America Online 2010 Annual Report Download - page 110

Table of Contents
AOL INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Guarantee Agreements
In connection with entering into the Revolving Credit Facility, Time Warner guaranteed all of the Company's obligations with respect to loans and
letters of credit under the Revolving Credit Facility. As consideration for Time Warner providing such guarantee, the Company paid 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 varied
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. On September 30, 2010, the Company terminated its Revolving Credit Facility. In
connection with the termination of the Revolving Credit Facility, the Time Warner guarantee also terminated.
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, 2010, these events had not occurred and, accordingly, the amount
guaranteed by Time Warner at December 31, 2010 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 or 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.
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. Amounts that were due and owed under these arrangements were settled in
cash prior to the spin-off.
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
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