America Online 2010 Annual Report Download - page 101

Table of Contents
AOL INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
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 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.
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 and
restricted stock unit grants.
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, prior to the spin-off, is as follows (in millions):
Years Ended December 31,
2010 2009 2008
Stock options $ 17.0 $ 4.3 $ 8.7
RSUs and performance stock units (PSUs)(a) 19.1 8.2 10.9
Total equity-based compensation expense (b) $ 36.1 $ 12.5 $ 19.6
Tax benefit recognized $ 14.4 $ 5.0 $ 8.3
(a) AOL has not granted PSUs to employees. Prior to the spin-off, Time Warner granted RSUs and PSUs to AOL employees.
(b) Equity-based compensation expense in 2009 included a reduction to expense caused 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.
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