UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of the

Securities Exchange Act of 1934

(Amendment No.     )

Filed by the Registrant  x¨                      Filed by a Party other than the Registrant  ¨

Check the appropriate box:

AOL Inc.

(Name of Registrant as Specified In Its Charter)

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):

Notice of 2014 Annual Meeting

of Stockholders and Proxy Statement

May 22, 2014

9:00 a.m., Pacific Time

The L.A. Hotel Downtown

Los Angeles, California

March 20, 2013April 8 2014

Dear Fellow Stockholders:

Please join us for AOL Inc.’s Annual Meeting of Stockholders on May 3, 2013,22, 2014, at 9:00 a.m. (Eastern(Pacific Time) at the Sheraton Inner Harbor, 300The L.A. Hotel Downtown, 333 South CharlesFigueroa Street, Baltimore, Maryland 21201.Los Angeles, California 90071. We are pleased to be utilizing the Securities and Exchange Commission rule allowing companies to furnish proxy materials to their stockholders over the internet. We believe that the e-proxy process will expedite our stockholders’ receipt of proxy materials, lower the costs of distribution and reduce the environmental impact of our Annual Meeting.

In accordance with this rule, we are sending stockholders of record at the close of business on March 7, 201327, 2014 a Notice of Internet Availability of Proxy Materials. The Notice contains instructions on how to access our Proxy Statement and Annual Report and vote online. If you would like to receive a printed copy of our proxy materials instead of downloading a printable version from the internet, please follow the instructions for requesting such materials included in the Notice as well as in the attached Proxy Statement.

Attached to this letter are a Notice of Annual Meeting of Stockholders and Proxy Statement, which describe the business to be conducted at the Annual Meeting. We also will report on matters of current interest to our stockholders.

Your vote is important. Whether you own a few shares or many, and whether or not you plan to attend the Annual Meeting in person, it is important that your shares be represented and voted at the Annual Meeting.

Thank you for your continued support of AOL Inc.

Sincerely,

Tim Armstrong

Chairman and Chief Executive Officer

PROXY VOTING METHODS

If at the close of business on March 7, 201327, 2014 you were a stockholder of record, you may vote your shares by proxy through the internet, by telephone or by mail, or you may vote in person at our Annual Meeting of Stockholders to be held on May 3, 201322, 2014 (the “Annual Meeting”). If at the close of business on March 7, 201327, 2014 you held shares through a bank, broker or other nominee, you may vote by submitting voting instructions to your bank, broker or nominee. In these cases, you may vote directly over the internet or by telephone or you may vote by mail by submitting a voting instruction form. We encourage you to vote through the internet or by telephone, both of which you may do 24 hours a day, 7 days a week. In addition, if at the close of business on March 7, 201327, 2014 you were a stockholder of record or held shares through a bank, broker or other nominee, you may vote in person at the Annual Meeting. You may revoke your proxy and change your vote at the time and in the manner described on page 3 of the Proxy Statement.

If you hold your shares directly in your name in our stock records maintained by our transfer agent, Computershare Trust Company N.A., proxies submitted via the internet or by telephone must be received by 11:59 p.m., EasternPacific Time, on Thursday,Wednesday, May 2, 2013.21, 2014.

If you hold shares through a bank, broker or other nominee, voting instructions submitted over the internet or by telephone as described above must be received by 11:59 p.m., EasternPacific Time, on Thursday,Wednesday, May 2, 2013.21, 2014.

Proxies or voting instructions submitted by mail shouldmust be returned in the envelope provided to you with your paper proxy card or voting instruction form, and received not later than 9:00 a.m. EasternPacific Time, on Friday,Thursday, May 3, 2013.22, 2014.

ToYou may vote by proxy:

BY INTERNET

BY TELEPHONE

BY MAIL

YOUR VOTE IS IMPORTANT. THANK YOU FOR VOTING.

AOL INC.

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

By Order of the Board of Directors,

Julie Jacobs

Executive Vice President, Corporate Development, General Counsel and Corporate Secretary

This Notice of Annual Meeting and Proxy Statement

are being distributed to stockholders beginning on or about March20, 2013.April 8, 2014.

TABLE OF CONTENTS

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AOL INC.

770 Broadway

New York, New York 10003

Telephone: (212) 652-6400

PROXY STATEMENT

Annual Meeting of Stockholders

May 3, 201322, 2014

9:00 a.m. (Eastern(Pacific Time)

GENERAL INFORMATION

Why am I being provided with these materials?

We have made these proxy materials available to you via the internet or, upon your request, have delivered printed versions of these materials to you by mail in connection with the solicitation by the Board of Directors (the “Board”) of AOL Inc. (the “Company” or “AOL”) of proxies to be voted at our Annual Meeting of Stockholders to be held on May 3, 2013 (the “Annual Meeting”), and at any postponements or adjournments of the Annual Meeting. If at the close of business on March 7, 2013 you were a stockholder of record or held shares through a bank, broker or other nominee, you are invited to vote your shares and attend the meeting.

There are four proposals scheduled to be voted on at the Annual Meeting:

Why did I receive a one-page notice in the mail regarding the internet availability of proxy materials instead of a full set of proxy materials?

Pursuant to the rules adopted by the United States Securities and Exchange Commission (the “SEC”), we have elected to provide stockholders access to our proxy materials via the internet. We believe that the e-proxy process will expedite our stockholders’ receipt of proxy materials, lower the costs of distribution and reduce the environmental impact of our Annual Meeting. Accordingly, we are sending a Notice of Internet Availability of Proxy Materials (the “Notice”) on or about March20, 2013 to stockholders of record entitled to vote at the Annual Meeting. All stockholders will have the ability to access the proxy materials on the website referred to in the Notice or your proxy card and to download printable versions of the proxy materials or to request and receive a printed set of the proxy materials from us. Instructions on how to access the proxy materials over the internet or to request a printed copy from us may be found in the Notice.

Who is entitled to vote?

Stockholders as of the close of business on March 7, 2013 (the “Record Date”) may vote at the Annual Meeting. As of that date, there were77,211,619 shares of our common stock outstanding and entitled to vote. You have one vote for each director nominee and for each other proposal to be voted on at the Annual Meeting with respect to each share of common stock held by you as of the Record Date, including shares:

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What constitutes a quorum?

A majority of the voting power of the outstanding shares of common stock entitled to vote generally on the business properly brought before the Annual Meeting must be represented in person or by proxy to constitute a quorum for the Annual Meeting. Abstentions are counted as present and entitled to vote for purposes of determining a quorum. If you hold your shares in street name and do not provide voting instructions to your broker, New York Stock Exchange (“NYSE”) rules grant your broker discretionary authority to vote your shares on “routine matters” at the Annual Meeting, including the ratification of the independent auditors in Proposal 2. However, the proposals regarding the election of directors, the advisory vote to approve executive compensation and the approval of the Company’s Tax Asset Protection Plan are not considered “routine matters.” As a result, if you do not provide instructions your shares will not be voted on Proposals 1, 3 and 4 (resulting in a “broker non-vote”). Although “broker non-votes” will be counted as present and entitled to vote for purposes of determining a quorum, we urge you to promptly provide voting instructions to your broker so that your shares are voted on all proposals.

How many votes are required to approve each proposal?

Each director nominee shall be elected at the Annual Meeting by the vote of a majority of the votes cast with respect to the nominee. A majority of the votes cast with respect to election of a director nominee means that the number of votes cast “FOR” a nominee must exceed the votes cast “AGAINST” that nominee (with “abstentions” and “broker non-votes” not counted as votes cast with respect to that nominee).

Any other proposal requires the affirmative vote of a majority of the voting power of the shares of common stock of the Company present in person or represented by proxy at the Annual Meeting and voting thereon.

How are votes counted?

You may vote “FOR” or “AGAINST” each In addition, NYSE rules contain separate approval requirements with respect to the approval of the director nominees, or you may “ABSTAIN” from voting for one or more nominees. You mayCompany’s AOL Inc. 2010 Stock Incentive Plan, as amended and restated. Under NYSE rules, approval of this proposal requires the affirmative vote “FOR” or “AGAINST” or you may “ABSTAIN” from voting on each of the other proposals.a majority of votes cast.

With respect to the election of directors, neither an abstention nor a broker non-vote will count as a vote cast “for” or “against” a director nominee. Therefore, abstentions and broker non-votes will have no direct effect on the outcome of the election of directors.

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With respect to each of the other proposals to be voted on at the Annual Meeting, neither an abstention nor a broker non-vote will count as voting with respect to the proposal. Therefore, abstentions and broker non-votes will have no direct effect on the outcome of the proposal. However, for purposes of approval of the Company’s AOL Inc. 2010 Stock Incentive Plan, as amended and restated, under NYSE rules, abstentions are treated as votes cast, and, therefore, will have the same effect as an “against” vote.

If you sign and submit your proxy card without specifying how you would like your shares voted, your shares will be voted in accordance with the Board’s recommendations specified below under “How does the Board recommend that I vote?” and in accordance with the discretion of the persons named on the proxy card (the “proxyholders”) with respect to any other matters that may be voted upon at the Annual Meeting.

Who will countMeeting or at any adjournment or postponement of the vote?

Representatives of Computershare Trust Company N.A., our transfer agent, will tabulate the votes and act as inspectors of election.

How does the Board recommend that I vote?

Our Board recommends that you vote your shares:Annual Meeting.

How do I vote my shares without attending

If your shares are held in street name, your bank, broker or other nominee should give you instructions for voting your shares. In these cases, you may vote via the internet, by telephone or by mail by submitting a voting instruction form.

Internet and telephone voting facilities will close at 11:59 p.m. (Eastern(Pacific Time) on May 2, 201321, 2014 for the voting of shares held by stockholders of record and for the voting of shares held in street name.

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Mailed proxy cards or voting instruction forms shouldmust be returned in the envelope provided to you with your proxy card or voting instruction form, and received by 9:00 a.m. (Eastern(Pacific Time) on May 3, 2013.22, 2014.

How do I vote my shares in person at the Annual Meeting?

First, you must satisfy the requirements for admission to the Annual Meeting as detailed below. Then, if you are a stockholder of record and prefer to vote your shares at the Annual Meeting, you must bring either your Notice or proof of stock ownership. You may vote shares held in street name at the Annual Meeting only if you obtain a signed proxy from the record holder (bank, broker or other nominee) giving you the right to vote the shares. You may obtain directions to the Annual Meeting by contacting our Corporate Secretary via email at corporatesecretary@teamaol.com,via phone at (212) 652-6450, via fax at (703) 466-9813 or via mail to AOL Inc., 770 Broadway, New York, New York 10003.

Even if you plan to attend the Annual Meeting, we encourage you to vote in advance via internet, telephone or mail so that your vote will be counted even if you later decide not to attend the Annual Meeting.

What does it mean if I receive more than one Notice or proxy card on or about the same time?

It generally means you hold shares registered in more than one account. To ensure that all your shares are voted, please sign and return each proxy card or, if you vote via internet or telephone, vote once for each Notice you receive. For more information, see “Householding of Proxy Materials” on page90 of this Proxy Statement.

May I change my vote or revoke my proxy?

Yes. Whether you have voted via internet, telephone or mail, if you are a stockholder of record, you may change your vote and revoke your proxy by:

If you hold shares in street name, you may submit new voting instructions by contacting your bank, broker or other nominee. You may also change your vote or revoke your voting instructions in person at the Annual Meeting if you obtain a signed proxy from the record holder (bank, broker or other nominee) giving you the right to vote the shares.Only the latest validly executed proxy that you submit will be counted.

Do I need a ticket to be admitted to the Annual Meeting?

No, although only stockholders and one guest, and other individuals invited by the Company are entitled to attend the Annual Meeting. To obtain admission to the Annual Meeting, you must register in advance by emailingcorporatesecretary@teamaol.com, by calling (212) 652-6450 or by faxing (703) 466-9813. You may bring one immediate family member as a guest. Please register by April 30, 2013. Please include the following information in your email, voicemail or fax:

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In addition, we may establish additional or different rules and regulations for admission into and the conduct of the Annual Meeting.

Do I also need to present identification to be admitted to the Annual Meeting?

Yes, all stockholders and guests must present a government-issued form of identification in order to be admitted to the Annual Meeting.

Could other matters be decided at the Annual Meeting?

We are currently unaware of any matters to be raised at the Annual Meeting other than those referred to in this Proxy Statement. If other matters are properly presented at the Annual Meeting for consideration, the proxyholders will have the discretion to vote on those matters for you.

Who will pay for the cost of this proxy solicitation?

We will pay for the cost of soliciting proxies. Proxies may be solicited on our behalf by directors, officers or employees (for no additional compensation) in person or by telephone, electronic transmission and facsimile transmission. We have hired Georgeson Inc. to solicit proxies. We will pay Georgeson Inc. a fee of $9,000, plus reasonable expenses, for these services. Brokers and other nominees will be requested to solicit proxies or authorizations from beneficial owners and will be reimbursed for their reasonable and documented expenses.

WHAT THE COMPANY HAS DONE SINCE THE 2012 ANNUAL MEETING

Since the 2012 Annual Meeting, at which each of the Company’s directors standing for election were reelected, we have followed through on the commitments we made to stockholders. Specifically, we have achieved the following:

A:

We will pay for the cost of soliciting proxies. Proxies may be solicited on our behalf by directors, officers or employees (for no additional compensation) in person or by telephone, electronic transmission and facsimile transmission. We have hired Georgeson Inc. to solicit proxies. We will pay Georgeson Inc. a fee of $9,000, plus reasonable expenses, for these services. Brokers and other nominees will be requested to solicit proxies or authorizations from beneficial owners and will be reimbursed for their reasonable and documented expenses.

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Grew fourth quarter Revenue and full year Adjusted OIBDA in 2012. In 2012 we returned to revenue growth in the fourth quarter and Adjusted OIBDA growth for the full year, and we believe we are well positioned to continue our growth path in 2013.

NOTICE OF INTERNET AVAILABILITY OF PROXY MATERIALS

Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting of Stockholders to be held on May 3, 2013.22, 2014.

The Proxy Statement and Annual Report are available at http://corp.aol.com/proxymaterials.

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The Board, upon recommendation of the Nominating and Governance Committee of the Board (the “Nominating and Governance Committee”), unanimously nominated the 8nine director nominees listed below for election to the Board at the Annual Meeting. Each of the 8nine nominees currently serves as a member of the Board and was last elected by the stockholders at the 20122013 Annual Meeting of Stockholders, with the exception of Mr. Johnston and Ms. LeporeBurton who werewas appointed to the Board in September and October 2012, respectively, each2013, after being recommended to theour Nominating and Governance Committee by a third party search firm.non-management director of our Board.

Directors elected at the Annual Meeting will be elected to hold office until the 20142015 Annual Meeting of Stockholders and until their successors are duly elected and qualified. Unless otherwise instructed, the proxyholders intend to vote the proxies held by them for the election of the 8nine director nominees named below. The proxies cannot be voted for more than 8nine candidates for director. If any of the 8nine director nominees is unable or unwilling to be a candidate for election by the time of the Annual Meeting (a contingency which the Board does not expect to occur), the proxyholders may vote for a substitute nominee chosen by the present Board to fill the vacancy. In the alternative, the proxyholders may vote just for the remaining nominees, leaving a vacancy that may be filled at a later date by the Board. Alternatively, the Board may reduce the size of the Board. Set forth below are the principal occupation,occupations, business experience, qualifications, directorships and certain other information for each of the 8nine director nominees.

Nominees for Election as Directors

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HUGH F. JOHNSTON Executive Vice President and Chief Financial Officer PepsiCo Director since 2012 Age 51 8		Mr. Hugh Johnston has served since 2010 as Executive Vice President and Chief Financial Officer of PepsiCo, Inc., a global food and beverage company. Mr. Johnston joined PepsiCo in 1987 and has held a number of increasing leadership roles, including Executive Vice President, Global Operations and President, Pepsi-Cola North America Beverages during the period 2007 to 2009. Mr. Johnston left PepsiCo from August 1999 through March 2002 to pursue a general management role as VP, Retail, at Merck Medco, leading the company’s retail pharmacy card business. Mr. Johnston brings to the Board extensive experience, expertise and background in accounting, financial, strategy and general management matters gained from his current position as Executive Vice President and Chief Financial Officer of PepsiCo, Inc. and various senior executive roles at PepsiCo and Merck Medco.

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Name, Title, Age and Tenure as a Director		Principal Occupation, Business Experience, Qualifications and Directorships
JAMES STENGEL President and Chief Executive Officer The Jim Stengel Company, LLC Director since 2009 Age 5758		Mr. James Stengel has been President and Chief Executive Officer of The Jim Stengel Company, LLC, a marketing think tank and consulting firm, since 2008. Mr. Stengel is also currently an adjunct marketing professor at UCLA’s Anderson School of Management. Mr. Stengel worked at The Procter & Gamble Company, a global consumer products company, from 1983 to 2008, holding a variety of positions including Global Marketing Officer from 2001 to 2008. Mr. Stengel served on the board of directors of Motorola, Inc. prior to the spin-off of Motorola Mobility, Inc. in January 2011 and Motorola Mobility Inc. prior to its sale to Google Inc. in 2012.   Skills and Qualifications Mr. Stengel brings to the Board extensive experience, expertise and background in branding and marketing, having served as the Global Marketing Officer of Procter & Gamble Company. He also brings public company board experience and leadership development experience gained from his service as a board member and as the Chairman of the Compensation and Leadership Committee of Motorola Mobility, Inc. prior to its sale to Google Inc. in 2012, and of Motorola, Inc. prior to the spin-off of Motorola Mobility, Inc. in January 2011.

THE BOARD UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE “FOR” THE ELECTION OF EACH OF THE EIGHT

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BOARD OF DIRECTORS INFORMATION

Committees of the Board and Meetings

There are currently fivefour standing committees of the Board: the Audit and Finance Committee, the Compensation and Leadership Committee, the Nominating and Governance Committee the Executive Committee and the TransactionsExecutive Committee (each, a “Committee”). Currently, as discussed in more detail below, each Committee is comprised entirely of independent directors, consistent with the definition of “independent” under the NYSE listing standards applicable to boards of directors generally and board committees in particular. Each Committee is authorized to retain its own outside counsel and other advisors as it deems necessary or advisable.

The Board has adopted written charters for each of its standing Committees, copies of which are posted on our website at www.corp.aol.com/corpgov. A stockholder also may request a copy of these materials in print, without charge, by contacting our Corporate Secretary at AOL Inc., 770 Broadway, New York, New York 10003. Each of the Audit and Finance Committee, the Compensation and Leadership Committee, the Nominating and Governance Committee and the TransactionsExecutive Committee reviews its charter on an annual basis. Each Committee makes recommendations, as appropriate, to management or the full Board as a result of its charter review.

The following table summarizes the current membership of the Board and of each of its standing Committees, as well as the number of times the Board and each Committee met during 2012.2013.

The Transactions Committee of the Board was dissolved by the Board on August 8, 2013. Mr. Reynolds served as Chair of the Transactions Committee and Ms. Lepore served as a member of the Transactions Committee at the time of its dissolution.

Each current director attended 75% or more of the total number of meetings of the Board and of the Committees on which each such director served during 2012.2013. In addition to the fivefour standing Committees, the Board may approve, and has from time to time approved, the creation of special committees to act on behalf of the Board.

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Audit and Finance Committee

The Audit and Finance Committee of the Board (the “Audit and Finance Committee”), among other things:

All members of the Audit and Finance Committee are “independent,” consistent with the NYSE listing standards applicable to boards of directors in general and audit committees in particular and SEC rules regarding audit committees. In addition, the Board has determined that each of the members of the Audit and Finance Committee is financially literate and that each of Mr. Reynolds and Mr. Johnston has sufficient accounting and related financial management expertise to satisfy the criteria to be an “audit committee financial expert” under the rules and regulations of the SEC.

In accordance with the Audit and Finance Committee charter, no Audit and Finance Committee member may simultaneously serve on more than two other public company audit committees unless the Board specifically determines that it would not impair the ability of an existing or prospective member to serve effectively on the Audit and Finance Committee. None of the current members currently serves on more than two other public company audit committees.

Compensation and Leadership Committee

The Compensation and Leadership Committee of the Board (the “Compensation Committee”), among other things:

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All members of the Compensation Committee are “independent” as defined by“independent,” consistent with the NYSE listing standards.standards applicable to boards of directors in general and compensation committees in particular. In addition, all members of the Compensation Committee qualify as “non-employee directors” (within the meaning of Rule 16b-3 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) and as “outside directors” (within the meaning of Section 162(m) of the Internal Revenue Code of 1986, as amended (the “Internal Revenue Code”“Code”)).

Delegation of Authority with Respect to Equity Grants

Pursuant to its charter, unless otherwise prohibited by law, our certificate of incorporation or our by-laws, the Compensation Committee may delegate its responsibilities to subcommittees or individuals. The Compensation Committee has delegated limited authority to individuals serving as our chief executive officer, chief financial officer, chief legal officer and chief human resources officer to make certain equity grants outside of the annual equity grant process to non-executive management

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employees who are newly hired employees or those employees who are otherwise selected by the CEO to receive a grant other than employees with the title of Executive Vice President or higher, any other Section 16 officer or any employee whose annual total target compensation has a value of $3 million or greater.

Compensation Consultant

The Compensation Committee has the authority under its charter to retain outside consultants or advisors, as it deems necessary or advisable. In accordance with this authority, the Compensation Committee has engaged Compensation Advisory Partners LLC (“CAP”) as its independent compensation consultant to provide it with objective and expert analyses, advice and information with respect to executive compensation. All executive compensation services provided by CAP were conducted under the direction or authority of the Compensation Committee. After considering the following six factors with respect to CAP: (i) the provision of other services to us by CAP; (ii) the amount of fees received from us by CAP, as a percentage of the total revenue of CAP; (iii) the policies and procedures of CAP that are designed to prevent conflicts of interest; (iv) any business or personal relationship of the CAP consultant with a member of the Compensation Committee; (v) any of our stock owned by the CAP consultants; and (vi) any business or personal relationship of the CAP consultant or CAP with any of our executive officers, our Compensation Committee has concluded that no conflict of interest exists with CAP.

In addition to CAP, members of our Human Resources, Legal and Finance Departments support the Compensation Committee in its work.

For additional information on the Compensation Committee’s activities, its use of outside advisors and its consideration and determination of executive compensation, see “Executive Compensation—Compensation Discussion and Analysis” beginning on page 3342 of this Proxy Statement.

Compensation Programs and Risk Management

Management engaged the executive compensation firm Exequity LLP to assist us in conducting a detailed review and analysis of risk associated with the employee compensation plans administered by the Company in 2012,2013, including (i) base pay, (ii) cash-based incentive plans, (iii) sales incentive plans and (iv) equity plans.

Key characteristics of our compensation plans and programs, such as the structure of annual and long-term incentives, the combination and number of metrics used in such programs, the positions eligible to participate, the use and availability of discretion (including the ability of program administrators to limit award payouts), individual target and maximum awards and the timing of payouts were analyzed based on the level of risk associated with the plans and programs.

The assessment also identified and evaluated characteristics of the plans and programs that mitigate risk associated with compensation, including the processes for calculating payouts under incentive compensation programs (such as third-party verification or determination of performance achieved), approval processes (including the ability of program administrators to limit award payouts), maximum payouts, use of a combination of long-term and short-term incentive programs with different time horizons for measuring performance, share ownership and equity retention policies for senior executives, the mix of cash bonuses and long-term equity incentive compensation, the existence of claw-back and anti-pledging policies, and multi-year vesting schedules for equity awards.

Based on this detailed review and analysis, management and the Compensation Committee determined that there are no risks arising from the Company’s compensation plans and programs that are reasonably likely to have a material adverse effect on the Company.

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Nominating and Governance Committee

The Nominating and Governance Committee of the Board (the “Nominating and Governance Committee”), among other things:

All of the members of the Nominating and Governance Committee are “independent” as defined by the NYSE listing standards.

Executive Committee

The Executive Committee of the Board (the “Executive Committee”), consisting of the Lead Independent Director (as described below) and the Chairs of the Audit and Finance Committee, the Nominating and Governance Committee and the Compensation Committee, provides flexibility to act promptly between regularly scheduled meetings of the Board. During these intervals, the Board has granted to the Executive Committee all the powers of the Board in the management of the business and affairs of the Company, including the ability to review and approve all of the Company’s proposed transactions in which the dollar amount for any such proposed transaction equals or exceeds $10 million and is no greater than $100 million, except (i) as limited by the Company’s certificateAmended and Restated Certificate of incorporationIncorporation or by-laws,Amended and Restated By-laws, the rules of the NYSE or applicable law or regulation and (ii) with respect to matters that are specifically reserved for another committee of the Board. The Executive Committee also oversees the CEO succession planning process, including an emergency succession plan.

Transactions Committee

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The Board has granted to the Transactions Committee of the Board (the “Transactions Committee”) authority to review, authorize and approve the terms of acquisitions, divestitures, investments, joint ventures and strategic transactions (collectively, “Transactions”) of the Company with a value less than or equal to $100 million in cash or stock or other consideration or any combination thereof that are required to be approved by the Board. The Transactions Committee has also been granted the authority to review and make recommendations to the Board for or against Transactions with a value greater than $100 million and to review, authorize and approve the terms of any significant employee retention or compensation arrangements in connection with Transactions as well as other duties granted to it from time to time.

GOVERNANCE OF YOUR COMPANY

Our Standards of Business Conduct, our Code of Ethics for Our Senior Executive and Senior Financial Officers, our Corporate Governance Policy, our Committee charters and other corporate governance information are available on our website at www.corp.aol.com/corpgov. Any stockholder also may request them in print, without charge, by contacting our Corporate Secretary at AOL Inc., 770 Broadway, New York, New York 10003.

Standards of Business Conduct

Our Standards of Business Conduct apply to our employees and members of the Board. The Standards of Business Conduct establish policies pertaining to, among other things, employee conduct in the workplace, electronic communications and information security, accuracy of books, records and financial statements, securities trading, confidentiality, conflicts of interest, fairness in business practices, the Foreign Corrupt Practices Act, the UK Bribery Act, antitrust laws and political activities and solicitations.

Our Chief Ethics and Compliance Officer oversees adherence to the Standards of Business Conduct in addition to overseeing our compliance function throughout our business. Our Chief Ethics and Compliance Officer also assists in the communication of the Standards of Business Conduct and oversees employee education regarding its requirements, including online compliance training. All employees worldwide participate in annual business conduct training.

We maintain an employee help line, called the SBC Help Line. The SBC Help Line and the Whistleblower Procedures discussed below are the Company’s primary mechanisms for receiving and acting on business conduct and ethical complaints. Through the SBC Help Line, employees can report integrity concerns or seek guidance on business conduct matters. In some countries, local and regional differences in culture and law limit the scope and types of reports we may accept through our SBC Help Line. We provide alternative reporting direction for employees in these countries. The SBC Help Line has a toll-free number for U.S.-based employees, and provides toll-free international numbers for employees based in some countries outside the United States. Employees may also report integrity concerns via an online form, mail, fax or email. If an employee alleges a complaint, our Chief Ethics and Compliance Officer receives the report and then coordinates with internal and outside resources, as appropriate, to investigate reported concerns. The Chief Ethics and Compliance Officer regularly reports to the Audit and Finance Committee inquiries and complaints we receive through the SBC Help Line and any resulting investigations and corrective actions.

Code of Ethics for Our Senior Executive and Senior Financial Officers

Our Code of Ethics for Our Senior Executive and Senior Financial Officers (the “Code of Ethics”) applies to certain senior management of the Company, including individuals in the role of CEO, Chief Operating Officer (“COO”), as applicable, Chief Financial Officer (“CFO”), Controller and the senior-most tax executive (and others performing similar senior executive functions at the Company from time to time in the future). Among other things, the Code of Ethics mandates that the designated officers engage in and promote honest and ethical conduct, avoid conflicts of interest and disclose any material transaction or relationship that reasonably could be expected to give rise to a conflict, protect the confidentiality of non-public information about the Company, take all reasonable measures to achieve responsible use of the Company’s assets and resources, comply with all applicable governmental rules and regulations and promptly report any possible violation of the Code of Ethics. Additionally, the Code of Ethics requires that these individuals

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promote full, fair, accurate, timely and understandable disclosure in the Company’s publicly filed reports and other public communications and sets forth standards for accounting practices and records. We hold individuals to whom the Code of Ethics applies accountable for adherence to the Code of Ethics. Our Chief Ethics and Compliance Officer oversees and assists in the communication of the Code of Ethics.

We intend to disclose any amendments to or waivers of provisions of the Standards of Business Conduct or Code of Ethics granted to directors or executive officers by posting such information on our website.

Whistleblower Procedures

With respect to complaints and concerns regarding accounting, internal accounting controls and auditing, and in response to Section 301 of the Sarbanes-Oxley Act of 2002, the Audit and Finance Committee has established additional procedures, referred to as Whistleblower Procedures. Under these procedures, as under our standard SBC Help Line procedures, persons, including employees of the Company, may submit, without fear of retaliation, and, where the law permits, anonymously, an allegation of questionable accounting, internal accounting controls or auditing matters to the Company through the SBC Help Line options described above. Employees may also report these types of complaints and concerns to the Company’s Controller. The Chief Ethics and Compliance Officer’s regular reports to the Audit and Finance Committee include these complaints and concerns, and if the Chief Ethics and Compliance Officer and/or Company management determine that an allegation is both credible and material to the Company’s financial reporting, financial condition or internal controls, they will inform the Audit and Finance Committee promptly.promptly and they will assist in determining the manner in which such material allegation is to be investigated.

Corporate Governance Policy

Our commitment to good corporate governance is reflected in our Corporate Governance Policy, which describes the Board’s views on a wide range of governance topics. The Corporate Governance Policy is reviewed no less than annually by the Nominating and Governance Committee and, to the extent deemed appropriate in light of emerging practices, revised accordingly, upon recommendation to and approval by the Board.

Significant Governance Practices

Board Composition and Director Nomination Process

Our director recruitment process involves, among other steps: developing criteria for selecting members of the Board; identifying potential candidates; reviewing the potential candidates against the relevant criteria; interviewing the potential candidates; and exchanging relevant information between us and the potential candidates. We have retained an outside executive search firm to assist in the process of identifying and recruiting individuals to serve on our Board.

The Nominating and Governance Committee evaluates director candidates in accordance with the director membership criteria described in our Corporate Governance Policy. The Nominating and Governance Committee evaluates a candidate’s qualifications to serve as a member of our Board based on the skills and characteristics of individual directors as well as the composition of our Board as a whole. With regard to the criteria for our Board members, we believe that each director should possess integrity, judgment, acumen, familiarity with our business, independence of thought and the

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ability to work collegially, as well as the time and ability to make a constructive contribution to the Board. In addition, we endeavor to provide that the Board has the appropriate overall mix of professional skills and background, industry experience, financial expertise (including expertise that would qualify a director as a “financial expert” as that term is defined under the rules and regulations of the SEC), age, diversity and geographic background to fulfill the roles of the Board and its committees. In particular, we seek skilled persons in the areas of finance, accounting, technology, marketing and general executive management, as well as those who are experienced in the areas of advertising, media and government. Finally, we seek to have a substantial majority of the Board members who are independent under the NYSE listing standards, and have a majority of the Board members possess prior experience working closely with, or serving on, the board of a public company.

At least annually, in connection with the director nomination process, the Board evaluates its composition to assess the skills and experience that are currently represented on the Board, as well as those that the Board will find valuable in the future, given the Company’s current position and strategic plans. This evaluation enables the Board to update the Board membership criteria as the Company’s needs evolve over time and to assess the effectiveness of efforts at pursuing diversity. In connection with the nominations of each of the current Board members for election as directors at the Annual Meeting, the Board considered the biographical information and director qualifications set forth with respect to each Board member under “Item 1—Election of Directors—Nominees for Election as Directors.”

The Nominating and Governance Committee considers and reviews all candidates in the same manner regardless of the source of the recommendation. The Nominating and Governance Committee has established procedures for stockholders of the Company to recommend director candidates. Stockholders who wish to recommend director candidates for the Nominating and Governance Committee’s consideration should send their recommendation to our Corporate Secretary at AOL Inc., 770 Broadway, New York, New York 10003 and should include:

Our amended and restated by-laws provide that any stockholder of record entitled to vote for the election of directors at the applicable meeting of stockholders may nominate persons for election to our Board, if such stockholder complies with the applicable advance notice procedures in the Company’s by-laws, which are discussed on page90 97 of this Proxy Statement.

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Annual Meeting of Stockholders

We encourage all of our directors to attend each annual meeting of stockholders. AllSeven of the eight directors who were members of our Board at the time of our 20122013 Annual Meeting of Stockholders attended that meeting.

Director Independence and Independence Determinations

Under NYSE rules, a director is not independent unless the Board makes an affirmative determination to such effect. In order to determine that a director is independent, the Board must affirmatively determine that the director has no material relationship with the Company, and the director must satisfy the standards and objective tests set forth under NYSE rules.

In making this determination, the Board considers all relevant facts and circumstances, including commercial, charitable and familial relationships that exist between the director and the Company, or between entities with which the director is affiliated and the Company. In the event a director has a relationship with the Company that is relevant to his or her independence, the Board determines in its judgment whether such relationship is material. During its independence review, the Board considered that Mr. Armstrong, our Chairman and CEO, serves on the Board of Trustees of The Paley Center for Media, a non-profit institution, where Ms. Mitchell serves as President and CEO. The Board determined that this relationship does not impair Ms. Mitchell’s independence because Mr. Armstrong does not serve on the Executive Compensation Committee of The Paley Center for Media’s Board of Trustees or otherwise determine or influence Ms. Mitchell’s compensation.

Our Corporate Governance Policy requires that a substantial majority of the members of the Board and that all the members of the Audit and Finance Committee, the Compensation Committee and the Nominating and Governance Committee be independent under the NYSE regulations. The Board has determined that each of the following director nominees is independent: Ms. Burton, Ms. Lepore and Ms. Mitchell, and Messrs. Dalzell, Ibargüen, Johnston, Reynolds and Stengel. Mr. Armstrong, our CEO, is not independent. In addition, the Board previously determined that Ms. Dykstra (who resigned from the Board in September 2012) and Ms. Susan Lyne (who resigned from the Board on March 1, 2013) werewas independent prior to their resignations.her resignation.

Board Leadership Structure

The Board believes that no single leadership structure will always be the most effective for creating long-term stockholder value. The Board believes that an effective leadership structure can be achieved by either combining or separating the CEO and Chairman positions, if the structure encourages the free and open dialogue of differing opinions and provides for strong checks and balances. Specifically, an effective governance structure must balance the powers of the CEO and the independent directors and provide that the independent directors are fully informed, able to discuss and debate the issues that they deem important and able to provide effective oversight of management.

The Board has determined that combining the CEO and Chairman positions is currently the appropriate leadership structure for the Company. The Board believes that combining the CEO and Chairman roles fosters clear accountability, effective decision-making and alignment on corporate strategy between the Board and the senior management of the Company. Nevertheless, the Board believes that “one-size” does not fit all, and that the decision of whether to combine or separate the positions of CEO and Chairman depends upon each company’s particular circumstances at a given point in time. Accordingly, the Board intends to carefully consider from time to time, including during its annual self-evaluation, whether the CEO and Chairman positions should be combined or separated based on what the Board believes is best for the Company and its stockholders at that time.

The Board has a Lead Independent Director who is elected by the independent members of the Board. Currently, the Lead Independent Director is Mr. Reynolds. As set forth in the Company’s Corporate Governance Policy, the responsibilities of the Lead Independent Director include:

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As part of its evaluation of the Board’s leadership structure, the Board considered the fact that it has appointed a Lead Independent Director with responsibilities that are substantially similar to many of the functions typically fulfilled by a board chairman, including presiding at executive sessions of independent directors and convening such sessions when necessary and appropriate, serving as the liaison between the CEO and the independent directors, approving the agenda for Board meetings and being available for communication with the Company’s stockholders. The Board believes that the Lead Independent Director position balances the need for effective and independent oversight of management with the significant benefits of strong, unified leadership. In addition, the Board has noted that all of the members of the Board other than Mr. Armstrong are independent, and that all of the members of each of the committees of the Board are independent, within the meaning of “independent” under NYSE listing standards.

The Board has also considered that the combined role of CEO and Chairman promotes unified leadership and direction for the Company as it continues to execute its strategy to improve the Company’s growth trajectory and create meaningful stockholder value. Additionally, the Board believes that the current structure promotes effective decision-making by seeing that the Board’s agenda responds to the Company’s strategic opportunities and challenges and that the Board receives the information it needs to fulfill its responsibilities. The Board also considered that the combined role of CEO and Chairman allows one person to speak on behalf of the Company to its customers, employees and stockholders, and minimizes inefficiencies that might arise under a different structure as the Board and management respond to developments affecting the Company.

The Board believes that its existing structure is in the best interest of the Company and our stockholders, as it allows for a balance of authority between the CEO and Chairman and the independent directors and provides an environment in which the independent directors, under the leadership of the Lead Independent Director, are

fully informed, have significant input into the content of Board meeting agendas and are able to provide objective and thoughtful oversight of management.

Executive Sessions of Non-Employee and Independent Directors

In 2012,2013, the independent directors on the Board met in executive sessions, without any employee directors or management present. Executive sessions of the non-employee directors and independent directors are led by the Lead Independent Director and facilitate candid discussion of the independent directors’ viewpoints regarding the performance of management and the strategic direction of the Company.

Board and Committee Evaluations

Annually the Board and each of the Audit and Finance, Compensation and Leadership and Nominating and Governance Committees evaluate and discuss their respective performances and

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effectiveness, as required by our Corporate Governance Policy and their respective charters. These evaluations cover a wide range of topics, including, but not limited to, the fulfillment of the Board and Committee responsibilities identified in the Corporate Governance Policy and Committee charters, which are posted on our website at www.corp.aol.com/corpgov.

Communications with the Board of Directors

Stockholders and other interested parties who wish to communicate with our Board or a particular member of our Board (including the Lead Independent Director) or with the non-management or independent directors as a group, may do so by addressing such communications to our Corporate Secretary, AOL Inc., 770 Broadway, New York, New York 10003 or corporatesecretary@teamaol.com, who will forward such communications to the appropriate party. Such communications may be made confidentially or anonymously. All communications that relate to matters that are within the scope of the responsibilities of the Board and its Committees will be forwarded to the Chairman (or Lead Independent Director, as the case may be). Communications that relate to matters that are within the responsibility of one of the Committees will also be forwarded to the Chair of the appropriate Committee. Communications that relate to ordinary business matters that are not within the scope of the Board’s responsibilities, such as customer complaints, will be sent to the appropriate contact person within the Company. Solicitations, junk mail and obviously frivolous or inappropriate communications will not be forwarded, but will be made available to any director who wishes to review them.

Oversight of Risk Management

The Board has overall responsibility for risk oversight with a focus on the most significant risks facing the Company. The Board carries out its risk oversight responsibilities primarily through the Audit and Finance Committee, which is responsible for oversight of the Company’s risk management policies and procedures. The Company is exposed to a number of risks including financial risks, strategic and operational risks and risks relating to regulatory and legal compliance. The Audit and Finance Committee discusses with management the Company’s major risk exposures and the steps management has taken to monitor and control such exposures, including the guidelines and policies to govern the process by which risk assessment and risk management are undertaken. The CFO is responsible for the Company’s risk management function and works closely with the Company’s senior management to identify risks material to the Company. The CFO reports regularly to the CEO and the Audit and Finance Committee regarding the Company’s risk management policies and procedures. In that regard, the CFO meets with the Audit and Finance Committee regularly to discuss the risks facing the Company, highlighting any new risks that may have arisen since they last met. The Audit and Finance Committee also reports to the Board on a regular basis to apprise Board members of its discussions with the CFO regarding the Company’s risk management efforts. The CEO or CFO reportsreport directly to the Board at least annually to apprise it directly of the Company’s risk management efforts. Additionally,

In addition, the TransactionsCompensation Committee has responsibility for reviewing and recommending acquisition strategies and targets todiscusses with management the Board and management, as appropriate, and as part of its review considers and weighsCompany’s major risks associated with such transactions.the Company’s compensation plans and programs as described on page 15 of this Proxy Statement.

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Executive Officers

The following sets forth certain information as of March 6, 2013 concerning our executive officers.

Mr. Tim Armstrong

Mr. Armstrong, age 42, has served as Chairman and Chief Executive Officer of AOL since April 2009. Prior to that, Mr. Armstrong was President, Americas Operations of Google Inc.¸ a global technology company. Mr. Armstrong joined Google in 2000 as Vice President, Advertising Sales, and in 2004 was promoted to Vice President, Advertising and Commerce and then in 2007 was named President, Americas Operations and Senior Vice President. Before joining Google, Mr. Armstrong served as Vice President of Sales and Strategic Partnerships for Snowball.com from 1998 to 2000. Prior to that, he served as Director of Integrated Sales and Marketing at Starwave’s and Disney’s ABC/ESPN Internet Ventures. Mr. Armstrong started his career by co-founding and running a newspaper based in Boston, Massachusetts. Mr. Armstrong is a current Board member of priceline.com Incorporated, a trustee of Lawrence Academy and The Paley Center for Media and a Chairman Emeritus of the Ad Council, a non-profit organization.

Mr. Edward Brody

Mr. Brody, age 49, has served as Executive Vice President and CEO of AOL Networks (formerly known as Advertising.com Group) since June 2012. Prior to that Mr. Brody served in various roles with AOL, including AOL’s Chief Revenue Officer from July 2011 to May 2012, President of AOL’s Advertising.com Group from February 2011 to July 2011, President of AOL’s Paid Services and COO of AOL’s Advertising, Media and Commerce from October 2010 to February 2011, and President of AOL Paid Services from November 2009 to October 2010. Prior to joining AOL, Mr. Brody founded and served as CEO of eCommerce company ARPU, Inc. (now SnappCloud, Inc.) from February 2005 to November 2009. Prior to founding ARPU, Mr. Brody served as AOL’s SVP, Premium Services from April 2003 to February 2005 and served in various roles, including CFO, with early search company LookSmart, Ltd. from September 1998 to March 2001. Prior to joining LookSmart, Mr. Brody was a partner, founder of the Internet practice, and head of the San Francisco office of Mercer Management Consulting (now Oliver Wyman) from August 1986 to September 1998.

Mr. Curtis Brown

Mr. Brown, age 49, has served as Executive Vice President and Chief Technology Officer of AOL since May 2012. Prior to that, Mr. Brown served as Senior Vice President of Engineering and Chief Technology Officer of AOL’s global advertising business, Advertising.com from November 2010 to May 2012. Prior to joining AOL in 2010, Mr. Brown served from June 2008 to November 2010 as Senior Vice President and Chief Technology Officer of Kaplan Test Prep, a multi-national educational services provider and as an independent technical consultant from January 2008 to June 2008, with clients that included the Metropolitan Museum of Art and digital brand agency, Katzenbach Partners. He has also previously held the title of Chief Technology Officer with Skymall, Oxygen Media, The Princeton Review and CTB/McGraw-Hill. Mr. Brown has served as a member of the IT Technology Advisory Board at the New School and the CTO Advisory Council for InfoWorld magazine and is a founding member of the New York City CTO Club.

Ms. Karen Dykstra

Ms. Dykstra, age 54, has served as Chief Financial Officer of AOL since September 2012. Prior to that, Ms. Dykstra was a partner at Plainfield Asset Management LLC and held leadership positions with Plainfield from 2006 to 2010, including Chief Operating Officer and Chief Financial Officer of Plainfield Direct Inc. Plainfield Asset Management LLC manages investment capital for institutions and high net worth individuals in the United States and abroad. Plainfield Direct Inc., a direct lending and investment business of Plainfield Asset Management, is now known as Plainfield Direct LLC. Prior to joining Plainfield, she was the Chief Financial

Officer of Automatic Data Processing, Inc. from 2003 to 2006 and acted as the Principal Financial Officer from 2001 to 2003. Her career spanned 25 years with Automatic Data Processing. Ms. Dykstra currently serves on the board of directors of Gartner Inc. She previously served on the AOL Board of Directors from 2009 until September 2012 and on the board of directors of Crane Co. from 2004 until 2012.

Ms. Julie Jacobs

Ms. Jacobs, age 46, has served as Executive Vice President, Corporate Development, General Counsel and Corporate Secretary of AOL since December 2011. Prior to that, Ms. Jacobs served as Executive Vice President, General Counsel and Corporate Secretary, a role she held from May 2010 to December 2011. Prior to that, Ms. Jacobs served as Senior Vice President, Deputy General Counsel and Assistant Corporate Secretary, a role she held from March 2006 until May 2010. Ms. Jacobs joined AOL in 2000 as Assistant General Counsel. Prior to joining AOL, Ms. Jacobs was an attorney at Milbank Tweed Hadley & McCloy LLP, where her practice focused on a wide variety of international development and telecommunications projects.

Ms. Susan Lyne

Ms. Lyne, age 62, has served as Executive Vice President and Chief Executive Officer of AOL’s Brand Group since February 2013. Prior to that, Ms. Lyne served as the Chair of Gilt Groupe, Inc., an online fashion and luxury brand retailer, since September 2010. Previously, she was Gilt Groupe’s Chief Executive Officer from September 2008 to September 2010. From 2004 to 2008, Ms. Lyne served as President, Chief Executive Officer and director of Martha Stewart Living Omnimedia, Inc., an integrated media and merchandising company. From 1996 to 2004, Ms. Lyne held various positions at the Walt Disney Company, including Executive Vice President Acquisition, Development and New Business, Walt Disney Motion Picture Group from 1996 to 1998, Executive Vice President, Movies and Miniseries, ABC Entertainment from 1998 to 2002 and President, ABC Entertainment from 2002 to 2004. Prior to joining Walt Disney, she worked for News Corporation Ltd. and K-111 Communications. Ms. Lyne currently serves on the board of directors of Starz, LLC and as Vice Chairman on the board of directors of Gilt Groupe, Inc. Ms. Lyne previously served on the AOL Board of Directors from 2009 until March 1, 2013 and on the board of directors of CIT Group Inc from 2006 until 2009.

Mr. John Reid-Dodick

Mr. Reid-Dodick, age 51, has served as Executive Vice President and Chief People Officer of AOL since December 2011. Prior to that, Mr. Reid-Dodick served as Global Head of Human Resources of Thomson Reuters Markets, a division of Thomson Reuters, serving the financial services and media markets, from 2008 to 2011 and Global Head of Human Resources, Reuters Business Divisions and Americas Human Resources from 2005 to 2008. Mr. Reid-Dodick was the Global Head of Organizational Development and Learning at Reuters Group PLC from 2003 to 2005, and before that was Reuters interim Group Human Resources Director from 2002 to 2003 and Director of Human Resources from 2001 to 2002. Mr. Reid-Dodick joined Reuters America in 1995 as Corporate Counsel, and served as Reuters America’s General Counsel from 1997 to 2000 and Executive Vice President for Corporate Affairs from 2000 to 2001. Before joining Reuters America, Mr. Reid-Dodick was an attorney at Sullivan & Cromwell LLP, where his practice focused on securities, antitrust and contract litigation.

ITEM 2—RATIFICATION OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Audit-Related Matters

Report of the Audit and Finance Committee

In accordance with its charter, the Audit and Finance Committee assists the Board in fulfilling responsibilities in a number of areas. These responsibilities include, among others: (i) overseeing the quality and integrity of our financial statements and accounting practices; (ii) selecting an independent registered public accounting firm (taking into account the vote on ratification by the stockholders); (iii) pre-approving all services to be provided to us by our independent registered public accounting firm; (iv) reviewing and discussing matters required to be discussed under Auditing Standard No. 16, as adopted by the Public Company Accounting Oversight Board (the “PCAOB”) and amended from time to time, and such other matters pertaining to the annual financial audit as the Committee may deem appropriate; (v) reviewing the independence of our independent registered public accounting firm; (vi) overseeing our internal audit function; (vii) meeting with our independent registered public accounting firm and appropriate financial and accounting personnel regarding our internal controls and other matters; and (viii) overseeing all of our compliance, internal controls and risk management policies. To assist it in fulfilling its oversight and other duties, the Audit and Finance Committee regularly meets separately with the internal auditor, the independent registered public accounting firm and management.

Independent Registered Public Accounting Firm and Internal Audit Matters

The Audit and Finance Committee discussed with the Company’s independent registered public accounting firm its plan for the audit of the Company’s annual consolidated financial statements as of and for the year ended December 31, 20122013 (the “2012“2013 Annual Financial Statements”), as well as reviews of the Company’s quarterly financial statements.statements (the “2013 Quarterly Financial Statements” and together with the 2013 Annual Financial Statements, the “2013 Financial Statements”). The Audit and Finance Committee met with the independent registered public accounting firm, with and without management present, to discuss the results of its audits and quarterly reviews of the 20122013 Financial Statements, as well as its evaluations of the Company’s internal control over financial reporting and the overall quality of the Company’s accounting principles. The Audit and Finance Committee has also appointed Ernst & Young as the Company’s independent registered public accounting firm for 2013.2014.

The Audit and Finance Committee has reviewed and approved the annual internal audit plan for 20132014 and has met with the head of the internal audit group, with and without management present, to review and discuss internal audit matters.

Financial Statements as of and for the year ended December 31, 20122013

Management has the primary responsibility for the Company’s financial statements and the reporting process, including its systems of internal and disclosure controls (including internal control over financial reporting). The independent registered public accounting firm is responsible for performing an independent audit of the Company’s consolidated financial statements and expressing an opinion on the conformity of the consolidated financial statements with U.S. generally accepted accounting principles (“GAAP”).

In this context, the Audit and Finance Committee has met and held discussions with management and the independent registered public accounting firm with respect to the 20122013 Financial Statements. Management represented to the Audit and Finance Committee that the Company’s consolidated financial statements were prepared in accordance with U.S. GAAP.

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In connection with its review of the Company’s year-end financial statements, the Audit and Finance Committee has reviewed and discussed with management and the independent registered public accounting firm the consolidated financial statements, management’s assessment of the effectiveness of the Company’s internal control over financial reporting and the independent registered public accounting firm’s evaluation of the effectiveness of the Company’s internal control over financial reporting. The Audit and Finance Committee also discussed with the independent registered public accounting firm the matters required to be discussed by applicable PCAOB rules, including the quality and acceptability of the Company’s accounting policies, financial

reporting processes and controls. The Audit and Finance Committee also received the written disclosures and the letter from the independent registered public accounting firm required by the PCAOB regarding the independent registered public accounting firm’s communications with the Audit and Finance Committee concerning independence, and the Audit and Finance Committee discussed with Ernst & Young its independence from the Company and its management. The Audit and Finance Committee further considered whether the provision by the independent registered public accounting firm of any non-audit services described elsewhere in this Proxy Statement is compatible with maintaining auditor independence and determined that the provision of those services does not impair the independent registered public accounting firm’s independence.

In performing its functions, the Audit and Finance Committee acts only in an oversight capacity and necessarily relies on the work and assurances of the Company’s management, internal audit group and independent registered public accounting firm, which, in their reports, express opinions on the conformity of the Company’s annual financial statements with U.S. GAAP and the effectiveness of the Company’s internal control over financial reporting.

In reliance on the reviews and discussions referred to in this Report and in light of its role and responsibilities, the Audit and Finance Committee recommended to the Board, and the Board approved, that the audited financial statements of the Company be included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 20122013 (the “2012“2013 Form 10-K”) filed with the SEC.

Submitted by the Audit and Finance Committee of the Company’s Board of Directors:

Fredric ReynoldsHugh Johnston (Chair)

Alberto Ibargüen

Hugh JohnstonDawn Lepore

Policy Regarding Pre-Approval of Services Provided by the Independent Auditors

The Audit and Finance Committee has established a policy (the “Pre-Approval Policy”) requiring its pre-approval of all audit services and permissible non-audit services provided by the independent registered public accounting firm, along with the associated fees for those services. The Pre-Approval Policy provides for the annual pre-approval of specific types of services pursuant to policies and procedures adopted by the Audit and Finance Committee and gives detailed guidance to management as to the specific services that are eligible for such annual pre-approval.

The Pre-Approval Policy requires the specific pre-approval of all other permitted services. In evaluating any pre-approval, the Audit and Finance Committee considers whether the provision of a non-audit service is consistent with the SEC’s rules on registered public accounting firm independence, including whether provision of the service: (i) would create a mutual or conflicting interest between the independent registered public accounting firm and the Company; (ii) would place the independent registered public accounting firm in the position of auditing its own work; (iii) would result in the independent registered public accounting firm acting in the role of management or as an employee of

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the Company; or (iv) would place the independent registered public accounting firm in a position of being an advocate for the Company. Additionally, the Audit and Finance Committee considers whether the independent registered public accounting firm is best positioned and qualified to provide the most effective and efficient service, based on factors such as the independent registered public accounting firm’s familiarity with the Company’s business, personnel, culture, accounting systems or risk profile and whether provision of the service by the independent registered public accounting firm would enhance the Company’s ability to manage or control risk or improve audit quality or would otherwise be beneficial to the Company. The Audit and Finance Committee also considers the relative level of fees for audit and non-audit services in deciding whether to pre-approve such services. The Audit and Finance Committee has delegated to its Chair the authority to address certain requests for pre-approval of services between meetings of the Audit and Finance Committee, and the Chair must report any pre-approval decisions to the Audit and Finance Committee at its next regular meeting. The Pre-Approval Policy is designed to help ensureprovide that there is no delegation by the Audit and Finance Committee of authority or responsibility for pre-approval decisions to management of the

Company. The Audit and Finance Committee monitors compliance by management with the Pre-Approval Policy by requiring the CFO, pursuant to the Pre-Approval Policy, to report to the Audit and Finance Committee on a regular basis regarding the pre-approved services rendered by the independent registered public accounting firm. Management has also implemented internal procedures to promote compliance with the Pre-Approval Policy.

Audit and Non-Audit Fees

In connection with the audit of the 20122013 Annual Financial Statements and review of the 2013 Quarterly Financial Statements the Company entered into an agreement with Ernst & Young that sets forth the terms under which Ernst & Young performed audit and review services for the Company.

The following table presents the aggregate fees billed for professional services rendered by Ernst & Young for the audit and review of our financial statements for 20122013 and 20112012 and the aggregate fees for other services rendered by Ernst & Young billed in those periods (in thousands):

The Audit and Finance Committee considered whether providing the non-audit services shown in this table was compatible with maintaining Ernst & Young’s independence and concluded that it was compatible.

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The Audit and Finance Committee has selected Ernst & Young to serve as our independent registered public accounting firm for 2013.2014. The Audit and Finance Committee evaluates the performance of the Company’s independent registered public accounting firm, including the senior audit engagement team, each year and determines whether to reengage the current independent auditors or consider other audit firms. In doing so, the Audit and Finance Committee considers the quality and efficiency of the services provided by the auditors, the auditors’ global capabilities, and the auditors’ technical expertise, tenure as the Company’s independent auditors and knowledge of the Company’s global operations and industry. In this Item 2, we are asking stockholders to ratify the selection of Ernst & Young to serve as our independent registered public accounting firm for 2013.2014. Although ratification is not required by our by-laws or otherwise, the Board is submitting the selection of Ernst & Young to our stockholders for ratification as a matter of good corporate governance. If the selection is not ratified, the Audit and Finance Committee will consider whether it is appropriate to select another independent registered public accounting firm. Even if the selection is ratified, the Audit and Finance Committee in its discretion may select a different independent registered public accounting firm at any time during the year if it determines that such a change would be in the best interests of the Company and our stockholders.

Representatives of Ernst & Young are expected to be present at the Annual Meeting and to answer appropriate questions. They also will have the opportunity to make a statement if they desire to do so.

The shares represented by your proxy will be voted for the ratification of the selection of Ernst & Young unless you specify otherwise. Ernst & Young has served as the independent registered public accounting firm of the Company since the complete legal and structural separation of the Company from Time Warner Inc. (“Time Warner”) in December 2009, following which we became an independent, publicly-traded company (the “Spin-off”).company.

THE BOARD UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE “FOR” THE RATIFICATION OF ERNST & YOUNG LLP AS OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM FOR 2013.

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ITEM 3—ADVISORY VOTE TO APPROVE EXECUTIVE COMPENSATION

Section 14A of the Exchange Act, which was added by the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, requires that, not less frequently than once every three years, we provide stockholders with an advisory vote to approve the Company’s executive compensation as disclosed herein. Accordingly, in this Item 3, stockholders are being asked to approve the following advisory resolution:

RESOLVED, that the stockholders of the Company approve, on an advisory basis, the compensation of the Company’s Named Executive Officers, as disclosed pursuant to Item 402 of Regulation S-K, including the Compensation Discussion and Analysis and the related compensation tables and narrative discussion in the Proxy Statement for the Annual Meeting.

The Company believes that it is appropriate to seek the views of stockholders on the design and effectiveness of the Company’s executive compensation program. The Company’s goal for its executive compensation program is to attract, motivate and retain a talented, entrepreneurial and creative team of executives who will provide leadership for the Company’s success in dynamic and competitive markets. The Company seeks to accomplish this goal in a way that rewards performance and is aligned with its stockholders’ long-term interests. The Company believes that its executive compensation program, which emphasizes long-term equity awards, satisfies this goal and is strongly aligned with the long-term interests of its stockholders.

Stockholders are encouraged to read the Compensation Discussion and Analysis, compensation tables and narrative discussion in this Proxy Statement beginning on page33 42 of this Proxy Statement, which discuss in detail how our compensation policies and procedures implement our compensation philosophy and how our 20122013 performance relates to our 20122013 compensation decisions.

Key Financial and Operational Highlights

In 2012,2013, as a result of the leadership of our executives and their execution of the Company’s key strategies, we had a strong financial year. Our achievements included:

returning to revenue growth

returning

² Adjusted OIBDA growth;is a non-GAAP financial measure and may be different than similarly-titled non-GAAP financial measures used by other companies. The presentation of this financial information is not intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance with U.S. GAAP. A reconciliation of our GAAP to non-GAAP results can be found in Annex B attached hereto.

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Key Compensation Practices Highlights in 20122013

Recent executive compensation program highlights include the following:

We revised the Industry Peer Group (as discussed in more detail below) to better reflect both: (a) the nature of our business and (b) the scope of our operations, as measured by revenue.

 

We modified executiveintroduced a new type of equity grant practices by introducing equity grantsfor certain business segment leaders that tied to the achievement of specificsegment performance criteria for our CEO and executive team members(SPSUs) to compensation, to emphasize our pay-for-performance philosophy.

 

71% ofWe introduced a new business segment performance component for segment employees under the equity grantedCompany’s Annual Bonus Plan (ABP) to our CEO in connectionmore closely link accountability and performance at the business segment level with his new employment agreement is performance contingent and tied to either revenue goals, relative total shareholder return (“Total Shareholder Return”) and/or stock price targets; 29% is made up of time-based stock options.

compensation.

 

Other executive team members received one-third of equity granted in connection withWe introduced two new employment contracts in the form of performance share units contingent on relative Total Shareholder Return.

We entered into new employment agreements with key executives that substantially conform to the guidelines established bymetrics under the Company for executive officers. As a result,performance component under the new employment agreements, in certain cases, reduce the benefitsABP to executives compared to their prior employment agreementsbe more consistent with the Company.

We provide limited perquisites to our executives, we maintain equity ownership guidelines for our executivesmeasures on which the Company historically has focused its quarterly and we maintain strict clawback and anti-hedging requirements for our executives.

annual earnings results.

As an advisory vote, this proposal is not binding upon the Board or the Company. Whether a majority of the votes cast by our stockholders are cast in favor of or against the advisory resolution, our Board and its Compensation Committee will not be required to change our compensation programs as a result. However, the Board and the Compensation Committee, which is responsible for designing and administering the Company’s executive compensation program, value the opinions expressed by stockholders in their vote on this proposal and will review and consider the outcome of the vote when making future decisions on executive compensation.

Taking into account the advisory vote of stockholders regarding the frequency of advisory votes to approve executive compensation at our 2011 Annual Meeting, the Board’s current policy is to include a resolution regarding approval of the Company’s executive compensation annually until the next advisory vote on frequency occurs. Accordingly, unless the Board modifies its policy on the frequency of future votes, the next advisory vote to approve our executive compensation will occur at the 20142015 Annual Meeting.

THE BOARD UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE “FOR” THE BOARD UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE “FOR” THE APPROVAL OF THE FOREGOING RESOLUTION APPROVING THE COMPANY’S EXECUTIVE COMPENSATION ON AN ADVISORY BASIS OF THE FOREGOING RESOLUTION APPROVING THE COMPANY’S EXECUTIVE COMPENSATION AS DISCLOSED IN THE COMPENSATION DISCUSSION AND ANALYSIS AND THE RELATED COMPENSATION TABLES AND NARRATIVE DISCUSSION CONTAINED IN THIS PROXY STATEMENT.

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ITEM 4—APPROVAL OF THE AOL INC. 2010 STOCK INCENTIVE PLAN AS AMENDED AND RESTATED

ITEM 4—APPROVAL OF THE COMPANY’S TAX ASSET PROTECTION PLANGeneral

Our Board isWe are asking the Company’s stockholders to approve the Tax Asset Protectionamendment and restatement of the AOL Inc. 2010 Stock Incentive Plan. In this section, we refer to the existing AOL Inc. 2010 Stock Incentive Plan dated August 27, 2012 (the “Plan”). Ifas the “Existing Plan” and the amended and restated version of the plan as the “Stock Incentive Plan.” The amendment and restatement of the Existing Plan will:

Increase the number of shares available for issuance of awards under the Existing Plan by 7 million plus any shares that remain available for issuance under our other equity plans (which we refer to as our Other Plans, as defined below) and any shares subject to outstanding awards under our Other Plans that may become available again for issuance of awards in accordance with the Stock Incentive Plan’s terms, which we refer to collectively as the Share Authorization, as described further below;

Eliminate the “fungible share reserve” so that each one share issued pursuant to any award under the Stock Incentive Plan will count as the issuance of one share for the purpose of computing shares remaining available for issuance under the Stock Incentive Plan;

Provide that any shares subject to an award that are held back or tendered in payment of an option price or purchase price with respect to an award, tendered or held back to satisfy any tax withholding obligation with respect to an award, or not issued upon the net settlement or exercise of a stock appreciation right will be added back to the shares remaining available for issuance under the Stock Incentive Plan;

Extend the term of the Existing Plan through March 26, 2024; and

Make other clarifying and administrative amendments.

These changes to the Existing Plan are contingent upon receipt of stockholder approval of the Stock Incentive Plan.

We are also asking our stockholders do not approveto re-approve the Plan by or on August 27, 2013, the Plan will automatically expire on that date.

Background and Reasons for the Proposal

We believe that we have valuable tax attributes which are significant assetsmaterial terms of the Company. AsStock Incentive Plan for purposes of December 31, 2012, we had several domestic tax attributes, including federal net operating losses of approximately $284 million pre-tax, which expire over a period ranging from five to twenty years, and capital loss carry-forwards of approximately $1,255 million pre-tax, which expire over a period ranging from three to five years (the “Tax Assets”). Unless otherwise restricted, we can utilize the Tax Assets in certain circumstances to offset future U.S. taxable income, including in connection with capital gains that may be generated from a potential asset sale.

Our ability to use the Tax Assets could be limited and the timing of the usage of the Tax Assets could be substantially delayed, however, if we experience an “ownership change,” as defined in Section 382 of the Internal Revenue Code. A company generally experiences an “ownership change” for tax purposes if the percentage of stock owned by its 5% stockholders (as defined for tax purposes) increases by more than 50 percentage points over a rolling three-year period.

We adopted the Plan, after consultation with our legal, tax and investment banking advisors, including a review of the ownership of our common stock, to help protect stockholder value and preserve our ability to use the Tax Assets. Calculating whether an “ownership change” has occurred is subject to uncertainty. This uncertainty arises from the complexity and ambiguity inherent in Section 382162(m) of the Internal Revenue Code of 1986, as well as limitations onamended (the “Code”). The Stock Incentive Plan is designed to allow for the knowledge that any publicly traded company can have about the ownershipgrant of and transactions in its securities. We have analyzed the information available, along with various scenarios of possible future changes in ownership. In light of this analysis, our current stock price and daily trading volume, we believe that, if no action is taken, it is possible that we could undergo a subsequent “ownership change” under Section 382 of the Internal Revenue Code, which would substantially reduce our ability to utilize the Tax Assets. We believe the implementation of the Plan will serve the interests of all stockholders given the size of the Tax Assets and the potential loss of value should changes in our stock ownership occurawards that are sufficient to cause a 50 percentage point or greater “ownership change.”

The Plan is intended to actqualify as a deterrent to“performance-based compensation” within the meaning of Section 162(m). Under Code Section 162(m), no deduction is allowed in any person acquiring beneficial ownership of 4.9% or more of our outstanding common stock without the approval of the Board. Stockholders who beneficially owned 4.9% or more of our outstanding common stock as of the execution of the Plan did not trigger the Plan so long as they do not acquire beneficial ownership of additional shares of common stock. Similarly, the exercise of any options, warrants, rights or similar interests (including restricted stock) granted by the Company to its directors, officers and employees, any unilateral grant of any security by the Company and any transaction exempted by the Board, will not trigger the Plan. In addition, changes in beneficial ownership solely as a result of a reduction in the number of shares of common stock outstanding will not trigger the Plan. The Board will consider written requests to exempt certain stockholders or proposed acquisitions of our common stock from the ownership trigger. Such exemptions may be granted by the Board in its sole discretion.

If stockholders do not approve the Plan, the Plan will expire on August 27, 2013. Otherwise, the Plan will expire as of the earliest of the following events:

August 27, 2015;

the time at which the Rights (as defined below) are redeemed pursuant to the Plan;

the time at which the Rights are exchanged in full pursuant to the Plan;

the effective date of the repeal of both Section 382 and Section 383 of the Internal Revenue Code, or any successor provisions or replacement provisions, if the Board determines that the Plan is no longer necessary for the preservation of Tax Assets; or

the beginning of a taxable year of the Company for compensation in excess of $1 million paid to the Company’s “covered employees.” An exception to this rule applies to compensation that qualifies as “performance-based compensation.” In order for awards under the Stock Incentive Plan to be eligible to qualify as “performance-based compensation” for purposes of Code Section 162(m), among other things, the material terms of the performance goals under which compensation may be paid must be disclosed to and approved by the Company’s stockholders. The material terms include the employees eligible to receive compensation under the Stock Incentive Plan, a description of the business criteria on which any performance goals are based for awards under the Stock Incentive Plan, and the maximum amount of compensation that can be paid to an employee under the performance goal. Each of these material terms of the Stock Incentive Plan are described below, and approval of the Stock Incentive Plan will constitute approval of the material terms of the Stock Incentive Plan for purposes of Code Section 162(m).

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Effective as of March 27, 2014, the Board determinesapproved the amendment and restatement of the Stock Incentive Plan and recommended its submission to the stockholders for approval at our annual meeting. Although not all of the changes to the Stock Incentive Plan are required to be approved by stockholders, the discretionary amendments have been included in the Stock Incentive Plan that the Company has or will have no Tax Assets.is submitting for stockholder approval.

Summary of TermsThe Company believes that operation of the Stock Incentive Plan is important in attracting and retaining talented employees and directors essential to the Company’s long-term growth and success. The Stock Incentive Plan enables the Company to closely align the interests of employees and its stockholders by providing the Company the ability to award employees stock-based compensation and other performance-based compensation. If Item No. 4 is not approved by our stockholders, we believe our ability to attract and retain talent in our industry will be seriously and negatively impacted. Competition to attract talented and experienced management and employees in our industry is intense and having a substantial equity compensation program is necessary to attract and retain our executives and other employees.

Material Amendments

The following description ofmaterial differences between the Existing Plan and the Stock Incentive Plan are described below. For further information on the terms of the Stock Incentive Plan, please see the complete text of the Stock Incentive Plan, which is attached as Annex A to this Proxy Statement.

Increase in Share Authorization

The Company is seeking to increase the share reserve under the Existing Plan by 7 million shares and to simplify the administration of our equity program by rolling over into the Existing Plan any shares that remain available for issuance under our Other Plans. If the Stock Incentive Plan is approved, we will stop granting awards under these Other Plans. The maximum number of shares authorized for issuance under the Stock Incentive Plan is referred to as the Share Authorization for purposes of this section. The Board believes that without the requested Share Authorization increase, the Company may not be able to maintain its current equity compensation programs after 2014.

Under the Existing Plan, 24,638,331 shares were reserved for issuance of awards (which number includes shares that have already been issued or are subject to outstanding awards under the Existing Plan as described below). Under the Stock Incentive Plan, a maximum of 31,638,331 shares plus any shares that remain available for issuance pursuant to future awards under our Other Plans as of March 27, 2014 and any shares subject to outstanding awards under the Other Plans as of March 27, 2014 (as described below) that cease to be subject to such awards upon expiration, termination, cancellation, forfeiture or the settlement in cash of any such award will be available for grants of awards. The Share Authorization under the Stock Incentive Plan includes 7,355,058 shares that have already been issued under the Existing Plan, 8,923,100 shares that are currently subject to outstanding awards under the Existing Plan (assuming that performance awards vest in the maximum number of shares) and 2,776,786 shares that remain available for issuance under our Other Plans as of March 27, 2014. If the Stock Incentive Plan is approved, no further awards will be made under the Other Plans. The Company believes that the administration of the Company’s equity plans will be simplified if all equity awards are granted under the Stock Incentive Plan, rather than continuing to grant and administer awards under the Existing Plan and the Other Plans.

The Company believes that the proposed increase to the Share Authorization represents a reasonable amount of potential equity dilution and allows the Company to continue to award equity

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incentives, which are a critical component of our overall compensation program as described above. If approved, the 7 million share increase will increase the potential future dilution of our fully diluted common stock as of March 31, 2014 by 5.2% as compared to the potential future dilution of our fully diluted common stock under our Existing Plan and Other Plans as of the same date. If approved, the total future dilution, or “total overhang”, attributable to outstanding awards and shares available for future issuance under the Stock Incentive Plan, calculated on a fully dilutive basis and not including any shares that may become available for issuance under the Stock Incentive Plan pursuant to awards outstanding under the Other Plans, will be 25.4% as of March 31, 2014. Assuming that the aggregate equity awards are granted at levels consistent with our historical practice, we generally expect that the Share Authorization should be sufficient to cover the Company’s projected equity awards at least until our 2016 annual meeting of stockholders.

The Compensation Committee determined that it is the appropriate time to request an increase in the number of shares authorized under the Existing Plan because it is reasonably likely that the total number of shares currently available for future grants under all of our employee equity plans would not be sufficient to cover projected grants up to the date of our 2015 annual meeting. The Compensation Committee is aiming to avoid a situation in which the Company does not have a sufficient pool of available shares to cover projected equity awards such as: 2015 grants to executives and high-performing employees, equity awards for new promotions, new hire inducement awards, and potential grants to new employees acquired in connection with Company acquisitions.

In determining the number of shares to request for the increase to the Share Authorization, the Compensation Committee considered forward-looking, multi-year share usage estimates and projections prepared by management in consultation with Exequity, the number of shares currently available for future grants under all our employee equity plans, and historical equity usage patterns. The forward-looking share usage estimates incorporate factors such as planned market-competitive annual grants to executives and high-performing employees, estimated equity awards for employee promotions, estimated inducement awards for new hires at all levels in the organization, potential stock price volatility, and projected cancellations of existing equity awards (because such awards would be added back to the number of shares available for future grants under the Stock Incentive Plan). Projections for these variables were informed by the Company’s historical equity usage patterns, and were adjusted for potential stock price volatility, projected headcount changes, program design changes, proposed changes to share counting under the Stock Incentive Plan, and other factors. Based on all of these considerations, the Share Authorization increase being submitted for stockholder approval is the estimated number of additional shares that would be needed such that the total Share Authorization would last until the 2016 annual meeting of stockholders (according to the multi-year share usage estimates and projections prepared by management in consultation with Exequity).

As described above, one factor the Compensation Committee considered when evaluating the Share Authorization increase was the Company’s historical equity usage patterns, including the Company’s annual and 3-year average “burn rate.” The burn rate measures the dilutive impact of our equity program over a specific time period. We calculate our annual “burn rate” by dividing the total number of equity awards granted in one year (assuming that performance awards vest at target) by the weighted average number of shares outstanding during the year. The 3-year average “burn rate” is the sum of the annual burn rates for the last three years divided by three. The Company’s burn rate for 2013 was 3.1% and our 3-year average was 3.9%.

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Information Regarding Awards Made Under our Existing Plan and Other Plans

While the Existing Plan is the primary equity plan that we use to grant equity awards, we also have awards outstanding under plans assumed in acquisitions, including the AOL Inc. Long-Term Incentive Plan for the Employees of the HuffingtonPost Media Group, the AOL Inc. 2013 Adap.tv Acquisition Stock Incentive Plan, and the AOL Inc. 2014 Gravity Acquisition Stock Incentive Plan (together, the “Other Plans”). A copy of each of the Other Plans has been previously filed with the Securities and Exchange Commission. As of March 27, 2014, in the aggregate 2,776,786 shares remained available for future awards under the Other Plans.

The following table summarizes the overhang from awards outstanding under the Existing Plan and the Other Plans as of March 31, 2014:

Award		Number Outstanding		Weighted Average   Exercise Price		Weighted Average   Remaining Term
Options		6,418,851		$22.5137		6.758 years
Unvested Restricted Stock and RSUs(1)		4,094,678		Not applicable		Not applicable
Total Overhang(2)		10.5%

(1)	Assumes that all performance awards vest in the maximum number of shares.

(2)	Represents the total number of shares reserved for issuance under outstanding awards as a percent of the Company’s fully-diluted total common shares outstanding.

Elimination of the Fungible Share Reserve

All shares issued pursuant to equity awards under the Stock Incentive Plan following its approval (including previously granted awards) will count against the total Share Authorization as one share. There will no longer be a distinction between how one share is counted for purposes of reducing the Share Authorization based on the form of the award. Under the Existing Plan, shares that are subject to restricted stock awards, restricted stock units or other stock-based awards denominated in shares are counted as 1.61 shares for every share granted. Under the Stock Incentive Plan, each one share granted and/or issued pursuant to a restricted stock award, restricted stock unit award (including PSU and SPSU awards (as defined in the Compensation Discussion and Analysis section beginning on page 42)), an other-stock based award, a stock option or a stock appreciation right will count as the issuance of one share for the purpose of computing shares remaining available for issuance under the plan, including shares issued following approval of the Stock Incentive Plan pursuant to all such awards granted prior to such approval.

Change in Share Counting Provisions

As under the Existing Plan, there are certain circumstances under the Stock Incentive Plan in which shares will not be treated as having been issued pursuant to awards, and therefore will not decrease the Share Authorization under the Stock Incentive Plan. Generally, the Existing Plan provides that to the extent an award expires, is forfeited, terminated, cancelled or settled in cash, the shares subject to the award will be added back to the Share Authorization. The Stock Incentive Plan would further provide that any shares that, after approval of the Stock Incentive Plan, are held back or tendered in payment of an option price or purchase price of an award award, tendered or held back to satisfy any tax withholding obligation with respect to an award, or not issued upon the net settlement or exercise of a stock appreciation right (including, in each case, pursuant to and/or in respect of awards granted prior to approval of the Stock Incentive Plan) will be added back to the Share Authorization. Shares reacquired by the Company on the open market using cash proceeds attributable to the exercise price or purchase price of an award will continue to not be added back to the Share Authorization under the Stock Incentive Plan.

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Extension of the Term of the Stock Incentive Plan

The term of the Stock Incentive Plan will expire on March 27, 2024 such that no further awards may be granted after March 26, 2024 (ten years after the effective date of the Stock Incentive Plan as approved by the Board and submitted for stockholder approval at our annual meeting). Currently, the term of the Existing Plan is set to expire on November 20, 2019.

Summary of the Stock Incentive Plan

The essential features of the Stock Incentive Plan, including the proposed amendments, are summarized below. This summary does not purport to be a complete description of all the provisions of the Stock Incentive Plan, and is subject to and qualified in its entirety by reference to the complete text of the amended Stock Incentive Plan, which is attached hereto asAnnex A and is incorporated herein by reference. We urge you to read carefully the Plan in its entirety, as the discussion below is only a summary.

The Rights. In connection with the adoption of the Plan, on August 26, 2012, we declared a dividend of one preferred stock purchase right (individually, a “Right” and collectively, the “Rights”) for each share of our common stock outstanding at the close of business on September 7, 2012. One Right will also be issued together with each share of common stock issued after September 7, 2012, but before the Distribution Date (as defined below) and, in certain circumstances, after the Distribution Date. Subject to the terms, provisions and conditions of the Plan, if the Rights become exercisable, each Right would initially represent the right to purchase from the Company one ten-thousandth of a share of the Company’s Series A Junior Participating Preferred Stock, par value $0.01 per share (the “Series A Preferred Stock”) for a purchase price of $100 (the “Purchase Price”). If issued, each fractional share of Series A Preferred Stock would give the stockholder approximately the same dividend, voting and liquidation rights as does one share of common stock. However, prior to exercise, a Right does not give its holder any rights as a hereto. Any stockholder of the Company including, without limitation, any dividend, voting or liquidation rights.

Initial Exercisability. The Rights will not be exercisable until the earlier of (i) ten business days afterwho wishes to obtain a public announcement that a person has become an “Acquiring Person” by acquiring beneficial ownership of 4.9% or morecopy of the Company’s outstanding common stock (or, inactual Stock Incentive Plan document may do so upon written request to the case of a person that had beneficial ownership of 4.9% or more ofCorporate Secretary at the Company’s outstanding common stock upon execution of the Plan, by obtaining beneficial ownership of additional shares of common stock) and (ii) ten business days (or such later date as may be specified by the Board prior to such time as any person becomes an Acquiring Person) after the commencement of a tender or exchange offer by or on behalf of a person that, if completed, would result in such person becoming an Acquiring Person.principal executive offices.

The Company refersShares Subject to the date thatStock Incentive Plan. Subject to stockholder approval, the Rights become exercisable as the “Distribution Date.” Until the Distribution Date, common stock certificates or the ownership statements issued with respect to uncertificated shares of common stock will evidence the Rights. Any transfer of shares of common stock prior to the Distribution Date will also constitute a transfer of the associated Rights. After the Distribution Date, separate rights certificates will be issued and the Rights may be transferred other than in connection with the transfer of the underlying shares of common stock unless and until the Board has determined to effect an exchange pursuant to the Plan (as described below).

Flip-In Event. In the event that a person becomes an Acquiring Person, each holder of a Right, other than Rights that are or, under certain circumstances, were beneficially owned by the Acquiring Person (which will thereupon become null and void), will thereafter have the right to receive upon exercise of a Right and payment of the Purchase Price, atotal number of shares of common stock having a market value of two timesthat may be issued under the Purchase Price.

Redemption. AtStock Incentive Plan is 34,415,117 plus any time until a person becomes an “Acquiring Person”shares subject to awards made under Other Plans that return to the share reserve as described below (the “Share Authorization”), which number includes shares that have already been issued or are subject to outstanding awards under the Board may redeemExisting Plan. The Share Authorization is subject to adjustment to reflect stock splits, reorganizations and other changes in the Rights in whole, but not in part, at a price of $0.00001 per Right (the “Redemption Price”). The redemptioncapital structure of the Rights may be made effective at such time, on such basisCompany and with such conditionstransactions as provided in the Board in its sole discretion may establish. Immediately upon any redemption of the Rights, the right to exercise the Rights will terminate and the only right of the holders of Rights will be to receive the Redemption Price.

Exchange. At any time after a person becomes an Acquiring Person, the Board may exchange the Rights (other than RightsStock Incentive Plan. Taking into account shares that have become nullbeen previously issued and void), in whole or in part, at an exchange ratioawards that have been previously granted under the Existing Plan, as of one share of common stock, or a fractional share of Series A PreferredMarch 27, 2014, the Stock (or of a share of a similar class or series ofIncentive Plan will have 16,642,775 shares plus any shares that return to the Company’s preferred stock having similar rights, preferences and privileges) of equivalent value, per Right (subjectplan from awards granted under the Other Plans available for issuance pursuant to adjustment). Immediately upon an exchange of any Rights, the right to exercise such Rightsfuture awards after its approval by stockholders.

The Company will terminate and the only right of the holders of Rights will be to receivereserve the number of shares of common stock (or fractionalnecessary to satisfy the maximum number of shares that may be issued under the Stock Incentive Plan. Shares that are subject to awards that have expired, been cancelled, terminated, forfeited or settled for cash will be added to the shares available for awards under the Stock Incentive Plan. Similarly, shares that are subject to awards that have been issued under the Other Plans that are cancelled, forfeited or settled for cash after March 27, 2014 will be added to the shares available for awards under the Stock Incentive Plan. In addition, the following shares will be added to the shares available for awards under the Stock Incentive Plan: (i) shares that are held back or tendered by participants to the Company as full or partial payment or the exercise price of purchase price of awards or awards under Other Plans; (ii) shares that are held back or tendered by participants to the Company to meet the tax withholding obligations with respect to an award or an award under an Other Plan; and (iii) shares that were not issued upon the net settlement or net exercise of a Stock Appreciation Right. After the approval of the Stock Incentive Plan, if any Option or Stock Appreciation Right or other award covering Shares under the Stock Incentive Plan is settled in cash, the number of Shares underlying such cash-settled award shall again be available for awards under the Stock Incentive Plan. Shares repurchased on the open market with proceeds from an award will not increase the number of shares available for awards under the Stock Incentive Plan.

The maximum number of shares with respect to which awards may be granted during each calendar year to any given participant may not exceed 2,600,000 shares of common stock. The annual grant limit under the preceding sentence shall only apply to an award, other than an Option or a Stock Appreciation Right, if such award is intended to be “performance-based” as that term is used in Code

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Section 162(m). The maximum number of awards that may be granted as incentive stock options under the Stock Incentive Plan may not exceed 34,415,117 shares of common stock.

Eligibility. Employees, prospective employees, directors and advisors of the Company and its Affiliates are eligible to participate in the Stock Incentive Plan. As of March 27, 2014, approximately 4,633 employees and 8 non-employee directors currently qualify to participate in the Stock Incentive Plan. Advisors to the Company may also become eligible to participate in the Stock Incentive Plan if determined by the Compensation Committee.

Stock Options and Stock Appreciation Rights. The Compensation Committee may award nonqualified or incentive stock options (“Options”) under the Stock Incentive Plan. Options granted under the Stock Incentive Plan will become vested and exercisable at such times and upon such terms and conditions as may be determined by the Compensation Committee at the time of grant, but in no event will an Option be exercisable beyond the date that is ten years from the date of grant (five years in the case of an incentive stock option granted to any participant who owns stock representing more than 10% of the combined voting power of the Company or any parent or subsidiary of the Company). Participants awarded Options or Stock Appreciation Rights will not receive dividends or dividend equivalents or have any voting rights with respect to shares of common stock underlying the Options or Stock Appreciation Rights.

The exercise price per share of Series A Preferred Stock orcommon stock for any Option awarded will not be less than the fair market value of a share of common stock on the day the Option is granted. Fair market value is defined under the Stock Incentive Plan as the closing sales price of a similar classshare of our common stock on the NYSE. To the extent permitted by the Compensation Committee, the exercise price of an Option may be paid in cash or seriesits equivalent, in shares of the Company’s preferredcommon stock having similar rights, preferences and privileges)a fair market value equal to the aggregate Option exercise price; partly in cash and partly in shares of common stock; or through the delivery of irrevocable instructions to a broker to sell shares of common stock obtained upon the exercise of the Option and to deliver promptly to the Company an amount out of the proceeds of the sale equal to the aggregate Option exercise price for the shares of common stock being purchased.

The Compensation Committee may grant Stock Appreciation Rights independent of or in conjunction with an Option. The exercise price of a Stock Appreciation Right will not be less than the fair market value (i.e., the closing price) of a share of common stock on the date the Stock Appreciation Right is granted; except that, in the case of a Stock Appreciation Right granted in conjunction with an Option, the exercise price will not be less than the exercise price of the related Option. A Stock Appreciation Right will in no event be exercisable beyond the date that is ten years from the date of grant. Each Stock Appreciation Right granted independent of an Option shall entitle a participant upon exercise to an amount equal to (i) the excess of (A) the fair market value (i.e., the closing price) on the exercise date of one share of common stock over (B) the exercise price, times (ii) the number of such Rights held by such holder multipliedshares of common stock covered by the exchange ratio. Stock Appreciation Right, and each Stock Appreciation Right granted in conjunction with an Option will entitle a participant to surrender the Option and to receive such amount. Payment will be made in shares of common stock and/or cash (any share of common stock valued at fair market value (i.e., the closing price)), as determined by the Compensation Committee.

No Repricing.The Board shall notStock Incentive Plan prohibits the repricing of Options or Stock Appreciation Rights awarded under the Stock Incentive Plan, unless such action is approved by the Company’s stockholders in accordance with the applicable rules of the NYSE.

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Restricted Stock. The Compensation Committee will determine the number of shares of Restricted Stock to be empoweredgranted to effecta participant, the duration of the period during which, and the conditions, if any, under which, the Restricted Stock may be forfeited to the Company and the other terms and conditions of Restricted Stock Awards.

Restricted Stock Units (RSUs). The Compensation Committee will determine the number of Restricted Stock Units, known as RSUs, to be granted to a participant, the duration of the period during which, and the conditions, if any, under which, the RSUs may be forfeited to the Company and the other terms and conditions of RSUs.

Other Stock-Based Awards. The Compensation Committee, in its sole discretion, may grant stock awards, unrestricted stock and other awards that are valued in whole or in part by reference to, or are otherwise based on the fair market value of, our common stock. Such stock-based awards may be in such exchange at any time after an Acquiring Person becomesform, and dependent on such conditions, as the beneficial owner of 50%Compensation Committee determines, including, without limitation, the right to receive, or vest with respect to, one or more shares of common stock (or the equivalent cash value of such shares of common stock) upon the completion of a specified period of service, the occurrence of an event and/or the attainment of performance objectives.

Performance Goals and Code Section 162(m).The maximum number of shares with respect to awards (including awards of Restricted Stock, RSUs or other stock-based awards that are intended to be performance-based compensation under Code Section 162(m)) that may be granted to a participant during a calendar year is 2,600,000 shares. The foregoing limitation will be adjusted proportionately by the Compensation Committee in connection with any change in the Company’s outstandingcapitalization due to a stock split, stock dividend or similar event affecting the shares of common stock.

Expiration. The Rightsstock and the Plan will expire on the earlier of (i) the Close of Business on the earlier of (a) August 27, 2015 or (b) August 27, 2013 if stockholder approval of the Plan has not been received by or on such date, (ii) the time at which the Rights are redeemed pursuant to the Plan, (iii) the time at which the Rights are exchangedits determination shall be final, binding and conclusive. Under Code Section 162(m), no deduction is allowed in full pursuant to the Plan, (iv) the effective date of the repeal of both Section 382 and Section 383 of the Internal Revenue Code, or any successor provisions or replacement provisions, if the Board determines that the Plan is no longer necessary for the preservation of Tax Assets or (v) the beginning of a taxable year of the Company for compensation in excess of $1 million paid to the Company’s “covered employees.” An exception to this rule applies to compensation that is paid to a covered employee pursuant to a stock incentive plan approved by stockholders and that specifies, among other things, the maximum number of shares with respect to which options and stock appreciation rights may be granted to eligible participants under such plan during a calendar year. Compensation paid pursuant to options and stock appreciation rights granted under such a plan and with an exercise price equal to the Board determines thatfair market value (i.e., the Company hasclosing price) of a share of common stock on the date of grant is deemed to be inherently performance-based, since such awards provide value to participants only if the stock price appreciates. To the extent required by Code Section 162(m) or will have no Tax Assets.

Anti-Dilution Provisions. The Board may adjust the Purchase Price,regulations thereunder, in applying the foregoing limitation, if any Option or Stock Appreciation Right is canceled, the canceled award shall continue to count against the maximum number of shares of Series A Preferredcommon stock with respect to which an award may be granted to a participant. With respect to Restricted Stock, orRSUs and other securities or assets issuable andstock-based awards, the number of outstanding Rightsgeneral rule is that in order for such awards (such as RSUs) to prevent dilution that may occurqualify as performance-based compensation, the Compensation Committee must establish a result of certain events, including among others, a stock dividend, a stock split or a reclassificationperformance goal with respect to such award in writing not later than 90 days after the commencement of the Series A Preferredservices to which it relates (or, in the case of performance periods for less than one year, not later than the date upon which 25% of the performance period lapses) and while the outcome is substantially uncertain. In addition, the performance goal must be stated in terms of an objective formula or standard. There can be no guarantee, however, that amounts payable under the Stock or common stock. With certain exceptions, no adjustments to the Purchase PriceIncentive Plan will be required until cumulative adjustments amount to at least 1% of the Purchase Price.treated as qualified performance-based compensation under Code Section 162(m).

Amendments. For so long as the Rights are redeemable, the Board may supplement or amend any provision of the Plan in any respect without the approval of the holders of the Rights. From and after the time the Rights are no longer redeemable, the Board may supplement or amend the Plan only to cure an ambiguity, to alter time period provisions, to correct inconsistent provisions, or to make any additional changes to the Plan which the Company may deem necessary or desirable, but only to the extent that those changes do not impair or adversely affect any Rights holder (other than an Acquiring Person or any Affiliate or Associate of an Acquiring Person or certain of their transferees) and do not result in the Rights again becoming redeemable or the Plan again becoming amendable other than in accordance with this sentence.

Certain Considerations Relating to the Plan

Our Board believes that protecting the Tax Assets is in the Company’s and our stockholders’ best interests. Nonetheless, we cannot eliminate the possibility that changes in our stock ownership will occur sufficient to cause a 50 percentage point “ownership change” even if the Plan is approved. You should consider the factors below when making your decision.

Future Use and Amount of the Tax Assets is Uncertain. Our use of the Tax Assets depends on our ability to generate taxable income in the future. We cannot assure you whether we will have taxable income in any applicable period or, if we do, whether such income will exceed any potential Section 382 limitation and therefore we cannot assure you that we will realize the full value of the tax assets.

Potential Challenge to the Tax Assets. The amount of the Tax Assets has not been audited or otherwise validatedCurrently, interpretive guidance issued by the Internal Revenue Service (the “IRS”defines a “covered employee” under Code Section 162(m) as the Company’s chief executive officer and the three other most highly compensated officers of the Company other than the chief financial officer.

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The Stock Incentive Plan includes the following performance criteria that may be considered by the Compensation Committee when granting performance-based awards: (i) operating income before depreciation and amortization (“OIBDA”), including adjusted OIBDA; (ii) operating income (either before or after, either or any combination of, interest, taxes, depreciation and/or amortization); (iii) earnings per share or in the aggregate; (iv) return on stockholders’ equity; (v) stock price; (vi) revenues or sales; (vii) advertising revenue or sales; (viii) free cash flow; (ix) return on invested capital; (x) total stockholder return; (xi) net sales or revenue growth; (xii) return on assets; (xiii) return on capital; (xiv) return on sales; (xv) return on revenue; (xvi) operating cash flow; (xvii) cash flow return on equity; (xviii) cash flow return on investment; (xix) earnings before or after taxes, interest, depreciation, and/or amortization; (xx) gross or operating margins; (xxi) productivity ratios; (xxii) expense targets; (xxiii) margins; (xxiv) operating efficiency; (xxv) market share; (xxvi) working capital targets and change in working capital; (xxvii) economic value added (net operating profit after tax minus the sum of capital multiplied by the cost of capital); (xxviii) reductions in expenses; (xxix) net economic value; (xxx) completion or progress on the achievement of significant transactions, acquisitions, divestitures, product development and/or projects or processes; (xxxi) results of customer satisfaction surveys; (xxxii) product price; (xxxiii) achievement of product and/or service quality goals; and/or (xxxiv) credit rating.

Termination of Service. An award may not be exercised after the termination date of such award as set forth in the award agreement. In the event a participant in the Stock Incentive Plan terminates continuous service with the Company, an award may be exercised only to the extent provided in the award agreement. Where an award agreement permits a participant to exercise an award following termination of service, the award shall terminate to the extent not exercised on the last day of the period specified in the award agreement or the last day of the original term of the award, whichever comes first. Any award designated as an incentive stock option, to the extent not exercised within the time permitted by law for the exercise of incentive stock options following the termination of employment, shall convert automatically to a nonqualified stock option and thereafter shall be exercisable as such to the extent exercisable by its terms for the period specified in the award agreement.

Adjustments Upon Certain Events.In the event of any stock dividend or split, reorganization, recapitalization, merger, spin-off, share exchange or any other similar transaction, the Compensation Committee, in its sole discretion, shall (subject to limitations due to Code Section 409A) adjust (i) the number or kind of shares of common stock or other securities issued or reserved for issuance pursuant to the Stock Incentive Plan or pursuant to outstanding awards; (ii) the maximum number of shares for which awards may be granted during a calendar year to any participant; (iii) the Option price or exercise price of any Stock Appreciation Right; and/or (iv) any other affected terms of such awards.

Upon the occurrence of a change in control of the Company (as defined in the Stock Incentive Plan), the Stock Incentive Plan provides that the Compensation Committee may (subject to limitations due to Code Section 409A) (i) accelerate, vest or cause the restrictions to lapse with respect to, all or any portion of an award; (ii) cancel awards for fair value; (iii) provide for the issuance of substitute awards that will substantially preserve the otherwise applicable terms of any affected awards previously granted under the Stock Incentive Plan as determined by the Compensation Committee in its sole discretion; or (iv) provide that for a period of at least 30 days prior to the change in control, such Options will be exercisable as to all shares subject thereto and that upon the occurrence of the change in control, such Options will terminate. The Compensation Committee is not obligated to treat all awards in the same manner nor to take any action with respect to all awards if it determines to take action with respect to certain awards.

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Administration. The Stock Incentive Plan is administered by the Compensation Committee, which may delegate its duties and powers in whole or in part to any subcommittee of the Compensation Committee consisting solely of at least two individuals who are intended to qualify as “independent directors” within the meaning of the NYSE listed company rules, “non-employee directors” within the meaning of Rule 16b-3 under the Exchange Act, as amended (or any successor rule thereto) and, to the extent required by Code Section 162(m), “outside directors” within the meaning thereof. The Compensation Committee is authorized to interpret the Stock Incentive Plan, to establish, amend and rescind any rules and regulations relating to the Stock Incentive Plan, and to make any other determinations that it deems necessary or desirable for the administration of the Stock Incentive Plan.

Amendment and Termination. The Board or the Compensation Committee may at any time amend, suspend or terminate the Stock Incentive Plan. To the extent necessary to comply with applicable provisions of federal securities laws, state corporate and securities laws, the Code, applicable rules of any stock exchange or national market system and the rules of any foreign jurisdiction applicable to awards granted to residents of the jurisdiction, the Company shall obtain stockholder approval of any such amendment to the Stock Incentive Plan in such a manner and to such a degree as required.

Transferability. Unless otherwise determined by the Compensation Committee, awards under the Stock Incentive Plan may not be transferred or assigned by a participant otherwise than by will or the laws of descent and distribution. An award that is exercisable after the death of a participant may be exercised by the legatees, personal representatives or distributees of the participant.

New Plan Benefits

The benefits that will be awarded or paid in the future under the Stock Incentive Plan are not currently determinable. Such awards are within the discretion of the Compensation Committee, and the Compensation Committee has not determined future awards or who might receive them. The Company’s Nominating and Governance Committee is responsible for determining the compensation of our non-employee directors. The Company’s current approved program for awards to non-employee directors provides for an annual equity award of restricted stock units covering a number of shares equal to $150,000. The number of restricted stock units is determined by dividing the $150,000 by the per-share closing price of the Company’s common stock on the date of grant (rounded downward to the nearest whole share). A non-employee director who is newly appointed to the Board other than in connection with our annual meeting of stockholders will also receive an initial award of restricted stock units determined in the same manner as the annual awards, but the grant-date value of the award is prorated based on the remaining length of time during the year during which the non-employee director is anticipated to serve on the Board. See “Non-Employee Director Compensation” beginning on page 90 for equity granted to our non-employee directors in 2013. See the “Grants of Plan-Based Awards in 2013” table beginning on page 66 for equity granted to our Named Executive Officers (“NEOs”) in 2013.

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Awards under the Existing Stock Plan

The IRS could challengefollowing table sets forth the options, restricted stock units and restricted stock awards that have been received by or allocated under the Existing Plan since it was adopted on November 20, 2009 through February 28, 2014 to the following persons or groups: (i) our CEO; (ii) each of our other NEOs (as listed below); (iii) our current executive officers as a group; (iv) our current non-executive officer directors as a group; (v) each nominee for election as a director; and (vi) all employees, other than current executive officers, as a group. On February 28, 2014 the closing sale price of our common stock, as reported on the NYSE, was $43.78 per share.

Name		Number of Securities Underlying Options Granted Since Adoption of Existing Plan				Number of Securities Underlying   RSUs or Restricted Shares Granted Since Adoption of Existing Plan
Mr. Armstrong			4,006,715				915,730
Ms. Dykstra			129,905				136,922
Ms. Jacobs			304,868				147,469
Mr. Lord			85,895				97,080
Ms. Lyne			83,171				96,764
All current executive officers as a group			4,794,605				1,543,465
All non-executive officer directors as a group			84,336				142,439
All employees, other than current executive officers, as a group			8,015,102				8,762,928

Tax Status of Stock Incentive Plan Awards

The following discussion of the U.S. federal income tax status of awards under the Stock Incentive Plan is based on current U.S. federal tax laws and regulations and does not purport to be a complete description of the U.S. federal income tax laws. Participants may also be subject to certain state and local taxes or may be subject to taxes imposed by countries other than the U.S., none of which are described below.

Nonqualified Stock Options. If the Option is a nonqualified Option, no income is realized by the participant at the time of grant of the Option, and no deduction is available to the Company at such time. At the time of exercise (other than by delivery of shares of common stock to the Company), ordinary income is realized by the participant in an amount equal to the excess, if any, of the fair market value (i.e., the closing price) of the shares of common stock on the date of exercise over the exercise price, and the Company receives a tax deduction for the same amount, subject to possible limitations imposed by Code Section 162(m). Any gain that the participant realizes upon subsequent disposition of the shares will be short- or long-term capital gain, depending on how long the shares were held. If a participant exercises a nonqualified Option by delivering shares of common stock in lieu of paying cash for the strike price, the participant will not recognize gain or loss with respect to the exchange of such shares, even if the fair market value of such shares is different from the participant’s

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tax basis. The participant, however, will be taxed as described above with respect to the exercise of the nonqualified Option as if the participant paid the exercise price in cash, and the Company likewise generally will be entitled to an equivalent tax deduction.

Incentive Stock Options. The grant of an incentive stock option under the Stock Incentive Plan will not result in any federal income tax consequences to the participant or to the Company. A participant recognizes no federal taxable income upon exercising an incentive stock option (subject to the alternative minimum tax rules discussed below), and the Company receives no tax deduction at the time of exercise. In the event of a disposition of stock acquired upon exercise of an incentive stock option, the tax consequences depend upon how long the participant has held the shares of common stock. If the participant does not dispose of the shares within two years after the incentive stock option was granted, nor within one year after the incentive stock option was exercised, the participant will generally recognize a long-term capital gain (or loss) equal to the difference between the sale price of the shares and the exercise price. The Company is not entitled to any deduction under these circumstances.

If the participant fails to satisfy either of the foregoing holding periods (referred to as a “disqualifying disposition”), he or she must recognize ordinary income in the year of the disposition. The amount of ordinary income generally is the lesser of (i) the difference between the amount realized on the disposition and the exercise price or (ii) the difference between the fair market value (i.e., the closing price) of the stock at the time of exercise and the exercise price. Any gain in excess of the amount taxed as ordinary income will be treated as a long or short-term capital gain, depending on whether the stock was held for more than one year. The Company, in the year of the disqualifying disposition, is entitled to a deduction equal to the amount of ordinary income recognized by the participant, subject to possible limitations imposed by Code Section 162(m).

The “spread” under an incentive stock option—i.e., the difference between the fair market value (i.e., the closing price) of the shares at exercise and the exercise price—is classified as an item of adjustment in the year of exercise for purposes of the alternative minimum tax. If a participant’s alternative minimum tax liability exceeds such participant’s regular income tax liability, the participant will owe the larger amount of taxes. In order to avoid the application of alternative minimum tax with respect to incentive stock options, the participant must sell the shares within the calendar year in which the incentive stock options are exercised. However, such a sale of shares within the year of exercise will constitute a disqualifying disposition, as described above.

Stock Appreciation Rights. No income is realized by the participant at the time a Stock Appreciation Right is granted, and no deduction is available to the Company at such time. When the right is exercised, ordinary income is realized by the participant in the amount of the Tax Assets,cash and/or the fair market value of the common stock received by the participant, and the Company will be entitled to a deduction of equivalent value.

Restricted Stock. The grant of Restricted Stock will subject the recipient to ordinary compensation income on the difference between the amount paid for such stock and the fair market value of the shares (i.e., the closing price) on the date that the restrictions lapse. This income is subject to withholding for federal income and employment tax purposes. The Company is entitled to a tax deduction in the amount of the ordinary income recognized by the recipient, subject to possible limitations imposed by Code Section 162(m). Any gain or loss on the recipient’s subsequent disposition of the shares will receive long or short-term capital gain or loss treatment depending on how long the stock has been held since the restrictions lapsed. The Company does not receive a tax deduction for

any such gain.

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Recipients of Restricted Stock may make an election under Code Section 83(b) (“Section 83(b) Election”) to recognize as ordinary compensation income in the year that such Restricted Stock is granted, the amount equal to the spread between the amount paid for such stock and the fair market value (i.e., the closing price) on the date of the issuance of the stock. If such an election is made, the recipient recognizes no further amounts of compensation income upon the lapse of any restrictions and any gain or loss on subsequent disposition will be long or short-term capital gain to the recipient. The Code Section 83(b) Election must be made within thirty days from the time the Restricted Stock is issued.

Restricted Stock Units. The Company receives a tax deduction and the participant recognizes taxable income equal to the fair market value of the RSUs at the time the shares of common stock (or the equivalent value in cash or other property) are issued. Code Section 83(b) is not applicable to RSUs. The value of any part of an award of RSUs distributed to participants is taxable as ordinary income to such participant in the year in which such award is settled, and the Company will be entitled to a corresponding tax deduction.

Other Stock-Based Awards.   The U.S. federal income tax consequences of other stock-based awards under the Stock Incentive Plan (other than RSUs) will depend upon the actual terms and conditions of such Awards when granted and are not currently determinable.

Company Deduction and Code Section 162(m).   Code Section 162(m) generally allows the Company to obtain tax deductions without limit for performance-based compensation. The Stock Incentive Plan is designed to permit the grant of Options and Stock Appreciation Rights, and certain awards of Restricted Stock, RSUs and other stock-based awards that are intended to qualify as “performance-based compensation” not subject to Code Section 162(m)’s $1,000,000 deductibility cap. The rules and regulations promulgated under Code Section 162(m) are complicated and subject to change from time to time, sometimes with retroactive effect. In addition, a number of requirements must be met in order for particular compensation to so qualify. As such, there can be no assurance that any compensation awarded or paid under the Stock Incentive Plan will be fully deductible under all circumstances. Additionally, it is possible that certain awards granted under the Stock Incentive Plan will not be intended to qualify as “performance-based compensation” under Code Section 162(m).

Section 409A.   The American Jobs Creation Act of 2004 introduced a new section of the Code (“Code Section 409A”) covering certain nonqualified deferred compensation arrangements. Code Section 409A generally establishes new rules that must be followed with respect to covered deferred compensation arrangements in order to avoid the imposition of an additional 20% tax (plus interest) on the service provider who is entitled to receive the deferred compensation. The Stock Incentive Plan permits the grants of various types of awards, which may or may not be exempt from Code Section 409A. If an award is subject to Code Section 409A, and if the requirements of Code Section 409A are not met, the taxable events described in this section could apply earlier than described, and could result in an increase in our liability for income taxes. In addition, determining whether an “ownership change” has occurred isthe imposition of the 20% additional tax plus interest. Restricted Stock Awards, Options and Stock Appreciation Rights that comply with the terms of the Stock Incentive Plan, are designed to be exempt from Code Section 409A. RSUs granted under the Stock Incentive Plan may be subject to uncertainty, both because of the complexity and ambiguity of theCode Section 382 provisions and because of limitations on the knowledge that any publicly traded company can have about the ownership of, and transactions in, its securities on a timely basis. Therefore, we cannot assure you that

the IRS or other taxing authority will not claim that we experienced an “ownership change” and attempt to reduce the benefit of the Tax Assets even if the Plan is in place.

Continued Risk of Ownership Change. Although the Plan is intended to diminish the likelihood of an “ownership change,” we cannot assure you that it will be effective. The amount by which our ownership may change in the future could, for example, be affected by purchases and sales of stock by stockholders and new issuances or repurchases of stock by us, should we choose to do so.

Potential Effects on Liquidity. The Plan is intended to deter persons or groups of persons from acquiring beneficial ownership of shares of our common stock in excess of the specified limitation. A stockholder’s ability to dispose of our common stock may be limited if the Plan reduces the number of persons willing to acquire our common stock or the amount409A unless they are willingdesigned to acquire.satisfy the short-term deferral exemption from Code Section 409A. If not exempt, such RSUs must be specifically designed to meet the requirements of Code Section 409A in order to avoid early taxation and penalties.

Potential Impact on Value. The Plan could negatively impact the value of our common stock by deterring persons or groups of persons from acquiring shares of our common stock, including in acquisitions for which some stockholders might receive a premium above market value.

THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE “FOR” THE APPROVAL OF THE AOL INC. 2010 STOCK INCENTIVE PLAN AS AMENDED AND RESTATED

Anti-Takeover Effect. Our Board adopted the Plan to diminish the risk that our ability to use the Tax Assets to reduce potential federal income tax obligations becomes limited. Nonetheless, the Plan may have an “anti-takeover effect” because it will deter a person or group of persons from acquiring beneficial ownership of 4.9% or more of our common stock or, in the case of persons or persons that already own 4.9% or more of our common stock, from acquiring any additional shares of our common stock. The Plan could discourage a merger, tender offer or accumulations of substantial blocks of shares.

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THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE “FOR” THE APPROVAL OF THE COMPANY’S TAX ASSET PROTECTION PLAN.

EQUITY COMPENSATION PLAN INFORMATION

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EQUITY COMPENSATION PLAN INFORMATION

The following table summarizes information as of December 31, 2012,2013, about the Company’s outstanding equity compensation awards and shares of common stock reserved for future issuance under the Company’s equity compensation plans.

 

Plan Category		Number of securities to be issued upon exercise of outstanding options, warrants and rights(2)(3) (a)				Weighted-average exercise price of outstanding options, warrants and rights(4) (b)				Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a))(5) (c)				Number of securities to be issued upon exercise of outstanding options, warrants and rights(2)(3) (a)				Weighted-average exercise price of outstanding options, warrants and rights(4) (b)				Number of securities remaining available for future issuance under equity compensation plans   (excluding securities reflected in column (a))(5) (c)
Equity compensation plans approved by security holders(1)			11,255,752			$	18.59				9,760,840				8,672,856			$	21.76				20,466,010
Equity compensation plans not approved by security holders			0				—				0				0				—				0
Total			11,255,752			$	18.59				9,760,840				8,672,856			$	21.76				20,466,010

 

(1)

Consists of shares that may be issued under the Amended and Restated AOL Inc. 2010 Stock Incentive Plan ,as amended and restated as of June 14, 2012 (“AOL Inc. 2010 Stock Incentive Plan”), the HP Plan (as defined below) and Adap.tv Plan (as defined below) in the form of stock options, stock appreciation rights, restricted stock, RSUs, PSUs or other stock-based awards.

(2)

Consists of 8,052,8736,278,778 shares of our common stock issuable upon the exercise of outstanding options, 2,373,0981,612,842 shares of our common stock issuable upon the vesting of RSUs and a maximum of 321,890500,228 shares of our common stock issuable upon the vesting of PSUs awarded under the Amended and Restated AOL Inc. 2010 Stock Incentive Plan, and 382,375201,961 shares of our common stock issuable upon the exercise of outstanding options and 125,51679,047 shares of our common stock issuable upon the vesting of RSUs outstanding under the HP Plan. See footnote 3 below for further details about the HP Plan.

(3)

In connection with our acquisition of TheHuffingtonPost.com, Inc. (“Huffington Post”) in March 2011, we assumed the HuffingtonPost.com, Inc. Long-Term Incentive Plan (as amended and restated, the “HP Plan”) and, generally, converted into Company shares all Huffington Post shares either subject to outstanding options or still available for issuance under the HP Plan. Specifically, as of closing: (1) we converted 706,881 outstanding shares that were subject to Huffington Post stock options into 664,075 Company stock options; (2) the remainder of the shares subject to outstanding 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 HP Plan); and (3) a small number of shares subject to 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 HP Plan). The number in this column includes 507,891281,008 shares of Company common stock issuable upon the exercise of outstanding options and RSUs under the HP Plan.

(4)	The weighted-average exercise price pertains only to the 8,435,2486,480,739 outstanding options and not to the outstanding RSUs and PSUs, which by their nature have no exercise price.

(5)

Consists of 9,695,351(i) 8,674,802 shares of Company common stock available for future issuance under the Amended and Restated AOL Inc. 2010 Stock Incentive Plan, and 65,489(ii) 66,800 shares of Company common stock available for future issuance under the HP Plan, (iii) 2,560,325 under the AOL Inc. 2013 Adap.tv Acquisition Stock Incentive Plan (as amended and restated, the “Adap.tv Plan”) which plan we assumed in connection with our acquisition of Adap.tv, Inc. and (iv) 9,164,083 under the Employee Stock Purchase Plan. In connection with our acquisition of Adap.tv, Inc.in September 2013 and the assumption of the Adap.tv Plan, at the time of the acquisition we converted into Company shares all outstanding Adap.tv Inc. options and shares still available for future issuance.

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EXECUTIVE COMPENSATION

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EXECUTIVE COMPENSATION

Compensation Discussion and Analysis

This Compensation Discussion and Analysis discusses (i)explains (1) our executive compensation philosophy, process and policies, (2) the elements of our compensation programs applicable to theour Named Executive Officers (each an “NEO”) for 2012, (ii) the actions taken in 2012 with respect to compensation for the NEOs and (iii)2013, (3) the compensation of our NEOs during 2012.2013, and (4) other compensation policies and information.

We refer to theThe following individuals aswere our NEOs for 2012:2013:

 

Name		Title
Tim Armstrong		Chairman and Chief Executive Officer (“CEO”)
Arthur Minson*		Former Executive Vice President and Chief Operating Officer
Karen Dykstra**		Executive Vice President and Chief Financial and Administrative Officer (“CFAO”)
Curtis Brown*Julie Jacobs		Executive Vice President, General Counsel and Corporate Secretary
Robert Lord***		Executive Vice President and Chief Technology OfficerCEO of AOL Platforms
Julie Jacobs		Executive Vice President, Corporate Development, General Counsel and Corporate Secretary
John Reid-Dodick Susan Lyne***		Executive Vice President and Chief People OfficerCEO of AOL Brand Group

 

*

Mr. MinsonMs. Dykstra was promoted to the role of Executive Vice President and Chief OperatingFinancial and Administrative Officer on June 29, 2012. Hein July 2013. She had been serving as Executive Vice President and Chief Financial Officer prior to the promotion. Mr. Minson continued in the role of CFO until he was replaced by Ms. Dykstra effective September 19, 2012. Mr. Minson stepped down from his position as EVP and COO effective February 26, 2013. He is remaining with the Company for a transition period ending no later than December 31, 2013.

**

Ms. Dykstra served as a director of the Company until September 19, 2012. She joined the Company asMr. Lord became Executive Vice President and Chief Financial Officer effective asCEO of September 19, 2012 and resigned as a director of the Company immediately thereafter.AOL Platforms (formerly AOL Networks) in August 2013.

***	Mr. Brown was promoted toMs. Lyne became Executive Vice President and Chief Technology Officer, effectiveCEO of AOL Brand Group in February 2013.

EXECUTIVE SUMMARY

An analysis of our recent stock performance, financial and operational performance and recent industry pay trends demonstrated that pay decisions made by the Compensation Committee in 2013 rewarded NEOs for their performance and balanced short-term and long-term incentives to align compensation with the short-term and long-term goals of the Company. These decisions were consistent with our compensation philosophy and further aligned our NEOs’ interests with those of our stockholders.

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2013 Stock Performance

As set forth in the chart below, our one year Total Shareholder Return (“TSR”) of 57% surpassed the one-year TSR of the Morgan Stanley High Technology Index of 32%, the S&P 500 return of 30% and the S&P 400 return of 32%.

2013 Financial and Operational Highlights

As described in more detail in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of our most recent Annual Report on Form 10-K, fiscal year 2013 was a strong year operationally and financially. We aggressively executed our business strategy in 2013 and created stockholder value by doing the following:

Delivering strongest revenue growth in a decade with year-over-year revenue growth of 6%.

•

Delivering strong Adjusted OIBDA growth with year-over-year Adjusted OIBDA growth of 17%;3

Achieving global advertising revenue growth year-over-year in all four quarters in 2013;

Ending the year with the 6th consecutive quarter of unique visitor growth across our properties;

Achieving record low churn of 1.3% in the fourth quarter, compared to 1.8% in the prior year period;

Solidifying our position as a leader in programmatic advertising and expanding our video offering with the acquisition of Adap.tv, Inc.;

Repurchasing 3.9 million shares as part of our disciplined capital allocation strategy to return value to our stockholders; and

Entering into a $250 million senior secured revolving credit facility.

3

Adjusted OIBDA is a non-GAAP financial measure and may be different than similarly-titled non-GAAP financial measures used by other companies. The presentation of this financial information is not intended to be considered in isolation or as a substitute for the financial information prepared and presented in accordance with U.S. GAAP. A reconciliation of May 9, 2012. Priorour GAAP to non-GAAP results can be found in Annex B attached hereto.

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How Pay Was Tied to Performance in 2013 and Aligned with Stockholder Interests

In connection with restructuring the Company into three business segments for the 2013 fiscal year, the Compensation Committee and executive management extensively reviewed our executive compensation program at the end of 2012. The review process included examining the program design as well as the financial and operational metrics of cash and equity incentive programs of our proxy peer group (“Industry Peer Group”) that includes companies with which we compete for talent, business or investment capital, as well as of other companies with whom we compete. The Compensation Committee, after reviewing alternatives presented by executive management and review by its independent compensation consultant, made substantial changes to our 2013 executive compensation program. The primary goal of the changes was to ensure that our executive compensation program closely reflects the way the Company has been aligned organizationally to execute on its strategy as well as maintain the tie between pay and performance and the creation of enduring stockholder value.

The material changes to the executive compensation program approved by the Compensation Committee for 2013 are as follows:

Added the following financial metrics to the company performance component under our annual incentive cash bonus plan (“ABP”) that the Compensation Committee and executive management believe are key drivers of Company performance: (i) Revenue Net of TAC and (ii) Adjusted Earnings Per Share (see page 53 for definitions and further discussion);

Added a new component to the ABP that, for purposes of determining incentive compensation for certain NEOs who lead business segments, is tied directly to the performance of such segments (“Segment Performance Component”). The Compensation Committee and executive management believe that the new component will drive operational focus and enhance accountability for the performance of the business segments. The new component includes segment-specific metrics, such as business segment Adjusted OIBDA and business segment Revenue Net of TAC, that the Compensation Committee and executive management believe are important measures of a segment’s financial and operational performance; and

Created the segment performance share unit (“SPSU”), a form of performance-based equity award with vesting conditioned on the financial performance of a business segment, in order to drive and reward superior performance of the leaders of our business segments as well as to align the compensation of such leaders with our stockholders.

The Compensation Committee believes that each of the above changes further aligns executive pay with performance in the near-term and rewards sustainable financial and operational achievements that create enduring stockholder value.

The following other elements of our executive compensation program also reflect the link between pay and performance:

The majority of our executive pay is not fixed. For example, in 2013, our CEO’s fixed pay was 15.4% of his target direct compensation. Fixed pay for our other NEOs averaged 16.4% of target direct compensation.

As a result of our strong Company performance in 2013, our NEOs earned an annual bonus payout above target with respect to the Company-wide performance component of our ABP.

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For our NEOs who led a reportable business segment, their payout under our ABP reflected business segment performance that was below financial and operational targets for their business segment.

OUR EXECUTIVE COMPENSATION PHILOSOPHY, PROCESS AND POLICIES

Our Compensation Goals and Principles

The goal of our executive compensation program is to attract and retain talented executives and to reward executives in a manner that aligns compensation with short-term and long-term goals of the Company and creating enduring stockholder value. In 2013, the following principles guided us in determining the compensation of our NEOs:

•

Accountability for Business Performance.Compensation should be significantly tied to our overall Company and business segment financial and operating performance so that he served as interim Chief Technology Officerexecutives are held accountable through their compensation for the performance of the Company. Priorbusiness operations for which they are responsible and for creating enduring stockholder value.

•

Accountability for Individual Performance.Compensation should be tied, in part, to the interim Chief Technology Officer role, he held the positionexecutive’s individual performance to encourage and reflect individual contributions to our performance.

•

Independence. Compensation should be consistent with high standards of Senior Vice President of Network, Publisher and Data Technologiescorporate governance which include having an independent Compensation Committee of the Company.Board review and set executive compensation using its own independent advisors that are hired and funded by the Compensation Committee to assist with carrying out its responsibilities.

In June 2012,

•

Retain and Attract Talent.Compensation should reflect the competitive marketplace to enable us to attract, retain and motivate talented executives over the long term as required to achieve the Company’s objectives.

How We Considered the 2013 “Say-on-Pay” Advisory Vote

At the 2013 Annual Meeting of Stockholders in May 2013, our stockholders voted, on an advisory basis, on a resolution regarding the Company’s executive compensation (the “say on pay proposal”). The say-on-pay proposal was approved by more than 80%95% of the votes cast demonstrating stockholder support for our overall executive compensation program.program during 2012. The Compensation Committee considered this a favorable result along with input from itsand believed it showed strong stockholder support for the Company’s compensation consultant on best practices when designingand the decisions taken by the Compensation Committee and thus the Compensation Committee did not make any specific changes to the compensation for NEOs as a result the advisory vote. Notwithstanding the result of the vote, however, as noted above, the Compensation Committee reviewed the overall design of the compensation program for our NEOs in 2012,2013 and made certainultimately decided to make substantial changes to the program as a result of the advisory vote including strengthening the link between our NEOs’ compensation and performance by issuing Performance Share Units (“PSUs”) to NEOs who received equity awards following the advisory vote. described above.

Our current policy is to include a resolution regarding approval of the Company’s executive compensation annually and such a proposal is submitted to our stockholders during the Annual Meeting as described Item 3 of this Proxy Statement. The Compensation Committee considered and will continue to consider the outcome of these advisory votes when evaluating future executive compensation arrangements. We expect to hold the next vote on the frequency of advisory votes to approve executive compensation at our 2017 annual meeting.

EXECUTIVE SUMMARY

2012 Financial and Operational Highlights

As described in more detail in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of our most recent Annual Report on Form 10-K, fiscal year 2012 was a strong year. We aggressively executed our business strategy in 2012 by doing the following:

achieving Total Shareholder Return of 130%, which surpassed the Morgan Stanley High Technology Index return of 16%, the S&P 500 return of 13% and the S&P 400 return of 16%;

returning to revenue growth in the fourth quarter for the first time in 8 years;

returning to full year Adjusted OIBDA growth;

growing operating income in the fourth quarter 24% year-over-year;

growing global advertising revenue in the fourth quarter 13% year-over-year;

growing our unique visitors in the fourth quarter 6% year-over-year;

growing our search revenue in the fourth quarter 17% year-over-year;

reducing shares outstanding by approximately 19% year-over-year as of December 31, 2012, including through a $600 million accelerated stock repurchase program;

unlocking $1.056 billion of value through the patent transaction;

completing a special cash dividend payment that completed the return of $1.056 billion to stockholders; and

over-performing against the Company financial targets in the 2012 Annual Bonus Plan.

See our 2012 Annual Report on Form 10-K for further details on these developments.

Additionally, our NEOs’ 2012 compensation reflected strong Company performance as follows:

CEO Compensation:Mr. Armstrong earned an above target annual bonus of $2,750,000, as a result of strong Company performance against Adjusted OIBDA and Free Cash Flow targets under the 2012 Annual Bonus Plan (as further discussed below) and strong individual performance. Mr. Armstrong also received a special cash performance award of $500,000 to recognize him for the role he played in the Company’s return to growth, the completion of the $1.056 billion patent transaction and the special cash dividend paid to stockholders of the Company on December 14, 2012. Mr. Armstrong’s salary did not increase in 2012. In connection with entering into his new employment agreement upon expiry of his prior agreement, Mr. Armstrong received long term equity awards, which included equity awards tied to specific performance criteria for the first time. The performance-based equity represented 71% of the total value of his 2012 equity awards on their grant date and may be earned based upon achievement of revenue goals, relative Total Shareholder Return and/or stock price targets. The remaining 29% of the grant date value of his 2012 equity awards were made up of time-based stock options.

Other NEO Compensation:Each of the other NEOs earned above target annual bonuses as a result of strong Company performance against financial targets in the 2012 Annual Bonus Plan and strong individual performances. Mr. Minson and Ms. Jacobs also received special cash performance awards to recognize them for their individual roles in the completion of the $1.056 billion patent transaction and the payment of a special cash dividend to stockholders. Mr. Minson entered into a new employment agreement in 2012 upon expiry of his prior agreement and in connection with his promotion, and received a salary increase and equity awards, including equity awards tied to relative Total Shareholder Return performance for the first time. Mr. Brown entered into a new employment agreement in 2012 in connection with his promotion and also received a salary increase and equity awards, including equity awards tied to relative Total Shareholder Return performance for the first time. See “Narrative to the 2012 Summary Compensation Table and the Grants of Plan-Based Awards in 2012 Table” beginning on page 58 of this Proxy Statement for further discussion of NEO employment arrangements.

New Executive Employment Agreements Introduced Performance-Based Equity and Standard Terms

In 2012 the Compensation Committee reviewed the overall compensation philosophy for our executives, including how long term incentives are linked to Company performance. As a result the following occurred:

We introduced three new types of performance-based long term incentive awards as part of executive compensation including performance-based stock options and two types of performance-based stock units (described in more detail below).

Three of the NEOs, including our CEO, our former COO and our CPO, entered into new employment agreements that reduced certain contractual benefits compared to prior agreements.

CEO

Our CEO’s prior employment agreement had been negotiated and approved by Time Warner Inc. prior to the Spin-off and included several terms more favorable for the CEO than the Company’s current form of executive agreement. Upon review, the Committee concluded that the current form of employment agreement is more appropriate for the CEO of a stand-alone company. Mr. Armstrong’s prior agreement expired and was replaced with a new agreement that reduced his contractual benefits compared to his prior agreement. In connection with the new employment agreement, Mr. Armstrong received an equity award which included our new performance-based equity awards linking compensation more directly with the Company’s long term stock price performance. These awards included performance-based stock options that may vest over a two year performance period tied to the price of our stock, performance-based stock units with vesting based on achievement of revenue targets over a three year performance period (referred to as “Rev PSUs” in this proxy statement) and performance-based stock units with vesting based on relative Total Shareholder Return over a three year performance period (referred to as “TSR PSUs” in this proxy statement). The material terms of these new performance-based equity awards are described further in the table below.

Other NEOs

Over the course of 2012, Mr. Minson, (whose prior agreement was the Time Warner Inc. form of agreement similar to Mr. Armstrong’s prior agreement), Mr. Brown, and Ms. Dykstra entered into new employment agreements that substantially conformed to standard terms applicable to other senior executives in the Company. In the case of Mr. Minson, like with Mr. Armstrong, the new agreement reduced his contractual benefits compared to his prior agreement.

Additionally, in July 2012 we amended Mr. Reid-Dodick’s employment agreement to conform the terms of certain equity incentive awards granted when he was hired to the standard Company executive employment agreement. As a result, the amendment reduces certain favorable terms applicable to Mr. Reid-Dodick’s prior equity awards compared to Mr. Reid-Dodick’s original employment agreement.

The new agreements entered into with Messrs. Minson and Brown and Ms. Dykstra also provided for awards of newly created TSR PSUs. The Company intends that the value of annual equity awards granted to our NEOs and other senior executives in the near future shall be delivered in equal thirds based on the Black-Scholes value of time-based stock options, and the face value of RSUs and PSUs (assuming target level performance) on the date of grant.

The following table describes the Company’s compensation policies and practices that help to advance the Compensation Committee’s compensation philosophy and that are designed to discourage excessive risk taking.

 

Executive Compensation Practices		Executive Compensation Practices Not Engaged in by the Company
•    Compensation is tied to performance against clearly articulated Company financial goals and individual performance goals		•    The Company does not have guaranteed annual bonuses.
•    The Compensation Committee exerts its discretion to reduce bonus plan funding when it believes financial targets have not been fully met.
•    The Company mitigates compensation-related risks by utilizing multi-year vesting, performance-based equity and multiple performance targets across different types of equity awards.		•    We do not over-emphasize short or long term compensation to the detriment of the other
•    The RSU and stock option award agreements for the NEOs provide for accelerated vesting in full after a change in control only if the NEO is also terminated without cause, resigns for good reason or remains employed through the one year anniversary of the change in control. •    The PSU award agreements for the NEOs provide for accelerated vesting based on actual performance level achieved if, within 12 months following a change in control, the NEO is terminated without cause, resigns for good reason, or terminates due to death or disability. •    Mr. Armstrong’s performance-based stock option agreement provides for full vesting to the extent performance goals are achieved at or prior to the change in control, if Mr. Armstrong is terminated without cause, resigns for good reason, or terminates due to death or disability within one year after the change in control.		•    The equity award agreements do not provide for automatic “single trigger” vesting acceleration upon a change in control.
•    Employment agreements for NEOs have been conformed over time such that terms are substantially the same as terms offered other senior executives in the Company. As a result, with respect to our CEO and former COO, the new agreements reduced certain contractual benefits compared to their prior agreements.		•    Employment agreements for NEOs do not provide for any “tax gross-up” payments to them as a result of a change in control of the Company
•    The Company provides limited perquisites and personal benefits.		•    The Company does not provide a defined benefit pension plan or supplemental executive retirement plan (SERP) for its executives. •    The Company does not maintain a non-qualified deferred compensation plan for its employees.(1) 45

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Roles and Responsibilities in Determining Executive Compensation

•    The Company has stock ownership guidelines with which all NEOs are required to comply. •    The Company has a clawback policy.		•    The Company’s current equity plan prohibits stock options repricing. •    The Company does not permit its NEOs to engage in hedging transactions. •    The Company does not permit its NEOs to pledge Company stock without prior authorization of the General Counsel.
•    The Compensation Committee has engaged an independent compensation consulting firm (CAP) to advise it. The Committee annually reviews the relationship and has determined that the consulting firm does not have any conflicts of interest with the Company.		•    The Compensation Committee does not allow its independent compensation consulting firm to provide any other services to the Company

(1)

Ms. Dykstra was permitted to defer the cash and RSU compensation she received as a director prior to becoming an NEO according to the terms of the AOL Inc. 2011 Directors’ Deferred Compensation Plan. As an employee of the Company, she continues to participate in the AOL Inc. 2011 Directors’ Deferred Compensation Plan, but may not defer any compensation earned as an employee.

Role of Compensation Committee

Our Compensation Committee is comprised entirely of independent directors. The following table describesCompensation Committee oversees the typesdesign and implementation of our compensation and benefit plans and policies and equity incentives awarded toincentive plans. The Compensation Committee determines the compensation of our NEOs, during 2012including reviewing and reflects the Compensation Committee’s focus on further tying equity awards to specific performance criteria. With respect to the types of awards grantedapproving employment agreements and annual compensation relating to the CEO and certain senior executives including the NEOs. The Compensation Committee also reviews and approves corporate, segment and individual goals relevant to such executives and evaluates performance in light of such goals and objectives, and exercises oversight over the disclosures regarding executive compensation.

Role of Management

Our CEO and CFAO, assisted by input from members of our Human Resources, Finance and Legal departments, regularly reviews the Company’s executive compensation philosophy with the Compensation Committee. Our CEO, with the assistance of the Human Resources department, annually reviews the performance and compensation of the other NEOs and makes recommendations to the Compensation Committee determined thatas described in greater detail below. Our Human Resources department staff provides information to the designCompensation Committee on peer group practices and on survey data.

Role of such equity awards appropriately aligned the potential reward with stockholder interests.

New 2012 Long Term Incentive (“LTI”) Design

CEO 2012 Equity Awards

New Performance – Based LTI Awards

Time-Based LTI Awards

Performance-Based Options

TSR PSUs

Rev PSUs

Time-Based Options

Percent of total grant

43%

14%

14%

29%

Vesting period

Vesting over 2 years

3 year performance period – January 1, 2012 – December 31, 2014

3 year performance period – January 1, 2012 – December 31, 2014

Vesting over 4 years

Vesting criteria

Subject to the executive’s continued employment with the Company, fifty percent of the award will vest following the first anniversary of the grant date if our stock price exceeds a certain threshold, generally representing a 20% increase in the per share price of our common stock as of the date of grant.   Subject to the executive’s continued employment with the Company, fifty percent of the award will vest following the second anniversary of the grant date if our stock price exceeds a certain threshold, generally representing a 30% increase in the per share price of our common stock as of the date of grant.

Subject to the executive’s continued employment with the Company, the number of PSUs earned following the end of the three year performance period is determined by AOL’s relative Total Shareholder Return compared to the Morgan Stanley High-Technology Index.

Subject to the executive’s continued employment with AOL, the number of PSUs earned following the end of the three year performance period is determined based on the achievement of revenue goals. Minimum revenue goals must be met at end of performance period in order for any awards to be earned.

25% of the award vests after one year; monthly vesting thereafter for 36 months.

Other NEOs Receiving Equity Awards in 2012 in Connection with New Employment Agreements

New Performance-Based LTI Awards

Time-Based LTI Awards

TSR PSUs

Time-Based Options

Restricted Stock Units

Percentage of total grant

33 1/3%

33 1/3%

33 1/3%

Vesting period

3 year performance period – January 1, 2012 – December 31, 2014

Vesting over 4 years

Vesting over 4 years

Vesting criteria

Subject to the executive’s continued employment with the Company, the number of PSUs earned following the end of the three year performance period is determined by AOL’s relative Total Shareholder Return compared to the Morgan Stanley High-Technology Index.

25% vests after one year; monthly vesting thereafter for 36 months.

50% vests after 2 years; 25% vests on third anniversary; 25% vests on fourth anniversary.

COMPENSATION PHILOSOPHY AND PROCESS

Our Compensation Goals and PrinciplesConsultants

The goalCompensation Committee has selected Compensation Advisory Partners (“CAP”) as its independent executive compensation advisor pursuant to the Compensation Committee charter. CAP works with the members of the Compensation Committee and management to provide strategic guidance to the Compensation Committee regarding executive and director compensation.

We also retain the executive compensation firm Exequity LLP (“Exequity”) to provide guidance to our management on executive compensation matters. Specific services provided by Exequity include, but are not limited to, the identification of relevant peer group companies, a review of our executive compensation program is to attract and retain talented executives and to reward executives in a manner that alignspractices, views of non-employee director compensation, with short-term and long-term goalsas well as modeling of potential equity pool designs. For the Company and creating stockholder value. In 2012 we were guided bypurposes of assessing the following principles in determining the compensationcompetitiveness of our NEOs:

•

Accountability for Business Performance.Compensation should be significantly tied to our financialexecutive compensation programs with respect to pay and program design, Exequity conducts and/or validates external benchmarking analyses relative to peer companies selected and approved by management and operating performance so that executives are held accountable through their compensation for the performance of the business operations for which they are responsible and for sustainable long-term stockholder value.

•

Accountability for Individual Performance.Compensation should be tied, in part, to the executive’s individual performance to encourage and reflect individual contributions to our performance.

•

Independence. Compensation should be consistent with high standards of corporate governance which shall include having an independent Compensation Committee of the Board review and set executive compensation using its own independent advisors that are hired and funded by the Compensation Committee to assist with carrying out its responsibilities.

•

Retain and Attract Talent.Compensation should reflect the competitive marketplace to enable us to attract, retain and motivate talented executives over the long term as required to achieve the Company’s objectives.

This section discusses the Company’s compensation policies and practices that help to advance the Compensation Committee’sCommittee. Management utilizes Exequity as a strategic consultant on key decisions and market trends relating to our executive compensation philosophy and that are designedprograms. Exequity does not provide advice to discourage excessive risk taking.the Compensation Committee regarding the amount or form of executive compensation.

Performance Review Process

We determine regular base salary merit increases, annual bonuses and equity grants, if any, through an annual review of all employees, including the NEOs, which we use to measure individual performance over the course of the performance year against pre-set financial, operational and individual goals. TheThis process assists in confirming that each NEO’s compensation is tied to our overall financial and operating performance, the performance of our business segments, individual achievement and the execution of our strategic initiatives and demonstration of our values. The annual performance review process is generally conducted in the fourth quarter of the relevant year and continues into the first quarter of the following year. As part of the annual performance review process, Mr. Armstrong conducts a performance assessment of the other NEOs and makes recommendations concerning base salary merit increases, equity awards and annual bonuses, if any. For 2012,

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Mr. Armstrong, in consultation with our Human Resources Department,department, conducted the 2013 performance assessment of each other NEO, and shared the relevant compensation recommendations with the Compensation Committee. Additionally for 2012,In connection with Mr. Armstrong’s performance assessment, Mr. Armstrong prepared a written self-assessment, and met with each of the Chairman of the Compensation Committee and the Lead Independent director to discuss his performance. The Compensation Committee then conducted an independent performance assessment of Mr. Armstrong and reviewedshared and discussed this assessment with the Board. In connectionBoard in executive session. The Board then communicated their assessment of Mr. Armstrong’s performance with promotions and new employment agreements that occur during the year, salary levels are reviewed by the Compensation Committee and may be increased to recognize outstanding performance and to align compensation with comparative peer levels. During 2012, Mr. Minson received a 13% salary increase as of September 7, 2012 in connection with his promotion to COO. Mr. Brown received a 3% salary increase as of May 9, 2012 in connection with his promotion to Chief Technology Officer (“CTO”).Armstrong.

Use of Compensation Surveys and Other Comparative Data

In connection with our annual executive compensation planning process, both management and the Compensation Committee review peer group compensation information to benchmark executives’ pay design and levels. The external compensation data sources referenced by management and the Compensation Committee as they deliberate appropriate levels and mixes of compensation include both private compensation surveys (“survey data”) and

public SEC filings (e.g., proxy statements and other compensation-related filings) for companies specifically selected as peers for the purposes of pay benchmarking (“proxy data”), as described in greater detail below.

Annually we participate in and receive competitive pay data analysis based on numerous compensation surveys of public and private technology companies and other multinational companies prepared by a varietyRadford Consulting. We also use data relating to our Industry Peer Group as defined below. In the course of different compensation firms, includingapplying this information, management and the Compensation Committee reviewed Radford Consulting median and 75th percentile data for total direct compensation and calibrated the Company’s executive compensation program for 2013 such that NEO’s target total compensation opportunities were positioned between these two benchmarks—with actual pay being closer to 75th percentile peer benchmarks when Company performance and individual performance is strong and actual pay being below peer median benchmarks when Company, segment and individual performance is not strong.

The Croner Company. In applying proxy data, we use an “Industry Peer Group” that includes companies with which we compete for talent, business or investment capital.

In 2012, we revisedCompensation Committee annually reviews the composition of the Industry Peer Group such thatand makes modifications warranted by our continually evolving business. In 2013, we did not revise our Industry Peer Group as we felt it better reflects:adequately reflected:

 

companies with which we compete for talent because attracting and retaining employees that possess a depth of expertise in highly sought after specialty areas, including engineering, mobile and editorial, is critical to achieving the Company’s long-term objectives; and

 

companies with which we compete based on the scope of our operations, as measured by revenue.

Based on these considerations, we added Revenues in 2012 for the revised 2013 Industry Peer Group ranged from $1.0 billion to $77.8 billion, with median 2012 revenues of approximately $4.4 billion, as compared to the Industry Peer Group: Akamai Technologies Inc., Autodesk, Inc. and LinkedIn Corp. We removed News Corporation from the Industry Peer Group. Following these changes, theCompany’s 2012 revenues of approximately $2.2 billion. The list of companies included in the revised Industry Peer Group areis as set forth below.

Revenues in 2011 for

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Compensation Policies and Practices

The following table describes the revised 2012 Industry Peer Group ranged from $0.5 billionCompany’s compensation policies and practices that help to $72.1 billion, with median 2011 revenues of approximately $4.2 billion, as compared to AOL’s 2011 revenues of approximately $2.2 billion.

AOL management andadvance the Compensation Committee will continueCommittee’s compensation philosophy and that are designed to review the compositiondiscourage excessive risk taking.

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Elements of the Industry Peer Group and make such modifications as are warranted in connection with our continually evolving business.

Considerations in DeterminingExecutive Compensation Program

Our compensation philosophy described above is reflected in the elements of our executive compensation program, which are listed in the table below. In general, we believe that the elementsThe annual compensation of our NEOs consists of three principal components: annual cash compensation, reflect a focus on performance-drivenshort-term incentive compensation a balance between short-term and long-term compensation and a combination of cash and equity-basedequity-related incentive compensation. TheThese elements of executive compensation are reviewed annually by the Compensation Committee, our CEO and our Chief People Officer (“CPO”)CFAO to maintain the amount and type of compensation within appropriate competitive parameters as well as to promote long-term performance.