America Online 2011 Annual Report Download - page 99

Table of Contents
AOL INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
additional five years. Monthly rental payments to the landlord under this lease escalate by 7% after the end of the fifth year and tenth year of the lease
term. In 2010 AOL entered into a new lease of a building in California and included in the above table are approximately $54.8 million of payments
associated with this property. AOL has leased this space for a non-cancelable initial lease term that ends in June 2017 with no renewal options. Rent
was abated for the first nine months of the lease term, with partial rent abatement for an additional three months. Only operating expenses were paid
during the rent abatement period. Also included in the above table are payments for ongoing leases associated with AOL's restructuring activities. AOL
has recorded a liability on the balance sheet of $7.1 million related to these payments.
AOL has commitments under certain network licensing, royalty, deferred compensation and other agreements aggregating approximately $127.7
million at December 31, 2011, which are payable principally over a three-year period, as follows (in millions):
2012 $ 78.0
2013-2014 47.6
2015-2016 1.4
Thereafter 0.7
Total $ 127.7
The Company also has certain contractual arrangements that would require it to make payments or provide funding if certain circumstances occur
("contingent commitments"). At December 31, 2011, these arrangements related primarily to letters of credit and totaled $12.0 million. The Company does
not expect that these contingent commitments will result in any material amounts being paid by the Company in the foreseeable future.
Included in the commitment amounts discussed above are certain commitments to Time Warner, see "Note 12" for additional information.
Contingencies
On April 30, 2008, Bascom Global Internet Services, Inc. filed claims against AOL Inc. in the Eastern District Court of New York alleging that AOL's
WebUnlock Parental Controls technology infringes Bascom's U.S. Patent No. 5,987,606. Bascom sought $67,000,000 in damages. During the fourth quarter
of 2011, Bascom and AOL entered into a settlement agreement and settled the claims for $8,500,000.
In addition to the matter described above, AOL is a party to a variety of claims, suits and proceedings that arise in the normal course of business,
including actions with respect to intellectual property claims, tax matters, labor and unemployment claims, commercial claims, claims related to the
Company's business model for content creation and other matters. With respect to tax matters, AOL has received tax assessments in certain states related to
sales and use taxes on its business operations. AOL has appealed these tax assessments and plans to vigorously contest these matters. In addition, AOL has
received assessments in certain foreign countries related to income tax and transfer pricing, and plans to vigorously contest these matters as well. In certain
instances, the Company was required to pay a portion of the tax assessment in order to proceed with the dispute of the assessment. While the results of such
normal course claims, suits and proceedings cannot be predicted with certainty, management does not believe that, based on current knowledge and the likely
timing of resolution of the various matters, any additional reasonably possible potential losses above the amount accrued for such matters would be material to
the Company's financial statements. Regardless of the outcome, legal proceedings can have an adverse effect on us because of defense costs, diversion of
management resources and other factors.
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