10-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark One)

x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2009

OR

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from              to             

Commission File Number 001-34419

AOL INC.

(Exact name of Registrant as specified in its charter)

Delaware	20-4268793
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
770 Broadway New York, NY	10003
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code: 212-652-6400

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Name of each exchange on which registered
Common Stock, $0.01 par value	New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act:

None

Indicate by check mark whether the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    Yes  ¨    No  x

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.    Yes  ¨    No  x

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulations S-T (§232.405 of this chapter) during the preceding 12 months (or for shorter period that the registrant was required to submit and post such files).    Yes  ¨    No  ¨

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405) is not contained herein, and will not be contained, to the best of the registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendments to this Form 10-K.  x

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer  ¨	Accelerated filer  ¨
Non-accelerated filer  x	Smaller reporting company  ¨
(Do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act.)    Yes  ¨    No  x

As of June 30, 2009 the registrant’s common stock was not publicly traded.

As of February 19, 2010, the number of shares of the Registrant’s common stock, par value $0.01 per share, outstanding was 106,534,436.

DOCUMENTS INCORPORATED BY REFERENCE

Certain information required by Part III of this report is incorporated by reference from the Registrant’s proxy statement to be filed pursuant to Regulation 14A with respect to the Registrant’s 2010 Annual Meeting of Stockholders to be held on April 29, 2010.

TABLE OF CONTENTS

			Page Number
Part I.
		Cautionary Statement Concerning Forward-Looking Statements	1
	Item 1.	Business	1
	Item 1A.	Risk Factors	16
	Item 1B.	Unresolved Staff Comments	29
	Item 2.	Properties	29
	Item 3.	Legal Proceedings	29
	Item 4.	Reserved	31
Part II.
	Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	32
	Item 6.	Selected Financial Data	34
	Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	36
	Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	60
	Item 8.	Financial Statements and Supplementary Data	61
	Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	103
	Item 9A(T).	Controls and Procedures	103
	Item 9B.	Other Information	103
Part III.
	Item 10.	Directors, Executive Officers and Corporate Governance	105
	Item 11.	Executive Compensation	105
	Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	105
	Item 13.	Certain Relationships and Related Transactions, and Director Independence	105
	Item 14.	Principal Accountant Fees and Services	105
Part IV.
	Item 15.	Exhibits and Financial Statement Schedules	106
Signatures			107
Exhibit Index			109

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INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

	Page Number
Report of Independent Registered Public Accounting Firm	62
Consolidated Statements of Operations for the years ended December 31, 2009, 2008 and 2007	63
Consolidated Balance Sheets as of December 31, 2009 and 2008	64
Consolidated Statements of Cash Flows for the years ended December 31, 2009, 2008 and 2007	65
Consolidated Statements of Equity for the years ended December 31, 2009, 2008 and 2007	66
Note 1: Description of Business, Basis of Presentation and Summary of Significant Accounting Policies	67
Note 2: Income (Loss) Per Common Share	78
Note 3: Goodwill and Intangible Assets	79
Note 4: Business Acquisitions, Dispositions and Other Significant Transactions	80
Note 5: Long-term Debt and Other Financing Arrangements	83
Note 6: Income Taxes	85
Note 7: Stockholders’ Equity	88
Note 8: Equity-Based Compensation and Employee Benefit Plans	88
Note 9: Restructuring Costs	92
Note 10: Derivative Instruments	93
Note 11: Commitments and Contingencies	94
Note 12: Accrued Expenses and Other Current Liabilities	97
Note 13: Related Party Transactions	97
Note 14: Segment Information	101
Note 15: Selected Quarterly Financial Data (unaudited)	101
Schedule II—Valuation and Qualifying Accounts	102

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CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS

This Annual Report on Form 10-K (“Annual Report”) contains certain “forward-looking statements” regarding business strategies, market potential, future financial performance and other matters. Words such as “anticipates,” “estimates,” “expects,” “projects,” “forecasts,” “intends,” “plans,” “believes” and words and terms of similar substance used in connection with any discussion of future operating or financial performance identify forward-looking statements. These forward-looking statements are based on management’s current expectations and beliefs about future events. As with any projection or forecast, they are inherently susceptible to uncertainty and changes in circumstances. Except for our ongoing obligations to disclose material information under the federal securities laws, we are under no obligation to, and expressly disclaim any obligation to, update or alter any forward-looking statements whether as a result of such changes, new information, subsequent events or otherwise.

Various factors could adversely affect our operations, business or financial results in the future and cause our actual results to differ materially from those contained in the forward-looking statements, including those factors discussed in detail in “Item 1A—Risk Factors.” In addition, we operate a web services company in a highly competitive, rapidly changing and consumer and technology-driven industry. This industry is affected by government regulation, economic, strategic, political and social conditions, consumer response to new and existing products and services, technological developments and, particularly in view of new technologies, the continued ability to protect intellectual property rights. Our actual results could differ materially from management’s expectations because of changes in such factors.

Further, lower than expected valuations associated with our cash flows and revenues may result in our inability to realize the value of recorded intangibles and goodwill. In addition, achieving our business and financial objectives, including growth in operations and maintenance of a strong balance sheet and liquidity position, could be adversely affected by the factors discussed or referenced “Item 1A—Risk Factors” as well as, among other things:

• a longer than anticipated continuation of the current economic slowdown or further deterioration in the economy;

• decreased liquidity in the capital markets;

• our ability to access the capital markets for debt securities or bank financings;

• our borrowing capacity under the new revolving credit facility;

• the impact of terrorist acts and hostilities;

• changes in our plans, strategies and intentions;

• our ability to attract and retain key employees;

• asset impairments;

• the impact of significant acquisitions, dispositions and other similar transactions; and

• the failure to meet earnings expectations.

ITEM 1. BUSINESS

Introduction

We are a leading global web services company with an extensive suite of brands and offerings and a substantial worldwide audience. Our business spans online content, products and services that we offer to consumers, publishers and advertisers. We are focused on attracting and engaging consumers and providing

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valuable online advertising services on both our owned and operated properties and third-party websites. We have the largest advertising network in terms of online consumer reach in the United States as of January 2010.

The Spin-Off

In the fourth quarter of 2009, the Board of Directors of Time Warner Inc. (“Time Warner”) approved the complete legal and structural separation of AOL Inc. from Time Warner (the “spin-off”), following which we became an independent, publicly-traded company. In the spin-off, which occurred on December 9, 2009, Time Warner distributed to its shareholders of record all of the shares of our common stock that it owned at a ratio of one share of AOL common stock for each 11 shares of Time Warner common stock held by each such holder as of November 27, 2009, the record date for the spin-off.

Prior to the spin-off, Time Warner caused a reorganization of our corporate structure. On July 8, 2009, Time Warner completed the purchase of Google Inc.’s (“Google”) 5% interest in us. Following this purchase, AOL Holdings LLC, which was formed in Delaware in 2006, became a wholly-owned subsidiary of Time Warner. On November 2, 2009, Time Warner caused the conversion of AOL Holdings LLC into a Delaware corporation named AOL Inc. Prior to the spin-off, Time Warner caused substantially all of the assets and liabilities (other than guarantees of indebtedness of Time Warner and other non-AOL affiliates of Time Warner) of AOL LLC, then our wholly-owned subsidiary that held, directly or indirectly, all of the AOL business, to be transferred to and assumed by us.

Following this transfer and assumption of substantially all of AOL LLC’s assets and liabilities, ownership of AOL LLC was retained by Time Warner.

In connection with the spin-off, the following key transactions or events occurred:

• On November 16, 2009, we entered into a Separation and Distribution Agreement (the “Separation Agreement”) with Time Warner which set forth the terms and conditions of our legal and structural separation from Time Warner.

• Our Registration Statement on Form 10 was declared effective by the U.S. Securities and Exchange Commission on November 17, 2009.

• On December 9, 2009, we entered into a 364-day $250 million senior secured revolving credit facility (the “Revolving Credit Facility”) which is guaranteed by Time Warner.

• On December 10, 2009, after completion of the spin-off, our common stock began trading “regular way” on the New York Stock Exchange under the symbol “AOL”.

Our Relationship with Time Warner

Following the spin-off, our company and Time Warner operate independently, and neither has any ownership interest in the other. In order to govern certain of the ongoing relationships between us and Time Warner after the spin-off and to provide mechanisms for orderly transition, we and Time Warner have entered into agreements pursuant to which certain services and rights are provided for following the spin-off, and we and Time Warner have agreed to indemnify each other against certain liabilities arising from our respective businesses. See “Note 13: Related Party Transactions” in our accompanying consolidated financial statements for further information on the ongoing relationship with Time Warner.

Restructuring

We undertook various restructuring activities in 2009 in an effort to better align our organizational structure and costs with our strategy. We are in the midst of a significant restructuring initiative which began late in 2009 and we expect to complete in the first half of 2010. We expect to reduce our total workforce by nearly one-third

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in connection with this restructuring initiative, prior to hiring of new employees in areas of strategic focus. In addition, we plan to reduce our cost base in the United Kingdom and cease or reduce operations in a number of other countries. Specifically, we plan to reduce our presence in Europe by significantly reducing our operations in France and Germany and ceasing operations in a number of other countries. In certain of these countries, we are currently consulting with employees or employee representatives in accordance with applicable legal requirements.

Background

Historically, our primary strategic focus was our dial-up Internet access services business which operated one of the largest Internet subscription access services in the United States. As broadband penetration in the United States increased, we experienced a decline, which we continue to experience, in subscribers to our access service. At the same time, online advertising experienced significant growth. In August 2006, we fundamentally shifted the primary strategic focus of our business from generating subscription access revenues to attracting and engaging Internet consumers and generating advertising revenues. In connection with this shift, we began offering the vast majority of our content, products and services to consumers for free in an effort to attract and engage a broader group of consumers. Although our primary strategic focus has shifted, our subscription access service remains an important source of our total revenues and cash flows.

Prior to the spin-off, Time Warner had been evaluating potential transactions involving, and structural alternatives for, AOL, including the possibility of separating the global web services and subscription access services businesses, which share infrastructure such as data centers and network operations centers. Historically, the global web services business had three units: the first focused on content published on a variety of websites with related applications and services; the second focused on social networking, community and instant communications products and services; and the third focused on providing advertising services on both our owned and operated properties and third-party websites. The subscription access services business included the AOL-branded Internet access service as well as CompuServe and Netscape Internet access services.

In April 2009, Tim Armstrong was appointed our Chairman and Chief Executive Officer, and he commenced a review of AOL’s strategy and operations while Time Warner continued its evaluation of structural alternatives. Time Warner’s evaluation resulted in the announcement on May 28, 2009 that it would move forward with plans for the complete legal and structural separation of AOL from Time Warner.

In connection with this strategic review, which factored in Time Warner’s decision to spin off AOL, we updated our organizational structure and developed the next phase in the strategic shift begun in 2006. Our strategy remains focused primarily on attracting and engaging Internet consumers and generating advertising revenues, with our subscription access service managed as a valuable distribution channel for our content, product and service offerings. As a result, we currently operate as a single integrated business rather than as two separate businesses.

Our Strategic Initiatives

Consistent with our strategic shift to a business focused primarily on generating advertising revenues, we have begun executing a multi-year strategic plan to reinvigorate growth in our revenues and profits by taking advantage of the migration of commerce, information and advertising to the Internet. Our strategy is to focus our resources on AOL’s core competitive strengths in web content production, local, consumer applications, advertising and paid services while expanding the presence of our content, product and service offerings on multiple platforms and digital devices. We also aim to reorient AOL’s culture and reinvigorate the AOL brand by prioritizing the consumer experience, making greater use of data-driven insights and encouraging innovation, including through AOL Ventures. Particular areas of strategic emphasis include:

• Expanding Our Exclusive Content Offerings. We are expanding our offerings of relevant and engaging online consumer content by focusing on the creation and publication of exclusive original content.

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• Pursuing Local Opportunities. We believe that there are significant opportunities for growth in the area of local content, platforms and services, by providing comprehensive content covering all geographic areas from local neighborhoods to major metropolitan areas. By enhancing these local offerings we seek to provide consumers with a comprehensive local experience.

• Enhancing Our Established Consumer Applications. We seek to increase the reach of and engagement on our established consumer applications (including communications offerings such as our e-mail products and instant messaging applications) on multiple platforms and digital devices.

• Increasing Advertising Sales on Our Own Properties and Growing the Third Party Network. We seek to provide premium global advertisers with effective and efficient means of reaching our consumers. In addition, we seek to significantly increase the number of publishers and advertisers utilizing our third-party advertising network by providing an open, transparent and easy-to-use advertising system that offers unique and valuable insights to our publishers and advertisers.

• Becoming a Consumer-Friendly Retailer of Subscription Products and Services. We seek to develop, test and market new subscription products that are owned by us and by third parties. To facilitate this goal, we are planning to develop a single, consumer-facing platform that will allow us to manage and distribute these additional subscription products as well as our subscription access service.

Business Overview

Our business operations are focused on the following:

• AOL Properties. We seek to be a global publisher of relevant and engaging online content by utilizing open and highly scalable publishing platforms and content management systems, as well as a leading online provider of consumer products and services. AOL Properties include our owned and operated content, products and services in the Content, Local, Paid Services and Consumer Applications strategy areas in addition to our AOL Ventures offerings.

We generate advertising revenues from our owned and operated content, products and services through the sale of display advertising and search and contextual advertising. We seek to provide effective and efficient advertising solutions utilizing data-driven insights that help advertisers decide how best to engage consumers.

We also generate revenues through our subscription access service. We view our subscription access service as a valuable distribution channel for AOL Properties. Our access service subscribers are important users of AOL Properties and engaging both present and former access service subscribers is an important component of our strategy. In addition, our subscription access service will remain an important source of revenue and cash flow for us in the near term. We also generate revenues from subscriptions to other products and services.

Global consumers are increasingly accessing and using the Internet through devices other than personal computers, such as digital devices (e.g., smartphones). As a result, we seek to ensure that our content, products and services are compatible with such devices so that our consumers are able to access and use our content, products and services via these devices.

• Third Party Network. We also generate advertising revenues through the sale of advertising on third-party websites and on digital devices, which we collectively refer to as the “Third Party Network.” Our mission is to provide an open and transparent advertising system that is easy-to-use and offers our publishers and advertisers unique and valuable insights. We seek to significantly increase the number of publishers and advertisers utilizing the Third Party Network.

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We market our offerings to advertisers on both AOL Properties and the Third Party Network under the brand “AOL Advertising.” We market our offerings to publishers on the Third Party Network under the brand “Advertising.com.”

AOL Properties

AOL Media Offerings

AOL Media offerings include original content produced through our large network of content creators, which includes established journalists and other writers, content we license from third parties and aggregations of user-generated content. Our content offerings are made available to broad audiences through sites such as the AOL.com homepage, as well as to niche audiences on highly-targeted, branded properties, such as Asylum, Engadget and WalletPop. Over time, to increase the flexibility and revenue generation potential of our content, we intend to create more exclusive original content and rely less on non-exclusive third-party content. To facilitate the intake, management and publication of original content, we are moving toward utilizing publishing platforms and content management systems that are designed to scale in a cost-effective manner in order to produce a large variety of relevant content for consumers. We recently launched our Seed.com platform which allows writers and photographers to submit original content for our professional editors to review and possibly publish on AOL Properties or on third party sites. Additionally, our acquisition of StudioNow, Inc. in the first quarter of 2010 provides us with a video content management system and network of professional videographers that will allow us to increase the amount of original video we create.

AOL Media offerings include the following:

• News & Information (including Engadget, DailyFinance, AOL News, WalletPop, FanHouse and PoliticsDaily);

• Women & Lifestyle (including StyleList, Lemondrop, PawNation and ParentDish);

• Entertainment (including Moviefone, AOL Music, AOL Television and PopEater); and

• Marketplace Solutions (including AOL Autos, AOL Shopping, Tripvine and RentedSpaces).

Local

We seek to be a leading provider of local content, platforms and services covering geographic levels ranging from neighborhoods to major metropolitan areas. We have developed and acquired a number of platforms that are designed to facilitate the aggregation, distribution and consumption of local content. This local content includes professional editorial content, user-generated content and business listings. We anticipate providing one of the most compelling, accessible and comprehensive local experiences on the Internet.

Historically, local “city guide” and “directory-style” sites have focused on providing information and services to larger-scale metropolitan areas, while smaller communities and towns have been largely ignored. We believe that these smaller communities represent a significant opportunity. For small communities, local newspapers associated with nearby metropolitan regions have been a central resource for news and events. We believe these local print publications are currently facing significant economic challenges. In order to take advantage of these dynamics we intend to significantly invest in this area and establish online destinations that provide comprehensive news, events and directories at the community level.

Our local offerings include the following:

• Patch, which is a community-specific news and information platform dedicated to providing comprehensive and trusted local coverage for individual towns and communities;

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• MapQuest, which is a leading online mapping and directions service;

• Local Entertainment Guides (including City’s Best); and

• Local Directories (including AOL Yellow Pages).

Consumer Applications

We offer a powerful suite of consumer applications, including communications products and services. Our e-mail and instant messaging products and services provide us with the ability to reach millions of consumers globally. Our goal is to increase the reach and engagement of our communications offerings on multiple platforms and digital devices (including on smartphones such as the iPhone, Blackberry and Android-based devices). Accordingly, we seek to continue to develop and enhance the functionality of our communications offerings, including through user interface improvements and integrations with other networks and services.

Our consumer applications offerings include the following:

• AOL Mail, which is one of the most popular e-mail services in the United States;

• AIM, which is a leading instant messaging service in the United States;

• a suite of mobile offerings which extend our content, products and services to a range of digital devices;

• a variety of toolbars (browser plug-ins) that gives consumers persistent, easy access to content and search;

• Lifestream, which provides consumers an easy way to aggregate updates from different social networks to which they belong; and

• ICQ, which is an instant messaging service that has a strong international presence.

We are continually looking to enhance our communications offerings. For example, in the fourth quarter of 2009, we launched a simpler, more intuitive user interface for AOL Mail. We also believe there are long-term opportunities to distribute content, products and advertising through our communications offerings, enabling us to generate increased advertising revenue.

Search and Contextual

We offer AOL Search on AOL Properties. We provide our consumers with a general, Internet-based search experience that utilizes Google’s organic web search results and additional links on the search results page that showcase contextually relevant AOL and third-party content and information, as well as provide a variety of search-related features (such as suggesting related searches to help users further refine their search queries). We also provide our consumers with relevant paid text-based search advertising through our relationship with Google, in which we provide consumers sponsored link ads in response to their search queries.

We also offer our own proprietary video (Truveo) and news (Relegence) search services. We believe Truveo is the most comprehensive video search engine in the world. Truveo’s functionality enables consumers to enter search terms to discover publicly available online videos and receive search results that include links to each video’s host site and thumbnail-sized images to help consumers refine their search queries for relevant videos. The Relegence news search service acquires information on a real-time basis from public and private information sources, including news wires, websites, regulatory feeds and corporate sources, and indexes this information on a proprietary platform to enable the use of relevant, targeted news feeds across AOL Properties. In addition, we offer vertical search services (i.e., search within a specific content category) and mobile search services on AOL Properties.

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We also offer contextually relevant advertising generated based on the content of the AOL Properties webpage the consumer is viewing.

Paid Services

Historically, our primary subscription service has been our subscription access service. Moving forward, we seek to develop, test and market new subscription products and services that are either owned by us or by third parties. To facilitate this goal, we are planning to develop a single, consumer-facing platform that will allow us to manage and distribute these additional subscription products as well as our subscription access service. We plan to offer those subscriptions to our access subscribers and to other Internet consumers.

Distribution of AOL Properties

Content, products and services on AOL Properties are generally available to online consumers and we are focused on attracting greater numbers of consumers to our offerings. In addition, we utilize various distribution channels which allow us to more directly reach online consumers.

SUBSCRIPTION ACCESS SERVICE

Our AOL-brand subscription access service, which we offer consumers in the United States for a monthly fee, is a valuable distribution channel for AOL Properties. As of December 31, 2009, we had 5.0 million AOL-brand access subscribers in the United States.

In addition to our content, products and services that are available to all online consumers, an AOL-brand access subscription provides members with dial-up access to the Internet and, depending on the applicable price plan, various degrees of enhanced safety and security features, technical support and other benefits. In addition, we continue to offer Internet access services under the CompuServe and Netscape brands.

Our major access service partners are Level 3 Communications, LLC and MCI Communications Services, Inc., who provide us with modem networks and related services for a substantial portion of our subscription access service. We have agreed to commit a significant portion of our access service subscribers’ total dial-up network hours to the Level 3 and MCI networks. More specifically, 30% of our total dial-up network hours are presently committed to Level 3, and 50% of our total dial-up network hours are presently committed to MCI. Through take or pay provisions in each agreement, we will incur penalty payments if we fail to dedicate the required percentage of dial-up hours to these service partners. As of December 31, 2009, we are meeting our volume commitments to each of these service partners. We have agreed to use the Level 3 and MCI networks until March 31, 2011 and December 31, 2014, respectively. The agreement with MCI may be renewed at our option until December 31, 2015. Upon expiration of these agreements, we expect to continue our relationships with Level 3 and MCI or enter into agreements with one or more other providers of modem networks and related services.

Our access service subscriber base has declined and is expected to continue to decline as a result of several factors, including the increased availability of high-speed broadband Internet connections, the fact that a significant amount of online content, products and services has been optimized for use with broadband Internet connections and the effects of our strategic shift announced in 2006, which resulted in significantly reduced marketing efforts for our subscription access service and the free availability of the vast majority of our content, products and services. See “Item 1A—Risk Factors—Risks Relating to Our Business—Our strategic shift to an online advertising-supported business model involves significant risks”.

OTHER DISTRIBUTION CHANNELS

We also distribute AOL Properties through a variety of other channels, including agreements with original equipment manufacturers of computers, digital devices and other consumer electronics, broadband access providers and mobile carriers. Additional distribution channels include toolbars, widgets, co-branded portals and

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websites, and third-party websites and social networks that link to AOL Properties. We also utilize search engine marketing and search engine optimization as distribution methods. In addition, we make available open standards and protocols for use by third-party developers to enhance, promote and distribute AOL Properties.

AOL Properties Revenue Generation

ADVERTISING REVENUES

We generate advertising revenues from AOL Properties through the sale of display advertising and search and contextual advertising. We offer advertisers a wide range of capabilities and solutions to effectively deliver advertising and reach targeted audiences across AOL Properties through our dedicated advertising sales force. The substantial number of unique visitors on AOL Properties allows us to offer advertisers the capability of reaching a broad and diverse demographic and geographic audience without having to partner with multiple content providers. We seek to provide effective and efficient advertising solutions utilizing data-driven insights that help advertisers decide how best to engage consumers. We offer advertisers marketing and promotional opportunities to purchase specific placements of advertising directly on AOL Properties (i.e., in particular locations and on specific dates). In addition, we offer advertisers the opportunity to bid on unsold advertising inventory on AOL Properties utilizing our proprietary scheduling, optimization and delivery technology. Finally, advertising inventory on AOL Properties not sold directly to advertisers, as described above, may be included for sale to advertisers with inventory purchased from third-party publishers in the Third Party Network.

We offer numerous types of display advertising, including text and banner advertising, mobile, video and rich media advertising, sponsorship of content offerings, local and classified advertising and audience targeting opportunities. Display advertising revenues are generated through the display of graphical advertisements as well as performance-based advertising. Search and contextual advertising revenues are generated when a consumer clicks on or views a text-based ad on their screen. These text-based ads are either generated from a consumer- initiated search query or generated based on the content of the webpage the consumer is viewing. Agreements for advertising on AOL Properties typically take the following forms:

• impression-based contracts in which we provide “impressions” (an “impression” is delivered when an advertisement appears in web pages viewed by users) in exchange for a fixed fee (generally stated as cost-per-thousand impressions);

• time-based contracts in which we provide a minimum number of impressions over a specified time period for a fixed fee; or

• performance-based contracts in which performance is measured in terms of either “click-throughs” (when a user clicks on a company’s advertisement) or other user actions such as product/customer registrations, survey participation, sales leads or product purchases.

We utilize our own proprietary “ad serving technology” (i.e., technology that places advertisements on websites and digital devices) as the primary vehicle for placements of advertisements on AOL Properties through our subsidiary, ADTECH AG. We also license this ad serving technology to third parties.

Google is, except in certain limited circumstances, the exclusive web search provider for AOL Properties. In connection with these search services, Google provides us with a share of the revenue generated through paid text-based search advertising and contextual advertising on AOL Properties. For the year ended December 31, 2009, advertising revenues associated with the Google relationship (substantially all of which were search and contextual revenues generated on AOL Properties) were $556.7 million. In addition, we sell search-based keyword advertising directly to advertisers on AOL Properties through the use of a white-labeled, modified version of Google’s advertising platform, for which we provide a share of the revenue generated through such sales to Google. Domestically, we have agreed, except in certain limited circumstances, to use Google’s search services on an exclusive basis through December 19, 2010. Upon expiration of this agreement, we expect to continue to generate

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advertising revenues by providing paid-search advertising and contextual advertising on AOL Properties, either through the continuation of our relationship with Google or an agreement with another provider. See “Item 1A—Risk Factors—Risks Relating to Our Business—We are dependent on a third-party search provider”.

For the years ended December 31, 2009, 2008 and 2007, our advertising revenues on AOL Properties were $1,213.7 million, $1,450.4 million and $1,553.1 million, respectively.

SUBSCRIPTION REVENUES

We generate subscription revenues through our subscription access service. As of January 2010, our primary AOL-brand price plans were $25.90 and $11.99 per month. We also offer consumers, among other things, enhanced online safety and security features and technical support for a monthly subscription fee. As noted above, our access service subscriber base has declined and is expected to continue to decline. This has resulted in year-over-year declines in our subscription revenues. The number of domestic AOL-brand access subscribers was 5.0 million, 6.9 million and 9.3 million at December 31, 2009, 2008 and 2007, respectively. For the years ended December 31, 2009, 2008 and 2007, our subscription revenues were $1,388.8 million, $1,929.3 million and $2,787.9 million, respectively.

Although our subscription revenues have declined and are expected to continue to decline, we believe that our subscription access service will continue to provide us with an important source of revenue and cash flow in the near term. The revenue and cash flow generated from our subscription access service will help us to pursue our strategic initiatives.

Third Party Network

We also generate advertising revenues through the sale of advertising on the Third Party Network. In order to effectively connect advertisers with online advertising inventory, we purchase advertising inventory from publishers and utilize proprietary optimization, targeting and delivery technology to best match advertisers with available advertising inventory. We also offer search engine campaign management and lead generation affiliate products. However, in the fourth quarter of 2009, we began proactively de-emphasizing the search engine campaign management and lead generation affiliate products on the Third Party Network in order to focus and strengthen our efforts in display advertising solutions.

The Third Party Network includes a display advertising interface that gives advertisers the ability to target and control the delivery of their advertisements and provides advertisers and agencies with relevant display analytics and measurement tools. We intend to utilize self-service systems and tools in order to expand our relationships with advertisers. For our publishers, inclusion in the Third Party Network offers a comprehensive set of tools and technologies to manage and maximize their return.

We utilize a proprietary scheduling, optimization and delivery technology, called AdLearn, which employs a set of complex mathematical algorithms that seek to optimize advertisement placements across the Third Party Network and the available inventory on AOL Properties. This optimization is based on expected user response, which is derived from previous user response plus factors such as user segmentation, creative performance and site performance. AdLearn allows performance to be analyzed quickly and advertisement placement to be frequently optimized based on specific objectives, including click-through rate, conversion rate, sales volume and other metrics.

Advertising arrangements for the sale of Third Party Network inventory typically take the form of impression-based contracts or performance-based contracts. For the years ended December 31, 2009, 2008 and 2007, our advertising revenues on the Third Party Network were $534.6 million, $646.0 million and $677.5 million, respectively.

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Other Revenues

In addition to advertising and subscription revenues, we also generate fee, license and other revenues. We generate fees from our consumer applications associated with mobile e-mail and instant messaging functionality from mobile carriers. Through MapQuest’s business-to-business services, we generate licensing revenue from third-party customers. We also generate revenues by licensing our proprietary ad serving technology to third parties, primarily through our subsidiary, ADTECH AG.

AOL Ventures

Some of the initiatives described above may be classified as part of AOL Ventures. We formed AOL Ventures with the goal of creating an entrepreneurial environment to attract and develop innovative initiatives. AOL Ventures will focus on acquisitions that we have previously made which have start-up characteristics or which do not currently fit within our other areas of strategic focus, investments we intend to make in early-stage, externally-developed opportunities and employee-originated innovations that we believe would benefit from incubation and development within the AOL Ventures environment.

For initiatives included within AOL Ventures, our goal is to create an improved environment for fostering sustained long-term growth. For future initiatives and investments—whether externally-developed or employee-originated—AOL Ventures will focus on early-stage opportunities that are aligned with our long-term strategy. The size of our investment and corresponding ownership interest will vary depending on the opportunity, as will our level of involvement and control. We intend to attract top talent and source attractive opportunities by partnering with leading angel investors, venture capitalists and universities. We currently expect to invest significantly less capital in AOL Ventures than in our other operations. In addition to capitalizing the initiatives and investments included within AOL Ventures ourselves, we may seek outside capital where appropriate.

Product Development

We seek to develop new and enhanced versions of our products and services for our consumers, publishers and advertisers. While in the past we have relied primarily on our own proprietary technology to support our products and services, we have been steadily increasing our use of open source technologies and platforms with a view to diversifying our sources of technology, as well as for cost management. Research and development costs related to our software development efforts for 2009, 2008 and 2007 totaled $63.2 million, $68.8 million and $74.2 million, respectively. These costs consist primarily of personnel and related costs that are incurred related to the development of software and user-facing Internet offerings that do not qualify for capitalization. At December 31, 2009 and 2008, the net book value of capitalized internal-use software was $112.1 million and $155.0 million, respectively.

Intellectual Property

Our intellectual property assets include copyrights, trademarks and trademark applications, patents and patent applications, domain names, trade secrets and licenses of intellectual property rights of various kinds. These intellectual property assets, both in the United States and in other countries around the world, are, collectively, among our most valuable assets. We rely on a combination of copyright, trademark, patent, trade secret and unfair competition laws as well as contractual provisions to protect these assets. The duration and scope of the protection afforded to our intellectual property depend on the type of property in question and the laws and regulations of the relevant jurisdiction. In the case of licenses, they also depend on contractual provisions. We consider the AOL brand and our other brands to be some of our most valuable assets and these assets are protected by numerous trademark registrations in the United States and globally. These registrations may generally be maintained in effect for as long as the brand is in use in the respective jurisdictions.

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Google Alliance

In April 2006, AOL, Google and Time Warner completed the issuance to Google of a 5% equity interest in us and entered into agreements in March 2006 which expanded their existing strategic alliance. Under the expanded alliance, Google provides our consumers with a general, Internet-based search experience that utilizes Google’s organic web search results and additional links on the search results page that showcase contextually relevant AOL and third-party content and information (adjacent to the search results), as well as a variety of search-related features (such as suggesting related searches to help users further refine their search queries). We also provide our consumers with relevant paid text-based search advertising through our relationship with Google, in which we provide consumers search-based sponsored link ads in response to their search queries. In addition, Google provides us with the use of a white-labeled, modified version of its advertising platform to enable us to sell search-based keyword advertising directly to advertisers on AOL Properties, provides us with advertising credits for promotion of AOL Properties on Google’s network, provides other promotional opportunities for our content and collaborates with us on a number of other areas.

On July 8, 2009, Time Warner completed the purchase of Google’s 5% interest in us. See “Note 4: Business Acquisitions, Dispositions and Other Significant Transactions” in our accompanying consolidated financial statements for additional information on this purchase.

Competition

We compete for the time and attention of consumers with a wide range of Internet companies, including Yahoo! Inc., Google, Microsoft Corporation’s MSN, IAC/Interactive Corp. and social networking sites such as Facebook, Inc. and News Corporation’s MySpace, as well as traditional media companies which are increasingly offering their own Internet products and services.

We compete for advertisers and publishers with a wide range of companies offering competing advertising products, technology and services, aggregators of such advertising products, technology and services and aggregators of third-party advertising inventory. In addition to those companies listed above, competitors include WPP plc (24/7 Real Media) and ValueClick, Inc. Competition among these companies has been intensifying and may lead to continuing decreases in prices for certain advertising inventory, particularly in light of current economic conditions where advertisers in certain categories are lowering their marketing expenditures.

Our subscription access service competes with other Internet access providers, especially broadband providers.

Internationally, our primary competitors are global enterprises such as Yahoo!, Google, MSN, IAC, Facebook, MySpace and other social networking sites, as well as a large number of local enterprises.

The Internet industry is dynamic and rapidly evolving, and new and popular competitors, such as social networking sites, providers of communications tools and providers of advertising services, frequently emerge.

Government Regulation and Other Regulatory Matters

Our business is subject to various federal and state laws and regulations, particularly in the areas of privacy, data security and consumer protection.

Laws and regulations applicable to our business include the following:

• The Children’s Online Privacy Protection Act of 1998 and the Federal Trade Commission’s related implementing regulations, which prohibit the collection of personal information from users under the age of 13 without parental consent. In addition, there has been an international movement to provide additional protections to minors who are online which, if enacted, could result in substantial compliance costs.

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• The Digital Millennium Copyright Act of 1998, parts of which limit the liability of certain eligible online service providers for listing or linking to third-party websites that include materials which infringe copyrights or other intellectual property rights of others.

• The Communications Decency Act of 1996, sections of which provide certain statutory protections to online service providers who distribute third-party content.

• The PROTECT Our Children Act of 2008, which requires online services to report and preserve evidence of violations of federal child pornography laws under certain circumstances.

• The Electronic Communications Privacy Act of 1986, which sets forth the provisions for access, use, disclosure and interception and privacy protections of electronic communications.

• The Controlling the Assault of Non-Solicited Pornography and Marketing Act of 2003, which establishes requirements for those who send commercial e-mail, sets forth penalties for e-mail “spammers” and companies whose products are advertised in spam if they violate the law and gives consumers the right to ask e-mailers to stop spamming them.

Our marketing and billing activities are subject to regulation by the Federal Trade Commission and each of the states and the District of Columbia under both general consumer protection laws and regulations prohibiting unfair or deceptive acts or practices as well as various laws and regulations mandating disclosures, authorizations, opt-out procedures and record-keeping for particular sorts of marketing and billing transactions. These laws and regulations include, for example, the Telemarketing Sales Rule, federal and state “Do Not Call” statutes, the Electronic Funds Transfer Act, Regulation E and anti-cramming regulations promulgated by state Public Utilities Commissions and other regulatory bodies. Moreover, our ability to bill under certain payment methods is subject to commercial agreements including, for example, the Credit Card Association rules and agreements between our payment aggregator and telephone carriers.

We regularly receive and resolve inquiries relating to marketing and billing issues from state Attorneys General, the Federal Trade Commission and the Federal Communications Commission and, over the course of more than 20 years of operations, we have entered into several Consent Orders, Assurances of Voluntary Compliance/Discontinuance and settlements pursuant to which we have implemented a series of consumer protection safeguards. Examples include the prohibition of consumer retention-related compensation to call center personnel based either on non-third-party verified retention transactions or minimum retention thresholds; implementing tools that mandate adherence to various consumer protection procedural safeguards around marketing, sales, registration, cancellation, retention and reactivation transactions; recordation and retention of particular call types; enabling and requiring full customer support for disabled consumers; and implementing regular training programs and monitoring mechanisms to ensure compliance with these obligations.

In the United States, Internet access services are generally classified as “information services” which are not subject to regulation by the Federal Communications Commission.

Various international laws and regulations also affect our growth and operations. In addition, various legislative and regulatory proposals under consideration from time to time by the United States Congress and various federal, state and international authorities have materially affected us in the past and may materially affect us in the future. In particular, federal, state and international governmental authorities continue to evaluate the privacy implications inherent in the use of third-party web “cookies” for behavioral advertising. We use cookies, which are small text files placed in a consumer’s browser, to facilitate authentication, preference management, research and measurement, personalization and advertisement and content delivery. In the Third Party Network, cookies or similar technologies help present, target and measure the effectiveness of advertisements. More sophisticated targeting and measurement facilitate enhanced revenue opportunities. The regulation of these “cookies” and other current online advertising practices could adversely affect our business.

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Marketing

We believe the most effective type of marketing in the near term will be our ability to deliver compelling content and relevant products and services to the millions of consumers who visit us each day. On December 10, 2009, we launched a new AOL brand identity to the world. We intend to seek opportunities to integrate AOL into high impact events, select targeted promotions and partnerships with complementary brands that will add meaningful growth to our audience base and in our premium content offerings and communications tools.

Employees

As of December 31, 2009, we employed approximately 6,700 people, based in 19 countries around the world, including the United States, India, the United Kingdom, Germany, Ireland, Israel, France and Canada. At that time, the country outside of the United States where we had the largest employee population was India, with over 1,000 employees. We are in the midst of a significant restructuring initiative which began late in 2009 and we expect to reduce our total workforce by nearly one-third in connection with this restructuring initiative, prior to hiring of new employees in areas of strategic focus. In addition, we plan to reduce our cost base in the United Kingdom and cease or reduce operations in a number of other countries. A significant number of our international employees support our domestic operations. In general, we consider our relationship with employees to be good.

Global Presence

As of December 31, 2009, we had AOL-branded and co-branded portals and websites in North and South America, Europe and the Asia Pacific region. We offer Internet access service under the AOL-brand in the United States and Canada and have advertising operations in the United States, Canada and Europe, as well as in Japan through a joint venture with Mitsui & Co., Ltd. As part of our recent restructuring initiative to better align our organizational structure and costs with our strategy, we plan to reduce our cost base in the United Kingdom and cease or reduce operations in a number of other countries. Specifically, we plan to significantly reduce our presence in Europe by reducing our operations in France and Germany and ceasing operations in a number of other countries. In certain of these countries, we are currently consulting with employees or employee representatives in accordance with applicable legal requirements. For geographic area data for the years ended December 31, 2009, 2008 and 2007, see “Note 1: Description of Business, Basis of Presentation and Summary of Significant Accounting Policies” in our accompanying consolidated financial statements.

Seasonality

In the fourth quarter, we have historically seen a sequential increase in advertising revenues associated with holiday advertising; however, this fluctuation can be offset by adverse economic conditions. Additionally, in the first quarter we have historically seen a sequential increase in average monthly churn of domestic AOL-brand access subscribers (the number of subscribers that terminate or cancel our services, factoring in new and reactivated subscribers).

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WHERE YOU CAN FIND MORE INFORMATION

We are required to file annual, quarterly and current reports, proxy statements and other information with the Securities and Exchange Commission. Unless otherwise stated herein, these filings are not deemed to be incorporated by reference in this report. You may read and copy any documents filed by us at the Public Reference Room of the SEC, 100 F Street, N.E., Washington, D.C. 20549. You may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. Our filings with the SEC are also available to the public through the SEC’s website at http://www.sec.gov. Our common stock is listed on the New York Stock Exchange (NYSE) under the symbol “AOL”. You can inspect and copy reports, proxy statements and other information about us at the NYSE’s offices at 20 Broad Street, New York, New York 10005. We also maintain an Internet website at www.corp.aol.com. We use our website as a channel of distribution of material company information. Financial and other information regarding AOL is routinely posted on and accessible at http://www.corp.aol.com. In addition, you may automatically receive e-mail alerts and other information about AOL by visiting the “e-mail alerts” section at http://corp.aol.com/investor and enrolling your e-mail. We make available on our Internet website free of charge our annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K and any amendments to those reports as soon as practicable after we electronically file such reports with the SEC. In addition, copies of our (i) Corporate Governance Policy, (ii) charters for the Audit and Finance Committee, Compensation Committee and Nominating and Governance Committee and (iii) Standards of Business Conduct and Code of Ethics for Our Senior Executive and Senior Financial Officers are available through our Internet website at http://corp.aol.com/corporate-policy. Our website and the information posted on it or connected to it shall not be deemed to be incorporated by reference into this report.

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Executive Officers of the Registrant

The following sets forth certain information as of March 2, 2010 concerning our executive officers.

Mr. Tim Armstrong

Mr. Armstrong, age 39, has served as Chairman and Chief Executive Officer of AOL since April 7, 2009. Prior to that, Mr. Armstrong was President, Americas Operations of Google Inc. Mr. Armstrong joined Google in 2000 as Vice President, Advertising Sales, and in 2004 was promoted to Vice President, Advertising and Commerce and then in 2007 he was named President, Americas Operations and SVP. Before joining Google, Mr. Armstrong served as Vice President of Sales and Strategic Partnerships for Snowball.com from 1998 to 2000. Prior to that, he served as Director of Integrated Sales and Marketing at Starwave’s and Disney’s ABC/ESPN Internet Ventures. Mr. Armstrong started his career by co-founding and running a newspaper based in Boston, Massachusetts. Mr. Armstrong is a trustee of Connecticut College and Lawrence Academy and is on the board of the Ad Council.

Mr. Arthur Minson

Mr. Minson, age 39, has served as Executive Vice President and Chief Financial Officer of AOL since September 8, 2009. Prior to that, Mr. Minson served as Executive Vice President and Deputy Chief Financial Officer at Time Warner Cable Inc. Prior to joining Time Warner Cable in February 2006, Mr. Minson was Senior Vice President, Corporate Finance and Development at AOL from December 2004 to February 2006. Prior to that, Mr. Minson was Senior Vice President, Finance for AOL’s Broadband and Premium Services division from April 2004 to December 2004. Mr. Minson has also held senior finance positions at Rainbow Media Holdings, Inc. and Time Warner. Mr. Minson began his career in the audit practice of Ernst and Young LLP.

Mr. Dave Harmon

Mr. Harmon, age 42, has served as AOL’s Executive Vice President, Human Resources since November 2007 and has also served as Executive Vice President, Corporate Services since September 2009. Prior to that, Mr. Harmon served as Senior Vice President of AOL’s HR Solution Center from July 2007 until October 2007. Mr. Harmon joined AOL in 2003 as Vice President, Human Resources. Prior to that, he served as Vice President, New Business Development at Footstarworks, a division of Footstar, Inc. Mr. Harmon joined Footstar in 1998 as Vice President, Human Resources. Prior to that, Mr. Harmon was at PepsiCo, Inc. and Cooper Industries in multiple human resources positions for approximately eight years.

Mr. Ira Parker

Mr. Parker, age 53, has served as Executive Vice President, General Counsel of AOL since 2006. Mr. Parker has also served as Executive Vice President, Corporate Development from February 2009 to September 2009, as Corporate Secretary from 2006 to December 2009, and also, from January 2008 to June 2009, as Executive Vice President, Business Development. Prior to joining AOL, Mr. Parker served as Vice President and General Counsel, Corporate Secretary, and Chief Compliance Officer at Polaroid Corp. Prior to joining Polaroid in February 2004, Mr. Parker served as President and Chief Executive Officer at Genuity, Inc. from February 2003 to December 2003. Prior to that, he was Executive Vice President, General Counsel, Corporate Secretary, and Chief Compliance Officer of Genuity. Prior to joining Genuity in June 2000, Mr. Parker was Vice President and Deputy General Counsel at GTE Corp. for two years and was a partner in the Washington, D.C. law firm Alston & Bird for three years. Before that, Mr. Parker spent nearly 10 years with the Federal Deposit Insurance Corp. in Washington, D.C. in various legal positions including Vice President and Deputy General Counsel of the FDIC’s Resolution Trust Corporation.

Ms. Tricia Primrose Wallace

Ms. Primrose Wallace, age 45, has served as Executive Vice President, Corporate Communications of AOL since January 2007. Prior to that, Ms. Primrose Wallace was Vice President, Corporate Communications at AOL from March 2005. Ms. Primrose Wallace joined AOL in 1999 and from 2001 to March 2005, Ms. Primrose Wallace was Vice President, Corporate Communications at Time Warner. Prior to that, she served as an Executive Vice President for the strategic communications firm Robinson Lerer & Montgomery from January 1997 to October 1999.

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ITEM 1A. RISK FACTORS

The risks and uncertainties described below are those which we consider material and of which we are currently aware. In addition, this Annual Report contains forward-looking statements that involve risks and uncertainties. You should carefully read the section “Cautionary Statement Concerning Forward-Looking Statements”.

If any of the following events occur, our business, financial condition or results of operations could be materially and adversely affected and the trading price of our common stock could materially decline.

Risks Relating to Our Business

Our strategic shift to an online advertising-supported business model involves significant risks.

Following our strategic shift in 2006 from focusing primarily on generating subscription revenues to focusing primarily on attracting and engaging Internet consumers and generating advertising revenues, we have become increasingly dependent on advertising revenues as our subscription access service revenues continue to decline. We have not been able to generate sufficient growth in our advertising revenues to offset the loss of subscription access service revenues we have experienced in recent years. In order for us to increase advertising revenues in the future, we believe it will be important to increase our overall volume of advertising sold, including sales of advertising through our higher-priced channels, and to maintain or increase pricing for advertising. Our cash flows over the next several years will be adversely affected by the continued decline of access subscribers. Additionally, advertising revenues are more unpredictable and variable than our subscription access service revenues, and are more likely to be adversely affected during economic downturns, as spending by advertisers tends to be cyclical in line with general economic conditions. Further, because subscription revenues have relatively low direct costs, the expected decline in subscription revenues will likely result in declines in operating income and cash flows for the foreseeable future, even if we achieve significant growth in advertising revenues. If we are unable to successfully implement our strategic plan and grow the earnings generated by our online advertising services, we may not be able to support our business in the future.

Accordingly, we have recently implemented several restructuring plans to better align our organizational structure and costs with our strategy. We expect to continue to actively manage our costs. However, if we do not fully realize or maintain the anticipated benefits of our restructuring plans and cost reduction initiatives, our business could be adversely affected.

If we do not continue to develop and offer compelling content, products and services, our ability to attract new consumers or maintain the engagement of our existing consumers could be adversely affected.

In order to attract consumers and generate increased engagement on AOL Properties, we believe we must offer compelling content, products and services. However, acquiring, developing and offering new content, products and services, as well as new functionality, features and enhanced performance of our existing content, products and services, may require significant costs and time to develop. In addition, consumer tastes are difficult to predict and subject to rapid change. If we are unable to provide content, products and services that are sufficiently attractive and relevant to consumers (including subscribers to our subscription access service), we may not be able to attract new consumers or maintain or increase our existing consumers’ engagement. Even if we successfully develop and offer compelling content, products and services, we may not be able to attract new consumers and maintain or increase our existing consumers’ engagement.

In general, subscribers to our subscription access service are among the most engaged consumers on AOL Properties, including search. As our subscriber base declines, we need to maintain the engagement of former subscribers and increase the number and engagement of other consumers on AOL Properties in order to successfully execute our business model. There can be no assurance that we will be able to maintain the engagement of former subscribers or attract and engage sufficient other consumers to sustain or increase historical engagement levels on AOL Properties. If we cannot do so, our business could be adversely affected.

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Even if we are able to attract new consumers to, and generate increased engagement on, AOL Properties, we may not be able to maintain or increase our advertising revenues associated with AOL Properties.

Different AOL Properties generate varying volumes of advertising that are sold at a range of prices. To the extent our consumers are active on AOL Properties where we do not deliver a high volume of advertisements or high-priced advertisements, we are limited in our ability to generate advertising revenues from such activity. Accordingly, if we are not able to attract and engage consumers to those AOL Properties that typically generate higher-priced and higher-volume advertising, our advertising revenues may not increase even if the aggregate number of consumers on AOL Properties increases and their aggregate engagement increases.

Our restructuring actions may not deliver the expected results and these actions may adversely affect our business operations, particularly in the near future.

We undertook various restructuring activities in 2009 and the first quarter of 2010 in an effort to better align our organizational structure and costs with our strategy. As part of our restructuring activities we implemented voluntary and involuntary separation programs which we expect to result in the reduction of nearly one-third of our workforce, prior to hiring of new employees in areas of strategic focus. Certain employees who participated in the voluntary separation program have unique and specific areas of expertise which are important to our strategic objectives. Even if we are able to attract new personnel to replace these key employees, we may still experience a disruption in our ability to perform functions critical to our strategy given the significant reduction in the number of our employees. While we strive to reduce the negative impact of the departure of such a large number of our employees, this reduction could result in significant disruptions to our operations, particularly in the near future, including adversely affecting the timeliness of product releases, the successful implementation and completion of our strategic objectives and the results of our operations.

We face intense competition in all aspects of our business.

The Internet industry, with its low barriers to entry and rapidly shifting consumer tastes, is dynamic and rapidly evolving. New and popular competitors, such as social networking sites, online advertising businesses and providers of communication tools, quickly emerge. Competition among companies offering advertising products, technology and services, and aggregators of third-party products and services, is intense. Internationally, we face intense competition from both global and local competitors. In addition, competition may generally cause us to incur unanticipated costs associated with research and product development.

The competition faced by our subscription access service, especially from broadband Internet access providers, could cause the number of our subscribers to decline at a faster rate than experienced in the past. Dial-up Internet access services do not compete favorably with broadband access services with respect to connection speed and do not have a significant, if any, price advantage over certain broadband services. Many broadband providers, including cable companies, bundle their offerings with telephone, entertainment or other services, which may result in lower prices than stand-alone services. Based on customer survey information, the majority of our canceling access subscribers either already has broadband Internet connections or is leaving for broadband Internet connections. Broadband penetration of U.S. households increased from 28% in 2004 to 69% in 2009 and the number of U.S. households with dial-up access decreased from approximately 44 million in 2004 to 10 million in 2009. In addition to competition from broadband providers, competition among dial-up Internet access service providers is intense.

There can be no assurance that we will be able to compete successfully in the future with existing or potential competitors or that competition will not adversely affect our business.

Weak economic conditions could adversely affect our revenues.

The global economy has been in a recession, and the future economic environment may continue to be less favorable than that of recent years. These weak economic conditions could lead to further reduced advertising

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spending in the foreseeable future. Because we derive a substantial portion of our revenues from the sale of advertising, declines and delays in advertising spending could continue to reduce our revenues. Advertising spending by companies in certain sectors that have been significantly impacted by the downturn in the economy represents a significant portion of our advertising revenues, and any economic or other changes resulting in a significant reduction in the advertising spending of these or other sectors could further adversely affect our advertising revenues.

Additionally, declines in consumer spending due to weak economic conditions may cause advertisers to reduce their spending if consumers are purchasing fewer of their products or services, ultimately resulting in downward pricing pressure on our advertising inventory. As a result, declines in consumer spending could indirectly adversely affect our advertising revenues.

While we do not believe that our subscription access service has been adversely affected by the recession, there is a risk that existing subscribers may elect to cancel their subscriptions as a result of the weaker economic climate. Should this occur, we may experience an accelerated decline in our subscription revenues.

Demand and pricing for, and volume sold of, online advertising may face downward pressure which would adversely affect our advertising revenues.

During 2009, we experienced lower demand from advertisers across a number of advertiser categories that have been significantly impacted by weak global economic conditions. In order for us to maintain or increase advertising revenues in the future, we believe it will be important to increase our overall volume of advertising sold, including sales of advertising through our higher-priced channels, and to maintain or increase pricing for advertising. If overall demand continues to decline or if overall pricing declines occur, our advertising revenues could be adversely affected.

We are dependent on a third-party search provider.

We do not own or control a general text-based web search service. Instead, Google is, except in certain limited circumstances, the exclusive web search provider for AOL Properties. In 2009, search advertising revenues comprised approximately one-third of our total advertising revenues. Changes that Google has made and may unilaterally make in the future to its search service or advertising network, including changes in pricing, algorithms or advertising relationships, could adversely affect our advertising revenues. Furthermore, except in certain limited circumstances, we have agreed to use Google’s algorithmic search and sponsored links on an exclusive basis in the United States through December 19, 2010. Upon expiration of this agreement, there can be no assurance that the agreement will be renewed, or, if the agreement is renewed, that we would receive the same or a higher revenue share as we do under the current agreement. In addition, there can be no assurance that if we enter into an arrangement with an alternative search provider the terms would be as favorable as those under the current Google agreement. Even if we were to enter into an arrangement with an alternative search provider with terms as or more favorable than those under the current Google agreement, such an arrangement might generate significantly lower search advertising revenues for us if the alternative search provider is not able to generate search advertising revenues as successfully as Google currently does.

Because we do not own or control such a search service, we are not able to package and sell search advertising along with display advertising services outside of AOL Properties. As search advertising represents a significant portion of online advertising spending, we believe that our lack of a proprietary search service could adversely affect our ability to maintain and increase advertising revenues.

We may need to raise additional capital, and we cannot be sure that additional financing will be available.

While subsequent to our separation from Time Warner we have funded our ongoing working capital, capital expenditure and financing requirements through cash flows from operations and we currently have available borrowing capacity under our new 364-day senior secured revolving credit facility, we may require additional

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financing in the future. Our ability to obtain future financing will depend on, among other things, our financial condition and results of operations as well as the condition of the capital markets or other credit markets at the time we seek financing. Time Warner provided a guarantee of our revolving credit facility in order to facilitate its arrangement in connection with the spin-off. However, Time Warner will not provide guarantees with respect to our future financings, and without the benefit of such guarantee, we may not be able to obtain replacement or other future financing on terms acceptable to us in a timely manner, or at all. Our ability to fund our working capital, capital expenditure and financing requirements in the future may be adversely affected if we are unable to extend the credit facility beyond the 364-day term or obtain a new credit facility or other financing on acceptable terms. If we are unable to enter into the necessary financing arrangements or sufficient funds are not available on acceptable terms when required, we may not have sufficient liquidity and our business may be adversely affected.

The terms of our new revolving credit facility contain restrictive covenants which limit our business and financing activities.

The terms of our new revolving credit facility include customary covenants which impose restrictions on our business and financing activities, subject to certain exceptions or the consent of our lenders and Time Warner as guarantor, including, among other things, limits on our ability to incur additional debt, create liens, enter into merger, acquisition and divestiture transactions, pay dividends and engage in transactions with affiliates. The credit facility contains certain customary affirmative covenants, including a requirement that we maintain a maximum consolidated leverage ratio and a minimum consolidated interest coverage ratio, and customary events of default. Our ability to comply with these covenants may be adversely affected by events beyond our control, including economic, financial and industry conditions. A breach of any of the credit facility covenants, including a failure to maintain a required ratio or meet a required test, may result in an event of default. This may allow our lenders to declare all amounts outstanding under the credit facility, together with accrued interest, to be immediately due and payable. If this occurs, we may not be able to refinance the accelerated indebtedness on acceptable terms, or at all, or otherwise repay the accelerated indebtedness. In addition, we are restricted from extending, renewing or increasing our obligations under our new revolving credit facility, and the documentation entered into in connection with the facility may not be amended, modified, waived or released, in each case, without the consent of Time Warner, which may limit our ability to react to changes in financing needs or obtain relief from covenant restrictions in the event necessary.

If we cannot make our content, products and services available and attractive to consumers via devices other than personal computers, our ability to attract consumers and maintain or increase their engagement could be adversely affected.

Global consumers are increasingly accessing and using the Internet through devices other than personal computers, such as digital devices (e.g., smartphones). In order for consumers to access and use our content, products and services via these devices, we must ensure that our content, products and services are compatible with such devices. We also need to secure arrangements with device manufacturers and wireless carriers in order to have placement on these devices. We must also ensure that our licensing arrangements with third-party content providers allow us to make this content available on these devices. If we cannot effectively make our content, products and services available on these devices, fewer consumers may access and use our content, products and services. In addition, we must develop and offer effective advertising solutions on these devices in order to generate advertising revenues from the use of such devices by our consumers. If we are not able to attract and engage consumers via these devices or develop effective advertising solutions for such devices, our business could be adversely affected.

We rely on legacy technology infrastructure and a failure to update or replace this technology infrastructure could adversely affect our business.

Significant portions of our content, products and services are dependent on technology infrastructure that was developed a number of years ago. In addition, we incur significant costs operating our business with multiple

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and often contradictory technology platforms and infrastructure. Updating and replacing our technology infrastructure may be challenging to implement and manage, may take time to test and deploy, may cause us to incur substantial costs and may cause us to suffer data loss or delays or interruptions in service. These delays or interruptions in service may cause our consumers, advertisers and publishers to become dissatisfied with our offerings and could adversely affect our business.

Our dependence on legacy technology infrastructure may also put us in a weaker position relative to a number of our key web services competitors. Competitors with newer technology infrastructure may have greater flexibility and be in a position to respond more quickly than us to new opportunities, which may impact our competitive position in certain markets and adversely affect our business.

In addition, many of our employees with the necessary skills to maintain and repair our legacy technology infrastructure have either been reassigned within AOL or are no longer with AOL, creating a potential gap in our ability to service and support this legacy infrastructure. This potential gap may be exacerbated by our recent restructuring activities.

If we are unable to hire, engage and retain key personnel, our business could be adversely affected.

We are dependent on our ability to hire, engage and retain talented, highly-skilled employees, including employees with specific areas of expertise. Accomplishing this may be difficult due to many factors, including the impact of our restructuring plans on employee morale, the geographic location of our main corporate and business offices, fluctuations in global economic and industry conditions, frequent changes in our management and leadership and the attractiveness of our compensation programs relative to those of our competitors. If we do not succeed in retaining and engaging our key employees and in attracting new key personnel, including personnel with specific areas of expertise, we may be unable to meet our strategic objectives and, as a result, our business could be adversely affected.

Further, due to past changes in our strategic direction and recent restructuring activities, we may not have employees whose skills fully align with those required to achieve our strategic objectives. In some cases, we may need to hire suitably skilled employees to address strategic challenges we may encounter in the future.

A failure to scale and adapt our existing technology architecture to manage the expansion of our offerings could adversely affect our business.

We expect to continue to expand our offerings to consumers, advertisers and publishers. Expanding the amount and type of our offerings will require substantial expenditures to scale or adapt our technology infrastructure. The technology architectures utilized for our consumer offerings and advertising services are highly complex and may not provide satisfactory support as usage increases and products and services expand, change and become more complex in the future. We may make additional changes to our architectures and systems to deliver our consumer offerings and services to advertisers and publishers, including moving to completely new technology architectures and systems. Such changes may be challenging to implement and manage, may take time to test and deploy, may cause us to incur substantial costs and may cause us to suffer data loss or delays or interruptions in service. These delays or interruptions in service may cause consumers, advertisers and publishers to become dissatisfied with our offerings and could adversely affect our business.

If we cannot effectively distribute our content, products and services, our ability to attract new consumers could be adversely affected.

As the Internet audience continues to fragment, distribution of our content, products and services via traditional methods (e.g., toolbars) may become less effective, and new distribution strategies may need to be developed. Even if we are able to distribute our content, products and services effectively, this does not assure that we will be able to attract new consumers.

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Currently, an important distribution channel for AOL Properties is through our subscription access service. However, our access service subscriber base has declined and is expected to continue to decline. This continued decline is likely to reduce the effectiveness of our subscription access service as a distribution channel. If we are unable to grow organically by attracting new consumers to our content, products and services, we may need to rely on distribution channels that require us to pay significant fees to third parties. Furthermore, these fees have been increasing as Internet companies compete for a limited number of premium distribution channels. Any increased reliance on these third-party distribution channels could adversely affect our business.

If we cannot continue to develop and offer effective advertising products and services, our advertising revenues could be adversely affected.

Growth in our advertising revenues depends on our ability to continue offering effective products and services for advertisers and publishers. Continuing to develop and improve these products and services may require significant time and costs. If we cannot continue to develop and improve our advertising products and services, our advertising revenues could be adversely affected. Furthermore, if we cannot enhance our existing advertising offerings or develop new advertising offerings or technologies to keep pace with market trends, including new technologies that more effectively or efficiently plan, price or target advertising, our advertising revenues could be adversely affected.

Our access service subscriber base could decline faster than we currently anticipate.

Our access service subscriber base has declined and is expected to continue to decline. This decline is the result of several factors, including the increased availability of high-speed Internet broadband connections, the fact that a significant amount of online content, products and services has been optimized for use with broadband Internet connections and the effects of our strategic shift announced in 2006, which resulted in significantly reduced marketing efforts for our subscription access service and the free availability of the vast majority of our content, products and services. Also, a substantial number of the subscribers to our subscription access service do not use the service to access the Internet on a regular basis and may terminate their subscription at any time. In addition, we must maintain the current payment method information of our subscribers and, if we fail to do so, we may lose paid relationships with some of our access subscribers. If any of these factors result in our access subscriber base declining faster than we currently anticipate, our subscription revenues and business could be adversely affected.

A disruption or failure of our networks and information systems, the Internet or other technology may disrupt our business.

Our business is heavily dependent on the availability of network and information systems, the Internet and other technologies. Shutdowns or service disruptions caused by events such as criminal activity, computer viruses, denial of service attacks, power outages, natural disasters, accidents, terrorism or other events within or outside our control could adversely affect us and our consumers, including through service disruption, damage to equipment and data and excessive call volume to call centers. Such an event could result in large expenditures necessary to repair or replace such networks or information systems or to protect them from similar events in the future. Significant incidents could result in a disruption of our business, consumer dissatisfaction and a loss of consumers or revenues.

We are dependent on third-party providers of telecommunications services.

Although we currently have agreements with several different third-party telecommunications service providers, there are only a limited number of such providers that are capable of providing our network services. To the extent that we cannot renew or extend our contracts with these providers on similar terms or to the extent that we cannot acquire similar network capacity from other providers on similar terms, the cost of obtaining network services may increase and our financial results could be adversely affected. In addition, because of the

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limited number of telecommunications services providers, in the event that a provider decides to exit the business of providing telecommunications services, our ability to maintain the geographic scope of these network services could be adversely affected. In such an event, certain consumers in the affected geographic areas would be unable to continue to use our subscription access service and our business could be adversely affected.

If we cannot continue to enforce and protect our intellectual property rights, our business could be adversely affected.

We rely on patent, copyright, trademark, domain name and trade secret laws in the United States and similar laws in other countries, as well as licenses and other agreements with our employees, consumers, suppliers and other parties, to establish and maintain our intellectual property rights in the technology, content, products and services used in our operations. These laws and agreements may not guarantee that our intellectual property rights will be protected and our intellectual property rights could be challenged or invalidated. In addition, such intellectual property rights may not be sufficient to permit us to take advantage of current industry trends or otherwise to provide competitive advantages, which could result in costly redesign efforts, discontinuance of offerings, decreased traffic and associated revenue or otherwise adversely affect our business.

We have been, and may in the future be, subject to claims of intellectual property infringement that could adversely affect our business.

Periodically, third parties claim that we infringe their intellectual property rights. We expect to continue to be subject to claims and legal proceedings regarding alleged infringement by us of the intellectual property rights of others. These claims, whether meritorious or not, are time-consuming and costly to resolve, and may require expensive changes in our methods of doing business and/or our content, products and services. These intellectual property infringement claims may require us to enter into royalty or licensing agreements on unfavorable terms or to incur substantial monetary liability. Additionally, these claims may result in our being enjoined preliminarily or permanently from further use of certain intellectual property and/or our content, products and services, or may require us to cease or significantly alter certain of our operations. The occurrence of any of these events as a result of these claims could result in substantially increased costs, could limit or reduce the number of our offerings to consumers, advertisers and publishers or otherwise adversely affect our business.

Some of our commercial agreements may require us to indemnify parties against intellectual property infringement claims, which may require us to use substantial resources to defend against or settle such claims or, potentially, to pay damages. Additionally, we may be exposed to liability or substantially increased costs if a commercial partner does not honor its contractual obligation to indemnify us for intellectual property infringement claims made by third parties. The occurrence of any of these events could adversely affect our business.

The misappropriation, release, loss or misuse of AOL data or consumer or other data could adversely affect our business.

Our business utilizes significant amounts of data about our business, consumers and our advertising and publishing partners in order to deliver our content, products and services and our advertising solutions. The misappropriation, release, loss or misuse of this data, whether by accident, omission or as the result of criminal activity, computer hacking, natural disasters, terrorism or other events, could lead to negative publicity, harm to our reputation, customer dissatisfaction, regulatory enforcement actions or individual or class-action lawsuits or significant expenditures to recover the data or protect data from similar releases in the future, and may otherwise adversely affect our business.

Changes to federal, state or international laws or regulations applicable to our business could adversely affect our business.

Our business is subject to a variety of federal, state and international laws and regulations, including those with respect to advertising generally, consumer protection, content regulation, intellectual property, privacy,

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defamation, child protection, advertising to and collecting information from children, taxation and billing. These laws and regulations and the interpretation or application of these laws and regulations could change. In addition, new laws or regulations affecting our business could be enacted. These laws and regulations are frequently costly to comply with and may divert a significant portion of management’s attention. If we fail to comply with these applicable laws or regulations, we could be subject to significant liabilities which could adversely affect our business.

There are several federal laws that specifically affect our business, including the following:

• The Children’s Online Privacy Protection Act of 1998 and the Federal Trade Commission’s related implementing regulations, which prohibit the collection of personal information from users under the age of 13 without parental consent. In addition, there has been an international movement to provide additional protections to minors who are online which, if enacted, could result in substantial compliance costs.

• The Digital Millennium Copyright Act of 1998, parts of which limit the liability of certain eligible online service providers for listing or linking to third-party websites that include materials which infringe copyrights or other intellectual property rights of others.

• The Communications Decency Act of 1996, sections of which provide certain statutory protections to online service providers who distribute third-party content.

• The PROTECT Our Children Act of 2008, which requires online services to report and preserve evidence of violations of federal child pornography laws under certain circumstances.

• The Electronic Communications Privacy Act of 1986, which sets forth the provisions for access, use, disclosure and interception and privacy protections of electronic communications.

In addition, many states have enacted legislation governing the breach of data security in which sensitive consumer information is released or accessed. If we fail to comply with these applicable laws or regulations we could be subject to significant liabilities which could adversely affect our business.

Many of our advertising partners are subject to industry specific laws and regulations or licensing requirements, including advertisers in the following industries: pharmaceuticals, online gaming, alcohol, adult content, tobacco, firearms, insurance, securities brokerage, real estate, sweepstakes, free trial offers, automatic renewal services and legal services. If any of our advertising partners fail to comply with any of these licensing requirements or other applicable laws or regulations, or if such laws and regulations or licensing requirements become more stringent or are otherwise expanded, our business could be adversely affected.

Failure to comply with federal, state or international privacy laws or regulations, or the expansion of current or the enactment of new privacy laws or regulations, could adversely affect our business.

A variety of federal, state and international laws and regulations govern the collection, use, retention, sharing and security of consumer data. The existing privacy-related laws and regulations are evolving and subject to potentially differing interpretations. In addition, various federal, state and foreign legislative and regulatory bodies may expand current or enact new laws regarding privacy matters. We have posted privacy policies and practices concerning the collection, use and disclosure of user data on our websites. Any failure, or perceived failure, by us to comply with our posted privacy policies or with any data-related consent orders, Federal Trade Commission requirements or orders or other federal, state or international privacy or consumer protection-related laws, regulations or industry self-regulatory principles could result in claims, proceedings or actions against us by governmental entities or others or other liabilities, which could adversely affect our business. In addition, a failure or perceived failure to comply with industry standards or with our own privacy policies and procedures could result in a loss of consumers or advertisers and adversely affect our business.

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Federal, state and international governmental authorities continue to evaluate the privacy implications inherent in the use of third-party web “cookies” for behavioral advertising. We use cookies, which are small text files placed in a consumer’s browser, to facilitate authentication, preference management, research and measurement, personalization and advertisement and content delivery. In the Third Party Network, cookies or similar technologies help present, target and measure the effectiveness of advertisements. The regulation of these “cookies” and other current online advertising practices could adversely affect our business.

Changes to products, technology and services made by third parties and consumers could adversely affect our business.

We are dependent on many products, technologies and services provided by third parties, including browsers, data and search indexes, in order for consumers to use our content, products and services, as well as to deliver, measure, render and report advertising. Any changes made by these third parties or consumers to functionality, features or settings of these products, technologies and services could adversely affect our business. For example, third parties may develop, and consumers may install, software that is used to block advertisements or delete cookies, or consumers may elect to manually delete cookies more frequently. Likewise, search services providers may adjust their algorithms and indexes, which may hinder the ability of consumers to reach and use our content, products and services. This risk is increased because there are a small number of search services providers and any change made by one or more of these providers could significantly affect our business. The widespread adoption of these products and technologies or changes to current products, technologies and services could adversely affect our business.

Acquisitions of other businesses could adversely affect our operations and result in unanticipated liabilities.

Since January 1, 2008, we have acquired 12 businesses and we are likely to make additional acquisitions and strategic investments in the future. The completion of acquisitions and strategic investments and the integration of acquired companies or assets involve a substantial commitment of resources. In addition, past or future transactions may be accompanied by a number of risks, including:

• the uncertainty of our returns on investment due to the new and developing industries in which some of the acquired companies operate;

• the adverse effect of known potential liabilities or unknown liabilities, such as claims of patent or other intellectual property infringement, associated with the companies acquired or in which we invest;

• the difficulty of integrating technology, administrative systems, personnel and operations of acquired companies into our services, systems and operations and unanticipated expenses related to such integration;

• the potential loss or disengagement of key talent at acquired companies;

• the potential disruption of our ongoing business and distraction of our management;

• additional operating losses and expenses of the businesses we acquire or in which we invest and the failure of such businesses to perform as expected;

• the failure to successfully further develop acquired technology, resulting in the impairment of amounts currently capitalized as intangible assets;

• the difficulty of reconciling potentially conflicting or overlapping contractual rights and duties; and

• the potential impairment of relationships with consumers, partners and employees as a result of the combination of acquired operations and new management personnel.

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The failure to successfully address these risks or other problems encountered in connection with past or future acquisitions and strategic investments could cause us to fail to realize the anticipated benefits of such transactions and incur unanticipated liabilities that could harm our business.

We face risks relating to doing business internationally that could adversely affect our business.

Our business operates and serves consumers globally. There are certain risks inherent in doing business internationally, including:

• economic volatility and the current global economic recession;

• currency exchange rate fluctuations;

• the requirements of local laws and customs relating to the publication and distribution of content and the display and sale of advertising;

• uncertain protection and enforcement of our intellectual property rights;

• import or export restrictions and changes in trade regulations;

• difficulties in developing, staffing and simultaneously managing a large number of foreign operations as a result of distance as well as language and cultural differences;

• issues related to occupational safety and adherence to local labor laws and regulations;

• potentially adverse tax developments;

• longer payment cycles;

• political or social unrest;

• seasonal volatility in business activity;

• risks related to government regulation;

• the existence in some countries of statutory stockholder minority rights and restrictions on foreign direct ownership;

• the presence of corruption in certain countries; and

• higher than anticipated costs of entry.

One or more of these factors could adversely affect our business.

As part of our recent restructuring activities, we plan to cease or reduce operations in a number of countries. We could be at a competitive disadvantage in the long term if we are not able to capitalize on international opportunities in growth economies, especially as compared to our competitors who maintain a continuous expansive global presence. International expansion involves significant investment as well as risks associated with doing business abroad, as described above. Furthermore, investments in some regions can take a long period to generate an adequate return and in some cases there may not be a developed or efficient legal system to protect foreign investment or intellectual property rights. In addition, if we expand into new international regions, we may have limited experience in operating and marketing our products and services in such regions and could be at a disadvantage compared to competitors with more experience.

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We could be subject to additional tax liabilities which could adversely affect our business.

International, federal, state and local tax laws and regulations affecting our business, or interpretations or application of these tax laws and regulations, could change. In addition, new international, federal, state and local tax laws and regulations affecting our business could be enacted or taxing authorities may disagree with our interpretation of tax laws and regulations. Our subscription access service is protected from taxation through the Federal Internet Tax Non-Discrimination Act, which is in effect until November 2014. However, faced with decreasing revenues, several states have sought to increase revenue by taxing advertising generally, Internet advertising specifically, or by increasing general business taxes. Imposing new taxes on advertising or Internet advertising would adversely affect us. An increase in general business taxes would adversely affect us if it occurred in a jurisdiction in which we operate. Other states have sought to expand the definition of “nexus” for the purpose of taxing goods and services sold over the Internet. If enacted, these new taxes would adversely affect our consumers and, as a result, could adversely affect our business.

We could be required to record significant impairment charges in the future.

We are required under generally accepted accounting principles to test goodwill for impairment at least annually, and to review our identifiable intangible assets when events or changes in circumstances indicate the carrying value may not be recoverable. Factors that could lead to impairment of goodwill and identifiable intangible assets include significant adverse changes in the business climate and declines in the value of our business. We recorded a significant goodwill impairment charge in 2008 and while no goodwill impairment charge was recorded for 2009 as the estimated fair value exceeded the book value of our sole reporting unit, we may be required to record additional impairment charges (which would reduce our net income) in the future. Our estimated fair value is primarily based on our market capitalization and volatility in our stock price could have a significant impact on the estimated fair value of our sole reporting unit. If the estimated fair value of our reporting unit had been hypothetically lower by 5% as of December 31, 2009, the book value would have exceeded fair value by approximately $70 million, and the second step of the goodwill impairment test would have been required. As of December 31, 2009, our goodwill totaled $2,184.2 million.

We may be unable to achieve some or all of the benefits that we expect to achieve from our separation from Time Warner.

As an independent, publicly-traded company, we believe that our business benefits from, among other things, allowing us to better focus our financial and operational resources on our specific business, allowing our management to design and implement corporate strategies and policies that are based primarily on the business characteristics and strategic decisions of our business, allowing us to more effectively respond to industry dynamics and allowing the creation of effective incentives for our management and employees that are more closely tied to our business performance. However, we may be more susceptible to market fluctuations and other adverse events than we would have been were we still a subsidiary of Time Warner. In addition, we may not be able to achieve some or all of the benefits that we expect to achieve as an independent company in the time we expect, if at all. For example, it is possible that investors and securities analysts will not place a greater value on our business as an independent company than on our business as a subsidiary of Time Warner.

We may experience increased costs after the spin-off, as we operate as an independent company.

We have historically operated as part of Time Warner’s corporate organization, and Time Warner has assisted us by providing certain corporate functions. Following the spin-off, Time Warner has no obligation to provide assistance to us other than the interim services to be provided as described in “Note 13: Related Party Transactions” in our accompanying consolidated financial statements.

Because our business has previously operated as part of the wider Time Warner organization, we may incur additional costs that could adversely affect our business, as a result of operating independently.

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Our historical financial information is not necessarily representative of the results we would have achieved as an independent, publicly-traded company and may not be a reliable indicator of our future results.

The historical financial information we have included in this Annual Report may not reflect what our results of operations, financial position and cash flows would have been had we been an independent, publicly-traded company during the periods presented, or what our results of operations, financial position and cash flows will be in the future as an independent company. This is primarily because:

• we have entered into transactions with Time Warner that either have not existed historically or that are on different terms than the terms of arrangements or agreements that existed prior to the spin-off;

• our historical financial information reflects allocations for certain services historically provided to us by Time Warner that may not reflect the costs we will incur for similar services in the future as an independent company; and

• our historical financial information does not reflect changes that we expect to experience in the future as a result of our separation from Time Warner, including changes in the cost structure, personnel needs, financing and operations of our business.

We are responsible for the additional costs associated with being an independent, publicly-traded company, including costs related to corporate governance and public reporting. Therefore, our financial statements may not be indicative of our future performance as an independent company. For additional information about our past financial performance and the basis of presentation of our financial statements, see “Item 6—Selected Financial Data,” “Item 7—Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our accompanying consolidated financial statements and the notes thereto included elsewhere in this Annual Report.

We may have been able to receive better terms from unaffiliated third parties than the terms we receive in our agreements with Time Warner.

The agreements related to our separation from Time Warner, including the Separation and Distribution Agreement, Transition Services Agreement, Second Tax Matters Agreement, Employee Matters Agreement, Intellectual Property Cross-License Agreement, IT Applications and Database Agreement, Master Services Agreement for ATDN and Hosting Services and any other agreements, were negotiated in the context of our separation from Time Warner while we were still part of Time Warner. Accordingly, these agreements may not reflect terms that would have resulted from arm’s-length negotiations among unaffiliated third parties. The terms of the agreements entered into in the context of our separation are related to, among other things, allocations of assets, liabilities, rights, indemnifications and other obligations among Time Warner and us. We may have received better terms from third parties because third parties may have competed with each other to win our business. See “Note 13: Related Party Transactions” in our accompanying consolidated financial statements for further information on the ongoing relationship with Time Warner.

Risks Relating to our Common Stock and the Securities Market

Our stock price may fluctuate significantly.

Our stock price may fluctuate significantly depending on many factors, some of which may be beyond our control, including:

• actual or anticipated fluctuations in our operating results due to factors related to our business;

• success or failure of our business strategy;

• our quarterly or annual earnings, or those of other companies in our industry;

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• our ability to obtain financing as needed;

• announcements by us or our competitors of significant acquisitions or dispositions;

• changes in accounting standards, policies, guidance, interpretations or principles;

• changes in earnings estimates by securities analysts or our ability to meet those estimates;

• the operating and stock price performance of other comparable companies;

• overall market fluctuations;

• changes in laws and regulations affecting our business; and

• general economic conditions and other external factors.

Stock markets in general have experienced volatility that has often been unrelated to the operating performance of a particular company. This has been particularly true in recent years for Internet services companies. These broad market fluctuations could adversely affect the trading price of our common stock.

Provisions in our amended and restated certificate of incorporation and by-laws and of Delaware law may prevent or delay an acquisition of our company, which could decrease the trading price of our common stock.

Our amended and restated certificate of incorporation and by-laws and Delaware law contain provisions that are intended to deter coercive takeover practices and inadequate takeover bids by making such practices or bids unacceptably expensive to the raider and to encourage prospective acquirors to negotiate with our board of directors rather than to attempt a hostile takeover. These provisions include rules regarding how shareholders may present proposals or nominate directors for election at shareholder meetings and the right of our board to issue preferred stock without shareholder approval.

Delaware law also imposes some restrictions on mergers and other business combinations between any holder of 15% or more of our outstanding common stock and us.

We believe these provisions protect our shareholders from coercive or otherwise unfair takeover tactics by requiring potential acquirors to negotiate with our board and by providing our board with more time to assess any acquisition proposal. These provisions are not intended to make our company immune from takeovers. However, these provisions apply even if the offer may be considered beneficial by some shareholders and could delay or prevent an acquisition that our board determines is not in the best interests of our company and our shareholders.

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ITEM 1B. UNRESOLVED STAFF COMMENTS

None.

ITEM 2. PROPERTIES

The following table sets forth certain information as of December 31, 2009 concerning our principal properties:

Description/Use/Location	Approximate Square Footage		Leased or Owned	Expiration Date, if Leased
Corporate Headquarters,	228,000		Leased	2023
770 Broadway, New York, New York
Corporate Campus,	1,398,000	(a)	Owned	N/A
Primary address at 22000 AOL Way, Dulles, Virginia
Dulles Technology Center,	180,000		Owned	N/A
22080 Pacific Boulevard, Dulles, Virginia
Manassas Technology Center,	228,000		Owned	N/A
7777 Infantry Ridge Road, Manassas, Virginia
Netscape Technology Center,	363,000	(b)	Leased	2010-2014
Executive, Administrative and Business Offices, 401, 464, 466, 468 and 475 Ellis, Mountain View, California
Development Center,	262,000		Leased	2012
RMZ EcoSpace Campus 1A Outer Ring Road, Bellandur, Bangalore, India

(a) Approximately 663,000 square feet are leased to third-party tenants.

(b) Approximately 195,000 square feet are subleased to third-party tenants.

In addition to the properties above, as of December 31, 2009 we owned and leased approximately 80 facilities for use as corporate offices, sales offices, development centers, technology centers and other operations in other locations in California, Colorado, the District of Columbia, Florida, Georgia, Illinois, Maryland, Massachusetts, Michigan, New York, Ohio, Pennsylvania, Texas, Virginia and Washington and in the countries of Canada, China, Denmark, Finland, France, Germany, India, Ireland, Israel, Japan, Luxembourg, the Netherlands, Norway, Spain, Sweden and the United Kingdom.

We believe that our facilities are well-maintained and are sufficient to meet our current and projected needs. We also have an ongoing process to continually review and update our real estate portfolio to meet changing business needs.

ITEM 3. LEGAL PROCEEDINGS

On May 24, 1999, two former AOL Community Leader volunteers brought a putative class action, Hallissey et al. v. America Online, Inc., in the U.S. District Court for the Southern District of New York alleging violations of the Fair Labor Standards Act (“FLSA”) and New York State law. The plaintiffs allege that, in serving as AOL Community Leader volunteers, they were acting as employees rather than volunteers for purposes of the FLSA and

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New York State law and are entitled to minimum wages. In 2001, four of the named plaintiffs in the Hallissey case filed a related lawsuit alleging retaliation as a result of filing the FLSA suit in Williams, et al. v. America Online, Inc., et al. A related case was filed by several of the Hallissey plaintiffs in the U.S. District Court for the Southern District of New York alleging violations of the retaliation provisions of the FLSA. Also in 2001, two related class actions were filed in state courts in New Jersey (Superior Court of New Jersey, Bergen County Law Division) and Ohio (Court of Common Pleas, Montgomery County, Ohio), alleging violations of the FLSA and/or the respective state laws. These cases were removed to federal court and subsequently transferred to the U.S. District Court for the Southern District of New York for consolidated pretrial proceedings with Hallissey.

On January 17, 2002, AOL Community Leader volunteers filed a class action lawsuit in the U.S. District Court for the Southern District of New York, Hallissey et al. v. AOL Time Warner, Inc., et al., against AOL LLC alleging ERISA violations and an entitlement to pension, welfare and/or other employee benefits subject to ERISA. In March 2003, plaintiffs filed and served a second amended complaint, adding as defendants the AOL Time Warner Administrative Committee and the AOL Administrative Committee.

The parties to all of the Community Leader-related lawsuits have agreed to settle the lawsuits on terms that are not material to the Company. The court granted preliminary approval of the settlement on February 2, 2010.

On August 1, 2005, Thomas Dreiling, a shareholder of Infospace Inc., filed a derivative suit in the U.S. District Court for the Western District of Washington against AOL LLC and Infospace Inc. as nominal defendant. The complaint, brought in the name of Infospace, asserts violations of Section 16(b) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). The plaintiff alleges that certain AOL LLC executives and the founder of Infospace, Naveen Jain, entered into an agreement to manipulate Infospace’s stock price through the exercise of warrants that AOL LLC received in connection with a commercial agreement with Infospace. The complaint seeks disgorgement of profits, interest and attorneys’ fees. On January 3, 2008, the court granted AOL LLC’s motion and dismissed the complaint with prejudice. Plaintiff filed a notice of appeal with the U.S. Court of Appeals for the Ninth Circuit, and the oral argument occurred on May 7, 2009. On August 19, 2009, the Ninth Circuit issued its opinion affirming the District Court’s opinion on all issues. The petitioners’ September 2, 2009 motion for rehearing en banc before the Ninth Circuit was denied on October 13, 2009. The time period for petitioners to seek certiorari before the U.S. Supreme Court has expired, so the Company expects no further activity in this matter.

On September 22, 2006, Salvadore Ramkissoon and two unnamed plaintiffs filed a putative class action against AOL LLC in the U.S. District Court for the Northern District of California based on AOL LLC’s public posting of AOL LLC member search queries in late July 2006. Among other things, the complaint alleges violations of the Electronic Communications Privacy Act and California statutes relating to privacy, data protection and false advertising. The complaint seeks class certification and damages, as well as injunctive relief that would oblige AOL LLC to alter its search query retention practices. In February 2007, the District Court dismissed the action without prejudice. The plaintiffs then appealed this decision to the Ninth Circuit. On January 16, 2009, the Ninth Circuit held that AOL LLC’s Terms of Service violated California public policy as to any California plaintiffs in the putative class, as it did not allow for them to fully exercise their rights. The Ninth Circuit reversed and remanded to the District Court for further proceedings. On April 24, 2009, AOL LLC filed a motion to implement the Ninth Circuit’s mandate. AOL LLC filed its answer on June 29, 2009. On July 6, 2009, the District Court found that the plaintiffs’ claims for unjust enrichment and public disclosure of private facts were subject to the forum selection clause in the Terms of Service and thus could not be pursued in that court. On October 27, 2009, plaintiffs filed a motion for class certification and two additional named individuals filed a motion to intervene as plaintiffs in the matter. Also on October 27, AOL filed its reply brief with regards to its 12(c) Motion for Judgment on the Pleadings. On February 2, 2010, the Court issued an Order granting AOL’s motion to implement the mandate of the Ninth Circuit. In its Order, the court dismissed named plaintiff Ramkissoon, as he is not a California resident. In addition, the court dismissed the remaining claim under the Electronic Communications Privacy Act, as well as the claims for unjust enrichment and public disclosure of private facts. The Court also dismissed without prejudice both the plaintiffs’ motion for class certification as well as AOL’s 12(c) motion. Subsequent to the court’s order, AOL filed a modified 12(c) motion on February 24, 2010. The Company intends to defend against this lawsuit vigorously.

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Between December 27, 2006 and July 6, 2009, AOL Europe Services S.à r.l. (which we refer to as “AOL Luxembourg”), a wholly-owned subsidiary of AOL organized under the laws of Luxembourg, received four assessments from the French tax authority for French value added tax related to AOL Luxembourg’s subscription revenues from French subscribers earned during the period from July 1, 2003 through October 31, 2006. During October 2009, the Company entered into a settlement agreement with the French tax authority to resolve this matter. The Company recorded an incremental reserve and corresponding expense of $14.7 million in the third quarter of 2009 related to this matter. The settlement payment was made in the fourth quarter of 2009.

In addition to the matters listed above, we are a party to a variety of legal proceedings that arise in the normal course of our business. While the results of such normal course legal proceedings cannot be predicted with certainty, management believes that, based on current knowledge, the final outcome of the current pending matters will not have a material adverse effect on our financial position, results of operations or cash flows. Regardless of the outcome, legal proceedings can have an adverse effect on us because of defense costs, diversion of management resources and other factors. See “Item 1A—Risk Factors—Risks Relating to Our Business—If we cannot continue to enforce and protect our intellectual property rights, our business could be adversely affected” and “Item 1A—Risk Factors—Risks Relating to Our Business—We have been, and may in the future be, subject to claims of intellectual property infringement that could adversely affect our business” included elsewhere in this Annual Report.

ITEM 4. RESERVED

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PART II

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

AOL Inc.’s common stock is listed on the New York Stock Exchange under the symbol “AOL.” The following table presents the high and low sales prices for the common stock on the New York Stock Exchange since November 24, 2009, the date that our common stock began “when-issued” trading on the NYSE, as reported on the NYSE:

	High		Low
2009:
Fourth Quarter (since November 24, 2009)	$	27.00	$	22.01

As of February 19, 2010 there were approximately 20,500 holders of record of our common stock. Because many of our shares of common stock are held by brokers and other institutions on behalf of stockholders, we are unable to estimate the total number of stockholders represented by these record holders. The closing price of the common stock on the New York Stock Exchange on February 19, 2010 was $25.15.

Sales of Unregistered Securities During the Fourth Quarter of Fiscal 2009

None.

Dividend Policy

We have not paid cash dividends. Our Revolving Credit Facility restricts the payment of dividends and we do not anticipate the payment of cash dividends on our common stock in the immediate future.

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Performance Graph

The following graph compares the relative performance of our common stock, the S&P Midcap 400 index and the Morgan Stanley High-Technology index. This graph covers the period from November 24, 2009 (the first day our common stock began “when-issued” trading on the NYSE) through December 31, 2009.

* $100 invested on 11/24/09 in stock or index, including reinvestment of dividends.

Fiscal year ending December 31.

Copyright^© 2010 S&P, a division of The McGraw-Hill Companies Inc. All rights reserved.

	11/24/09		11/30/09		12/31/09
AOL Inc.	$	100.00	$	98.13	$	92.86
S&P Midcap 400 Index	$	100.00	$	98.83	$	105.03
Morgan Stanley Technology Index	$	100.00	$	99.12	$	103.61

The stock price performance included in this graph is not necessarily indicative of future stock price performance.

This performance graph shall not be deemed “filed” for purposes of Section 18 of the Exchange Act or incorporated by reference into any of our filings under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such filing.

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ITEM 6. SELECTED FINANCIAL DATA

The following financial information for the five years ended December 31, 2009 has been derived from the Company’s consolidated financial statements. The selected consolidated financial data as of December 31, 2009 and 2008 and for the years ended December 31, 2009, 2008 and 2007 is derived from our consolidated financial statements included elsewhere in this Annual Report. The selected consolidated financial data as of December 31, 2007 and for the year ended December 31, 2006 is derived from audited financial statements not included herein and the selected historical consolidated financial data as of December 31, 2006 and 2005 and for the year ended December 31, 2005 is derived from our unaudited consolidated financial statements that are not included in this Annual Report. The unaudited financial statements have been prepared on the same basis as the audited financial statements, and in the opinion of our management include all adjustments, consisting of only ordinary recurring adjustments, necessary for a fair presentation of the information set forth in this Annual Report.

The selected historical financial data presented below should be read in conjunction with our consolidated financial statements and the accompanying notes thereto, and “Item 7—Management’s Discussion and Analysis of Financial Condition and Results of Operations,” included elsewhere in this Annual Report. Prior to December 9, 2009, the effective date of the spin-off, we were a subsidiary of Time Warner. The financial information included herein may not necessarily reflect our financial position, results of operations and cash flows in the future or what our financial position, results of operations and cash flows would have been had we been an independent, publicly-traded company during the periods presented. In addition, our historical financial information does not reflect changes that we expect to experience in the future as a result of our separation from Time Warner, including changes in the financing, operations, cost structure and personnel needs of our business. Further, the historical financial information includes allocations of certain Time Warner corporate expenses. We believe the assumptions and methodologies underlying the allocation of general corporate expenses are reasonable. However, such expenses may not be indicative of the actual level of expense that would have been incurred by us if we had operated as an independent, publicly-traded company or of the costs to be incurred in the future.

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	Years Ended December 31,
	2009		2008		2007		2006		2005
($ in millions, except per share amounts)									(unaudited)
Statement of Operations Data:
Revenues:
Advertising	$	1,748.3	$	2,096.4	$	2,230.6	$	1,886.1	$	1,337.8
Subscription		1,388.8		1,929.3		2,787.9		5,783.6		6,754.9
Other		120.3		140.1		162.2		117.0		109.4
Total revenues	$	3,257.4	$	4,165.8	$	5,180.7	$	7,786.7	$	8,202.1
Costs of revenues	$	1,898.5	$	2,278.4	$	2,652.6	$	4,129.0	$	4,281.5
Operating income (loss) (a)	$	458.0	$	(1,167.7)	$	1,853.8	$	1,167.8	$	(1,817.8)
Income (loss) from continuing operations (b)	$	248.5	$	(1,526.6)	$	1,213.3	$	716.5	$	(363.6)
Net income (loss) attributable to AOL Inc. (c)	$	248.8	$	(1,525.8)	$	1,396.1	$	749.7	$	(334.1)
Income per Share Data Attributable to AOL Inc. Common Stockholders (d):
Basic and diluted income (loss) per common share from continuing operations	$	2.35	$	(14.42)	$	11.48	$	6.77	$	(3.44)
Discontinued operations		—		—		1.72		0.18		0.28
Cumulative effect of accounting change		—		—		—		0.14		—
Basic and diluted net income (loss) per common share	$	2.35	$	(14.42)	$	13.20	$	7.09	$	(3.16)
Shares used in computing basic and diluted income (loss) per share (in millions)		105.8		105.8		105.8		105.8		105.8

(a) 2009 includes $27.9 million in amounts incurred related to securities litigation and government investigations. 2008 includes a $2,207.0 million non-cash impairment to reduce the carrying value of goodwill and $20.8 million in amounts incurred related to securities litigation and government investigations. 2007 includes a net pre-tax gain of $668.2 million on the sale of the German access service business and $171.4 million in amounts incurred related to securities litigation and government investigations. 2006 includes a $767.4 million gain on the sales of the French and United Kingdom access service businesses and $705.2 million in amounts incurred related to securities litigation and government investigations. 2005 includes $2,864.8 million in amounts incurred related to securities litigation and government investigations.

(b) Includes net gains of $944.4 million in 2005 related to the sale of primarily available-for-sale equity securities.

(c) Includes net income of $182.1 million in 2007, $18.9 million in 2006 and $29.5 million in 2005 related to discontinued operations. 2006 also includes a non-cash benefit of $14.3 million as the cumulative effect of an accounting change upon the adoption of guidance related to the accounting for equity-based compensation to recognize the effect of estimating the number of equity awards granted prior to January 1, 2006 that are ultimately not expected to vest.

(d) On November 2, 2009, the Company converted from AOL Holdings LLC, a limited liability company wholly owned by Time Warner, to AOL Inc., a corporation wholly owned by Time Warner. On December 9, 2009, the date of our spin-off, 105.8 million shares of $0.01 par value AOL common stock were distributed to Time Warner shareholders of record as of 5 p.m. on November 27, 2009. For periods prior to 2009, the same number of shares is being used for basic and diluted income (loss) per common share as no common stock of the Company existed prior to November 2, 2009 and no dilutive securities of the Company were outstanding for any prior period.

For the year ended December 31, 2009, in determining the weighted average number of common shares outstanding for basic income (loss) per common share, the Company used 105.8 million shares for the period from January 1, 2009 through December 9, 2009, and the actual number of shares outstanding for the period from December 10, 2009 through December 31, 2009. Diluted income (loss) per common share subsequent to the distribution date of December 9, 2009 reflects the potential dilution of outstanding equity-based compensation awards by application of the treasury stock method.

	As of December 31,
	2009		2008		2007		2006		2005
(in millions)							(unaudited)		(unaudited)
Balance Sheet Data:
Cash and equivalents	$	147.0	$	134.7	$	151.9	$	401.5	$	119.9
Total assets	$	3,963.1	$	4,861.3	$	6,863.1	$	6,786.4	$	6,064.6
Long-term notes payable and obligations under capital leases	$	41.5	$	33.7	$	24.7	$	105.1	$	110.4
Total equity	$	3,062.9	$	3,737.7	$	5,269.5	$	4,505.8	$	3,530.8

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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

You should read the following discussion of our results of operations and financial condition together with our audited consolidated financial statements and the notes thereto included elsewhere in this Annual Report as well as the discussion in the “Item 1—Business” section. This discussion contains forward-looking statements that involve risks and uncertainties. The forward-looking statements are not historical facts, but rather are based on current expectations, estimates, assumptions and projections about our industry, business and future financial results. Our actual results could differ materially from the results contemplated by these forward-looking statements due to a number of factors, including those discussed in “Item 1A—Risk Factors” and “Cautionary Statement Concerning Forward-Looking Statements.”

Introduction

Management’s discussion and analysis of financial condition and results of operations (“MD&A”) is a supplement to the accompanying consolidated financial statements and provides additional information on our business, recent developments, results of operations, liquidity and capital resources and critical accounting policies. MD&A is organized as follows:

• Overview. This section provides a general description of our business, as well as recent developments we believe are important in understanding the results of operations and financial condition or in understanding anticipated future trends.

• Results of operations. This section provides an analysis of our results of operations for the three years ended December 31, 2009.

• Liquidity and capital resources. This section provides a discussion of our current financial condition and an analysis of our cash flows for the three years ended December 31, 2009. This section also provides a discussion of our contractual obligations and commitments, off-balance sheet arrangements and customer credit risk that existed at December 31, 2009. Included in this section is a discussion of the amount of financial capacity available to fund our future commitments and ongoing operating activities.

• Critical accounting policies. This section identifies and summarizes those accounting policies that are considered important to our results of operations and financial condition and require significant judgment and estimates on the part of management.

Overview

The Spin-Off

On December 9, 2009, we completed our legal and structural separation from Time Warner via a spin-off. In the spin-off, Time Warner shareholders of record as of 5 p.m. on November 27, 2009, the record date for the distribution, received one share of AOL common stock for every eleven shares of Time Warner common stock held. Fractional shares of AOL common stock were aggregated and sold in the open market, with the net proceeds distributed pro rata in the form of cash payments to Time Warner shareholders who would otherwise be entitled to receive a fractional share of AOL common stock. On December 10, 2009, AOL began trading on the NYSE as an independent, public company.

In connection with the separation, we entered into the Separation Agreement and several other related agreements which govern the ongoing relationship between us and Time Warner. See “Note 13: Related Party Transactions” in our accompanying consolidated financial statements for further information on our ongoing relationship with Time Warner.

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On December 9, 2009, we entered into a 364-day $250.0 million senior secured revolving credit facility among us, as borrower, the lenders party thereto (the “Lenders”), Bank of America, N.A., as administrative agent and the other financial institutions party thereto. See “Liquidity and Capital Resources—Principal Debt Obligations” for additional information regarding the Revolving Credit Facility.

We completed a number of transactions with Time Warner in connection with the spin-off, which resulted in a net $36.2 million reduction to our equity as of the separation date. The reduction to our equity included the reversal of our liability to Time Warner for certain tax positions and the reversal of our equity-based compensation deferred tax assets which were retained by Time Warner following the spin-off. We began recording retained earnings subsequent to November 2, 2009, when we converted from a limited liability company to a corporation. See “Item 1A—Business—The Spin-Off” for additional information.

Prior to the spin-off, we were a subsidiary of Time Warner. The financial information included herein may not necessarily reflect our financial position, results of operations and cash flows in the future or what our financial position, results of operations and cash flows would have been had we been an independent, publicly-traded company during all of the periods presented. We expect to incur additional costs to be able to function as an independent, publicly-traded company, including additional costs related to corporate finance, governance and public reporting.

In connection with the spin-off, we entered into transactions with Time Warner that either have not existed historically or that are on terms different from the terms of arrangements or agreements that existed prior to the spin-off. See “Note 13: Related Party Transactions” in our accompanying consolidated financial statements for more detail. Our historical financial information does not reflect changes that we expect to experience in the future as a result of our separation from Time Warner, including changes in the financing, operations, cost structure and personnel needs of our business. Further, the historical financial statements include allocations of certain Time Warner corporate expenses. We believe the assumptions and methodologies underlying the allocation of general corporate expenses are reasonable. However, such expenses may not be indicative of the actual level of expense that would have been incurred by us if we had operated as an independent, publicly-traded company or of the costs expected to be incurred in the future. These allocated expenses relate to various services that have historically been provided to us by Time Warner, including cash management and other treasury services, administrative services (such as government relations, tax, employee benefit administration, internal audit, accounting and human resources), equity-based compensation plan administration, aviation services, insurance coverage and the licensing of certain third-party patents. During the years ended December 31, 2009, 2008 and 2007, we incurred $20.9 million, $23.3 million and $28.4 million, respectively, of expenses related to charges for services performed by Time Warner.

Our Business

As described further in the “Item 1A—Business” section, our business operations are focused on AOL Properties and the Third Party Network. We market our offerings to advertisers on both AOL Properties and the Third Party Network under the brand “AOL Advertising.”

IMPACT OF THE CURRENT ECONOMIC ENVIRONMENT

The global economic recession adversely impacted our advertising revenues in 2008 and 2009. During the year ended December 31, 2009, our advertising revenues declined 17%, as compared to the year ended December 31, 2008. While our ability to forecast future advertising revenues is limited, we expect the current economic conditions will continue to impact our advertising revenues in 2010. We do not believe that the global economic recession had a material impact on our subscription revenues.

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AOL PROPERTIES

We seek to be a leading online provider of consumer products and services, as well as a publisher of relevant and engaging online content by utilizing open and highly scalable publishing platforms and content management systems. In addition, we plan to extend the reach of our offerings to a consumer audience on multiple platforms and digital devices.

We generate advertising revenues from AOL Properties through the sale of display advertising and search and contextual advertising. We offer advertisers a wide range of capabilities and solutions to effectively deliver advertising and reach targeted audiences across AOL Properties through our dedicated advertising sales force. We seek to provide effective and efficient advertising solutions utilizing data-driven insights that help advertisers decide how best to engage consumers. We offer advertisers marketing and promotional opportunities to purchase specific placements of advertising directly on AOL Properties (i.e., in particular locations and on specific dates). In addition, we offer advertisers the opportunity to bid on unsold advertising inventory on AOL Properties utilizing our proprietary scheduling, optimization and delivery technology. Finally, advertising inventory on AOL Properties not sold directly to advertisers, as described above, may be included for sale to advertisers with inventory purchased from third-party publishers in the Third Party Network.

Growth of our advertising revenues depends on our ability to attract consumers and increase engagement on AOL Properties by offering compelling content, products and services, as well as on our ability to monetize such engagement by offering effective advertising solutions. In order to attract consumers and generate increased engagement, we have developed and acquired, and in the future will continue to develop and acquire, content, products and services designed to meet these goals.

We have made and are exploring making additional changes to our content, products and services designed to enhance the consumer experience (e.g., fewer advertisements on certain AOL Properties). These changes have involved and may continue to involve the elimination or modification of advertising practices that historically have been a source of revenues. These enhancements to the consumer experience are intended to ultimately increase our revenues by increasing the attractiveness of our content, product and service offerings to consumers and therefore their value to advertisers. Specifically, we have undertaken efforts on certain AOL Properties to reduce the number of display advertising units, reduce monetization of search results and reduce the number of contextual advertising links. While difficult to quantify, we believe that these changes will have a negative impact on our advertising revenues in the near term, but we do not believe this impact will be significant.

Google is, except in certain limited circumstances, the exclusive web search provider for AOL Properties. In connection with these search services, Google provides us with a share of the revenue generated through paid text-based search and contextual advertising on AOL Properties. For the year ended December 31, 2009, advertising revenues associated with the Google relationship (substantially all of which were search and contextual revenues generated on AOL Properties) were $556.7 million. Domestically, we have agreed, except in certain limited circumstances, to use Google’s search services on an exclusive basis through December 19, 2010. Upon expiration of this agreement, we expect to continue to generate advertising revenues by providing paid-search advertising on AOL Properties, either through the continuation of our relationship with Google or an agreement with another search provider.

We view our subscription access service, which we offer to consumers in the United States for a monthly fee, as a valuable distribution channel for AOL Properties. In general, subscribers to our subscription access service are among the most engaged consumers on AOL Properties. However, our access service subscriber base has declined and is expected to continue to decline. This decline is the result of several factors, including the increased availability of high-speed broadband Internet connections, the optimization of a significant amount of online content, products and services for use with broadband Internet connections, the effects of our strategic focus on advertising, which has led to significantly reduced marketing efforts for our subscription access service, and the free availability of the vast majority of our content, products and services. See “Item 1A—Risk Factors—Risks Relating to Our Business—Our strategic shift to an online advertising-supported business model involves

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significant risks.” As our subscriber base declines, we need to maintain the engagement of former subscribers and increase the number and engagement of other consumers on AOL Properties. We seek to do this by developing and offering engaging content, products and services. Further, we have transitioned and will continue to seek to transition a substantial percentage of those access subscribers who are terminating their paid access subscriptions to free AOL Properties offerings. One of the metrics we monitor related to our subscription access service is monthly average churn, which represents on average the number of AOL-brand access subscribers that terminate or cancel our services each month, factoring in new and reactivated subscribers. The domestic AOL-brand access subscriber monthly average churn was 3.4%, 3.6% and 4.6% for the years ended December 31, 2009, 2008 and 2007, respectively. Recently there has been a moderation in monthly churn, reaching 3.0% in December 2009. The average paid tenure of the remaining domestic AOL-brand access subscribers has been increasing, and was approximately 8 years, 7 years, and 6 years as of December 31, 2009, 2008 and 2007, respectively.

Historically, our primary subscription service has been our subscription access service. Moving forward, we seek to develop, test and market new subscription products and services that are either owned by us or by third parties. To facilitate this goal, we are planning to develop a single, open, consumer-facing platform that will allow us to manage and distribute these additional subscription products as well as our subscription access service. We plan to offer those subscriptions to our access subscribers and to other Internet consumers.

For the years ended December 31, 2009, 2008 and 2007, our subscription revenues were $1,388.8 million, $1,929.3 million and $2,787.9 million, respectively. Our subscription revenues have relatively low direct costs, and accordingly, our subscription access service represents the source of the vast majority of our operating income. Although our subscription revenues have declined and are expected to continue to decline, we believe that our subscription access service will continue to provide us with an important source of revenue and cash flow in the near term. The revenue and cash flow generated from our subscription access service will help us to pursue our strategic initiatives and continue the transition of our business toward attracting and engaging Internet consumers and generating advertising revenues. We expect our total revenues and operating income to decline in the near term and foreseeable future, even if our strategy is successful and we are able to grow our advertising revenues, primarily due to the continuing decline in our subscriber base.

THIRD PARTY NETWORK

We also generate advertising revenues through the sale of advertising on the Third Party Network. Our advertising offerings on the Third Party Network consist primarily of the sale of display advertising. In order to generate advertising revenues on the Third Party Network, we have historically had to incur higher traffic acquisition costs (“TAC”) as compared to advertising on AOL Properties.

We plan to expand the Third Party Network in order to allow us to serve many more publishers and advertisers than at present. We currently market our offerings to publishers under the brand “Advertising.com”. A significant portion of our revenues on the Third Party Network is generated from the advertising inventory acquired from a limited number of publishers. Accordingly, we intend to make strategic investments in order to expand the Third Party Network and related advertising solutions.

In the fourth quarter of 2009, we began proactively de-emphasizing the search engine campaign management and lead generation affiliate products on the Third Party Network in order to focus and strengthen our efforts in display advertising solutions. Given the relatively high level of direct costs associated with these products, we do not believe that this change will have a significant adverse impact on operating income in 2010. During 2009, we generated approximately $100 million in revenue related to these products.

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TRENDS, DEMANDS AND UNCERTAINTIES IMPACTING OUR BUSINESS

The web services industry is highly competitive and rapidly changing. Trends, challenges and uncertainties that may have a significant impact on our business, our opportunities and our ability to execute our strategy include the following:

• Commerce, information and advertising continue to migrate to the Internet and away from traditional media outlets. We believe this continuing trend will create strategic growth opportunities for us to attract new consumers and develop new and effective advertising solutions.

• We believe that effectively aligning our organizational structure and costs to our strategy is an important challenge to the successful implementation of our strategic plan. We are in the midst of a significant restructuring plan, which includes the reduction of a significant portion of our workforce, and expect to continue to actively manage our costs, in order to realize the desired benefits of our strategic plan.

• As the amount of content that is available online continues to expand, consumers are increasingly fragmenting across the Internet. While this fragmentation may result in fewer consumers utilizing portals for their information consumption, we own a large variety of niche sites (e.g., Engadget, Lemondrop and PoliticsDaily) that we expect to continue to drive consumer engagement. Furthermore, the Third Party Network, which reaches thousands of websites, will allow us to continue to provide advertising solutions across a fragmenting Internet environment.

• In recent years, there has been a significant shift in the method of Internet access away from dial-up access. This is due to a number of factors, including the increased availability of high-speed broadband Internet connections and the fact that a significant amount of online content, products and services has been optimized for use with broadband Internet connections. This trend has contributed to the continuing decline in the number of our access subscribers.

In addition to the trends, challenges and uncertainties listed above, we have historically operated as part of Time Warner’s corporate organization, and Time Warner has assisted us by providing certain corporate functions. Following the spin-off, Time Warner has no obligation to provide assistance to us other than the interim services to be provided as described in “Note 13: Related Party Transactions” in our accompanying consolidated financial statements. Because our business has previously operated as part of the Time Warner organization, we cannot assure you that we will be able to efficiently implement the changes necessary to operate independently or that we will not incur additional costs that could adversely affect our business. Further, implementing these changes may require a significant portion of our management’s attention.

AUDIENCE METRICS

We utilize unique visitor numbers to evaluate the performance of AOL Properties and AOL Media. In addition, we utilize unique visitor numbers to evaluate the reach of our total advertising network, which includes both AOL Properties and the Third Party Network. Unique visitor numbers provide an indication of our consumer reach. Although our consumer reach does not correlate directly to advertising revenue, we believe that our ability to broadly reach diverse demographic and geographic audiences is attractive to brand advertisers seeking to promote their brands to a variety of consumers without having to partner with multiple content providers.

The source for our unique visitor information is a third party (comScore Media Metrix, or Media Metrix). Media Metrix has historically estimated unique visitors based on a sample of Internet users in various countries (referred to as the “panel-only methodology”). While we are familiar with the general methodologies and processes that Media Metrix uses in estimating unique visitors, we have not performed independent testing or validation of Media Metrix’s data collection systems or proprietary statistical models, and therefore we can provide no assurance as to the accuracy of the information that Media Metrix provides.

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Using the historical panel-only methodology, our domestic average monthly unique visitors to AOL Properties, as reported by Media Metrix, for the years ended December 31, 2009, 2008 and 2007 were 104 million, 110 million and 112 million, respectively. Our domestic average monthly unique visitors to AOL Media, as reported by Media Metrix, for the years ended December 31, 2009 and 2008 were 74 million and 73 million, respectively. Unique visitor data pertaining to AOL Media represents a customized report from Media Metrix that is not available for periods prior to January 2008. Our domestic average monthly unique visitors to our total advertising network, which includes both AOL Properties and the Third Party Network, as reported by Media Metrix, for the years ended December 31, 2009, 2008 and 2007 were 179 million, 171 million and 156 million, respectively. AOL’s unique visitor numbers also include unique visitors attributable to co-branded websites owned by third parties for which certain criteria have been met, including that the Internet traffic has been assigned to us.

Media Metrix has announced the availability of an alternate ‘panel-centric hybrid’ methodology (“Media Metrix 360”) to estimate unique visitors, in order to provide a more accurate count of a website’s audience. Media Metrix has implemented this new methodology domestically and, currently, in limited countries globally. We elected to adopt this alternate methodology for our average monthly unique visitors to AOL Properties and AOL Media starting December 2009 and going forward. As a result, our average monthly unique visitors to AOL Properties and AOL Media based on Media Metrix 360 will not be comparable to the data under the previous panel-only methodology. For comparison purposes, domestic average monthly unique visitors to AOL Properties for the month of December 2009 were 111 million under Media Metrix 360 and were 102 million under the panel-only methodology, and domestic average monthly unique visitors to AOL Media for the month of December 2009 were 88 million under Media Metrix 360 and were 77 million under the panel-only methodology.

Recent Developments

SALE OF PERFILIATE LIMITED

On February 26, 2010, we completed the sale of Perfiliate Limited (doing business as buy.at) to Digital Window Limited for approximately $17.0 million in cash (subject to working capital adjustments). We expect to record a pre-tax loss on this sale of approximately $15 to 20 million, based on the cash proceeds and the carrying value of the net assets sold (including goodwill allocated to the sale). The results of operations of buy.at were not material to our consolidated financial statements.

ACQUISITION OF STUDIONOW

On January 22, 2010, we completed the acquisition of StudioNow, Inc. (“StudioNow”), a provider of a proprietary digital platform that allows clients to create, produce, manage and distribute professional quality videos at scale, for aggregate consideration of $36.5 million. $15.0 million of the consideration was paid through the issuance of approximately 595,000 shares of AOL common stock. Of the remaining $21.5 million, $14.0 million was paid in cash at the close date and $7.5 million is due in cash two years subsequent to the close date. It is anticipated that a significant portion of the purchase price will be allocated to intangible assets and goodwill. See “Note 4–Business, Acquisitions, Dispositions and Other Significant Transactions” in our accompanying consolidated financial statements for additional information on our acquisition of StudioNow.

RESTRUCTURING ACTIONS

We undertook various restructuring activities in 2009 in an effort to better align our organizational structure and costs with our strategy. As a result, for the three months and the year ended December 31, 2009, we incurred restructuring charges of $107.4 million and $190.3 million, respectively, related to voluntary and involuntary employee terminations and facility closures. We are in the midst of a significant restructuring initiative which began late in 2009 and we expect to complete in the first half of 2010. We expect to reduce our total workforce by nearly one-third in connection with this restructuring initiative, prior to hiring of new employees in areas of strategic focus . In addition, we plan to reduce our cost base in the United Kingdom and cease or reduce operations in a number of other countries. Specifically, we plan to reduce our presence in Europe by significantly

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reducing our operations in France and Germany and ceasing operations in a number of other countries. In certain of these countries, we are currently consulting with employees or employee representatives in accordance with applicable legal requirements. In connection with the restructuring activities we plan to undertake in 2010, we expect to incur additional restructuring charges of up to $50 million, substantially all of which are expected to be incurred through the first half of 2010. As a result of ceasing operations in various international countries and shutting down legal entities in certain countries where we operate, we may incur a significant non-cash loss related to the recognition in the income statement of our cumulative foreign currency translation adjustments accumulated in other comprehensive income, a component of equity. In the fourth quarter of 2009, we reevaluated the useful lives of certain intangible assets which resulted in the acceleration of amortization expense related to these assets. Approximately $60 million of amortization expense related to these assets will be incurred in 2010, the majority of which will be incurred in the first quarter of 2010.

AOL-GOOGLE ALLIANCE

On July 8, 2009, Time Warner repurchased Google’s 5% interest in us for $283.0 million, which amount included a payment in respect of Google’s pro rata share of cash distributions to Time Warner by AOL attributable to the period of Google’s investment in us. Following this repurchase, we became a wholly-owned subsidiary of Time Warner until the separation (see “The Spin-Off” for further details).

ACQUISITION OF PATCH MEDIA CORPORATION

On June 10, 2009, we purchased Patch Media Corporation (“Patch”), a news, information and community platform business dedicated to providing comprehensive local information and services for individual towns and communities, for approximately $7.0 million in cash. Approximately $700,000 of the consideration is being held in an indemnity escrow account until the first anniversary of the closing.

At the time of closing, Tim Armstrong, our Chairman and Chief Executive Officer, held, indirectly, through Polar Capital Group, LLC (“Polar Capital”) (a private investment company which he founded), economic interests in Patch that entitled him to receive approximately 75% of the transaction consideration. Mr. Armstrong’s original investment in Patch, made in December 2007 through Polar Capital, was approximately $4.5 million. In connection with the transaction, Mr. Armstrong, through Polar Capital, waived his right to receive any transaction consideration in excess of his original $4.5 million investment, opting to accept only the return of his initial investment in AOL common stock. In addition, Mr. Armstrong elected to return the $4.5 million (approximately $450,000 of which is being held in the indemnity escrow account for a year) that he was entitled to receive in connection with the transaction to us, which was held by us until after our separation from Time Warner. In partial exchange for the $4.5 million he was entitled to receive, on January 29, 2010, AOL issued to Polar Capital approximately 173,000 shares of AOL common stock. The issuance of shares of AOL Inc. common stock to Polar Capital was exempt from registration under Section 4(2) of the Securities Act of 1933, as a transaction by an issuer not involving a public offering.

In evaluating the fair market value of Patch, Time Warner engaged the services of an independent financial advisory firm, which reviewed certain information, including recent financial performance and financial forecasts relating to Patch’s earnings and cash flow and performed valuation analyses including: a discounted cash flow analysis of Patch’s expected earnings, a comparison of the multiple being paid for Patch to the trading multiples of comparable public companies, and a comparison of the multiple being paid for Patch to the multiples paid in comparable merger and acquisition transactions. The discounted cash flow analysis was based on terminal multiples of revenue of 2.0 to 4.0x, terminal multiples of EBITDA of 8.0 to 12.0x and discount rates of 20 to 40%. Comparable public companies were trading at 0.2 to 3.2x 2010 revenue and 0.01 to 0.20x revenue on a growth adjusted basis. In comparable mergers and acquisitions, acquirers paid a multiple of 0.7 to 29.4x revenue for the last 12 months prior to the transaction, 0.8 to 8.6x forward revenue and 1.6 to 10.6x invested capital. The purchase price of $7.0 million for Patch was within the range implied by the discounted cash flow analysis and the implied valuation multiples were below or within the range of multiples for the comparable public companies and comparable merger and acquisition transactions.

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In connection with its analysis, the financial advisory firm assumed and relied upon the accuracy and completeness of the financial and other information that was available to it from public sources, that was provided to it by Time Warner or its representatives, or that was otherwise available to it, without independent verification of such information. With respect to the financial forecasts, the financial advisory firm assumed no responsibility for such forecasts or the assumptions on which they were based and assumed that such forecasts had been reasonably prepared on a basis reflecting the best currently available estimates and judgments of the management of Time Warner as to the future financial performance of Patch, and that such financial information was materially complete.

Based on the analyses undertaken, and subject to the above assumptions and qualifications, the financial advisory firm confirmed that the $7.0 million value ascribed by us was within the range of estimated fair market values for Patch as of the transaction date.

The Patch acquisition did not significantly affect our consolidated financial results for the year ended December 31, 2009. As part of our plan to expand our local strategic initiatives, we currently anticipate investing up to $50.0 million in Patch during the remainder of 2010.

Results of Operations

Recent Accounting Standards

See “Note 1: Description of Business, Basis of Presentation and Summary of Significant Accounting Policies” in our accompanying consolidated financial statements for a discussion of recent accounting standards.

Consolidated Results

The following table presents our historical operating results as a percentage of revenues for the periods presented and should be read in conjunction with the accompanying consolidated statements of operations:

	Years Ended December 31,
	2009	2008	2007
Costs and expenses:
Costs of revenues	58%	55%	51%
Selling, general and administrative	17	16	19
Amortization of intangible assets	4	4	2
Amounts related to securities litigation and government investigations, net of recoveries	1	—	3
Restructuring costs	6	—	2
Goodwill impairment charge	—	53	—
Gain on disposal of assets and consolidated businesses, net	—	—	(13)
Total costs and expenses	86%	128%	64%
Operating income (loss)	14%	(28)%	36%

The following table presents our revenues, by revenue type, for the periods presented (in millions):

	Years Ended December 31,
	2009		2008		% Change from 2008 to 2009		2007		% Change from 2007 to 2008
Revenues:
Advertising	$	1,748.3	$	2,096.4	(17	)%	$	2,230.6	(6	)%
Subscription		1,388.8		1,929.3	(28	)%		2,787.9	(31	)%
Other		120.3		140.1	(14	)%		162.2	(14	)%
Total revenues	$	3,257.4	$	4,165.8	(22	)%	$	5,180.7	(20	)%

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The following table presents our revenues, by revenue type, as a percentage of total revenues for the periods presented:

	Years Ended December 31,
	2009	2008	2007
Revenues:
Advertising	54%	50%	43%
Subscription	43	46	54
Other	3	4	3
Total revenues	100%	100%	100%

The strengthening of the U.S. dollar relative to major foreign currencies to which we are exposed negatively affected our revenues by approximately $55 million for the year ended December 31, 2009, as compared to the year ended December 31, 2008. However, due to an offsetting positive impact on expenses, the impact of exchange rate differences on operating income and net income in comparing these periods was not material.

ADVERTISING REVENUES

Advertising revenues are generated on AOL Properties through display advertising and search and contextual advertising. Display advertising revenue is generated by the display of graphical advertisements and other performance-based advertising. Search and contextual advertising revenue is generated when a user clicks on or views a text-based advertisement on the user’s screen. These text-based advertisements are either generated from a user-initiated search query or generated based on the content of the webpage the user is viewing. Agreements for advertising on AOL Properties typically take the form of impression-based contracts in which we provide impressions in exchange for a fixed fee (generally stated as cost-per-thousand impressions), time-based contracts in which we provide a minimum number of impressions over a specified time period for a fixed fee or performance-based contracts in which performance is measured in terms of either “click-throughs” when a user clicks on a company’s advertisement or other user actions such as product/customer registrations, survey participation, sales leads or product purchases. In addition, agreements with advertisers can include other advertising-related elements such as content sponsorships, exclusivities or advertising effectiveness research.

In addition to advertising revenues generated on AOL Properties, we also generate revenues from our advertising offerings on the Third Party Network. To generate revenues on the Third Party Network, we purchase advertising inventory from publishers (both large and small) in the Third Party Network using proprietary optimization, targeting and delivery technology to best match advertisers with available advertising inventory. Advertising arrangements for the sale of Third Party Network inventory typically take the form of impression-based contracts or performance-based contracts.

Advertising revenues on AOL Properties and the Third Party Network for the years ended December 31, 2009, 2008 and 2007 are as follows (in millions):

	Years Ended December 31,
	2009		2008		% Change from 2008 to 2009		2007		% Change from 2007 to 2008
AOL Properties:
Display	$	603.9	$	729.2	(17	)%	$	896.2	(19)%
Search and Contextual		609.8		721.2	(15	)%		656.9	10%
Total AOL Properties		1,213.7		1,450.4	(16	)%		1,553.1	(7)%
Third Party Network		534.6		646.0	(17	)%		677.5	(5)%
Total advertising revenues	$	1,748.3	$	2,096.4	(17	)%	$	2,230.6	(6)%

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Advertising revenues generated on AOL Properties decreased 16%, or $236.7 million for the year ended December 31, 2009, as compared to the year ended December 31, 2008 driven by decreases in display advertising and search and contextual revenues. The decrease in display advertising was due to weak global economic conditions that resulted in lower advertising demand. Specifically, international display revenue declined reflecting weakness in the U.K., Germany and France and domestic display revenue reflected weakness in certain advertiser categories, including Classifieds, Finance and Telecommunications. The decline in search and contextual revenue was primarily due to a decline in search revenues due to decreases in search query volume (partially due to the decline in domestic AOL-brand access subscribers) on certain AOL Properties which contributed $71.8 million to the decline and lower revenues per search query on certain AOL Properties which contributed $30.4 million to the decline. Contextual revenues declined $10.4 million primarily due to reduced monetization on MapQuest, partially offset by increased prioritization of certain contextual links in the first half of 2009.

Advertising revenues generated on AOL Properties decreased 7%, or $102.7 million, for the year ended December 31, 2008, as compared to the year ended December 31, 2007. The decrease in display advertising was due in part to a benefit to revenue for the year ended December 31, 2007 of approximately $19 million related to a change in an accounting estimate as a result of more timely impression delivery data. The remaining decrease in display advertising revenue of approximately $148 million was due to weak global economic conditions which resulted in lower advertising demand, as well as the challenges of integrating businesses acquired in late 2007 and early 2008. The increase in search and contextual revenue was primarily driven by higher revenues per search query on certain AOL Properties and broader distribution of paid-search through AOL Properties, which contributed $76 million and $30 million, respectively, to the increase, partially offset by a $75 million decrease due to a decline in search query volume on certain AOL Properties. The remaining increase in search and contextual revenue was due primarily to the acquisition of Quigo Technologies, Inc. in late 2007, which contributed $22 million to the increase for the year ended December 31, 2008 as compared to the year ended December 31, 2007.

For all periods presented in this Annual Report, we have had a contractual relationship with Google whereby Google provides paid text-based search and contextual advertising on AOL Properties. For all of the periods presented in this Annual Report, revenues under the Google arrangement represented a significant percentage of the advertising revenues generated by AOL Properties. For the years ended December 31, 2009, 2008 and 2007, the revenues associated with the Google relationship (substantially all of which were search and contextual revenues generated on AOL Properties) were $556.7 million, $677.9 million and $642.1 million, respectively.

The 17% decrease in advertising revenues on the Third Party Network for the year ended December 31, 2009, as compared to the year ended December 31, 2008, was due to weak global economic conditions that resulted in lower advertising demand, as well as a decrease of $23 million due to the wind-down of a contract with a major customer. Revenues associated with this major customer were $3 million for the year ended December 31, 2009 compared to $26 million for the year ended December 31, 2008.

The 5% decrease in advertising revenues generated on the Third Party Network for the year ended December 31, 2008, as compared to the year ended December 31, 2007, was due to a decrease of $189 million resulting from the wind-down of a contract with a major customer, which was partially offset by increased revenues of $131 million attributable to acquisitions completed in 2007 and other advertising growth of $27 million. Since January 1, 2008, the major customer noted above has been under no contractual obligation to do business with us, and our advertising revenues from this customer declined to $26 million in 2008 from $215 million in 2007.

We expect that our advertising revenues on both AOL Properties and the Third Party Network will decline significantly in 2010. We believe that advertising revenues generated on AOL Properties will be negatively impacted by the decline in our domestic AOL-brand access subscribers, particularly as it relates to search and contextual revenues, as well as our plan to cease or reduce operations in a number of countries. Visibility into

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advertising revenue for the full year of 2010 is limited due to the impact of our previously announced restructuring efforts, including the restructuring of our advertising organization, and the fact that many advertising agreements are executed during the quarter that the advertising is displayed. However, based on current information, we believe domestic display advertising revenues will decline in the first quarter of 2010 as compared to the first quarter of 2009 as a result of our advertising sales organization restructuring which resulted in the reassignment of a majority of our advertising accounts, significantly lower monetization of AOL Properties through our Third Party Network and an approximate $5 million reduction (which represents an approximate 40% year-over-year decline) in advertising revenue related to legacy agreements on certain AOL Properties. Finally, our Third Party Network revenues will be negatively impacted in 2010 by the international reductions and closures previously discussed as well as the de-emphasis of our search engine campaign management and lead generation affiliate products, which are discussed in “Overview—Third Party Network” above.

SUBSCRIPTION REVENUES

The 28% decline in subscription revenues for the year ended December 31, 2009, as compared to the year ended December 31, 2008, was due to a 28% decrease in the number of domestic AOL-brand access subscribers (which is discussed further below). The 31% decline in subscription revenues for the year ended December 31, 2008, as compared to the year ended December 31, 2007, was due to a 26% decrease in the number of domestic AOL-brand access subscribers, the sale of our German access service business in the first quarter of 2007, which resulted in a decrease of $88 million for the year ended December 31, 2008, and a decrease of $51 million related to a decline in non-AOL-brand access subscribers (i.e., CompuServe and Netscape brand access subscribers).

The number of domestic AOL-brand access subscribers was 5.0 million, 6.9 million and 9.3 million at December 31, 2009, 2008 and 2007, respectively. The domestic average monthly revenue per AOL-brand access subscriber (which we refer to in this Annual Report as ARPU) was $18.46, $18.38 and $18.66 for the years ended December 31, 2009, 2008 and 2007, respectively. We include in our subscriber numbers individuals, households and entities that have provided billing information and completed the registration process sufficiently to allow for an initial log-on to the AOL access service. Individuals who have registered for our free offerings, including subscribers who have migrated from paid subscription plans, are not included in the AOL-brand access subscriber numbers presented above. Subscribers to our subscription access service contribute to our ability to generate advertising revenues.

As previously discussed, the continued decline in domestic AOL-brand access subscribers is the result of several factors, including the increased availability of high-speed broadband Internet connections, the fact that a significant amount of online content, products and services has been optimized for use with broadband Internet connections and the effects of our strategic focus on advertising, which has led to significantly reduced marketing efforts for our subscription access service and the free availability of the vast majority of our content, products and services. As a result of these factors, we expect subscription revenues to continue to decline for the foreseeable future. The change in ARPU for the year ended December 31, 2009, compared to the year ended December 31, 2008, did not have a significant impact on subscription revenues. The decrease in ARPU of $0.28 for the year ended December 31, 2008, as compared to the year ended December 31, 2007, was due to a shift in the subscriber mix to lower-priced plans, which reduced ARPU by $1.35, and a decrease in premium services revenues, which reduced ARPU by $0.30. These decreases were partially offset by an increase in the percentage of revenue-generating customers, which increased ARPU by $0.43, and price increases for lower-priced plans, which increased ARPU by $1.11.

OTHER REVENUES

Other revenues consist primarily of fees associated with our mobile e-mail and instant messaging functionality from mobile carriers, licensing revenues from third-party customers through MapQuest’s business-to-business services and licensing revenues from licensing our proprietary ad serving technology to third parties through our subsidiary, ADTECH AG. Additionally, other revenues for the years ended December 31, 2008 and 2007 include revenues associated with transition support services agreements with the purchasers of our European access service businesses.

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Other revenues decreased 14% for both of the years ended December 31, 2009 and December 31, 2008, as compared to the prior years, due to declines in the revenues associated with the transition support services agreements with the purchasers of our European access service businesses (which ended in 2008). These agreements contributed $23 million and $51 million in revenue for the years ended December 31, 2008 and December 31, 2007, respectively. The decline in revenue from these agreements was partially offset by increases in mobile e-mail and instant messaging revenues of $6 million and $14 million for the years ended December 31, 2009 and December 31, 2008, as compared to the years ended December 31, 2008 and December 31, 2007, respectively.

GEOGRAPHICAL CONCENTRATION OF REVENUES

For all of the periods presented herein, a significant majority of our revenues have been generated in the United States. In 2009, 2008 and 2007, 88%, 87% and 88%, respectively, of our revenues were generated in the United States. Substantially all of the non-United States revenues in 2009, 2008 and 2007 were generated by our European operations (primarily in the United Kingdom, France and Germany). We expect the significant majority of our revenues to continue to be generated in the United States for the foreseeable future. See “Note 1: Description of Business, Basis of Presentation and Summary of Significant Accounting Policies” in our accompanying consolidated financial statements for further discussion of our geographical concentrations.

OPERATING COSTS AND EXPENSES

The following table presents our operating costs and expenses for the periods presented (in millions):

	Years Ended December 31,
	2009		2008			% Change from 2008 to 2009	2007			% Change from 2007 to 2008
Costs of revenues	$	1,898.5	$	2,278.4		(17)%	$	2,652.6		(14)%
Selling, general and administrative		538.0		644.8		(17)%		964.2		(33)%
Amortization of intangible assets		144.7		166.2		(13)%		95.9		73%
Amounts related to securities litigation and government investigations, net of recoveries		27.9		20.8		34%		171.4		(88)%
Restructuring costs		190.3		16.6		NM		125.4		(87)%
Goodwill impairment charge		—		2,207.0		(100)%		—		NM
Gain on disposal of assets and consolidated businesses, net		—		(0.3	)	(100)%		(682.6	)	(100)%

NM = not meaningful

The following categories of costs are generally included in costs of revenues: network-related costs, traffic acquisition costs (TAC), product development costs and other costs of revenues. For the year ended December 31, 2009, the largest component of costs of revenues was TAC. TAC consists of costs incurred through arrangements in which we acquire third-party online advertising inventory for resale and arrangements whereby partners distribute our free products or services or otherwise direct traffic to AOL Properties. TAC arrangements have a number of different economic structures, the most common of which are: payments based on a cost-per-thousand impressions or based on a percentage of the ultimate advertising revenues generated from the advertising inventory acquired for resale, payments for direct traffic delivered to AOL Properties priced on a per click basis (e.g., search engine marketing fees) and payments to partners in exchange for distributing our products to their users (e.g., agreements with computer manufacturers to distribute our toolbar or a co-branded web portal on computers shipped to end users). These arrangements can be on a fixed-fee basis (which often carry reciprocal performance guarantees by the counterparty), on a variable basis or, in some cases, a combination of the two. Network-related costs include narrowband access costs, hardware and software maintenance expense, high-speed data circuits, personnel and related overhead costs incurred in supporting the network and depreciation of network-related assets. Product development costs include software maintenance costs, research and development costs and other expenses incurred in the development of software and user-facing Internet offerings, including personnel and related overhead support costs. Other costs of revenues include content royalties and customer service costs, which include outsourced

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customer service costs and, historically, employee and related costs for our operated customer support call centers, as well as costs associated with customer billing and collections, personnel and related overhead costs, depreciation and amortization of certain capitalized software and certain asset impairments.

Selling, general and administrative expenses consist primarily of marketing costs associated with subscriber acquisition marketing efforts and payments to marketing partners for domestic AOL-brand access subscribers, personnel costs and facility costs related to our corporate and business support functions, depreciation on property and equipment used in our corporate and business support functions, consulting fees, bad debt expense and legal fees.

Our costs of revenues and selling, general and administrative expenses declined significantly for the periods presented, driven by cost reduction initiatives we have undertaken as a result of the strategic focus on advertising. The decisions made in connection with these cost reduction initiatives included ceasing to actively market our subscription access service, closing and outsourcing our customer support and call center functions, entering into variable network cost agreements as opposed to fixed cost agreements to reduce costs in response to the declining access subscriber base, reducing headcount through restructuring actions taken during the periods presented and leveraging non-United States personnel in a cost-effective manner.

Costs of Revenues

Costs of revenues decreased 17% to $1,898.5 million for the year ended December 31, 2009, as compared to $2,278.4 million for the year ended December 31, 2008. The primary drivers of the decrease in costs of revenues were decreases in TAC, network-related costs, product development and certain other costs of revenues (as discussed further below). TAC decreased 17% to $567.8 million for the year ended December 31, 2009, as compared to $687.0 million for the year ended December 31, 2008, due to the decrease in advertising revenues on the Third Party Network and, to a lesser extent, declines in product distribution costs related to an amendment to a product distribution agreement in the third quarter of 2008. Network-related costs declined by $85.2 million for the year ended December 31, 2009 due to declines in narrowband network and other network-related costs related to cost reduction initiatives undertaken in response to the decline in domestic AOL-brand access subscribers. Product development costs declined by $65.6 million for the year ended December 31, 2009 due to reduced headcount and reduced product development efforts. Other costs of revenues declines for the year ended December 31, 2009 as compared to the year ended December 31, 2008 included declines in outside services costs of $47.4 million as a result of reduced consulting, lower outsourced call center expenses and the transition to internally developed ad serving technology beginning in the first quarter of 2009. Depreciation and amortization expense declined by $41.3 million, which includes declines in depreciation of capitalized software associated with our subscription access service. We also had declines in customer billing and collection costs of $27.6 million for the year ended December 31, 2009 due to the decline in domestic AOL-brand access subscribers. Partially offsetting the decreases described above was an increase of $48.4 million in personnel costs for the year ended December 31, 2009, resulting from the decision not to pay most annual bonuses for 2008.

Costs of revenues as a percentage of revenues were 58% and 55% for the years ended December 31, 2009 and 2008, respectively. While we undertook a number of cost reduction initiatives in response to the decline in revenues, the increase in costs of revenues as a percentage of revenues was partially driven by the decision not to pay most annual bonuses for 2008. The remaining increase was a result of declines in our subscription revenues and advertising revenues exceeding the decline in costs to deliver such revenues.

Costs of revenues decreased 14% to $2,278.4 million for the year ended December 31, 2008, as compared to $2,652.6 million for the year ended December 31, 2007. The sale of our German access service business in the first quarter of 2007 contributed $78 million of the decrease. Excluding that decline, the primary drivers of the decrease in costs of revenues were a decrease in network-related costs, product development and certain other costs of revenues. Network-related costs declined by $149 million, which included declines in narrowband network costs of $56 million due to the decline in access service subscribers, a decrease in personnel and related overhead costs to support the network of $43 million resulting from reduced headcount, declines in depreciation expense associated with network equipment of $29 million and other declines of $26 million related to the decline in access service subscribers. Product development expenses declined $32 million due to a decrease in

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personnel-related costs as a result of reduced headcount. Other costs of revenues included a decrease in other personnel and related overhead costs of $97 million as a result of reduced headcount, declines in non-network depreciation and amortization of $47 million, declines in costs associated with customer billing and collections of $24 million due to the decline in subscribers and lower content royalties of $21 million. Also contributing to the decline in personnel-related costs described above was our decision not to pay most annual bonuses for 2008. Partially offsetting these declines were increases in TAC. TAC increased 14% to $687 million for the year ended December 31, 2008, as compared to $604 million for the year ended December 31, 2007, due to a new product distribution agreement resulting in TAC of $106 million, additional TAC of $92 million related to revenues generated by the acquisitions completed in 2007 and other increases in TAC consistent with the other Third Party Network advertising growth of $27 million previously discussed, partially offset by the wind-down of the contract with the major customer described above, which resulted in a decline of $160 million.

Costs of revenues as a percentage of revenues were 55% and 51% in the years ended December 31, 2008 and 2007, respectively. The increase in costs of revenues as a percentage of revenues for the year ended December 31, 2008, as compared to the year ended December 31, 2007, was a result of declines in our subscription revenues and advertising revenues exceeding the decline in costs to deliver such revenues.

Selling, General and Administrative

Selling, general and administrative expenses decreased 17% to $538.0 million for the year ended December 31, 2009, as compared to $644.8 million for the year ended December 31, 2008 due to declines in marketing costs of $52.9 million, reflecting reduced payments to marketing partners due to the decline in domestic AOL-brand access subscribers and reduced spending due to cost savings initiatives. Further contributing to the decline in selling, general and administrative expenses for the year ended December 31, 2009, as compared to the year ended December 31, 2008 were decreases in consulting costs of $33.1 million, partially due to the costs incurred in 2008 associated with Time Warner’s evaluation of various strategic alternatives related to our business, which were $22 million for the year ended December 31, 2008, and personnel related declines of $32.2 million due to reduced headcount. Partially offsetting the decline was an increase of $14.7 million for the year ended December 31, 2009 related to the resolution of a French value-added tax matter associated with our historical European access service businesses and an increase in personnel related costs of $15.4 million for the year ended December 31, 2009, resulting from the decision not to pay most annual bonuses for 2008.

Selling, general and administrative expenses decreased to $644.8 million for the year ended December 31, 2008, a 33% decline as compared to the year ended December 31, 2007, of which $34 million was attributable to the sale of our German access service business. The remaining decrease was due to a decline in marketing costs of $127 million, which was related to reduced subscriber acquisition marketing efforts as part of the strategic shift announced in 2006, and a reduction in personnel and related overhead costs of $88 million, due partially to reduced headcount and our decision not to pay most annual bonuses for 2008. Selling, general and administrative expenses for the year ended December 31, 2008 also included $22 million of external costs incurred in connection with Time Warner’s evaluation of various strategic alternatives related to us, including the previously contemplated separation of AOL into separate businesses, which more than offset a $20 million decline in other outside consulting expenses.

Amortization of Intangible Assets

Amortization of intangible assets results primarily from acquired intangible assets including technology, customer relationships and trade names. Amortization of intangibles declined 13% to $144.7 million for the year ended December 31, 2009, as compared to $166.2 million for the year ended December 31, 2008, due to certain intangible assets becoming fully amortized at the end of 2008, partially offset by an increase in our acquired intangible assets resulting from the acquisition of Bebo, Inc. in early 2008. Amortization of intangible assets increased $70.3 million for the year ended December 31, 2008, a 73% increase as compared to the year ended December 31, 2007, due primarily to a significant increase in our acquired intangible assets resulting from the acquisitions of Bebo, Inc. in early 2008 and the acquisitions of Quigo Technologies, Inc. and TACODA, Inc. in late 2007.

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Amounts Related to Securities Litigation and Government Investigations, Net of Recoveries

Amounts related to securities litigation and government investigations, net of recoveries consist of legal settlement costs and legal and other professional fees incurred by Time Warner prior to the spin-off related to the defense of various securities lawsuits involving us or our or Time Warner’s present or former officers and employees. While these amounts were historically incurred by Time Warner and reflected in Time Warner’s financial results, they have been reflected as an expense and a corresponding additional capital contribution by Time Warner in our consolidated financial statements for the periods when we were a wholly-owned subsidiary of Time Warner because they involve us. We recognized $27.9 million, $20.8 million and $171.4 million of expense related to these matters for the years ended December 31, 2009, 2008 and 2007, respectively. Following the spin-off, these costs continue to be incurred by Time Warner to the extent that proceeds from a settlement with insurers are available to pay those costs, and thereafter AOL has an obligation to indemnify Time Warner for such costs to the extent they are associated with present or former officers and employees of AOL. We do not view the remaining potential obligations related to this matter to be material. See “Note 11: Commitments and Contingencies” in our accompanying consolidated financial statements for more information.

Restructuring Costs

We undertook various restructuring activities in 2009 in an effort to better align our organizational structure and costs with our strategy. As a result, for the three months and the year ended December 31, 2009, we incurred restructuring charges of $107.4 million and $190.3 million, respectively, related to voluntary and involuntary employee terminations and facility closures. We are in the midst of a significant restructuring initiative which began late in 2009 and we expect to complete in the first half of 2010. We expect to reduce our total workforce by nearly one-third in connection with this restructuring initiative, prior to hiring of new employees in areas of strategic focus. In addition, we plan to reduce our cost base in the United Kingdom and cease or reduce operations in a number of other countries. Specifically, we plan to reduce our presence in Europe by significantly reducing our operations in France and Germany and ceasing operations in a number of other countries. In certain of these countries, we are currently consulting with employees or employee representatives in accordance with applicable legal requirements. In connection with the restructuring activities we plan to undertake in 2010, we expect to incur additional restructuring charges of up to $50 million, substantially all of which are expected to be incurred through the first half of 2010. As a result of ceasing operations in various international countries and shutting down legal entities in certain countries where we operate, we may incur a significant non-cash loss related to the recognition in the income statement of our cumulative foreign currency translation adjustments accumulated in other comprehensive income, a component of equity. In the fourth quarter of 2009, we reevaluated the useful lives of certain intangible assets which will result in accelerated amortization expense of approximately $60 million in 2010, the majority of which will be incurred in the first quarter of 2010.

As a result of the strategic focus on advertising and continuing efforts to better position and optimize our business, we also undertook restructurings in 2008 and 2007. Our 2008 results included net restructuring charges of $16.6 million related to costs incurred associated with involuntary employee terminations and facility closures. Our 2007 results included restructuring charges of $125.4 million, reflecting costs incurred associated with involuntary employee terminations, asset write-offs and facility closures. The 2007 charges also included a reversal of $15 million of restructuring costs associated with a change in estimate for 2006 and prior restructuring activity.

Goodwill Impairment Charge

Based on our goodwill impairment analysis, we have determined that the estimated fair value of AOL exceeds its book value as of December 31, 2009 and therefore no goodwill impairment charge was recorded for 2009. See “Note 3: Goodwill and Intangible Assets” in our accompanying consolidated financial statements for more information.

The goodwill impairment charge in 2008 was incurred as a result of the annual goodwill impairment analysis performed during the fourth quarter of 2008. In that analysis, we determined that the carrying value of our goodwill was impaired and, accordingly, recorded a goodwill impairment charge of $2,207.0 million to write

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goodwill down to its implied fair value. See “Note 1: Description of Business, Basis of Presentation and Summary of Significant Accounting Policies” and “Note 3: Goodwill and Intangible Assets” in our accompanying consolidated financial statements for more information.

Gain on Disposal of Assets and Consolidated Businesses, Net

The gain on disposal of assets and consolidated businesses for the year ended December 31, 2007 consisted primarily of the $668.2 million gain on the sale of our German access service business in 2007.

OPERATING INCOME (LOSS)

Operating income was $458.0 million for the year ended December 31, 2009, as compared to an operating loss of $1,167.7 million for the year ended December 31, 2008. The operating loss in 2008 included a $2,207.0 million goodwill impairment charge. Excluding this charge, operating income declined in 2009 as compared to 2008 due to the decline in revenues and increase in restructuring costs, partially offset by decreases in costs of revenues and selling, general and administrative expenses.

Our operating loss was $1,167.7 million for the year ended December 31, 2008, as compared to operating income of $1,853.8 million for the year ended December 31, 2007. The decline was due primarily to the goodwill impairment charge in 2008, a significant decrease in revenues in 2008 and a gain on the disposal of our German access service business in 2007, partially offset by decreases in costs of revenues, selling, general and administrative expenses and restructuring costs.

OTHER INCOME STATEMENT AMOUNTS

The following table presents our other income statement amounts for the periods presented (in millions):

	Years Ended December 31,
	2009		2008		% Change from 2008 to 2009	2007		% Change from 2007 to 2008
Other income (loss), net	$	(2.8)	$	(3.8)	(26)%	$	1.2	NM
Income tax provision		206.7		355.1	(42)%		641.7	(45)%
Discontinued operations, net of tax		—		—	NM		182.1	(100)%

Income Tax Provision

Our effective tax rate was 45.4% for the year ended December 31, 2009, as compared to (30.3)% for the year ended December 31, 2008. The effective tax rate for the year ended December 31, 2008 included the effect of the $2,207.0 million goodwill impairment charge, the majority of which was non-deductible for income tax purposes. Excluding the effect of this charge, our effective tax rate for the year ended December 31, 2008 was 43.4%. The increase in the effective tax rate (after excluding the effect of this charge) was primarily due to taxable distributions from foreign jurisdictions. The effective tax rate for the year ended December 31, 2009 differs from the statutory U.S. federal income tax rate of 35.0% due principally to state income taxes and the impact of uncertain tax positions.

Excluding the effect of the goodwill impairment charge, our effective tax rate for the year ended December 31, 2008 was 43.4%, as compared to 34.6% for the year ended December 31, 2007. The increase in the effective tax rate (after excluding the effect of this charge) was due to tax benefits realized in 2007 associated with the utilization of tax loss carryforwards on the sale of our German access service business. The effective tax rate for the year ended December 31, 2008 differs from the U.S. federal income tax rate due to state taxes and a goodwill impairment charge, the majority of which was non-deductible for income tax purposes.

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Discontinued Operations, Net of Tax

Discontinued operations, net of tax for the year ended December 31, 2007 includes the financial data associated with the Tegic and Wildseed businesses. See “Note 4: Business Acquisitions, Dispositions and Other Significant Transactions” in our accompanying consolidated financial statements for more detail on these divestitures.

Liquidity and Capital Resources

Current Financial Condition

Historically, the cash we generate has been sufficient to fund our working capital, capital expenditure and financing requirements. While our ability to forecast future cash flows is limited, we expect to fund our ongoing working capital, capital expenditure and financing requirements primarily through cash flows from operations. In addition, we have available to us the revolving credit facility entered into in connection with the separation. While we expect to continue to generate positive cash flows from operations, our cash flows from operations will decline over the next several years principally due to the continued decline in the number of domestic AOL-brand access subscribers as well as a projected decline in search and contextual revenues. Growth in cash flows from operations will only be achieved when, and if, the growth in earnings from our online advertising services more than offsets the continued decline in domestic AOL-brand access subscribers. In order for us to achieve such increase in earnings from advertising services, we believe it will be important to increase our overall volume of display advertising sold, including through our higher-priced channels, and to maintain or increase pricing for advertising. Advertising revenues, however, are more unpredictable and variable than our subscription revenues, and are more likely to be adversely affected during economic downturns, as spending by advertisers tends to be cyclical in line with general economic conditions. If we are unable to successfully implement our strategic plan and grow the earnings generated by our online advertising services, we would reassess our cost structure or seek other financing alternatives to fund our business. As part of our ongoing assessment of our business and availability of capital and to enhance our liquidity position, we may consider divesting of certain assets or product lines.

At December 31, 2009, our cash and equivalents totaled $147.0 million, as compared to $134.7 million at December 31, 2008. Prior to the spin-off, Time Warner provided cash management and other treasury services to us. As part of these services, we swept the majority of our domestic cash balances to Time Warner on a daily basis and received funding from Time Warner for any domestic cash needs. Accordingly, our cash and equivalents balances presented herein prior to the spin-off consist primarily of cash held at international locations for international cash needs. Our cash and equivalents balance as of the date of the spin-off was $100.0 million.

In connection with the spin-off, we entered into a new revolving credit facility. We intend to use the proceeds of this facility, as necessary, for general corporate purposes. We describe the anticipated terms of this facility in greater detail under “Principal Debt Obligations”.

Summary Cash Flow Information

Our cash flows from operations are driven by net income adjusted for non-cash items such as depreciation, amortization, goodwill impairment, equity-based compensation expense and other activities impacting net income such as the gains and losses on the sale of assets or operating subsidiaries. Cash flows from investing activities consist primarily of the cash used in the acquisitions of various businesses as part of our strategy, proceeds received from the sale of assets or operating subsidiaries and cash used for capital expenditures. Cash flows from financing activities relate primarily to our distributions of cash to Time Warner as part of our historical cash management and treasury operations, as well as payments made on debt and capital lease obligations.

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OPERATING ACTIVITIES

The following table presents cash provided by operations for the periods presented (in millions):

	Years Ended December 31,
	2009		2008		2007
Net income (loss)	$	248.5	$	(1,526.6)	$	1,395.4
Adjustments for non-cash and non-operating items:
Depreciation and amortization		406.2		477.2		498.6
Non-cash asset impairments		23.1		2,240.0		16.2
Gain on disposal of assets and consolidated businesses, net		—		(0.3)		(682.6)
Non-cash equity-based compensation		12.5		19.6		32.3
Amounts related to securities litigation and government investigations, net of recoveries		27.9		20.8		171.4
Deferred income taxes		(6.7)		(49.5)		102.2
Adjustments relating to discontinued operations		—		—		(186.7)
All other, net, including working capital changes		196.7		(247.6)		(330.2)
Cash provided by operations	$	908.2	$	933.6	$	1,016.6

Cash provided by operations decreased by $25.4 million to $908.2 million for the year ended December 31, 2009, as compared to the year ended December 31, 2008. Our operating income was $458.0 million for the year ended December 31, 2009, an increase of $1,625.7 million as compared to the year ended December 31, 2008. Excluding the $2,207.0 million non-cash goodwill impairment charge in 2008, operating income decreased, driving the decrease in cash provided by operations. The decrease in operating income was partially offset by an increase in cash provided by working capital, driven mainly by lower employee bonus payments in 2009 and the restructuring charge incurred in 2009, the majority of which has not been paid as of the year ended December 31, 2009 and is expected to be paid in 2010.

Cash provided by operations decreased by $83.0 million to $933.6 million for the year ended December 31, 2008 as compared to the year ended December 31, 2007 driven by our decline in operating income. Our operating loss was $1,167.7 million for the year ended December 31, 2008, a decline of $3,021.5 million as compared to the year ended December 31, 2007. Excluding the declines in operating income related to the $2,207.0 million non-cash goodwill impairment charge in 2008 and the $668.2 million gain on the sale of our German access service business in 2007 (which is related to an investing cash flow), and excluding the $150.6 million increase in operating income related to securities litigation and government investigations (which were non-cash to us as Time Warner paid these amounts), operating income declined by $296.9 million, driving the decrease in cash provided by operations. This decline was mostly offset by changes in working capital, driven by a number of factors. First, a portion of our $222.2 million restructuring charge incurred in 2006 was paid in 2007, and the majority of our restructuring charge incurred in 2007 was also paid in 2007, reducing cash provided by operations in 2007. Second, the continued decline in domestic access subscribers and our strategic shift announced in 2006 led to a significant decline in deferred revenues (as we typically collect cash in advance of providing service to customers) from December 31, 2006 to December 31, 2007, resulting in lower cash from operations in 2007. Third, our advertising receivables increased in 2007 as our advertising business grew, and our advertising receivables declined in 2008 as a result of the weak economic conditions. As a result, our cash from operations in 2008 benefited from sales of advertising in 2007.

The components of working capital are subject to fluctuations based on the timing of cash transactions. The changes in working capital between periods primarily reflect changes in cash collected from subscribers and advertising customers and the timing of payments for accrued expenses and other liabilities.

Our cash paid for taxes (substantially all of which was paid to Time Warner under the tax matters agreement) was $216.8 million, $516.6 million and $741.9 million for the years ended December 31, 2009, 2008 and 2007, respectively. The fluctuations in cash paid for taxes for the years ended December 31, 2009, 2008 and

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2007 were commensurate with the fluctuations in operating income for those periods (after excluding the effect of the non-deductible goodwill impairment charge in 2008). See “Note 13: Related Party Transactions” in our accompanying consolidated financial statements for further information on the tax matters agreement.

INVESTING ACTIVITIES

The following table presents cash provided (used) by investing activities for the periods presented (in millions):

	Years Ended December 31,
	2009		2008		2007
Investments and acquisitions, net of cash acquired:
Bebo	$	(7.8)	$	(852.0)	$	—
buy.at		—		(125.2)		—
Quigo		—		—		(346.4)
TACODA		—		—		(273.9)
ADTECH AG		—		—		(105.9)
Third Screen Media		—		—		(105.4)
All other		(10.3)		(58.2)		(49.8)
Capital expenditures and product development costs		(135.8)		(172.2)		(280.2)
Proceeds from disposal of assets and consolidated businesses, net:
German access service business		—		—		849.6
United Kingdom access service business		—		126.9		118.7
All other		—		—		66.5
Investment activities from discontinued operations:
Proceeds from the sale of Tegic		—		—		265.0
All other		—		—		(4.0)
Other investment proceeds		2.1		8.4		8.0
Cash provided (used) by investing activities	$	(151.8)	$	(1,072.3)	$	142.2

Cash used by investing activities decreased by $920.5 million to $151.8 million for the year ended December 31, 2009, as compared to the year ended December 31, 2008, due to a decrease in cash used for acquisitions, partially offset by a decrease related to proceeds received in 2008 from the sale of our United Kingdom access service business.

Cash used by investing activities for the year ended December 31, 2008 was $1,072.3 million, a decrease of $1,214.5 million as compared to cash provided by investing activities of $142.2 million for the year ended December 31, 2007. This decrease was due to a decrease in proceeds received from sold businesses and an increase in cash used for acquisitions, partially offset by reduced capital expenditures and product development costs.

Capital expenditures and product development costs are mainly for the purchase of computer hardware, software, network equipment, furniture, fixtures and other office equipment.

FINANCING ACTIVITIES

The following table presents cash provided (used) by financing activities for the periods presented (in millions):

	Years Ended December 31,
	2009		2008		2007
Debt repayments	$	—	$	(54.0)	$	(25.9)
Principal payments on capital leases		(31.1)		(25.1)		(36.1)
Excess tax benefits on stock options		—		2.1		34.4
Net contribution from (distribution to) Time Warner		(709.3)		210.4		(1,390.3)
Other		(9.2)		1.5		(7.4)
Cash provided (used) by financing activities	$	(749.6)	$	134.9	$	(1,425.3)

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Cash used by financing activities was $749.6 million for the year ended December 31, 2009, compared to $134.9 million of cash provided by financing activities in the year ended December 31, 2008. This change was due to the $709.3 million of net cash distributed to Time Warner in 2009, compared to $210.4 million of net cash contributed by Time Warner in 2008. Cash was contributed by Time Warner in 2008 as a result of our significant acquisitions in 2008, which required cash in excess of the amount generated by operations.

Cash provided by financing activities for the year ended December 31, 2008 was $134.9 million, compared to cash used by financing activities of $1,425.3 million for the year ended December 31, 2007. This change was due to the $210.4 million of net cash contributed by Time Warner in 2008 due to our acquisition activity, compared to $1,390.3 million of net cash distributed to Time Warner in 2007. In 2007, we also spent cash on acquisitions in excess of the cash provided by operations; however, we received proceeds from the sales of Tegic and the German and United Kingdom access service businesses in that year, which allowed us to distribute cash to Time Warner.

Principal Debt Obligations

On December 9, 2009, we entered into the Revolving Credit Facility. Time Warner guaranteed all of our obligations under the Revolving Credit Facility, pursuant to a guarantee dated as of December 9, 2009. The maturity date of the Revolving Credit Facility is December 8, 2010. Borrowings under the Revolving Credit Facility are available for general corporate purposes. Loans made under the Revolving Credit Facility will bear interest at a fluctuating rate based on the applicable rating for the senior unsecured long-term debt of Time Warner. As of March 2, 2010, we have not borrowed under the terms of our Revolving Credit Facility. See “Note 5: Long-Term Debt and Other Financing Arrangements” in our accompanying consolidated financial statements for additional information.

Contractual Obligations and Commitments

We have obligations under certain contractual arrangements to make future payments for goods and services. These contractual obligations secure the future rights to various assets and services to be used in the normal course of operations. For example, we are contractually committed to make certain minimum lease payments for the use of property under operating lease agreements. In accordance with applicable accounting rules, the future rights and obligations pertaining to firm commitments, such as operating lease obligations and certain purchase obligations under contracts, are not reflected as assets or liabilities in the accompanying consolidated balance sheets.

The following table presents certain payments due under contractual obligations with minimum firm commitments as of December 31, 2009 (in millions):

	Total		2010		2011-2012		2013-2014		Thereafter
Capital lease obligations	$	79.6	$	35.8	$	39.6	$	4.2	$	—
Operating lease obligations		412.9		62.8		94.9		63.7		191.5
Purchase obligations		137.6		96.8		32.9		7.0		0.9
Total contractual obligations	$	630.1	$	195.4	$	167.4	$	74.9	$	192.4

The following is a description of our material contractual obligations at December 31, 2009:

• Capital lease obligations represent the minimum lease payments under non-cancelable capital leases, primarily for network equipment financed under capital leases. See “Note 5: Long-Term Debt and Other Financing Arrangements” in our accompanying consolidated financial statements for more information.

• Operating lease obligations represent the minimum lease payments under non-cancelable operating leases, primarily for our real estate and operating equipment in various locations around the world. Included in the above table are approximately $230.7 million of payments associated with the lease of our corporate headquarters in New York. We have leased our corporate headquarters for a non-cancelable

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initial lease term that ends in February 2023, and we have the option to extend the lease for an additional five years. Monthly rental payments to the landlord under this lease escalate by approximately 7% after each of the first five years and the first ten years of the lease term. See “Note 11: Commitments and Contingencies” in our accompanying consolidated financial statements for more information.

• Purchase obligations, as used herein, refer to a purchase obligation representing an agreement to purchase goods or services that is enforceable and legally binding on us and that specifies all significant terms, including: fixed or minimum quantities to be purchased; fixed, minimum or variable price provisions; and the approximate timing of the transaction. We expect to receive consideration (i.e., products or services) for these purchase obligations. The purchase obligation amounts do not represent the entire anticipated purchases in the future, but represent only those items for which we are contractually obligated. Examples of the types of obligations included within purchase obligations include narrowband network agreements and guaranteed royalty payments. Additionally, we also purchase products and services as needed with no firm commitment. For this reason, the amounts presented in the table above do not provide a reliable indicator of our expected future cash outflows. For purposes of identifying and accumulating purchase obligations, we have included all material contracts meeting the definition of a purchase obligation (e.g., legally binding for a fixed or minimum amount or quantity). For those contracts involving a fixed or minimum quantity but with variable pricing terms, we have estimated the contractual obligation based on our best estimate of the pricing that will be in effect at the time the obligation is incurred. Additionally, we have included only the obligations represented by those contracts as they existed at December 31, 2009, and did not assume renewal or replacement of the contracts at the end of their respective terms. See “Note 11: Commitments and Contingencies” in our accompanying consolidated financial statements.

The liability for uncertain tax positions of $14.3 million as of December 31, 2009 is not reflected in the above contractual obligations table as we are not able to reasonably estimate the timing of payments in individual years due to uncertainties in the timing of tax audit outcomes.

Off-Balance Sheet Arrangements

As of December 31, 2009, we did not have any relationships with unconsolidated special purpose entities or financial partnerships for the purpose of facilitating off-balance sheet arrangements.

Indemnification Obligations

Prior to the spin-off, we indemnified Time Warner for certain tax positions related to AOL taken by Time Warner from April 13, 2006 up to the date of the spin-off in its consolidated tax return. At the date of the spin-off, Time Warner assumed the obligation for these tax positions, and accordingly, we reversed the recorded liability to Time Warner related to these tax positions, with an offsetting adjustment to equity. As of December 31, 2009, we no longer indemnify Time Warner for any tax positions taken by Time Warner in its consolidated tax return.

In the ordinary course of business, we incur indemnification obligations of varying scope and terms to third parties, which could include customers, vendors, lessors, purchasers of assets or operating subsidiaries and other parties related to certain matters, including losses arising out of our breach of agreements or representations and warranties made by us, services to be provided by us, intellectual property infringement claims made by third parties or, with respect to the divestiture of assets or operating subsidiaries, matters related to our conduct of the business and tax matters prior to the sale. It is not possible to determine the aggregate maximum potential loss under such indemnification agreements due to the limited history of prior indemnification claims and the unique facts and circumstances involved in each particular agreement. Historically, we have not incurred material costs as a result of claims made in connection with indemnifications provided and, as of December 31, 2009, management concluded that the likelihood of any material amounts being paid by us under such indemnifications is not probable. As of December 31, 2009, amounts accrued in our financial statements related to indemnification obligations are not material.

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Customer Credit Risk

Customer credit risk represents the potential for financial loss if a customer is unwilling or unable to meet its agreed-upon contractual payment obligations. Credit risk originates from sales of advertising and subscription access service and is dispersed among many different counterparties.

We had gross accounts receivable of approximately $494.1 million and maintained an allowance for doubtful accounts of $31.7 million at December 31, 2009. Our exposure to customer credit risk relates primarily to our advertising customers and individual subscribers to our access service, which represent $448.6 million and $25.6 million, respectively, of the gross accounts receivable balance at December 31, 2009. No single customer had a receivable balance at December 31, 2009 greater than 10% of total net receivables.

Customer credit risk is monitored on a company-wide basis. We maintain a comprehensive approval process prior to issuing credit to third-party customers. On an ongoing basis, we track customer exposure based on news reports, ratings agency information and direct dialogue with customers. Counterparties that are determined to be of a higher risk are evaluated to assess whether the payment terms previously granted to them should be modified. We also continuously monitor payment levels from customers, and a provision for estimated uncollectible amounts is maintained based on historical experience and any specific customer collection issues that have been identified. While such uncollectible amounts have historically been within our expectations and related reserve balances, if there is a significant change in uncollectible amounts in the future or the financial condition of our counterparties across various industries or geographies deteriorates further, additional reserves may be required.

Critical Accounting Policies

Our consolidated financial statements are prepared in accordance with generally accepted accounting principles in the United States, which require management to make estimates, judgments and assumptions that affect the amounts reported in the consolidated financial statements and the accompanying notes. Management considers an accounting policy to be critical if it is important to our financial condition and results of operations, and if it requires significant judgment and estimates on the part of management in its application. The development and selection of these critical accounting policies have been determined by our management. Due to the significant judgment involved in selecting certain of the assumptions used in these areas, it is possible that different parties could choose different assumptions and reach different conclusions. We consider the policies relating to the following matters to be critical accounting policies:

• Gross versus net revenue recognition;

• Impairment of goodwill; and

• Income taxes.

Gross versus Net Revenue Recognition

We generate a significant portion of our advertising revenues from our advertising offerings on the Third Party Network, which consist of sales of display advertising. In connection with our advertising offerings on the Third Party Network, we typically act as or use an intermediary or agent in executing transactions with third parties. The significant judgments made in accounting for these arrangements relate to determining whether we should report revenue based on the gross amount billed to the customer or on the net amount received from the customer after commissions and other payments to third parties. To the extent revenues are recorded on a gross basis, any commissions or other payments to third parties are recorded as costs of revenues so that the net amount (gross revenues less expense) is reflected in operating income. Accordingly, the impact on operating income is the same whether we record revenue on a gross or net basis.

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The determination of whether revenue should be reported gross or net is based on an assessment of whether we are acting as the principal or an agent in the transaction. If we are acting as a principal in a transaction, we report revenue on a gross basis. If we are acting as an agent in a transaction, we report revenue on a net basis. The determination of whether we are acting as a principal or an agent in a transaction involves judgment and is based on an evaluation of the terms of an arrangement. We recognize revenue on a gross basis in situations in which we believe we are the principal in transactions, considering all of the indicators set forth in the accounting guidance for principal agent considerations. While none of the indicators individually are considered presumptive or determinative, in reaching our conclusions on gross versus net revenue recognition, we place the most weight on the analysis of whether or not we are the primary obligor in the arrangement.

As an example of the judgments relating to recognizing revenue on a gross or net basis, we sell advertising on behalf of third parties on the Third Party Network. The determination of whether we should report our revenue based on the gross amount billed to our advertising customers, with the amounts paid to the Third Party Network website owner (for the advertising inventory acquired) reported as costs of revenues, requires a significant amount of judgment based on an analysis of several factors. In these arrangements, we are generally responsible for (i) identifying and contracting with third-party advertisers, (ii) establishing the selling prices of the inventory sold, (iii) serving the advertisements at our cost and expense, (iv) performing all billing and collection activities including retaining credit risk and (v) bearing sole liability for fulfillment of the advertising. Accordingly, in these arrangements, we generally believe we are the primary obligor and therefore report revenues earned and costs incurred related to these transactions on a gross basis. During 2009, we earned and reported gross advertising revenues of $534.6 million and incurred costs of revenues of $389.8 million related to providing advertising services on the Third Party Network.

Impairment of Goodwill

Goodwill is tested annually for impairment during the fourth quarter or earlier upon the occurrence of certain events or substantive changes in circumstances that indicate goodwill is more likely than not impaired. The testing of goodwill for impairment is required to be performed at the level referred to as the reporting unit. A reporting unit is either the “operating segment level” or one level below, which is referred to as a “component.” The level at which the impairment test is performed requires judgment as to whether there exist any components below the operating segment that constitute one or more self-sustaining businesses with discrete results reviewed by management. If the operations below the operating segment level are determined to be one or more self-sustaining businesses, testing is generally required to be performed at this level; however, if multiple self-sustaining business units exist within an operating segment, an evaluation would be performed to determine if the multiple business units share resources that support the overall goodwill balance and should be combined for purposes of this test. For purposes of our goodwill impairment test, we operate as a single reporting unit, as management does not regularly review discrete financial information below the consolidated unit level. Different judgments relating to the determination of reporting units could significantly affect the testing of goodwill for impairment and the amount of any impairment recognized.

Goodwill impairment is determined using a two-step process. The first step involves a comparison of the estimated fair value of a reporting unit to its carrying amount, including goodwill. In performing the first step, we determine the fair value of our single reporting unit using a combination of an income approach by preparing a discounted cash flow (“DCF”) analysis and a market-based approach based on the Company’s market capitalization. Determining fair value requires the exercise of significant judgment, including judgments about appropriate discount rates, terminal growth rates, the amount and timing of expected future cash flows, as well as the premium used to arrive at a controlling interest equity value for the market-based approach. Given that our common stock started trading on December 10, 2009, we concluded that there was insufficient trading activity to solely consider the market-based approach. This approach was considered as one data point in determining fair value, but was not the sole indicator of fair value. The cash flows employed in the DCF analysis are based on our most recent budgets, forecasts and business plans as well as various growth rate assumptions for years beyond the current business plan period. Discount rate assumptions are based on an assessment of the risk inherent in the

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future revenue streams and cash flows of the reporting unit. In addition, when a DCF analysis is used as the primary method for determining fair value, we assess the reasonableness of its determined fair value by reference to other fair value indicators such as comparable company public trading values, research analyst estimates and, where available, values observed in private market transactions. As an example of the judgments made by us, in our 2009 goodwill impairment analysis, the discount rates utilized in the DCF analysis were in a range of 10.5% to 14% in 2009, as compared to 13% to 15% in 2008, while the terminal growth rates for our advertising revenues were 4% in 2009 as compared to a range of 2.5% to 3% in 2008. The premium used to arrive at a controlling interest equity value for the market-based approach was determined based on values observed in recent market transactions. Significant changes in the estimates and assumptions described above could materially affect the determination of fair value for our reporting unit which could trigger future impairment.

If the estimated fair value of the reporting unit exceeds its carrying amount, goodwill of the reporting unit is not impaired and the second step of the impairment test is not necessary. If the carrying amount of a reporting unit exceeds its estimated fair value, then the second step of the goodwill impairment test must be performed. The second step of the goodwill impairment test compares the implied fair value of the reporting unit’s goodwill with its carrying amount to measure the amount of impairment loss, if any. The implied fair value of goodwill is determined in the same manner as the amount of goodwill recognized in a business combination. In other words, the estimated fair value of the reporting unit is allocated to all of the assets and liabilities of that unit (including any unrecognized intangible assets) as if the reporting unit had been acquired in a business combination and the fair value of the reporting unit was the purchase price paid. If the carrying amount of the reporting unit’s goodwill exceeds the implied fair value of that goodwill, an impairment loss is recognized in an amount equal to that excess.

Based on our goodwill impairment analysis, we have determined that the estimated fair value of our sole reporting unit exceeded its book value by approximately 3% and therefore no impairment charge was recorded for 2009. However, any future declines in estimated fair value of our reporting unit will likely result in a significant goodwill impairment charge. As the market-based approach is based on our market capitalization, volatility in our stock price could have a significant impact on the estimated fair value of our sole reporting unit. If the estimated fair value of our reporting unit had been hypothetically lower by 5% as of December 31, 2009, the book value would have exceeded fair value by approximately $70 million. If the book value of our reporting unit had been greater than fair value, the second step of the goodwill impairment test would have been required to be performed to determine the implied fair value of goodwill, and would likely have resulted in a significant goodwill impairment charge.

Income Taxes

Prior to the spin-off, income taxes as presented in the consolidated financial statements represented current and deferred income taxes of Time Warner attributed to us in a manner that is systematic, rational and consistent with the asset and liability method prescribed by the accounting guidance for income taxes. AOL’s income tax provision prior to the spin-off was prepared under the “separate return method.” The separate return method applies the accounting guidance for income taxes to the standalone financial statements as if AOL were a separate taxpayer and a standalone enterprise. Income taxes (i.e., deferred tax assets, deferred tax liabilities, taxes currently payable/refunds receivable and tax expense) are recorded based on amounts refundable or payable in the current year and include the results of any difference between GAAP and tax reporting. Deferred income taxes reflect the tax effect of net operating loss, capital loss and general business credit carryforwards and the net tax effects of temporary differences between the carrying amount of assets and liabilities for financial statement and income tax purposes, as determined under enacted tax laws and rates. Valuation allowances are established when management determines it is more likely than not that some portion or all of the deferred tax asset will not be realized. Significant judgment is required with respect to the determination of whether or not a valuation allowance is required for certain of our deferred tax assets. Subsequent to the spin-off, AOL will file its own consolidated income tax return (beginning with the short period December 10 – December 31, 2009).

With respect to uncertain tax positions, we recognize in the consolidated financial statements those tax positions determined to be “more likely than not” of being sustained upon examination, based on the technical merits of the positions.

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From time to time, we engage in transactions in which the tax consequences may be subject to uncertainty. Examples of such transactions include business acquisitions and dispositions, including dispositions designed to be tax-free, issues related to consideration paid or received and certain financing transactions. Significant judgment is required in assessing and estimating the tax consequences of these transactions. We prepare and file tax returns based on interpretation of tax laws and regulations. In the normal course of business, our tax returns are subject to examination by various taxing authorities. Such examinations may result in future tax and interest assessments by these taxing authorities. In determining our tax provision for financial reporting purposes, we establish a reserve for uncertain tax positions unless such positions are determined to be “more likely than not” of being sustained upon examination, based on their technical merits. That is, for financial reporting purposes, we only recognize tax benefits taken on the tax return that we believe are “more likely than not” of being sustained. We record a liability for the difference between the benefit recognized and measured pursuant to the accounting guidance for income taxes and the tax position taken on our tax return. There is considerable judgment involved in determining whether positions taken on the tax return are “more likely than not” of being sustained. Actual results could differ from the judgments and estimates made, and we may be exposed to losses or gains that could be material. Further, to the extent we prevail in matters for which a liability has been established, or are required to pay amounts in excess of the liability established, our effective income tax rate in a given financial statement period could be materially affected.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Market risk is the potential gain or loss arising from changes in market rates and prices, which historically, for us, is associated primarily with changes in foreign currency exchange rates.

Prior to the spin-off, we used derivative instruments (principally foreign exchange forward contracts), which historically have been entered into by Time Warner on our behalf, to manage the risk associated with exchange rate volatility.

We used these derivative instruments to hedge various foreign exchange exposures, including variability in foreign-currency-denominated cash flows (such as foreign currency expenses expected to be incurred in the future) and currency risk associated with foreign-currency-denominated operating assets and liabilities (i.e., fair value hedges).

Prior to the spin-off, all outstanding derivative instruments were settled. Subsequent to the spin-off and through December 31, 2009, we have not entered into any derivative instruments or hedges. While we may enter into derivative instruments or hedges in the future, we do not currently believe our exposure to foreign exchange risk is significant.

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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Shareholders of AOL Inc.

We have audited the accompanying consolidated balance sheets of AOL Inc. as of December 31, 2009 and 2008, and the related consolidated statements of operations, equity and cash flows for each of the three years in the period ended December 31, 2009. Our audits also included the financial statement schedule listed in the index at Item 15(a)(2). These financial statements and schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements and schedule based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. We were not engaged to perform an audit of the Company’s internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of AOL Inc. at December 31, 2009 and 2008, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 2009, in conformity with U.S. generally accepted accounting principles. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein.

As discussed in Note 6, as of January 1, 2007, AOL Inc. adopted new guidance for uncertainty in income tax positions.

/s/ Ernst & Young LLP

McLean, Virginia

March 2, 2010

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AOL Inc.

Consolidated Statements of Operations

(In millions, except per share amounts)

	Years ended December 31,
	2009		2008		2007
Revenues
Advertising	$	1,748.3	$	2,096.4	$	2,230.6
Subscription		1,388.8		1,929.3		2,787.9
Other		120.3		140.1		162.2
Total revenues		3,257.4		4,165.8		5,180.7
Costs of revenues		1,898.5		2,278.4		2,652.6
Selling, general and administrative		538.0		644.8		964.2
Amortization of intangible assets		144.7		166.2		95.9
Amounts related to securities litigation and government investigations, net of recoveries		27.9		20.8		171.4
Restructuring costs		190.3		16.6		125.4
Goodwill impairment charge		—		2,207.0		—
Gain on disposal of assets and consolidated businesses, net		—		(0.3)		(682.6)
Operating income (loss)		458.0		(1,167.7)		1,853.8
Other income (loss), net		(2.8)		(3.8)		1.2
Income (loss) from continuing operations before income taxes		455.2		(1,171.5)		1,855.0
Income tax provision		206.7		355.1		641.7
Income (loss) from continuing operations		248.5		(1,526.6)		1,213.3
Discontinued operations, net of tax		—		—		182.1
Net income (loss)		248.5		(1,526.6)		1,395.4
Less: Net loss attributable to noncontrolling interests		0.3		0.8		0.7
Net income (loss) attributable to AOL Inc.	$	248.8	$	(1,525.8)	$	1,396.1
Amounts attributable to AOL Inc.:
Income (loss) from continuing operations	$	248.8	$	(1,525.8)	$	1,214.0
Discontinued operations, net of tax		—		—		182.1
Net income (loss) attributable to AOL Inc.	$	248.8	$	(1,525.8)	$	1,396.1
Per share information attributable to AOL Inc. common stockholders:
Basic and diluted income (loss) per common share from continuing operations	$	2.35	$	(14.42)	$	11.48
Discontinued operations		—		—		1.72
Basic and diluted net income (loss) per common share	$	2.35	$	(14.42)	$	13.20
Shares used in computing basic and diluted income (loss) per common share		105.8		105.8		105.8

See accompanying notes.

63

AOL Inc.

Consolidated Balance Sheets

(In millions, except per share amounts)

	December 31,
	2009		2008
Assets
Current assets:
Cash and equivalents	$	147.0	$	134.7
Accounts receivable, net of allowances of $31.7 and $39.8, respectively		462.4		500.2
Receivables from Time Warner Inc. (“Time Warner”)		—		39.5
Prepaid expenses and other current assets		33.3		33.5
Deferred income taxes		44.7		25.8
Assets held for sale		—		6.7
Total current assets		687.4		740.4
Property and equipment, net		704.8		790.6
Long-term receivables from Time Warner		—		37.7
Goodwill		2,184.2		2,161.5
Intangible assets, net		224.7		369.2
Long-term deferred income taxes		136.8		734.2
Other long-term assets		25.2		27.7
Total assets	$	3,963.1	$	4,861.3
Liabilities and Equity
Current liabilities:
Accounts payable	$	100.5	$	52.2
Accrued compensation and benefits		91.4		51.1
Accrued expenses and other current liabilities		413.6		302.4
Deferred revenue		113.5		140.1
Payables to Time Warner		—		58.8
Current portion of obligations under capital leases		32.4		25.0
Total current liabilities		751.4		629.6
Obligations under capital leases		41.5		33.7
Long-term obligations to Time Warner		—		377.0
Restructuring liabilities		28.3		9.0
Deferred income taxes		9.3		11.5
Other long-term liabilities		69.7		62.8
Total liabilities		900.2		1,123.6
Commitments and contingencies (See Note 11) Equity:
Common stock, $0.01 par value, 105.8 million shares issued and outstanding at December 31, 2009		1.1		—
Divisional equity		—		4,038.6
Additional paid-in capital		3,355.5		—
Accumulated other comprehensive loss, net		(275.1)		(302.4)
Retained earnings (accumulated deficit) for the period subsequent to November 2, 2009		(20.4)		—
Total AOL Inc. stockholders’ equity		3,061.1		3,736.2
Noncontrolling interest		1.8		1.5
Total equity		3,062.9		3,737.7
Total liabilities and equity	$	3,963.1	$	4,861.3

See accompanying notes.

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AOL Inc.

Consolidated Statements of Cash Flows

(In millions)

	Years ended December 31,
	2009		2008		2007
Operations
Net income (loss)	$	248.5	$	(1,526.6)	$	1,395.4
Adjustments for non-cash and non-operating items:
Depreciation and amortization		406.2		477.2		498.6
Asset impairments		23.1		2,240.0		16.2
Gain on disposal of assets and consolidated businesses, net		—		(0.3)		(682.6)
Equity-based compensation		12.5		19.6		32.3
Amounts related to securities litigation and government investigations, net of recoveries		27.9		20.8		171.4
Other non-cash adjustments		7.7		(1.7)		(6.7)
Deferred income taxes		(6.7)		(49.5)		102.2
Changes in operating assets and liabilities, net of acquisitions:
Receivables		51.6		73.2		(86.9)
Accrued expenses		125.9		(282.9)		(151.3)
Deferred revenue		(28.2)		(21.7)		(123.9)
Other balance sheet changes		39.7		(14.5)		38.6
Adjustments relating to discontinued operations (a)		—		—		(186.7)
Cash provided by operations		908.2		933.6		1,016.6
Investing Activities
Investments and acquisitions, net of cash acquired		(18.1)		(1,035.4)		(881.4)
Proceeds from disposal of assets and consolidated businesses, net		—		126.9		1,034.8
Capital expenditures and product development costs		(135.8)		(172.2)		(280.2)
Investment activities from discontinued operations		—		—		261.0
Other investment proceeds		2.1		8.4		8.0
Cash provided (used) by investing activities		(151.8)		(1,072.3)		142.2
Financing Activities
Debt repayments		—		(54.0)		(25.9)
Principal payments on capital leases		(31.1)		(25.1)		(36.1)
Excess tax benefits on stock options		—		2.1		34.4
Net contribution from (distribution to) Time Warner		(709.3)		210.4		(1,390.3)
Other		(9.2)		1.5		(7.4)
Cash provided (used) by financing activities		(749.6)		134.9		(1,425.3)
Effect of exchange rate changes on cash and equivalents		5.5		(13.4)		16.9
Increase (decrease) in cash and equivalents		12.3		(17.2)		(249.6)
Cash and equivalents at beginning of period		134.7		151.9		401.5
Cash and equivalents at end of period	$	147.0	$	134.7	$	151.9
Supplemental disclosures of cash flow information
Cash paid for interest	$	7.3	$	10.5	$	9.7
Cash paid for taxes (b)	$	216.8	$	516.6	$	741.9

(a) The year ended December 31, 2007 included net income from discontinued operations of $182.1 million. After considering non-cash expenses, the net gain on sale reported in discontinued operations and working capital related adjustments relating to discontinued operations, net operational cash used by discontinued operations was $4.6 million for the year ended December 31, 2007.

(b) The amount of cash paid for taxes includes $210.8 million, $504.2 million and $704.4 million for the years ended December 31, 2009, 2008 and 2007, respectively, paid to Time Warner under the tax matters agreement. See “Note 13: Related Party Transactions” for further information on the tax matters agreement.

See accompanying notes.

65

AOL Inc.

Consolidated Statements of Equity

(In millions)

	Common Stock			Divisional Equity		Additional Paid-In Capital		Accumulated Other Comprehensive Income (Loss)		Retained Earnings (Accumulated Deficit)		Non- Controlling Interest		Total Equity
	Shares	Amount
Balance at December 31, 2006				$	4,755.2			$	(252.4)			$	3.0	$	4,505.8
Net income (loss)					1,396.1								(0.7)		1,395.4
Unrealized losses on derivatives and investments, net of tax									(0.2)						(0.2)
Foreign currency translation adjustments									45.7						45.7
Comprehensive income (loss)			—		1,396.1		—		45.5		—		(0.7)		1,440.9
Impact of adopting new accounting guidance (see Note 6)					379.3										379.3
Net transactions with Time Warner					(1,056.5)										(1,056.5)
Balance at December 31, 2007		$	—	$	5,474.1	$	—	$	(206.9)	$	—	$	2.3	$	5,269.5
Net loss					(1,525.8)								(0.8)		(1,526.6)
Foreign currency translation adjustments									(95.5)						(95.5)
Comprehensive loss			—		(1,525.8)		—		(95.5)		—		(0.8)		(1,622.1)
Net transactions with Time Warner					90.3										90.3
Balance at December 31, 2008		$	—	$	4,038.6	$	—	$	(302.4)	$	—	$	1.5	$	3,737.7
Net income (loss)					269.2						(20.4)		(0.3)		248.5
Unrealized losses on derivatives and investments, net of tax									(0.7)						(0.7)
Foreign currency translation adjustments									28.0				0.6		28.6
Comprehensive income (loss)			—		269.2		—		27.3		(20.4)		0.3		276.4
Net transactions with Time Warner					(915.6)										(915.6)
Distribution to Time Warner (a)					(36.2)										(36.2)
Issuance of common stock (b)	105.8		1.1				(1.1)								—
Reclassification of divisional equity to additional paid-in capital (b)					(3,356.0)		3,356.0								—
Amounts related to equity-based compensation							0.6								0.6
Balance at December 31, 2009	105.8	$	1.1	$	—	$	3,355.5	$	(275.1)	$	(20.4)	$	1.8	$	3,062.9

(a) AOL completed a number of transactions with Time Warner in connection with the spin-off. The reduction to AOL’s equity included the reversal of AOL’s liability to Time Warner for certain tax positions, which resulted in an increase to equity of $368.1 million and the reversal of AOL’s equity-based compensation deferred tax assets, which resulted in a decrease to equity of $436.1 million. These amounts were retained by Time Warner following the spin-off.

(b) Upon the effective date of the spin-off, AOL’s divisional equity was reclassified and allocated between common stock and additional paid-in capital based on the number of shares of AOL common stock issued and outstanding.

See accompanying notes.

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AOL Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1—DESCRIPTION OF BUSINESS, BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Description of Business

AOL Inc. (“AOL” or the “Company”) is a leading global web services company with an extensive suite of brands and offerings and a substantial audience. AOL’s business spans online content, products and services that it offers to consumers, publishers and advertisers. AOL is focused on attracting and engaging consumers and providing valuable online advertising services on both its owned and operated properties and third-party websites. AOL generates advertising revenues from the owned and operated content, products and services, which are referred to as “AOL Properties”, through the sale of display advertising and search and contextual advertising. A valuable distribution channel for AOL Properties is through the AOL-brand subscription access service, which is offered to consumers in the United States for a monthly fee. AOL also generates advertising revenues through the sale of advertising on third-party websites and on digital devices, which are collectively referred to as the “Third Party Network.”

The Spin-Off

On December 9, 2009, the separation of AOL from Time Warner was completed pursuant to a Separation and Distribution Agreement (the “Separation Agreement”) dated as of November 16, 2009 between AOL and Time Warner. In accordance with the Separation Agreement, on November 16, 2009, Time Warner declared a pro rata dividend of the shares of AOL’s common stock owned by Time Warner to Time Warner shareholders. On the distribution date of December 9, 2009, Time Warner shareholders of record as of 5 p.m. on November 27, 2009, the record date for the distribution, received one share of AOL common stock for every eleven shares of Time Warner common stock held, which resulted in the complete legal and structural separation of the two companies (also referred to herein as the “spin-off”). Fractional shares of AOL common stock were not distributed to Time Warner shareholders. Instead, the fractional shares of AOL common stock were aggregated and sold in the open market with the net proceeds distributed pro rata in the form of cash payments to Time Warner shareholders who would otherwise be entitled to receive a fractional share of AOL common stock. On December 10, 2009, AOL began trading on the New York Stock Exchange as an independent, public company.

Prior to the spin-off, AOL reorganized its corporate structure. On July 8, 2009, Time Warner completed the purchase of Google Inc.’s (“Google”) 5% interest in AOL. Following this purchase, AOL Holdings LLC, which was formed in Delaware in 2006, became a wholly-owned subsidiary of Time Warner. On November 2, 2009, AOL Holdings LLC was converted into a Delaware corporation named AOL Inc. Prior to the spin-off, substantially all of the assets and liabilities (other than guarantees of indebtedness of Time Warner and other non-AOL affiliates of Time Warner) of AOL LLC, then AOL’s wholly-owned subsidiary that held, directly or indirectly, all of the AOL business, were transferred to and assumed by AOL. Following this transfer and assumption of substantially all of AOL LLC’s assets and liabilities, ownership of AOL LLC was retained by Time Warner.

In connection with the spin-off, the Company entered into the Separation Agreement and several other related agreements which govern the ongoing relationship between the two companies. See “Note 13: Related Party Transactions” for further information on the ongoing relationship with Time Warner.

On December 9, 2009, the Company entered into a secured credit agreement (the “Credit Agreement”) among the Company, as borrower, the lenders party thereto (the “Lenders”), Bank of America, N.A., as administrative agent (the “Administrative Agent”) and the other financial institutions party thereto for a 364-day $250.0 million senior secured revolving credit facility (the “Revolving Credit Facility”). See “Note 5: Long-Term Debt and Other Financing Arrangements” for additional information regarding the Revolving Credit Facility.

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Prior to the spin-off, the Company completed certain transactions with Time Warner related to AOL’s separation from Time Warner, which resulted in a net reduction to AOL’s equity of $36.2 million. These transactions primarily consisted of the reversal of AOL’s liability to Time Warner for certain tax positions and the reversal of AOL’s equity-based compensation deferred tax assets which were retained by Time Warner following the spin-off. AOL began recording retained earnings subsequent to November 2, 2009, when AOL converted from a limited liability company to a corporation.

Basis of Presentation

Basis of Consolidation

The consolidated financial statements include 100% of the assets, liabilities, revenues, expenses and cash flows of AOL, all voting interest entities in which AOL has a controlling voting interest (“subsidiaries”), and those variable interest entities for which AOL is the primary beneficiary in accordance with the consolidation accounting guidance. Through the date of the spin-off, these financial statements present the historical consolidated results of operations, financial position, and cash flows of the AOL business that now comprises the operations of the Company. Intercompany accounts and transactions between consolidated companies have been eliminated in consolidation. Prior to the spin-off, AOL was a subsidiary of Time Warner. The financial information included herein may not necessarily reflect AOL’s financial position, results of operations and cash flows in the future or what AOL’s financial position, results of operations and cash flows would have been had AOL been an independent, publicly-traded company during all of the periods presented.

Through the date of the spin-off, the consolidated financial statements include allocations of certain Time Warner corporate expenses. Management believes the assumptions and methodologies underlying the allocation of general corporate overhead expenses are reasonable. However, such expenses may not be indicative of the actual level of expense that would have been incurred by AOL if it had operated as an independent, publicly-traded company or of the costs expected to be incurred in the future. These allocated expenses relate to various services that were provided to AOL by Time Warner, including cash management and other treasury services, administrative services (such as government relations, tax, employee benefit administration, internal audit, accounting and human resources), equity-based compensation plan administration, aviation services, insurance coverage and the licensing of certain third-party patents. During the years ended December 31, 2009, 2008 and 2007, AOL incurred $20.9 million, $23.3 million and $28.4 million, respectively, of expenses related to charges for services performed by Time Warner. See “Note 13: Related Party Transactions” for further information regarding the allocation of Time Warner corporate expenses and the ongoing relationship with Time Warner.

The financial position and operating results of substantially all foreign operations are consolidated using the local currency as the functional currency. Local currency assets and liabilities are translated at the rates of exchange on the balance sheet date, and local currency revenues and expenses are translated at average rates of exchange during the period. Resulting translation gains or losses are included in the consolidated balance sheet as a component of accumulated other comprehensive income (loss), net.

Use of Estimates

The preparation of the financial statements in conformity with U.S. generally accepted accounting principles (“GAAP”) requires management to make estimates, judgments and assumptions that affect the amounts reported in the consolidated financial statements and footnotes thereto. Actual results could differ from those estimates. Significant estimates inherent in the preparation of the consolidated financial statements include accounting for asset impairments, reserves established for doubtful accounts, equity-based compensation, depreciation and amortization, business combinations, income taxes, litigation matters and contingencies.

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Summary of Significant Accounting Policies

Revenues

The Company generates revenue primarily from advertising and from its subscription access service. Revenue is recognized when persuasive evidence of an arrangement exists, performance under the contract has begun, the contract price is fixed or determinable and collectability of the related fee is reasonably assured.

Advertising Revenues

Advertising revenues are generated on AOL Properties through display advertising and search and contextual advertising. Display advertising revenue is generated by the display of graphical advertisements and other performance-based advertising. Search and contextual advertising revenue is generated when a user clicks on or views a text-based advertisement on the user’s screen. These text-based advertisements are either generated from a user-initiated search query or generated based on the content of the webpage the user is viewing. Advertising revenues derived from impression-based contracts, in which AOL provides impressions in exchange for a fixed fee (generally stated as cost-per-thousand impressions), are generally recognized as the impressions are delivered. An “impression” is delivered when an advertisement appears in pages viewed by users. Revenues derived from time-based contracts, in which AOL provides a minimum number of impressions over a specified time period for a fixed fee, are recognized on a straight-line basis over the term of the contract, provided that AOL is meeting and will continue to meet its obligations under the contract (e.g., delivery of impressions over the term of the contract). Advertising revenues derived from contracts where AOL is compensated based on certain performance criteria are recognized as AOL completes the contractually specified performance. Performance can be measured in terms of “click-throughs” when a user clicks on a company’s advertisement or other user actions such as product/customer registrations, survey participation, sales leads or product purchases.

In addition to advertising revenues generated on AOL Properties, the Company also generates revenue from its advertising offerings on its Third Party Network, which consist primarily of sales of display advertising on behalf of third parties on a cost-per-impression basis, a fixed-fee basis or on a pay-for-performance basis.

Gross versus Net Revenue Recognition

In the normal course of business, the Company sometimes acts as or uses an intermediary or agent in executing transactions with third parties. The determination of whether revenue should be reported gross or net is based on an assessment of whether the Company is acting as the principal or an agent in the transaction. If the Company is acting as a principal in a transaction, the Company reports revenue on a gross basis. If the Company is acting as an agent in a transaction, the Company reports revenue on a net basis. In determining whether the Company acts as the principal or an agent, the Company follows accounting guidance for principal agent considerations.

Multiple-Element Transactions

Management analyzes contracts with multiple elements under the accounting guidance for revenue recognition in multiple-element arrangements. Specifically, if the Company enters into sales contracts for the sale of multiple products or services, then the Company evaluates whether the delivered elements have value to the customer on a standalone basis, and whether it has objective and reliable evidence of fair value for each undelivered element in the transaction. If these criteria are met, then the Company accounts for each deliverable in the transaction separately. The Company generally recognizes revenue for undelivered contractual elements on a straight-line basis over the contractual performance period for time-based elements or once specified deliverables have been provided to the customer. If the Company is unable to determine the fair value of one or more undelivered elements in the transaction, the Company recognizes the aggregate contract value as revenue on a straight-line basis over the period in which the last deliverable in the transaction is provided to the customer.

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Contemporaneous Purchases and Sales

In the normal course of business, AOL enters into transactions in which it purchases a product or service and contemporaneously negotiates a contract for the sale of advertising to the customer. Contemporaneous transactions may also involve circumstances where the Company is purchasing or selling products and services and settling a dispute. Such arrangements, although negotiated contemporaneously, may be documented in one or more contracts.

The Company’s accounting policy for each transaction negotiated contemporaneously is to record each element of the transaction based on the respective estimated fair values of the products or services purchased and the fair values of the products or services sold. If the Company is unable to determine the fair value of one or more of the elements being purchased, revenue is recognized for the contemporaneous transactions on a net basis.

Subscription Revenues

The Company earns revenue from its subscription access service in the form of monthly fees paid by subscribers to its dial-up Internet access service, and such revenues are recognized as the service is provided.

Traffic Acquisition Costs

AOL incurs costs through arrangements in which it acquires online advertising inventory from publishers for resale to advertisers and arrangements whereby partners distribute AOL’s free products or services or otherwise direct traffic to AOL Properties. AOL considers these costs to be traffic acquisition costs or “TAC.” TAC arrangements have a number of different economic structures, the most common of which are: (i) payments based on a cost-per-thousand impressions or based on a percentage of the ultimate advertising revenues generated from the advertising inventory acquired for resale, (ii) payments for direct traffic delivered to AOL Properties priced on a per-click basis (e.g., search engine marketing fees) and (iii) payments to partners in exchange for distributing AOL products to their users (e.g., agreements with computer manufacturers to distribute the AOL toolbar or a co-branded web portal on computers shipped to end users). These arrangements can be on a fixed-fee basis (which often carry reciprocal performance guarantees by the counterparty), on a variable basis or, in some cases, a combination of the two. TAC agreements with fixed payments are typically expensed ratably over the term of the agreement. TAC agreements with variable payments are typically expensed based on the volume of the underlying activity at the specified contractual rates. TAC agreements with a combination of a fixed fee for a minimum amount of traffic delivered or other underlying activity and variable payments for delivery or performance in excess of the minimum are typically recognized into expense at the higher of straight-line or actual performance, taking into account counterparty performance to date and the projected counterparty performance over the term of the agreement.

Restructuring Costs

Restructuring costs consist primarily of employee termination benefits and contract termination costs, including lease exit costs. One-time involuntary termination benefits are recognized as a liability at estimated fair value when the plan of termination has been communicated to employees and certain other criteria are met. Special termination benefits offered to employees in connection with voluntary termination arrangements offered for a short period of time for a special purpose are recognized as a liability at estimated fair value when the employees accept the offer and the amount of benefits can be reasonably estimated. With respect to certain contractual termination benefits or employee terminations in certain foreign countries operating under ongoing benefit arrangements, a liability for termination benefits is recognized at estimated fair value when it is probable that amounts will be paid to employees and such amounts are reasonably estimable. Contract termination costs are recognized as a liability at fair value when a contract is terminated in accordance with its terms, or when AOL has otherwise executed a written termination of the contract. When AOL ceases using a facility but does

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not intend to or is unable to terminate the operating lease, AOL records a liability for the present value of the remaining lease payments, net of estimated sublease income that could be reasonably obtained for the property (even if the Company does not intend to sublease the facility for the remaining term of the lease). Costs associated with exit or disposal activities are reflected as restructuring costs in the consolidated statement of operations. See “Note 9: Restructuring Costs” for additional information about the Company’s restructuring activities.

Equity-Based Compensation

Prior to the spin-off from Time Warner, AOL participated in Time Warner’s equity-based compensation plans and recorded compensation expense based on the equity awards granted to AOL employees. Subsequent to the spin-off, AOL has established an equity-based compensation incentive plan and AOL employees are no longer eligible to participate in Time Warner’s equity-based compensation plans. AOL records compensation expense under the AOL plans based on the equity awards granted to employees.

In accounting for equity-based compensation awards, the Company follows the accounting guidance for equity-based compensation, which requires that a company measure the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award. The cost associated with stock options is estimated using the Black-Scholes option-pricing model and recognized in the consolidated statement of operations on a straight-line basis over the period during which an employee is required to provide service in exchange for the award. This accounting guidance also requires that excess tax benefits, as defined, realized from the exercise of stock options be reported as a financing cash inflow rather than as a reduction of taxes paid in cash flows from operations. See “Note 8: Equity-Based Compensation and Employee Benefit Plans” for additional information on equity-based compensation.

In connection with the legal and structural separation of the Company from Time Warner, AOL employees ceased participating in the Time Warner equity plans once the spin-off was completed. Employees holding Time Warner equity awards at the time of the separation were treated as if their employment with Time Warner was terminated without cause. For most AOL employees, this treatment resulted in the forfeiture of unvested stock options, shortened exercise periods for vested stock options and pro rata vesting of the next installment of (and forfeiture of the remainder of) restricted stock unit grants.

Asset Impairments

GOODWILL

Goodwill is tested annually for impairment during the fourth quarter or earlier in the year upon the occurrence of certain events or substantive changes in circumstances that indicate goodwill is more likely than not impaired. The testing of goodwill for impairment is required to be performed at the level referred to as the reporting unit. A reporting unit is either the “operating segment level” or one level below, which is referred to as a “component.” For purposes of AOL’s goodwill impairment test, AOL operates as a single reporting unit.

Goodwill impairment is determined using a two-step process. The first step involves a comparison of the estimated fair value of a reporting unit to its carrying amount, including goodwill. In performing the first step, the Company determines the fair value of its reporting unit using a combination of an income approach by preparing a discounted cash flow (“DCF”) analysis and a market-based approach based on the Company’s market capitalization. If the estimated fair value of the reporting unit exceeds its carrying amount, goodwill of the reporting unit is not impaired and the second step of the impairment test is not necessary. If the carrying amount of a reporting unit exceeds its estimated fair value, then the second step of the goodwill impairment test must be performed. The second step of the goodwill impairment test compares the implied fair value of the reporting unit’s goodwill with its carrying amount to measure the amount of impairment loss, if any. The implied fair value

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of goodwill is determined in the same manner as the amount of goodwill recognized in a business combination. In other words, the estimated fair value of the reporting unit is allocated to all of the assets and liabilities of that unit (including any unrecognized intangible assets) as if the reporting unit had been acquired in a business combination and the fair value of the reporting unit was the purchase price paid. If the carrying amount of the reporting unit’s goodwill exceeds the implied fair value of that goodwill, an impairment loss is recognized in an amount equal to that excess.

LONG-LIVED ASSETS

Long-lived assets, including finite-lived intangible assets (e.g., acquired technology and customer relationships), do not require that an annual impairment test be performed; instead, long-lived assets are tested for impairment upon the occurrence of an indicator of impairment. Once an indicator of impairment has occurred, the impairment test is based on whether the intent is to hold the asset for continued use or to hold the asset for sale. If the intent is to hold the asset for continued use, the impairment test first requires a comparison of estimated undiscounted future cash flows generated by the asset group against the carrying value of the asset group. The Company groups long-lived assets for purposes of recognition and measurement of an impairment loss at the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets and liabilities. If the carrying value of the asset group exceeds the estimated undiscounted future cash flows, the asset would be deemed to be impaired. Impairment would then be measured as the difference between the estimated fair value of the asset and its carrying value. Fair value is generally determined by discounting the future cash flows associated with that asset group. If the intent is to hold the asset group for sale and certain other criteria are met (i.e., the asset group can be disposed of currently, appropriate levels of authority have approved the sale and there is an active program to locate a buyer), the impairment test involves comparing the asset group’s carrying value to its estimated fair value less estimated costs of disposal. To the extent the carrying value is greater than the asset group’s estimated fair value less estimated costs of disposal, an impairment loss is recognized for the difference.

AOL recorded non-cash asset impairments related to long-lived assets held and used of $23.1 million, $33.0 million and $16.2 million in 2009, 2008 and 2007, respectively, included in costs of revenues in the consolidated statement of operations. The impairment charge recorded in 2009 related primarily to an intangible asset write-off in connection with the Company’s anticipated disposition of Yedda, Inc., as well as the write-off of certain trade name intangible assets that were abandoned in 2009. The impairment charge recorded in 2008 related primarily to asset write-offs in connection with facility consolidations. The impairment charge recorded in 2007 related primarily to impairments of certain capitalized software no longer being used by AOL.

Income Taxes

Time Warner and its domestic subsidiaries, including AOL prior to the spin-off, file a consolidated U.S. federal income tax return. Income taxes as presented in the consolidated financial statements represent current and deferred income taxes of Time Warner attributed to AOL for periods prior to the spin-off using the “separate return method”, a method that is systematic, rational and consistent with the asset-and-liability method prescribed by the accounting guidance for income taxes. The separate return method applies the accounting guidance for income taxes to the financial statements as if AOL were a separate taxpayer and a standalone enterprise for all periods. AOL will file its own consolidated U.S. federal income tax return following the spin-off (beginning with the short period December 10 – December 31, 2009).

Income taxes (i.e., deferred tax assets, deferred tax liabilities, taxes currently payable/refunds receivable and tax expense) are recorded based on amounts refundable or payable in the current year and include the results of any deferred income taxes. Deferred income taxes reflect the tax effect of net operating loss, capital loss and general business credit carryforwards and the net tax effects of temporary differences between the carrying amount of assets and liabilities for financial statement and income tax purposes, as determined under enacted tax laws and rates. Valuation allowances are established when management determines it is more likely than not that some portion or all of the deferred tax assets will not be realized.

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With respect to uncertain tax positions, AOL recognized in the consolidated financial statements those tax positions determined to be “more likely than not” of being sustained upon examination, based on the technical merits of the positions. The Company adjusts its estimated liabilities for uncertain tax positions periodically because of ongoing examinations by, and settlements with, the various taxing authorities, as well as changes in tax laws, regulations and interpretations. The consolidated tax provision for any given year includes adjustments to prior year income tax accruals that are considered appropriate and any related estimated interest. The estimated liability for uncertain income tax positions as of December 31, 2008 was included in long-term obligations to Time Warner in the consolidated balance sheet, as these liabilities related to positions taken by AOL while included in Time Warner’s consolidated tax return. The Company’s policy is to recognize, when applicable, interest and penalties on uncertain tax positions as part of income tax expense. Effective with the spin-off, the Company and Time Warner entered into the Second Tax Matters Agreement, which generally provides that Time Warner shall indemnify AOL for consolidated income taxes relating to any pre-distribution period. Accordingly, $368.1 million of liabilities for uncertain tax positions were reversed on the separation date, with an offsetting increase to equity. As of December 31, 2009, the remaining liabilities for uncertain tax positions (which relate either to pre-distribution periods or foreign returns and are therefore not retained by Time Warner) are included in other long-term liabilities in the consolidated balance sheet. For further information, see “Note 6: Income Taxes” and “Note 13: Related Party Transactions”.

Certain Risks and Concentrations

The Company’s financial instruments include primarily cash and equivalents, accounts receivable, accounts payable, accrued expenses and other current liabilities. Due to the short-term nature of these assets and liabilities, their carrying amounts approximate their fair value. Financial instruments that potentially subject the Company to concentrations of credit risk are primarily cash and accounts receivable.

The Company maintains its cash balances in the form of money market accounts and overnight deposits. The Company maintains cash deposits with banks that at times exceed applicable insurance limits. The Company reduces its exposure to credit risk by maintaining such deposits with high quality financial institutions that management believes are creditworthy.

The Company’s exposure to customer credit risk relates primarily to advertising customers and individual subscribers to AOL’s subscription access service, and is dispersed among many different counterparties, with no single customer having a receivable balance in excess of 10% of total net receivables at December 31, 2009 or 2008.

For each of the periods presented herein, the Company has had a contractual relationship with Google whereby Google provides paid text-based search advertising and contextual advertising on AOL Properties. For the years ended December 31, 2009, 2008 and 2007, the revenues associated with the Google relationship (substantially all of which were search and contextual revenues generated on AOL Properties), were $556.7 million, $677.9 million and $642.1 million, respectively.

Property and equipment, net located outside the United States, which represent less than 1% of total assets, are not material. Revenues in different geographical areas are as follows (in millions):

	Revenues for the Years Ended December 31, (a)
	2009		2008		2007
United States	$	2,863.6	$	3,623.6	$	4,535.0
United Kingdom		169.5		257.6		283.0
Germany		59.2		82.2		187.2
France		70.3		82.0		57.1
Canada		35.7		48.0		51.8
Other international		59.1		72.4		66.6
Total international		393.8		542.2		645.7
Total	$	3,257.4	$	4,165.8	$	5,180.7

(a) Revenues are attributed to countries based on the location of customers.

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Cash and Equivalents

Cash equivalents primarily consist of money market accounts and overnight deposits that are readily convertible into cash with original maturities of less than three months. Cash equivalents are carried at cost, which approximates fair value.

Allowance for Doubtful Accounts

AOL’s receivables consist primarily of two components, receivables from individual subscribers to AOL’s subscription access service and receivables from advertising customers. Management performs separate evaluations of these components to determine if the balances will ultimately be fully collected considering management’s views on trends in the overall aging of receivables. In addition, for certain advertising receivables, management prepares an analysis of specific risks on a customer-by-customer basis. Using this information, management reserves an amount that is expected to be uncollectible. At December 31, 2009 and 2008, total allowance for doubtful accounts was $31.7 million and $39.8 million, respectively.

Receivables from, and Payables to, Time Warner

Prior to the spin-off, receivables from, and payables to, Time Warner represented amounts due from or to Time Warner and its subsidiaries under various arrangements which are discussed further in “Note 13: Related Party Transactions.” Subsequent to the spin-off, amounts due from or to Time Warner and its subsidiaries are reflected in the same manner as receivables and payables to other counterparties.

Property and Equipment

Property and equipment are stated at cost. Depreciation, which includes amortization of capitalized software costs and amortization of assets under capital leases, is provided generally on a straight-line basis over the estimated useful lives of the assets. AOL evaluates the depreciation periods of property and equipment to determine whether events or circumstances warrant revised estimates of useful lives. Depreciation expense, recorded in costs of revenues and selling, general and administrative expense, totaled $261.5 million, $311.0 million and $402.7 million for the years ended December 31, 2009, 2008 and 2007, respectively.

Property and equipment, including assets under capital lease, consist of ($ in millions):

	December 31,				Estimated Useful Lives
	2009		2008
Land (a)	$	47.0	$	47.0
Buildings and building improvements		407.6		387.1	15 to 40 years
Capitalized internal-use software costs		772.0		908.6	1 to 5 years
Leasehold improvements		165.5		182.0	5 to 15 years
Furniture, fixtures and other equipment		898.8		1,060.0	2 to 5 years
		2,290.9		2,584.7
Less accumulated depreciation		(1,586.1)		(1,794.1)
Total	$	704.8	$	790.6

(a) Land is not depreciated.

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CAPITALIZED SOFTWARE

Internal-use Software

AOL capitalizes certain costs incurred for the development of internal-use software. These costs, which include the costs associated with coding, software configuration, upgrades and enhancements and are related to both AOL’s internal systems (such as billing and accounting) and AOL’s user-facing Internet offerings, are included in property and equipment, net in the consolidated balance sheet.

Capitalized Software Associated with Subscription Access Service

AOL capitalizes costs incurred for the production of computer software that generates the functionality for its subscription access service. Capitalized costs typically include direct labor and related overhead for software produced by AOL, as well as the cost of software purchased from third parties. Costs incurred for a product prior to the determination that the product is technologically feasible (i.e., research and development costs), as well as maintenance costs for established products, are expensed as incurred. Once technological feasibility has been established, development costs are capitalized until the software has completed testing and is mass-marketed. Amortization is recognized on a product-by-product basis using the greater of the straight-line method or the current year revenue as a percentage of total revenue estimates for the related software product, not to exceed five years, commencing the month after the date of the product release. The total net book value of capitalized software costs related to the subscription access service was $1.5 million and $9.5 million at December 31, 2009 and 2008, respectively. Such amounts are included in other long-term assets in the consolidated balance sheet. Amortization of capitalized software costs related to the Company’s subscription access service was $8.0 million, $22.4 million and $62.2 million for the years ended December 31, 2009, 2008 and 2007, respectively.

Research and Development

Research and development costs related to the Company’s software development efforts, which are expensed as incurred, are included in costs of revenues and totaled $63.2 million, $68.8 million and $74.2 million for the years ended December 31, 2009, 2008 and 2007, respectively. These costs consist primarily of personnel and related costs that are incurred related to the development of software and user-facing Internet offerings that do not qualify for capitalization.

Leases

The Company leases operating equipment and office space in various locations worldwide. Lease obligations are classified as operating leases or capital leases, as appropriate. Leased property that meets the capital lease criteria is capitalized and the present value of the future minimum lease payments is recorded as an asset under capital lease with a related capital lease obligation in the consolidated balance sheets.

Rent expense under operating leases is recognized on a straight-line basis over the lease term taking into consideration scheduled rent increases or any lease incentives.

Intangible Assets

AOL has a significant number of intangible assets, including acquired technology, trademarks and customer relationships. AOL does not recognize the fair value of internally generated intangible assets. Intangible assets acquired in business combinations are recorded at fair value on the Company’s consolidated balance sheets and are amortized over estimated useful lives generally on a straight-line basis. Intangible assets subject to amortization are tested for impairment whenever events or changes in circumstances indicate that their carrying amount may not be recoverable.

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Advertising Costs

The Company expenses advertising costs as they are incurred. Advertising expense to third parties was $59.3 million, $117.0 million and $301.1 million for the years ended December 31, 2009, 2008 and 2007, respectively.

Loss Contingencies

In the normal course of business, the Company is involved in legal proceedings, tax audits and other matters that give rise to potential loss contingencies. The Company accrues a liability for such matters when it is probable that a liability has been incurred and the amount of loss can be reasonably estimated. In situations where the Company can determine a best estimate within the range of potential loss, the Company records the best estimate of the potential loss as a liability. In situations where the Company has determined a range of loss, but no amount within the range is a better estimate than any other amount within the range, the Company records the minimum amount of the range of loss as a liability.

Discontinued Operations

In determining whether a group of assets disposed (or to be disposed) of should be presented as a discontinued operation, the Company makes a determination of whether the group of assets being disposed of comprises a component of the entity; that is, whether it has historical operations and cash flows that can be clearly distinguished (both operationally and for financial reporting purposes). The Company also determines whether the cash flows associated with the group of assets have been significantly (or will be significantly) eliminated from the ongoing operations of the Company as a result of the disposal transaction and whether the Company has no significant continuing involvement in the operations of the group of assets after the disposal transaction. If these determinations can be made affirmatively, the results of operations of the group of assets being disposed of (as well as any gain or loss on the disposal transaction) are aggregated for separate presentation apart from continuing operating results of the Company in the consolidated financial statements. See “Note 4: Business Acquisitions, Dispositions and Other Significant Transactions” for additional information.

Comprehensive Income (Loss)

Comprehensive income (loss) is included within equity in the consolidated balance sheets and consists of net income (loss) and other gains and losses affecting equity that, under GAAP, are excluded from net income (loss). For AOL, such items consist primarily of foreign currency translation gains (losses). The following table sets forth other comprehensive income (loss), net of tax, accumulated in equity (in millions):

	Foreign currency translation gains (losses)		Net unrealized gains (losses) on securities		Net derivative financial instrument gains (losses)		Net accumulated other comprehensive income (loss)
Balance at December 31, 2006	$	(253.3)	$	—	$	0.9	$	(252.4)
2007 activity		45.7		0.1		(0.3)		45.5
Balance at December 31, 2007		(207.6)		0.1		0.6		(206.9)
2008 activity		(95.5)		(0.1)		0.1		(95.5)
Balance at December 31, 2008		(303.1)		—		0.7		(302.4)
2009 activity		28.0		—		(0.7)		27.3
Balance at December 31, 2009	$	(275.1)	$	—	$	—	$	(275.1)

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Recent Accounting Standards

Determining Whether Instruments Granted in Share-Based Payment Transactions are Participating Securities

On January 1, 2009, the Company adopted guidance that requires share-based compensation awards that qualify as participating securities to be included in basic earnings per share using the two-class method. Under this guidance, all outstanding unvested share-based payment awards that contain rights to nonforfeitable dividends or dividend equivalents are considered participating securities. The adoption of this guidance did not impact net income per common share attributable to AOL for prior periods and is not expected to have an impact on future periods until such time as AOL declares a regular quarterly dividend.

Fair Value Measurements

On January 1, 2009, the Company adopted guidance related to fair value measurements pertaining to non-financial assets and liabilities on a prospective basis. This guidance establishes the authoritative definition of fair value, sets out a framework for measuring fair value and expands the required disclosures about fair value measurement. The adoption of this guidance did not have a material impact on the Company’s consolidated financial statements.

The majority of the Company’s non-financial assets, which include goodwill, intangible assets and property and equipment, are not required to be carried at fair value on a recurring basis. However, if certain triggering events occur (or at least annually for goodwill) such that a non-financial asset is required to be evaluated for impairment, a resulting asset impairment would require that the non-financial asset be recorded at the lower of historical cost or fair value.

Business Combinations

On January 1, 2009, the Company adopted the guidance related to the accounting for business combinations, and is applying such provisions prospectively to business combinations that have an acquisition date on or after January 1, 2009. This guidance establishes principles and requirements for how an acquirer in a business combination (i) recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, and any noncontrolling interest in the acquiree, (ii) recognizes and measures goodwill acquired in a business combination or a gain from a bargain purchase and (iii) determines what information to disclose to enable users of financial statements to evaluate the nature and financial effects of the business combination. In addition, changes in accounting for deferred tax asset valuation allowances and acquired income tax uncertainties after purchase accounting is completed will be recognized in earnings rather than as an adjustment to the cost of an acquisition. This accounting treatment for deferred tax asset valuation allowances and acquired income tax uncertainties is applicable to acquisitions that occurred both prior and subsequent to the adoption of this guidance. The adoption of this guidance did not affect the Company’s consolidated financial statements for prior periods.

Noncontrolling Interests

On January 1, 2009, the Company adopted guidance which establishes accounting and reporting standards for the noncontrolling interest in a subsidiary, including the accounting treatment upon the deconsolidation of a subsidiary. This guidance is being applied prospectively, except for the provisions related to the presentation of noncontrolling interests. Noncontrolling interests have been reclassified to equity in the consolidated balance sheet and excluded from net income in the consolidated statement of operations for all prior periods presented.

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Variable Interest Entities

In June 2009, new guidance was issued which requires an enterprise to perform an analysis to determine whether the enterprise’s variable interest or interests give it a controlling financial interest in a variable interest entity. This analysis identifies the primary beneficiary of a variable interest entity as the enterprise that has (i) the power to direct the activities of a variable interest entity that most significantly impact the entity’s economic performance, and (ii) the obligation to absorb losses of the entity that could potentially be significant to the variable interest entity or the right to receive benefits from the entity that could potentially be significant to the variable interest entity. In addition, this guidance amends the accounting for variable interest entities to (i) require ongoing assessments of whether an entity is the primary beneficiary of a variable interest entity, (ii) eliminate the quantitative approach for determining the primary beneficiary of a variable interest entity, (iii) amend certain guidance for determining whether an entity is a variable interest entity and (iv) require enhanced disclosures. This guidance became effective for AOL on January 1, 2010 and is not expected to have a material impact on the Company’s consolidated financial statements.

Amendments to Revenue Arrangements with Multiple Deliverables

In October 2009, new guidance was issued related to the accounting for multiple-deliverable revenue arrangements. This new guidance amends the existing guidance for separating consideration in multiple deliverable arrangements and establishes a selling price hierarchy for determining the selling price of a deliverable. This new guidance will become effective for AOL on January 1, 2011 with earlier application permitted, provided that the revised guidance is retroactively applied to the beginning of the year of adoption. The Company is currently evaluating the timing of adopting this new guidance and the impact that the adoption of this new guidance will have on the Company’s revenue recognition policies and results of operations.

NOTE 2—INCOME (LOSS) PER COMMON SHARE

Basic income (loss) per common share is calculated by dividing net income attributable to AOL common stockholders by the weighted average number of shares of common stock issued and outstanding during the reporting period. Diluted income (loss) per common share is calculated to give effect to all potentially dilutive common shares that were outstanding during the reporting period. The dilutive effect of outstanding equity-based compensation awards is reflected in diluted income (loss) per common share by application of the treasury stock method.

On November 2, 2009, the Company converted from AOL Holdings LLC, a limited liability company wholly owned by Time Warner, to AOL Inc., a corporation wholly owned by Time Warner. On the distribution date of December 9, 2009, 105.8 million shares of $0.01 par value AOL common stock were distributed to Time Warner shareholders of record as of 5 p.m. on November 27, 2009. This share amount is being utilized for the calculation of basic income (loss) per common share for periods presented prior to 2009 as no common stock of the Company existed prior to November 2, 2009. For periods prior to 2009, the same number of shares is being used for diluted income (loss) per common share as for basic income (loss) per common share as no common stock of the Company existed prior to November 2, 2009 and no dilutive securities of the Company were outstanding for any prior period.

For the year ended December 31, 2009, in determining the weighted average number of common shares outstanding for basic income (loss) per common share, the Company assumed 105.8 million shares were outstanding for the period from January 1, 2009 through December 9, 2009. Diluted income (loss) per common share subsequent to the distribution date of December 9, 2009 reflects the potential dilution of outstanding equity-based compensation awards by application of the treasury stock method.

Certain stock options and restricted stock units granted to employees in 2009 have a dilutive effect on income (loss) per share; however, the dilutive effect is not significant to the total weighted-average shares

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outstanding for 2009 since dilutive shares were only outstanding from December 10, 2009 through December 31, 2009. Accordingly, for the year ended December 31, 2009, AOL’s weighted average number of common shares outstanding for diluted income (loss) per common share was 105.8 million. Grants of restricted stock units to employees will have a dilutive effect on future income per share and grants of stock options to employees may have a dilutive effect on future income per share, if the exercise price of the options is less than the market price during a future reporting period.

NOTE 3—GOODWILL AND INTANGIBLE ASSETS

Goodwill

A summary of changes in the Company’s goodwill during the years ended December 31, 2009 and 2008 is as follows (in millions):

	Gross Goodwill			Impairments			Net Goodwill
December 31, 2007	$	35,531.1		$	(32,003.7	)	$	3,527.4
Acquisitions, dispositions and adjustments		889.9			—			889.9
Impairments		—			(2,207.0	)		(2,207.0	)
Translation and other adjustments		(48.8	)		—			(48.8	)
December 31, 2008		36,372.2			(34,210.7	)		2,161.5
Acquisitions, dispositions and adjustments		8.3			—			8.3
Translation and other adjustments		14.4			—			14.4
December 31, 2009	$	36,394.9		$	(34,210.7	)	$	2,184.2

In connection with the annual goodwill impairment analysis performed during the fourth quarter of 2009, AOL determined that the fair value of AOL’s sole reporting unit exceeded its book value, and therefore no goodwill impairment charge was recorded in 2009.

In performing the first step (“Step 1”) of the goodwill impairment test, AOL compared the carrying amount of its reporting unit to its estimated fair value. In determining the estimated fair value of its reporting unit, the Company used a combination of an income approach by preparing a discounted cash flow analysis and a market-based approach based on AOL’s market capitalization. Given that AOL’s common stock started trading on December 10, 2009, there was insufficient trading activity to solely consider the market-based approach. This approach was considered as one data point in determining fair value, but was not the sole indicator of fair value. The cash flows employed in the income approach are based on AOL’s most recent budgets, forecasts and business plans as well as various growth rate assumptions for years beyond the current business plan period. Discount rate assumptions are based on an assessment of the risk inherent in the future revenue streams and cash flows of the reporting unit. In addition, when a discounted cash flow analysis is used in determining fair value, reasonableness of the determined fair value is assessed by reference to other fair value indicators such as comparable company public trading values, research analyst estimates and, where available, values observed in private market transactions. In the 2009 goodwill impairment analysis, the discount rates utilized in the discounted cash flow analysis were in a range of 10.5% to 14% in 2009, as compared to 13% to 15% in 2008, while the terminal growth rates for the Company’s advertising revenues were 4% in 2009 as compared to a range of 2.5% to 3% in 2008. The premium used to arrive at a controlling interest equity value for the market-based approach was determined based on values observed in recent market transactions.

The results of the Step 1 process indicated that the fair value of AOL exceeded its book value by approximately 3%. As a result, the second step (“Step 2”) of the goodwill impairment test did not need to be performed, and therefore no impairment charge was recorded for 2009.

As the market-based approach is based on AOL’s market capitalization, volatility in the Company’s stock price could have a significant impact on the estimated fair value of the Company’s sole reporting unit. If the estimated fair value of AOL had been hypothetically lower by 5% as of December 31, 2009, the book value

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would have exceeded fair value by approximately $70 million. If the book value of AOL had been greater than fair value, the second step of the goodwill impairment test would have been required to be performed to determine the implied fair value of goodwill, and would likely have resulted in a significant goodwill impairment charge.

In connection with the annual impairment analysis performed during the fourth quarter of 2008, AOL determined that the carrying value of its goodwill was impaired and, accordingly, recorded a goodwill impairment charge of $2,207.0 million to write goodwill down to its implied fair value.

Intangible Assets

The Company’s intangible assets and related accumulated amortization at December 31, 2009 and 2008 consisted of the following (in millions):

	December 31, 2009							December 31, 2008
	Gross		Accumulated Amortization (a)			Net		Gross		Accumulated Amortization (a)			Net
Acquired technology	$	886.2	$	(776.3	)	$	109.9	$	886.2	$	(704.7	)	$	181.5
Customer relationships		216.8		(144.5	)		72.3		215.1		(99.1	)		116.0
Trade names		98.2		(66.7	)		31.5		97.0		(39.3	)		57.7
Other intangible assets		57.1		(46.1	)		11.0		56.8		(42.8	)		14.0
Total	$	1,258.3	$	(1,033.6	)	$	224.7	$	1,255.1	$	(885.9	)	$	369.2

(a) Amortization of intangible assets is provided generally on a straight-line basis over their respective useful lives, which range from two to seven years. The Company evaluates the useful lives of its finite-lived intangible assets each reporting period to determine whether events or circumstances warrant revised estimates of useful lives.

The Company recorded amortization expense of $144.7 million, $166.2 million and $95.9 million for the years ended December 31, 2009, 2008 and 2007, respectively. Based on the amount of intangible assets as of December 31, 2009, the estimated amortization expense for each of the succeeding five years ending December 31 is as follows (in millions):

2010 (a)	$	148.8
2011		71.4
2012		4.5
Total	$	224.7

(a) Included in the 2010 intangible amortization estimates above is approximately $60.0 million related to certain intangible assets for which the Company has accelerated the amortization based on its reevaluation of their useful lives.

The amounts above may vary as acquisitions and dispositions occur in the future.

NOTE 4—BUSINESS ACQUISITIONS, DISPOSITIONS AND OTHER SIGNIFICANT TRANSACTIONS

Significant 2008 Acquisitions

AOL completed the following significant acquisitions during 2008:

Bebo, Inc.

On May 14, 2008, the Company completed the acquisition of Bebo, Inc. (“Bebo”), a global social media network, for $859.8 million, net of cash acquired, of which $852.0 million was paid in cash in May 2008, and $7.8 million of which was paid by the Company in the first quarter of 2009. AOL recognized $765.8 million of goodwill (which is not deductible for tax purposes) and $86.5 million of intangible assets related to this acquisition.

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Perfiliate Limited (doing business as buy.at)

On February 5, 2008, the Company completed the acquisition of Perfiliate Limited (“buy.at”), a company based in the United Kingdom which provides performance-based advertising services to advertisers, for $125.2 million in cash, net of cash acquired. AOL recognized $99.3 million of goodwill (which is not deductible for tax purposes) and $32.5 million of intangible assets related to this acquisition.

The results of operations of Bebo and buy.at have been included in the Company’s consolidated financial statements from their respective dates of acquisition, and were not material to the Company’s consolidated results in 2008. These businesses were acquired to attract and engage more Internet users and provide advertising services to customers, which, along with market conditions at the time of acquisition, contributed to purchase prices that resulted in the allocation of a significant portion of the purchase price to goodwill. The intangible assets associated with these acquisitions consist primarily of acquired technology to be amortized on a straight- line basis over a weighted-average period of four years, customer relationships to be amortized on an accelerated basis over a weighted-average period of four years and trade names and other intangible assets to be amortized on an accelerated basis over a weighted-average period of four years.

Significant 2007 Acquisitions

AOL completed the following significant acquisitions during 2007:

Quigo Technologies, Inc.

On December 19, 2007, the Company completed the acquisition of Quigo Technologies, Inc. (now Quigo Technologies LLC), a site- and content-targeted advertising company, for $346.4 million in cash, net of cash acquired. AOL recognized $239.6 million of goodwill (which is not deductible for tax purposes) and $133.5 million of intangible assets related to this acquisition.

TACODA, Inc.

On September 6, 2007, the Company completed the acquisition of TACODA, Inc. (now TACODA LLC), an online behavioral targeting advertising company, for $273.9 million in cash, net of cash acquired. AOL recognized $219.1 million of goodwill (which is not deductible for tax purposes) and $47.2 million of intangible assets related to this acquisition.

ADTECH AG

On May 15, 2007, the Company acquired a majority ownership stake in ADTECH AG (“ADTECH”), an international provider of online ad serving technology, for $88.1 million in cash, and acquired the remaining outstanding shares of ADTECH during the second, third and fourth quarters of 2007 for an additional $17.8 million, such that the Company owned 100% of the shares of ADTECH at December 31, 2007. AOL recognized $89.2 million of goodwill (which is not deductible for tax purposes) and $23.0 million of intangible assets related to this acquisition.

Third Screen Media, Inc.

On May 15, 2007, the Company completed the acquisition of Third Screen Media, Inc. (now Third Screen Media LLC), a mobile advertising company and mobile ad serving management platform provider, for $105.4 million in cash, net of cash acquired. AOL recognized $76.2 million of goodwill (which is not deductible for tax purposes) and $29.0 million of intangible assets related to this acquisition.

The results of operations of these acquired businesses have been included in the Company’s consolidated financial statements from their respective dates of acquisition, and were not material to the Company’s consolidated results in 2007. These businesses were acquired to attract and engage more Internet users and

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provide advertising services to customers, which, along with market conditions at the time of acquisition, contributed to purchase prices that resulted in the allocation of a significant portion of the purchase price to goodwill. The intangible assets consist primarily of acquired technology to be amortized on a straight-line basis over a weighted-average period of three years and customer relationships to be amortized on an accelerated basis over a weighted-average period of three years.

Other Significant Transactions

Sale of German Access Service Business

On February 28, 2007, the Company completed the sale of its German access service business to Telecom Italia S.p.A. for $849.6 million in cash, resulting in a net pre-tax gain of $668.2 million, calculated as the excess of the cash proceeds over the carrying value of the net assets sold (including goodwill allocated to the sale of $136.4 million). In connection with this sale, the Company entered into a separate agreement to provide ongoing web services, including content, e-mail and other online tools and services, to Telecom Italia S.p.A.’s wholly-owned subsidiary, Hansenet Telekommunikation GmbH, which expires on February 26, 2012; however, Hansenet Telekommunikation GmbH and AOL have unilateral rights to terminate the web services agreement effective August 31, 2010 if certain revenue thresholds are not achieved by February 26, 2010. For the year ended December 31, 2007, AOL’s German access service business had subscription revenues of $88.2 million.

As a result of the historical interdependency of AOL’s German access service and web service businesses, the historical cash flows and operations of the German access service and web service businesses were not clearly distinguishable. Accordingly, AOL’s German access service business has not been reflected as discontinued operations in the consolidated financial statements.

Asset Dispositions

On December 28, 2007, AOL completed the sale of a building in Reston, Virginia, for a net sales price of $43.4 million, which resulted in a pre-tax gain of $15.8 million.

Divestitures of Certain Wireless Businesses

On August 24, 2007, the Company completed the sale of Tegic Communications, Inc. (“Tegic”) to Nuance Communications, Inc. for $265.0 million in cash, which resulted in a pre-tax gain of approximately $201.4 million. In addition, in the third quarter of 2007, the Company transferred the assets of Wildseed LLC (“Wildseed”) to a third party to settle an outstanding dispute. The Company recorded a pre-tax charge of $6.5 million related to this divestiture in the second quarter of 2007 and an impairment charge of $18.5 million on the long-lived assets of Wildseed in the first quarter of 2007. All amounts related to both Tegic and Wildseed have been reflected as discontinued operations for all periods presented.

Financial data associated with the Tegic and Wildseed businesses reflected as discontinued operations in 2007 is as follows (in millions):

	Year Ended December 31, 2007
Total revenues	$	43.0
Pre-tax loss (before gain on sale of business)		(29.1)
Gain on sale of business		201.4
Income tax benefit		9.8
Net income attributable to AOL Inc.		182.1

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Lease of Office Space to Raytheon

In March 2009, the Company executed an agreement whereby the Company leased to Raytheon Company (“Raytheon”) approximately 600,000 square feet of its owned office space in Dulles, Virginia beginning in October 2009. The lease has an initial term of 10 years with aggregate lease payments of approximately $102.0 million, and provides Raytheon with a series of five-year renewal options for up to an additional 20 years.

AOL-Google Alliance

During December 2005, AOL announced that it was expanding its strategic alliance with Google. As part of this alliance, on April 13, 2006, Time Warner completed its issuance of a 5% equity interest in AOL to Google for $1,000 million in cash. On July 8, 2009, Time Warner repurchased Google’s 5% interest in AOL for $283.0 million, which amount included a payment in respect of Google’s pro rata share of cash distributions to Time Warner by AOL attributable to the period of Google’s investment in AOL. Following this purchase, AOL became a 100%-owned subsidiary of Time Warner. Google continues to provide paid text-based search advertising and contextual advertising on AOL Properties.

Acquisition of StudioNow, Inc.

On January 22, 2010, the Company completed the acquisition of StudioNow, Inc. (“StudioNow”), a provider of a proprietary digital platform that allows clients to create, produce, manage and distribute professional quality videos at scale, for aggregate consideration of $36.5 million (of which $3.1 million is contingent on the future service of certain StudioNow employees). $15.0 million of the total consideration was paid through the issuance of approximately 595,000 shares of AOL common stock. Of the remaining $21.5 million, $14.0 million was paid in cash at the close date and $7.5 million is due in cash two years subsequent to the close date. The $3.1 million contingent on the future service of certain StudioNow employees is not included in the purchase price allocation and will be recognized as compensation expense on a straight-line basis over two years. It is anticipated that a significant portion of the remaining purchase price will be allocated to intangible assets and goodwill. The Company has not completed the allocation of the consideration transferred to acquired identifiable assets and liabilities assumed.

This business was acquired to attract and engage more Internet users and drive high volumes of video content production through StudioNow’s platform, which, along with market conditions at the time of acquisition, contributed to a purchase price that is expected to result in the allocation of a significant portion of the purchase price to goodwill.

Sale of buy.at

On February 26, 2010, the Company completed the sale of buy.at to Digital Window Limited for approximately $17.0 million in cash (subject to working capital adjustments). The Company expects to record a pre-tax loss on this sale of approximately $15 to 20 million, based on the cash proceeds and the carrying value of the net assets sold (including goodwill allocated to the sale). The results of operations of buy.at were not material to the Company’s consolidated financial statements.

NOTE 5—LONG-TERM DEBT AND OTHER FINANCING ARRANGEMENTS

Capital Leases

Capital lease obligations consist of ($ in millions):

	Weighted-Average Interest Rate at December 31, 2009		Maturities	Outstanding Amount
				December 31, 2009		December 31, 2008
Capital lease obligations	5.67	%	2010-2013	$	73.9	$	58.7
Amount due within one year					(32.4)		(25.0)
Total long-term capital lease obligations				$	41.5	$	33.7

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Assets recorded under capital lease obligations totaled $138.4 million and $275.3 million at December 31, 2009 and 2008, respectively. Related accumulated amortization totaled $67.0 million and $215.9 million at December 31, 2009 and 2008, respectively.

Future minimum capital lease payments at December 31, 2009 are as follows (in millions):

2010	$	35.8
2011		25.3
2012		14.3
2013		4.2
2014 and thereafter		—
Total		79.6
Amount representing interest		(5.7)
Present value of minimum lease payments		73.9
Current portion		(32.4)
Total long-term portion	$	41.5

Senior Secured Revolving Credit Facility

On December 9, 2009, the Company entered into the Credit Agreement among the Company, the Lenders, the Administrative Agent and the other financial institutions party thereto for a 364-day $250.0 million senior secured Revolving Credit Facility. The maturity date of the Revolving Credit Facility is December 8, 2010. Borrowings under the Revolving Credit Facility are available for general corporate purposes. Loans made under the Revolving Credit Facility will bear interest at a fluctuating rate based on the applicable rating for the senior unsecured long-term debt of Time Warner.

Time Warner has guaranteed all of the Company’s obligations with respect to loans and letters of credit under the Revolving Credit Facility, pursuant to a Guarantee, dated as of December 9, 2009, in favor of the Administrative Agent (the “Time Warner Guarantee”). As consideration for Time Warner providing such guarantee, the Company will pay Time Warner an annual fee (payable quarterly) equal to 1.0% of the aggregate principal amount of the commitments at closing under the Revolving Credit Facility, and an ongoing guarantee fee, which will vary with the amount of undrawn commitments and the principal amount of the Company’s obligations outstanding under the Revolving Credit Facility, as well as changes in Time Warner’s senior unsecured long-term debt credit ratings, but will be a minimum fee of $0.9 million. The guarantee fee will be subject to prescribed periodic increases over the term of the Revolving Credit Facility.

On December 9, 2009, the Company and each of the Company’s material, wholly-owned domestic subsidiaries entered into a Security Agreement in favor of Bank of America, N.A., as collateral agent (the “Security Agreement”), for the benefit of the secured parties thereunder. Pursuant to the Security Agreement, the obligations under the Revolving Credit Facility are secured by a perfected first-priority security interest in substantially all of the Company’s assets and the assets of each of the Company’s material, wholly-owned domestic subsidiaries (excluding cash and real property, but including 100% of the stock of the Company and each of the Company’s material, wholly-owned domestic subsidiaries’ first-tier domestic subsidiaries and 65% of the stock of their first-tier foreign subsidiaries).

Under the terms of the Revolving Credit Facility, the Company is restricted from paying dividends, among other restrictive covenants. The Company continues to be in full compliance with all covenants contained in the Revolving Credit Facility.

As of March 2, 2010, the Company has not borrowed under the terms of the Company’s Revolving Credit Facility.

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Interest Expense

Interest expense amounted to $5.2 million, $8.0 million and $9.7 million for the years ended December 31, 2009, 2008 and 2007, respectively, and is included in other income (loss), net on the consolidated statements of operations. The weighted-average interest rate on AOL’s capital lease obligations was 5.67% and 5.73% at December 31, 2009 and 2008, respectively. The rate on capital lease obligations due within one year was 5.66% at December 31, 2009.

NOTE 6—INCOME TAXES

AOL was included in Time Warner’s consolidated U.S. federal income tax return filings for each of the years presented through December 9, 2009, the date of the spin-off. AOL will file its own consolidated U.S. federal income tax return following the spin-off (beginning with the short period from December 10 through December 31, 2009). AOL also files separate income tax returns in certain state and foreign jurisdictions in which it operates.

AOL’s income taxes are computed and reported herein under the “separate return method” for the periods prior to the spin-off. The separate return method applies the accounting guidance for income taxes to the standalone financial statements as if AOL were a separate taxpayer and a standalone enterprise for the entire period. Income taxes related to the short period from December 10 through December 31, 2009 are calculated based on AOL’s separate income tax status.

Domestic and foreign income (loss) from continuing operations before income taxes is as follows (in millions):

	Years Ended December 31,
	2009		2008		2007
Domestic	$	583.6	$	(1,123.1)	$	1,272.5
Foreign		(128.4)		(48.4)		582.5
Total	$	455.2	$	(1,171.5)	$	1,855.0

Current and deferred income taxes (tax benefits) provided on income from continuing operations are as follows (in millions):

	Years Ended December 31,
	2009		2008		2007
U.S. federal:
Current	$	172.3	$	309.8	$	426.2
Deferred		(1.5)		(35.1)		102.6
Foreign:
Current		1.1		13.1		19.0
Deferred		(2.8)		(0.7)		(0.8)
State and local:
Current		40.0		81.7		94.3
Deferred		(2.4)		(13.7)		0.4
Total	$	206.7	$	355.1	$	641.7

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The differences between income taxes (tax benefits) expected at the U.S. federal statutory income tax rate of 35% and income taxes (tax benefits) provided are as set forth below (in millions):

	Years Ended December 31,
	2009		2008		2007
Taxes (tax benefits) on income at U.S. federal statutory rate	$	159.4	$	(410.1)	$	649.3
State and local taxes, net of U.S. federal tax benefits		19.3		42.0		74.3
Non-deductible goodwill (including goodwill impairment charge)		—		696.3		52.2
Change in valuation allowance for deferred tax assets		40.3		19.2		(71.6)
U.S. tax benefit from foreign operations		(29.7)		(13.9)		(16.0)
Tax contingencies		21.8		25.2		21.4
Other		(4.4)		(3.6)		(67.9)
Total	$	206.7	$	355.1	$	641.7

Significant components of AOL’s deferred tax assets and liabilities are as follows (in millions):

	December 31,
	2009		2008
Deferred tax assets:
Reserves and allowances	$	38.8	$	28.7
Equity-based compensation (a)		4.2		614.7
Tax loss and credit carryforwards (b)		1,303.2		1,045.1
Other		240.3		210.2
Valuation allowance		(1,003.1)		(902.2)
Total deferred tax assets		583.4		996.5
Deferred tax liabilities:
Capitalized software		(38.0)		(46.5)
Unrealized foreign exchange tax gain		(175.3)		(109.3)
Intangible assets and goodwill		(161.0)		(66.9)
Other		(36.9)		(25.3)
Total deferred tax liabilities		(411.2)		(248.0)
Net deferred tax assets	$	172.2	$	748.5

(a) Upon the effective date of the spin-off, the Company reversed its equity-based compensation deferred tax asset totaling $436.1 million with a corresponding decrease to additional paid-in capital, as this amount was retained by Time Warner under the terms of the Second Tax Matters Agreement between Time Warner and AOL.

(b) The deferred tax asset relating to tax losses includes $67.5 million of tax losses corresponding to the December 10 through December 31 short period. This short period loss is primarily attributable to restructuring expenses that occurred after the spin-off. It is anticipated that this tax loss carryforward will be utilized during 2010.

AOL had approximately $4,273 million and $3,414 million of accumulated tax losses in various foreign jurisdictions, primarily from countries with unlimited carryforward periods, as of December 31, 2009 and 2008, respectively. However, many of these foreign losses are attributable to specific operations and may not be utilized against income of certain other operations of AOL. The valuation allowance outstanding at December 31, 2009 and 2008 is primarily attributable to these foreign net operating loss carryforwards.

AOL had approximately $123.1 million and $160.3 million of U.S. federal net operating losses many of which are subject to use limitations as of December 31, 2009 and 2008, respectively. In addition, AOL had approximately $771.9 million and $214.8 million of accumulated tax losses in various state and local

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jurisdictions as of December 31, 2009 and 2008, respectively. However, similar to the foreign net operating loss carryforwards, many of these tax losses are subject to a valuation allowance because they are attributable to specific operations and may not be utilized against income of other operations of AOL. These tax loss carryforwards will expire at various dates between 2010 and 2029. The increase in state net operating losses from 2008 to 2009 is primarily attributable to Time Warner’s allocation of consolidated Virginia net operating losses to AOL in connection with the spin-off.

U.S. federal income taxes are provided on that portion of AOL’s income from foreign subsidiaries that is expected to be remitted to the United States and be taxable. U.S. federal income and foreign withholding taxes have not been recorded on permanently reinvested earnings of certain foreign subsidiaries aggregating approximately $22.0 million and $17.4 million, as of December 31, 2009 and 2008, respectively. Determination of the amount of unrecognized deferred U.S. federal income tax liability with respect to such earnings is not practicable.

Accounting for Uncertainty in Income Taxes

Prior to the adoption of the accounting guidance for uncertainties in income tax provisions in 2007, AOL took positions on its tax returns that may be challenged by domestic and foreign taxing authorities. Certain of these tax positions arose in the context of transactions involving the purchase, sale or exchange of businesses or assets. All such transactions were subject to substantial tax due diligence and planning, in which the underlying form, substance and structure of the transaction was evaluated. Although AOL believes it had support for the positions taken on these tax returns, AOL recorded a liability for its best estimate of the probable loss on certain of these transactions.

On January 1, 2007, AOL adopted the new accounting guidance, which clarifies the accounting for uncertainty in income tax positions. Upon adoption, AOL recorded an increase to equity of $379.3 million, which was due primarily to the recognition of tax benefits for positions that were previously unrecognized. The liability for uncertain income tax positions as of January 1, 2007 was approximately $176.4 million (excluding interest) and reflected a $110.4 million reduction to the previously recorded income tax liability resulting from the adoption of this guidance.

AOL entered into a Second Tax Matters Agreement with Time Warner that governs the respective rights, responsibilities and obligations of Time Warner and AOL after the spin-off with respect to all tax matters. As a member of Time Warner’s consolidated U.S. federal income tax group, AOL has (and continues to have following the spin-off) joint and several liability with Time Warner to the IRS for the consolidated U.S. federal income taxes of the Time Warner group relating to the taxable periods in which AOL was part of the group. Under the Second Tax Matters Agreement, however, Time Warner agreed to assume this liability and any similar liability for U.S. federal, state or local income taxes that are determined on a consolidated, combined, unitary or similar basis for each taxable period in which AOL was included in such consolidated, combined, unitary or similar group with Time Warner. AOL remains responsible for any foreign income taxes and any income taxes (primarily state taxes) that are not determined on a consolidated, combined, unitary or similar basis with Time Warner.

Upon the effectiveness of the Second Tax Matters Agreement, Time Warner assumed the liability for uncertain tax positions taken by Time Warner in its consolidated, combined, unitary or similar tax returns with respect to AOL up to the date of the spin-off. As a result, at the date of the spin-off, AOL reversed the recorded liability (including accrued interest) to Time Warner related to these tax positions, with an offsetting $368.1 million adjustment to equity.

In certain foreign jurisdictions (including the United Kingdom) in which AOL files separately from Time Warner, various periods from 2003 through the current period remain open to examination by the taxing authorities. For the period following the spin-off, the examination periods in all significant jurisdictions, including the United States, Virginia, New York and the United Kingdom, remain open.

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Changes in the liability for uncertain tax positions, excluding the related accrual for interest, from January 1 to December 31 are set forth below (in millions):

	Years Ended December 31,
	2009		2008		2007
Beginning balance	$	345.7	$	311.8	$	176.4
Additions for current year tax provisions		26.0		41.0		137.4
Reductions for prior year tax provisions		(32.0)		(7.1)		—
Settlements (including reversal of the liability retained by Time Warner following the spin-off)		(325.4)		—		(2.0)
Total	$	14.3	$	345.7	$	311.8

Interest expensed through the income tax provision for uncertain tax provisions was $14.3 million, $18.2 million, and $11.5 million for the years ended December 31, 2009, 2008 and 2007, respectively. As of December 31, 2009 and 2008, the amount of accrued interest in the consolidated balance sheet associated with uncertain tax positions was $3.2 million and $31.3 million, respectively.

As of December 31, 2009 and 2008, the amount of unrecognized tax benefits which, if recognized, would affect our effective tax rate is $13.4 million and $42.7 million, respectively.

NOTE 7—STOCKHOLDERS’ EQUITY

AOL is authorized to issue up to 660.0 million shares of all classes of stock, consisting of 60 million shares of preferred stock, par value $0.01 per share (“Preferred Stock”), and 600 million shares of common stock, par value $0.01 per share. Rights and privileges associated with shares of Preferred Stock are subject to authorization by the Company’s Board of Directors and may differ from those of any and all other series at any time outstanding. All shares of common stock will be identical and will entitle the holders thereof to the same rights and privileges.

As discussed in “Note 1: Description of Business, Basis of Presentation and Summary of Significant Accounting Policies” on December 9, 2009, in accordance with the Separation Agreement, Time Warner shareholders of record as of 5 p.m. on November 27, 2009, the record date for the distribution, received one share of AOL common stock for every eleven shares of Time Warner common stock held, which resulted in the complete legal and structural separation of the two companies. Fractional shares of AOL common stock were not distributed to Time Warner shareholders. Instead, the fractional shares of AOL common stock were aggregated and sold in the open market, with the net proceeds distributed pro rata in the form of cash payments to Time Warner shareholders who would otherwise be entitled to receive a fractional share of AOL common stock.

As of December 31, 2009, 105.8 million shares of common stock were issued and outstanding. No dividends were declared or paid as of December 31, 2009.

NOTE 8—EQUITY-BASED COMPENSATION AND EMPLOYEE BENEFIT PLANS

Defined Contribution Plans

Prior to the spin-off, AOL employees participated in certain Time Warner domestic and international defined contribution plans, including savings and profit sharing plans. AOL’s contributions to Time Warner’s savings plans were primarily based on a percentage of the employees’ elected contributions and were subject to plan provisions. Subsequent to the spin-off, AOL employees are no longer participating in and AOL is no longer contributing to these plans.

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Subsequent to the spin-off, AOL employees participate in domestic and international defined contribution plans, primarily consisting of AOL’s domestic savings plan. AOL’s contributions to these plans are based on a percentage of the employees’ elected contributions and are subject to plan provisions.

Expenses related to AOL’s contribution to the Time Warner and AOL plans amounted to $17.4 million, $19.8 million and $27.8 million for the years ended December 31, 2009, 2008 and 2007, respectively.

Equity-Based Compensation

AOL Equity Plan

Pursuant to the Company’s 2010 Stock Incentive Plan, or “2010 SIP”, options are generally granted to employees and non-employee directors of AOL with exercise prices equal to the quoted fair market value of the common stock at the date of grant. Generally, the stock options vest ratably over a four year vesting period and expire ten years from the date of grant. Certain stock option awards provide for accelerated vesting upon an election to retire pursuant to the Company’s defined benefit retirement plans or after reaching a specified age and years of service, as well as certain additional circumstances for non-employee directors.

Also pursuant to the 2010 SIP, AOL may also grant shares of common stock or restricted stock units (“RSUs”) to its employees and non-employee directors, which generally vest ratably over a four year period from the date of grant. Holders of restricted stock and RSU awards are generally entitled to receive regular cash dividends or dividend equivalents, respectively, if paid by the Company during the period of time that the restricted stock or RSU awards are unvested.

The Company is authorized to grant equity awards to employees covering an aggregate of 11.3 million shares of AOL common stock under the 2010 SIP, of which up to 6.6 million awards may be issued in the form of restricted stock or restricted stock units.

Upon the (i) exercise of a stock option award, (ii) the vesting of a RSU or (iii) the grant of restricted stock, shares of AOL common stock are issued from authorized but unissued shares or from treasury stock. At both December 31, 2009 and December 31, 2008, the Company did not have any shares of treasury stock.

On December 9, 2009, Time Warner equity awards held by AOL’s Chairman and Chief Executive Officer at the time of the separation were converted into AOL equity awards. This modification preserved both the intrinsic value and the fair value of his awards at the separation date, and accordingly, there was no incremental compensation expense associated with this modification.

Time Warner Equity Plans

Until consummation of the separation from Time Warner, AOL employees participated in Time Warner’s equity plans. See “Note 1: Description of Business, Basis of Presentation and Summary of Significant Accounting Policies—Summary of Significant Accounting Policies—Equity-based Compensation” for additional information on the treatment of vested and unvested Time Warner equity awards held by AOL employees upon separation. Time Warner had two active equity plans under which it was authorized to grant equity awards of Time Warner common stock to AOL employees. Options had been granted to employees of AOL with exercise prices equal to the fair market value of the underlying common stock at the date of grant. Generally, the stock options vested ratably over a four-year vesting period and expired 10 years from the date of grant. Certain stock option awards provided for accelerated vesting upon an election to retire pursuant to the Time Warner defined benefit retirement plans or after reaching a specified age and years of service.

Pursuant to these equity plans, Time Warner also granted shares of common stock or RSUs to employees of AOL. These awards generally vested between three to five years from the date of grant. Certain RSU awards provided for accelerated vesting upon an election to retire pursuant to Time Warner’s defined benefit retirement

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plans or after reaching a specified age and years of service. Holders of restricted stock and RSU awards were generally entitled to receive regular cash dividends or dividend equivalents, respectively, paid by Time Warner during the period of time that the restricted stock or RSU awards were unvested.

Equity-Based Compensation Expense

Compensation expense recognized by AOL related to its equity-based compensation plan and for its participation in Time Warner’s equity-based compensation plans is as follows (in millions):

	Years Ended December 31,
	2009		2008		2007
Stock options	$	4.3	$	8.7	$	20.1
RSUs and performance stock units (PSUs) (a)		8.2		10.9		12.2
Total equity-based compensation expense (b)	$	12.5	$	19.6	$	32.3
Tax benefit recognized	$	5.0	$	8.3	$	11.9

(a) AOL has only granted RSUs to employees. Prior to the spin-off, Time Warner granted restricted stock units and performance stock units to AOL employees. However, none of the performance stock units granted to AOL employees vested, and accordingly, compensation expense related to the performance stock units was zero on a cumulative basis.

(b) Equity-based compensation expense in 2009 included a reduction to expense driven by a change in the estimated forfeiture rate for Time Warner equity awards held by AOL employees, as fewer Time Warner equity awards were expected to vest as a result of the spin-off. Also included in the total equity-based compensation expense for the year ended December 31, 2009 is $0.6 million attributable to AOL’s equity awards.

AOL Stock Options

The assumptions presented in the table below represent the weighted-average value of the applicable assumption used to value AOL stock options at their grant dates:

	Year Ended December 31, 2009
Expected volatility	42.5%
Expected term to exercise from grant date	5.38 years
Risk-free rate	2.9%
Expected dividend yield	0%

The valuation of, as well as the expense recognition for, AOL awards is generally consistent with the treatment of Time Warner awards granted to AOL employees as described above. However, because AOL’s common stock has a limited trading history, the volatility assumption was determined for 2009 awards based on a blend of AOL’s implied volatility and the historical and implied volatilities of a comparable peer group of publicly traded companies. The expected term, which represents the period of time that options granted are expected to be outstanding, is estimated based on the historical exercise experience of AOL employees that held similar options to acquire Time Warner common stock. The risk-free rate assumed in valuing the options is based on the U.S. Treasury yield curve in effect at the time of grant for the expected term of the option. As the Company does not currently intend to pay dividends, the dividend yield is zero for AOL equity awards granted in 2009.

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The following table summarizes information about AOL stock options that were outstanding at December 31, 2009:

Options	Number of Options (in millions)	Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Life (in years)	Aggregate Intrinsic Value (in thousands)
Outstanding at December 31, 2008	—
Converted (a)	0.5	$	11.90	9.3 years
Granted	3.2	$	23.28	10.0 years
Outstanding at December 31, 2009	3.7	$	21.85	9.9 years	$	1,549
Exercisable at December 31, 2009	—

(a) Represents the Time Warner stock options held by AOL’s Chairman and Chief Executive Officer that were converted into AOL stock options.

As of December 31, 2009, 4.4 million shares of AOL common stock were available for future grants of stock options. Total unrecognized compensation cost related to unvested AOL stock option awards as of December 31, 2009, without taking into account expected forfeitures, is $33.4 million and is expected to be recognized over a weighted-average period of 3.27 years.

The weighted-average grant date fair value of an AOL stock option granted during the year ended December 31, 2009 was $9.94. No stock options were exercised during the year ended December 31, 2009.

AOL Restricted Stock Units

The following table summarizes information about unvested AOL RSUs at December 31, 2009:

	Number of Shares/Units (millions)	Weighted- Average Grant Date Fair Value
Unvested at December 31, 2008	—	$	—
Converted (a)	0.3		23.39
Granted	2.9		23.28
Unvested at December 31, 2009	3.2		23.29

(a) Represents the Time Warner RSUs held by AOL’s Chairman and Chief Executive Officer that were converted into AOL RSUs. The weighted-average grant date fair value amount above for these converted awards represents the fair value on the conversion date.

At December 31, 2009, the intrinsic value of unvested AOL RSUs was $68.6 million. Total unrecognized compensation cost related to unvested AOL RSUs at December 31, 2009, without taking into account expected forfeitures, was $67.9 million and is expected to be recognized over a weighted-average period of 3.78 years.

Time Warner Stock Options

The assumptions presented in the table below represent the weighted-average value of the applicable assumption used to value Time Warner stock options at their grant date.

	Years Ended December 31,
	2009	2008	2007
Expected volatility	38.1%	28.5%	22.1%
Expected term to exercise from grant date	4.71 years	5.73 years	5.16 years
Risk-free rate	1.9%	3.1%	4.4%
Expected dividend yield	3.8%	1.7%	1.1%

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The grant date fair value of all Time Warner equity-based awards has been adjusted to reflect the effect of Time Warner’s 1-for-3 reverse stock split which became effective on March 27, 2009. The weighted-average fair value of a Time Warner stock option granted to AOL employees was $4.57, $12.09 and $15.21 for the years ended December 31, 2009, 2008 and 2007, respectively. The total intrinsic value of Time Warner options exercised by AOL employees was $3.3 million, $38.6 million and $141.8 million for the years ended December 31, 2009, 2008 and 2007, respectively. Time Warner received cash from the exercise of Time Warner stock options by AOL employees totaling $13.0 million, $90.9 million and $188.9 million for the years ended December 31, 2009, 2008 and 2007, respectively. The tax benefits realized by AOL from Time Warner stock options exercised in the years ended December 31, 2009, 2008 and 2007 were approximately $1.2 million, $15.4 million and $55.9 million, respectively.

Time Warner Restricted Stock and Restricted Stock Units

The fair value of Time Warner restricted stock and RSUs granted to AOL employees that vested during the years ended December 31, 2009, 2008 and 2007 was $12.1 million, $5.4 million and $5.9 million, respectively.

For the year ended December 31, 2009, 0.5 million Time Warner RSUs were granted to AOL employees at a weighted-average grant date fair value per RSU of $18.14. For the year ended December 31, 2008, 0.8 million Time Warner RSUs were granted to AOL employees at a weighted-average grant date fair value per RSU of $44.13. For the year ended December 31, 2007, 0.6 million Time Warner RSUs were granted to AOL employees at a weighted-average grant date fair value per RSU of $59.88. Time Warner RSUs held by most employees at the date of spin-off were either vested or forfeited as a result of the spin-off. Following the spin-off, there are no outstanding unvested Time Warner RSUs held by AOL employees.

NOTE 9—RESTRUCTURING COSTS

2009 Restructuring Costs

For the year ended December 31, 2009, the Company undertook various restructuring activities in an effort to better align its organizational structure and costs with its strategy. As a result, the Company incurred $190.3 million in restructuring costs, which included $185.0 million in restructuring costs related to employee terminations, facility closures and other exit activities in 2009, and $5.3 million in restructuring costs associated with actions taken in 2008 and prior years (which includes adjustments to previous estimates). Employee termination costs were attributable to terminations of employees ranging from senior executives to line personnel.

2008 Restructuring Costs

For the year ended December 31, 2008, the Company incurred $16.6 million in restructuring costs, which included $7.2 million in restructuring costs related to employee terminations, facility closures and other exit activities in 2008, and $9.4 million in restructuring costs associated with actions taken in 2007 and prior years (which includes adjustments to previous estimates). Employee termination costs were attributable to terminations of employees ranging from senior executives to line personnel.

2007 Restructuring Costs

For the year ended December 31, 2007, the Company incurred $125.4 million in restructuring costs, which included $93.7 million in restructuring costs related primarily to employee terminations, asset write-offs, facility closures and other exit activities in 2007, and $31.7 million in restructuring costs associated with actions taken in 2006 and prior years (which includes adjustments to previous estimates). Employee termination costs were attributable to terminations of employees ranging from senior executives to line personnel.

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A summary of AOL’s restructuring activity for the years ended December 31, 2009, 2008 and 2007 is as follows (in millions):

	Employee Terminations		Other Exit Costs		Total
Liability at December 31, 2006	$	92.4	$	31.1	$	123.5
Net accruals (including adjustments to previous estimates)		119.7		10.4		130.1
Cash paid		(147.9)		(14.8)		(162.7)
Liability at December 31, 2007		64.2		26.7		90.9
Net accruals (including adjustments to previous estimates)		13.8		4.4		18.2
Cash paid		(67.6)		(10.6)		(78.2)
Liability at December 31, 2008		10.4		20.5		30.9
Net accruals (including adjustments to previous estimates)		163.3		29.7		193.0
Non-cash charges		(11.5)		(1.3)		(12.8)
Cash paid		(53.0)		(20.6)		(73.6)
Liability at December 31, 2009	$	109.2	$	28.3	$	137.5

At December 31, 2009, of the remaining liability of $137.5 million, $109.2 million was classified as a current liability within accrued expenses and other current liabilities, with the remaining $28.3 million classified as a long-term liability in the consolidated balance sheet. Amounts classified as long-term are expected to be paid through 2014.

NOTE 10—DERIVATIVE INSTRUMENTS

Prior to the spin-off, AOL used derivative instruments (principally forward contracts), entered into on its behalf by Time Warner, to manage the risk associated with movements in foreign currency exchange rates. Time Warner monitored its positions with, and the credit quality of, the financial institutions that were a party to any of its financial transactions. Netting provisions were provided for in existing International Swap and Derivative Association Inc. agreements in situations where Time Warner executed multiple contracts with the same counterparty. Prior to the spin-off, all outstanding derivative instruments were settled. Subsequent to the spin-off and through December 31, 2009, AOL has not entered into any derivative instruments or hedges. The following is a summary of AOL’s foreign currency risk management strategies while AOL was a subsidiary of Time Warner and the effect of these strategies on AOL’s consolidated financial statements.

Foreign Currency Risk Management

Until consummation of the separation from Time Warner, Time Warner managed certain derivative contracts on AOL’s behalf. Foreign exchange derivative contracts were used by AOL primarily to manage the risk associated with the volatility of future cash flows denominated in foreign currencies and changes in fair value resulting from changes in foreign currency exchange rates.

AOL used derivative instruments to hedge various foreign exchange exposures including the following: (i) variability in foreign-currency-denominated cash flows (i.e., cash flow hedges) and (ii) currency risk associated with foreign-currency-denominated operating assets and liabilities (i.e., fair value hedges).

As part of its overall strategy to manage the level of exposure to the risk of foreign currency exchange rate fluctuations, AOL hedged a portion of its foreign currency exposures anticipated over the calendar year. This process generally coincided with AOL’s annual strategic planning period. Additionally, as transactions arose (or were planned) during the year that were exposed to foreign currency risk and were unhedged at the time, AOL entered into derivative instruments, primarily foreign currency forward contracts, to mitigate the exposure presented by such transactions. Time Warner reimbursed or was reimbursed by AOL for contract gains and losses related to AOL’s foreign currency exposure. To hedge this exposure, AOL used foreign exchange

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contracts that generally had maturities of three months to 18 months providing continuing coverage throughout the hedging period with all positions being unwound prior to the spin-off. In the aggregate, the derivative instruments and hedging activities were not material to AOL. Time Warner managed the foreign currency transactions directly and entered into foreign currency purchase and sale transactions directly with counterparties and allocated costs to AOL related to these transactions. For the years ended December 31, 2009, 2008 and 2007, AOL recognized net gains (losses) of $10.8 million, ($20.4 million) and $22.1 million, respectively, within other income, net related to foreign currency management activity performed by Time Warner on behalf of AOL. These amounts were recognized upon the de-designation or settlement of foreign exchange contracts used in hedging relationships, including economic hedges. Such amounts were largely offset by corresponding gains or losses from the respective transaction that was hedged and were generally recognized in income in the same period that the hedged item or transaction affects income. Gains and losses from the ineffectiveness of hedging relationships, including ineffectiveness as a result of the discontinuation of cash flow hedges for which it was probable that the originally forecasted transaction would no longer occur, were not material for any period.

NOTE 11—COMMITMENTS AND CONTINGENCIES

Commitments

AOL’s total rent expense from continuing operations amounted to $50.3 million, $55.9 million and $59.6 million for the years ended December 31, 2009, 2008 and 2007, respectively. The Company has long-term non-cancelable lease commitments for office space and operating equipment in various locations around the world, a number of which have renewal options at market rates to be determined prior to the renewal option being exercised. In addition, certain leases have rent escalation clauses with either fixed scheduled rent increases or rent increases based on the Consumer Price Index. The minimum rental commitments under non-cancelable long-term operating leases during the next five years are as follows (in millions):

	Gross operating lease commitments		Sublease income		Net operating lease commitments
2010	$	62.8	$	5.4	$	57.4
2011		55.2		4.7		50.5
2012		39.7		5.2		34.5
2013		33.1		0.6		32.5
2014		30.6		—		30.6
Thereafter		191.5		—		191.5
Total (a)	$	412.9	$	15.9	$	397.0

(a) Included in the above table are approximately $230.7 million of payments associated with the lease of our corporate headquarters in New York. We have leased our corporate headquarters for a non-cancelable initial lease term that ends in February 2023, and we have the option to extend the lease for an additional five years. Monthly rental payments to the landlord under this lease escalate by approximately 7% after each of the first five years and the first ten years of the lease term.

AOL has commitments under certain network licensing, marketing, royalty and other agreements aggregating approximately $137.6 million at December 31, 2009, which are payable principally over a three-year period, as follows (in millions):

2010	$	96.8
2011-2012		32.9
2013-2014		7.0
Thereafter		0.9
Total (a)	$	137.6

(a) Includes amounts committed to Time Warner, as the Company no longer considers Time Warner a related party. See “Note 13: Related Party Transactions” for further information.

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The Company also has certain contractual arrangements that would require it to make payments or provide funding if certain circumstances occur (“contingent commitments”). At December 31, 2009, these arrangements related primarily to letters of credit and totaled $10.9 million. The Company does not expect that these contingent commitments will result in any material amounts being paid by the Company in the foreseeable future.

Included in the commitment amounts discussed above are certain commitments to Time Warner, see “Note 13: Related Party Transactions” for additional information.

Contingencies

Shareholder Derivative Lawsuits

During the summer and fall of 2002, numerous shareholder derivative lawsuits were filed in state and federal courts naming as defendants certain current and former directors and officers of Time Warner, as well as Time Warner as a nominal defendant. The complaints alleged that defendants breached their fiduciary duties by, among other things, causing Time Warner to issue corporate statements that did not accurately represent that AOL had declining advertising revenues. Certain of these lawsuits were later dismissed, and others were eventually consolidated in their respective jurisdictions. In 2006, the parties entered into a settlement agreement to resolve all of the remaining derivative matters, and the Court granted final approval of the settlement on September 6, 2006. The court has yet to rule on plaintiffs’ petition for attorneys’ fees and expenses. During 2009 and 2008, AOL incurred $27.9 million and $20.8 million, respectively, of legal fees related to securities litigation and government investigations. During 2007, Time Warner reached agreements to settle substantially all of the remaining securities litigation claims, and AOL incurred expenses of $171.4 million related to these agreements and legal fees. While these amounts were historically incurred by Time Warner and reflected in Time Warner’s financial results, through the date of spin-off they also have been reflected as an expense and a corresponding capital contribution in AOL’s financial statements because they relate to AOL matters. Following the spin-off, these costs will continue to be incurred by Time Warner to the extent that proceeds from a settlement with insurers are available to pay those costs, and thereafter AOL has an obligation to indemnify Time Warner for such costs to the extent they are associated with present or former officers and employees of AOL. As of December 31, 2009, the Company did not have any liability recorded related to these shareholder derivative lawsuits. AOL does not view the remaining potential obligations related to this matter to be material. As a result, the Company does not intend to include disclosure regarding this matter in future notes to financial statements.

Other Matters

On May 24, 1999, two former AOL Community Leader volunteers brought a putative class action, Hallissey et al. v. America Online, Inc., in the U.S. District Court for the Southern District of New York alleging violations of the Fair Labor Standards Act (“FLSA”) and New York State law. The plaintiffs allege that, in serving as AOL Community Leader volunteers, they were acting as employees rather than volunteers for purposes of the FLSA and New York State law and are entitled to minimum wages. In 2001, four of the named plaintiffs in the Hallissey case filed a related lawsuit alleging retaliation as a result of filing the FLSA suit in Williams, et al. v. America Online, Inc., et al. A related case was filed by several of the Hallissey plaintiffs in the U.S. District Court for the Southern District of New York alleging violations of the retaliation provisions of the FLSA. Also in 2001, two related class actions were filed in state courts in New Jersey (Superior Court of New Jersey, Bergen County Law Division) and Ohio (Court of Common Pleas, Montgomery County, Ohio), alleging violations of the FLSA and/or the respective state laws. These cases were removed to federal court and subsequently transferred to the U.S. District Court for the Southern District of New York for consolidated pretrial proceedings with Hallissey.

On January 17, 2002, AOL Community Leader volunteers filed a class action lawsuit in the U.S. District Court for the Southern District of New York, Hallissey et al. v. AOL Time Warner, Inc., et al., against AOL LLC alleging ERISA violations and an entitlement to pension, welfare and/or other employee benefits subject to ERISA. In March 2003, plaintiffs filed and served a second amended complaint, adding as defendants the AOL Time Warner Administrative Committee and the AOL Administrative Committee.

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The parties to all of the Community Leader-related lawsuits have agreed to settle the lawsuits on terms that did not result in a material incremental expense or material payment by the Company in 2009. The court granted preliminary approval of the settlement on February 2, 2010. The Company does not expect to make any additional payments related to this matter.

On August 1, 2005, Thomas Dreiling, a shareholder of Infospace Inc., filed a derivative suit in the U.S. District Court for the Western District of Washington against AOL LLC and Infospace Inc. as nominal defendant. The complaint, brought in the name of Infospace, asserts violations of Section 16(b) of the Exchange Act. The plaintiff alleges that certain AOL LLC executives and the founder of Infospace, Naveen Jain, entered into an agreement to manipulate Infospace’s stock price through the exercise of warrants that AOL LLC received in connection with a commercial agreement with Infospace. The complaint seeks disgorgement of profits, interest and attorneys’ fees. On January 3, 2008, the court granted AOL LLC’s motion and dismissed the complaint with prejudice. Plaintiff filed a notice of appeal with the U.S. Court of Appeals for the Ninth Circuit, and the oral argument occurred on May 7, 2009. On August 19, 2009, the Ninth Circuit issued its opinion affirming the District Court’s opinion on all issues. The petitioners’ September 2, 2009 motion for rehearing en banc before the Ninth Circuit was denied on October 13, 2009. The time period for petitioners to seek certiorari before the U.S. Supreme Court has expired, so the Company expects no further activity in this matter.

On September 22, 2006, Salvadore Ramkissoon and two unnamed plaintiffs filed a putative class action against AOL LLC in the U.S. District Court for the Northern District of California based on AOL LLC’s public posting of AOL LLC member search queries in late July 2006. Among other things, the complaint alleges violations of the Electronic Communications Privacy Act and California statutes relating to privacy, data protection and false advertising. The complaint seeks class certification and damages, as well as injunctive relief that would oblige AOL LLC to alter its search query retention practices. In February 2007, the District Court dismissed the action without prejudice. The plaintiffs then appealed this decision to the Ninth Circuit. On January 16, 2009, the Ninth Circuit held that AOL LLC’s Terms of Service violated California public policy as to any California plaintiffs in the putative class, as it did not allow for them to fully exercise their rights. The Ninth Circuit reversed and remanded to the District Court for further proceedings. On April 24, 2009, AOL LLC filed a motion to implement the Ninth Circuit’s mandate. AOL LLC filed its answer on June 29, 2009. On July 6, 2009, the District Court found that the plaintiffs’ claims for unjust enrichment and public disclosure of private facts were subject to the forum selection clause in the Terms of Service and thus could not be pursued in that court. On October 27, 2009, plaintiffs filed a motion for class certification and two additional named individuals filed a motion to intervene as plaintiffs in the matter. Also on October 27, AOL filed its reply brief with regards to its 12(c) Motion for Judgment on the Pleadings. On February 2, 2010, the Court issued an Order granting AOL’s motion to implement the mandate of the Ninth Circuit. In its Order, the court dismissed named plaintiff Ramkissoon, as he is not a California resident. In addition, the court dismissed the remaining claim under the Electronic Communications Privacy Act, as well as the claims for unjust enrichment and public disclosure of private facts. The Court also dismissed without prejudice both the plaintiffs’ motion for class certification as well as AOL’s 12(c) motion. Subsequent to the court’s order, AOL filed a modified 12(c) motion on February 24, 2010. The Company intends to defend against this lawsuit vigorously.

Between December 27, 2006 and July 6, 2009, AOL Europe Services S.à r.l. (“AOL Luxembourg”), a wholly-owned subsidiary of AOL organized under the laws of Luxembourg, received four assessments from the French tax authorities for French value added tax (“VAT”) related to AOL Luxembourg’s subscription revenues from French subscribers earned during the period from July 1, 2003 through October 31, 2006. During October 2009, the Company entered into a settlement agreement with the French tax authority to resolve this matter. The Company recorded an incremental reserve and corresponding expense of $14.7 million in the third quarter of 2009 related to this matter. The settlement payment was made in the fourth quarter of 2009.

In addition to the matters listed above, AOL is a party to a variety of legal proceedings that arise in the normal course of business. While the results of such normal course legal proceedings cannot be predicted with certainty, management believes that, based on current knowledge, the final outcome of the current pending matters will not have a material adverse effect on the Company’s financial position, results of operations or cash

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flows. Regardless of the outcome, legal proceedings can have an adverse effect on us because of defense costs, diversion of management resources and other factors.

NOTE 12—ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES

Accrued expenses and other current liabilities consist of (in millions):

	December 31,
	2009		2008
TAC	$	148.7	$	112.0
Restructuring liabilities		109.2		21.9
Taxes		30.1		42.0
Costs of revenues (excluding TAC)		24.9		28.5
Network and related costs		10.4		12.6
Advertising and marketing		10.0		6.1
Rent and facilities expense		4.5		16.7
Member support services		4.0		5.9
Other accrued expenses		71.8		56.7
Total accrued expenses and other liabilities	$	413.6	$	302.4

NOTE 13—RELATED PARTY TRANSACTIONS

Acquisition of Patch Media Corporation

On June 10, 2009, AOL purchased Patch Media Corporation (“Patch”), a news, information and community platform business dedicated to providing comprehensive local information and services for individual towns and communities, for approximately $7.0 million in cash. Approximately $700,000 of the consideration is being held in an indemnity escrow account until the first anniversary of the closing.

At the time of closing, Timothy M. Armstrong, AOL’s Chairman and Chief Executive Officer, held, indirectly, through Polar Capital Group, LLC (“Polar Capital”) (a private investment company which he founded), economic interests in Patch that entitled him to receive approximately 75% of the transaction consideration. Mr. Armstrong’s original investment in Patch, made in December 2007 through Polar Capital, was approximately $4.5 million. In connection with the transaction, Mr. Armstrong, through Polar Capital, waived his right to receive any transaction consideration in excess of his original $4.5 million investment, opting to accept only the return of his initial investment in AOL common stock. In addition, Mr. Armstrong elected to return the $4.5 million (approximately $450,000 of which is being held in the indemnity escrow account for a year) that he was entitled to receive in connection with the transaction to AOL, to be held by AOL until after the Company’s separation from Time Warner in exchange for the subsequent issuance of AOL common stock. In partial exchange for the $4.5 million he was entitled to receive, on January 29, 2010, AOL issued to Polar Capital approximately 173,000 shares of AOL common stock (valued at $4.1 million based on the closing price on that date). The issuance of shares of AOL common stock to Polar Capital was exempt from registration under Section 4(2) of the Securities Act of 1933, as a transaction by an issuer not involving a public offering. The remaining amount due to Mr. Armstrong is expected to be settled in shares later in 2010, once the one year escrow period has passed.

The results of operations of Patch have been included in the Company’s consolidated financial statements from the date of acquisition, and were not material to the Company’s consolidated results in 2009.

Transactions with Time Warner

Through the date of the spin-off, AOL had certain related party relationships with Time Warner and its subsidiaries. In connection with the separation, AOL entered into the Separation Agreement and several other

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related agreements which govern the ongoing relationship between the two companies. The Company does not consider Time Warner to be a related party subsequent to the spin-off. The related party relationships and subsequent relationships with Time Warner are discussed further below.

Administrative Services

Through the date of the spin-off, Time Warner performed certain administrative functions on behalf of AOL. Costs of these services that were allocated or charged to AOL were based on either the actual costs incurred or Time Warner’s estimate of expenses relative to the services provided to other subsidiaries of Time Warner. AOL believes that these allocations were made on a reasonable basis, and that receiving these services from Time Warner created cost efficiencies. These services and transactions included the following:

• cash management and other treasury services;

• administrative services such as government relations, tax, employee benefit administration, internal audit, accounting and human resources;

• equity-based compensation plan administration;

• aviation services;

• insurance coverage; and

• the licensing of certain third-party patents.

During the years ended December 31, 2009, 2008 and 2007, AOL incurred $20.9 million, $23.3 million and $28.4 million, respectively, of expenses related to charges for services performed by Time Warner. These expenses were recorded as operating expenses by AOL as incurred.

Subsequent to the separation, Time Warner continues to provide consultation on cash management and other treasury services, as well as tax services. These services are provided on a fixed monthly fee basis for a period not to exceed one year from the date of the spin-off. AOL does not expect the costs associated with these services to be material to AOL’s consolidated financial statements.

Tax Matters Agreements

In connection with Google’s investment in the Company in 2006, AOL entered into a tax matters agreement with Time Warner governing AOL’s inclusion in Time Warner consolidated tax returns. Under the terms of the tax matters agreement, Time Warner prepared a pro forma AOL income tax return, and AOL agreed to make tax payments to Time Warner generally on the basis of this pro forma consolidated AOL income tax return. Amounts payable or receivable under the tax matters agreement were generally reported as adjustments to divisional equity. Uncertain tax positions that were recorded as a liability in AOL’s financial statements were included in long-term obligations to Time Warner in the consolidated balance sheet as of December 31, 2008, as the amounts related to positions taken in Time Warner’s consolidated tax return.

Effective with the spin-off, the Company entered into a Second Tax Matters Agreement with Time Warner that governs the respective rights, responsibilities and obligations of Time Warner and AOL after the spin-off with respect to all tax matters. See “Note 6: Income Taxes” for additional information on the Second Tax Matters Agreement.

Guarantee Agreements

In connection with entering into the Revolving Credit Facility, Time Warner has guaranteed all of the Company’s obligations with respect to loans and letters of credit under the Revolving Credit Facility. As

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consideration for Time Warner providing such guarantee, the Company will pay Time Warner a fee equal to 1.0% of the aggregate principal amount of the commitments at closing under the Revolving Credit Facility, and an ongoing guarantee fee, which will vary with the amount of undrawn commitments and the principal amount of the Company’s obligations outstanding under the Revolving Credit Facility, as well as changes in Time Warner’s senior unsecured long-term debt credit ratings. The guarantee fee will be subject to prescribed periodic increases over the term of the Revolving Credit Facility.

Through the date of the spin-off, AOL LLC entered into several guarantee agreements with Time Warner or subsidiaries of Time Warner whereby AOL LLC guaranteed debt issued by Time Warner or its subsidiaries on a joint and several basis As this was an intercompany guarantee, the Company did not recognize an indemnification liability or any income associated with this guarantee in its financial statements. Subsequent to the spin-off, AOL and its subsidiaries no longer guarantee any debt issued by Time Warner or its subsidiaries.

In 2007, in connection with a lease of office space in New York City that the Company entered into with a third party, Time Warner agreed to guarantee up to $10.0 million to the third party as security for AOL’s obligations under the lease. In 2008, in connection with the lease of additional office space at the same building, Time Warner agreed, upon the occurrence of certain events, to increase the total guarantee to approximately $15.7 million to the third party as security for AOL’s obligations under the lease. As of December 31, 2009, these events had not occurred and, accordingly, the amount guaranteed by Time Warner at December 31, 2009 was $10.0 million.

In addition, Time Warner provides credit support for certain AOL lease and trade obligations of approximately $108.1 million ending on the earlier of December 9, 2011 and 30 days after AOL obtains the right to borrow funds under a permanent credit facility, in exchange for a fee equal to a rate per annum of 4.375% of the outstanding principal amount of such obligations, subject to periodic increases. Since the spin-off, AOL has replaced or released Time Warner as the source of the credit support for certain AOL lease and trade obligations or otherwise reduced Time Warner’s credit support obligations. As of February 24, 2010, the amount of credit support provided by Time Warner for AOL lease and trade obligations was $28.2 million.

Banking and Treasury Functions

Through the date of the spin-off, Time Warner provided cash management and treasury services to AOL. As part of these services, AOL swept the majority of all cash balances to Time Warner on a daily basis and received funding from Time Warner for any cash needs.

Additionally, AOL entered into various financial arrangements internationally with Time Warner International Finance Limited, a wholly-owned subsidiary of Time Warner, and other Time Warner international subsidiaries. The objective of these arrangements was to provide AOL with efficient avenues for liquidity in a structure that minimized or eliminated the currency risk to AOL. AOL had a net receivable balance from Time Warner of $34.7 million as of December 31, 2008 related to these arrangements. Amounts that were due and owed under these arrangements were settled in cash prior to the spin-off.

Subsequent to the separation, Time Warner will continue to provide consultation on cash management and other treasury services. AOL does not expect the costs associated with these services to be material to AOL’s consolidated financial statements.

Equity-Based Compensation Reimbursement

As a result of AOL’s participation in Time Warner’s equity-based compensation plans, prior to the date of spin-off AOL was obligated to make cash payments to Time Warner for the intrinsic value of Time Warner RSUs and PSUs held by AOL employees upon vesting and for the intrinsic value of stock options held by AOL employees upon the exercise of those options. Accordingly, AOL recorded a liability (reflected in payables to

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Time Warner as of December 31, 2008) measured based on the intrinsic value as of each balance sheet date of vested but unexercised Time Warner stock options and a portion of the intrinsic value of unvested RSUs and PSUs held by AOL employees. As of December 31, 2008, the liability related to vested unexercised stock options, unvested RSUs and PSUs was $11.6 million. For the years ended December 31, 2009, 2008 and 2007, AOL remitted cash totaling $2.4 million, $43.8 million and $161.0 million, respectively, to Time Warner for stock options exercised by AOL employees and the vesting of RSUs held by AOL employees.

In connection with the separation, AOL employees no longer participate in Time Warner’s equity-based compensation plans and AOL is no longer obligated to reimburse Time Warner for the intrinsic value of Time Warner equity-based compensation awards held by AOL employees. Accordingly, at the date of spin-off, AOL reversed the outstanding liability based on the intrinsic value of the Time Warner equity awards held by AOL employees and recorded a corresponding increase in equity.

Other

In the normal course of business, AOL historically entered into commercial transactions with other subsidiaries of Time Warner. AOL recognized $3.7 million, $10.5 million and $19.6 million in revenue and $22.0 million, $33.7 million and $29.7 million in operating expenses from transactions with other Time Warner subsidiaries for the years ended December 31, 2009, 2008 and 2007, respectively.

Prior to AOL’s separation from Time Warner, AOL was a party to a Memorandum of Understanding with Telepictures Productions Inc., an indirect wholly-owned subsidiary of Time Warner, governing the operations of TMZ.com. Under the Memorandum of Understanding, AOL’s contribution to TMZ included the provision of certain technology and the design, development and maintenance of TMZ’s website. Subject to certain performance adjustments and the reimbursement of expenses, revenues were split evenly between the parties. Under this arrangement, Telepictures received payments from AOL of $8.7 million, $12.7 million and $9.6 million in 2009, 2008 and 2007, respectively.

As part of AOL’s separation from Time Warner, the TMZ Memorandum of Understanding between AOL and Telepictures was amended such that Telepictures assumed responsibility for all of TMZ’s ongoing operations. Under the terms of the amended Memorandum of Understanding, AOL provides online distribution to TMZ for a fee. This amended Memorandum of Understanding will terminate on December 9, 2010. In addition, AOL provides hosting services to TMZ under the Master Services Agreement for ATDN and Hosting Services between Time Warner and AOL. The financial results related to TMZ are not material to AOL’s business.

In December 2006, AOL sold certain real estate in Columbus, Ohio to Time Warner subject to a leaseback by AOL. Due to the related party nature of the arrangement and AOL’s continuing involvement in the building in the form of a lease, such real estate’s net book value was historically recorded as an asset in AOL’s financial statements. During 2008, AOL, in conjunction with Time Warner, made the decision to dispose of this facility. Accordingly, AOL recorded a $13.2 million non-cash impairment associated with this real estate, and classified the remaining net book value of the property of $6.7 million as held for sale in the consolidated balance sheet. AOL exited this facility in 2009 and therefore has no ongoing operations in the facility as of December 31, 2009. Accordingly, the remaining net book value of this facility of $6.7 million was transferred to Time Warner during 2009 with a corresponding reduction in equity.

In 2007, Time Warner purchased a perpetual right to use a series of patents from a third party on behalf of AOL and other divisions of Time Warner. Based on AOL’s usage of the technology related to these patents relative to other divisions, approximately $21 million of the consideration paid by Time Warner for this right has been allocated to AOL and included within intangible assets, net in the consolidated balance sheet. Subsequent to the separation, AOL maintains the perpetual right to use this series of patents with no additional consideration due to the third party. This intangible asset is being amortized by AOL on a straight-line basis over a five-year period that began January 1, 2007.

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NOTE 14—SEGMENT INFORMATION

An operating segment is defined as a component of an enterprise that engages in business activities from which it may earn revenues and incur expenses, and that has discrete financial information that is regularly reviewed by the chief operating decision-maker in deciding how to allocate resources and in assessing performance.

The Company’s chief operating decision-maker, its chief executive officer, evaluates performance and makes operating decisions about allocating resources based on financial data presented on a consolidated basis. There are no managers who are held accountable by AOL’s chief operating decision-maker, or anyone else, for an operating measure of profit and loss for any operating unit below the consolidated unit level. Accordingly, management has determined that the Company has one segment.

NOTE 15—SELECTED QUARTERLY FINANCIAL DATA (Unaudited)

	Quarter Ended
	March 31,		June 30,		September 30,		December 31,
	(in millions, except per share amounts)
2009
Revenues
Advertising	$	443.0	$	419.2	$	414.5	$	471.6
Subscription		393.5		355.7		332.2		307.4
Other		30.7		28.9		30.0		30.7
Total revenues		867.2		803.8		776.7		809.7
Costs of revenues		485.1		464.3		453.2		495.9
Operating income (loss) (a)		141.6		158.7		127.4		30.3
Net income (loss)		82.5		90.7		73.9		1.4
Less: Net loss attributable to noncontrolling interests		0.2		—		0.1		—
Net income (loss) attributable to AOL Inc.	$	82.7	$	90.7	$	74.0	$	1.4
Basic net income (loss) per common share	$	0.78	$	0.86	$	0.70	$	0.01
Diluted net income (loss) per common share	$	0.78	$	0.86	$	0.70	$	0.01
2008
Revenues
Advertising	$	551.9	$	530.3	$	501.7	$	512.5
Subscription		538.8		491.0		470.1		429.4
Other		37.6		35.4		34.8		32.3
Total revenues		1,128.3		1,056.7		1,006.6		974.2
Costs of revenues		623.5		601.6		546.5		506.8
Operating income (loss)(b)		280.1		225.0		258.9		(1,931.7)
Net income (loss)		159.6		126.6		147.4		(1,960.2)
Less: Net loss attributable to noncontrolling interests		0.1		0.3		0.1		0.3
Net income (loss) attributable to AOL Inc.	$	159.7	$	126.9	$	147.5	$	(1,959.9)
Basic net income (loss) per common share	$	1.51	$	1.20	$	1.39	$	(18.52)
Diluted net income (loss) per common share	$	1.51	$	1.20	$	1.39	$	(18.52)

(a) Operating income (loss) includes impacts for restructuring charges related primarily to voluntary and involuntary employee terminations and facility closures of $58.3 million, $14.4 million, $10.2 million and $107.4 million for the quarters ended March 31, 2009, June 30, 2009, September 30, 2009 and December 31, 2009, respectively.

(b) The quarter ended December 31, 2008 includes a $2,207.0 million non-cash impairment charge to reduce the carrying value of goodwill and a $13.2 million non-cash impairment charge associated with certain real estate in Columbus, Ohio.

101

AOL Inc.

SCHEDULE II—VALUATION AND QUALIFYING ACCOUNTS

Years Ended December 31, 2007, 2008 and 2009

(In millions)

Allowance for Doubtful Accounts	Balance at Beginning of Year		Additions Charged to Costs and Expenses		Deductions			Balance at End of Year
2007	$	44.3	$	48.1	$	(61.5	)	$	30.9
2008	$	30.9	$	30.4	$	(21.5	)	$	39.8
2009	$	39.8	$	20.7	$	(28.8	)	$	31.7

102

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.

ITEM 9A(T). CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that the information we are required to disclose in our financial reports is recorded, processed, summarized and reported within the time periods specified by the SEC rules and forms and that such information is accumulated and communicated to senior management, as appropriate, to allow timely decisions regarding required disclosure. Management is responsible for establishing and maintaining effective disclosure controls and procedures, as defined under Rules 13a-15(e) and 15d-15(e) of the Exchange Act. As of December 31, 2009, an evaluation was performed under the supervision and with the participation of management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures. Management, including our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as of December 31, 2009. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of December 31, 2009, at a reasonable assurance level.

Internal Control Over Financial Reporting

Management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is a process designed by, or under the supervision of, our Chief Executive Officer and Chief Financial Officer and effected by the Board of Directors, management and other personnel to provide reasonable assurance regarding the reliability of our financial reporting and the preparation of financial statements for external purposes in accordance with GAAP.

Because of its inherent limitations, internal control over financial reporting cannot provide absolute assurance of achieving financial reporting objectives. It is a process that involves human diligence and compliance and is therefore subject to lapses in judgment and breakdowns resulting from human error. It also can be circumvented by collusion or improper override. Because of its limitations, there is a risk that internal control over financial reporting may not prevent or detect on a timely basis errors or fraud that could cause a material misstatement of the financial statements.

This Annual Report on Form 10-K does not include a report of management’s assessment regarding internal control over financial reporting or an attestation report of our independent registered public accounting firm on the effectiveness of our internal control over financial reporting due to a transition period established by the rules of the SEC for newly public companies.

Changes to Internal Control Over Financial Reporting

We have evaluated the changes in our internal control over financial reporting that occurred during the quarter ended December 31, 2009 and concluded that there have not been any changes that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

ITEM 9B. OTHER INFORMATION

On November 2, 2009, the stockholders of AOL, by unanimous written consent, elected Timothy M. Armstrong, Jeffrey L. Bewkes and John K. Martin, Jr. as directors of AOL. Our current directors were elected by our pre-spin-off board of directors.

103

On November 20, 2009, the stockholders of AOL, by unanimous written consent (1) approved and adopted the Amended and Restated Certificate of Incorporation of AOL; (2) approved the AOL Inc. 2010 Stock Incentive Plan; and (3) approved the AOL Inc. Annual Incentive Plan for Executive Officers. The Amended and Restated Certificate of Incorporation of AOL was filed and effective on December 9, 2009.

On December 8, 2009, the sole stockholder of AOL, by unanimous written consent, approved and adopted a Certificate of Amendment of the Certificate of Incorporation of AOL. The Certificate of Amendment was filed and effective on December 8, 2009.

104

PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

In addition to the information set forth under the caption “Executive Officers of the Registrant” in Part I, Item 1 of this Annual Report on Form 10-K, the information required by this Item is incorporated by reference to our Proxy Statement to be filed in connection with the 2010 Annual Meeting of Stockholders.

We have adopted a Code of Ethics for Our Senior Executive and Senior Financial Officers. A copy of the Code is publicly available on our website at http://corp.aol.com/corporate-policy. Amendments to the Code or any grant of a waiver from a provision of the Code requiring disclosure under applicable SEC rules will also be disclosed on our website.

ITEM 11. EXECUTIVE COMPENSATION

The information called for by this item is hereby incorporated by reference to our Proxy Statement to be filed in connection with the 2010 Annual Meeting of Stockholders.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

The information called for by this item is hereby incorporated by reference to our Proxy Statement to be filed in connection with the 2010 Annual Meeting of Stockholders.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

The information called for by this item is hereby incorporated by reference to our Proxy Statement to be filed in connection with the 2010 Annual Meeting of Stockholders.

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

The information called for by this item is hereby incorporated by reference to our Proxy Statement to be filed in connection with the 2010 Annual Meeting of Stockholders.

105

PART IV

ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

(a)(1) Financial Statements

The Financial Statements listed in the Index to Consolidated Financial Statements and Supplementary Data, filed as part of this Annual Report on Form 10-K.

(a)(2) Financial Statement Schedule

The Financial Statement Schedule listed in the Index to Consolidated Financial Statements and Supplementary Data, filed as part of this Annual Report on Form 10-K.

(a)(3) Exhibits

See Item 15(b) below.

(b) Exhibits

The agreements and other documents filed as exhibits to this report are not intended to provide factual information or other disclosure other than with respect to the terms of the agreements or other documents themselves, and you should not rely on them for that purpose. In particular, any representations and warranties made by us in these agreements or other documents were made solely within the specific context of the relevant agreement or document and may not describe the actual state of affairs as of the date they were made or at any other time.

See the Exhibit Index immediately following the signature page of this Annual Report.

106

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on March 2, 2010.

AOL INC.
By	/s/    ARTHUR MINSON
Name:	Arthur Minson
Title:	Executive Vice President and Chief Financial Officer

POWER OF ATTORNEY

KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Timothy M. Armstrong and Arthur Minson, jointly and severally, his or her attorney-in-fact, each with the power of substitution, for him or her in any and all capacities, to sign any amendments to this Annual Report on Form 10-K and to file the same, with exhibits thereto and other documents in connection therewith with the Securities and Exchange Commission, hereby ratifying and confirming all that each of said attorneys-in-fact, or substitute or substitutes may do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.

Signature	Title	Date
/s/    TIMOTHY M. ARMSTRONG	Chairman and Chief Executive Officer (Principal Executive Officer)	March 2, 2010
Timothy M. Armstrong
/s/    ARTHUR MINSON	Executive Vice President and Chief Financial Officer (Principal Financial Officer)	March 2, 2010
Arthur Minson
/s/    DOUGLAS E. HORNE	Controller (Principal Accounting Officer)	March 2, 2010
Douglas E. Horne
/s/    RICHARD L. DALZELL	Director	March 2, 2010
Richard L. Dalzell
/s/    KAREN E. DYKSTRA	Director	March 2, 2010
Karen E. Dykstra
/s/    WILLIAM R. HAMBRECHT	Director	March 2, 2010
William R. Hambrecht
/s/    SUSAN M. LYNE	Director	March 2, 2010
Susan M. Lyne
/s/    PATRICIA E. MITCHELL	Director	March 2, 2010
Patricia E. Mitchell

107

Signature	Title	Date
/s/    MICHAEL K. POWELL	Director	March 2, 2010
Michael K. Powell
/s/    FREDRIC G. REYNOLDS	Director	March 2, 2010
Fredric G. Reynolds
/s/    JAMES R. STENGEL	Director	March 2, 2010
James R. Stengel
/s/    JAMES A. WIATT	Director	March 2, 2010
James A. Wiatt

108

EXHIBIT INDEX

Exhibit Number	Description
2.1	Separation and Distribution Agreement between AOL Inc. and Time Warner Inc., dated November 16, 2009 (incorporated herein by reference to Exhibit 2.1 to the Registrant’s Amendment No. 5 to Form 10 dated November 16, 2009).
3.1	Amended and Restated Certificate of Incorporation of the Registrant filed with the Secretary of State of the State of Delaware on December 9, 2009 (incorporated herein by reference to Exhibit 3.1 to the Registrant’s Current Report on Form 8-K dated December 11, 2009).
3.2	Amended and Restated By-laws of the Registrant (incorporated herein by reference to Exhibit 3.2 to the Registrant’s Current Report on Form 8-K dated December 11, 2009).
4.1	Specimen Common Stock Certificate of Registration (incorporated herein by reference to Exhibit 4.1 to the Registrant’s Current Report on Form 8-K dated December 11, 2009).
10.1	Transition Services Agreement between AOL Inc. and Time Warner Inc., dated November 16, 2009 (incorporated herein by reference to Exhibit 10.1 to the Registrant’s Amendment No. 5 to Form 10 dated November 16, 2009).
10.2	Second Tax Matters Agreement between AOL Inc. and Time Warner Inc., dated November 16, 2009 (incorporated herein by reference to Exhibit 10.2 to the Registrant’s Amendment No. 5 to Form 10 dated November 16, 2009).
10.3	Employee Matters Agreement by and among AOL Inc., AOL LLC and Time Warner Inc., dated November 16, 2009 (incorporated herein by reference to Exhibit 10.3 to the Registrant’s Amendment No. 5 to Form 10 dated November 16, 2009).
10.4	Intellectual Property Cross-License Agreement between AOL Inc. and Time Warner Inc., dated November 16, 2009 (incorporated herein by reference to Exhibit 10.4 to the Registrant’s Amendment No. 5 to Form 10 dated November 16, 2009).
10.5	IT Application and Database Agreement between AOL Inc. and Time Warner Inc., dated November 16, 2009 (incorporated herein by reference to Exhibit 10.5 to the Registrant’s Amendment No. 5 to Form 10 dated November 16, 2009).
10.6	Assignment and Assumption Agreement by and among AOL Inc., AOL LLC and Time Warner Inc., dated December 4, 2009.
10.7	Employee Matters Assignment and Assumption Agreement by and among AOL Inc., AOL LLC and Time Warner Inc., dated December 3, 2009.
10.8	Master Services Agreement for ATDN and Hosting Services between AOL Inc. and Time Warner Inc., dated November 16, 2009 and effective December 1, 2009 (the “MSA for ATDN”) (incorporated herein by reference to Exhibit 10.73 to the Registrant’s Amendment No. 5 to Form 10 dated November 16, 2009).
10.9	Private Label Publisher Master Services Agreement between Quigo Technologies, Inc. and Time Inc., dated June 15, 2007 (the “Private Label Publisher MSA”) (incorporated herein by reference to Exhibit 10.74 to the Registrant’s Amendment No. 2 to Form 10 dated October 26, 2009).
10.10	First Addendum to the Private Label Publisher MSA, dated October 10, 2008 (incorporated herein by reference to Exhibit 10.75 to the Registrant’s Amendment No. 2 to Form 10 dated October 26, 2009).
10.11	Second Addendum to the Private Label Publisher MSA, dated April 16, 2009 (incorporated herein by reference to Exhibit 10.76 to the Registrant’s Amendment No. 2 to Form 10 dated October 26, 2009).
10.12	Third Addendum to the Private Label Publisher MSA, dated October 5, 2009 (incorporated herein by reference to Exhibit 10.94 to the Registrant’s Amendment No. 3 to Form 10 dated November 6, 2009).

109

Exhibit Number	Description
10.13	Search Services Agreement between AOL LLC and Time Inc., dated August 23, 2007 (the “SSA”) (incorporated herein by reference to Exhibit 10.77 to the Registrant’s Amendment No. 2 to Form 10 dated October 26, 2009).
10.14	First Amendment to the SSA, dated March 10, 2009 (incorporated herein by reference to Exhibit 10.78 to the Registrant’s Amendment No. 2 to Form 10 dated October 26, 2009).
10.15	Second Amendment to the SSA, dated December 17, 2009.
10.16	Memorandum of Understanding between America Online, Inc. and Telepictures Productions Inc., dated July 25, 2005 (incorporated herein by reference to Exhibit 10.79 to the Registrant’s Amendment No. 2 to Form 10 dated October 26, 2009).
10.17	Amendment to Memorandum of Understanding between AOL Inc. and Telepictures Productions Inc., dated December 8, 2009.
10.18*	Employment Agreement among AOL LLC, Time Warner Inc. and Timothy Armstrong, dated March 12, 2009 and effective as of April 7, 2009 (incorporated herein by reference to Exhibit 10.6 to Amendment No. 1 to Form 10 dated September 16, 2009).
10.19*	First Amendment to the Employment Agreement between AOL Inc. and Timothy M. Armstrong, dated December 15, 2009 (incorporated herein by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K dated December 22, 2009).
10.20*	Employment Agreement between AOL LLC and Arthur Minson, dated August 24, 2009 and effective as of September 8, 2009 (incorporated herein by reference to Exhibit 10.7 to Amendment No. 1 to Form 10 dated September 16, 2009).
10.21*	Employment Letter Agreement between AOL LLC and Ira Parker, dated January 7, 2008 (incorporated herein by reference to Exhibit 10.8 to Amendment No. 1 to Form 10 dated September 16, 2009).
10.22*	Employment Letter Agreement between AOL LLC and Tricia Primrose, dated December 7, 2007 (incorporated herein by reference to Exhibit 10.9 to Amendment No. 1 to Form 10 dated September 16, 2009).
10.23*	Employment Letter Agreement between AOL LLC and Theodore R. Cahall, Jr., dated December 15, 2006.
10.24*	Amendment to Employment Letter Agreement between AOL LLC and Theodore R. Cahall, Jr., dated May 13, 2008.
10.25*	Employment Agreement between Time Warner Inc., AOL LLC and Randel A. Falco, dated March 7, 2008 (incorporated herein by reference to Exhibit 10.81 to the Registrant’s Amendment No. 2 to Form 10 dated October 26, 2009).
10.26*	Employment Agreement between AOL LLC and Ron Grant, dated December 21, 2006 (incorporated herein by reference to Exhibit 10.82 to the Registrant’s Amendment No. 2 to Form 10 dated October 26, 2009).
10.27*	Employment Letter Agreement between AOL LLC and Nisha Kumar, dated January 9, 2008 (incorporated herein by reference to Exhibit 10.83 to the Registrant’s Amendment No. 2 to Form 10 dated October 26, 2009).
10.28*	Separation Letter Agreement between Time Warner Inc., AOL LLC and Randel A. Falco, dated May 13, 2009 (incorporated herein by reference to Exhibit 10.87 to the Registrant’s Amendment No. 2 to Form 10 dated October 26, 2009).

110

Exhibit Number	Description
10.29*	Separation Letter Agreement between AOL LLC and Ron Grant, dated May 26, 2009 (incorporated herein by reference to Exhibit 10.88 to the Registrant’s Amendment No. 2 to Form 10 dated October 26, 2009).
10.30*	Separation Letter Agreement between AOL LLC and Nisha Kumar, dated June 30, 2009 (incorporated herein by reference to Exhibit 10.89 to the Registrant’s Amendment No. 2 to Form 10 dated October 26, 2009).
10.31*	Separation Agreement and Release of Claims between AOL Inc. and Kimberley Partoll, dated November 17, 2009.
10.32*	Equity Letter Agreement between Time Warner Inc. and Ron Grant, dated February 18, 2009 (incorporated herein by reference to Exhibit 10.86 to the Registrant’s Amendment No. 2 to Form 10 dated October 26, 2009).
10.33*	2009 Retention Program Letter Agreement between AOL LLC and Ira Parker, dated April 1, 2009 (incorporated herein by reference to Exhibit 10.11 to the Registrant’s Amendment No. 1 to Form 10 dated September 16, 2009).
10.34*	2009 Retention Program Letter Agreement between AOL LLC and Tricia Primrose, dated April 1, 2009 (incorporated by reference to Exhibit 10.12 to the Registrant’s Amendment No. 1 to Form 10 dated September 16, 2009).
10.35*	2009 Retention Program Letter Agreement between AOL LLC and Theodore Russell Cahall Jr., dated April 1, 2009.
10.36*	Form of Non-Qualified Stock Option Agreement between AOL Inc. and Timothy Armstrong, dated December 9, 2009.
10.37*	Form of Non-Qualified Stock Option Agreement between AOL Inc. and Timothy Armstrong, dated December 31, 2009 (incorporated herein by reference to Exhibit 10.2 to the Registrant’s Current Report on Form 8-K dated December 22, 2009).
10.38*	Form of Non-Qualified Stock Option Agreement between AOL Inc. and Timothy Armstrong, dated January 4, 2010 (incorporated herein by reference to Exhibit 10.3 to the Registrant’s Current Report on Form 8-K dated December 22, 2009).
10.39*	Form of Restricted Stock Units Agreement between AOL Inc. and Timothy Armstrong, dated December 9, 2009.
10.40*	Form of Restricted Stock Units Agreement between AOL Inc. and Timothy Armstrong, dated January 4, 2010 (incorporated herein by reference to Exhibit 10.4 to the Registrant’s Current Report on Form 8-K dated December 22, 2009).
10.41*	Form of Non-Qualified Stock Option Agreement (incorporated herein by reference to Exhibit 10.5 to the Registrant’s Current Report on Form 8-K dated December 22, 2009).
10.42*	Form of Restricted Stock Units Agreement (incorporated herein by reference to Exhibit 10.6 to the Registrant’s Current Report on Form 8-K dated December 22, 2009).
10.43*	AOL Inc. 2010 Stock Incentive Plan, adopted by the Registrant on November 20, 2009 (incorporated herein by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K dated November 23, 2009).
10.44*	AOL Inc. Annual Incentive Plan for Executive Officers, adopted by the Registrant on November 20, 2009 (incorporated herein by reference to Exhibit 10.2 to the Registrant’s Current Report on Form 8-K dated November 23, 2009).

111

Exhibit Number	Description
10.45	AOL LLC 2009 Global Bonus Plan (incorporated herein by reference to Exhibit 10.20 to Amendment No. 1 to Form 10 dated September 16, 2009).
10.46	Amended and Restated Interactive Marketing Agreement between AOL LLC and Google Inc., dated October 1, 2003 (the “IMA”) (incorporated herein by reference to Exhibit 10.22 to the Registrant’s Amendment No. 3 to Form 10 dated November 6, 2009).**
10.47	First Amendment to the IMA, dated December 15, 2003 (incorporated herein by reference to Exhibit 10.23 to the Registrant’s Amendment No. 3 to Form 10 dated November 6, 2009).**
10.48	Second Amendment to the IMA, dated March 30, 2004 (incorporated herein by reference to Exhibit 10.24 to the Registrant’s Amendment No. 3 to Form 10 dated November 6, 2009).**
10.49	Addendum One to the Second Amendment to the IMA, dated October 5, 2004 (incorporated herein by reference to Exhibit 10.25 to the Registrant’s Amendment No. 3 to Form 10 dated November 6, 2009).**
10.50	Third Amendment to the IMA, dated April 7, 2004 (incorporated herein by reference to Exhibit 10.26 to the Registrant’s Amendment No. 3 to Form 10 dated November 6, 2009).**
10.51	Fourth Amendment to the IMA, dated June 1, 2004 (incorporated herein by reference to Exhibit 10.27 to the Registrant’s Amendment No. 3 to Form 10 dated November 6, 2009).**
10.52	Fifth Amendment to the IMA, dated June 14, 2004 (incorporated herein by reference to Exhibit 10.28 to the Registrant’s Amendment No. 3 to Form 10 dated November 6, 2009).**
10.53	Sixth Amendment to the IMA, dated December 17, 2004 (incorporated herein by reference to Exhibit 10.29 to the Registrant’s Amendment No. 3 to Form 10 dated November 6, 2009).**
10.54	Seventh Amendment to the IMA, dated March 28, 2005 (incorporated herein by reference to Exhibit 10.30 to the Registrant’s Amendment No. 3 to Form 10 dated November 6, 2009).**
10.55	Eighth Amendment to the IMA, dated April 28, 2005 (incorporated herein by reference to Exhibit 10.31 to the Registrant’s Amendment No. 3 to Form 10 dated November 6, 2009).**
10.56	Ninth Amendment to the IMA, dated December 15, 2005 (incorporated herein by reference to Exhibit 10.32 to the Registrant’s Amendment No. 3 to Form 10 dated November 6, 2009).**
10.57	Tenth Amendment to the IMA, dated March 24, 2006 (incorporated herein by reference to Exhibit 10.33 to the Registrant’s Amendment No. 3 to Form 10 dated November 6, 2009).**
10.58	Eleventh Amendment to the IMA, dated September 28, 2006 (incorporated herein by reference to Exhibit 10.34 to the Registrant’s Amendment No. 1 to Form 10 dated September 16, 2009).
10.59	Twelfth Amendment to the IMA, dated December 15, 2006 (incorporated herein by reference to Exhibit 10.35 to the Registrant’s Amendment No. 3 to Form 10 dated November 6, 2009).**
10.60	Thirteenth Amendment to the IMA, dated January 12, 2007 (incorporated herein by reference to Exhibit 10.36 to the Registrant’s Amendment No. 3 to Form 10 dated November 6, 2009).**
10.61	Fourteenth Amendment to the IMA, dated February 16, 2007 (incorporated herein by reference to Exhibit 10.37 to the Registrant’s Amendment No. 3 to Form 10 dated November 6, 2009).**
10.62	Fifteenth Amendment to the IMA, dated March 2, 2007 (incorporated herein by reference to Exhibit 10.38 to the Registrant’s Amendment No. 3 to Form 10 dated November 6, 2009).**

112

Exhibit Number	Description
10.63	Sixteenth Amendment to the IMA, dated September 24, 2007 (incorporated herein by reference to Exhibit 10.39 to the Registrant’s Amendment No. 3 to Form 10 dated November 6, 2009).**
10.64	Seventeenth Amendment to the IMA, dated February 29, 2008 (incorporated herein by reference to Exhibit 10.40 to the Registrant’s Amendment No. 3 to Form 10 dated November 6, 2009).**
10.65	Eighteenth Amendment to the IMA, dated March 31, 2008 (incorporated herein by reference to Exhibit 10.41 to the Registrant’s Amendment No. 1 to Form 10 dated September 16, 2009).
10.66	Nineteenth Amendment to the IMA, dated April 30, 2008 (incorporated herein by reference to Exhibit 10.42 to the Registrant’s Amendment No. 3 to Form 10 dated November 6, 2009).**
10.67	Twentieth Amendment to the IMA, dated October 1, 2008 (incorporated herein by reference to Exhibit 10.43 to the Registrant’s Amendment No. 1 to Form 10 dated September 16, 2009).
10.68	Twenty-First Amendment to the IMA, dated November 1, 2008 (incorporated herein by reference to Exhibit 10.44 to the Registrant’s Amendment No. 3 to Form 10 dated November 6, 2009).**
10.69	Twenty-Second Amendment to the IMA, dated March 13, 2009 (incorporated herein by reference to Exhibit 10.45 to the Registrant’s Amendment No. 3 to Form 10 dated November 6, 2009).**
10.70	Twenty-Third Amendment to the IMA, dated December 4 2009.****
10.71	Consent Letter related to the IMA, dated August 19, 2008 (incorporated herein by reference to Exhibit 10.46 to the Registrant’s Amendment No. 3 to Form 10 dated November 6, 2009).**
10.72	Network Services Agreement between AOL LLC and MCI Communications Services, Inc., a subsidiary of Verizon Communications Inc., dated January 1, 2004 (the “Verizon NSA”) (incorporated herein by reference to Exhibit 10.47 to the Registrant’s Amendment No. 3 to Form 10 dated November 6, 2009).**
10.73	Amendment No. 1 to the Verizon NSA, dated June 9, 2004 (incorporated herein by reference to Exhibit 10.48 to the Registrant’s Amendment No. 3 to Form 10 dated November 6, 2009).**
10.74	Amendment No. 2 to the Verizon NSA, dated February 1, 2005 (incorporated herein by reference to Exhibit 10.49 to the Registrant’s Amendment No. 3 to Form 10 dated November 6, 2009).**
10.75	Amendment No. 3 to the Verizon NSA, dated July 1, 2006 (incorporated herein by reference to Exhibit 10.50 to the Registrant’s Amendment No. 4 to Form 10 dated November 12, 2009).**
10.76	Amendment No. 4 to the Verizon NSA, dated April 10, 2007 (incorporated herein by reference to Exhibit 10.51 to the Registrant’s Amendment No. 3 to Form 10 dated November 6, 2009).**
10.77	Amendment No. 5 to the Verizon NSA, dated January 1, 2008 (incorporated herein by reference to Exhibit 10.52 to the Registrant’s Amendment No. 4 to Form 10 dated November 12, 2009).**
10.78	Amendment No. 6 to the Verizon NSA, dated November 1, 2009 (incorporated herein by reference to Exhibit 10.95 to the Registrant’s Amendment No. 4 to Form 10 dated November 12, 2009).**
10.79	Amended and Restated Agreement for Delivery of Service between AOL LLC and Level 3 Communications, LLC, dated April 18, 2000 (the “Level 3 ADS”) (incorporated herein by reference to Exhibit 10.53 to the Registrant’s Amendment No. 3 to Form 10 dated November 6, 2009).**
10.80	Amendment No. 1 to the Level 3 ADS, dated March 29, 2002 (incorporated herein by reference to Exhibit 10.54 to the Registrant’s Amendment No. 3 to Form 10 dated November 6, 2009).**
10.81	Amendment No. 2 to the Level 3 ADS, dated December 17, 2004 (incorporated herein by reference to Exhibit 10.55 to the Registrant’s Amendment No. 3 to Form 10 dated November 6, 2009).**

113

Exhibit Number	Description
10.82	Third Amendment to the Level 3 ADS, dated February 25, 2008 (incorporated herein by reference to Exhibit 10.56 to the Registrant’s Amendment No. 1 to Form 10 dated September 16, 2009).
10.83	Letter Agreement related to the Level 3 ADS, dated October 13, 2005 (incorporated herein by reference to Exhibit 10.57 to the Registrant’s Amendment No. 3 to Form 10 dated November 6, 2009).**
10.84	Letter Agreement related to the Level 3 ADS, dated May 31, 2006 (incorporated herein by reference to Exhibit 10.58 to the Registrant’s Amendment No. 3 to Form 10 dated November 6, 2009).**
10.85	Letter Agreement related to the Level 3 ADS, dated September 13, 2006 (incorporated herein by reference to Exhibit 10.59 to the Registrant’s Amendment No. 1 to Form 10 dated September 16, 2009).
10.86	Letter Agreement related to the Level 3 ADS, dated June 29, 2007 (incorporated herein by reference to Exhibit 10.60 to the Registrant’s Amendment No. 3 to Form 10 dated November 6, 2009).**
10.87	Letter Agreement related to the Level 3 ADS, dated March 7, 2008 (incorporated herein by reference to Exhibit 10.61 to the Registrant’s Amendment No. 4 to Form 10 dated November 12, 2009).**
10.88	Letter Agreement related to the Level 3 ADS, dated July 1, 2008 (incorporated herein by reference to Exhibit 10.62 to the Registrant’s Amendment No. 3 to Form 10 dated November 6, 2009).**
10.89	Letter Agreement related to the Level 3 ADS, dated December 15, 2008 (incorporated herein by reference to Exhibit 10.63 to the Registrant’s Amendment No. 3 to Form 10 dated November 6, 2009).**
10.90	Letter Agreement related to the Level 3 ADS, dated September 1, 2009 (incorporated herein by reference to Exhibit 10.64 to the Registrant’s Amendment No. 3 to Form 10 dated November 6, 2009).**
10.91	Letter Agreement related to the Level 3 ADS, dated September 29, 2009 (incorporated herein by reference to Exhibit 10.67 to the Registrant’s Amendment No. 3 to Form 10 dated November 6, 2009).**
10.92	Agreement and Plan of Merger by and among AOL LLC, Buckingham Acquisition Corp., Bebo, Inc. and Michael Birch, dated March 12, 2008 (the “Bebo Merger Agreement”) (incorporated herein by reference to Exhibit 10.65 to the Registrant’s Amendment No. 1 to Form 10 dated September 16, 2009).***
10.93	Amendment to the Bebo Merger Agreement, dated May 5, 2008 (incorporated herein by reference to Exhibit 10.66 to the Registrant’s Amendment No. 2 to Form 10 dated October 26, 2009).***
10.94	Agreement and Plan of Merger by and among AOL LLC, Pumpkin Merger Corporation, Patch Media Corporation and Jon Brod, dated May 30, 2009 (the “Patch Merger Agreement”) (incorporated herein by reference to Exhibit 10.68 to the Registrant’s Amendment No. 2 to Form 10 dated October 26, 2009).
10.95	Side Letter Agreement related to the Patch Merger Agreement, dated June 10, 2009 (incorporated herein by reference to Exhibit 10.69 to the Registrant’s Amendment No. 2 to Form 10 dated October 26, 2009).
10.96	Side Letter Agreement related to the Patch Merger Agreement, dated August 11, 2009 (incorporated herein by reference to Exhibit 10.70 to the Registrant’s Amendment No. 2 to Form 10 dated October 26, 2009).
10.97	Credit Support Agreement between AOL Inc. and Time Warner Inc. dated December 9, 2009.

114

Exhibit Number	Description
10.98	$250,000,000 Credit Agreement among AOL Inc., the lenders party thereto, Bank of America, N.A., as administrative agent and the other financial institutions party thereto, dated December 9, 2009 (incorporated herein by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K dated December 11, 2009).
10.99	Guarantee made by the subsidiaries of AOL Inc. from time to time party thereto, in favor of Bank of America, N.A., as administrative agent for the lenders party to the Credit Agreement, dated December 9, 2009 (incorporated herein by reference to Exhibit 10.2 to the Registrant’s Current Report on Form 8-K dated December 11, 2009).
10.100	Security Agreement made by AOL Inc. and the subsidiaries of AOL Inc. from time to time party thereto, in favor of Bank of America, N.A., as collateral agent, pursuant to the Credit Agreement, dated December 9, 2009 (incorporated herein by reference to Exhibit 10.3 to the Registrant’s Current Report on Form 8-K dated December 11, 2009).
10.101	Patent Security Agreement made by the pledgors party thereto, in favor of Bank of America, N.A., as collateral agent, pursuant to the Credit Agreement, dated December 9, 2009 (incorporated herein by reference to Exhibit 10.4 to the Registrant’s Current Report on Form 8-K dated December 11, 2009).
10.102	Trademark Security Agreement made by the pledgors party thereto, in favor of Bank of America, N.A., as collateral agent, pursuant to the Credit Agreement, dated December 9, 2009 (incorporated herein by reference to Exhibit 10.5 to the Registrant’s Current Report on Form 8-K dated December 11, 2009).
21.1	Subsidiaries of the Registrant.
23.1	Consent of Independent Registered Public Accounting Firm.
31.1	Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, with respect to the Registrant’s Annual Report on Form 10-K for the fiscal year ended December 31, 2009.
31.2	Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, with respect to the Registrant’s Annual Report on Form 10-K for the fiscal year ended December 31, 2009.
32.1	Certification of Principal Executive Officer and Principal Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, with respect to the Registrant’s Annual Report on Form 10-K for the fiscal year ended December 31, 2009.†

* Management contract or compensatory plan or arrangement.

** Exhibit omits certain information that has been filed separately with the Securities and Exchange Commission and has been granted confidential treatment.

*** Pursuant to Item 601(b)(2) of Regulation S-K, AOL Inc. hereby agrees to furnish supplementally a copy of any omitted schedule or exhibit to the Bebo Merger Agreement to the Securities and Exchange Commission upon request.

**** An application for confidential treatment for selected portions of this agreement has been filed with the Securities and Exchange Commission.

† This certification will not be deemed “filed” for purposes of Section 18 of the Exchange Act (15 U.S.C. 78r), or otherwise subject to the liability of that section. Such certification will not be deemed to be incorporated by reference into any filing under the Securities Act or Exchange Act, except to the extent that the Registrant specifically incorporates it by reference.

115

EX-10.6

Exhibit 10.6

EXECUTION COPY

ASSIGNMENT AND ASSUMPTION AGREEMENT (this “Agreement”), dated as of December 4, 2009 (the “Asset Distribution Date”), by and among TIME WARNER INC., a Delaware corporation (“TWX”), AOL INC., a Delaware corporation (“AOL”) and AOL LLC, a Delaware limited liability company (“AOL LLC”).

RECITALS

WHEREAS, TWX and AOL are parties to a Separation and Distribution Agreement dated as of November 16, 2009 (the “Separation and Distribution Agreement”);

WHEREAS, pursuant to the Separation and Distribution Agreement, TWX and AOL agreed to cause the Internal Transactions, including the Asset Distribution, to be completed;

WHEREAS, in order to complete the Asset Distribution, the parties desire to enter into this Agreement; and

WHEREAS, terms used but not defined herein have the meanings assigned thereto in the Separation and Distribution Agreement.

NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are acknowledged by this Agreement, the parties agree as follows:

1. Assignment. Subject to the terms of the Separation and Distribution Agreement, effective as of 12:01 a.m. eastern standard time on the Asset Distribution Date, AOL LLC hereby transfers, assigns, conveys and delivers to AOL, and AOL hereby accepts from AOL LLC, all of AOL LLC’s right, title and interest in the AOL Assets (excluding the AOL Online Shares).

2. Assumption. Subject to the terms of the Separation and Distribution Agreement, effective as of 12:01 a.m. eastern standard time on the Asset Distribution Date, AOL hereby assumes and agrees faithfully to pay, perform, discharge and fulfill when due, all of the AOL LLC Liabilities.

3. Release. Except as provided in the Separation and Distribution Agreement or any Ancillary Agreement, effective as of the Distribution, AOL does hereby, for itself and each other member of the AOL Group, remise, release and forever discharge TWX, AOL LLC and the other members of the TWX Group, from any and all AOL LLC Liabilities.

4. Further Assurances. Each party hereto agrees to take such further actions as may be reasonably necessary to effect the transactions contemplated by this Agreement, including any actions after the Asset Distribution Date required in accordance with the terms of the Separation and Distribution Agreement.

5. Separation and Distribution Agreement and Ancillary Agreements. The parties agree that, in the event of a conflict between the terms of this Agreement and the Separation and Distribution Agreement or any Ancillary Agreement, the terms of the Separation and Distribution Agreement or the relevant Ancillary Agreement, as applicable, shall govern.

6. Employee Matters Assignment and Assumption Agreement. The parties agree that the Employee Matters Assignment and Assumption Agreement shall exclusively govern the assignment and assumption of all AOL LLC employment-related assets and liabilities.

7. Governing Law; Jurisdiction. This Agreement shall be governed by, and construed in accordance with, the laws of the State of New York, regardless of the laws that might otherwise govern under applicable principles of conflicts of laws thereof. Each party irrevocably consents to the exclusive jurisdiction, forum and venue of the Commercial Division of the Supreme Court of the State of New York, New York County and the United States District Court for the Southern District of New York over any and all claims, disputes, controversies or disagreements between the parties or any of their respective subsidiaries, affiliates, successors and assigns under or related to this Agreement or any of the transactions contemplated hereby.

8. Binding Effect. This Agreement shall be binding upon each of the parties and their respective successors and assigns.

9. Counterparts. This Agreement may be executed in one or more counterparts, all of which counterparts shall be considered one and the same agreement, and shall become effective when one or more counterparts have been signed by each party hereto and delivered to the other parties.

10. Severability. If any provision of this Agreement or the application thereof to any Person or circumstance is determined by a court of competent jurisdiction to be invalid, void or unenforceable, the remaining provisions hereof, or the application of such provision to Persons or circumstances or in jurisdictions other than those as to which it has been held invalid or unenforceable, shall remain in full force and effect and shall in no way be affected, impaired or invalidated thereby, 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 any such determination, the parties shall negotiate in good faith in an effort to agree upon a suitable and equitable provision to effect the original intent of the parties.

11. Headings. The section headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement.

12. Amendments. No provisions of this Agreement shall be deemed waived, amended, supplemented or modified by any party hereto, unless such waiver, amendment, supplement or modification is in writing and signed by the authorized representative of each party. Any waiver of any term or condition shall not be construed as a waiver of any subsequent breach or a subsequent waiver of the same term or

condition, or a waiver of any other term or condition of this Agreement. The failure of any party to assert any of its rights hereunder shall not constitute a waiver of any such rights.

IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

TIME WARNER INC.,
by
	/s/ John K. Martin, Jr.
	Name:	John K. Martin, Jr.
	Title:	Executive Vice President and Chief Financial Officer

AOL INC.,
by
	/s/ Ira H. Parker
	Name:	Ira H. Parker
	Title:	Executive Vice President, Corporate Secretary and General Counsel

AOL LLC,
by
	/s/ Ira H. Parker
	Name:	Ira H. Parker
	Title:	Executive Vice President, Corporate Secretary and General Counsel

EX-10.7

Exhibit 10.7

EXECUTION COPY

EMPLOYEE MATTERS ASSIGNMENT AND ASSUMPTION AGREEMENT (“Agreement”), dated as of December 3, 2009 (the “Employee Asset Distribution Date”), by and among TIME WARNER INC., a Delaware corporation (“TWX”), AOL INC., a Delaware corporation (“AOL”), and AOL LLC, a Delaware limited liability company (“AOL LLC”).

RECITALS

WHEREAS, TWX and AOL are parties to a Separation and Distribution Agreement, dated as of November 16, 2009 (the “Separation and Distribution Agreement”), and TWX, AOL and AOL LLC are parties to an Employee Matters Agreement, dated as of November 16, 2009 (the “Employee Matters Agreement”);

WHEREAS, pursuant to the Separation and Distribution Agreement, TWX and AOL agreed to cause the Internal Transactions, including the Asset Distribution, to be completed;

WHEREAS, pursuant to the Employee Matters Agreement, TWX, AOL and AOL LLC agreed to allocate certain Assets and Liabilities relating to employee and employee-benefits matters;

WHEREAS, in order to complete the Asset Distribution, the parties desire to enter into this Agreement; and

WHEREAS, terms used but not defined herein have the meanings assigned thereto in the Employee Matters Agreement.

NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are acknowledged by this Agreement, the parties agree as follows:

1. Assignment. Subject to the terms of the Employee Matters Agreement, effective as of 12:01 a.m. eastern standard time on the Employee Asset Distribution Date (the “AOL Employee Transfer Time”), AOL LLC hereby transfers, assigns, conveys and delivers to AOL, and AOL hereby accepts from AOL LLC, all of AOL LLC’s right, title and interest in the AOL Assets relating to employee or employee-benefits matters.

2. Assumption. Subject to the terms of the Employee Matters Agreement, effective as of the AOL Employee Transfer Time, AOL hereby assumes and agrees faithfully to pay, perform, discharge and fulfill when due, all of the AOL LLC Employee Liabilities, other than those Liabilities retained by TWX or AOL LLC pursuant to the Employee Matters Agreement.

3. Release. Except as provided in the Employee Matters Agreement, effective as of the Distribution, AOL does hereby, for itself and each other member of the AOL Group, remise, release and forever discharge TWX, AOL LLC and the other members of the TWX Group, from any and all AOL LLC Employee Liabilities other than those Liabilities retained by TWX or AOL LLC pursuant to the Employee Matters Agreement.

4. Further Assurances. Each party hereto agrees to take such further actions as may be reasonably necessary to effect the transactions contemplated by this Agreement, including any actions after the AOL Employee Transfer Time required in accordance with the terms of the Employee Matters Agreement.

5. Other Agreements. The parties agree that, in the event of a conflict between the terms of this Agreement and the Separation and Distribution Agreement, the Employee Matters Agreement or any other Ancillary Agreement, the terms of the Separation and Distribution Agreement, Employee Matters Agreement or other Ancillary Agreement, as applicable, shall govern.

6. Governing Law; Jurisdiction. This Agreement shall be governed by, and construed in accordance with, the laws of the State of New York, regardless of the laws that might otherwise govern under applicable principles of conflicts of laws thereof. Each party irrevocably consents to the exclusive jurisdiction, forum and venue of the Commercial Division of the Supreme Court of the State of New York, New York County and the United States District Court for the Southern District of New York over any and all claims, disputes, controversies or disagreements between the parties or any of their respective subsidiaries, affiliates, successors and assigns under or related to this Agreement or any of the transactions contemplated hereby.

7. Binding Effect. This Agreement shall be binding upon each of the parties and their respective successors and assigns.

8. Counterparts. This Agreement may be executed in one or more counterparts, all of which counterparts shall be considered one and the same agreement, and shall become effective when one or more counterparts have been signed by each party hereto and delivered to the other parties.

9. Severability. If any provision of this Agreement or the application thereof to any Person or circumstance is determined by a court of competent jurisdiction to be invalid, void or unenforceable, the remaining provisions hereof, or the application of such provision to Persons or circumstances or in jurisdictions other than those as to which it has been held invalid or unenforceable, shall remain in full force and effect and shall in no way be affected, impaired or invalidated thereby, 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 any such determination, the parties shall negotiate in good faith in an effort to agree upon a suitable and equitable provision to effect the original intent of the parties.

10. Headings. The section headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement.

11. Amendments. No provisions of this Agreement shall be deemed waived, amended, supplemented or modified by any party hereto, unless such waiver, amendment, supplement or modification is in writing and signed by the authorized representative of each party. Any waiver of any term or condition shall not be construed as a waiver of any subsequent breach or a subsequent waiver of the same term or condition, or a waiver of any other term or condition of this Agreement. The failure of any party to assert any of its rights hereunder shall not constitute a waiver of any such rights.

IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

TIME WARNER INC.,
by
	/s/ John K. Martin, Jr.
	Name:	John K. Martin, Jr.
	Title:	Executive Vice President and Chief Financial Officer

AOL INC.,
by
	/s/ Ira H. Parker
	Name:	Ira H. Parker
	Title:	Executive Vice President, Corporate Secretary and General Counsel

AOL LLC,
by
	/s/ Ira H. Parker
	Name:	Ira H. Parker
	Title:	Executive Vice President, Corporate Secretary and General Counsel

EX-10.15

Exhibit 10.15

Execution Copy

SECOND AMENDMENT TO SEARCH SERVICES AGREEMENT

This Second Amendment to Search Services Agreement (“Second Amendment”) is entered into by and between AOL Inc. (successor-in-interest to AOL LLC), a Delaware corporation, with its principal place of business at 770 Broadway, New York, NY 10003 (“AOL”), and Time Inc. (“TI”), a Delaware corporation with offices at 1271 Avenue of the Americas, New York, New York 10020, effective as of December 17, 2009 (the “Second Amendment Effective Date”).

INTRODUCTION

The Parties hereto wish to amend the Search Services Agreement entered into by and between the AOL and TI on August 23, 2007, as amended by the First Amendment dated as of March 10, 2009 (collectively, the “Existing Agreement”). Together, the Existing Agreement and this Second Amendment shall be referred to collectively as the “Agreement”. Capitalized terms not defined in this Second Amendment shall have the meanings set forth in the Existing Agreement.

AGREEMENT

For good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties hereby amend the Existing Agreement as follows:

1. Term. Section 6.1 (titled, “Term”) of the Existing Agreement is hereby deleted in its entirety and replaced with the following:

“This Agreement will commence on the Effective Date and shall expire at 11:59 p.m. (EST) on January 31, 2010, unless terminated earlier as provided for in this Agreement (the “Term”). TI may terminate this Agreement upon no less than three (3) days prior written notice to AOL if Google is prepared to provide search services directly to TI.”

2. Order of Precedence; Entire Agreement. Except as expressly modified by this Second Amendment, all terms and conditions, and provisions of the Existing Agreement shall continue in full force and effect. In the event of conflict between the terms and conditions of the Existing Agreement and the terms and conditions of this Second Amendment, the terms and conditions of this Second Amendment will control. The Existing Agreement, together with any exhibits, and schedules attached thereto and referenced therein, all as modified by this Second Amendment, constitutes the entire and exclusive agreement between the Parties with respect to the subject matter thereof.

3. Counterparts; Facsimile. This Second Amendment may be executed in counterparts, each of which shall be deemed an original and all of which together shall constitute one and the same document. This Second Amendment may be executed by signatures transmitted by facsimile.

IN WITNESS WHEREOF, the Parties have caused this Second Amendment to Search Services Agreement to be signed by their duly authorized representatives and delivered as of the dates set forth below.

AOL INC.		TIME INC.
By:	/s/ Steven Quan	By:	/s/ Andy Blau
Name:	Steven Quan	Name:	Andy Blau`
Title:	VP, Business Development	Title:
Date:	12/17/09	Date:	12/17/09

Confidential 1

EX-10.17

Exhibit 10.17

EXECUTION COPY

AMENDMENT TO

MEMORANDUM OF UNDERSTANDING

This Amendment (this “Amendment”), dated as of December 8, 2009 (“Amendment Effective Date”), is entered into by and between AOL Inc., a Delaware corporation, with its principal offices at 770 Broadway, New York, New York 10003 (“AOL”), and Telepictures Productions Inc., a Delaware corporation, with its principal offices at 4000 Warner Blvd., Burbank, CA 91522 (“TP”; and together with AOL, the “Parties” and each a “Party”) to amend that certain Memorandum of Understanding, effective as of July 25, 2005, between AOL (as assignee of AOL LLC (f/k/a America Online, Inc.)) and TP, as such Memorandum of Understanding may have been amended from time to time (as so amended, the “MOU”).

1. Binding MOU; Term. Except as amended herein effective as of the date first written above, AOL and TP agree that the MOU shall remain in full force and effect, and shall be binding and enforceable against each Party, in accordance with the terms thereof. Notwithstanding any other provision in the MOU or this Amendment, the MOU, as amended by this Amendment, shall become effective as of the Amendment Effective Date and terminate on the date that is the earlier of December 31, 2010 or twelve (12) months after the on the date AOL is no longer wholly owned by Time Warner Inc. (“Spin Date”), or such earlier date as the Parties may mutually agree in writing.

2. Amendments. AOL and TP hereby agree to amend the MOU as follows, effective as of the Spin Date:

a. Section 2.1 of Exhibit A to the MOU is hereby amended by deleting it in its entirety and substituting the following:

“2.1 Brand Website: the website located at www.tmz.com.”

b. Section 2.3 of Exhibit A to the MOU is hereby amended by deleting all references to AOL’s assistance in obtaining approvals.

c. Section 2.4 of Exhibit A to the MOU is hereby amended by deleting it in its entirety and substituting the following:

“2.4 Services Provided by AOL.

• Hosting and Streaming:

– AOL shall be responsible for procuring and maintaining the production equipment for the Brand Website and procuring and maintaining the transmission of the Brand Website information to the Internet (collectively, “Hosting and Streaming”). Beginning on the Spin Date, instead of the foregoing, AOL shall provide Hosting and Streaming to the Brand Website in accordance with the terms of the Master Services Agreement

between AOL and Time Warner Inc., dated November 16, 2009 (the “Hosting Agreement”).

– Hosting and Streaming provided by AOL will be maintained at the same level and quality as the Hosting and Streaming services provided by AOL to the Branded Website as of the Spin Date.

– TP will pay AOL for the Hosting and Streaming provided by AOL to the Branded Website, the JV, TP or any of their affiliates at the rates which are set forth in the Hosting Agreement (“Hosting and Steaming Fees”).

• Reports: AOL shall provide the JV with monthly reports on promotions provided and access to reporting systems consistent with AOL’s normal business practices and that are made available to the JV as of the Amendment Effective Date.”

d. Article 7 of Exhibit A to the MOU is hereby amended by adding the following as a new Section 7.6 after Section 7.5:

“7.6 Financial and Other Matters Commencing on January 1, 2010 or the date AOL is no longer owned by Time Warner Inc., whichever is earlier (“Spin Date”).

(i) Prior to the Spin Date. Sections 7.1-7.5 above shall be effective until expiration on the day before the Spin Date.

(ii) Commencing on the Spin Date. Commencing on the Spin Date:

(a) Except for Hosting and Streaming provided by AOL pursuant to Section 2.4 of this Exhibit A and the distribution and promotion obligations of AOL set forth in Annex A, none of AOL nor any of its affiliates shall have any obligations with respect to the TMZ Parties (as defined below) hereunder, including without limitation, any obligations to make any contributions, reimbursements or other payments to the Brand, the Brand Website, Additional Brand Services (including the TMZ television show and TMZ wireless services), the Service, the JV, TP, and/or any of their affiliates (collectively, the “TMZ Parties”) under this MOU.

(b) Except for the AOL Ad Revenue Share (as defined below), the Hosting and Streaming Fees and the promotion obligations of the TMZ Parties set forth

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in Annex A, none of the TMZ Parties shall have any obligation to make any contributions, reimbursements or other payments to AOL or any of its affiliates, and none of AOL nor any of its affiliates shall have the right to receive, share, or participate in any revenues of the TMZ Parties, in each case under this MOU.

(c) From the Spin Date through the end of the Term, AOL shall receive fifteen percent (15%) of Gross Advertising Revenues for all Gross Advertising Revenues up to and including ten million dollars ($10,000,000) and twenty percent (20%) of all Gross Advertising Revenues in excess of ten million dollars, with a guaranteed minimum revenue share of one million five hundred thousand dollars ($1,500,000) to AOL. As used herein, “Gross Advertising Revenues” means gross advertising (including but not limited to display, video, text, and search advertising) revenues actually received from advertisements placed on the Brand Website and the TMZ Mobile Site (collectively, the “AOL Ad Revenue Share”). The AOL Ad Revenue Share shall be paid quarterly.”

e. Article 8 of Exhibit A to the MOU is hereby amended by deleting it in its entirety and substituting the following:

“8. Promotion and Distribution of the Brand Website.

• AOL and the Brand Website shall perform their respective promotion and distribution obligations set forth on Annex A attached hereto.

• Notwithstanding anything herein to the contrary, AOL reserves the right to redesign or modify the organization, structure, “look and feel,” navigation and other elements of the AOL Network at any time. In the event such modifications materially and adversely affect any particular AOL Promotions, AOL, after a good faith consultation and working with TP, will provide alternative promotional assets of equivalent value, on the AOL.com primary, “entry” or “landing” page, with reasonably equivalent placement (e.g. above the fold in a position that AOL has reasonably demonstrated to be in a equivalent position as the previous placements). AOL shall in good faith avoid exercising its rights hereunder in a manner intended to decrease the value of the AOL Promotions.”

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f. Article 9 of Exhibit A to the MOU is hereby amended by deleting it in its entirety and substituting the following:

“9. Advertising Sales and Sponsorships for the Brand Website.

 • TP will solely handle the selling of all advertising and sponsorships for the Brand Website, and fulfilling and serving all sold advertising and sponsorships.”

g. The first bullet point under Section 11.1 of Exhibit A to the MOU is hereby amended by deleting it in its entirety and substituting the following:

“• All AOL Provided Technology will be owned by AOL.”

h. The first bullet point under Section 11.2 of Exhibit A to the MOU is hereby amended by deleting it in its entirety and substituting the following:

“• All TP Provided Content will be owned by TP.”

i. Section 11.3 of Exhibit A to the MOU is hereby amended by adding the following to the end of the bullet:

“11.3 JV Property.

 • “JV Property” shall also include the Brand, the name “TMZ”, the domain name www.tmz.com, the Brand Website, Additional Brand Services (including the TMZ television show and TMZ wireless services), the Service, JV Produced Content, and Third Party Content and Third Party Technology acquired by, or licensed to, the TMZ Parties in connection with the Service, but excluding the TP Provided Content and the AOL Provided Technology.

 • Notwithstanding anything to the contrary in this MOU, the Parties will mutually agree on a list of all JV Developed Technology and all JV Developed Technology will be jointly owned by the Parties, with no duty by either Party to account to the other Party for use or profits. Nothing created after the Spin Date shall be deemed JV Developed Technology for the purposes of this agreement.

 • Any and all JV Property will be owned solely by TP. AOL shall have no ownership interests in, or rights in or to, the JV Property.”

j. Articles 1, 3, 4, 5, 6, 7.1-7.5, 10, 12, 13, 14, 15, and 17, and Sections 5.2, 11.4 and 11.5 of Exhibit A to the MOU and Schedules 1-5 of the MOU are hereby amended by deleting each in its entirety and substituting the following:

4

“[Intentionally Omitted]”.

k. The following new Section 13 shall be added to Exhibit A of the MOU:

“13. Other Rights.

13.1 Transfer to Non-TW Affiliate. In the event of a transfer or assignment by TP of any of its interest in the Service (or any portion thereof) or of any TMZ Party which owns the Service (or any portion thereof) (a “Transfer”) to an entity that does not control, is not controlled by or is not under common control with TP, Warner Brothers or Time Warner Inc. (“Third Party”) during the Term, TP shall provide AOL sixty (60) days prior written notice thereof and AOL shall have a right to terminate this Agreement upon ten (10) days prior written notice.

13.2 Right of First Negotiation. In the event of TP wishes to make a Transfer to a Third Party during the Term and within one years thereafter, TP shall notify AOL thereof (“TP Notice”). Upon written request by AOL given within five (5) days after the TP Notice, the Parties shall negotiate in good faith for a period of thirty (30) days (“Negotiating Period”) regarding a Transfer to AOL. During the Negotiating Period, TP shall not enter into any agreement with a Third Party or enter into binding discussions with a Third Party regarding a Transfer to such Third Party.

13.3 Remedies. In the event of a breach, the parties will work together in good faith to resolve the dispute. If a resolution cannot be reached the matter shall be submitted to the CEOs of AOL and Warner Brothers for resolution.

3. Traffic Roll-Up. Through and including February 28, 2010,(a) the traffic for Popeater will continue to roll-up to the Brand Website as it does as of October 25, 2009 and AOL will continue to provide promotions reasonably necessary to continue such arrangement (the “PopEater Roll-up Obligation”), and (b) the traffic for the Brand Website will continue to roll-up to AOL as it does as of October 25, 2009 and TP will continue to provide promotions reasonably necessary to continue such arrangement. In consideration of AOL’s performance of the Popeater Roll-up Obligation from October, 2008 through February 28, 2010, TP shall pay AOL six hundred thousand dollars ($600,000), payable on March 15, 2010. TP shall also reimburse AOL for any fee charged by ComScore to effectuate the foregoing arrangements. TP acknowledges that timing of such arrangements is not completely in AOL’s control and is subject to ComScore’s approval and implementation.

4. Miscellaneous.

4.1 Governing Law. The MOU and this Amendment shall be interpreted and construed in accordance with the laws of the State of New York, without regard to the principles of conflicts of laws, and with the same force and effect as if fully executed and performed therein.

5

4.2 Entire Agreement. The MOU, as amended by this Amendment, represents the entire agreement of the Parties with respect to the subject matter hereof and supersedes all prior and/or contemporaneous agreements and understandings, written or oral between the Parties with respect to the subject matter hereof.

4.3 Press Releases and Public Statements. No Party will issue any press releases or make public statements relating to the MOU, this Amendment, or the relationship between the Parties without the other Party’s review of and written consent to such press release or public statement.

[Remainder of page intentionally left blank]

6

IN WITNESS WHEREOF, this Amendment has been duly executed by the Parties hereto effective as of the date first set above.

TELEPICTURES PRODUCTIONS INC.		AOL LLC
By:	/s/ David Decker	By:	/s/ Bill Wilson
Name:	David Decker	Name:	Bill Wilson
Title:	EVP Business & Legal Affairs	Title:	President, AOL Media
Date:	12/8/09	Date:	12.08.09

7

ANNEX A

Brand Website/AOL Promotion and Distribution Arrangement

1. AOL Obligations

a. Promotion and Distribution. AOL shall provide the Brand Website with eight (8) Dynamic Leads (DL) promotion spots per month, reasonably evenly distributed over the month (averaging approximately 2 per week) on the AOL “Welcome” screen/page, with 6 DLs per month in position DL2 or better, and 2 DL per month in position DL4 or better. The DL promotion touts a story from the Brand Website. An AOL DL manager shall coordinate with the Brand Website editorial team to select the story that will be promoted in the DL. TP shall ensure that the landing page linked to on the Brand Website from an AOL promotion provided hereunder, for the duration of such promotion, does not promote or market the following direct competitors of AOL: Google, Yahoo! or MSN (and any other Microsoft web properties). In addition, TP shall in good faith avoid doing anything intended to send a disproportionate amount of traffic to any other direct AOL competitor relative to traffic driven to AOL from these landing pages. In the event AOL believes TP is in violation of the foregoing sentence, AOL shall provide TP with written notice thereof and TP shall have the opportunity to cure by removing or decreasing such promotion or links within the following seven (7) days. Search tools (including bars, branding, sponsored links, etc.) shall not be considered direct competition to AOL and will be excluded from the above restrictions.

b. Editorial Coverage. AOL shall provide the Brand Website with the following links:

1. for the extraordinary story (e.g., Michael Jackson’s death, Mel Gibson’s tirade) where the Brand Website is the “breaking news” source and is the actual source for the Popeater story (if any), three (3) links to the Brand Website from such Popeater story.

For example, the Michael Jackson death story was one where the Brand Website broke the story/was the originator of the content. AOL put 3 links to the Brand Website within the Popeater story because the Brand Website was the original breaking news source of the content and AOL used it as the actual source for the Popeater story.

2. With respect to stories that are not originating from the Brand Website editorial team, but are covered by the Brand Website and for which the Brand Website has additional exclusive assets like exclusive photos, video or legal documents, AOL shall provide one (1) link to the Brand Website story from Popeater stories where AOL incorporates such Brand Website exclusive asset.

c. In order to allow AOL to provide the promotions set forth in 1.a. above, TP, for itself and the TMZ Parties, hereby grants AOL a worldwide, non-

8

exclusive license to display the Licensed Content (or any portion thereof) on the AOL Network (as formerly defined in the MOU). TP will indemnify and defend AOL from and against all third party claims, actions, costs and/or damages arising from or relating to the Licensed Content and AOL use of the Licensed Content in accordance with this MOU. As used herein, “Licensed Content” shall mean any Content on the Brand Website that is displayed on the AOL Network at the request of TP and furnished by TP solely for the DL placements, but shall exclude any claims arising out of or related to AOL content that accompanies such Licensed Content (i.e. AOL inserted headline or caption), or AOL changes/modifications to Licensed Content that have not been required of TP.

9

EX-10.23

Exhibit 10.23

REVISED

December 15, 2006

Mr. Theodore R. Cahall, Jr.

3718 Smithers Avenue South

Renton, WA 98055

Dear Ted:

Congratulations! AOL LLC (“AOL” or “Company”) is pleased to offer you the position of Executive Vice President, Platforms, reporting to the Chief Operating Officer or his or her functional equivalent. This letter sets forth the economics and key employment conditions in your new position.

Location: Your primary work location will be Dulles, Virginia, but you shall make yourself available for travel to other locations as business needs require and in order to facilitate effective interaction between you and other members of management and the Company.

Base Salary: Your compensation will be $20,208.34 semi-monthly (“Base Salary”), less applicable withholdings, which if calculated on a yearly basis is $485,000.16. Your Base Salary will be reviewed annually and may be increased based on your individual performance or changes in competitive market conditions.

Annual Incentive Plan: In addition to Base Salary, the Company typically pays its executives an annual cash bonus (“Bonus”) pursuant to the terms of its Annual Incentive Plan (“AIP”). Although a Bonus (and its amount, if a Bonus is paid) is fully discretionary, your target annual bonus as a percentage of your annual Base Salary is 75 percent. Each year, the Company will review its overall performance and your individual performance, and will determine your Bonus, if any. Although as a general matter the Company expects to pay Bonuses at the target level in cases of satisfactory individual performance, the Company does not commit to paying any Bonus, and your Bonus may be negatively affected by the exercise of the Company’s discretion or by overall Company performance. Assuming you start your employment prior to October 1, 2007, you will be eligible to receive a portion of your 2007 AIP Bonus which shall be pro-rated beginning on your first day of employment.

Signing Bonus: In addition, you will receive a one-time signing bonus in the amount of $550,000.00, less applicable withholdings, which will be paid the second pay period following your first day of employment; however, if you resign during your first 12 months of employment, you must repay the signing bonus to the Company within 30 days of your resignation.

Stock Options and Restricted Stock Units: You will be granted an option to purchase 75,000 shares of Time Warner Inc. (Time Warner) common stock, subject to Board of Director approval, vesting equally on an annual basis, over a four (4) year period (Stock Option grant). Additionally, you will receive a one-time award of 20,000 restricted stock units (RSU’s), subject to Board of Director approval, of which 50% will vest on the third anniversary of the award date and the remaining 50% will vest on the fourth anniversary of the award date. Your Stock Option grant date and your RSU award date will be as soon as possible following your first day of employment, pending Board of Director approval and administrative processing. The exercise price for your Stock Option grant will be the Fair Market Value on your grant date which is determined by the average of the high and low sales prices of Time Warner common stock on the NYSE on that day. (Note that AOL and Time Warner may discontinue granting options to purchase shares of Time Warner common stock at any time.) Your Stock Option grant and your award of RSU’s shall be governed in accordance with the terms and conditions of the plans, agreements and notices under which they were issued.

Long-Term Incentive Program: You may participate in the Company’s long-term incentive program at the sole discretion of the Company and in accordance with the terms of the program. The Company will consider you among the pool of candidates eligible for the long-term incentive program in 2008 and thereafter; however, nothing in this letter shall be considered a guarantee of your participation in that program

Relocation Assistance: In addition to your salary, annual incentives, stock options and sign-on bonus, you will be eligible for relocation assistance, as set forth in the enclosed copy of Executive Relocation Assistance Program D. You may initiate your relocation at any time within 12 months of starting employment with AOL, Inc. All amounts paid to you or on your behalf for reimbursement of relocation expenses will be appropriately reported on your W-2 as either taxable or non-taxable income. If you resign from the Company within 12 months of initiating relocation, you will be required to repay in full, within 30 days, the total amount paid for relocation expenses either to you or on your behalf.

Please do not initiate any relocation activities without first contacting the relocation department. To initiate relocation, please contact Laurie Steinemer, Sr. Relocation Consultant, at LSteinemer@aol.com. Please be advised that Relocation Department’s receipt of your signed Reimbursement Agreement (Appendix A) and Promissory Note (Appendix B) is required prior to payment of any approved relocation expenses.

Benefits: The Company offers a generous and comprehensive benefits package, including health, disability, and life insurance. You and your family members will be eligible to participate in a full range of benefits in accordance with the Company’s current eligibility requirements. It will be necessary for you to make benefit elections within 30 days of your hire date with the Company. If you do not make an election within the designated timeframe, you will be enrolled into the benefits default plan and you will be responsible for any associated costs. Employee benefits are subject to change at the sole discretion of the Company. A copy of the benefits brochure is enclosed.

Vacation: You are eligible for four (4) weeks vacation annually, in addition to the company’s recognized holidays and personal days.

Key Employment Conditions: This offer is contingent on your submission of satisfactory proof of eligibility to work in the United States. You must bring documentary proof of your eligibility to work with you on your first day of work. Please contact me if you have any questions about what documents are acceptable for this purpose.

This offer also is contingent upon the results of a pre-employment background check, which may include confirmation of your Social Security number, verification of prior employment, verification of education, if applicable, and a criminal records check. If the results of the pre-employment background check are not satisfactory, or if the Company determines that you have falsified or failed to disclose relevant information on your application, the Company reserves the right to withdraw this offer or terminate your employment.

In addition, as a condition of your employment, you must sign and comply with the enclosed Confidentiality, Non-Competition and Proprietary Rights Agreement (“CNPR Agreement”), the terms of which are incorporated herein by reference. Please return an executed copy of this CNPR Agreement by facsimile to 703-265-6601, along with your executed version of this offer letter. You agree that your signature of this letter and start of employment at AOL also constitutes your agreement to abide by the terms of the CNPR Agreement.

Further, as a condition of your employment, you will be required to electronically sign AOL’s Standards of Business Conduct within the first 30 days of your employment and periodically thereafter during your employment as requested by the Company, as an affirmation of your agreement to the Company’s code of ethical and appropriate workplace conduct.

You shall render your services to the Company on a full-time, exclusive basis. However, nothing in this letter precludes you from performing any charitable or civic duties provided that such duties do not interfere with the performance of your duties as an employee of AOL, do not violate the Standards of Business Conduct or the CNPR Agreement, or cause a conflict of interest. You may sit on the boards of non-AOL entities during your employment only if first approved in writing by AOL’s Compliance Council.

Cooperation. During and after your employment with the Company, you agree to assist the Company, upon its reasonable request, in connection with any litigation, investigation, or other matter involving the Company. You agree that such assistance may include, but is not limited to, meeting with the Company’s legal counsel upon request.

Return of Company Property. Upon termination of your employment, or at any other time the Company so requests, you must return to your manager all the Company property in your possession, including, but not limited to, keys, access cards, computers, pagers, telephones and the original and all copies of any written, recorded, or computer readable information about Company practices, procedures, trade secrets, customer lists or marketing associated with the Company’s business.

Termination: Your employment with the Company is at-will, meaning that you or the Company may terminate the employment at any time for any reason not prohibited by law, with or without notice or “cause” (as defined below), subject to the following consequences. Nothing in this offer is intended to create a contract for employment or guarantee of continued employment with the Company. This at-will employment relationship cannot be modified except by an express

written agreement signed by you and an authorized officer of the Company. In the event the Company terminates your employment for cause, you shall be entitled as of the termination date to no further compensation under this agreement, except that you shall be entitled to receive: a) such portion of your base compensation as shall have accrued but remain unpaid through the termination date, and b) payment of your AIP bonus earned for the fiscal year ending prior to your termination, at the same time and at the same rate similarly situated continuing employees receive their AIP bonuses, if applicable and if such bonus has not already been paid to you at your termination.

In the event the Company terminates your employment other than for cause, you will be entitled to receive the following, solely in exchange for execution of a Company separation agreement at the time of your termination, which shall contain, among other obligations, a valid release of any and all claims against the Company and its related entities and agents:

• Your Base Salary accrued through your termination date, including any accrued, but unused vacation in accordance with Company policy;

• An amount equal to twelve (12) months of your Base Salary at the time of termination, less applicable taxes, payable in a lump sum;

• Payment of your AIP bonus earned for the fiscal year prior to your termination, at the same time and at the same rate similarly situated continuing employees receive their AIP bonuses, if such bonus has not been paid to you; and

• At the Company’s expense, continuation of health benefits coverage under COBRA for twelve (12) months beginning the first day of the calendar month following your termination date.

For purposes of this letter, “cause” shall be limited to (i) your conviction of, or nolo contendere or guilty plea to, a felony (whether any right to appeal has been or may be exercised); (ii) your failure or refusal, without proper cause, to perform your duties with the Company, including your obligations under this letter, if such failure or refusal remains uncured for 15 days after written notice to you; (iii) fraud, embezzlement, misappropriation, or reckless or willful destruction of Company property; (iv) breach of any statutory or common law duty of loyalty to the Company; (v) your violation of the CNPR Agreement or the Company’s Standards of Business Conduct; (vi) your improper conduct substantially prejudicial to the Company’s business, or (vii) your failure to cooperate in any internal or external investigation involving the Company.

Orientation: Each Monday AOL holds an Orientation session for new employees. This event is intended to give you an introduction to the company, its online services and employee benefits. On your first day, please report to the Dulles Headquarters building at 8:15 am and notify the receptionist that you are here for Orientation. Orientation begins promptly at 8:30 a.m. and ends at approximately 12:30 p.m.

Commencement Date: The commencement date of your employment will be mutually agreed upon by the Chief Operating Officer and you.

This letter constitutes the full terms and conditions of your employment with the Company. It supersedes any other oral or written promises that may have been made to you.

If you agree to accept this offer, please sign and date one copy of this letter, along with your signed CNPR Agreement and fax it to 703-265-6601 at your earliest convenience so that we can begin making arrangements for your arrival. We hope that your employment with the Company will prove to be exciting and beneficial for both you and us and we look forward to having you aboard. If you have any questions, please do not hesitate to contact me.

Sincerely,

Glenn M. Fox

VP Executive Recruitment &

Talent Acquisition

AOL LLC

ACCEPTED: /s/ Theodore R. Cahall, Jr. DATE: 12-22-06

EX-10.24

Exhibit 10.24

To:	Ted Cahall
From:	Ron Grant
Date:	May 13, 2008
Re:	Amendment to your Employment Agreement

This memo, upon your signature, supplements your revised offer letter dated December 15, 2006, and shall constitute the complete agreement between you and AOL LLC (together with its subsidiaries, affiliates and assigns “AOL” or the “Company”) regarding your continued employment.

The paragraph in your offer letter with the heading “Termination” shall be deleted in its entirety and replaced with the following.

Termination: Your employment with the Company is at-will, meaning that you or the Company may terminate the employment at any time for any reason not prohibited by law, with or without notice “Cause” (as defined below), subject to the following consequences. Nothing in this offer is intended to create a contract for employment or guarantee of continued employment with the Company. This at-will employment relationship cannot be modified except by an express written agreement signed by you and an authorized officer of the Company.

In the event the Company terminates your employment for Cause, you shall be entitled as of the termination date to no further compensation under this agreement, except that you shall be entitled to receive a) such portion of your Base Salary as shall have accrued but remain unpaid through the termination date and any accrued, but unused vacation in accordance with Company policy.

In the event the Company terminates your employment other than for Cause, you will be entitled to receive the following, solely in exchange for your execution and delivery to the Company of a Company separation agreement, which shall contain, among other obligations, a valid release of any and all claims against the Company and its related entities and agents:

• An amount equal to 18 months of your Base Salary at the time of termination, less applicable taxes. This amount will be paid in a lump sum within thirty (30) days of the Company’s receipt of your executed separation agreement, but no later than March 15 of the calendar year following the year of the termination of your employment. This payment will not be eligible for deferrals in the Company’s 401(k) plan.

• If you are terminated between January 1 and March 15, a Bonus payment for the calendar year ending prior to your termination (“Prior Year”), payable at the same rate that continuing employees receive their Bonus payment, less applicable taxes, but in no event to exceed 100% of your target payout; provided that (i) the Company pays a Bonus to

eligible employees under the AIP for the Prior Year, (ii) such Bonus has not already been paid to you at the time of termination of your employment, and (iii) you were otherwise eligible for such Bonus payment if you had remained employed through the date of payout. This amount will be paid in a lump sum within thirty (30) days of the Company’s receipt of your executed separation agreement, but no later than March 15 of the calendar year following the year of the termination of your employment. The payment will not be eligible for deferrals in the Company’s 401(k) plan.

• A Bonus payment, prorated through the date of the termination of your employment, payable at target, less applicable taxes. This amount will be paid in a lump sum within thirty (30) days of the Company’s receipt of your executed separation agreement, but no later than March 15 of the calendar year following the year of the termination of your employment. This payment will not be eligible for deferrals in the Company’s 401(k) plan.

• If you elect to enroll in COBRA benefit continuation, at the Company’s expense, continuation of health, vision and dental benefits coverage under COBRA for 18 months beginning the first day of the calendar month following your termination date.

For purposes of this letter, “Cause” shall be limited to (i) your conviction of, or nolo contendere or guilty plea to, a felony (whether any right to appeal has been or may be exercised); (ii) your failure or refusal, without proper cause, to perform your duties with the Company, including your obligations under this letter, if such failure or refusal remains uncured for 15 days after written notice to you; (iii) fraud, embezzlement, misappropriation, or reckless or willful destruction of Company property; (iv) breach of any statutory or common law duty of loyalty to the Company; (v) your violation of the CNPR Agreement or the Company’s Standards of Business Conduct; (vi) your improper conduct substantially prejudicial to the Company’s business, or (vii) your failure to cooperate in any internal or external investigation involving the Company.]

Compliance with IRC Section 409A. This letter is intended to comply with Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”) and will be interpreted in a manner intended to comply with Section 409A of the Code. Notwithstanding anything herein to the contrary, (i) if at the time of your termination of employment with the Company you are a “specified employee” as defined in Section 409A of the Code (and any related regulations or other pronouncements thereunder) and the deferral of the commencement of any payments or benefits otherwise payable hereunder as a result of such termination of employment is necessary in order to prevent any accelerated or additional tax under Section 409A of the Code, then the Company will defer the commencement of the payment of any such payments or benefits hereunder (without any reduction in such payments or benefits ultimately paid or provided to you) until the date that is six months following your termination of employment with the Company (or the earliest date as is permitted under Section 409A of the Code) and (ii) if any other payments of money or other benefits due to you hereunder could cause the application of an accelerated or additional tax under Section 409A of the Code, such payments or other benefits shall be deferred if deferral will make such payment or other benefits compliant under Section 409A of the Code, or otherwise such payment or other benefits shall be restructured, to

the extent possible, in a manner, determined by the Company, that does not cause such an accelerated or additional tax. To the extent any reimbursements or in-kind benefits due to you under this letter constitute “deferred compensation” under Section 409A of the Code, any such reimbursements or in-kind benefits shall be paid to you in a manner consistent with Treas. Reg. Section 1.409A-3(i)(l)(iv). Each payment made under this letter shall be designated as a “separate payment” within the meaning of Section 409A of the Code. The Company shall consult with you in good faith regarding the implementation of the provisions of this section; provided that neither the Company nor any of its employees or representatives shall have any liability to you with respect thereto.

All other terms and conditions of your offer letter remain in full force and effect. Please sign and date one copy of this memo and return it to Michaela Oliver, Senior Vice President, Human Resouces via interoffice mail. (An extra copy is enclosed for your files.)

AGREED AND ACCEPTED:

/s/ Theodore R. Cahall, Jr.	7/1/08
Ted Cahall	Date

EX-10.31

Exhibit 10.31

Via Hand Delivery

November 17, 2009

Kimberley Partoll

22000 AOL Way

Dulles, VA 20166

Separation Agreement and Release of Claims

Dear Kimberley:

This letter will serve as confirmation that your employment with AOL Inc. (together with any successors, subsidiaries, merged entities, parent entities and their respective affiliates, “AOL” or “the Company”) is being terminated without cause. This Separation Agreement and Release of Claims (“Separation Agreement”), upon your signature after your Separation Date, will constitute the complete agreement between you and the Company regarding the terms of your separation from employment. This agreement supersedes and replaces all prior agreements, unless explicitly provided for in this Separation Agreement.

1. Your employment with the Company has been terminated without cause as of the close of business on October 1, 2009 (your “Separation Date”). During the period from September 16, 2009 through your Separation Date, you acknowledge that you did not have day-to-day responsibilities and were not expected to work from the office; however, you provided transition services to AOL and performed projects requested by the Chief Executive Officer of the Company, or his designee or successor. Such transitional services consumed approximately fifty (50%) percent of the time that you devoted to your full-time responsibilities. Accordingly, October 1, 2009 is the date of your separation from service with respect to Section 409A as defined in your April 23, 2008 Agreement (your “Agreement”). The Company represents that you were not a “specified employee” as of your separation from service, for purposes of 409A application. You are relying upon this representation by the Company in accepting the consideration in this Separation Agreement. In the event there is a determination to the contrary, in spite of the Company’s belief and representation that you were not a “specified employee” as of your separation from service, within the meaning of 409A, then the Company shall take all steps to make you whole, including any gross ups, payments of taxes, penalties and interest, and shall further compensate you for any losses as a result of such contrary determination, including any legal, tax and financial fees incurred by you associated with any challenge, determination and/or compliance. If any provision of this Agreement would cause you to incur any additional tax or interest under Section 409A of the Internal Revenue Code of 1986, as amended (“the Code”), any regulations or Treasury guidance promulgated thereunder, the Company shall reform such provision, provided that the Company shall: (i) maintain, to the maximum extent practicable, the original intent of the applicable provision without violating the provisions of Section 409A of the Code; and (ii) notify and consult with you regarding such amendments or modifications prior to the effective date of any such change.

In addition to the payments under paragraph 6, if it shall be determined that any event or any payment, vesting, distribution, or transfer by the Company (or any successor, affiliate or by any other person) to you or for your benefit under the terms of this Agreement or otherwise

would be subject to or result in the imposition of the excise tax under Section 4999 of the Code (and any regulations issued thereunder, any successor provision, and any similar provision of state or local income tax law) (collectively, the “Excise Tax”), then the Company shall pay to you a lump sum (“Tax Equalization Payment”) in an amount sufficient that, after payment of the federal, state or local income, employment or other required taxes (other than taxes that may be imposed by Section 409A of the Code)(“Regular Taxes”), you shall receive an amount equal to the Excise Tax. Such payment shall be made within 15 days of the date which you remit such Excise Tax. In determining the amount of any Regular Taxes, the maximum applicable, marginal rate of tax for the year in which the Tax Equalization Payment is payable shall be used. The amount of this Tax Equalization Payment shall be determined by the Company's independent accountants.

Your rights under any stock option or restricted stock unit awards shall be determined in accordance with the terms and provisions of the equity plans and agreements under which any grants of stock options or awards of restricted stock units were granted, based on an October 1, 2009 Separation Date. If you accept other employment with AOL or with any Time Warner company within thirty days of your Separation Date, you will not be eligible to receive any of the benefits set forth in this Separation Agreement, unless specified herein, and this Separation Agreement shall become null and void.

2. On the next regularly scheduled pay date following your Separation Date, or sooner if local law requires, you received a check for all unpaid wages and any accrued, unused vacation or paid time off from January 1, 2009, or longer if required by state law, due through your Separation Date, less applicable deductions and withholdings.

3. Your medical, dental and vision benefits continued through the end of the month in which your Separation Date occurs. With respect to the Consolidated Omnibus Budget Reconciliation Act (“COBRA”), your COBRA period began on the first day of the month following your Separation Date. You received separate information regarding your option to continue health benefits under COBRA after your Separation Date. Your Company-paid life insurance continued through the end of the month in which your Separation Date occurs. All other benefits terminated on your Separation Date.

4. Prior to your departure on your Separation Date, you acknowledge that you have:

a. resigned from any and all positions you hold as an officer and/or director of AOL LLC and from each of its direct and indirect subsidiaries and/or affiliates (using the four attached resignation letters, which contain a true and accurate list of all of the entities for which you serve as a director, managing director, chairman, representative, authorized person, officer, or other appointment on behalf of the Company, any of its group companies, or any of its direct or indirect subsidiaries, and which letters, where notice of your resignation is required to be filed with the applicable authorities, the Company agrees to cause to be timely filed with such applicable authorities); and

b. returned to the the Company, all the Company property in your possession, including, but not limited to, your SecurID, keys, computers, corporate credit cards, pagers, telephones, parking permits and the original and all copies of any written, recorded, or computer readable information about Company practices, procedures, trade secrets, customer lists or product marketing associated with the Company’s

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business and any other information deemed proprietary or confidential in accordance with Company policies. By signing this Separation Agreement, you represent that you will return all Company confidential or proprietary information in your possession and that you will take all reasonable steps to protect the confidentiality of such Company information during your employment. Notwithstanding the foregoing or anything else in this Separation Agreement to the contrary, you will be permitted to keep your Company-provided Blackberry once it has been reviewed and all appropriate Company data removed from the device (provided that your “contacts list” will not be removed). By signing this Separation Agreement, you agree that you are bound by all the terms of the Standards of Business Conduct through your Separation Date and the Company’s CNPR Agreement, which remains in full force and effect after your Separation Date, with the following exception:

Notwithstanding any prior agreement between you and the Company (including, without limitation, any Confidentiality, Non-Competition and Property Rights Agreement), after the Separation Date, you shall not be prevented from owning, controlling, managing, or working for any business except only that, for the six-month period immediately following the Separation Date (the “Restricted Period”), you will not, anywhere in the United States or any country in which the Company is now operating, directly or indirectly participate in the ownership, control or management of, or be employed by, Yahoo!, Inc., Google Inc., Microsoft Corporation, IAC/InterActive Corp., News Corp., Viacom Inc. or Disney, or any of their respective subsidiaries, affiliates or successors (each a “Restricted Entity”); provided that this restriction does not prevent you from (i) working in a capacity that does not compete with the specific business of the Company in which you were engaged or had material knowledge during the last two years of your employment with the Company, or (ii) owning as a passive investor not more than 1% of the outstanding stock of any class of a competitor entity that is publicly traded. In the event that you wish to work for a Restricted Entity during the Restricted Period, you may send written notice of that request to the Company, at which time the Company may elect to waive the application of this Paragraph 4 and to allow you to work for that Restricted Entity during the Restricted Period.

5. You and the Company disagree on what you may be entitled to if you do not enter into this Agreement. You acknowledge that the Company is making the payments and providing the benefits to you because you are signing a Release of claims. The Company would not otherwise provide you these payments and benefits without a release of claims.

6. In exchange for your execution of this Separation Agreement, the Company will provide you the following and the following terms shall apply:

a. An amount equal to four (4) years of your current Base Salary of $625,000 ($2,500,000), less applicable withholdings, payable in a lump sum, subject to paragraph 6(d) below. This payment will not be eligible for deferrals to the Company’s 401(k) plan.

b. An amount equal to four (4) years of your bonus at 100% of $625,000 ($2,500,000), less applicable withholdings, payable in a lump sum, subject to paragraph 6(d) below. This payment will not be eligible for deferrals to the Company’s 401(k) plan.

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c. If you elect to enroll in COBRA benefit continuation, the Company will pay the cost of medical, dental and vision benefit coverage under COBRA for eighteen (18) months beginning the first day of the calendar month following the termination of your employment.

d. The payments made under paragraphs 6(a) - 6(b) will be paid within thirty (30) days of the Separation Date or the “effective date” of the signed Separation Agreement, as set forth in paragraph 18 below, whichever is later, but no later than March 15 of the calendar year following the year of the termination of your employment.

e. You shall not be entitled to notice and severance under any policy or plan of the Company (the payments set forth in this Severance Agreement being given in lieu thereof).

f. Except as set forth in paragraphs 6(b) and 6(b), you shall not be entitled to receive any other bonus or pro-rated bonus payment.

g. The payments under paragraphs 6(a) — 6(b) shall be made without regard to any duty to mitigate damages and shall not be reduced by any compensation received by you from any subsequent employment.

7. The payments and other benefits set forth in paragraph 6 are being offered solely in consideration for your execution of this Separation Agreement, including a release of all claims against the Company as set forth in paragraph 8 below. The payments are not an admission of any wrongdoing by the Company.

8. In exchange for the Company’s agreement as stated above, you agree to release and discharge unconditionally the Company and any successors, subsidiaries, affiliates, related entities, predecessors, merged entities and parent entities, and their respective officers, directors, stockholders, employees, benefit plan administrators and trustees, agents, attorneys, insurers, representatives, affiliates, successors and assigns, from any and all claims, actions, causes of action, demands, obligations or damages of any kind arising from your employment with the Company and the separation of that employment or otherwise, including the notice of your termination, whether known or unknown to you, which you ever had or now have upon or by reason of any matter, cause or thing, up to and including the day on which you sign this Separation Agreement. The claims you are waiving include, but are not limited to, all claims arising out of or related to any stock options held by you or granted to you by the Company which are scheduled to vest subsequent to your Separation Date; all claims under Title VII of the Civil Rights Act of 1964, as amended; all claims under the Worker Adjustment and Retraining Notification Act (WARN) or similar state statutes; all claims under the Americans with Disabilities Act; all claims under the Age Discrimination in Employment Act; all claims under the National Labor Relations Act; all claims under the Older Workers Benefit Protection Act (“OWBPA”); all claims under the Family and Medical Leave Act, to the extent permitted by law, all claims under the Employee Retirement Income Security Act; all claims under 42 U.S.C. § 1981; all claims under the Sarbanes-Oxley Act of 2002; all claims under state antidiscrimination laws; except in California, all claims for unreimbursed business expenses; all claims under any principle of common law; all claims concerning any right to reinstatement; and all claims for any type of relief from the Company, whether federal, state or local, whether statutory, regulatory or common law, and whether tort, contract or otherwise, to the fullest

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extent permitted by law. This release of claims does not affect any claim for workers’ compensation benefits, unemployment benefits or other non-waivable administrative claims, your vested rights, if any, in the Company’s 401(k) plan, your rights to exercise any and all Company stock options held by you that are exercisable as of your Separation Date during the applicable period of exercise and in accordance with all other terms of those options and the stock options plans, agreements, and notices under which such options were granted, or your right to enforce the terms of this Separation Agreement.

Notwithstanding the foregoing, in the event any of the Company’s successors, subsidiaries, affiliates, related entities, predecessors, merged entities and parent entities, or their respective officers, directors, stockholders, employees, benefit plan administrators and trustees, agents, attorneys, insurers, representatives, affiliates, successors and assigns bring any claim against you, you shall have the right to fully defend against such claims and may bring any counterclaims against such individuals or entities, without regard to this release.

9. In exchange for your agreement and covenants contained in this Agreement, the Company agrees to release and discharge you unconditionally, from any and all claims, actions, causes of action, demands, obligations or damages of any kind arising out of or relating to your employment with the Company, the separation of that employment, whether known or unknown to them, which they ever had or now have upon or by reason of any matter, cause or thing, up to and including the day on which the Company signs this Separation Agreement. The claims they are waiving include, but are not limited to, all claims under any principle of common law; and all claims for any type of relief from you, whether federal, state or local, whether statutory, regulatory or common law, and whether tort, contract or otherwise, to the fullest extent permitted by law. This release of claims does not affect the Company’s right to enforce the terms of this Separation Agreement.

10. The Company will provide you, within fifteen (15) days of your signature on this Separation Agreement, a full copy of your personnel file. Within seven (7) days of receipt of the file, you will mark any documents that you would like removed from the personnel file. Those documents marked and any copies of those documents will be removed from the personnel file and personnel records, and shall be held under seal by outside counsel for the Company. The documents held under seal shall not be released absent Court Order, subpoena or other compulsory process. A release signed by you shall not be sufficient to release the documents; however, a letter requesting the release of the documents from your personal counsel shall be sufficient. Notwithstanding anything in this paragraph, the Company shall not be limited in its right to maintain accurate information in its personnel records in order to appropriately respond to any governmental agency or in any governmental or legal proceeding or to provide its benefit vendors with accurate information. In the event the Company believes that any of the information that you have requested be removed and kept under seal is provided to any governmental agency or in any governmental or legal proceeding or provided to its benefit vendors, the Company shall notify you in writing within 10 days of such event and the reasons therefore.

11. The Company will provide you, within fifteen (15) days of your signing this Separation Agreement, a letter of recommendation, in a substantially and materially similar form as attached as Attachment 1, on AOL letterhead, signed by Timothy Armstrong, as CEO of AOL.

12. Except as set forth in Paragraph 11, the Company shall provide only a neutral reference for any inquiries from prospective employers, and shall affirmatively state that AOL’s policy is to provide only a Neutral Reference, and they will provide only the dates of employment, positions held, and salary information, if appropriate.

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13. You agree to reasonably assist the Company, in connection with any litigation, investigation or other matter involving your tenure as an employee, officer, or director of the Company, including, but not limited to, meetings with Company representatives and counsel and giving testimony in any legal proceeding involving the Company. The Company will pay you reasonable compensation for the time you spend on such matters and reimburse you for all reasonable out-of-pocket expenses incurred in rendering such assistance to the Company (not including attorney’s fees unless required by federal, state or local law).

14. The parties understand and agree that the terms of this Separation Agreement are confidential, and they agree not to disclose to others the terms of this Separation Agreement, except as otherwise permitted by law or with the written consent of each other, provided however, that this paragraph 14 does not preclude disclosure to your immediate family or for purposes of securing professional financial, tax or legal services, and for the Company on a strictly need to know basis, provided further that, prior to making any such disclosure, the parties will inform any such persons that this confidentiality clause is in effect and that they are also bound by it.

15. The parties agree not to affirmatively encourage or assist any person or entity in litigation against each other. This provision does not prohibit either party responding to a valid subpoena for documents or testimony or other lawful process; however, the parties agree to provide the other party with prompt notice of any such subpoena or process. The parties agree that they will not attempt to admit this Separation Agreement into evidence in any proceeding except one to enforce the terms of this Separation Agreement.

16. The Parties agree not to make any disparaging or untruthful remarks or statements about each other. The Company further agrees that it will take measure to ensure that its officers or senior executives (defined as the CEO and all direct reports to the CEO) do not make any disparaging or untruthful remarks or statements about your employment with the Company. Nothing in this Agreement prevents you or the Company from making truthful statements when required by law, court order, subpoena, or the like, to a governmental agency or body.

17. In accordance with the terms of this Agreement, you agree that in the event you are found in a court of law to be in breach of any of your obligations under this Separation Agreement, the Company may be entitled to receive the full amount paid under paragraph 6 above unless otherwise determined by the court and the Company will be entitled to obtain all other remedies provided by law or equity. In the event the Company is found in a court of law to be in breach of its obligations under this Separation Agreement, you will be entitled to appropriate relief as determined by the court. If any term or clause of this Separation Agreement should ever be determined to be unenforceable, you and the Company agree that this will not affect the enforceability of any other term or clause of this Separation Agreement.

18. Pursuant to the Older Workers Benefit Protection Act of 1990 (“OWBPA”), you acknowledge and warrant the following: (i) that you are waiving rights and claims for age discrimination under the ADEA and OWBPA, in exchange for the consideration described above, which is not otherwise due to you; (ii) you have consulted with an attorney before signing this Release and Waiver; (iii) you are not waiving rights or claims for age discrimination that

6

may arise after the effective date of this Release and Waiver; (iv) you have been given a period of at least twenty-one (21) days in which to consider this Release and Waiver and the waiver of any claims you have or may have under law, including your rights under the ADEA and OWBPA, before signing below; and (v) you understand that you may revoke the waiver of your age discrimination claims under the ADEA and OWBPA within seven (7) days after your execution of this Release and Waiver, and that such waiver shall not become effective or enforceable until seven (7) days after the date on which you execute this Release and Waiver.

To revoke, you must send a written statement of revocation delivered by certified mail to AOL LLC, Attn: Michaela Oliver, 22110 Pacific Blvd, Dulles, VA 20166. The revocation must be received no later than 5:00 p.m. on the seventh day following your execution of this Separation Agreement. If you do not so revoke, the eighth day following your acceptance will be the “effective date” of this Separation Agreement. If you have not returned the executed Separation Agreement within the time permitted, then the Company's offer will expire by its own terms at such time.

19. This Agreement shall be interpreted, construed and enforced in all respects in accordance with the laws of the Commonwealth of Virginia except for its conflicts of laws principles. Each Party irrevocably consents to the exclusive jurisdiction, forum and venue of the Circuit Court of Loudoun County, Virginia, and the United States District Court for the Eastern District of Virginia (Alexandria Division) over any and all claims, disputes, controversies or disagreements between the Parties or any of their respective subsidiaries, affiliates, successors and assigns under or related to this Agreement or any document executed pursuant to this Agreement or any of the transactions contemplated hereby.

To accept the Separation Agreement, you must sign below on or after your Separation Date and return one entire copy to AOL LLC, Attn: Michaela Oliver, 22110 Pacific Blvd., Dulles, VA 20166. (An extra copy for your files is enclosed.)

Sincerely,

/s/ David Harmon

David Harmon

Executive Vice President, Human Resources

AOL LLC

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By signing this Separation Agreement, I acknowledge that: I have had the opportunity to review this Separation Agreement carefully with legal or other personal advisors of my own choice; I understand that by signing this Separation Agreement I am releasing the Company of all claims against it; I have read this Separation Agreement and understand its terms; I have been given a reasonable period of time to consider its terms and effect and to ask any questions I may have; I voluntarily agree to the terms of this Separation Agreement.

AGREED AND ACCEPTED:
/s/ Kimberley A. Partoll	November 20, 2009
Kimberley Partoll	Date

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EX-10.35

Exhibit 10.35

HUMAN RESOURCES MEMORANDUM

TO:	Theodore Russell Cahall Jr. (ID 101738)
FROM:	Dave Harmon, EVP AOL Human Resources
CC:	Gillian Pon, VP AOL Human Resources, Total Rewards
DATE:	April 1, 2009
SUBJECT:	Retention Bonus Program

This memo is to notify you that you are eligible to participate in a one-time, discretionary retention bonus program (“Retention Bonus Program”) with AOL LLC (together with its subsidiaries and affiliates, “AOL” or “the Company”). This letter sets forth the key terms and conditions of your participation in the Retention Bonus Program.

1. Retention Bonus Program

a. Bonus Period. The Retention Bonus Program shall be effective from April 1, 2009 and shall end on March 31, 2010 (“Bonus Period”).

b. Bonus Payment. Subject to the Bonus Conditions set forth below, the total retention bonus amount for which you may be eligible shall be a one-time payment equal to $190,000, less applicable withholdings (“Bonus Payment”).

2. Retention Bonus Conditions

Your eligibility for the Bonus Payment shall be subject to and dependent upon you meeting the following conditions:

a. Employment. You must be a full-time, active employee of the Company throughout the entire Bonus Period, subject to the following conditions:

(i) Prior to the end of the Bonus Period, if AOL terminates your employment without cause, as defined below, in exchange for your execution and delivery of the Company’s standard separation agreement which contains, among other obligations, a valid release of all claims against the Company, you shall be entitled to receive any remaining, unpaid Bonus Payment under the Retention Bonus Program.

(ii) Prior to the end of the Bonus Period, if AOL terminates your employment for cause, as defined below, or if you resign your employment for any reason, you will not be entitled to any Bonus Payment (or any pro rata Bonus Payment) for the Bonus Period. If during the Bonus Period you move to another Time Warner entity, you will not be entitled to any Bonus Payment (or any pro rata Bonus Payment) for the Bonus Period.

(iii) Prior to the end of the Bonus Period, as a result of an “AOL Change of Control Transaction”, as defined as you no longer having a position with the Company, the Company agrees to terminate your employment and characterize such termination as a termination without cause for purposes of paragraph 2(a)(i) above. For purposes of this Retention Bonus Program, an “AOL Change in Control Transaction” means a transaction that results in (i) a transfer by the Company or any Affiliate of the Company of your employment to a corporation, company or other entity whose financial results are not consolidated with those of the Company or Time Warner, or (ii) a change in the ownership structure of the Company or Affiliate with which you are employed such that the Company’s or Affiliate’s financial results are no longer consolidated with those of Time Warner.

(iv) For purposes of this Paragraph, “cause” means: (i) your conviction of, or nolo contendere or guilty plea to, a felony (whether any right to appeal has been or may be exercised); (ii) your failure, in the sole discretion of the Company, to satisfactorily perform your duties and responsibilities for the Company; (iii) fraud, embezzlement, misappropriation, or material destruction of Company property by you; (iv) your breach of any statutory or common law duty of loyalty to the Company; (v) your violation of the Company’s Confidentiality, Non-competition and Proprietary Rights Agreement (the “CNPR Agreement”) or the Standards of Business Conduct; (vi) your improper conduct substantially prejudicial to the Company’s business; or (vii) your failure to cooperate in any internal or external investigation involving the Company.

b. Eligibility. Eligibility for participation in the Retention Bonus Program shall be determined by the Chairman and Chief Executive Officer and the Executive Vice President of the Human Resources department, at their sole and absolute discretion, and can be revised at any time, with or without notice, for any reason not prohibited by law.

c. Satisfactory Performance. You must perform your position in a satisfactory fashion throughout the entire Bonus Period. Satisfactory performance shall be determined by the Chairman and Chief Executive Officer and the Executive Vice President of the Human Resources department, at their sole and absolute discretion. If you are on a Performance Improvement Plan at the time of payout, you will not be deemed eligible to receive a bonus payment.

d. Leave of Absence. If you are on an approved leave of absence during the Bonus Period, you shall receive a Bonus Payment only upon your return to work. If you do not return from a leave of absence, you will not receive a Bonus Payment.

e. Payment Dates and Withholdings. Any Bonus Payment to which you may be awarded under this Retention Bonus Program shall be paid, less applicable withholdings, on your next regularly scheduled pay date following the end of the Bonus Period, unless local law requires that it be paid sooner. If AOL terminates your employment without cause as referenced in paragraph 2(a)(i)

above, AOL will pay any remaining, unpaid Bonus Payment, less applicable withholdings, within four (4) weeks of its receipt of your executed separation agreement.

f. CNPR Agreement/Non-Disparagement. You agree to comply with the current version of the Company’s Confidentiality, Non-competition and Proprietary Rights Agreement (the “CNPR Agreement”) which is incorporated herein by reference. In addition, you agree not to make any disparaging or untruthful remarks or statements about the Company, its officers, directors, employees or agents, and to comply with the Standards of Business Conduct and all other relevant policies of the Company.

g. Confidentiality. You agree to keep the existence and details of the Retention Bonus Program, including your participation in the Retention Bonus Program, strictly confidential. Any breach of this provision shall result in forfeiture of your eligibility for the Bonus Payment or your return of the Bonus Payment to the Company if previously paid to you.

All other terms and conditions of your employment with the Company remain in full force and effect. Your employment with the Company remains at-will, unless otherwise provided in a separate writing signed by an authorized officer of the Company. Nothing in this letter or the Retention Bonus Program is intended to create a contract for employment or guarantee of continued employment with the Company for any period of time. The Bonus Program is a discretionary incentive provided by the Company. It is not intended to be a payment of wages for services performed and no entitlement to any bonus payment should arise unless all of the stated terms and conditions of this Bonus Program have been satisfied in the Company’s sole and absolute discretion.

Please sign and date a copy of this memo and return it to Gillian Pon, via fax (703-265-7825) or interoffice mail by April 30^th , 2009 if you wish to participate in this Retention Bonus Program. If you have any questions, please do not hesitate to contact People Direct (PeopleDirect@corp.aol.com).

ACCEPTED:	/s/ Theodore Russell Cahall Jr.	DATE:	4/3/09
	Theodore Russell Cahall Jr.

EX-10.36

Exhibit 10.36

AOL INC.

NON-QUALIFIED STOCK OPTION AGREEMENT

This NON-QUALIFIED STOCK OPTION AGREEMENT (this “Agreement”) is dated as of December 9, 2009 by and between AOL Inc., a Delaware corporation (the “Company”), and Timothy M. Armstrong (the “Participant”).

WHEREAS, the Participant, an employee and officer of the Company and formerly an officer and employee of AOL, LLC (“AOL LLC”), a Delaware limited liability company and subsidiary of Time Warner Inc., a Delaware corporation (“TWX”), was granted a non-qualified stock option to purchase shares of TWX common stock on April 15, 2009 pursuant to a stock incentive plan of TWX (the “TWX Stock Option”);

WHEREAS, the Company, and TWX entered into that certain Separation and Distribution Agreement, dated as of November 16, 2009 (the “Separation Agreement”), in which TWX agreed to distribute to its shareholders its entire interest in the Company by way of a stock dividend to be made to holders of TWX common stock;

WHEREAS, the distribution of AOL Inc. shares of common stock to TWX shareholders contemplated by the Separation Agreement (the “Distribution”) occurred on December 9, 2009;

WHEREAS, in connection with the Distribution, the Company, TWX, and AOL LLC entered into that certain Employee Matters Agreement with regard to certain employment, compensation and employee benefits matters, dated as of November 16, 2009 (the “Employee Matters Agreement”);

WHEREAS, the Company has adopted the Plan (as defined below), the terms of which are hereby incorporated by reference and made a part of this Agreement; and

WHEREAS, pursuant to Section 12.02 of the Employee Matters Agreement and Appendix A of the Plan, the Participant’s TWX Stock Option shall be converted into an Option (as defined below) and subject to the Plan and the terms set forth herein.

NOW, THEREFORE, in consideration of the mutual covenants hereinafter set forth, the parties agree as follows:

1. Definitions. Whenever the following terms are used in this Agreement, they shall have the meanings set forth below. Capitalized terms not otherwise defined herein shall have the same meanings as in the Plan.

(a) “Cause” means, “Cause” as defined in an employment agreement between the Company or any of its Affiliates and the Participant or, if not defined therein or if there is no such agreement, “Cause” includes (and is not limited to) dishonesty with respect to the Company or any Affiliate, insubordination, substantial malfeasance or non-feasance of duty, unauthorized disclosure of confidential information, and conduct substantially prejudicial to the business of the Company or any Affiliate. The determination of the Committee as to the existence of “Cause” will be conclusive on the Participant and the Company.

(b) “Disability” means, “Disability” as defined in an employment agreement between the Company or any of its Affiliates and the Participant or, if not defined therein or if there shall be no such agreement, “disability” of the Participant shall have the meaning ascribed to such term in the Company’s long-term disability plan or policy, as in effect from time to time.

(c) “Employment Agreement” means the employment agreement originally made March 12, 2009 among AOL LLC, Time Warner Inc. and the Participant, as amended.

(d) “Expiration Date” means the date set forth on the Notice (as defined below).

(e) “Good Reason” means “Good Reason” as defined in an employment agreement between the Company or any of its Affiliates and the Participant or, if not defined therein or if there is no such agreement, “Good Reason” means (i) a breach by the Company or any Affiliate of any employment or consulting agreement to which the Participant is a party and (ii) following a Change in Control, (x) the failure of the Company to pay or cause to be paid the Participant’s base salary or annual bonus when due or (y) any substantial and sustained diminution in the Participant’s authority or responsibilities materially inconsistent with the Participant’s position; provided that either of the events described in clauses (x) and (y) will constitute Good Reason only if the Company fails to cure such event within 30 days after receipt from the Participant of written notice of the event which constitutes Good Reason; provided, further, that “Good Reason” will cease to exist for an event on the sixtieth (60^th) day following the later of its occurrence or the Participant’s knowledge thereof, unless the Participant has given the Company written notice of his or her termination of employment for Good Reason prior to such date.

(f) “Notice” means (i) the Notice of Grant of Stock Option that accompanies this Agreement, if this Agreement is delivered to the Participant in “hard copy,” and (ii) the screen of the website for the stock plan administration with the heading “Vesting Schedule and Details,” which contains the details of the grant governed by this Agreement, if this Agreement is delivered electronically to the Participant.

(g) “Plan” means the AOL Inc. 2010 Stock Incentive Plan, as the same may be amended, supplemented or modified from time to time.

(h) “Retirement” means a voluntary termination of employment by the Participant (i) following the attainment of age 55 with ten (10) or more years of service with the Company or any Affiliate or (ii) pursuant to a retirement plan or early retirement program of the Company or any Affiliate.

(i) “Vested Portion” means, at any time, the portion of an Option which has become vested, as described in Section 3 of this Agreement.

2. Grant of Option. The Company hereby grants to the Participant the right and option (the “Option”) to purchase, on the terms and conditions hereinafter set forth, the number of Shares set forth on the Notice, subject to adjustment as set forth in the Plan. The

purchase price of the Shares subject to the Option (the “Option Price”) shall be as set forth on the Notice. The Option is intended to be a non-qualified stock option, and as such is not intended to be treated as an option that complies with Section 422 of the Internal Revenue Code of 1986, as amended. The Option granted hereby constitutes a “Converted Award” issued pursuant to Appendix A of the Plan and the “Converted AOL Options” described in Section 12.02 of the Employees Matter Agreement for the “First Replacement Options” described in the Employment Agreement.

3. Vesting of the Option.

(a) In General. Subject to Sections 3(b) and 3(c), the Option shall vest and become exercisable at such times as are set forth in the Notice.

(b) Change in Control. Notwithstanding the foregoing, in the event of a Change in Control, the unvested portion of the Option, to the extent not previously cancelled or forfeited, shall immediately become vested and exercisable upon the earlier of (i) the first anniversary of the Change in Control or (ii) the termination of the Participant’s Employment (A) by the Company other than for Cause (unless such termination is due to death or Disability) or (B) by the Participant for Good Reason.

(c) Termination of Employment. If the Participant’s Employment with the Company and its Affiliates terminates for any reason (including, unless otherwise determined by the Committee, a Participant’s change in status from an employee to a non-employee (other than director of the Company or any Affiliate)), the Option, to the extent not then vested, shall be immediately canceled by the Company without consideration; provided, however, that if the Participant’s Employment terminates due to death, Disability or Retirement or if the Participant’s Employment is terminated as a result of a termination pursuant to Section 4.2 of the Employment Agreement and subject to Section 4.4 thereof, the unvested portion of the Option, to the extent not previously cancelled or forfeited, shall immediately become vested and exercisable. The Vested Portion of the Option shall remain exercisable for the period set forth in Section 4(a) of this Agreement. If the Participant is absent from work with the Company or with an Affiliate because of a temporary disability (any disability other than a Disability), or on an approved leave of absence for any purpose, the Participant shall not, during the period of any such absence, be deemed, by virtue of such absence alone, to have terminated Employment, except to the extent that the Committee so determines.

4. Exercise of Option.

(a) Period of Exercise. Subject to the provisions of the Plan and this Agreement, and the terms of any employment agreement entered into by the Participant and the Company or an Affiliate that provides for treatment of Options that is more favorable to the Participant than clauses (i) – (vii) of this Section 4(a), the Participant may exercise all or any part of the Vested Portion of the Option at any time prior to the closing time of trading on the Expiration Date (or 5:00 p.m. Eastern time on the Expiration Date, if earlier). Notwithstanding the foregoing, if the Participant’s Employment terminates prior to the Expiration Date, the Vested Portion of the Option shall remain exercisable for the period set forth below. If the last day on which the Option may be exercised, whether the Expiration Date or due to a termination of the Optionee’s

Employment prior to the Expiration Date, is a Saturday, Sunday or other day that is not a trading day on the New York Stock Exchange (the “NYSE”) or, if the Company’s Shares are not then listed on the NYSE, such other stock exchange or trading system that is the primary exchange on which the Company’s Shares are then traded, then the last day on which the Option may be exercised shall be the preceding trading day on the NYSE or such other stock exchange or trading system.

(i) Death or Disability. If the Participant’s Employment with the Company and its Affiliates terminates due to the Participant’s death or Disability, the Participant (or his or her representative) may exercise the Vested Portion of the Option for a period ending on the earlier of (A) three (3) years following the date of such termination and (B) the Expiration Date;

(ii) Retirement. If the Participant’s Employment with the Company and its Affiliates terminates due to the Participant’s Retirement, the Participant may exercise the Vested Portion of the Option for a period ending on the earlier of (A) five (5) years following the date of such termination and (B) the Expiration Date; provided, that if the Company or any Affiliate has given the Participant notice that the Participant’s Employment is being terminated for Cause prior to the Participant’s election to terminate due to the Participant’s Retirement, then the provisions of Section 4(a)(v) shall control;

(iii) Unsatisfactory Performance; Voluntary Termination without Good Reason. If the Participant’s Employment with the Company and its Affiliates is terminated by the Company or an Affiliate (other than after a Change in Control as set forth in Section 4(a)(vi)) for unsatisfactory performance, but not for Cause (as determined in its sole discretion by the Company or any Affiliate), or the Participant voluntarily terminates Employment at any time without Good Reason, the Participant may exercise the Vested Portion of the Option for a period ending on the earlier of (A) three months following the date of such termination and (B) the Expiration Date; provided, that if Participant satisfies the age and service requirements described in the definition of “Retirement,” then the provisions of Section 4(a)(ii) shall control; provided further, that if the Company or any Affiliate has given the Participant notice that the Participant’s Employment is being terminated for Cause prior to the Participant’s election to voluntarily terminate Employment without Good Reason, then the provisions of Section 4(a)(v) shall control;

(iv) Termination other than for Cause. Subject to the provision of Section 4(a)(vi), if the Participant’s Employment with the Company and its Affiliates is terminated by the Company or an Affiliate for any reason other than by the Company or its Affiliates for Cause, unsatisfactory performance or due to the Participant’s death or Disability, the Participant may exercise the Vested Portion of the Option for a period ending on the earlier of (A) one year following the date of such termination and (B) the Expiration Date; provided that if Participant satisfies the age and service requirements described in the definition of “Retirement,” then the provisions of Section 4(a)(ii) shall control;

(v) Termination by the Company for Cause. If the Participant’s Employment with the Company and its Affiliates is terminated by the Company or an Affiliate for Cause, the Participant may exercise the Vested Portion of the Option for a period ending on the earlier of (A) one month following the date of such termination and (B) the Expiration Date; provided, however, that if the Participant is terminated by the Company or an Affiliate for Cause on account of one or more acts of fraud, embezzlement or misappropriation committed by the Participant, the Vested Portion of the Option shall immediately terminate in full and cease to be exercisable;

(vi) After a Change in Control. If the Participant’s Employment with the Company and its Affiliates terminates after a Change in Control due to a termination by the Company other than for Cause or due to the Participant’s resignation for Good Reason, the Participant may exercise the Vested Portion of the Option for a period ending on the earlier of (A) one year following the date of such termination and (B) the Expiration Date; provided that if Participant satisfies the age and service requirements described in the definition of “Retirement,” then the provisions of Section 4(a)(ii) shall control; and

(vii) Transfers of Employment. If (i) the Company or any Affiliate transfers the Participant’s Employment to a corporation, company or other entity that is not an Affiliate or (ii) the Affiliate with which the Participant has a service relationship ceases to be an Affiliate due to a sale or other disposition by the Company or an Affiliate, the Option, to the extent not then vested, shall be immediately canceled by the Company without consideration and the Participant may exercise the Vested Portion of the Option for a period ending on the earlier of (A) one year following the date of such transfer, sale or other disposition and (B) the Expiration Date; provided that if Participant satisfies the age and service requirements described in the definition of “Retirement,” then the provisions of Section 4(a)(ii) shall control.

(b) Method of Exercise.

(i) Subject to Section 4(a) of this Agreement, the Vested Portion of an Option may be exercised by delivering to the Company at its principal office written notice of intent to so exercise; provided that the Option may be exercised with respect to whole Shares only. Such notice shall specify the number of Shares for which the Option is being exercised, shall be signed (whether or not in electronic form) by the person exercising the Option and shall make provision for the payment of the Option Price. Payment of the aggregate Option Price shall be paid to the Company, at the election of the Committee, pursuant to one or more of the following methods: (A) in cash, or its equivalent; (B) by transferring Shares having a Fair Market Value equal to the aggregate Option Price for the Shares being purchased to the Company and satisfying such other requirements as may be imposed by the Committee; provided that such Shares have been held by the Participant for no less than six (6) months (or such other period as established from time to time by the Committee or generally accepted accounting principles); (C) partly in cash and partly in Shares; or (D) if there is a public market for the Shares at such time, subject to such rules as may be established by the Committee, through delivery of irrevocable instructions to a broker to sell the Shares otherwise deliverable upon the

exercise of the Option and to deliver promptly to the Company an amount equal to the aggregate Option Price. No Participant shall have any rights to dividends or other rights of a stockholder with respect to the Shares subject to the Option until the issuance of the Shares.

(ii) Notwithstanding any other provision of the Plan or this Agreement to the contrary, absent an available exemption to registration or qualification, the Option may not be exercised prior to the completion of any registration or qualification of the Option or the Shares under applicable state and federal securities or other laws, or under any ruling or regulation of any governmental body or national securities exchange that the Committee shall in its sole reasonable discretion determine to be necessary or advisable.

(iii) Upon the Company’s determination that the Option has been validly exercised as to any of the Shares, the Company shall issue certificates in the Participant’s name for such Shares. However, the Company shall not be liable to the Participant for damages relating to any delays in issuing the certificates to the Participant, any loss by the Participant of the certificates, or any mistakes or errors in the issuance of the certificates or in the certificates themselves.

(iv) In the event of the Participant’s death, the Vested Portion of an Option shall remain vested and exercisable by the Participant’s executor or administrator, or the person or persons to whom the Participant’s rights under this Agreement shall pass by will or by the laws of descent and distribution as the case may be, to the extent set forth in Section 4(a) of this Agreement. Any heir or legatee of the Participant shall take rights herein granted subject to the terms and conditions hereof.

(v) As a condition to the exercise of any Option evidenced by this Agreement, the Participant agrees to hold, for a period of twelve (12) months following the date of such exercise, a number of Shares issued pursuant to such exercise, equal to 75% (rounded down to the nearest whole Share) of the quotient of (A) and (B), where (A) is the product of (1) the number of Shares exercised by the Participant multiplied by (2) fifty percent (50%) of the excess of the Fair Market Value of a Share on the date of exercise over the exercise price and (B) is the Fair Market Value of a Share on the date of exercise. The holding requirement related to Shares that is established in this Section 4(b)(v) shall terminate with respect to the Options evidenced by this Agreement (as well as any Shares issued pursuant to exercise of such Options) on the first anniversary of the date of termination of the Participant’s Employment with the Company or its Affiliates.

5. No Right to Continued Employment. Neither the Plan nor this Agreement shall be construed as giving the Participant the right to be retained in the Employment of the Company or any Affiliate. Further, the Company or its Affiliate may at any time dismiss the Participant or discontinue any other relationship, free from any liability or any claim under the Plan or this Agreement, except as otherwise expressly provided herein.

6. Legend on Certificates. The certificates representing the Shares purchased by exercise of an Option shall be subject to such stop transfer orders and other restrictions as the

Committee may deem reasonably advisable under the Plan or the rules, regulations, and other requirements of the Securities and Exchange Commission, any stock exchange upon which such Shares are listed, any applicable federal or state laws and the Company’s Articles of Incorporation and Bylaws, and the Committee may cause a legend or legends to be put on any such certificates to make appropriate reference to such restrictions.

7. Transferability. Unless otherwise determined by the Committee, an Option may not be assigned, alienated, pledged, attached, sold or otherwise transferred or encumbered by the Participant otherwise than by will or by the laws of descent and distribution, and any such purported assignment, alienation, pledge, attachment, sale, transfer or encumbrance shall be void and unenforceable against the Company or any Affiliate.

8. Withholding. The Participant may be required to pay to the Company or its Affiliate and the Company or its Affiliate shall have the right and is hereby authorized to withhold from any payment due or transfer made under the Option or under the Plan or from any compensation or other amount owing to a Participant the amount (in cash, Shares, other securities, other Awards or other property) of any applicable withholding taxes in respect of the Option, its exercise, or any payment or transfer under the Option or under the Plan and to take such action as may be necessary in the option of the Company to satisfy all obligations for the payment of such taxes.

9. Securities Laws. Upon the acquisition of any Shares pursuant to the exercise of an Option, the Participant will make or enter into such written representations, warranties and agreements as the Committee may reasonably request in order to comply with applicable securities laws or with this Agreement.

10. Notices. Any notice under this Agreement shall be addressed to the Company in care of its General Counsel at the principal executive office of the Company, with a copy to the Director, Global Stock Plans Administration, at the principal executive office of the Company, and to the Participant at the address appearing in the personnel records of the Company for the Participant or to either party at such other address as either party hereto may hereafter designate in writing to the other. Any such notice shall be deemed effective upon receipt thereof by the addressee.

11. Personal Data. The Company, the Participant’s local employer and the local employer’s parent company or companies may hold, collect, use, process and transfer, in electronic or other form, certain personal information about the Participant for the exclusive purpose of implementing, administering and managing the Participant’s participation in the Plan. Participant understands that the following personal information is required for the above named purposes: his/her name, home address and telephone number, office address (including department and employing entity) and telephone number, e-mail address, date of birth, citizenship, country of residence at the time of grant, work location country, system employee ID, employee local ID, employment status (including international status code), supervisor (if applicable), job code, title, salary, bonus target and bonuses paid (if applicable), termination date and reason, tax payer’s identification number, tax equalization code, US Green Card holder status, contract type (single/dual/multi), any shares of stock or directorships held in the Company, details of all stock option grants (including number of grants, grant dates, exercise

price, vesting type, vesting dates, expiration dates, and any other information regarding options that have been granted, canceled, vested, unvested, exercisable, exercised or outstanding) with respect to the Participant, estimated tax withholding rate, brokerage account number (if applicable), and brokerage fees (the “Data”). Participant understands that Data may be collected from the Participant directly or, on Company’s request, from Participant’s local employer. Participant understands that Data may be transferred to third parties assisting the Company in the implementation, administration and management of the Plan, including the brokers approved by the Company, the broker selected by the Participant from among such Company-approved brokers (if applicable), tax consultants and the Company’s software providers (the “Data Recipients”). Participant understands that some of these Data Recipients may be located outside the Participant’s country of residence, and that the Data Recipient’s country may have different data privacy laws and protections than the Participant’s country of residence. Participant understands that the Data Recipients will receive, possess, use, retain and transfer the Data, in electronic or other form, for the purposes of implementing, administering and managing the Participant’s participation in the Plan, including any requisite transfer of such Data as may be required for the administration of the Plan and/or the subsequent holding of shares of common stock on the Participant’s behalf by a broker or other third party with whom the Participant may elect to deposit any shares of common stock acquired pursuant to the Plan. Participant understands that Data will be held only as long as necessary to implement, administer and manage the Participant’s participation in the Plan. Participant understands that Data may also be made available to public authorities as required by law, e.g., to the U.S. government. Participant understands that the Participant may, at any time, review Data and may provide updated Data or corrections to the Data by written notice to the Company. Except to the extent the collection, use, processing or transfer of Data is required by law, Participant may object to the collection, use, processing or transfer of Data by contacting the Company in writing. Participant understands that such objection may affect his/her ability to participate in the Plan. Participant understands that he/she may contact the Company’s Stock Plan Administration to obtain more information on the consequences of such objection.

12. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of New York, without regard to conflicts of laws, and any and all disputes between the Participant and the Company or any Affiliate relating to the Option shall be brought only in a state or federal court of competent jurisdiction sitting in Manhattan, New York, and the Participant and the Company and any Affiliate hereby irrevocably submit to the jurisdiction of any such court and irrevocably agree that venue for any such action shall be only in any such court.

13. Entire Agreement. This Agreement, together with the Notice and the Plan, and your Employment Agreement embody the entire agreement and understanding between the parties hereto with respect to the subject matter hereof and supersede all prior oral or written agreements and understandings relating to the subject matter hereof. This Agreement and the Notice shall be subject to and governed by the Plan, and in the event of any inconsistency between the provisions of this Agreement or the Notice and the provisions of the Plan, the provisions of the Plan shall govern. In the event of any ambiguity, conflict or inconsistency between any of this Agreement, the Notice or the Plan, on the one hand, and the Employment Agreement, on the other hand, the terms of the Employment Agreement shall take precedence and control.

14. Modifications And Amendments. The terms and provisions of this Agreement and the Notice may be modified or amended as provided in the Plan.

15. Waivers And Consents. Except as provided in the Plan, the terms and provisions of this Agreement and the Notice may be waived, or consent for the departure therefrom granted, only by a written document executed by the party entitled to the benefits of such terms or provisions. No such waiver or consent shall be deemed to be or shall constitute a waiver or consent with respect to any other terms or provisions of this Agreement or the Notice, whether or not similar. Each such waiver or consent shall be effective only in the specific instance and for the purpose for which it was given, and shall not constitute a continuing waiver or consent.

16. Reformation; Severability. If any provision of this Agreement or the Notice (including any provision of the Plan that is incorporated herein by reference) shall hereafter be held to be invalid, unenforceable or illegal, in whole or in part, in any jurisdiction under any circumstances for any reason, (i) such provision shall be reformed to the minimum extent necessary to cause such provision to be valid, enforceable and legal while preserving the intent of the parties as expressed in, and the benefits of the parties provided by, this Agreement, the Notice and the Plan or (ii) if such provision cannot be so reformed, such provision shall be severed from this Agreement or the Notice and an equitable adjustment shall be made to this Agreement or the Notice (including, without limitation, addition of necessary further provisions) so as to give effect to the intent as so expressed and the benefits so provided. Such holding shall not affect or impair the validity, enforceability or legality of such provision in any other jurisdiction or under any other circumstances. Neither such holding nor such reformation or severance shall affect the legality, validity or enforceability of any other provision of this Agreement, the Notice or the Plan.

17. Entry into Force. By entering into this Agreement, the Participant agrees and acknowledges that (i) the Participant has received and read a copy of the Plan and (ii) the Option is granted pursuant to the Plan and is therefore subject to all of the terms of the Plan. The Participant acknowledges and agrees that the Participant may be entitled from time to time to receive certain other documents related to the Company, including the Company’s annual report to stockholders and proxy statement related to its annual meeting of stockholders (which become available each year approximately three months after the end of the calendar year), and the Participant consents to receive such documents electronically through the Internet or as the Company otherwise directs.

EX-10.39

Exhibit 10.39

Restricted Stock Units Agreement

General Terms and Conditions

This RESTRICTED STOCK UNITS AGREEMENT (this “Agreement”), dated as of December 9, 2009, is by and between AOL Inc., a Delaware corporation (the “Company”), and Timothy M. Armstrong.

WHEREAS, the Participant, an employee and officer of the Company and formerly an officer and employee of AOL, LLC, (“AOL LLC”) a Delaware limited liability company and subsidiary of Time Warner Inc., a Delaware corporation (“TWX”), was granted restricted stock units of TWX on April 15, 2009 pursuant to a stock incentive plan of TWX (“TWX RSUs”);

WHEREAS, the Company, and TWX entered into that certain Separation and Distribution Agreement, dated as of November 16, 2009 (the “Separation Agreement”), in which TWX agreed to distribute to its shareholders its entire interest in the Company by way of a stock dividend to be made to holders of TWX common stock;

WHEREAS, the distribution of AOL Inc. shares of common stock to TWX shareholders contemplated by the Separation Agreement (the “Distribution”) occurred on December 9, 2009;

WHEREAS, in connection with the Distribution, the Company, TWX, and AOL LLC entered into that certain Employee Matters Agreement with regard to certain employment, compensation and employee benefits matters, dated as of November 16, 2009 (the “Employee Matters Agreement”);

WHEREAS, the Company has adopted the Plan (as defined below), the terms of which are hereby incorporated by reference and made a part of this Agreement; and

WHEREAS, pursuant to Section 12.02 of the Employee Matters Agreement and Appendix A of the Plan, the Participant’s TWX RSUs shall be converted into restricted stock units of the Company (the “RSUs”) and subject to the Plan and the terms set forth herein.

NOW, THEREFORE, in consideration of the mutual covenants hereinafter set forth, the parties agree as follows:

1. Definitions. Whenever the following terms are used in this Agreement, they shall have the meanings set forth below. Capitalized terms not otherwise defined herein shall have the same meanings as in the Plan.

a) “Cause” means, “Cause” as defined in an employment agreement between the Company or any of its Affiliates and the Participant or, if not defined therein or if there is no such agreement, “Cause” means (i) Participant’s continued failure substantially to perform such Participant’s duties (other than as a result of total or

partial incapacity due to physical or mental illness) for a period of ten (10) days following written notice by the Company or any of its Affiliates to the Participant of such failure, (ii) dishonesty in the performance of the Participant’s duties, (iii) Participant’s conviction of, or plea of nolo contendere to, a crime constituting (A) a felony under the laws of the United States or any state thereof or (B) a misdemeanor involving moral turpitude, (iv) Participant’s insubordination, willful malfeasance or willful misconduct in connection with Participant’s duties or any act or omission which is injurious to the financial condition or business reputation of the Company or any of its Affiliates, or (v) Participant’s breach of any non-competition, non-solicitation or confidentiality provisions to which the Participant is subject. The determination of the Committee as to the existence of “Cause” will be conclusive on the Participant and the Company.

b) “Disability” means, “Disability” as defined in an employment agreement between the Company or any of its Affiliates and the Participant or, if not defined therein or if there shall be no such agreement, “disability” of the Participant shall have the meaning ascribed to such term in the Company’s long-term disability plan or policy, as in effect from time to time, to the extent that such definition also constitutes such Participant being considered “disabled” under Section 409A(a)(2)(C) of the Code.

c) “Employment Agreement” means the employment agreement originally made March 12, 2009 among AOL LLC, Time Warner Inc. and the Participant, as amended.

d) “Good Reason” means “Good Reason” as defined in an employment agreement between the Company or any of its Affiliates and the Participant or, if not defined therein or if there is no such agreement, “Good Reason” means (i) the failure of the Company to pay or cause to be paid the Participant’s base salary or annual bonus when due or (ii) any substantial and sustained diminution in the Participant’s authority or responsibilities materially inconsistent with the Participant’s position; provided that either of the events described in clauses (i) and (ii) will constitute Good Reason only if the Company fails to cure such event within 30 days after receipt from the Participant of written notice of the event which constitutes Good Reason; provided, further, that “Good Reason” will cease to exist for an event on the sixtieth (60^th) day following the later of its occurrence or the Participant’s knowledge thereof, unless the Participant has given the Company written notice of his or her termination of employment for Good Reason prior to such date.

e) “Notice” means (i) the Notice of Grant of Restricted Stock Units that accompanies this Agreement, if this Agreement is delivered to the Participant in “hard copy,” and (ii) the screen of the website for the stock plan administration with the heading “Vesting Schedule and Details,” which contains the details of the grant governed by this Agreement, if this Agreement is delivered electronically to the Participant.

f) “Participant” means Timothy M. Armstrong, the individual to whom RSUs have been awarded hereunder pursuant to the Plan and shall have the same meaning as may be assigned to the terms “Holder” or “Participant” in the Plan.

g) “Plan” means the AOL Inc. 2010 Stock Incentive Plan, as the same may be amended, supplemented or modified from time to time.

h) “Retirement” means a voluntary termination of employment by the Participant (i) following the attainment of age 55 with ten (10) or more years of service as an employee or a director with the Company or any Affiliate or (ii) pursuant to the retirement plan or program of the Company or any Affiliate that is applicable to the Participant.

i) “Severance Period” means the period of time following a termination of Employment during which a Participant is entitled to receive both salary continuation payments and continued participation under the health benefit plans of the Company or any of its Affiliates, whether pursuant to an employment contract with, or a severance plan or other arrangement maintained by, the Company or any Affiliate. For the avoidance of doubt, unless otherwise determined by the Committee, the Severance Period shall not include any time period following the date on which a Participant commences employment with a subsequent employer that is not an Affiliate, regardless of whether the Participant continues to receive salary continuation payments from the Company or any Affiliate after such date.

j) “Shares” means shares of Common Stock of the Company.

k) “Vesting Date” means each vesting date set forth in the Notice.

2. Grant of Restricted Stock Units. The Company hereby grants to the Participant (the “Award”), on the terms and conditions hereinafter set forth, the number of RSUs set forth on the Notice. Each RSU represents the unfunded, unsecured right of the Participant to receive a Share on the date(s) specified herein. RSUs do not constitute issued and outstanding shares of Common Stock for any corporate purposes and do not confer on the Participant any right to vote on matters that are submitted to a vote of holders of Shares. The RSUs granted hereby constitute a “Converted Award” issued pursuant to Appendix A of the Plan and the “Converted AOL RSUs” described in Section 12.02 of the Employees Matter Agreement for the “First Replacement RSUs” described in the Employment Agreement.

3. Dividend Equivalents and Retained Distributions. If on any date while RSUs are outstanding hereunder the Company shall pay any regular cash dividend on the Shares, the Participant shall be paid, for each RSU held by the Participant on the record date, an amount of cash equal to the dividend paid on a Share (the “Dividend Equivalents”) at the time that such dividends are paid to holders of Shares. If on any date while RSUs are outstanding hereunder the Company shall pay any dividend other than a regular cash dividend or make any other distribution on the Shares, the Participant shall be credited

with a bookkeeping entry equivalent to such dividend or distribution for each RSU held by the Participant on the record date for such dividend or distribution, but the Company shall retain custody of all such dividends and distributions unless the Board has in its sole discretion determined that an amount equivalent to such dividend or distribution shall be paid currently to the Participant (the “Retained Distributions”); provided, however, that if the Retained Distribution relates to a dividend paid in Shares, the Participant shall receive an additional amount of RSUs equal to the product of (I) the aggregate number of RSUs held by the Participant pursuant to this Agreement through the related dividend record date, multiplied by (II) the number of Shares (including any fraction thereof) payable as a dividend on a Share. Retained Distributions will not bear interest and will be subject to the same restrictions as the RSUs to which they relate. Notwithstanding anything else contained in this paragraph 3, no payment of Dividend Equivalents or Retained Distributions shall occur before the first date on which a payment could be made without subjecting the Participant to tax under the provisions of Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”).

4. Vesting and Delivery of Vested Securities.

a) Subject to the terms and provisions of the Plan and this Agreement, no later than 30 days after each Vesting Date with respect to the Award, the Company shall issue or transfer to the Participant the number of Shares corresponding to such Vesting Date and the Retained Distributions, if any, covered by that portion of the Award. Except as otherwise provided in paragraphs 5, 6 and 7, the vesting of such RSUs and any Retained Distributions relating thereto shall occur only if the Participant has continued in Employment of the Company or any of its Affiliates on the Vesting Date and has continuously been so employed since the Date of Grant (as defined in the Notice).

b) RSUs Extinguished. Upon each issuance or transfer of Shares in accordance with this Agreement, a number of RSUs equal to the number of Shares issued or transferred to the Participant shall be extinguished and such number of RSUs will not be considered to be held by the Participant for any purpose.

c) Final Issuance. Upon the final issuance or transfer of Shares and Retained Distributions, if any, to the Participant pursuant to this Agreement, in lieu of a fractional Share, the Participant shall receive a cash payment equal to the Fair Market Value of such fractional Share.

d) Section 409A. Notwithstanding anything else contained in this Agreement, no Shares shall be issued or transferred to a Participant before the first date on which a payment could be made without subjecting the Participant to tax under the provisions of Section 409A of the Code.

5. Termination of Employment.

Subject to the provisions of the Plan and this Agreement and the terms of any employment agreement entered into by the Participant and the Company that provides for the treatment of RSUs that is more favorable to the Participant than this Section 5:

(a) If the Participant’s Employment with the Company and its Affiliates is terminated by the Participant for any reason other than those described in clauses (b) and (c) below prior to the Vesting Date with respect to any portion of the Award, then the RSUs covered by any such portion of the Award and all Retained Distributions relating thereto shall be completely forfeited on the date of any such termination, unless otherwise provided in an employment agreement between the Participant and the Company or an Affiliate.

(b) If the Participant’s Employment terminates (i) as a result of his or her death or Disability or (ii) as a result of his or her Retirement or is terminated by the Company and its Affiliates for any reason other than for Cause on a date when the Participant satisfies the requirements for Retirement, then the RSUs for which a Vesting Date has not yet occurred and all Retained Distributions relating thereto shall, to the extent the RSUs were not extinguished prior to such termination of Employment, fully vest on the date of any such termination and Shares subject to the RSUs shall be issued or transferred to the Participant, as soon as practicable, but no later than 90 days following such termination of Employment.

(c) If the Participant’s Employment is terminated by the Company and its Affiliates for any reason other than for Cause (unless such termination is due to death or Disability), then a pro rata portion of the RSUs that were scheduled to vest on the next Vesting Date, and on any subsequent Vesting Dates that occur during a Severance Period, and any Retained Distributions relating thereto, shall, to the extent the RSUs were not extinguished prior to such termination of Employment, become vested, and Shares subject to such RSUs shall be issued or transferred to the Participant on each such Vesting Date following such termination of Employment, determined as follows:

(x) the number of RSUs covered by the portion of the Award that were scheduled to vest on such Vesting Date multiplied by;

(y) a fraction, the numerator of which shall be the number of days from the last Vesting Date (or the Date of Grant if there was no prior Vesting Date) during which the Participant either remained in Employment or was within a covered Severance Period, and the denominator of which shall be the number of days from the last Vesting Date (or the Date of Grant if there was no prior Vesting Date).

If the product of (x) and (y) results in a fractional share, such fractional share shall be rounded to the next higher whole share.

The RSUs and any Retained Distributions related thereto that have not vested shall be completely forfeited on the date of any such termination.

For purposes of this paragraph 5, a temporary leave of absence shall not constitute a termination of Employment or a failure to be continuously employed by the Company or any Affiliate regardless of the Participant’s payroll status during such leave of absence if such leave of absence is approved in writing by the Company or any Affiliate; provided, that such leave of absence constitutes a bona fide leave of absence and not a Separation From Service under Treas. Reg. 1.409A-1(h)(1)(i). Notice of any such approved leave of absence should be sent to the Company at 770 Broadway, New York, New York 10003, attention: General Counsel, but such notice shall not be required for the leave of absence to be considered approved.

In the event the Participant’s Employment with the Company or any of its Affiliates is terminated, and subject to the terms of any employment agreement entered into by the Participant and the Company that provides for the treatment of RSUs upon the Participant’s termination of Employment that is more favorable to the Participant than this Section 5, the Participant shall have no claim against the Company with respect to the RSUs and related Retained Distributions, if any, other than as set forth in this paragraph 5, the provisions of this paragraph 5 being the sole remedy of the Participant with respect thereto.

6. Acceleration of Vesting Date. In the event a Change in Control, subject to paragraph 7, has occurred, to the extent that any such occurrence also constitutes a change in ownership or effective control of the Company, or in the ownership of a substantial portion of the assets of the Company, within the meaning of Section 409A(a)(2)(A)(v) of the Code (a “409A Change of Control Event”), (A) the Award will vest in full upon the earlier of (i) the expiration of the one-year period immediately following the Change in Control, provided the Participant’s Employment with the Company and its Affiliates has not terminated, (ii) the original Vesting Date with respect to each portion of the Award, or (iii) the termination of the Participant’s Employment by the Company or any of its Affiliates (I) by the Company other than for Cause (unless such termination is due to death or Disability) or (II) by the Participant for Good Reason and (B) Shares subject to the RSUs shall be issued or transferred to the Participant, as soon as practicable, but in no event later than 60 days following such Vesting Date, along with the Retained Distributions related thereto; provided, however, that notwithstanding the foregoing, to the extent that any such occurrence does not constitute a 409A Change of Control Event, the RSUs shall vest as described under this paragraph 6, but the issuance of Shares shall be made at the times otherwise provided hereunder as if no Change of Control had occurred. In the event of any such vesting as described in clauses (i) and (iii) of the preceding sentence, the date described in such clauses shall be treated as the Vesting Date.

7. Limitation on Acceleration. Notwithstanding any provision to the contrary in the Plan or this Agreement, subject to the terms of any employment agreement entered into by the Participant and the Company that provides for the treatment of RSUs that is more

favorable to the Participant than this Section 7, if the Payment (as hereinafter defined) due to the Participant hereunder as a result of the acceleration of vesting of the RSUs pursuant to paragraph 6 of this Agreement, either alone or together with all other Payments received or to be received by the Participant from the Company or any of its Affiliates (collectively, the “Aggregate Payments”), or any portion thereof, would be subject to the excise tax imposed by Section 4999 of the Code (or any successor thereto), the following provisions shall apply:

a) If the net amount that would be retained by the Participant after all taxes on the Aggregate Payments are paid would be greater than the net amount that would be retained by the Participant after all taxes are paid if the Aggregate Payments were limited to the largest amount that would result in no portion of the Aggregate Payments being subject to such excise tax, the Participant shall be entitled to receive the Aggregate Payments.

b) If, however, the net amount that would be retained by the Participant after all taxes were paid would be greater if the Aggregate Payments were limited to the largest amount that would result in no portion of the Aggregate Payments being subject to such excise tax, the Aggregate Payments to which the Participant is entitled shall be reduced to such largest amount.

The term “Payment” shall mean any transfer of property within the meaning of Section 280G of the Code.

The determination of whether any reduction of Aggregate Payments is required and the timing and method of any such required reduction in Payments under this Agreement or in any such other Payments otherwise payable by the Company or any of its Affiliates consistent with any such required reduction, shall be made by the Participant, including whether any portion of such reduction shall be applied against any cash or any shares of stock of the Company or any other securities or property to which the Participant would otherwise have been entitled under this Agreement or under any such other Payments, and whether to waive the right to the acceleration of the Payment due under this Agreement or any portion thereof or under any such other Payments or portions thereof, and all such determinations shall be conclusive and binding on the Company and its Affiliates. To the extent that Payments hereunder or any such other Payments are not paid as a consequence of the limitation contained in this paragraph 7, then the RSUs and Retained Distributions related thereto (to the extent not so accelerated) and such other Payments (to the extent not vested) shall be deemed to remain outstanding and shall be subject to the provisions hereof and of the Plan as if no acceleration or vesting had occurred. Under such circumstances, if the Participant terminates Employment for Good Reason or is terminated by the Company or any of its Affiliates without Cause, the RSUs and Retained Distributions related thereto (to the extent that they have not already become vested) shall become immediately vested in their entirety upon such termination and Shares subject to the RSUs shall be issued or transferred to the Participant, as soon as practicable following such termination of Employment, subject to the provisions relating to Section 4999 of the Code set forth herein.

The Company shall promptly pay, upon demand by the Participant, all legal fees, court costs, fees of experts and other costs and expenses which the Participant incurred in any actual, threatened or contemplated contest of the Participant’s interpretation of, or determination under, the provisions of this paragraph 7.

8. Withholding Taxes. The Participant agrees that,

a) Obligation to Pay Withholding Taxes. Upon the payment of any Dividend Equivalents and the vesting of any portion of the Award of RSUs and the Retained Distributions relating thereto, the Participant will be required to pay to the Company any applicable Federal, state, local or foreign withholding tax due as a result of such payment or vesting. The Company’s obligation to deliver the Shares subject to the RSUs or to pay any Dividend Equivalents or Retained Distributions shall be subject to such payment. The Company and its Affiliates shall, to the extent permitted by law, have the right to deduct from the Dividend Equivalent, Shares issued in connection with the vesting or Retained Distribution, as applicable, or any payment of any kind otherwise due to the Participant any Federal, state, local or foreign withholding taxes due with respect to such vesting or payment.

b) Payment of Taxes with Stock. Subject to the Committee’s right to disapprove any such election and require the Participant to pay the required withholding tax in cash, the Participant shall have the right to elect to pay the required withholding tax associated with a vesting with Shares to be received upon vesting. Unless the Company shall permit another valuation method to be elected by the Participant, Shares used to pay any required withholding taxes shall be valued at the closing price of a Share as reported on the New York Stock Exchange Composite Tape on the date the withholding tax becomes due (hereinafter called the “Tax Date”). Notwithstanding anything herein to the contrary, if a Participant who is required to pay the required withholding tax in cash fails to do so within the time period established by the Company, then the Participant shall be deemed to have elected to pay such withholding taxes with Shares to be received upon vesting. Elections must be made in conformity with conditions established by the Committee from time to time

c) Conditions to Payment of Taxes with Stock. Any election to pay withholding taxes with stock must be made on or prior to the Tax Date and will be irrevocable once made.

9. Changes in Capitalization and Government and Other Regulations. The Award shall be subject to all of the terms and provisions as provided in this Agreement and in the Plan, which are incorporated by reference herein and made a part hereof, including, without limitation, the provisions of Section 10 of the Plan (generally relating to adjustments to the number of Shares subject to the Award, upon certain changes in capitalization and certain reorganizations and other transactions).

10. Forfeiture. A breach of any of the foregoing restrictions or a breach of any of the other restrictions, terms and conditions of the Plan or this Agreement, with respect to any of the RSUs or any Dividend Equivalents and Retained Distributions relating thereto, except as waived by the Board or the Committee, will cause a forfeiture of such RSUs and any Dividend Equivalents or Retained Distributions relating thereto.

11. Right of Company to Terminate Employment. Nothing contained in the Plan or this Agreement shall confer on any Participant any right to continue in the employ of the Company or any of its Affiliates and the Company and any such Affiliate shall have the right to terminate the Employment of the Participant at any such time, with or without cause, notwithstanding the fact that some or all of the RSUs and related Retained Distributions covered by this Agreement may be forfeited as a result of such termination. The granting of the RSUs under this Agreement shall not confer on the Participant any right to any future Awards under the Plan.

12. Notices. Any notice which either party hereto may be required or permitted to give the other shall be in writing and may be delivered personally or by mail, postage prepaid, addressed to AOL Inc., at 770 Broadway, New York, NY 10003, attention: general Counsel, and to the Participant at his or her address, as it is shown on the records of the Company or its Affiliate, or in either case to such other address as the Company or the Participant, as the case may be, by notice to the other may designate in writing from time to time.

13. Interpretation and Amendments. The Board and the Committee (to the extent delegated by the Board) have plenary authority to interpret this Agreement and the Plan, to prescribe, amend and rescind rules relating thereto and to make all other determinations in connection with the administration of the Plan. The Board or the Committee may from time to time modify or amend this Agreement in accordance with the provisions of the Plan, provided that no such amendment shall adversely affect the rights of the Participant under this Agreement without his or her consent.

14. Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the Company and its successors and assigns, and shall be binding upon and inure to the benefit of the Participant and his or her legatees, distributees and personal representatives.

15. Copy of the Plan and Documents. By entering into the Agreement, the Participant agrees and acknowledges that he or she has received and read a copy of the Plan. The Participant acknowledges and agrees that the Participant may be entitled from time to time to receive certain other documents related to the Company, including the Company’s annual report to stockholders and proxy statement related to its annual meeting of stockholders (which become available each year approximately three months after the end of the calendar year), and the Participant consents to receive such documents electronically through the Internet or as the Company otherwise directs.

16. Governing Law. The Agreement shall be governed by, and construed in accordance with, the laws of the State of New York without regard to any choice of law rules thereof which might apply the laws of any other jurisdiction.

17. Waiver of Jury Trial. To the extent not prohibited by applicable law which cannot be waived, each party hereto hereby waives, and covenants that it will not assert (whether as plaintiff, defendant or otherwise), any right to trial by jury in any forum in respect of any suit, action, or other proceeding arising out of or based upon this Agreement.

18. Submission to Jurisdiction; Service of Process. Each of the parties hereto hereby irrevocably submits to the jurisdiction of the state courts of the State of New York and the jurisdiction of the United States District Court for the Southern District of New York for the purposes of any suit, action or other proceeding arising out of or based upon this Agreement. Each of the parties hereto to the extent permitted by applicable law hereby waives, and agrees not to assert, by way of motion, as a defense, or otherwise, in any such suit, action or proceeding brought in such courts, any claim that it is not subject personally to the jurisdiction of the above-named courts, that its property is exempt or immune from attachment or execution, that such suit, action or proceeding in the above-referenced courts is brought in an inconvenient forum, that the venue of such suit, action or proceedings, is improper or that this Agreement may not be enforced in or by such court. Each of the parties hereto hereby consents to service of process by mail at its address to which notices are to be given pursuant to paragraph 12 hereof.

19. Personal Data. The Company, the Participant’s local employer and the local employer’s parent company or companies may hold, collect, use, process and transfer, in electronic or other form, certain personal information about the Participant for the exclusive purpose of implementing, administering and managing the Participant’s participation in the Plan. Participant understands that the following personal information is required for the above named purposes: his/her name, home address and telephone number, office address (including department and employing entity) and telephone number, e-mail address, date of birth, citizenship, country of residence at the time of grant, work location country, system employee ID, employee local ID, employment status (including international status code), supervisor (if applicable), job code, title, salary, bonus target and bonuses paid (if applicable), termination date and reason, tax payer’s identification number, tax equalization code, US Green Card holder status, contract type (single/dual/multi), any shares of stock or directorships held in the Company, details of all grants of RSUs (including number of grants, grant dates, vesting type, vesting dates, and any other information regarding RSUs that have been granted, canceled, vested, or forfeited) with respect to the Participant, estimated tax withholding rate, brokerage account number (if applicable), and brokerage fees (the “Data”). Participant understands that Data may be collected from the Participant directly or, on Company’s request, from Participant’s local employer. Participant understands that Data may be transferred to third parties assisting the Company in the implementation, administration and management of the Plan, including the brokers approved by the Company, the broker selected by the Participant from among such Company-approved brokers (if applicable), tax consultants and the Company’s software providers (the “Data Recipients”).

Participant understands that some of these Data Recipients may be located outside the Participant’s country of residence, and that the Data Recipient’s country may have different data privacy laws and protections than the Participant’s country of residence. Participant understands that the Data Recipients will receive, possess, use, retain and transfer the Data, in electronic or other form, for the purposes of implementing, administering and managing the Participant’s participation in the Plan, including any requisite transfer of such Data as may be required for the administration of the Plan and/or the subsequent holding of Shares on the Participant’s behalf by a broker or other third party with whom the Participant may elect to deposit any Shares acquired pursuant to the Plan. Participant understands that Data will be held only as long as necessary to implement, administer and manage the Participant’s participation in the Plan. Participant understands that Data may also be made available to public authorities as required by law, e.g., to the U.S. government. Participant understands that the Participant may, at any time, review Data and may provide updated Data or corrections to the Data by written notice to the Company. Except to the extent the collection, use, processing or transfer of Data is required by law, Participant may object to the collection, use, processing or transfer of Data by contacting the Company in writing. Participant understands that such objection may affect his/her ability to participate in the Plan. Participant understands that he/she may contact the Company’s Stock Plan Administration to obtain more information on the consequences of such objection.

EX-10.70

Exhibit 10.70

Execution Copy

THE USE OF THE FOLLOWING NOTATION IN THIS EXHIBIT INDICATES THAT A CONFIDENTIAL PORTION HAS BEEN OMITTED PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT AND THE OMITTED MATERIAL HAS BEEN FILED SEPARATELY WITH THE COMMISSION: [****].

TWENTY-THIRD AMENDMENT TO AMENDED AND RESTATED

INTERACTIVE MARKETING AGREEMENT

This Twenty-Third Amendment to Amended and Restated Interactive Marketing Agreement (“Twenty-Third Amendment”) is entered into by and between AOL INC., a Delaware corporation (successor in interest to AOL LLC), with its principal place of business at 770 Broadway, New York, NY 10003 (“AOL”), and GOOGLE INC., a Delaware corporation (successor-in-interest to Google Inc., a California corporation) with offices at 1600 Amphitheatre Parkway, Mountain View, CA 94043 (“Google”), effective as of December 4, 2009 (the “Twenty-Third Amendment Effective Date”). AOL and Google may be referred to individually as a “Party” and collectively as the “Parties”.

INTRODUCTION

The Parties hereto wish to further amend that certain Amended and Restated Interactive Marketing Agreement effective as of October 1, 2003 (the “IMA”), as amended previously by that certain First Amendment to the Amended and Restated Interactive Marketing Agreement effective as of December 15, 2003 (the “First Amendment”), that Second Amendment to Amended and Restated Interactive Marketing Agreement effective as of March 30, 2004 (the “Second Amendment”), that Third Amendment to Amended and Restated Interactive Marketing Agreement effective as of April 7, 2004 (the “Third Amendment”), that Fourth Amendment to Amended and Restated Interactive Marketing Agreement effective as of June 1, 2004 (the “Fourth Amendment”), that Fifth Amendment to Amended and Restated Interactive Marketing Agreement effective as of June 14, 2004 (the “Fifth Amendment”), that Sixth Amendment to Amended and Restated Interactive Marketing Agreement effective as of December 17, 2004 (the “Sixth Amendment”), that Seventh Amendment to Amended and Restated Interactive Marketing Agreement effective as of March 28, 2005 (the “Seventh Amendment”), that Eighth Amendment to Amended and Restated Interactive Marketing Agreement effective as of April 28, 2005 (the “Eighth Amendment”), that Ninth Amendment to Amended and Restated Interactive Marketing Agreement effective as of December 15, 2005 (the “Ninth Amendment”), that Tenth Amendment to Amended and Restated Interactive Marketing Agreement effective as of March 24, 2006 (the “Tenth Amendment”), that Eleventh Amendment to Amended and Restated Interactive Marketing Agreement effective as of September 28, 2006 (the “Eleventh Amendment”), that Twelfth Amendment to Amended and Restated Interactive Marketing Agreement effective as of December 15, 2006 (the “Twelfth Amendment”), that Thirteenth Amendment to Amended and Restated Interactive Marketing Agreement effective as of January 12, 2007 (the “Thirteenth Amendment”), that Fourteenth Amendment to Amended and Restated Interactive Marketing Agreement effective as of February 16, 2007 (the “Fourteenth Amendment”), that Fifteenth Amendment to Amended and Restated Interactive Marketing Agreement effective as of March 2, 2007 (the “Fifteenth Amendment”), that Sixteenth Amendment to Amended and Restated Interactive Marketing Agreement effective as of September 24, 2007 (the “Sixteenth Amendment”), that Seventeenth Amendment to Amended and Restated Interactive Marketing Agreement effective as of February 29, 2008 (the “Seventeenth Amendment”), that Eighteenth Amendment to Amended and Restated Interactive Marketing Agreement effective as of March 31, 2008 (the “Eighteenth Amendment’), that Nineteenth Amendment to Amended and Restated Interactive Marketing Agreement effective as of April 30, 2008 (the “Nineteenth Amendment”), that Twentieth Amendment

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to Amended and Restated Interactive Marketing Agreement effective as of October 1, 2008 (the “Twentieth Amendment”), that Twenty-First Amendment to Amended and Restated Interactive Marketing Agreement effective as of November 1, 2008 (the “Twenty-First Amendment”), that Twenty-Second Amendment to Amended and Restated Interactive Marketing Agreement effective as of March 13, 2009 (the “Twenty-Second Amendment”), and that Addendum One to the Second Amendment to Amended and Restated Interactive Marketing Agreement dated October 5, 2004 (“Addendum One”) (the IMA and such amendments and addendum, collectively the “Existing Agreement” and the Existing Agreement together with this Twenty-Third Amendment, the “Agreement”). Capitalized terms not defined in this Twenty-Third Amendment shall have the meanings set forth in the Existing Agreement.

AGREEMENT

For good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties hereby amend the Existing Agreement as follows:

A. Definitions. Solely for purposes of this Twenty-Third Amendment, the capitalized terms below shall have the following meaning:

CNN means CNN Interactive Group, Inc.

CNN Interim Properties means www.cnn.com.

Interim Period means the period of time beginning on the Spin-Off Date and ending on [****].

Interim Properties means the CNN Interim Properties and the TII Interim Properties.

Spin-Off means a spinoff, split-off or other distribution of all or part of the equity interests of AOL to public shareholders.

Spin-Off Date means the effective date of the Spin-Off which, as of the Twenty-Third Amendment Effective Date, AOL expects to be December 10, 2009.

TII means Time Inc.

TII Interim Properties means the following websites of TII: SI.com, People.com, Time.com, CNNMoney.com, InStyle.com, EW.com, Golf.com, CookingLight.com, SouthernLiving.com and CottageLiving.com.

B. Assignment of the Agreement to AOL Inc. AOL LLC, a Delaware limited liability company (formerly known as America Online, Inc.), with its principal place of business at 770 Broadway, New York, NY 10003 (“AOL LLC”), was the contracting party to the Existing Agreement. In connection with the Spin-Off, AOL represents and warrants that the Agreement in its entirety was assigned to AOL and AOL will assume all of the rights, duties, obligations, liabilities and commitments of AOL LLC arising under the Agreement as of the Twenty-Third Amendment Effective Date (the “Assignment”). Notwithstanding anything to the contrary in the Agreement, Google hereby consents to the Assignment. Accordingly, (i) AOL shall be the contracting Party to the Agreement and all terms and conditions of the Agreement shall be fully binding on AOL as of the Twenty-Third Amendment Effective Date, and (ii) notwithstanding the Spin-Off, AOL has instructed Google, and Google hereby agrees, to continue paying any and all payments owed by Google arising under the Agreement in the same manner and to the same bank account as payments that were made by Google under the Existing Agreement fox the month of

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November 2009, including any and all payment owed by Google arising from Interim Properties and www.TMZ.com under the Agreement, provided that the duration of payment to Interim Properties and www.TMZ.com shall be subject to Section C.4 and Section D below, respectively.

C. CNN and TII.

1. The Parties acknowledge a proposed Spin-Off of AOL from its parent corporation Time Warner Inc. under which AOL will become an independent, publicly-traded company. In accordance with the Agreement, each entity that is an Affiliate of AOL under the Agreement as a result of Time Warner Inc.’s ownership and/or control of AOL (“AOL Affiliates Through Time Warner”) shall cease to be an Affiliate of AOL under the Agreement (including, without limitation, CNN and TII) as of the Spin-Off Date. Accordingly, all AOL Affiliates through Time Warner shall be removed from the Agreement and shall cease to receive Google Sponsored Advertising Service and/or the Content Targeted Advertising Service, as applicable, as of the Spin-Off Date. Notwithstanding the foregoing and anything else contrary in the Existing Agreement and solely in light of the Spin-Off, Google hereby agrees to permit Interim Properties to remain a part of the Agreement until the end of the Interim Period and therefore, continue to receive Google Sponsored Advertising Service through AOL during the Interim Period, subject to the terms and conditions of the Agreement. Google shall not be responsible, or held liable, for not providing the Google Sponsored Advertising Service to Interim Properties as of the end of the Interim Period. For the sake of clarity, the Content Targeted Advertising Service to the extent such service is provided on Interim Properties under the Agreement, if any, shall terminate as of the Spin-Off Date.

2. Notice of Spin-Off. AOL shall notify Google (including notification via email to the partner manager at Google) of the Spin-Off Date prior to, or immediately after (but no later than within eight (8) hours of) the occurrence of, the Spin-Off.

3. AOL hereby agrees that:

(a) Interim Properties, CNN and TII shall not acquire any rights in any intellectual property rights of Google (including, but not limited to, Google Marks and Google Sponsored Advertising Service); and

(b) AOL shall be solely responsible and liable for: (i) the access to and the use of the Google Sponsored Advertising Service (including, but not limited to, Google Advertising Results) by each Interim Property, CNN and/or TII and (ii) any and all access, use, acts or omissions of CNN and/or TII in connection with Interim Properties to the same extent as if AOL itself had engaged in such access, use, acts or omissions.

[****]

5. Representations and Warranties. AOL represents and warrants to Google that (i) AOL has entered into a written agreement with CNN and TII, respectively, pursuant to which Google Sponsored Advertising Service and Google Advertising Results are provided on Interim Properties by AOL; (ii) AOL has and will maintain throughout the Interim Period all rights, authorizations and licenses that are required with respect to Interim Properties to provide the Google Sponsored Advertising Service and Google Advertising Results on Interim Properties; (iii) CNN and TII have executed written agreements with AOL, respectively, which designates AOL (not CNN and/or TII) as the party that will receive from Google any and all payments arising from Google Sponsored Advertising Service on Interim Properties, including during the Interim Period; and (iv) AOL has and will maintain full control over the implementation of the Google Sponsored Advertising Service and the display of Google Advertising Results on Interim Properties and AOL will not disclose, and will block access to, Confidential Information of Google to CNN and TII, unless otherwise agreed to by Google.

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D. TMZ Productions, Inc. The site located at www.TMZ.com, which has been produced as a joint venture between AOL LLC and Telepictures Productions Inc. (but for which no separate legal entity has been created) shall cease to be an Affiliate of AOL as of the Spin-Off Date. Accordingly, www.TMZ.com shall be removed from the Agreement and the Google Sponsored Advertising Service implemented on www.TMZ.com under the Agreement shall terminate as of the Spin-Off Date. [****]

E. Indemnity. Notwithstanding anything to the contrary in the Existing Agreement, in addition to Section 10.3 (Indemnity) of Exhibit E of the Existing Agreement, AOL shall defend, indemnify, save and hold harmless Google and its Affiliates, direct or indirect parent companies of Google or such Affiliates, and their respective officers, directors, agents and employees from any and all third party claims based upon, or otherwise arising out of: (i) breach of this Twenty-Third Amendment by AOL, Interim Properties, CNN and/or TII, and/or (ii) Google’s payment of any amount arising under the Agreement (including payment arising from Interim Properties and www.TMZ.com under the Agreement) to AOL in the manner specified in Section B above.

F. Order of Precedence. This Twenty-Third Amendment is supplementary to and modifies the Existing Agreement. The terms of this Twenty-Third Amendment supersede provisions in the Existing Agreement only to the extent that the terms of this Twenty-Third Amendment and the Existing Agreement expressly conflict. However, nothing in this Twenty-Third Amendment shall be interpreted as invalidating the Existing Agreement, and provisions of the Existing Agreement shall continue to govern relations between the Parties insofar as they do not expressly conflict with this Twenty-Third Amendment. Furthermore, for the avoidance of doubt, any amendments or other changes made to any terms of the Existing Agreement under this Twenty-Third Amendment shall be interpreted to have full force and effect on any other relevant provisions of the Existing Agreement (including, but not limited to, Definitions, Exhibits, and Schedules related thereto), which reference or rely on such amended or changed terms.

G. Entire Agreement. This Agreement constitutes the entire agreement with respect to the subject matter hereof. The Agreement supersedes any other prior or collateral agreements, whether oral or written, with respect to the subject matter hereof.

H. Counterparts; Facsimile. This Twenty-Third Amendment may be executed in counterparts, each of which shall be deemed an original and all of which together shall constitute one and the same document. This Twenty-Third Amendment may be executed by facsimile.

[Remainder of this page intentionally left blank; Signature page follows.]

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IN WITNESS WHEREOF, the Parties have executed this Twenty-Third Amendment to the Existing Agreement.

AOL INC.		GOOGLE INC.
By:	/s/ Steven Quan	By:	/s/ Nikesh Arora
Name:	Steven Quan	Name:	Nikesh Arora
Title:	VP, Business Development	Title:	President, Global Sales and
			Business Development
			Google Inc.
Date:	12/9/09	Date:	2009.12.09
			20:18:29
			-08’00’

GOOGLE & AOL CONFIDENTIAL 5 23rd Amendment Draft 12.08.09 v2

EX-10.97

Exhibit 10.97

EXECUTION COPY

CREDIT SUPPORT AGREEMENT dated as of December 9 , 2009 (this “Agreement”), between TIME WARNER INC., a Delaware corporation (“Time Warner”), and AOL INC., a Delaware corporation (“AOL”).

W I T N E S S E T H:

WHEREAS Time Warner intends to effect a complete legal and structural separation (the “Spin-Off”) of AOL from Time Warner on substantially the terms and conditions described in the Registration Statement on Form 10, file no. 011-34419, filed with the Securities and Exchange Commission on July 27, 2009, as amended from time to time;

WHEREAS in furtherance of the Spin-Off, AOL has requested that Time Warner provide, and Time Warner has agreed to provide, (a) credit support in respect of certain of AOL’s lease and trade obligations for a period not to exceed two years as more fully set forth herein and (b) a guarantee (as amended, supplemented or otherwise modified from time to time, the “Guarantee”) of AOL’s obligations under the new $250,000,000 364-day senior secured revolving credit agreement (as amended, supplemented or otherwise modified from time to time, the “Credit Agreement”) to be entered into by AOL prior to the Spin-Off; and

WHEREAS in order to induce Time Warner to enter into this Agreement and the Guarantee and to perform its obligations hereunder and thereunder, AOL desires to undertake certain obligations as more fully set forth below;

NOW, THEREFORE, in consideration of the foregoing recitals and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Time Warner and AOL hereby agree as follows:

SECTION 1. (a) Defined Terms. For the purpose of this Agreement, the following terms shall have the following meanings:

“Additional AOL Primary Obligation” has the meaning set forth in Section 4.

“Additional TW Support Obligation” has the meaning set forth in Section 4.

“Agreement” has the meaning set forth in the preamble.

“AOL” has the meaning set forth in the preamble.

“AOL Primary Obligations” shall mean the obligations of AOL set forth on Schedule 1 hereto.

“Business Day” means any day other than a Saturday, Sunday or a holiday on which banks in New York City are authorized or required by law to close.

“Cash Collateral Account” has the meaning set forth in Section 3(d).

“Cash Collateralization Event” means the occurrence of any of the following:

(i) AOL shall fail to make any payment when and as the same shall become due and payable hereunder (after giving effect to any applicable grace periods) or under the TW Credit Fee Letter, and such failure shall continue unremedied for a period of five days;

(ii) the acquisition of ownership, directly or indirectly, beneficially or of record, by any person or group (within the meaning of the Securities Exchange Act of 1934, as amended, and the rules of the Securities and Exchange Commission thereunder), of equity interests in AOL representing more than 35% of either the aggregate ordinary voting power or the aggregate equity value represented by the issued and outstanding equity interests in AOL;

(iii) the sale, transfer, assignment, lease, conveyance or other disposition, directly or indirectly, of all or substantially all the assets of AOL and its subsidiaries, taken as a whole, or the merger, consolidation or amalgamation of AOL with or into any other person or of any other person with or into AOL, in any event pursuant to a transaction in which the outstanding voting equity interests of AOL are reclassified into or exchanged for cash, securities or other property, other than any such transaction pursuant to which the holders of the voting equity interests of AOL immediately prior to such transaction own, directly or indirectly, not less than a majority of such voting equity interests of AOL or the surviving corporation or transferee immediately after such transaction;

(iv) persons who were (A) nominated or recommended for nomination by the board of directors of AOL or (B) appointed by directors so nominated, in each case other than any person whose initial nomination or appointment occurred as a result of an actual or threatened solicitation of proxies or consents for the election or removal of one or more directors on the board of directors of AOL (other than any such solicitation made by the board of directors of AOL), ceasing to occupy a majority of the seats (excluding vacant seats) on the board of directors of AOL;

(v) an involuntary proceeding shall be commenced or an involuntary petition shall be filed seeking (A) liquidation, reorganization or other relief in respect of AOL or its debts, or of a substantial part of its assets, under any Federal, state or foreign bankruptcy, insolvency, receivership or similar law now or hereafter in effect or (B) the appointment of a receiver, trustee, custodian, sequestrator, conservator or similar official for AOL or for a substantial part of its assets, and, in any such

case, such proceeding or petition shall continue undismissed for 60 days or an order or decree approving or ordering any of the foregoing shall be entered; or

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(vi) AOL shall (A) voluntarily commence any proceeding or file any petition seeking liquidation, reorganization or other relief under any Federal, state or foreign bankruptcy, insolvency, receivership or similar law now or hereafter in effect, (B) consent to the institution of, or fail to contest in a timely and appropriate manner, any proceeding or petition described in clause (v) above, (C) apply for or consent to the appointment of a receiver, trustee, custodian, sequestrator, conservator or similar official for AOL or for a substantial part of its assets, (D) file an answer admitting the material allegations of a petition filed against it in any such proceeding, (E) make a general assignment for the benefit of creditors or (F) take any action for the purpose of effecting any of the foregoing.

“Closing Date” means the date on which all conditions to the effectiveness of the obligations of the lenders under the Credit Agreement to make loans are satisfied or waived pursuant to the terms of the Credit Agreement.

“Credit Agreement” has the meaning set forth in the recitals.

“Credit Support Period” means the period from the Distribution Date until the earlier to occur of the Credit Support Termination Date and the date on which all TW Support Obligations are Released.

“Credit Support Termination Date” means the earlier to occur of (i) the date that is 30 days after the date on which funds become available for borrowing under (or debt is incurred in respect of) AOL’s initial principal indebtedness arrangement (whether a revolving or term credit facility, security offering in the capital markets or otherwise, but which, for the avoidance of doubt, shall not include the facility under the Credit Agreement, but shall include any extension or renewal thereof) and (ii) the date that is 24 months after the Distribution Date.

“Default Interest Rate” has the meaning set forth in the TW Credit Fee Letter.

“Distribution Date” means the date on which the Spin-Off is completed.

“Guarantee” has the meaning set forth in the recitals.

“Indemnitee” has the meaning set forth in Section 6(d) below.

“Release” or “Released” means, (a) with respect to any TW Support Obligation, that all obligations and liabilities of Time Warner and/or its subsidiaries in respect of such TW Support Obligation are released and terminated, whether by the termination or cancelation of such TW Support Obligation or by the termination and release of Time Warner and its subsidiaries from their respective obligations and liabilities in respect of such TW Support Obligation, which release shall be evidenced in writing and signed by all parties to or beneficiaries of such TW Support Obligation that

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are required to consent to such termination and release (or in any other manner reasonably acceptable to Time Warner), and, in the case of a letter of credit or bank guarantee, by the surrender of the original TW Support Obligation to Time Warner or the originating bank and such bank’s confirmation to Time Warner of cancelation thereof and (b) with respect to any AOL Primary Obligation, that all obligations and liabilities of AOL and its subsidiaries in respect of such AOL Primary Obligation are released and terminated.

“Spin-Off” has the meaning set forth in the recitals.

“Time Warner” has the meaning set forth in the preamble.

“TW Credit Fee Letter” means the TW Credit Fee Letter dated as of the date hereof between Time Warner and AOL.

“TW Credit Support Certificate” has the meaning set forth in Section 7.

“TW Payment” means any payment in respect of or in connection with any TW Support Obligation or the Guarantee (including any payment in the form of collateral delivered by Time Warner in respect of any TW Support Obligation).

“TW Support Obligations” means the guarantees, surety bonds, letters of credit and other obligations set forth on Schedule 1 hereto.

(b) Interpretation. Words in the singular shall be held to include the plural and vice versa and words of one gender shall be held to include the other gender as the context requires. The terms “hereof,” “herein” “and “herewith” and words of similar import, unless otherwise stated, shall be construed to refer to this Agreement as a whole (including the schedules hereto) and not to any particular provision of this Agreement. Section and Schedule references are to the sections and schedules of or to this Agreement unless otherwise specified. Any reference herein to this Agreement, unless otherwise stated, shall be construed to refer to this Agreement as amended, supplemented or otherwise modified from time to time, as permitted by Section 10. The word “including” and words of similar import when used in this Agreement shall mean “including, without limitation,” unless the context otherwise requires or unless otherwise specified. The word “or” shall not be exclusive.

SECTION 2. Credit Support. Time Warner hereby agrees that, during the Credit Support Period, (a) it will maintain and continue, satisfy and comply in full with, and cause its subsidiaries to maintain and continue, satisfy and comply in full, for the benefit of AOL, and will not take any action, or cause any of its subsidiaries to take any action, to terminate (other than at the request of AOL) the TW Support Obligations and (b) it will, and will cause its subsidiaries to, renew or extend any TW Support Obligations, in each case until the Credit Support Termination Date; provided that (i) Time Warner and its subsidiaries shall not be required to renew or extend any TW Support Obligation (A) beyond the expiration date of the relevant AOL Primary Obligation in support or guarantee of which such TW Support Obligation has been provided or (B) which has been Released and (ii) Time Warner and its subsidiaries shall be permitted to terminate

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and shall not be required to renew or extend any TW Support Obligation so long as concurrently with such termination or expiration, it replaces such TW Support Obligation with another guarantee, letter of credit, surety bond or similar instrument or other arrangement in support of the relevant AOL Primary Obligation in form and substance reasonably satisfactory to the beneficiary of such AOL Primary Obligation, which replacement instrument shall be treated as a TW Support Obligation for all purposes hereunder.

SECTION 3. Replacement of TW Support Obligations. (a) AOL hereby agrees that it shall use its reasonable best efforts to obtain the full Release of all TW Support Obligations as soon as practicable following the Distribution Date, but in any event on or prior to the Credit Support Termination Date. For the avoidance of doubt, AOL shall reimburse Time Warner pursuant to the terms hereof for any reasonable and actual out-of-pocket fees or expenses incurred by Time Warner in connection with the renewal or Release of any TW Support Obligation (other than a release of a TW Support Obligation effected in connection with Time Warner’s voluntary replacement of such TW Support Obligation pursuant to clause (ii) of Section 2 above).

(b) AOL shall (i) promptly, but in any event within three Business Days, notify Time Warner of any expiration, termination or other modification or change to the terms of any AOL Primary Obligation and (ii) in the case of any such expiration or termination of an AOL Primary Obligation, promptly, but in any event within 10 Business Days of such expiration or termination, deliver to Time Warner evidence reasonably satisfactory to Time Warner of the Release of such AOL Primary Obligation.

(c) In the event that AOL is unable to obtain the full Release of all TW Support Obligations on or prior to the Credit Support Termination Date, on the Credit Support Termination Date, AOL shall, with respect to each TW Support Obligation then outstanding, either (i) provide Time Warner with a letter of credit or similar guarantee supporting AOL’s obligations under this Agreement in respect of such TW Support Obligation, in the currency in which such TW Support Obligation is denominated and on terms and issued by a financial institution reasonably acceptable to Time Warner for the benefit of Time Warner and its subsidiaries in an amount equal to 105% of the aggregate face amount (or reasonably calculated maximum exposure amount) of such TW Support Obligation, or (ii) otherwise provide cash collateral securing AOL’s obligations under this Agreement in respect of such TW Support Obligation for the benefit of Time Warner and its subsidiaries pursuant to the terms of paragraph (e) of this Section in an amount equal to 105% of the aggregate face amount (or reasonably calculated maximum exposure amount) of such TW Support Obligation; provided that AOL shall continue to use its reasonable best efforts to obtain the full Release of such outstanding TW Support Obligations until all TW Support Obligations have been Released.

(d) Upon the occurrence and during the continuation of a Cash Collateralization Event, AOL shall provide cash collateral securing AOL’s obligations under this Agreement in respect of all then outstanding TW Support Obligations for the benefit of Time Warner and its subsidiaries pursuant to the terms of paragraph (e) of this Section in an amount equal to 105% of the aggregate face amount (or reasonably calculated maximum exposure amount) of such TW Support Obligations.

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(e) In the event that AOL is required to provide cash collateral in respect of any TW Support Obligations pursuant to paragraph (c) or (d) of this Section, AOL shall provide cash in the amount required by such paragraph to or as directed by Time Warner for deposit in one or more interest-bearing accounts established by Time Warner in its name (collectively, the “Cash Collateral Account”). Unless otherwise agreed by Time Warner, such cash shall be provided with respect to each such TW Support Obligation in the currency in which such TW Support Obligation is denominated. Time Warner shall have exclusive control, including the exclusive right of withdrawal, over the Cash Collateral Account. Investment of amounts in the Cash Collateral Account shall be made at the option and sole discretion of Time Warner. Interest or profits, if any, on such investments shall accumulate and be held in the Cash Collateral Account. Amounts in the Cash Collateral Account may be applied by Time Warner in satisfaction of any amounts payable by AOL to Time Warner pursuant to this Agreement or the TW Credit Fee Letter. Amounts in the Cash Collateral Account shall be returned to AOL within five Business Days following (i) in the case of cash collateralization pursuant to paragraph (c) of this Section, the full Release of all outstanding TW Support Obligations and the payment in full of any amounts owed to Time Warner by AOL pursuant to this Agreement or the TW Credit Fee Letter and (ii) in the case of cash collateralization pursuant to paragraph (d) of this Section, the date on which all Cash Collateralization Events are no longer continuing.

SECTION 4. Additional TW Support Obligations. If at any time either of Time Warner or AOL shall identify an obligation of AOL (each, an “Additional AOL Primary Obligation”) and corresponding guarantee or similar obligation of Time Warner or its subsidiaries in respect of such Additional AOL Obligation (each, an “Additional TW Support Obligation”) that existed prior to the Distribution Date and that, had Time Warner and AOL been aware of such Additional AOL Primary Obligation and Additional TW Support Obligation prior to the Distribution Date, would have been identified as an AOL Primary Obligation and a TW Support Obligation, respectively, on the Distribution Date, (i) such Additional AOL Primary Obligation and Additional TW Support Obligation shall be deemed to be an AOL Primary Obligation and a TW Support Obligation, respectively, for all purposes hereunder and (ii) AOL shall pay to Time Warner all amounts in respect of such Additional TW Support Obligation which it would have been obligated to pay pursuant to this Agreement or the TW Credit Fee Letter (including Credit Support Fees and amounts payable pursuant to Section 8 hereof) since the Distribution Date had such Additional TW Support Obligation been identified as a TW Support Obligation hereunder on the Distribution Date.

SECTION 5. Guarantee. AOL hereby affirms that Time Warner’s obligations in respect of the Guarantee shall terminate pursuant to the terms thereof and agrees that AOL’s obligations under the Credit Agreement and the ancillary documents entered into in connection therewith may not be extended, renewed or increased, and the Credit Agreement and any such ancillary documents may not be amended, modified, waived or released in any manner, in each case without Time Warner’s prior written consent.

6

SECTION 6. Amendments to AOL Primary Obligations. AOL hereby agrees that it will not amend or modify the terms of any AOL Primary Obligation in any manner that increases the amount or duration of the relevant TW Support Obligation or is otherwise adverse to Time Warner without the prior written consent of Time Warner; provided that any renewal of the AOL Primary Obligations numbered 7, 11 and 12 on Schedule 1 hereto solely at the option of the applicable counterparty shall not be deemed to be an amendment or modification for purposes of this Section or an expiration of such AOL Primary Obligation for purposes of this Agreement.

SECTION 7. TW Credit Support Certificate. AOL shall deliver to Time Warner, within five Business Days following each March 31, June 30, September 30 and December 31, and on the date on which all TW Support Obligations are Released, a certificate (each, a “TW Credit Support Certificate”) setting forth the following:

(a) the aggregate amount of the TW Support Obligations and the aggregate amount of the AOL Primary Obligations on each day since the most recently delivered TW Credit Support Certificate (or, in the case of the first TW Credit Support Certificate, since the Distribution Date), including reasonable detail with respect to any change in such amount;

(b) for each foreign currency in which any AOL Primary Obligation is denominated, a calculation setting forth in reasonable detail, as of the last day of each calendar month since the most recently delivered TW Credit Support Certificate (or, in the case of the first TW Credit Support Certificate, since the Distribution Date), the aggregate effect of changes in the value of such currency against the US Dollar on the aggregate amount of the AOL Primary Obligations denominated in such currency; and

(c) a calculation setting forth in reasonable detail the amount of the TW Credit Fees payable to Time Warner pursuant to the TW Credit Fee Letter on such day.

SECTION 8. Reimbursement, Expenses, Indemnity. (a) If Time Warner or any of its subsidiaries shall make any TW Payment, AOL shall promptly, but in any event within five Business Days of written demand therefor, reimburse Time Warner in full for the amount of such TW Payment, together with any interest accrued thereon. AOL’s reimbursement obligations hereunder shall not be construed to limit or waive the rights of subrogation that Time Warner or any of its subsidiaries may have in respect of any TW Payment and AOL hereby acknowledges and affirms that Time Warner and its subsidiaries have not waived their rights of subrogation.

(b) AOL shall pay all reasonable and actual out-of-pocket expenses incurred by Time Warner and its subsidiaries (including the reasonable and actual fees, charges and disbursements of counsel for Time Warner) after the Distribution Date in connection with (i) this Agreement, the TW Support Obligations (including the continuation, extension or renewal of any TW Support Obligation), the Credit Agreement, the Guarantee, the TW Credit Fee Letter and any agreement entered into in connection with any of the foregoing or any amendments or other modifications to any of the foregoing (whether or not the transactions contemplated hereby or thereby shall be consummated) or (ii) the enforcement or protection of its rights in connection with

7

any of the foregoing, including its rights under this Section; provided that AOL shall not be required to pay any such expenses incurred in connection with the voluntary replacement by Time Warner of a TW Support Obligation pursuant to clause (ii) of Section 2 hereof.

(c) AOL shall indemnify Time Warner and its subsidiaries and their respective affiliates, directors, officers, employees, agents and advisors (each of the foregoing being called an “Indemnitee”) against, and hold each Indemnitee harmless from, any and all losses, claims, damages, liabilities and related expenses, including the reasonable fees, charges and disbursements of any counsel for any Indemnitee, incurred by or asserted against any Indemnitee arising out of, in connection with, or as a result of (i) the execution or delivery of this Agreement, the Credit Agreement, the Guarantee, the TW Credit Fee Letter or any agreement or instrument contemplated hereby or thereby (but excluding, for the avoidance of doubt, the separation agreement to be entered into between Time Warner and AOL in connection with the Spin-Off), the performance by the parties hereto of their respective obligations hereunder or thereunder or the consummation of the transactions contemplated hereby or thereby (including the continuation, extension or renewal of any TW Support Obligation), or the use of, or the proposed use of, the TW Support Obligations and the proceeds of the loans made and letters of credit issued under the Credit Agreement, or any actual or prospective claim, litigation, investigation or proceeding relating to any of the foregoing, whether based on contract, tort or any other theory and regardless of whether any Indemnitee is a party thereto; provided that such indemnity shall not, as to any Indemnitee, be available to the extent that such losses, claims, damages, liabilities or related expenses are found in a judgment by a court of competent jurisdiction to have resulted from the gross negligence or wilful misconduct of any Indemnitee.

(d) All amounts due under this Section shall be payable promptly after written demand therefor, and in any event within five Business Days following such demand, in immediately available funds in US Dollars to an account of Time Warner specified in writing, shall not be subject to reduction by way of set-off or counterclaim and shall be in addition to any other amounts payable to Time Warner in respect of or pursuant to the TW Credit Fee Letter. If any payment hereunder would be due and payable on a day that is not a Business Day, such payment shall instead be due on the immediately preceding Business Day.

(e) Any amount payable hereunder shall bear interest at a rate per annum equal to the Default Interest Rate, calculated on a daily basis, from (i) in the case of any TW Payment, the date on which such TW Payment was made and (ii) in the case of any other amount payable hereunder, the date immediately following the date by which such amount was required to be paid pursuant to paragraph (d) above until the date on which AOL shall make payment in full of such amount (including all interest accrued thereon pursuant to this paragraph (e)) to Time Warner.

(f) AOL hereby authorizes Time Warner at any time and from time to time when any amount owed by AOL to Time Warner pursuant to this Section or the TW Credit Fee Letter is due and payable to it and has not been paid, to the fullest extent permitted by law, to set off and apply any and all indebtedness at any time

8

owing by Time Warner to or for the credit or the account of AOL against any of and all of the amounts payable by AOL to Time Warner hereunder; provided that Time Warner shall not be permitted to exercise any right of set-off pursuant to this paragraph unless demand for payment has been made pursuant to paragraph (d) of this Section and the period within which AOL was required to make such payment has expired. Time Warner shall notify AOL promptly of any such setoff and the application made by Time Warner of the proceeds thereof; provided that the failure to give such notice shall not affect the validity of such setoff and application. The rights of Time Warner under this paragraph are in addition to other rights and remedies (including other rights of setoff) which Time Warner may have.

(g) The provisions of this Section shall survive and remain in full force and effect regardless of the consummation of the transactions contemplated hereby or by any of the agreements referred to herein or the termination of this Agreement or any such other agreements or any provision hereof or thereof.

SECTION 9. Notices. (a) All notices, requests and demands to or upon AOL shall be in writing and shall be delivered by hand or overnight courier service, mailed by certified or registered mail or sent by facsimile to it at AOL Inc., 770 Broadway, 4th Floor, New York, NY 10003, Attn: Chief Financial Officer, with a copy to AOL Inc, 22000 AOL Way, Dulles, VA 20166, Attn: Deputy General Counsel. All notices, requests or demands to or upon Time Warner shall be in writing and shall be delivered by hand or overnight courier service, mailed by certified or registered mail or sent by facsimile to it at One Time Warner Center, New York, NY 10019, Attention of Chief Financial Officer (Facsimile No. (212) 484-7175), with copies to its General Counsel (Facsimile No. (212) 484-7167) and its Treasurer (Facsimile No. (212) 484-7151). All such notices, requests or demands delivered hereunder shall be deemed to have been given on the date of receipt.

(b) (i) Substantially concurrently with the delivery by AOL of any notice or other document to the Administrative Agent or the Lenders under the Credit Agreement or any agreement relating thereto or, AOL shall deliver a copy of such notice or document to Time Warner.

(ii) Promptly, and in any event within one Business Day of receipt of any notice or other document sent by the Administrative Agent or a Lender to AOL or any other Loan Party, AOL shall deliver a copy of such notice or document to Time Warner.

SECTION 10. Amendments in Writing. None of the terms or provisions of this Agreement may be waived, amended, supplemented or otherwise modified except by a written instrument executed by Time Warner and AOL.

SECTION 11. No Waiver; Cumulative Remedies. Time Warner shall not by any act (except by a written instrument pursuant to Section 10 hereof), delay, indulgence, omission or otherwise be deemed to have waived any right or remedy hereunder or to have acquiesced in any breach of any of the terms and conditions hereof or any agreement referred to herein or contemplated hereby. No failure to exercise, nor any

9

delay in exercising, on the part of Time Warner, any right, power or privilege hereunder shall operate as a waiver thereof. No single or partial exercise of any right, power or privilege hereunder shall preclude any other or further exercise thereof or the exercise of any other right, power or privilege. A waiver by Time Warner of any right or remedy hereunder on any one occasion shall not be construed as a bar to any right or remedy which Time Warner would otherwise have on any future occasion. The rights and remedies herein provided are cumulative, may be exercised singly or concurrently and are not exclusive of any other rights or remedies provided by law or by any other agreement.

SECTION 12. Section Headings. The section headings used in this Agreement are for convenience of reference only and are not to affect the construction hereof or be taken into consideration in the interpretation hereof.

SECTION 13. Counterparts. This Agreement may be executed on any number of separate counterparts (including by facsimile or other electronic transmission), and all of said counterparts taken together shall be deemed to constitute one and the same instrument. Delivery of an executed counterpart of a signature page of this Agreement by facsimile or other electronic transmission shall be effective as delivery of a manually executed counterpart hereof.

SECTION 14. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.

SECTION 15. Jurisdiction; Consent to Service of Process.(a) Each party hereto hereby irrevocably and unconditionally submits, for itself and its property, to the exclusive jurisdiction of the Supreme Court of the State of New York sitting in New York County and of the United States District Court of the Southern District of New York, and any appellate court from any thereof, in any action or proceeding arising out of or relating to this Agreement, or for recognition or enforcement of any judgment, and each party hereto hereby irrevocably and unconditionally agrees that all claims in respect of any such action or proceeding shall be heard and determined in such New York State court or, to the extent permitted by law, in such Federal court. Each party hereto agrees that a final judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law.

(b) Each party hereto hereby irrevocably and unconditionally waives, to the fullest extent it may legally and effectively do so, any objection which it may now or hereafter have to the laying of venue of any suit, action or proceeding arising out of or relating to this Agreement in any court referred to in paragraph (a) of this Section 15. Each of the parties hereto hereby irrevocably waives, to the fullest extent permitted by law, the defense of an inconvenient forum to the maintenance of such action or proceeding in any such court.

SECTION 16. WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES TRIAL BY JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS AGREEMENT AND FOR ANY COUNTERCLAIM THEREIN.

[The remainder of this page has been left blank intentionally.]

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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed on their behalf and in their respective corporate names by their duly authorized officers as of the date first above written.

TIME WARNER INC.,
by
	/s/ Edward B. Ruggiero
	Name:	Edward B. Ruggiero
	Title:	Senior Vice President and Treasurer

11

AOL INC.,
by
	/s/ Arthur Minson
	Name:	Arthur Minson
	Title:	Executive Vice President and Chief Financial Officer

12

EX-21.1

EXHIBIT 21.1

SUBSIDIARIES OF AOL INC.

AOL Inc. (“AOL”) maintains over 100 subsidiaries. Set forth below are the names of certain controlled subsidiaries, at least 50% owned, directly or indirectly, of AOL as of December 31, 2009 that carry on a substantial portion of AOL’s lines of business. The names of various consolidated wholly-owned subsidiaries have been omitted. None of the foregoing omitted subsidiaries, considered either alone or in the aggregate, constitutes a significant subsidiary.

Name	State or Other Jurisdiction of Incorporation
AOL Inc. (Registrant)	Delaware
AOL Advertising Inc.	Maryland
ADTECH AG	Germany
ADTECH UK Limited	United Kingdom
AdTech US, Inc.	Delaware
Advertising.com LLC	Delaware
AOL Advertising International Holdings Limited	United Kingdom
AOL Advertising Denmark ApS	Denmark
AOL Advertising Finland OY	Finland
AOL Advertising France, Société à Responsabilité Limitée	France
AOL Advertising Iberia, S.L. Unipersonal	Spain
AOL Advertising International Limited	United Kingdom
AOL Advertising Norway AS	Norway
AOL Advertising Sweden AB	Sweden
Perfiliate Limited	United Kingdom
Lightstate Limited	United Kingdom
Gpak Limited	United Kingdom
Perfiliate Technologies Limited	United Kingdom
AOL Advertising Netherlands B.V.	Netherlands
ICQ LLC	Delaware
ICQ Ltd.	Israel
Lightningcast LLC	Delaware
Quigo Technologies LLC	Delaware
Quigo Israel Ltd.	Israel
TACODA LLC	Delaware
Third Screen Media LLC	Delaware
AOL Asia Limited	Hong Kong
AOL Australia Pty Limited	Australia
AOL Canada Corp.	Canada
AOL China Holdings LLC	Delaware

AOL Beijing Technology Research & Development Company Limited	China
AOL Community, Inc.	Delaware
AOL Europe S.à r.l	Luxembourg
AOL (UK) Limited	United Kingdom
AOL Deutschland Medien GmbH	Germany
AOL Europe Services S.à r.l.	Luxembourg
AOL France SNC	France
AOL Nederland BV	Netherlands
AOL Interactive Media India Private Limited	India
AOL International Finance Limited	United Kingdom
AOL Mexico Operations, S. de R.L. de C.V.	Mexico
AOL Online India Private Limited	India
Bebo, Inc.	Delaware
Bebo Pty Limited	Australia
Bebo UK Limited	United Kingdom
CompuServe Interactive Services, Inc.	Delaware
Cyber Fin S.à r.l.	Luxembourg
Digital Marketing Services, Inc.	Delaware
EJV Reorganization, Inc.	Delaware
AOL Finance Services Inc.	Delaware
Going, Inc.	Delaware
Goowy Media Inc.	California
InfoInterActive Corp.	Nova Scotia
AOL Canada Inc.	Canada
MapQuest, Inc.	Delaware
MapQuest PA, Inc.	Delaware
Netscape Communications Corporation	Delaware
AOL Global Operations Limited	Ireland
AOL Online Japan, Ltd.	Japan
Nullsoft, Inc.	Arizona
Patch Media Corporation	Delaware
POSTGORILLA INC.	Florida
Socialthing, Inc.	Delaware
Spinner Networks Incorporated	California
Surphace Inc. (formerly known as Sphere Source, Inc.)	Delaware
The Relegence Corporation	Delaware
AOL Relegence Israel Ltd.	Israel
Totekasche Holdings, Inc. d/b/a Userplane	Delaware
Transatlantic Web Services Inc.	Delaware
Truveo, Inc.	Delaware
Weblogs Inc. LLC	Delaware
Yedda, Inc.	Delaware
Yedda Technologies-Knowledge Management Services (Y.O.D.E.A. 2006) Ltd.	Israel

EX-23.1

Exhibit 23.1

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We consent to the incorporation by reference in the Registration Statement (Form S-8 No. 333-163603) pertaining to the AOL Inc. 2010 Stock Incentive Plan of our report dated March 2, 2010, with respect to the consolidated financial statements and schedule of AOL Inc. included in this Annual Report (Form 10-K) for the year ended December 31, 2009.

/s/ Ernst & Young LLP

McLean, Virginia

March 2, 2010

EX-31.1

Exhibit 31.1

CERTIFICATION

PURSUANT TO SECURITIES EXCHANGE ACT RULE 13a-14(a)

I, Timothy M. Armstrong , certify that:

1. I have reviewed this Annual Report on Form 10-K for the year ended December 31, 2009 of AOL Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

c. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: March 2, 2010	By:	/s/     TIMOTHY M. ARMSTRONG
	Name:	Timothy M. Armstrong
	Title:	Chairman and Chief Executive Officer (Principal Executive Officer)

EX-31.2

Exhibit 31.2

CERTIFICATION

PURSUANT TO SECURITIES EXCHANGE ACT RULE 13a-14(a)

I, Arthur Minson , certify that:

1. I have reviewed this Annual Report on Form 10-K for the year ended December 31, 2009 of AOL Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

c. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: March 2, 2010	By:	/s/    ARTHUR MINSON
	Name:	Arthur Minson
	Title:	Executive Vice President and Chief Financial Officer (Principal Financial Officer)

EX-32.1

Exhibit 32.1

CERTIFICATION

PURSUANT TO 18 U.S.C. SECTION 1350,

AS ENACTED BY SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report on Form 10-K for the year ended December 31, 2009 of AOL Inc. (the “Company”), as filed with the Securities and Exchange Commission on the date hereof (the “Report”), each of the undersigned officers of the Company certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to his respective knowledge:

1. The Report fully complies, in all material respects, with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: March 2, 2010	/s/    TIMOTHY M. ARMSTRONG
	Timothy M. Armstrong
	Chairman and Chief Executive Officer (Principal Executive Officer)
Date: March 2, 2010	/s/    ARTHUR MINSON
	Arthur Minson
	Executive Vice President and Chief Financial Officer (Principal Financial Officer)