America Online 2011 Annual Report Download - page 93

Table of Contents
AOL INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Equity-Based Compensation
AOL Equity Plan
Pursuant to the Company's Amended and Restated 2010 Stock Incentive Plan ("2010 SIP") stock options are granted to employees, advisors and non-
employee directors of AOL with exercise prices equal to the quoted market value of the common stock at the date of grant. Generally, the stock options vest
ratably over a four year vesting period and expire ten years from the date of grant. Certain stock option awards provide for accelerated vesting upon an
election to retire after reaching a specified age and years of service, as well as certain additional circumstances for non-employee directors.
Also pursuant to the 2010 SIP, AOL may also grant shares of common stock or restricted stock units ("RSUs") to its employees, advisors and non-
employee directors, which generally vest ratably over a four year period from the date of grant. Holders of restricted stock and RSU awards are generally
entitled to receive regular cash dividends or dividend equivalents, respectively, at the discretion of the Board of Directors, if paid by the Company during the
period of time that the restricted stock or RSU awards are unvested.
The Company is authorized to grant equity awards to employees, advisors and non-employee directors covering an aggregate of 16.6 million shares of
AOL common stock under the 2010 SIP, of which up to 7.8 million awards may be issued in the form of full-value awards, such as restricted stock or RSUs.
Amounts available for issuance pursuant to grants under the 2010 SIP will change over time based on such activities as the conversion of equity awards into
common stock, the forfeiture of equity awards and the cancellation of equity awards, among other activities.
Upon the (i) exercise of a stock option award, (ii) vesting of a RSU or (iii) grant of restricted stock, shares of AOL common stock are issued from
authorized but unissued shares or from treasury stock.
Time Warner Equity Plans
Until consummation of the separation from Time Warner, AOL employees participated in Time Warner's equity plans. Time Warner had two active
equity plans under which it was authorized to grant equity awards of 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.
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