America Online 2009 Annual Report Download - page 102

Table of Contents
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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