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Table of Contents
AOL INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Acquisition of The Huffington Post
In connection with the acquisition of The Huffington Post in March 2011, the Company assumed the Huffington Post Plan and, as discussed above,
agreed to consideration valued at $12.1 million related to the fair value of unvested stock options held by The Huffington Post employees that were generally
converted into unvested AOL stock options. Specifically, as of closing: (1) the Company converted 706,881 outstanding shares that were subject to The
Huffington Post stock options into 664,075 Company stock options; (2) the remainder of the shares subject to outstanding The Huffington Post stock options
were cashed out pursuant to the merger agreement (all of the cashed-out shares were canceled and will not be returned to the share pool as Company shares
under the Huffington Post Plan); and (3) a small number of shares subject to The Huffington Post stock options held by previously terminated employees had
been either exercised or forfeited (the forfeited shares were returned to the share pool, and converted into Company shares under the Huffington Post Plan).
Of the fair value of The Huffington Post options that were converted, $8.1 million is being recognized as equity-based compensation expense over the
remaining award vesting periods (subject to adjustments for actual forfeitures), which for most employees is 24 months from the acquisition date. See "Note
4" for additional information on the acquisition of The Huffington Post and related stock conversion.
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,
2011 2010 2009
Stock options $ 21.0 $ 17.0 $ 4.3
RSUs and performance stock units (PSUs)(a) 21.5 19.1 8.2
Total equity-based compensation expense(b) $ 42.5 $ 36.1 $ 12.5
Tax benefit recognized $ 16.7 $ 14.4 $ 5.0
(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.
AOL Stock Options
The assumptions presented in the table below represent the weighted-average value of the applicable assumption used to value AOL stock options at
their grant date:
Year Ended December 31,
2011 2010
Expected volatility 38.8% 39.9%
Expected term to exercise from grant date 5.52 years 5.38 years
Risk-free rate 2.1% 2.5%
Expected dividend yield 0.0% 0.0%
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