America Online 2009 Annual Report Download - page 60

Table of Contents
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.
56