includes 6,000 shares held by a charitable remainder trust as to which he
shares beneficial ownership.
(5) Represents shares issuable within 60 days of July 31, 2000 upon the
exercise of options to purchase Common Stock.
(6) Includes 6,402 shares held by a trust that Mr. Vradenburg has a pecuniary
interest in as co-trustee and beneficiary.
Changes in Control
On January 10, 2000, America Online entered into a merger agreement with
Time Warner Inc. pursuant to which each of America Online and Time Warner will
become a wholly owned subsidiary of a new parent company named AOL Time Warner
Inc. In the merger, each share of America Online common stock will be converted
into one share of AOL Time Warner common stock and each share of Time Warner
common stock and series common stock will be converted into 1.5 shares of AOL
Time Warner common stock and series common stock, respectively, and each share
of Time Warner preferred stock will be converted into a substantially identical
share of AOL Time Warner preferred stock.
As a result of the merger, the former stockholders of America Online will
have an approximate 55% interest in AOL Time Warner and the former stockholders
of Time Warner will have an approximate 45% interest in the combined entity,
expressed on a fully diluted basis. The merger is expected to be accounted for
by AOL Time Warner as an acquisition of Time Warner under the purchase method of
accounting for business combinations.
The merger was approved by the stockholders of America Online and Time
Warner at special meetings held on June 23, 2000. The merger is expected to
close in the fall of 2000. The consummation of the merger is subject to a number
of customary conditions, including required regulatory approvals, which the
companies are in the process of seeking. There can be no assurance that such
approvals will be obtained.
Item 13. Certain Relationships and Related Transactions
Frank Caufield, the son of Director Caufield, was employed by the
Company during the fiscal year ended June 30, 2000 as a consultant. Mr. Caufield
assisted in formulating the education strategy and formalizing a plan for the
development of the AOL@School concept. Before consulting for the Company, Mr.
Caufield provided similar services for other education websites. He received
$61,418 for his services.
Kenneth J. Novack, an executive officer and director of the Company, is
Of Counsel to the law firm of Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, PC.
Mintz Levin was retained by the Company during fiscal year 2000. Fees paid to
Mintz Levin were less than 5% of the firm's gross revenues for the fiscal year
ended June 30, 2000.
Set forth below is certain information as of July 31, 2000 as to loans
made pursuant to employment agreements by the Company to its Directors and
executive officers that were outstanding during the fiscal year.
Largest
Aggregate
Amount
Outstanding
Nature of in Fiscal Balance as
Name and Position Indebtedness Year 00 of 7/31/00 Interest Rate
George Vradenburg, III Residential(1) $400,000 $0 4.98%
Senior Vice President, Personal(1) $285,000 $0 *
Global and Strategic
Policy
------------------
* Such loan was granted at interest rates equal to the "Applicable Federal
Rate" as established by the Internal Revenue Service for each year the loan
was outstanding, as follows: year 1 - 5.50%; year 2 - 5.88%; and year 3 -
4.98%.
(1) Mr. Vradenburg has repaid the residential and personal loans in full.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized, on the 27th day of
October, 2000.
AMERICA ONLINE, INC.
By:/s/ Paul T. Cappuccio
Paul T. Cappuccio, Senior Vice President,
General Counsel and Assistant Secretary
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities indicated on the 27th day of October, 2000.
<TABLE>
<S> <C> <C>
SIGNATURE TITLE DATE
--------- ----- ----
Chairman of the Board and Chief October 27, 2000
* Executive Officer (principal executive
Stephen M. Case officer)
President, Chief Operating Officer and October 27, 2000
* Director
Robert W. Pittman
Senior Vice President, Chief Financial October 27, 2000
* Officer and Assistant Secretary (principal
J. Michael Kelly financial officer)
Senior Vice President, Controller, Chief October 27, 2000
* Accounting & Budget Officer and Corporate
James F. MacGuidwin Compliance Officer (principal accounting
officer)
* Director October 27, 2000
Daniel F. Akerson
* Director October 27, 2000
James L. Barksdale
* Director October 27, 2000
Frank J. Caufield
* Director October 27, 2000
Miles R. Gilburne
* Director October 27, 2000
Alexander M. Haig, Jr.
* Vice Chairman and Director October 27, 2000
Kenneth J. Novack
* Director October 27, 2000
Colin L. Powell
* Director October 27, 2000
Franklin D. Raines
* Director October 27, 2000
Marjorie M. Scardino
</TABLE>
*By: /s/ Paul T. Cappuccio
Paul T. Cappuccio, Attorney-in-Fact
