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Why AOL’s CEO is getting a $59 million bonus

Tim Armstrong, Chairman and CEO of AOL Inc., speaks during an interview with Fox Business Channel in New YorkTim Armstrong, Chairman and CEO of AOL Inc., speaks during an interview with Fox Business Channel in New York
AOL's CEO Tim ArmstrongPhotograph by Brendan McDermid — Reuters

We already knew that AOL chief executive Tim Armstrong stood to make a bundle from his company’s $4.4 billion sale to Verizon Communications. Thanks to new documents filed Tuesday, we also know that Armstrong’s payout includes a “Founders’ Incentive Award” worth about $59 million.

The bonus stems from Armstrong’s deal with Verizon (VZ) — a long-term contract that will keep him employed with the telecom giant — which stipulates the AOL CEO will get stock equal to 1.5% of AOL’s (AOL) market value once and if the sale is finalized. AOL’s market value was around $3.9 billion when the deal was announced, which means Armstrong would get about $59 million in stock options. Half of them would vest three years after the deal closes, while the remaining half vest after four years.

Armstrong, who collected about $6.9 million in compensation from AOL last year, has a 6.7% ownership stake in that company, which would be worth about $84 million based on current market value.

Tuesday’s filing also confirmed previous reports that Verizon had considered pursuing a joint venture that would have given Verizon access to AOL’s advertising technology business, which is seen as a key component to the deal.

[Re/code]