SEC Filings

TIME WARNER INC. filed this Form S-4/A on 03/24/2000
Entire Document
                                    ANNEX B
   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").
   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