America Online 2009 Annual Report Download - page 101

Table of Contents
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
97