General Counsel Employment Letter- George Vradenburg

February ___, 1997









George Vradenburg 16140 Valley Meadow Place Encino, CA 91436



Dear George:



We are very pleased to offer you the position of Senior Vice President, General Counsel, and Secretary, America Online, Inc. ("AOL" or the "Company") reporting directly and exclusively to Steve Case. In this position, you will be an Officer of AOL and a m e mber of the Company's Office of the Chairman and will be responsible, among other matters consistent with your position and office, for all legal and government relations matters relating to the Company. This letter will set forth the economic and key emp loyment conditions of our employment offer.





A. Salary



You will earn a minimum base compensation of $380,000, payable semi-monthly, subject to customary tax deductions. Your salary will be reviewed annually and any upward adjustments will be within the d iscretion of AOL's Board of Directors and based on your performance, contributions and/or changes in competitive market conditions.





B. Bonus



You will participate in the Management Incentive Plan with a targeted bonus of 75% of your base pay if you and AOL meet the established performance objectives (and proportionately greater percentages of your base pay should you and AOL exceed the established performance objectives). The bonus payment for your first twelve months of employment will be guaranteed at no less than 75% of your base pay (i.e., $285,000) of which half will be paid on or about September 1, 1997, and the remaining 50% will be paid on the anniversary of the date on which your employment commences (the "Commencement Date").





C. Stock Options



In contemplation of, and subject to, your becoming employed by the Company, you have been granted an option to purchase 200,000 shares of AOL common stock at an exercise price of $27.13 per share. You will be granted an additional option to purchase 40,0 00 shares of AOL common stock no later than March 15, 1997, at an exercise price equal to the fair market value of the stock on the date of grant. These options will vest pro rata on the vesting schedule set forth below.





Vesting Date Number of Options

- ------------ ----------------

Commencement Date 48,000



One year from Commencement Date 48,000

Two years from Commencement Date 48,000

Three years from Commencement Date 48,000

Four years from Commencement Date 48,000



The form of Option Agreement to be entered into by you and the Company with respect to these options is attached hereto.





D. Loan



AOL will lend you $285,000 within 30 days of the Commencement Date. This loan must be repaid at the earliest of the termina tion of your employment by AOL for "Cause" (as defined below), termination by you other than for "Good Reason" (as defined below), or three years from the Commencement Date, with simple interest at a rate equal to the applicable federal rate. Interest pay ments shall be made annually on the anniversary of the Commencement Date.





E. Relocation



You will be required as a condition of your employment to obtain housing in the Washington, D.C. area, to spend at least 75% of your time (subject to normal business travel) in the area, and to engage in in-home business entertainment (for which you will be reimbursed).



As a consequence, you will be eligible for AOL's executive relocation package (a copy of which you have received); however, you agree that AOL will n ot be asked to reimburse you for the closing costs associated with the sale of your present LA home at any time within the first three years of your employment. Any relocation costs paid by AOL and incurred by you following execution of this letter agreem ent must be repaid if you are terminated by AOL for Cause, or if you terminate your employment other than for "Good Reason", within the first year of employment.





F. Housing and Travel Allowance



In addition to the AOL relocation package and in considerat ion of your having to maintain a second house as a condition of your employment, AOL will provide you with the following housing and travel allowances. These allowances must be repaid if your employment is terminated by AOL for Cause or by you other than for "Good Reason" within the first year of employment:



1. A lump sum payment of $200,000 to be paid within 30 days of the

Commencement Date.



2. A monthly housing allowance of $9,150 paid semi-monthly, beginning on the

Commencement Date and continuing for 24 months thereafter. This allowance

will be grossed up to provide a net housing allowance of $110,000 annually

with the gross up adjusted downward by the benefit of any tax and/or

interest deductions (i.e., that you

actually take and that are not disallowed) on your Washington, D.C. area



In order to assure AOL the benefit of all properly available deductions,

you agree to claim all tax and/or interest deductions to which you may be

entitled, except to the extent you are advised by your tax advisor that you

do not have a reasonable reporting position with respect to such

deductions. AOL agrees that in the event that any such deductions are

disallowed, AOL will pay you the grossed-up amount of any tax assessment

with respect to such disallowed deductions, together with any related

penalty or interest.



3. At such time within the first three years of your employment as you

purchase a residence in the Washington, D.C. area, AOL will lend you

$400,000 for the down payment on such residence (and for furnishings),

secured by a second mortgage on such residence. Subject to the conditions

set forth below, this loan must be repaid at the earliest of termination of

your employment by AOL for Cause, termination by you other than for Good

Reason, or three years from the Commencement Date, with simple interest at

a rate equal to the applicable federal rate. Interest payments shall be

deferred until, and be paid at the time repayment of the loan is required.





G. Vacation



You will receive at least 3 weeks of vacation annually.





H. Benefits



You and your family will be entitled to participate in all AOL perquisites and benefits provided to AOL employees generally or to AOL senior management specifically, including sponsored health and benefits plans and life and disability insurance plans. A summary of which you have received.



I. Key Employment Conditions



. You will devote your full business time to Company.



. As a condition to your employment, you will enter into a

Confidentiality/Non-Competition/ Proprietary Rights Agreement (the

"Confidentiality Agreement"), a copy of which is attached.



. Subject to the terms and conditions of this letter agreement, your

employment at the Company is at will and you or the Company are free to

terminate the employment relationship at any time, with or without Cause,

with the following consequences:



1. Termination by You.

------------------



(a) You may terminate your employment at any time by giving thirty

(30) days written notice of termination to the Company. Upon

any such termination, the Company may elect to relieve you of

your duties, responsibilities and

authority hereunder during such thirty (30) day period, which

shall not constitute a termination for Good Reason.



(b) You may also terminate your employment at any time by giving a

notice of termination for a "Good Reason" (as defined below),

provided such notice is given within sixty (60) days of the

event or actions constituting Good Reason and sets forth in

reasonable detail the facts and circumstances claimed to

provide a basis for the termination, and provided, further, the

Company shall not have taken actions within thirty (30) days of

such notice of termination such that the circumstances

constituting a Good Reason have ceased. Your termination date

in the event of a termination under this subparagraph 1 shall

be the date set forth in the notice of termination, but in any

event not later than thirty (30) days after the date such

notice is given.



(c) As used herein, a "Good Reason" shall mean any of the

following:



(ii) a change in the location of the principal offices of the

Company to a location outside Northern Virginia, without

your consent; or



(ii) a sustained material change by the Company in your

authority or reporting relationship as Senior Vice

President and General Counsel, America Online, Inc.,

which causes your position with the Company to become of

materially less responsibility than your position

immediately following the Commencement Date, provided

that such material change is not in connection with a

termination of your employment hereunder by the Company.

Although it is the present intention of the Company that,

as General Counsel, you will have continuing

responsibility for government relations matters, any

change in the staffing or reporting arrangements for such

matters, after the first anniversary of the Commencement

Date and after good faith consultation with you, shall

not constitute "Good Reason."



2. Termination by the Company.

--------------------------



(a) Your employment may be terminated at any time by the Company

(i) with Cause by notice of termination to you, effective

immediately, except as provided in subparagraph (b) below,

unless otherwise stated in such notice, or (ii) without cause

at any time, by a notice of termination to you, effective

immediately unless otherwise stated in such notice.



(b) For purposes of this Agreement, the Company shall have "Cause"

to terminate your employment in the event of your (i)

conviction of a felony involving moral

turpitude, (ii) willful and continued failure to substantially

perform your required duties under this Agreement. which

failure has not been cured within ten (10) days after written

notice thereof by the Company, provided, however, that the

Company shall only be required to give notice pursuant to this

provision as a condition of termination for Cause one time

during the term of this Agreement, (iii) intentional or

repeated violation of the Confidentiality, Non-Competition and

Proprietary Rights Agreement, or (iv) intentional or repeated

improper conduct substantially prejudicial to the business of

the Company and any of its affiliates.



3. Effect of Termination

---------------------



(a) In the event your employment hereunder is terminated by you for

a Good Reason or by the Company other than for Cause, you

shall, effective as of the termination date, become a

consultant to the Company for a term of two (2) years, subject

to the terms and conditions set forth in the Consulting

Agreement (the "Consulting Agreement") attached as Exhibit A to

the Confidentiality Agreement.



(b) In the event the Company shall terminate your employment for

Cause, or you shall terminate your employment for other than a

Good Reason, then you shall be entitled as of the termination

date to no compensation under this Agreement, except as

provided in Paragraph 4. If the Company shall terminate your

employment for Cause or you shall terminate your employment for

other than a Good Reason, then you shall be subject to the

terms and conditions set forth in the Consulting Agreement,

unless in accordance with the notice provisions thereof, the

Company in its sole discretion shall have elected to terminate

such agreement.



4. Accrued Compensation.

--------------------



In the event of your termination as an employee for any reason, you

(or your estate) shall be paid such portion of your base

compensation (and, in the event your employment is terminated by the

Company other than for Cause or by you for a Good Reason, a pro rata

portion of your annual bonus (which, for purposes of this

calculation and for purposes of calculation under the Consulting

Agreement, shall be no less than the higher of the preceding year's

bonus and the average of your bonus for the two preceding years)) as

has accrued by virtue of your service during the period prior to

termination and has not yet been paid, together with any amounts for

expense reimbursement and similar items which have been properly

incurred in accordance with the provisions hereof prior to

termination and have not yet been paid.





J. Commencement Date



The Commencement Date of your employment shall be as soon as practicable, but no later than March 3, 1997. K. Compensation Committee Approval



The above economic and key employment conditions, have been approved by the Compensation Committee of AOL's Board of Directors.



George, I hope you will view this offer as a very significant demonstration of our desire to have you join our organization and be part of an incredible opportunity to build a new medium and a great Company. If the terms of this lette r are acceptable to you, please execute the enclosed copy of this letter and return it to me via facsimile.



We look forward to a long and mutually rewarding relationship.





Very truly yours,





/s/ Mark Stavish Mark Stavish Vice President, Human Resources







AGREED:





/s/ George Vradenburg George Vradenburg, III







Date: 11/17/97

Confidentiality/Non-Competition/Proprietary Rights Agreement



In consideration for the agreement of America Online, Inc., and/or its subsidiaries or affiliates (collectively, "America Online" ...