America Online raised $1.25 billion in a convertible note sale as buyers were lured by a share price that's almost doubled this year. For investors, the notes are a way to bet on a higher share price, with the cushion of an annual 3 percent return over 20 years even if the stock declines. To earn a bigger profit, AOL shares, which are up 16-fold in the past two years, must rise 30 percent from Tuesday's close, to $94.49. AOL shares jumped $3.25 yesterday, to $76.12 1/2. Convertible bonds are growing in popularity among Internet companies such as Dulles-based AOL, because they allow them take advantage of rising share prices and borrow inexpensively.

Toys R Us will pay a $200,000 fine and institute new safeguards in all its stores after inspections turned up some violations of child labor laws, the Department of Labor said. "We found more than 300 young Toys R Us employees working more hours and later into the night than allowed by law," said Labor Secretary Alexis Herman. The violations involved 14- and 15-year-olds who stock shelves, operate cash registers and clean at 19 New England Toys R Us stores, most of them in Massachusetts. A spokeswoman for the national toy-store chain, based in Paramus, N.J., said it has already taken steps to correct the problems, which she said were the result of misunderstandings of the law by some managers.

The nation's manufacturing sector grew for a 10th consecutive month in November, but at a slower rate than in previous months, a manufacturers group reported. A separate report said a key economic barometer held steady in October amid signs of weakness in manufacturing. The two reports of slower-than-expected growth helped ease inflation jitters on financial markets. The National Association of Purchasing Management said its index tracking the industrial economy slipped to 56.2 percent in November from 56.6 percent in October, or slightly below analysts' predictions. Readings over 50, however, indicate growth. Separately, the Conference Board said its index of leading economic indicators stood at 107.9 in October, the same as in September and in line with analysts' expectations.

BP-Amoco, one of the world's largest energy and petrochemical groups, has selected MCI WorldCom to provide its telecommunications services around the globe, in a five-year contract valued at about $650 million, the two companies announced. The British company has a presence in over 80 countries on six continents. MCI WorldCom will now exclusively handle its telephone services, as well as video conferencing and computer data traffic, as the energy company presses ahead with plans to conduct much of its business over the Internet. The deal represents a blow to AT&T and British Telecommunications, whose recently launched partnership seemed a natural for a global power with huge presence on both sides of the Atlantic.

All 1.8 million customers of AT&T WorldNet, the nation's fourth-largest Internet provider, lost their Internet access yesterday morning. The problems began at 8:15 a.m., according to a company spokesman, when the service's "domain name servers," which map Internet addresses to their underlying numerical identities, stopped functioning, causing Web servers to become unreachable and some mail sent to WorldNet subscribers to bounce. The spokesman said the outage was caused when another Internet provider, which he declined to identify, improperly changed a shared database of Internet addresses; service was restored at 4:30 p.m.

King Pharmaceuticals, a marketer of generic and brand-name drugs, agreed to buy Medco Research for $338.4 million in stock to gain its first pipeline of drugs in development. But Medco's largest investor, the State of Wisconsin Investment Board, threatened to block the sale because it said the offer was too low. King said it would pay 0.6818 shares for each share in Medco, or $31.45 each, an 18 percent premium on Medco's closing price Tuesday.

Bausch & Lomb said it will consolidate its contact-lens manufacturing unit and cut 850 jobs worldwide in a move to reduce costs and streamline production. The move, which comes only a few months after the global eye-care giant divested nonstrategic businesses to focus on growing its vision care unit, will lead to a $56 million pretax charge in the 1999 fourth quarter.

Johnson & Johnson has scrapped its consumer advertising campaign for Benecol, a new high-priced line of cholesterol-lowering margarines, salad dressings and snack bars that are among the first major foods designed to act like medicine. The decision to drop television and print advertising signals that Benecol has yet to catch on among U.S. shoppers despite an extensive marketing campaign. Rather than target Benecol ads to consumers, J&J will focus on selling doctors on the product, with hopes they will persuade their patients to give it a try.

The value of mergers worldwide has reached $3.1 trillion, more than the record $2.5 trillion in all of last year, as Europe's new single currency sparked a wave of cross-border combinations, Bloomberg News reported. European transactions announced through Nov. 30 amounted to $1.2 trillion, twice last year's total. The tally jumped Nov. 19 when Britain's Vodafone AirTouch made a hostile $141 billion bid for Germany's Mannesmann, the largest merger ever tried. U.S. activity, at $1.6 trillion, is about even with last year.

INTERNATIONAL

The European Union approved a ban on a softening chemical contained in certain toys, for fear it may affect the health of babies. The chemical substances, called phthalates, are used to soften toys such as baby rattlers and teething toys, which are sucked and chewed on by children. The EU's executive commission maintains that the chemicals pose a serious health risk, and may lead to liver, kidney and testicular damage. The ban, approved unanimously by the EU's Scientific Committee for Toxicity, Ecotoxicity and Environment, is expected to come into force before Christmas.

DaimlerChrysler said its November sales of cars and light trucks fell 2.7 percent as its aging minivan and pickup models lost ground to redesigned rivals. Sales of cars and light trucks excluding Mercedes-Benz fell to 194,716, matching analysts' average forecast. Stuttgart, Germany-based DaimlerChrysler said sales at its Chrysler arm rose 3.3 percent, to 53,970, while sales of light trucks fell 4.7 percent, to 140,746.

EARNINGS

Litton Industries, the U.S. Navy's third-biggest shipbuilder, said fiscal first-quarter profit rose 12 percent, driven by its August purchase of cargo-ship maker Avondale Industries. Profit before an accounting change rose to $52.8 million for the quarter ended Oct. 31. Sales rose 14 percent, to $1.37 billion.

LOCAL BUSINESS

America Online has acquired Seattle's Tegic Communications, a major provider of text-entry software for wireless devices. Tegic's programs enable people to send e-mail and instant messages using a standard telephone keypad to enter words or sentences. Dulles-based AOL, which would not disclose the financial terms of the purchase of the privately held Tegic, said the move is part of its 'AOL Anywhere' strategy to expand its Internet access to mobile telephones and other devices.

US Airways and its flight attendants union will resume contract negotiations the week of Dec. 13 after the National Mediation Board called for more talks, the two sides said. This all but guarantees there will be no strike by the flight attendants of the Arlington-based airline during the holiday season. A second federal mediator will join the discussions, the union said. The Association of Flight Attendants, which represents about 9,800 US Airways workers, asked the board last month to call an end to the three-year-old talks. That would have cleared the way for a 30-day cooling-off period, after which the union could go on strike or the company could impose work rules.

Columbia LNG, a subsidiary of Columbia Energy Group, will acquire Potomac Electric Power Co.'s 50 percent interest in the Cove Point liquefied natural gas terminal on Chesapeake Bay, the companies said. The two companies, which have been co-owners of the Lusby, Md., facility, did not disclose the purchase price for Pepco Energy Co.'s ownership interest. Pepco Energy is a subsidiary of Potomac Electric Power Co.