America Online right, subject to adjustment, and cash instead of fractional
shares, if any. Use of this exchange feature means that eligible America Online
rights holders would not have to pay a purchase price before receiving shares
of America Online common stock.
"Flip Over" Feature. In the event that, after a person acquires 15% or more
of the America Online common stock then outstanding:
. America Online merges into another entity;
. another entity merges into America Online; or
. America Online sells more than 50% of its assets or earning power,
then each holder of an America Online right, except for a person that is the
beneficial owner of 15% or more of the America Online common stock then
outstanding, will have the right to receive, upon exercise of the America
Online right, the number of shares of the acquiring company's common stock
having a value equal to twice the exercise price of the America Online right.
Redemption of Rights. At any time prior to the earlier to occur of:
. any public announcement that a person has become the beneficial owner of
15% or more of the America Online common stock then outstanding; and
. May 12, 2008,
the board of directors of America Online may redeem all of the America Online
rights at a redemption price of $0.001 per right, subject to adjustment. The
right to exercise the America Online rights will terminate upon redemption, and
at that time, the holders of the America Online rights will have the right to
receive only the redemption price for each America Online right they hold.
Amendment of Rights. At any time before a person becomes the beneficial
owner of 15% or more of the America Online common stock then outstanding, the
terms of the existing America Online rights agreement may be amended by the
board of directors of America Online without the approval of the holders of the
rights. However, after the date any person acquires at least 15% of America
Online's outstanding common stock, the rights agreement may not be amended in
any manner that would adversely affect the interests of the holders of the
America Online rights, excluding the interests of the acquiror.
Termination of Rights. If not previously exercised, the America Online
rights will expire on May 12, 2008, unless America Online earlier redeems or
exchanges the America Online rights or extends the expiration date.
Anti-Takeover Effects. The America Online rights have anti-takeover effects.
Once the America Online rights have become exercisable, in most cases the
America Online rights will cause substantial dilution to a person that attempts
to acquire or merge with America Online. Accordingly, the existence of the
America Online rights may deter potential acquirors from making a takeover
proposal or a tender offer. The America Online rights should not interfere with
any merger or other business combination approved by the board of directors of
America Online because America Online may redeem the America Online rights and
because the America Online board of directors can amend the America Online
rights agreement so that a transaction approved by the America Online board of
directors would not cause the America Online rights to become exercisable.
Series A-1 Preferred Stock. In connection with the creation of the America
Online rights, the board of directors of America Online authorized the issuance
of 500,000 shares of America Online preferred stock designated as America
Online series A-1 junior participating preferred stock.