Exhibit 10.2
STOCK OPTION AGREEMENT, dated as of January 10, 2000 (the
"Agreement"), between Time Warner Inc., a Delaware corporation ("Grantee"), and
America Online, Inc., a Delaware corporation ("Issuer").
W I T N E S S E T H:
WHEREAS, Grantee and Issuer are, concurrently with the
execution and delivery of this Agreement, entering into an Agreement and Plan of
Merger, dated as of the date hereof (the "Merger Agreement;" capitalized terms
used without definition herein having the meanings assigned to them in the
Merger Agreement), pursuant to which the parties will engage in a business
combination in a merger of equals (the "Merger"); and
WHEREAS, as a condition to their willingness to enter into the
Merger Agreement, Grantee has required that Issuer agree, and believing it to be
in the best interests of Issuer, Issuer has agreed, among other things, to grant
to Grantee the Option (as hereinafter defined) to purchase shares of common
stock, par value $.01 per share, of Issuer ("Issuer Common Stock") at a price
per share equal to the Exercise Price (as hereinafter defined).
NOW THEREFORE, in consideration of the foregoing and the
mutual representations, warranties, covenants and agreements herein contained,
and intending to be legally bound hereby, the parties hereto agree as follows:
ARTICLE I
OPTION TO PURCHASE SHARES
1.1 Grant of Option.
(a) Issuer hereby grants to Grantee an irrevocable option to purchase, in whole
or in part, an aggregate of up to 452,535,148 duly authorized, validly issued,
fully paid and nonassessable shares of Issuer Common Stock (representing 19.9%
of the outstanding shares of Issuer Common Stock as of January 5, 2000) on the
terms and subject to the conditions set forth herein (the "Option"); provided,
however, that in no event shall the number of shares of Issuer Common Stock for
which this Option is exercisable exceed 19.9% of the issued and outstanding
shares of Issuer Common Stock at the time of exercise without giving effect to
the issuance of any Option Shares (as hereinafter defined). The number of shares
of Issuer Common Stock that may be received upon the exercise of the Option and
the Exercise Price are subject to adjustment as herein set forth.
(b) In the event that any additional shares of Issuer Common Stock are issued or
otherwise become outstanding after the date of this Agreement (other than
pursuant to this Agreement and other than pursuant to an event described in
Section 3.1 hereof), the number of shares of Issuer Common Stock subject to the
Option shall be increased so that, after such issuance, such number together
with any shares of Issuer Common Stock previously issued pursuant hereto, equals
19.9% of the number of shares of Issuer Common Stock then issued and outstanding
without giving effect to any shares subject or issued pursuant to the Option.
Nothing contained in this Section 1.1(b) or elsewhere in this Agreement shall be
deemed to authorize Issuer to breach or fail to comply with any provision of the
Merger Agreement. As used herein, the term "Option Shares" means the shares of
Issuer Common Stock issuable pursuant to the Option, as the number of such
shares shall be adjusted pursuant to the terms hereof.
1.2 Exercise of Option.
(a) The Option may be exercised by Grantee, in whole or in part, at any time, or
from time to time, commencing upon the Exercise Date and prior to the Expiration
Date. As used herein, the term "Exercise Date" means the date on which Grantee
becomes unconditionally entitled to receive the America Online Termination Fee
pursuant to Section 8.2(c) of the Merger Agreement. As used herein, the term
"Expiration Date" means the first to occur prior to Grantee's exercise of the
Option pursuant to Section 1.2(b) of:
(i) the Effective Time;
(ii) written notice of termination of this
Agreement by Grantee to Issuer;
(iii) 12 months after the first occurrence
of an Exercise Date; or
(iv) the date of termination of the Merger
Agreement, unless, in the case
of this clause (iv), Grantee has the right to receive the America
Online Termination Fee either (x) upon or (y) following such
termination upon the occurrence of certain events, in which case the
Option will not terminate until the later of (x) 15 business days
following the time the America Online Termination Fee becomes
unconditionally payable and (y) the expiration of the period in which
Grantee has such right to receive the America Online Termination Fee.
Notwithstanding the termination of the Option, Grantee shall be entitled to
purchase those Option Shares with respect to which it may have exercised the
Option by delivery of an Option Notice (as defined below) prior to the
Expiration Date, and the termination of the Option will not affect any rights
hereunder which by their terms do not terminate or expire prior to or at the
Expiration Date.
(b) In the event Grantee wishes to exercise the Option, Grantee shall send a
written notice to Issuer of its intention to so exercise the Option (an "Option
Notice"), specifying the number of Option Shares to be purchased (and the
denominations of the certificates, if more than one), whether the aggregate
Exercise Price will be paid in cash or by surrendering a portion of the Option
in accordance with Section 1.3(b) or a combination thereof, and the place in the
United States, time and date of the closing of such purchase (the "Option
Closing" and the date of such Closing, the "Option Closing Date"), which date
shall not be less than two Business Days nor more than ten Business Days from
the date on which an Option Notice is delivered; provided that the Option
Closing shall be held only if (i) such purchase would not otherwise violate or
cause the violation of, any applicable material law, statute, ordinance, rule or
regulation (collectively, "Laws") (including the HSR Act and the Communications
Act), and (ii) no material judgment, order, writ, injunction, ruling or decree
of any Governmental Entity (collectively, "Orders") shall have been promulgated,
enacted, entered into, or enforced by any Governmental Entity which prohibits
delivery of the Option Shares, whether temporary, preliminary or permanent;
provided, however, that the parties hereto shall use their reasonable best
efforts to (x) promptly make and process all necessary filings and applications
and obtain all consents, approvals, Orders, authorizations, registrations and
declarations or expiration or termination of any required waiting periods
(collectively, "Approvals") and to comply with any such applicable Laws and (y)
have any such Order vacated or reversed. In the event the Option Closing is
delayed pursuant to clause (i) or (ii) above, the Option Closing shall be within
ten Business Days following the cessation of such restriction, violation, Law or
Order or the receipt of any necessary Approval, as the case may be (so long as
the Option Notice was delivered prior to the Expiration Date); provided further
that, notwithstanding any prior Option Notice, Grantee shall be entitled to
rescind such Option Notice and shall not be obligated to purchase any Option
Shares in connection with such exercise upon written notice to such effect to
Issuer.
(c) At any Option Closing, (i) Issuer shall deliver to Grantee all of the Option
Shares to be purchased by delivery of a certificate or certificates evidencing
such Option Shares in the denominations designated by Grantee in the Option
Notice, and (ii) if the Option is exercised in part and/or surrendered in part
to pay the aggregate Exercise Price pursuant to Section 1.3(b), Issuer and
Grantee shall execute and deliver an amendment to this Agreement reflecting the
Option Shares for which the Option has not been exercised and/or surrendered. If
at the time of issuance of any Option Shares pursuant to an exercise of all or
part of the Option hereunder, Issuer shall have issued any rights or other
securities which are attached to or otherwise associated with the Issuer Common
Stock, then each Option Share issued pursuant to such exercise shall also
represent such rights or other securities with terms substantially the same as
and at least as favorable to Grantee as are provided under any shareholder
rights agreement or similar agreement of Issuer then in effect. At the Option
Closing, Grantee shall pay to Issuer by wire transfer of immediately available
funds to an account specified by Issuer to Grantee in writing at least two
Business Days prior to the Option Closing an amount equal to the Exercise Price
multiplied by the number of Option Shares to be purchased for cash pursuant to
this Article I; provided that the failure or refusal of Issuer to specify an
account shall not affect Issuer's obligation to issue the Option Shares.
(d) Upon the delivery by Grantee to Issuer of the Option Notice and the tender
of the applicable aggregate Exercise Price in immediately available funds or the
requisite portion of the Option in accordance with Section 1.3, Grantee shall be
deemed to be the holder of record of the Option Shares issuable upon such
exercise, notwithstanding that the stock transfer books of Issuer may then be
closed, that certificates representing such Option Shares may not then have been
actually delivered to Grantee, or Issuer may have failed or refused to take any
action required of it hereunder. Issuer shall pay all expenses that may be
payable in connection with the preparation, issuance and delivery of stock
certificates or an amendment to this Agreement under this Section 1.2 and any
filing fees and other expenses arising from the performance of the transactions
contemplated hereby.
1.3 Payments.
(a) The purchase and sale of the Option Shares pursuant to Section 1.2 of this
Agreement shall be at a purchase price equal to $73.75 per Share (as such amount
may be adjusted pursuant to the terms hereof, the "Exercise Price"), payable at
Grantee's option in cash, by surrender of a portion of the Option in accordance
with Section 1.3(b), or a combination thereof.
(b) Grantee may elect to purchase Option Shares issuable, and pay some or all of
the aggregate Exercise Price payable, upon an exercise of the Option by
surrendering a portion of the Option with respect to such number of Option
Shares as is determined by dividing (i) the aggregate Exercise Price payable in
respect of the number of Option Shares being purchased in such manner by (ii)
the excess of the Fair Market Value (as defined below) per share of Issuer
Common Stock as of the last trading day preceding the date Grantee delivers its
Option Notice (such date, the "Option Exercise Date") over the per share
Exercise Price. The "Fair Market Value" per share of Issuer Common Stock shall
be (i) if the Issuer Common Stock is listed on the New York Stock Exchange, Inc.
(the "NYSE") or any other nationally recognized exchange or trading system as of
the Option Exercise Date, the average of last reported sale prices per share of
Issuer Common Stock thereon for the 10 trading days commencing on the 12th
trading day immediately preceding the Option Exercise Date, or (ii) if the
Issuer Common Stock is not listed on the NYSE or any other nationally recognized
exchange or trading system as of the Option Exercise Date, the amount determined
by a mutually acceptable independent investment banking firm as the value per
share the Issuer Common Stock would have if publicly traded on a nationally
recognized exchange or trading system (assuming no discount for minority
interest, illiquidity or restrictions on transfer). That portion of the Option
so surrendered under this Section 1.3(b) shall be canceled and shall thereafter
be of no further force and effect.
(c) Certificates for the Option Shares delivered at an Option Closing will have
typed or printed thereon a restrictive legend which will read substantially as
follows:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY BE
REOFFERED OR SOLD ONLY IF SO REGISTERED OR IF AN EXEMPTION FROM SUCH
REGISTRATION IS AVAILABLE. SUCH SECURITIES ARE ALSO SUBJECT TO
ADDITIONAL RESTRICTIONS ON TRANSFER AS SET FORTH IN THE STOCK OPTION
AGREEMENT DATED AS OF JANUARY 10, 2000, A COPY OF WHICH MAY BE OBTAINED
FROM THE SECRETARY OF AMERICA ONLINE, INC. AT ITS PRINCIPAL EXECUTIVE
OFFICES."
It is understood and agreed that (i) the reference to restrictions arising under
the Securities Act in the above legend will be removed by delivery of substitute
certificate(s) without such reference if such Option Shares have been registered
pursuant to the Securities Act, such Option Shares have been sold in reliance on
and in accordance with Rule 144 under the Securities Act or Grantee has
delivered to Issuer a copy of a letter from the staff of the SEC, or an opinion
of counsel in form and substance reasonably satisfactory to Issuer and its
counsel, to the effect that such legend is not required for purposes of the
Securities Act and (ii) the reference to restrictions pursuant to this Agreement
in the above legend will be removed by delivery of substitute certificate(s)
without such reference if the Option Shares evidenced by certificate(s)
containing such reference have been sold or transferred in compliance with the
provisions of this Agreement under circumstances that do not require the
retention of such reference.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
2.1 Representations and Warranties of Grantee. Grantee hereby represents and
warrants to Issuer that any Option Shares or other securities acquired by
Grantee upon exercise of the Option will not be taken with a view to the public
distribution thereof and will not be transferred or otherwise disposed of except
in a transaction registered or exempt from registration under the Securities
Act.
2.2 Representations and Warranties of Issuer. Issuer hereby represents and
warrants to Grantee as follows:
(a) Option Shares. Issuer has taken all necessary corporate and other action to
authorize and reserve for issuance, and, subject to receipt of any Approvals, to
permit it to issue, the Option Shares and all additional shares or other
securities which may be issued pursuant to Section 3.1 upon exercise of the
Option, and, at all times from the date hereof until such time as the obligation
to deliver Option Shares hereunder terminates, will have reserved for issuance
upon exercise of the Option the Option Shares and such other additional shares
or securities, if any. All of the Option Shares and all additional shares or
other securities or property which may be issuable pursuant to Section 3.1, upon
exercise of the Option and issuance pursuant hereto, shall be duly authorized,
validly issued, fully paid and nonassessable, shall be delivered free and clear
of all Liens of any nature whatsoever, and shall not be subject to any
preemptive or similar right of any Person.
(b) No Restrictions. No Delaware law or other takeover statute or similar Law
and no provision of the Restated Certificate of Incorporation or Bylaws of
Issuer or any agreement to which Issuer is a party (a) would or would purport to
impose restrictions which might adversely affect or delay the consummation of
the transactions contemplated by this Agreement, or (b) as a result of the
consummation of the transactions contemplated by this Agreement, (i) would or
would purport to restrict or impair the ability of Grantee to vote or otherwise
exercise the rights of a shareholder with respect to securities of Issuer or any
of its Subsidiaries that may be acquired or controlled by Grantee or (ii) would
or would purport to entitle any Person to acquire securities of Issuer.
ARTICLE III
ADJUSTMENT UPON CHANGES IN CAPITALIZATION
3.1 Adjustment Upon Changes in Capitalization. In addition to the adjustment in
the number of shares of Issuer Common Stock that may be purchased upon exercise
of the Option pursuant to Section 1.1 of this Agreement, the number of shares of
Issuer Common Stock that may be purchased upon the exercise of the Option and
the Exercise Price shall be subject to adjustment from time to time as provided
in this Section 3.1. In the event of any change in the number of issued and
outstanding shares of Issuer Common Stock by reason of any stock dividend,
split-up, merger, recapitalization, combination, conversion, exchange of shares,
spin-off or other change in the corporate or capital structure of Issuer which
would have the effect of diluting or otherwise diminishing Grantee's rights
hereunder, the number and kind of Option Shares or other securities subject to
the Option and the Exercise Price therefor shall be appropriately adjusted so
that Grantee shall receive upon exercise of the Option (or, if such a change
occurs between exercise and the Option Closing, upon the Option Closing) the
number and kind of shares or other securities or property that Grantee would
have received in respect of the Option Shares that Grantee is entitled to
purchase upon exercise of the Option if the Option had been exercised (or the
purchase thereunder had been consummated, as the case may be) immediately prior
to such event or the record date for such event, as applicable. The rights of
Grantee under this Section shall be in addition to, and shall in no way limit,
its rights against Issuer for breach of or the failure to perform any provision
of the Merger Agreement.
ARTICLE IV
REGISTRATION RIGHTS
4.1 Registration of Option Shares Under the Securities Act.
(a) If requested by Grantee at any time and from time to time within two years
after receipt by Grantee of Option Shares (the "Registration Period"), Issuer
shall use its reasonable best efforts, as promptly as practicable, to effect the
registration under the Securities Act and any applicable state law (a "Demand
Registration") of such number of Option Shares or such other Issuer securities
owned by or issuable to Grantee in accordance with the method of sale or other
disposition contemplated by Grantee, including a "shelf" registration statement
under Rule 415 of the Securities Act or any successor provision, and to obtain
all consents or waivers of other parties that are required therefor. Grantee
agrees to use reasonable best efforts to cause, and to use reasonable best
efforts to cause any underwriters of any sale or other disposition to cause, any
sale or other disposition pursuant to such registration statement to be effected
on a widely distributed basis so that upon consummation thereof no purchaser or
transferee will own beneficially more than 3% of the then-outstanding voting
power of Issuer. Except with respect to such a "shelf" registration, Issuer
shall keep such Demand Registration effective for a period of not less than 150
days, unless, in the written opinion of counsel to Issuer, which opinion shall
be delivered to Grantee and which shall be satisfactory in form and substance to
Grantee and its counsel, such registration under the Securities Act is not
required in order to lawfully sell and distribute such Option Shares or other
Issuer securities in the manner contemplated by Grantee. Issuer shall only have
the obligation to effect three Demand Registrations pursuant to this Section
4.1; provided that only requests relating to a registration statement that has
become effective under the Securities Act shall be counted for purposes of
determining the number of Demand Registrations made. Issuer shall be entitled to
postpone for up to 150 days from receipt of Grantee's request for a Demand
Registration the filing of any registration statement in connection therewith if
the Board of Directors of Issuer determines in its good faith reasonable
judgment that such registration would materially interfere with or require
premature disclosure of, any material acquisition, reorganization, pending or
proposed offering of Issuer Securities or other transaction involving Issuer or
any other material contract under active negotiation by Issuer; and provided
further that Issuer shall not have postponed any Demand Registration pursuant to
this sentence during the twelve month period immediately preceding the date of
delivery of Grantee's request for a Demand Registration.
(b) If Issuer effects a registration under the Securities Act of Issuer Common
Stock for its own account or for any other stockholders of Issuer (other than on
Form S-4 or Form S-8, or any successor form), Grantee shall have the right to
participate in such registration and include in such registration the number of
shares of Issuer Common Stock or such other Issuer securities as Grantee shall
designate by notice to Issuer (an "Incidental Registration" and, together with a
Demand Registration, a "Registration"); provided, however, that, if the managing
underwriters of such offering advise Issuer in writing that in their opinion the
number of shares of Issuer Common Stock or other securities requested to be
included in such Incidental Registration exceeds the number which can be sold in
such offering, Issuer shall include therein (i) first, all shares proposed to be
included therein by Issuer, (ii) second, subject to the rights of any other
holders of registration rights in effect as of the date hereof, the shares
requested to be included therein by Grantee and (iii) third, shares proposed to
be included therein by any other stockholder of Issuer. Participation by Grantee
in any Incidental Registration shall not affect the obligation of Issuer to
effect Demand Registrations under this Section 4.1. Issuer may withdraw any
registration under the Securities Act that gives rise to an Incidental
Registration without the consent of Grantee.
(c) In connection with any Registration pursuant to this Section 4.1, (i) Issuer
and Grantee shall provide each other and any underwriter of the offering with
customary representations, warranties, covenants, indemnification and
contribution obligations in connection with such Registration, and (ii) Issuer
shall use reasonable best efforts to cause any Option Shares included in such
Registration to be approved for listing on the NYSE or any other nationally
recognized exchange or trading system upon which Issuer's securities are then
listed, subject to official notice of issuance, which notice shall be given by
Issuer upon issuance. Grantee will provide all information reasonably requested
by Issuer for inclusion in any registration statement to be filed hereunder. The
costs and expenses incurred by Issuer in connection with any Registration
pursuant to this Section 4.1 (including any fees related to qualifications under
Blue Sky Laws and SEC filing fees) (the "Registration Expenses") shall be borne
by Issuer, excluding legal fees of Grantee's counsel and underwriting discounts
or commissions with respect to Option Shares to be sold by Grantee included in a
Registration.
4.2 Transfers of Option Shares. The Option Shares may not be sold, assigned,
transferred, or otherwise disposed of except (i) in an underwritten public
offering as provided in Section 4.1 or (ii) to any purchaser of transferee who
would not, to the knowledge of the Grantee after reasonable inquiry, immediately
following such sale, assignment, transfer or disposal beneficially own more than
3% of the then-outstanding voting power of the Issuer; provided, however, that
Grantee shall be permitted to sell any Option Shares if such sale is made
pursuant to a tender or exchange offer that has been approved or recommended by
a majority of the members of the Board of Directors of Issuer (which majority
shall include a majority of directors who were directors as of the date hereof).
ARTICLE V
REPURCHASE RIGHTS; SUBSTITUTE OPTIONS
5.1 Repurchase Rights.
(a) Subject to Section 6.1, at any time on or after the Exercise Date and prior
to the Expiration Date, Grantee shall have the right (the "Repurchase Right") to
require Issuer to repurchase from Grantee (i) the Option or any part thereof as
Grantee shall designate at a price (the "Option Repurchase Price") equal to the
amount, subject to reduction at the sole discretion of Grantee pursuant to
clause (iii) of Section 6.1(a), by which (A) the Market/Offer Price (as defined
below) exceeds (B) the Exercise Price, multiplied by the number of Option Shares
as to which the Option is to be repurchased and (ii) such number of Option
Shares as Grantee shall designate at a price (the "Option Share Repurchase
Price") equal to the Market/Offer Price multiplied by the number of Option
Shares so designated. The term "Market/Offer Price" shall mean the highest of
(i) the highest price per share of Issuer Common Stock offered or paid in any
Acquisition Proposal, or (ii) the highest closing price for shares of Issuer
Common Stock during the six-month period immediately preceding the date Grantee
gives the Repurchase Notice (as hereinafter defined). In determining the
Market/Offer Price, the value of consideration other than cash shall be
determined by a nationally recognized investment banking firm selected by
Grantee and reasonably acceptable to Issuer, which determination, absent
manifest error, shall be conclusive for all purposes of this Agreement.
(b) Grantee shall exercise its Repurchase Right by delivering to Issuer written
notice (a "Repurchase Notice") stating that Grantee elects to require Issuer to
repurchase all or a portion of the Option and/or the Option Shares as specified
therein. The closing of the Repurchase Right (the "Repurchase Closing") shall
take place in the United States at the place, time and date specified in the
Repurchase Notice, which date shall not be less than two Business Days nor more
than ten Business Days from the date on which the Repurchase Notice is
delivered. At the Repurchase Closing, subject to the receipt of a writing
evidencing the surrender of the Option and/or certificates representing Option
Shares, as the case may be, Issuer shall deliver to Grantee the Option
Repurchase Price therefor or the Option Share Repurchase Price therefor, as the
case may be, or the portion thereof that Issuer is not then prohibited under
applicable Law from so delivering. At the Repurchase Closing, (i) Issuer shall
pay to Grantee the Option Repurchase Price for the portion of the Option which
is to be repurchased or the Option Shares Repurchase Price for the number of
Option Shares to be repurchased, as the case may be, by wire transfer of
immediately available funds to an account specified by Grantee at least 24 hours
prior to the Repurchase Closing and (ii) if the Option is repurchased only in
part, Issuer and Grantee shall execute and deliver an amendment to this
Agreement reflecting the Option Shares for which the Option is not being
repurchased.
(c) To the extent that Issuer is prohibited under applicable Law from
repurchasing the portion of the Option or the Option Shares designated in such
Repurchase Notice, Issuer shall immediately so notify Grantee and thereafter
deliver, from time to time, to Grantee the portion of the Option Repurchase
Price and the Option Share Repurchase Price, respectively, that it is no longer
prohibited from delivering, within five Business Days after the date on which
Issuer is no longer so prohibited; provided, however, that if Issuer at any time
after delivery of a Repurchase Notice is prohibited under applicable Law from
delivering to Grantee the full amount of the Option Repurchase Price and the
Option Share Repurchase Price for the Option or Option Shares to be repurchased,
respectively, Grantee may rescind the exercise of the Repurchase Right, whether
in whole, in part or to the extent of the prohibition, and, to the extent
rescinded, no part of the amounts, terms or the rights with respect to the
Option or Repurchase Right shall be changed or affected as if such Repurchase
Right were not exercised. Issuer shall use its reasonable best efforts to obtain
all required regulatory and legal approvals and to file any required notices to
permit Grantee to exercise its Repurchase Right and shall use its reasonable
best efforts to avoid or cause to be rescinded or rendered inapplicable any
prohibition on Issuer's repurchase of the Option or the Option Shares.
5.2 Substitute Option.
(a) In the event that Issuer enters into an agreement (i) to consolidate with or
merge into any Person, other than Grantee or any Subsidiary of Grantee (each an
"Excluded Person"), and Issuer is not the continuing or surviving corporation of
such consolidation or merger, (ii) to permit any Person, other than an Excluded
Person, to merge into Issuer and Issuer shall be the continuing or surviving or
acquiring corporation, but, in connection with such merger, the then outstanding
shares of Issuer Common Stock shall be changed into or exchanged for stock or
other securities of any other Person or cash or any other property or the then
outstanding shares of Issuer Common Stock shall after such merger represent less
than 50% of the outstanding voting securities of the merged or acquiring
company, or (iii) to sell or otherwise transfer all or substantially all of its
assets to any Person, other than an Excluded Person, then, and in each such
case, the agreement governing such transaction shall make proper provision so
that, unless earlier exercised by Grantee, the Option shall, upon the
consummation of any such transaction and upon the terms and conditions set forth
herein, be converted into, or exchanged for, an option with identical terms
appropriately adjusted to acquire the number and class of shares or other
securities or property that Grantee would have received in respect of Issuer
Common Stock if the Option had been exercised immediately prior to such
consolidation, merger, sale, or transfer, or the record date therefor, as
applicable and make any other necessary adjustments; provided, however, that if
such a conversion or exchange cannot, because of applicable Law be the same as
the Option, such terms shall be as similar as possible and in no event less
advantageous to Grantee than the Option.
(b) In addition to any other restrictions or covenants, Issuer agrees that it
shall not enter or agree to enter into any transaction described in Section
5.2(a) unless the Acquiring Corporation (as hereinafter defined) and any Person
that controls the Acquiring Corporation assume in writing all the obligations of
Issuer hereunder and agree for the benefit of Grantee to comply with this
Article V.
(c) For purposes of this Section 5.2, the term "Acquiring Corporation" shall
mean (i) the continuing or surviving Person of a consolidation or merger with
Issuer (if other than Issuer), (ii) Issuer in a consolidation or merger in which
Issuer is the continuing or surviving or acquiring Person, and (iii) the
transferee of all or substantially all of Issuer's assets.
ARTICLE VI
MISCELLANEOUS
6.1 Total Profit.
(a) Notwithstanding any other provision of this Agreement, in no event shall
Grantee's Total Profit (as hereinafter defined) plus any America Online
Termination Fee paid pursuant to Section 8.2(c) and any fees paid by Issuer
pursuant to Section 8.2(d) of the Merger Agreement (such America Online
Termination Fee and such fees paid pursuant to Section 8.2(d)of the Merger
Agreement, collectively, the "Total Issuer Fees") exceed in the aggregate an
amount (the "Limitation Amount") equal to 2.75% of the product of (x) the number
of shares of Issuer Common Stock outstanding as of the date hereof (assuming the
exercise of all outstanding options (other than the Option) and the conversion
into Issuer Common Stock of all securities of the Issuer convertible into Issuer
Common Stock) multiplied by (y) the last sale price of Issuer Common Stock on
the NYSE on January 7, 2000, and, if the total amount that would otherwise be
received by Grantee otherwise would exceed such amount, Grantee, at its sole
election, shall either (i) reduce the number of shares of Issuer Common Stock
subject to this Option, (ii) deliver to Issuer for cancellation Option Shares
previously purchased by Grantee, (iii) reduce the amount of the Option
Repurchase Price or the Option Share Repurchase Price, (iv) pay cash to Issuer,
or (v) any combination thereof, so that Grantee's actually realized Total
Profit, when aggregated with the Total Issuer Fees so paid to Grantee, shall not
exceed the Limitation Amount after taking into account the foregoing actions.
(b) Notwithstanding any other provision of this Agreement, the Option may not be
exercised for a number of Option Shares as would, as of the date of exercise,
result in a Notional Total Profit (as defined below) which, together with the
Total Issuer Fees theretofore paid to Grantee, would exceed the Limitation
Amount; provided, that nothing in this sentence shall restrict any exercise of
the Option permitted hereby on any subsequent date.
(c) As used herein, the term "Total Profit" shall mean the aggregate amount
(before taxes) of the following: (i) the amount received by Grantee pursuant to
Issuer's repurchase of the Option (or any portion thereof) pursuant to Section
5.1, (ii) (x) the amount received by Grantee pursuant to Issuer's repurchase of
Option Shares pursuant to Section 5.1, less (y) Grantee's purchase price for
such Option Shares, (iii) (x) the net cash amounts or the fair market value of
any property received by Grantee pursuant to any consummated arm's-length sales
of Option Shares (or any other securities into which such Option Shares are
converted or exchanged) to any unaffiliated party, less (y) Grantee's purchase
price of such Option Shares.
(d) As used herein, the term "Notional Total Profit" with respect to any number
of Option Shares as to which Grantee may propose to exercise the Option shall be
the Total Profit determined as of the date of such proposal assuming that the
Option was exercised on such date for such number of Option Shares and assuming
that such Option Shares, together with all other Option Shares held by Grantee
and its affiliates as of such date, were sold for cash at the closing market
price (less customary brokerage commissions) for shares of Issuer Common Stock
on the preceding trading day on the NYSE (or on any other nationally recognized
exchange or trading system on which shares of Issuer Common Stock are then so
listed or traded).
6.2 Further Assurances; Listing.
(a) From time to time, at the other party's request and without further
consideration, each party hereto shall execute and deliver such additional
documents and take all such further action as may be necessary or desirable to
consummate the transactions contemplated by this Agreement, including, without
limitation, to vest in Grantee good and marketable title, free and clear of all
Liens, to any Option Shares purchased hereunder. Issuer agrees not to avoid or
seek to avoid (whether by charter amendment or through reorganization,
consolidation, merger, issuance of rights or securities, the America Online
Rights Agreement or similar agreement, dissolution or sale of assets, or by any
other voluntary act) the observance or performance of any of the covenants,
agreements or conditions to be observed or performed hereunder by it.
(b) If the Issuer Common Stock or any other securities to be acquired upon
exercise of the Option are then listed on the NYSE (or any other national
securities exchange or trading system), Issuer, upon the request of Grantee,
will promptly file an application to list the shares of Issuer Common Stock or
such other securities to be acquired upon exercise of the Option on the NYSE
(and any other national securities exchange or trading system) and will use
reasonable best efforts to obtain approval of such listing as promptly as
practicable.
6.3 Division of Option; Lost Options. The Agreement (and the Option granted
hereby) are exchangeable, without expense, at the option of Grantee, upon
presentation and surrender of this Agreement at the principal office of Issuer,
for other agreements providing for Options of different denominations entitling
Grantee to purchase, on the same terms and subject to the same conditions as are
set forth herein, in the aggregate the same number of Option Shares purchasable
hereunder. Upon receipt by Issuer of evidence reasonably satisfactory to it of
the loss, theft or destruction or mutilation of this Agreement, and (in the case
of loss, theft or destruction) of reasonably satisfactory indemnification, and
upon surrender and cancellation of this Agreement, if mutilated, Issuer will
execute and deliver a new agreement of like tenor and date.
6.4 Amendment. This Agreement may not be amended except by an instrument in
writing signed on behalf of each of the parties hereto.
6.5 Notices. All notices and other communications hereunder shall be in writing
and shall be deemed duly given (a) on the date of delivery if delivered
personally, or by telecopy or telefacsimile, upon confirmation of receipt, (b)
on the first Business Day following the date of dispatch if delivered by a
recognized next-day courier service, or (c) on the tenth Business Day following
the date of mailing if delivered by registered or certified mail, return receipt
requested, postage prepaid. All notices hereunder shall be delivered as set
forth below, or pursuant to such other instructions as may be designated in
writing by the party to receive such notice:
(a) if to Grantee to:
Time Warner Inc.
00 Xxxxxxxxxxx Xxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxxxxxxxx X. Xxxxxx, Esq.
with a copy to:
Cravath, Swaine & Xxxxx
Worldwide Plaza
000 Xxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx X. Xxxxxxx, Esq.
(b) if to Issuer to:
America Online, Inc.
00000 XXX Xxx
Xxxxxx, Xxxxxxxx
Attention: Xxxx X. Xxxxxxxxx, Esq.
with a copy to:
Xxxxxxx Xxxxxxx & Xxxxxxxx
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxxx X. Xxxxxxx, Esq.
6.6 Interpretation. When a reference is made in this Agreement to Articles,
Sections, Exhibits or Schedules, such reference shall be to an Article or
Section of or Exhibit or Schedule to this Agreement unless otherwise indicated.
The headings contained in this Agreement are for reference purposes only and
shall not affect in any way the meaning or interpretation of this Agreement.
Whenever the words "include," "includes" or "including" are used in this
Agreement, they shall be deemed to be followed by the words "without
limitation."
6.7 Counterparts. This Agreement may be executed in one or more counterparts,
all of which shall be considered one and the same agreement and shall become
effective when one or more counterparts have been signed by each of the parties
and delivered to the other party, it being understood that both parties need not
sign the same counterpart.
6.8 Entire Agreement; No Third Party Beneficiaries.
(a) This Agreement and the other agreements of the parties referred to herein
constitute the entire agreement and supersede all prior agreements and
understandings, both written and oral, among the parties with respect to the
subject matter hereof.
(b) This Agreement shall be binding upon and inure solely to the benefit of each
party hereto, and nothing in this Agreement, express or implied, is intended to
or shall confer upon any other Person any right, benefit or remedy of any nature
whatsoever under or by reason of this Agreement.
6.9 Governing Law. This Agreement shall be governed and construed in accordance
with the laws of the State of Delaware (without giving effect to choice of law
principles thereof).
6.10 Severability. If any term or other provision of this Agreement is invalid,
illegal or incapable of being enforced by any law or public policy, all other
terms and provisions of this Agreement shall nevertheless remain in full force
and effect so long as the economic or legal substance of the transactions
contemplated hereby is not affected in any manner materially adverse to any
party. Upon such determination that any term or other provision is invalid,
illegal or incapable of being enforced, the parties hereto shall negotiate in
good faith to modify this Agreement so as to effect the original intent of the
parties as closely as possible in an acceptable manner in order that the
transactions contemplated hereby are consummated as originally contemplated to
the greatest extent possible.
6.11 Assignment. Neither this Agreement nor any of the rights, interests or
obligations hereunder shall be assigned by any of the parties hereto, in whole
or in part (whether by operation of law or otherwise), without the prior written
consent of the other party, and any attempt to make any such assignment without
such consent shall be null and void. Subject to the preceding sentence, this
Agreement will be binding upon, inure to the benefit of and be enforceable by
the parties and their respective successors and assigns.
6.12 Submission to Jurisdiction; Waivers. Each of Grantee and Issuer irrevocably
agrees that any legal action or proceeding with respect to this Agreement or for
recognition and enforcement of any judgment in respect hereof brought by the
other party hereto or its successors or assigns may be brought and determined in
the Chancery or other Courts of the State of Delaware, and each of Grantee and
Issuer hereby irrevocably submits with regard to any such action or proceeding
for itself and in respect to its property, generally and unconditionally, to the
nonexclusive jurisdiction of the aforesaid courts. Each of Grantee and Issuer
hereby irrevocably waives, and agrees not to assert, by way of motion, as a
defense, counterclaim or otherwise, in any action or proceeding with respect to
this Agreement, (a) any claim that it is not personally subject to the
jurisdiction of the above-named courts for any reason other than the failure to
lawfully serve process, (b) that it or its property is exempt or immune from
jurisdiction of any such court or from any legal process commenced in such
courts (whether through service of notice, attachment prior to judgment,
attachment in aid of execution of judgment, execution of judgment or otherwise),
(c) to the fullest extent permitted by applicable law, that (i) the suit, action
or proceeding in any such court is brought in an inconvenient forum, (ii) the
venue of such suit, action or proceeding is improper and (iii) this Agreement,
or the subject matter hereof, may not be enforced in or by such courts and (d)
any right to a trial by jury.
6.13 Enforcement. The parties agree that irreparable damage would occur in the
event that any of the provisions of this Agreement were not performed in
accordance with their specific terms. It is accordingly agreed that the parties
shall be entitled to specific performance of the terms hereof, this being in
addition to any other remedy to which they are entitled at law or in equity.
6.14 Failure or Indulgence Not Waiver; Remedies Cumulative. No failure or delay
on the part of any party hereto in the exercise of any right hereunder will
impair such right or be construed to be a waiver of, or acquiescence in, any
breach of any representation, warranty or agreement herein, nor will any single
or partial exercise of any such right preclude other or further exercise thereof
or of any other right. All rights and remedies existing under this Agreement are
cumulative to, and not exclusive to, and not exclusive of, any rights or
remedies otherwise available.
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IN WITNESS WHEREOF, Grantee and Issuer have caused this
Agreement to be duly executed as of the date first above written.
AMERICA ONLINE, INC.
By: /s/ Xxxxxxx X. Case
Name: Xxxxxxx X. Case
Title: Chairman & Chief Executive Officer
TIME WARNER INC.
By: /s/ Xxxxxx X. Xxxxx
Name: Xxxxxx X. Xxxxx
Title: Chairman & Chief Executive Officer
