America Online 2009 Annual Report Download - page 103

Table of Contents
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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