UNITED STATES SECURITIES AND EXCHANGE COMMISSION Wa by iyj18952

VIEWS: 50 PAGES: 210

More Info
									                                              UNITED STATES
                                  SECURITIES AND EXCHANGE COMMISSION
                                                                   Washington, D.C. 20549

                                                                        FORM 10-K
(Mark One)
⌧   ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
    EXCHANGE ACT OF 1934
                            For the fiscal year ended December 31, 2005
                                                 OR
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
    EXCHANGE ACT OF 1934
                                                           Commission file number: 000-50726

                                                                Google Inc.
                                                         (Exact name of registrant as specified in its charter)

                               Delaware                                                                              77-0493581
                       (State or other jurisdiction of                                                               (I.R.S. Employer
                      incorporation or organization)                                                              Identification Number)
                                                                1600 Amphitheatre Parkway
                                                                 Mountain View, CA 94043
                                                               (Address of principal executive offices)

                                                                         (650) 253-4000
                                                     (Registrant’s telephone number, including area code)


                                            Securities registered pursuant to Section 12(b) of the Act:
                                                                       None
                                            Securities registered pursuant to Section 12(g) of the Act:
                                                   Class A Common Stock, $0.001 par value
                                                   Class B Common Stock, $0.001 par value
                                                                            (Title of class)
    Indicate by check mark if the Registrant is a well-known seasoned issuer as defined in Rule 405 of the Securities Act.
Yes   ⌧  No
      Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.
Yes       No   ⌧
     Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes        No            ⌧
      Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will
not be contained, to the best of the Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in
Part III of this Form 10-K or any amendment to this Form 10-K.
     Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See
definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):
                                Large accelerated filer          ⌧     Accelerated filer             Non-accelerated filer
      Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes       No   ⌧
      At June 30, 2005, the last business day of the Registrant’s most recently completed second fiscal quarter, there were
177,033,940 shares of the Registrant’s Class A common stock and 101,678,686 shares of the Registrant’s Class B common stock
outstanding, and the aggregate market value of such shares held by non-affiliates of the Registrant (based upon the closing sale price
of such shares on The Nasdaq National Market on June 30, 2005) was approximately $53,030,610,961. Shares of the Registrant’s
Class A common stock and Class B common stock held by each executive officer and director and by each entity or person that, to
     the Registrant’s knowledge, owned 5% or more of the Registrant’s outstanding common stock as of June 30, 2005 have been
excluded in that such persons may be deemed to be affiliates of the Registrant. This determination of affiliate status is not necessarily
a conclusive determination for other purposes.
     At February 28, 2006, there were 207,095,945 shares of the Registrant’s Class A common stock outstanding and 90,141,280
shares of the Registrant’s Class B common stock outstanding.

                                       DOCUMENTS INCORPORATED BY REFERENCE
     Portions of the Registrant’s Proxy Statement for the 2006 Annual Meeting of Stockholders are incorporated herein by reference
in Part III of this Annual Report on Form 10-K to the extent stated herein.
                                                        Form 10-K
                                       For the Fiscal Year Ended December 31, 2005
                                                          INDEX

                                                  TABLE OF CONTENTS
                                                                                                                         Page
PART I
Item 1.    Business                                                                                                        1
           Executive Officers of the Registrant                                                                           18
Item 1A.   Risk Factors                                                                                                   20
Item 1B.   Unresolved Staff Comments                                                                                      38
Item 2.    Properties                                                                                                     38
Item 3.    Legal Proceedings                                                                                              38
Item 4.    Submission of Matters to a Vote of Security Holders                                                            38
PART II
Item 5.    Market for The Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Services 39
Item 6.    Selected Financial Data                                                                                         41
Item 7.    Management’s Discussion and Analysis of Financial Condition and Results of Operations                           43
Item 7A.   Quantitative and Qualitative Disclosures About Market Risk                                                      69
Item 8.    Financial Statements and Supplementary Data                                                                     70
Item 9.    Changes in and Disagreements with Accountants on Accounting and Financial Disclosure                           101
Item 9A.   Controls and Procedures                                                                                        101
Item 9B.   Other Information                                                                                              101
PART III
Item 10.   Directors and Executive Officers of the Registrant                                                            102
Item 11.   Executive Compensation                                                                                        102
Item 12.   Security Ownership of Certain Beneficial Owners and Management                                                102
Item 13.   Certain Relationships and Related Transactions                                                                102
Item 14.   Principal Accountant Fees and Services                                                                        102
PART IV
Item 15.   Exhibits and Financial Statement Schedules                                                                    103
                                                                 i
                                                                 PART I

ITEM 1.     BUSINESS
Overview
     Google is a global technology leader focused on improving the ways people connect with information. Our innovations in web
search and advertising have made our web site a top Internet destination and our brand one of the most recognized in the world. We
maintain the largest, most comprehensive index of web sites and other content, and we make this information freely available to
anyone with an Internet connection. Our automated search technology helps people obtain nearly instant access to relevant
information from our vast online index.

      We generate revenue primarily by delivering relevant, cost-effective online advertising. Businesses use our AdWords program
to promote their products and services with targeted advertising. In addition, the thousands of third-party web sites that comprise the
Google Network use our AdSense program to deliver relevant ads that generate revenue and enhance the user experience.

      We were incorporated in California in September 1998 and reincorporated in Delaware in August 2003. Our headquarters are
located at 1600 Amphitheatre Parkway, Mountain View, California 94043, and our telephone number is (650) 253-4000. Our web site
is located at www.google.com; however, the information in, or that can be accessed through, our web site is not part of this report.
Our annual reports on Form 10-K, quarterly reports on Form 10-Q and amendments to such reports are available, free of charge, on
the “Investor Relations” section of our web site as soon as reasonably practicable after we electronically file such material with the
Securities and Exchange Commission.

Our Mission
       Our mission is to organize the world’s information and make it universally accessible and useful. We believe that the most
effective, and ultimately the most profitable, way to accomplish our mission is to put the needs of our users first. We have found that
offering a high-quality user experience leads to increased traffic and strong word-of-mouth promotion. Our dedication to putting users
first is reflected in three key commitments we have made to our users:
     •    We will do our best to provide the most relevant and useful search results possible, independent of financial incentives. Our
          search results will be objective and we will not accept payment for inclusion or ranking in them.
     •    We will do our best to provide the most relevant and useful advertising. Advertisements should not be an annoying
          interruption. If any element on a search result page is influenced by payment to us, we will make it clear to our users.
     •    We will never stop working to improve our user experience, our search technology and other important areas of information
          organization.

      We believe that our user focus is the foundation of our success to date. We also believe that this focus is critical for the creation
of long-term value. We do not intend to compromise our user focus for short-term economic gain.

How We Provide Value to Users, Advertisers, and Content Owners and Producers
  Our Users
     We serve our users by developing products that enable people to more quickly and easily find, create and organize information.
We place a premium on products that matter to many people and have the potential to improve their lives, especially in areas in which
our expertise enables us to excel.
                                                                     1
     Search is one such area. People use search frequently and the results are often of great importance to them. For example, people
search for information on medical conditions, purchase decisions, technical questions, long-lost friends and other topics about which
they care a great deal. Delivering quality search results requires significant computing power, advanced software and complex
processes—areas in which we have expertise and a high level of focus.

      Communication is another such area. People increasingly rely on the Internet to communicate with each other. Gmail, our email
service (available in a limited test), offers extensive free storage for each user, along with email search capabilities and relevant
advertising. Delivering an improved user experience in Gmail has similar computing and software requirements as our search service.

     Some of the key benefits we offer to users include:

      Relevant and Useful Information. Our technologies sort through a vast and growing amount of information to deliver relevant
and useful search results in response to user queries. This is an area of continual development for us. When we started the company
seven years ago, our web index contained approximately 30 million documents. We now index billions of web pages. We are also
constantly developing new functionality. We’ve made recent enhancements to our local search offering, which now includes Google
Maps and we’ve also enhanced Google Desktop Search, which now supports additional file formats and browser and email clients. In
addition, we also provide convenient links to specialized information, such as weather and movie information.

     Objectivity. We believe it is very important that the results users get from Google are produced with only their interests in mind.
We do not accept money for search result ranking or inclusion. We do accept fees for advertising, but it does not influence how we
generate our search results. The advertising is clearly marked and separated. This is similar to a newspaper, where the articles are
independent of the advertising. Some of our competitors charge web sites for inclusion in their indices or for more frequent updating
of pages. Inclusion and frequent updating in our index are open to all sites free of charge. We apply these principles to each of our
products and services. We believe it is important for users to have access to the best available information and research, not just the
information that someone pays for them to see.

      Global Access. We strive to provide Google to everyone in the world. Users from around the world visit our destination sites at
Google.com and our 136 other international domains, such as Google.ba, Google.dm, Google.nr, Google.co.jp and Google.ca. The
Google interface is available in 116 languages. Through Google News, we offer an automated collection of frequently updated news
stories in 11 languages tailored to 34 international audiences. Picasa, our image management product, is available in 38 languages and
133 domains. We also offer automatic translation of content between various languages, and provide localized versions of Google in
many developing countries. Although we do not currently recover our costs in these countries, we believe providing our products and
services is an important social good and a valuable long-term business investment.

      Ease of Use. We have always believed that the most useful and powerful search technology hides its complexity from users and
provides them with a simple, intuitive way to get the information they want. We have devoted significant efforts to create a
streamlined and easy-to-use interface based on a clean search box set prominently on a page free of commercial clutter. We have also
created many features that enhance the user experience. Our products present these features when we believe they will be most useful,
rather than promoting them unnecessarily. For example, Google WebSearch offers maps when a search appears to be for a geographic
location.

      Pertinent, Useful Commercial Information. The search for information often involves an interest in commercial information—
researching a purchase, comparing products and services or actively shopping. We help people find commercial information through
our search services and advertising products. Among our search services, we offer Froogle, a search engine for finding products for
sale online. We also present
                                                                   2
advertisements that are relevant to the information people seek. Our technology automatically rewards ads that users prefer and
removes ads that users do not find helpful.

      Multiple Access Platforms. Mobile phones are a fundamental development platform for us. Many people around the world have
their first experience of the Internet—and Google—on their mobile phones. We have continued to invest in improving mobile search
and recently introduced the beta of Google Local for Mobile—a downloadable application for mobile phones that combines maps,
directions, and satellite imagery to let people find relevant information when and where they need it, even if they are not close to a
computer.

  Our Advertisers
     As more people spend additional time and money online, advertisers are increasingly turning to the Internet to market their
products and services to consumers and business users. For these advertisers, we offer Google AdWords, an auction-based advertising
program that enables them to deliver relevant ads targeted to search queries or web content. Our AdWords program provides
advertisers with a cost-effective way to deliver ads to customers across Google sites and through the Google Network. The advertisers
using AdWords range from small businesses targeting local customers to many of the world’s largest global enterprises. AdWords is
accessible to advertisers in 41 different interface languages.

     The AdWords program offers advertisers the following benefits:

      Strong Return on Investment. Many advertising dollars are spent delivering messages in an untargeted fashion, and payment for
these advertisements is not tied to performance. With Google AdWords, businesses can achieve greater cost-effectiveness with their
marketing budgets for two reasons—AdWords shows ads only to people seeking information related to what the advertisers are
selling, and advertisers choose how much they pay when a user clicks on their ad (though they are subject to a minimum price per
click). Because we offer a simple ad format, advertisers can avoid incurring significant design, copywriting or other production costs
associated with creating ads. As a result, even small advertisers find AdWords cost-effective for connecting with potential customers.
In addition, advertisers can easily create many different ads, increasing the likelihood that an ad is exactly suited to a user’s search.
Users can find advertisements for exactly what they are seeking, and advertisers can find users who want exactly what they are
offering. When the interests of users and advertisers align, both are well-served.

       Effective Branding. We now also offer Site Targeting, a service that allows advertisers to target specific web sites that have
signed up to participate in AdSense—our network of content sites—with text, image, and Flash ads, so that they can more effectively
reach customers. In addition to targeting sites by content, advertisers targeting U.S.-based users can choose placements on sites based
on their user demographic attributes. To protect user privacy, we use only third-party opt-in panel data to map the demographics of
sites in our networks. Site Targeting is an auction-based system where bidding is based on a maximum cost per impression, and Site-
Targeted ads compete with keyword-targeted ads in the same auction.

      Access to the Google Search and Content Network. We serve AdWords ads on Google properties, our syndicated search
partners’ web sites, and the thousands of third-party web sites that make up the Google Content Network. We are thus able to offer
extensive search and content inventory on which advertisers can advertise. Apart from keyword-based Search Targeting and Site
Targeting, we also offer advertisers an effective contextual advertising option—Content Targeting—that displays their ads on relevant
content pages across our network of partner sites and products. As a result, AdWords advertisers can target users on Google
properties and on search and content sites across the web. This gives advertisers increased exposure to people who are likely to be
interested in their offerings. The Google Network significantly enhances our ability to attract interested advertisers.
                                                                    3
      Broader Range of Media. Our experiments with targeted ads in new media also open up new inventory options to AdWords
advertisers. With the acquisition of dMarc in February 2006, Google plans to unite our network of advertisers with dMarc’s
innovative radio ad distribution product. In addition, we have begun testing ad placements in mobile search in Japan. In each of these
cases, our goal is to provide targeted advertisements with measurable performance. We are also currently testing ad placements in
select magazines and newspapers and, among other things, experimenting with ways of streamlining the process of placing print ads.

      Precise Campaign Control. Google AdWords gives advertisers hands-on control over most elements of their ad campaigns.
Advertisers can specify the relevant search or content topics for each of their ads. Advertisers can also manage expenditures by
setting a maximum daily budget and determining how much they are willing to pay whenever a user clicks on an ad (or views an ad,
in the case of Site Targeting). Our online tracking tools and reports give advertisers timely updates on how well their campaigns are
performing and enable them to make changes or refinements quickly. Advertisers also can target their campaigns by city, country,
regional area or language.

      Effective Campaign Tools. Google has developed several new tools to help advertisers more easily manage their campaigns. For
example, the AdWords API allows large-scale AdWords advertisers to communicate directly with our ad servers to modify keywords,
bids and ads themselves. We also recently launched the beta version of AdWords Editor, enabling easy and rapid modification of ad
campaigns through a client application rather than through the conventional AdWords web interface.

      Global Support. We provide customer service to our advertiser base through our global support organization as well as through
32 field sales offices in 19 countries. AdWords is available on a self-service basis with email and real-time chat support. At certain
spending levels and through certain signup channels, phone support is also available. Advertisers with more extensive needs and
advertising budgets can request strategic support services, which include an account team of experienced professionals to help them
set up, manage and optimize their campaigns.

  Web Sites, Content Owners and Producers
      Google indexes a huge amount of information to provide relevant results to our users. Our users do searches and are directed to
relevant web sites. Google provides a significant amount of traffic to web sites with which we have no business relationship. We
syndicate our search services to properties across the web, including some of the most popular portal destinations. These services,
including web, news, image, and local search, fit easily into an existing user experience and enable our partners to enrich their
offerings with services that users demand. Many web sites are able to generate revenue from search traffic that we direct to them, but
others have difficulty doing so. We created Google AdSense to address this opportunity. We are enthusiastic about helping sites
monetize their content, thereby facilitating the creation of better content to search. If there is better content on the web, people are
likely to do more searches, and we expect that will be good for our business and for users. Our Google AdSense program enables the
web sites—large and small—that make up the Google Network to deliver AdWords ads that are relevant to the search results or
content on their pages. We share most of the revenue generated from ads shown by a member of the Google Network with that
member—creating an additional revenue stream for them. The key benefits we offer to content owners and web sites in the Google
Network include:

      Access to Advertisers. Many small web site companies and content producers do not have the time or resources to develop
effective programs for generating revenue from online advertising. Even larger sites, with dedicated sales teams, may find it difficult
to generate revenue from pages with specialized content. We believe that Google AdSense enables Google Network members to
generate revenue from their sites effectively and efficiently. Google AdSense promotes effective revenue generation by providing
Google Network members immediate access to Google’s base of advertisers and their broad collection of ads. Our technology
automatically starts delivering ads on a web site as soon as the site joins the Google Network. Because the ads are related to
                                                                    4
what the web site’s visitors are looking for on the site, AdSense provides web sites with a way to both monetize and enhance their
sites. The automated nature of our advertising programs promotes efficient revenue generation. Our online registration systems enable
web sites to easily join the Google Network, our ad serving technology allows automated delivery of ads for posting on the member’s
site, and the program requires virtually no maintenance once the member site is up and running. The Google Network member
determines the placement of the ads on its web site, and controls and directs the nature of ad content.

      Improved User Satisfaction. Google has a vested interest in understanding and catering to user needs. In their quest for revenue,
many Internet companies have cluttered their web sites with intrusive or untargeted advertising that may distract or confuse users and
may undermine users’ ability to find the information they want. Some web sites have adopted practices we consider to be abusive,
including pop-up ads or ads that take over web pages. We believe these tactics can cause dissatisfaction with Internet advertising and
reduce use of the Internet overall. Our AdSense program extends our commitment to improving the overall web experience for users
by enabling web sites to display AdWords ads in a fashion that we believe people find useful rather than disruptive. As part of our
commitment to user satisfaction, Google also offers web analytics for free, through Google Analytics. Using Google Analytics,
website owners can deepen their understanding of how their users find, navigate and click on advertisements on their web sites, and
use that understanding to improve their web sites. If AdWords ads point to useful, relevant websites, users are more likely to click on
their ads, which is beneficial to both our advertisers and us.

      Better Storage, Management, Access, and Visibility. Google has developed new storage, management, and access technologies
to allow content owners and producers to distribute and, if they wish, monetize more types of online and offline content. We believe
that only a small fraction of the world’s information and content is easily and effectively stored and searchable, and that bringing non-
traditional, online or offline content into Google’s index will encourage the preservation and continued creation of this content.
Google Scholar, Google Book Search, and Google Video enable more print and video content to be made easily accessible (and
monetizable) online, while Google Base allows owners and creators to put online even non-traditional forms of structured
information. In addition, Google SiteMaps, currently in beta, provides a free, easy way for webmasters to submit information about
their sites—such as URLs and site navigation—to Google to make their content more visible and easily found through organic
Google web search results.

      Syndicated Search. We provide our search technology to partners of all sizes, allowing Google search service to be offered
through these partners’ properties. For commercial partners, we provide an extensive range of customization options. We also provide
free standard Web Search and Site Search to other partners through Google Free.

Products and Services
      Our product development philosophy is centered on rapid and continuous innovation, with frequent releases of early stage
products that we seek to improve with every iteration. We often make products available early in their development stages by posting
them on Google Labs, at test locations online or directly on Google.com. If our users find a product useful, we promote it to “beta”
status for additional testing. Our beta testing periods often last a year or more. Once we are satisfied that a product is of high quality
and utility, we remove the beta label and make it a core Google product. Some of our product offerings are in their initial test phases
and are currently available only to limited audiences. Examples include Gmail, the AdWords Editor, and Google Analytics. Our
current principal products and services are described below.

  Google.com
     We are focused on building products and services that benefit our users and enable them to find relevant information quickly
and easily. We offer our services and products, free of charge, through Google.com and many of them at our international sites.
                                                                    5
     Google WebSearch. In addition to providing easy access to billions of web pages, we have integrated special features into
Google WebSearch to help people find exactly what they are looking for on the web. The Google.com search experience also
includes:
     •   Advanced Search Functionality—enables users to construct more complex queries, for example by using Boolean logic or
         restricting results to languages, countries or web sites.
     •   Spell Checker—suggests alternate search terms when a search appears to contain misspellings or typing errors.
     •   Web Page Translation—automatically translates web pages published in French, German, Italian, Portuguese and Spanish
         into English, or vice versa.
     •   Stock Quotes—provides links to stock and mutual fund information.
     •   Street Maps—provides links to street maps and directions.
     •   Calculator—solves math problems involving basic arithmetic, complicated math or physical constants and converts between
         units of measure.
     •   Currency Conversion—provides conversions among international currencies.
     •   Definitions—provides definitions for words or phrases based on content we have indexed.
     •   PhoneBook—provides U.S. street addresses and phone numbers for U.S. businesses and residences.
     •   Search by Number—enables people to conduct quick searches by entering FedEx, UPS and USPS package tracking
         numbers, vehicle ID numbers, product codes, telephone area codes, patent numbers, FAA airplane registration numbers and
         FCC equipment ID numbers.
     •   Travel Information—enables people to search for airline flights and see delays and weather conditions at U.S. airports.
     •   Cached Links—provides snapshots of web pages taken when the pages were indexed, enabling web users to view web pages
         that are no longer available.
     •   Movie Information—enables people to quickly and easily find movie reviews and showtimes for U.S. theatres.
     •   Music Information—enables people to find information about artists, songs, albums and places to legally purchase music.
     •   Weather—provides weather conditions and a four-day forecast for U.S. locations
     •   News, Product, Local, Image, Book and Groups Information—when relevant, we also display results from Google News,
         Froogle, Google Local, Google Image Search, Google Book Search and Google Groups.
     •   Q&A—provides quick answers to fact-based questions, with links to information sources.

      Google Image Search. Google Image Search is our searchable index of images found across the web. To extend the usefulness
of Google Image Search, we offer advanced features, such as searching by image size, format and coloration and restricting searches
to specific web sites or domains.

      Google Groups. The original Google Groups enabled easy participation in Internet discussion groups by providing users with
tools to search, read and browse these groups and to post messages of their own. Google Groups now contains more than 1 billion
messages from Usenet Internet discussion groups dating back to 1981. The discussions in these groups cover a broad range of
discourse and provide a comprehensive look at evolving viewpoints, debate and advice on many subjects.
                                                                  6
      Google News. Google News gathers information from thousands of news sources worldwide and presents news stories in a
searchable format within minutes of their publication on the web. The leading stories are presented as headlines on the user-
customizable Google News home page. These headlines are selected for display entirely by a computer algorithm, without regard to
political viewpoint or ideology. Google News uses an automated process to pull together related headlines, which enables people to
see many different viewpoints on the same story. Because topics are updated continuously throughout the day, people generally see
new stories each time they check Google News. We currently provide our Google News service in 11 languages, tailored to 34
international audiences. Google News is also available on mobile devices through Google News for Mobile.

      Froogle. Froogle is Google’s shopping search engine. Using Google search technology, Froogle can help shoppers find the
items they want, both online and in nearby stores. Users can sort results by price or store location, see product and merchant reviews,
specify a desired price range, and view photos. Froogle accepts data feeds directly from merchants to ensure that product information
is up-to-date and accurate. Because we do not charge merchants for inclusion in Froogle, users can browse categories or conduct
searches with confidence that the results we provide are relevant and unbiased. As with many Google products, Froogle displays
relevant advertising separately from search results.

      Google Local. Google Local, which merged with Google Maps in 2005, enables users to find driving directions and relevant
local businesses near a city, postal code, or specific address. This service combines telephone directory listings with information
found on web pages, and plots their locations on interactive user-friendly maps. We display relevant targeted ads for searches done
through Google Local.

     Google Desktop. Google Desktop enables users to perform a full text search on the contents of their own computer —including
email, files, instant messenger chats, and web browser history — without manual organization. Users can use this service to view web
pages they have visited even when they are not online. Google Desktop now includes an enhanced, customizable Sidebar for modules
such as weather, stock tickers, and news.

  Web and content search
     Google Scholar. Google Scholar provides a simple way to do a broad search for relevant scholarly literature including peer-
reviewed papers, theses, books, abstracts, and articles. Content in Google Scholar is taken from academic publishers, professional
societies, preprint repositories, universities, and other scholarly organizations.

     Google Book Search. Google Book Search brings print information online that had previously not been available to web
searchers. Under this program, we enable a number of publishers to host their content and show their publications at the top of our
search results. We also work closely with several libraries to digitize all or part of their collections to create a full-text searchable
online card catalog. Google Book Search links bring users to pages containing bibliographic information and several sentences of the
search term in context, sample book pages, or full text, depending on author and publisher permissions and book copyright status. On
Google Book Search pages, we also provide links to book sellers that may offer the full versions of these publications for sale, and we
show content-targeted ads that are served through the Google AdSense program.

     Google Base. Google Base allows users to upload, store and describe online or offline content for free. Google stores and
indexes this information and makes it easily searchable and accessible. We believe Google Base will help preserve information that
might previously have only been transient, and will extend the power of the web and search to content that was previously not part of
the online world.

     Google Video. Google Video allows the exchange of video content between consumers and producers. Any user can upload a
video to our service, and consumers can buy, rent or download for free a wide range of video content, including popular television
shows, independent films and historic and educational videos.
                                                                    7
      Google Personalized Search. Personalized Search provides search results for web, images, and music that are relevant to users’
interests based on what they have searched for in the past. Users can also view and manage their history of past searches and the
results they have clicked on and create bookmarks with labels and notes.

     Google Personalized Homepage. Google Personalized Homepage brings together several Google properties such as Google
News and Gmail on a user-customizable page, and is part of our efforts to make personalized information more easily accessible and
useful.

     Google Alerts. Google Alerts are email updates of the latest relevant Google results based on the user’s choice of query or topic.
Typical uses include monitoring a developing news story, keeping current on a competitor or industry, getting the latest on a celebrity
or event, or keeping tabs on a favorite sports team. Google Alerts is now available in eight languages.

      Google Web Directory. Google Web Directory enables people to browse and search through web sites that have been organized
into categories. Our directory combines Google’s search technology with the categorization developed by the Open Directory Project,
a third-party human edited directory of the Internet, and has content in over 70 languages.

     Google Music Search. Google Music Search offers users a quick way to search for a wide range of U.S. music information,
including artists, albums, song titles, links to music reviews, and places to legally purchase music.

  Communication and collaboration
      Gmail. Gmail is a free email service that offers over 2GB of free storage and incorporates Google search technology to help
users find their email messages. Gmail contains no pop-up ads or untargeted banners, but rather contains only relevant text ads and
links.

    orkut. orkut enables users to search and connect to other users through networks of trusted friends. Users can create, join, or
manage online communities, personal mailboxes, photos, and a profile.

      Blogger. Blogger is a web-based publishing tool that gives people the ability to publish to the web instantly using weblogs, or
“blogs.” Blogs are web pages usually made up of short, informal, frequently updated posts that are arranged chronologically. Blogs
can facilitate communications among small groups or to a worldwide audience in a way that is simpler and easier to follow than
traditional email or discussion forums. Blogger now features improved spam protection and is available in nine languages.

  Downloadable applications
     Google Toolbar. The Google Toolbar makes our search technology constantly and easily available as people browse the web.
The Google Toolbar is available as a free, fast download and improves people’s web experience through several innovative features,
including:
     •   Pop-up Blocker—blocks pop-up advertising while people use the web.
     •   PageRank Indicator—displays Google’s ranking of any page on the web.
     •   AutoFill—completes web forms with information saved securely on a user’s own computer.
     •   Highlight—highlights search terms where they appear on a web page, with each term marked in a different color.
     •   Word Find—finds search terms wherever they appear on a web page.
     •   AutoLink— turns street addresses into links to online maps.
     •   WordTranslator—translates English words into other languages.
                                                                   8
     •   SpellCheck—checks spelling when typing in web forms.
     •   Custom buttons—allow users to search their favorite websites, stay updated on their favorite feeds, and more. A Custom
         Button API is also available for developers.
     •   Link sharing— allows users to share web pages easily through Gmail, SMS, or blogs.

      Google Earth. Google Earth enables PC and Macintosh users to see and explore the world from their desktop. Users can fly
virtually to a specific location and learn about that area through detailed satellite and aerial images, 3D topography, street maps and
millions of data points describing the location of businesses, schools, parks, and other points of interest around the globe. Google
Earth also provides access to Local search from the Google web index in a highly-interactive 3D environment.

      Picasa. Picasa is a downloadable client application that helps users find, edit and share all the pictures on their computers. It
streamlines the digital photography experience, allowing pictures to be easily transferred from digital cameras, organized,
manipulated, and shared over email. Picasa’s “hello” service also lets users share pictures with others and chat about them in real-
time, or post them to blogs. Picasa integrates with other Google services—including Gmail, Blogger, and Froogle—and is available in
38 languages on 133 domains.

      Google Pack. Google Pack is a free collection of software from Google and other companies. It includes the Google Updater, a
tool that intelligently downloads, installs, and maintains all the software in the Google Pack.

  Mobile
      Google Mobile. Google Mobile offers people the ability to search and view both the “mobile web,” consisting of pages created
specifically for wireless devices, and the entire Google index, including popular products like Image Search and Froogle. Google
Mobile works on a wide range of devices that support WML, XHTML, WAP, WAP 2.0, i-mode or j-sky mobile Internet protocols. In
addition, users can access a variety of information using Google SMS by typing a query to the Google shortcode, and check their
email using Gmail Mobile. Google Mobile is available through many wireless and mobile phone services worldwide, including the
BlackBerry.

     Google Local for Mobile. Google Local for Mobile is a downloadable Java client application that enables users to view maps
and satellite imagery, find local businesses and obtain driving directions on mobile devices. Local for Mobile offers many of the same
functions as Google Local—such as draggable maps combined with satellite imagery—for free, and is supported on over 40 mobile
devices, including the BlackBerry.

  Labs
     Google Labs is our test bed for our engineers and for adventurous Google users. On Google Labs, we post product prototypes
and solicit feedback on how the technology could be used or improved. Current Google Labs examples include:
     •   Froogle Wireless—gives people the ability to search for product information from their mobile phones and other wireless
         devices.
     •   Google Suggest—guesses what you’re typing and offers suggestions in real time. This is similar to Google’s “Did you
         mean?” feature that offers alternative spellings for your query after you search, except that it works in real time.
     •   Google Transit—enables users to plan trips using public transportation (currently in Portland, Oregon only).
     •   Google Ridefinder—enables users to find a taxi, limousine or shuttle using real time position of vehicles.
                                                                    9
     •   Google Extensions for Firefox—includes Safe Browsing, Blogger Web Comments, and Google Send to Phone.
     •   Froogle Mobile US and UK—enables users to search for product information from their mobile phones and other wireless
         devices.
     •   Google Compute—allows users to donate computer idle time to scientific research.
     •   Google Reader—a web-based feed reader with enhanced support for photo feeds and podcasts that aims to make
         information more relevant and useful to users by combining Google functionality with personalized content.
     •   Google Web Accelerator—a downloadable client application that uses Google’s global computer network to enhance user
         web experience by enabling faster loading of web pages.

  Google AdWords
      Google AdWords is our global advertising program which enables advertisers to present ads to people when those people are
looking for information related to what the advertiser has to offer. Advertisers use our automated tools, often with little or no
assistance from us, to create text-based ads, bid on the keywords that will trigger the display of their ads and set daily spending
budgets. AdWords features an automated, low-cost online signup process that enables advertisers to implement ad campaigns that go
live on Google properties and the Google Network very quickly. The total sign-up cost for becoming an AdWords advertiser is only
$5.00, and AdWords ads cost as little as $0.01 per click.

      Ads are ranked for display in AdWords based on a combination of the maximum cost per click (CPC) set by the advertiser and
click-through rates and other factors used to determine the relevance of the ads. This favors the ads that are most relevant to users,
improving the experience for the person looking for information and for the advertiser who is generating relevant ads. AdWords has
many features that make it easy to set up and manage ad campaigns:
     •   Campaign management. Advertisers can target multiple ads to a given keyword and easily track individual ad performance
         to see which ads are the most effective. The campaign management tools built into AdWords enable advertisers to quickly
         shift their budgets to ads that deliver the best results.
     •   Keyword and site targeting. Businesses can deliver targeted ads based on specific search terms (keywords) entered by users
         or found in the content on a web page. We also offer tools that generate synonyms and useful phrases to use as keywords or
         ad text. Refining keywords and ad text can improve ad click-through rates and the likelihood of a user becoming the
         advertiser’s customer. Businesses can also deliver targeted text, animated and static images, and Flash ads to selected sites
         on the Google AdSense network on a cost-per-impression basis.
     •   Traffic estimator. This tool estimates the number of searches and potential costs related to advertising on a particular
         keyword or set of keywords. These estimates can help advertisers optimize their campaigns.
     •   Quality-based bidding. Advertisers’ keywords are assigned dynamic minimum bids based on their Quality Score—the
         higher the Quality Score, the lower the minimum bid. This rewards advertisers with relevant keywords and ads, and gives
         advertisers more control to run ads on keywords that they find are important.
     •   Budgeted delivery. Advertisers can set daily budgets for their campaigns and control the timing for delivery of their ads.
     •   Performance reports. We provide continuous, timely reporting of the effectiveness of each ad campaign.
     •   Multiple payment options. Depending on geography, we accept bank and wire transfers, direct debit, and local debit cards
         carrying the Visa and MasterCard logos. We also accept payment through
                                                                   10
         international credit cards. For selected advertisers, we offer several options for credit terms and monthly invoicing. We
         accept payments in over 40 currencies.
     •   AdWords Discounter. This feature gives advertisers the freedom to increase their maximum CPCs because it automatically
         adjusts pricing so that they never pay more than one cent over the next highest bid. The AdWords discounter is described in
         detail below under the heading “Technology—Advertising Technology—Google AdWords Auction System.”
     •   Conversion tracking. Conversion tracking is a free tool that is integrated into AdWords reports and measures the
         conversions of an advertiser’s campaigns, enabling a better understanding of the overall return on investment generated for
         the advertiser by the AdWords program.

     For larger advertisers, we offer additional services that help to maximize returns on their Internet marketing investments and
improve their ability to run large, dynamic campaigns. These include:
     •   Creative maximization. Our AdWords specialists help advertisers select relevant keywords and create more effective ads.
         This can improve advertisers’ ability to target customers and to increase the click-through rates and conversion rates for
         their ads.
     •   Vertical market experts. Specialists with experience in particular industries offer guidance on how to most effectively target
         potential customers.
     •   Bulk posting. We assist businesses in launching and managing large ad campaigns with hundreds or even thousands of
         targeted keywords.
     •   Dedicated client service representatives. These staff members continuously look for ways to better structure their clients’
         campaigns and to address the challenges large advertisers face.
     •   AdWords API and Commercial Developer Program. For large advertisers as well as third parties, Google’s free AdWords
         API service lets developers engineer computer programs that interact directly with the AdWords system. With such
         applications, advertisers and third parties can more efficiently—and creatively—manage their large AdWords accounts and
         campaigns. The AdWords Commercial Developer Program also enables our third-party developer ecosystem to continue
         designing and delivering innovative business applications based on the AdWords platform and distribution channel.

      In addition, we are experimenting with new media, such as print and mobile search, to offer advertisers even more ad placement
inventory. AdWords Editor, our AdWords campaign management client, and Google Analytics, our free web analytics tool designed
to help web site operators understand how users find, navigate, and convert on their sites, are both currently in limited availability.

  Google AdSense
     Our Google AdSense program enables the web sites in the Google Network to serve targeted ads from AdWords advertisers.
Targeting can be based on content, search, site and demagraphics. We share the revenue generated from ads shown by a member of
the Google Network with that member. Most of the web sites that make up the Google Network sign up with us online, under
agreements with no required term. We also engage in direct selling efforts to convince web sites with significant traffic to join the
Google Network, under agreements that vary in duration. For our network members, we offer:

      Google AdSense for search. For Internet companies who want to target search audiences, we offer Google AdSense for search.
Web sites use AdSense for search to generate additional revenue by serving relevant AdWords ads targeted to search results. Because
we also offer to license our web search technology along with Google AdSense for search, companies without their own search
service can offer Google WebSearch to improve the usefulness of their web sites for their users while increasing their revenue. We
offer a hosted version of AdSense for search to web sites that sign up with us online. We offer a more customizable premium offering
to websites with significant traffic.
                                                                  11
     Google AdSense for content. Google AdSense for content enables web sites to generate revenue from advertising by serving
relevant AdWords ads targeted to web content. Our automated technology analyzes the meaning of web content and serves relevant
advertising, usually in a fraction of a second. There is no charge for web sites to participate in our AdSense for content program.
Using our automated sign-up process, web sites can quickly display AdWords ads on their sites. We share the majority of the
revenues generated from these ads with the Google Network members that display the ads. For advertisers, this enables them to
extend their reach to other websites; for publishers, it gives them access to a large base of advertisers specifically targeted for their
content; and for users, it offers ads related to the content of the page. For web sites with higher traffic, we also provide customization
services. Important AdSense for content features include:
     •   Competitive ad filters. Web sites can block competitive ads, or other ads they want to keep off their site, simply by telling us
         which URLs to block.
     •   Reports. Publishers can view customizable reports about their AdSense performance for a specific day or date range, on an
         aggregate level or broken down by publisher defined parameters. Reporting data viewable includes total number of page
         impressions, ad unit impressions, ad clicks, clickthrough rate (CTR), cost per thousand impressions (effective CPM), and
         earnings.
     •   Sensitive content filters. At times, certain ads may be inappropriate for some pages. For example, Google automatically
         filters out ads that would be inappropriate on a news page about a catastrophic event.
     •   Choose default ads. In the unlikely event that Google is unable to serve targeted ads on a page, we offer web sites the option
         of displaying a default ad of their choice. This helps ensure that advertising space is always being used as effectively as
         possible.
     •   Ads in multiple formats. Web sites can show graphical ads in Flash and animated image formats precisely targeted to the
         content of a web page. Running a combination of image and text ads expands the available ad inventory for a web site, and
         offers the potential for increased revenue.

      Google AdSense for domains and feeds. Google AdSense for domains allows owners of undeveloped domains which receive
traffic from users typing generic terms into browsers or search to generate revenue from relevant advertising. AdSense for feeds is a
free program that allows publishers to monetize their feeds—user-subscribable content streams containing structured data such as
stock and financial information, web log posts, and weather reports—through text ads targeted to the content of the feed. Like
AdSense for search or content, Google shares the majority of the advertising revenue from AdSense for domains and AdSense for
feeds with the domain owner or feed publisher.

  Google Enterprise
      We provide our search technology for use within enterprises through the Google Search Appliance and Google Mini. These
search appliances are a complete software and hardware solution that companies can easily implement to extend Google’s search
performance to their internal or external information. They leverage our search technology to identify the most relevant pages on
public web sites and across the corporate network, making it easy for people to find the information they need. The Google Search
Appliance and Google Mini offer several useful features, including automated spell-checking, cached pages, dynamic snippets,
indented results and automatic conversion of Microsoft Office and PDF files to HTML. The Google Search Appliance is available in
three models: the GB-1001, for mid-sized companies; the GB-5005, for dedicated, high-priority search services such as customer-
facing web sites and company-wide intranet applications; and the GB-8008, for centralized deployments supporting global business
units. Pricing for the Google Search Appliance starts at $30,000. The Google Mini is targeted at small- and medium-sized businesses
to provide search on public web sites and intranets. It is sold online through the Google Store, and pricing starts at $2,995.

    For companies, universities and government agencies, Google also offers the Google Toolbar for Enterprise and Google
Desktop for Enterprise. Google Toolbar gives employees a search box right in the browser and the
                                                                    12
ability to create custom search buttons. Google Desktop for Enterprise indexes the contents of a user’s hard drive for easy search and
retrieval of documents, email, IM chats and other items.

     Google Earth’s Enterprise offerings enable business users to view, modify and export their data in a geographic context. Google
Earth Pro, a downloadable application with pricing starting at $400 per user, enables a user to overlay company-specific data and
information in Google Earth. Google Earth Enterprise enables users to integrate and host proprietary geographic data or satellite
imagery with Google Earth content.

Technology
      We began as a technology company and have evolved into a software, technology, Internet, advertising and media company all
rolled into one. We take technology innovation very seriously. We compete aggressively for talent, and our people drive our
innovation, technology development and operations. We strive to hire the best computer scientists and engineers to help us solve very
significant challenges across systems design, artificial intelligence, machine learning, data mining, networking, software engineering,
testing, distributed systems, cluster design and other areas. We work hard to provide an environment where these talented people can
have fulfilling jobs and produce technological innovations that have a positive effect on the world through daily use by millions of
people. We employ technology whenever possible to increase the efficiency of our business and to improve the experience we offer
our users.

     We provide our web search and targeted advertising technology using a large network of commodity computers running custom
software developed in-house. Some elements of our technology include:

  Web Search Technology
      Our web search technology uses a combination of techniques to determine the importance of a web page independent of a
particular search query and to determine the relevance of that page to a particular search query. We do not explain how we do ranking
in great detail because some people try to manipulate our search results for their own gain, rather than in an attempt to provide high-
quality information to users.

      Ranking Technology. One element of our technology for ranking web pages is called PageRank. While we developed much of
our ranking technology after Google was formed, PageRank was developed at Stanford University with the involvement of our
founders, and was therefore published as research. Most of our current ranking technology is protected as trade-secret. PageRank is a
query-independent technique for determining the importance of web pages by looking at the link structure of the web. PageRank
treats a link from web page A to web page B as a “vote” by page A in favor of page B. The PageRank of a page is the sum of the
PageRank of the pages that link to it. The PageRank of a web page also depends on the importance (or PageRank) of the other web
pages casting the votes. Votes cast by important web pages with high PageRank weigh more heavily and are more influential in
deciding the PageRank of pages on the web.

      Text-Matching Techniques. Our technology employs text-matching techniques that compare search queries with the content of
web pages to help determine relevance. Our text-based scoring techniques do far more than count the number of times a search term
appears on a web page. For example, our technology determines the proximity of individual search terms to each other on a given
web page, and prioritizes results that have the search terms near each other. Many other aspects of a page’s content are factored into
the equation, as is the content of pages that link to the page in question. By combining query independent measures such as PageRank
with our text-matching techniques, we are able to deliver search results that are relevant to what people are trying to find.
                                                                  13
  Advertising Technology
     Our advertising program serves millions of relevant, targeted ads each day based on search terms people enter or content they
view on the web. The key elements of our advertising technology include:

      Google AdWords Auction System. We use the Google AdWords auction system to enable advertisers to automatically deliver
relevant, targeted advertising. Every search query we process involves the automated execution of an auction, resulting in our
advertising system often processing hundreds of millions of auctions per day. To determine whether an ad is relevant to a particular
query, this system weighs an advertiser’s willingness to pay for prominence in the ad listings (the cost-per-click or cost-per-
impression bid) and interest from users in the ad as measured by the click-through rate and other factors. Our Quality-based Bidding
system also assigns minimum bids to advertiser keywords based on the Quality Scores of those keywords—the higher the Quality
Score, the lower the minimum bid. The Quality Score is determined by an advertiser’s keyword clickthrough rate, the relevance of the
ad text, historical keyword performance, the quality of the ad’s landing page and other relevancy factors. This prevents advertisers
with irrelevant ads from “squatting” in top positions to gain exposure, and rewards more relevant, well-targeted ads that are clicked
on frequently. Because we are paid only when users click on ads, the AdWords ranking system aligns our interests equally with those
of our advertisers and our users. The more relevant and useful the ad, the better for our users, for our advertisers, and for us.

      The AdWords auction system also incorporates the AdWords Discounter, which automatically lowers the amount advertisers
actually pay to the minimum needed to maintain their ad position. Consider a situation where there are three advertisers—Pat, Betty
and Joe—each bidding on the same keyword for ads that will be displayed on Google.com. These advertisers have ads with equal
click-through rates and bid $1.00 per click, $0.60 per click and $0.50 per click, respectively. With our AdWords discounter, Pat
would occupy the first ad position and pay only $0.61 per click, Betty would occupy the second ad position and pay only $0.51 per
click, and Joe would occupy the third ad position and pay the minimum bid of $0.01 per click (or the local equivalent in countries
outside the U.S.). The AdWords discounter saves money for advertisers by minimizing the price they pay per click, while relieving
them of the need to constantly monitor and adjust their CPCs. Advertisers can also experience greater discounts through the
application of our smart pricing technology introduced in April 2004. This technology can reduce the price of clicks for ads served
across the Google Network based on the expected value of the click to the advertiser.

     AdSense Contextual Advertising Technology. Our AdSense technology employs techniques that consider factors such as
keyword analysis, word frequency, and the overall link structure of the web to analyze the content of individual web pages and to
match ads to them almost instantaneously. With this ad targeting technology, we can automatically serve contextually relevant ads.
To do this, Google Network members embed a small amount of custom HTML code on web pages that generates a request to
Google’s AdSense service whenever a user views the web page. Upon receiving a request, our software examines the content of web
pages and performs a matching process that identifies advertisements that we believe are relevant to the content of the specific web
page. The relevant ads are then returned to the web pages in response to the request. We employ similar techniques for matching
advertisements to other forms of textual content, such as email messages and Google Groups postings. For example, our technology
can serve ads offering tickets to fans of a specific sports team on a news story about that team.

  Large-Scale Systems Technology
     Our business relies on our software and hardware infrastructure, which provides substantial computing resources at low cost.
We currently use a combination of off-the-shelf and custom software running on clusters of commodity computers. Our considerable
investment in developing this infrastructure has produced several key benefits. It simplifies the storage and processing of large
amounts of data, eases the deployment and operation of large-scale global products and services and automates much of the
administration of large-scale clusters of computers.
                                                                 14
      Although most of this infrastructure is not directly visible to our users, we believe it is important for providing a high-quality
user experience. It enables significant improvements in the relevance of our search and advertising results by allowing us to apply
superior search and retrieval algorithms that are computationally intensive. We believe the infrastructure also shortens our product
development cycle and allows us to pursue innovation more cost effectively.

      We regularly evaluate new hardware alternatives and software techniques to help further reduce our computational costs. This
allows us to improve our existing products and services and to more easily develop, deploy and operate new global products and
services.

Sales and Support
      We have put significant effort into developing our sales and support infrastructure. We maintain 32 sales offices in 19 countries,
and we deploy specialized sales teams across up to 11 vertical markets. We bring businesses into our advertising network through
both online and direct sales channels. We work to use technology and automation wherever possible to improve the experience for
our advertisers and to grow our business cost-effectively. The vast majority of our advertisers use our automated online AdWords
program to establish accounts, create ads, target users and launch and manage their advertising campaigns. Our direct advertising
sales team focuses on attracting and supporting companies around the world with sizeable advertising budgets. Our AdSense program
follows a similar model. Most of the web sites in the Google Network sign up for AdSense using an automated online process. Our
direct sales force focuses on building AdSense relationships with leading Internet companies. Our global support organization
concentrates on helping our advertisers and Google Network members get the most out of their relationships with us.

Marketing
      We have always believed that building a trusted, highly-recognized brand begins with providing high-quality products and
services that make a notable difference in people’s lives. Our user base has grown primarily by word-of-mouth, a method of
promotion which can work very well for products that inspire a high level of user loyalty because users are likely to share their
positive experiences with their friends and families. Our early marketing efforts focused on feeding this word-of-mouth momentum
and used public relations efforts to accelerate it. Through these efforts and people’s increased usage of Google worldwide, we have
been able to build our brand with relatively low marketing costs as a percentage of our revenues. Today, we use the quality of our
own products and services as our most effective marketing tool, and word-of-mouth momentum continues to drive consumer
awareness and user loyalty worldwide. We also engage in targeted marketing efforts, such as those we deliver to our advertising
clients, designed to inform potential advertisers, Google Network members and enterprises of the benefits they can achieve through
Google—as well as targeted consumer marketing in certain geographies. In addition, we sponsor industry conferences and have
promoted the distribution of Google products to Internet users in order to make our search services easier to access.

Competition
     We face formidable competition in every aspect of our business, and particularly from other companies that seek to connect
people with information on the web and provide them with relevant advertising. Currently, we consider our primary competitors to be
Microsoft and Yahoo.

      We also face competition from other web search providers, including companies that are not yet known to us. We compete with
Internet advertising companies, particularly in the areas of pay-for-performance and keyword-targeted Internet advertising. We may
compete with companies that sell products and services online because these companies, like us, are trying to attract users to their
web sites to search for information about products and services. In addition to Internet companies, we face competition from
companies that offer traditional media advertising opportunities.
                                                                    15
    We compete to attract and retain relationships with users, advertisers and web sites. The bases on which we compete differ
among the groups.
     •   Users. We compete to attract and retain users of our search and communication products and services. Most of the products
         and services we offer to users are free, so we do not compete on price. Instead, we compete in this area on the basis of the
         relevance and usefulness of our search results and the features, availability and ease of use of our products and services.
     •   Advertisers. We compete to attract and retain advertisers. We compete in this area principally on the basis of the return on
         investment realized by advertisers using our AdWords program. We also compete based on the quality of customer service,
         features and ease of use of AdWords.
     •   Web sites. We compete to attract and retain web sites as members of our Google Network based on the size and quality of
         our advertiser base, our ability to help our Google Network members generate revenues from advertising on their web sites
         and the terms of agreements with our Google Network members.

      We believe that we compete favorably on the factors described above. However, our industry is evolving rapidly and is
becoming increasingly competitive. Larger, more established companies than us are increasingly focusing on search businesses that
directly compete with us.

Intellectual Property
      We rely on a combination of patent, trademark, copyright and trade secret laws in the U.S. and other jurisdictions as well as
confidentiality procedures and contractual provisions to protect our proprietary technology and our brand. We also enter into
confidentiality and invention assignment agreements with our employees and consultants and confidentiality agreements with other
third parties, and we rigorously control access to proprietary technology.

     Google, AdSense, AdWords, I’m Feeling Lucky, PageRank, Blogger, orkut, Picasa and Keyhole are registered trademarks in the
U.S. Our unregistered trademarks include Froogle, Gmail and Blog*Spot.

     The first version of the PageRank technology was created while Larry and Sergey attended Stanford University, which owns a
patent to PageRank. The PageRank patent expires in 2017. We hold a perpetual license to this patent. In October 2003, we extended
our exclusivity period to this patent through 2011, at which point our license is non-exclusive.

      Circumstances outside our control could pose a threat to our intellectual property rights. For example, effective intellectual
property protection may not be available in every country in which our products and services are distributed. Also, the efforts we have
taken to protect our proprietary rights may not be sufficient or effective. Any significant impairment of our intellectual property rights
could harm our business or our ability to compete. Also, protecting our intellectual property rights is costly and time consuming. Any
increase in the unauthorized use of our intellectual property could make it more expensive to do business and harm our operating
results.

     Companies in the Internet, technology and media industries own large numbers of patents, copyrights and trademarks and
frequently enter into litigation based on allegations of infringement or other violations of intellectual property rights. As we face
increasing competition, the possibility of intellectual property claims against us grows. Our technologies may not be able to withstand
any third-party claims or rights against their use.

Government Regulation
     We are subject to a number of foreign and domestic laws that affect companies conducting business on the Internet. In addition,
because of the increasing popularity of the Internet and the growth of online services, laws
                                                                   16
relating to user privacy, freedom of expression, content, advertising, information security and intellectual property rights are being
debated and considered for adoption by many countries throughout the world.

      In the U.S., laws relating to the liability of providers of online services for activities of their users are currently being tested by a
number of claims, which include actions for defamation, libel, invasion of privacy and other data protection claims, tort, unlawful
activity, copyright or trademark infringement, or other theories based on the nature and content of the materials searched and the ads
posted or the content generated by users. Likewise, other federal laws could have an impact on our business. For example, the Digital
Millennium Copyright Act has provisions that limit, but do not eliminate, our liability for listing or linking to third-party web sites
that include materials that infringe copyrights or other rights, so long as we comply with the statutory requirements of this act. The
Children’s Online Protection Act and the Children’s Online Privacy Protection Act restrict the distribution of materials considered
harmful to children and impose additional restrictions on the ability of online services to collect information from minors. In addition,
the Protection of Children from Sexual Predators Act of 1998 requires online service providers to report evidence of violations of
federal child pornography laws under certain circumstances.

      In addition, the application of existing laws regulating or requiring licenses for certain businesses of our advertisers, including,
for example, distribution of pharmaceuticals, adult content, financial services, alcohol or firearms, can be unclear. Application of
these laws in an unanticipated manner could expose us to substantial liability and restrict our ability to deliver services to our users.
For example, some French courts have interpreted French trademark laws in ways that would, if upheld, limit the ability of
competitors to advertise on generic keywords.

     We also face risks from legislation that could be passed in the future.

       We also face risks due to failure to enforce or legislate, particularly in the area of network neutrality, where governments might
fail to protect the Internet’s basic neutrality as to the services and sites that users can access through the network. Such a failure could
limit Google’s ability to innovate and deliver new features and services, which could harm our business.

      We are also subject to international laws associated with data protection in Europe and elsewhere, and the interpretation and
application of data protection laws is still uncertain and in flux. In addition, because our services are accessible worldwide, foreign
jurisdictions may claim that we are required to comply with their laws.

Culture and Employees
     We take great pride in our company culture and embrace it as one of our fundamental strengths. We remain steadfast in our
commitment to constantly improve the technology we offer to our users and advertisers and to web sites in the Google Network. We
have assembled what we believe is a highly talented group of employees. Our culture encourages the iteration of ideas to address
complex technical challenges. In addition, we embrace individual thinking and creativity. As an example, we encourage our engineers
to devote 20% of their time to work on independent projects. Many of our significant new products have come from these
independent projects, including Google News, AdSense for content and Orkut.

      Despite our rapid growth, we constantly seek to maintain a small-company feel that promotes interaction and the exchange of
ideas among employees. We try to minimize corporate hierarchy to facilitate meaningful communication among employees at all
levels and across departments, and we have developed software to help us in this effort. We believe that considering multiple
viewpoints is critical to developing effective solutions, and we attempt to build consensus in making decisions. While teamwork is
one of our core values, we also significantly reward individual accomplishments that contribute to our overall success. As we grow,
we expect to continue to provide compensation structures that are more similar to those offered by start-ups than established
companies. We will focus on very significant rewards for individuals and teams that build amazing things that provide significant
value to us and our users.
                                                                      17
      At December 31, 2005, we had 5,680 employees, consisting of 2,093 in research and development, 2,325 in sales and marketing,
861 in general and administrative and 401 in operations. All of Google’s employees, except temporary employees and contractors, are
also equityholders, with significant collective employee ownership. As a result, many employees are highly motivated to make the
company more successful.

Current Development
  Google — AOL Strategic Alliance
     On December 20, 2005, we entered into a letter agreement with America Online, Inc. (or AOL) and Time Warner Inc. under
which we agreed to acquire a 5% indirect equity interest in AOL in exchange for $1 billion in cash. We have substantially completed
negotiations with Time Warner and AOL on the definitive agreements governing this $1 billion investment and we expect that the
investment will close in the second quarter of 2006. The investment transaction will not close until we have signed definitive
agreements with respect to certain commercial arrangements described in the letter agreement.

      In addition, under the letter agreement we agreed to expand our strategic alliance with AOL. Under this expanded alliance, we
will continue to provide search technology to AOL’s network of Internet properties worldwide. In addition, we have agreed with
AOL to, among other things:
       •   create an AOL Marketplace through white labeling of our advertising technology.
       •   expand display advertising throughout our network.
       •   collaborate in video search and showcase AOL’s premium video service within Google Video.
       •   enable Google Talk and AIM instant messaging users to communicate with each other, provided certain conditions are met.
       •   provide AOL marketing credits for its Internet properties.

Executive Officers of the Registrant
       The names of our executive officers and their ages, titles, and biographies as of March 15, 2006 are set forth below:
Executive Officers:

Name                                   Age                                              Position
Eric Schmidt                            50   Chairman of the Executive Committee, Chief Executive Officer and Director
Sergey Brin                             32   President of Technology and Director
Larry Page                              33   President of Products and Director
Omid Kordestani                         42   Senior Vice President of Global Sales and Business Development
David C. Drummond                       43   Senior Vice President of Corporate Development, Secretary and General Counsel
George Reyes                            51   Senior Vice President and Chief Financial Officer
Jonathan J. Rosenberg                   44   Senior Vice President of Product Management
Shona L. Brown                          40   Senior Vice President of Business Operations
Alan Eustace                            49   Senior Vice President of Engineering

     Our executive officers are appointed by, and serve at the discretion of, our board of directors. Each executive officer is a full-
time employee. There is no family relationship between any of our executive officers or directors.

    Eric Schmidt has served as our Chief Executive Officer since July 2001 and served as Chairman of our board of directors from
March 2001 to April 2004. In April 2004, Eric was named Chairman of the Executive
                                                                    18
Committee of our board of directors. Prior to joining us, from April 1997 to November 2001, Eric served as Chairman of the board of
Novell, a computer networking company, and, from April 1997 to July 2001, as the Chief Executive Officer of Novell. From 1983
until March 1997, Eric held various positions at Sun Microsystems, a supplier of network computing solutions, including Chief
Technology Officer from February 1994 to March 1997 and President of Sun Technology Enterprises from February 1991 until
February 1994. Eric has a Bachelor of Science degree in electrical engineering from Princeton University, and a Masters degree and
Ph.D. in computer science from the University of California at Berkeley.

     Sergey Brin, one of our founders, has served as a member of our board of directors since our inception in September 1998 and as
our President of Technology since July 2001. From September 1998 to July 2001, Sergey served as our President. Sergey holds a
Masters degree in computer science from Stanford University, a Bachelor of Science degree with high honors in mathematics and
computer science from the University of Maryland at College Park and is currently on leave from the Ph.D. program in computer
science at Stanford University.

     Larry Page, one of our founders, has served as a member of our board of directors since our inception in September 1998 and as
our President of Products since July 2001. From September 1998 to July 2001, Larry served as our Chief Executive Officer and from
September 1998 to July 2002 as our Chief Financial Officer. Larry holds a Masters degree in computer science from Stanford
University, a Bachelor of Science degree with high honors in engineering, with a concentration in computer engineering, from the
University of Michigan and is currently on leave from the Ph.D. program in computer science at Stanford University.

     Omid Kordestani was named Senior Vice President of Global Sales and Business Development in January 2006. Previously, he
had served as Senior Vice President of Worldwide Sales and Field Operations since May 1999. Prior to joining us, from 1995 to
1999, Omid served as Vice President of Business Development at Netscape, an Internet software and services company. Prior to
Netscape, he held positions in business development, product management and marketing at The 3DO Company, Go Corporation and
Hewlett-Packard. Omid holds a Masters of Business Administration degree from Stanford University and a Bachelor of Science
degree in electrical engineering from San Jose State University.

      David C. Drummond was named Senior Vice President of Corporate Development and General Counsel in January 2006.
Previously, he had served as Vice President of Corporate Development and General Counsel since February 2002. Prior to joining us,
from July 1999 to February 2002, David served as Chief Financial Officer of SmartForce, an educational software applications
company. Prior to that, David was a partner at the law firm of Wilson Sonsini Goodrich & Rosati, our outside counsel. David holds a
J.D. from Stanford University and a Bachelor of Arts degree in history from Santa Clara University. On July 20, 2004, David was
advised by the staff of the Securities and Exchange Commission that it intends to recommend that the Securities and Exchange
Commission bring a civil injunction action against David, alleging violation of federal securities laws, including the anti-fraud
provisions. The Securities and Exchange Commission’s recommendation arises out of David’s prior employment as Chief Financial
Officer of SmartForce, and involves certain disclosure and accounting issues relating to SmartForce’s financial statements. None of
the allegations involve Google. The staff of the Securities and Exchange Commission has, in accordance with its customary practices,
offered David the opportunity to make a Wells Submission setting forth why David believes that such action should not be brought
and David has made this submission.

     George Reyes was named Senior Vice President and Chief Financial Officer in January 2006. Previously, he had served as Vice
President and Chief Financial Officer since July 2002. Prior to joining us, George served as Interim Chief Financial Officer for ONI
Systems, a provider of optical networking equipment, from February 2002 until June 2002. From April 1999 to September 2001,
George served as Vice President and Treasurer of Sun Microsystems, a supplier of networking computing solutions, and as Vice
President, Corporate Controller of Sun Microsystems from April 1994 to April 1999. George is also a director of BEA Systems, an
application infrastructure software company, and Symantec, an information security company. George holds a Masters of Business
Administration degree from Santa Clara University and a Bachelor of Arts degree in accounting from the University of South Florida.
                                                                 19
     Jonathan J. Rosenberg was named Senior Vice President of Product Management in January 2006. Previously, he had served as
Vice President of Product Management since February 2002. Prior to joining us, from October 2001 to February 2002, Jonathan
served as Vice President of Software of palmOne, a provider of handheld computer and communications solutions. From November
2000 until October 2001, Jonathan was not formally employed. From March 1996 to November 2000, Jonathan held various
executive positions at Excite@Home, an Internet media company, most recently as its Senior Vice President of Online Products and
Services. Jonathan holds a Masters of Business Administration degree from the University of Chicago and a Bachelor of Arts degree
with honors in economics from Claremont McKenna College.

     Shona L. Brown was named Senior Vice President of Business Operations in January 2006. Previously, she had served as Vice
President of Business Operations since September 2003. Prior to joining us, from October 1995 to August 2003, Shona was at
McKinsey & Company, a management consulting firm where she had been a partner since December 2000. Shona holds a Ph.D. and
Post-Doctorate in industrial engineering and engineering management from Stanford University, a Masters of Arts degree from
Oxford University (as a Rhodes Scholar), and a Bachelor of Science degree in computer systems engineering from Carleton
University.

     Alan Eustace was named Senior Vice President of Engineering in January 2006. Previously, he had served as Vice President of
Engineering since July 2003. Prior to joining us, from May 2002 to June 2003, Alan was at Hewlett-Packard, where he most recently
served as Director of the Western Research Laboratory. Prior to that, Alan worked at Compaq from June 1998 until its acquisition by
Hewlett-Packard in May 2002. Prior to that, Alan held various positions at Digital Equipment Corporation until its acquisition by
Compaq in June 1998. Alan holds a B.S., M.S. and a Ph.D. in Computer Science from the University of Central Florida.

ITEM 1A.      RISK FACTORS
Risks Related to Our Business and Industry
  We face significant competition from Microsoft and Yahoo.
      We face formidable competition in every aspect of our business, and particularly from other companies that seek to connect
people with information on the web and provide them with relevant advertising. Currently, we consider our primary competitors to be
Microsoft Corporation and Yahoo! Inc. Microsoft has announced plans to develop features that make web search a more integrated
part of its Windows operating system or other desktop software products. We expect that Microsoft will increasingly use its financial
and engineering resources to compete with us. Both Microsoft and Yahoo have more employees than we do (in Microsoft’s case,
approximately 11 times as many). Microsoft also has significantly more cash resources than we do. Both of these companies also
have longer operating histories and more established relationships with customers and end users. They can use their experience and
resources against us in a variety of competitive ways, including by making acquisitions, investing more aggressively in research and
development and competing more aggressively for advertisers and web sites. Microsoft and Yahoo also may have a greater ability to
attract and retain users than we do because they operate Internet portals with a broad range of content products and services. If
Microsoft or Yahoo are successful in providing similar or better web search results compared to ours or leverage their platforms or
products to make their web search services easier to access than ours, we could experience a significant decline in user traffic. Any
such decline in traffic could negatively affect our revenues.

  We face competition from other Internet companies, including web search providers, Internet access providers, Internet
advertising companies and destination web sites that may also bundle their services with Internet access.
      In addition to Microsoft and Yahoo, we face competition from other web search providers, including companies that are not yet
known to us. We compete with Internet advertising companies, particularly in the areas of pay-for-performance and keyword-targeted
Internet advertising. Also, we may compete with companies that sell products and services online because these companies, like us,
are trying to attract users to their web sites to search for information about products and services.
                                                                 20
      We also compete with destination web sites that seek to increase their search-related traffic. These destination web sites may
include those operated by Internet access providers, such as cable and DSL service providers. Because our users need to access our
services through Internet access providers, they have direct relationships with these providers. If an access provider or a computer or
computing device manufacturer offers online services that compete with ours, the user may find it more convenient to use the services
of the access provider or manufacturer. In addition, the access provider or manufacturer may make it hard to access our services by
not listing them in the access provider’s or manufacturer’s own menu of offerings, or may charge users to access our websites or the
websites of our Google Network members. Also, because the access provider gathers information from the user in connection with
the establishment of a billing relationship, the access provider may be more effective than we are in tailoring services and
advertisements to the specific tastes of the user.

      There has been a trend toward industry consolidation among our competitors, and so smaller competitors today may become
larger competitors in the future. If our competitors are more successful than we are at generating traffic, our revenues may decline.

  We face competition from traditional media companies, and we may not be included in the advertising budgets of large
advertisers, which could harm our operating results.
      In addition to Internet companies, we face competition from companies that offer traditional media advertising opportunities.
Most large advertisers have set advertising budgets, a very small portion of which is allocated to Internet advertising. We expect that
large advertisers will continue to focus most of their advertising efforts on traditional media. If we fail to convince these companies to
spend a portion of their advertising budgets with us, or if our existing advertisers reduce the amount they spend on our programs, our
operating results would be harmed.

  We expect our revenue growth rate to decline and anticipate downward pressure on our operating margin in the future.
      We expect that our revenue growth rate will decline over time and anticipate that there will be downward pressure on our
operating margin. We believe our revenue growth rate will generally decline as a result of increasing competition and the inevitable
decline in growth rates as our revenues increase to higher levels. We believe our operating margin will experience downward pressure
as a result of increasing competition and increased expenditures for many aspects of our business. Our operating margin will also
experience downward pressure to the extent the proportion of our revenues generated from our Google Network members increases.
The margin on revenue we generate from our Google Network members is significantly less than the margin on revenue we generate
from advertising on our web sites. Additionally, the margin we earn on revenue generated from our Google Network could decrease
in the future if our Google Network members demand a greater portion of the advertising fees, which could be the result of increased
competition for these members.

  Our operating results may fluctuate, which makes our results difficult to predict and could cause our results to fall short of
expectations.
      Our operating results may fluctuate as a result of a number of factors, many of which are outside of our control. For these
reasons, comparing our operating results on a period-to-period basis may not be meaningful, and you should not rely on our past
results as an indication of our future performance. Our quarterly and annual expenses as a percentage of our revenues may be
significantly different from our historical or projected rates. Our operating results in future quarters may fall below expectations. Any
of these events could cause our stock price to fall. Each of the risk factors listed in Item 1A, Risk Factors, and the following factors,
may affect our operating results:
     •   Our ability to continue to attract users to our web sites.
     •   Our ability to monetize (or generate revenue from) traffic on our web sites and our Google Network members’ web sites.
     •   Our ability to attract advertisers to our AdWords program.
                                                                      21
     •   Our ability to attract web sites to our AdSense program.
     •   The mix in our revenues between those generated on our web sites and those generated through our Google Network.
     •   The amount and timing of operating costs and capital expenditures related to the maintenance and expansion of our
         businesses, operations and infrastructure.
     •   Our focus on long term goals over short term results.
     •   The results of our investments in risky projects.
     •   Payments made in connection with the resolution of litigation matters.
     •   General economic conditions and those economic conditions specific to the Internet and Internet advertising.
     •   Our ability to keep our web sites operational at a reasonable cost and without service interruptions.
     •   Our ability to forecast revenue from agreements under which we guarantee minimum payments.
     •   Geopolitical events such as war, threat of war or terrorist actions.

     Because our business is changing and evolving, our historical operating results may not be useful to you in predicting our future
operating results. In addition, advertising spending has historically been cyclical in nature, reflecting overall economic conditions as
well as budgeting and buying patterns. For example, in 1999, advertisers spent heavily on Internet advertising. This was followed by a
lengthy downturn in ad spending on the web. Also, user traffic tends to be seasonal. Our rapid growth has masked the cyclicality and
seasonality of our business. As our growth rate has slowed, the cyclicality and seasonality in our business has become more
pronounced and may cause our operating results to fluctuate.

  If we do not continue to innovate and provide products and services that are useful to users, we may not remain competitive,
and our revenues and operating results could suffer.
      Our success depends on providing products and services that people use for a high quality Internet experience. Our competitors
are constantly developing innovations in web search, online advertising and providing information to people. As a result, we must
continue to invest significant resources in research and development in order to enhance our web search technology and our existing
products and services and introduce new high-quality products and services that people can easily and effectively use. If we are
unable to ensure that our users and customers have a high quality experience with our products and services, then they may become
dissatisfied and move to competitors’ products and services. In addition, if we are unable to predict user preferences or industry
changes, or if we are unable to modify our products and services on a timely basis, we may lose users, advertisers and Google
Network members. Our operating results would also suffer if our innovations are not responsive to the needs of our users, advertisers
and Google Network members, are not appropriately timed with market opportunity or are not effectively brought to market. As
search technology continues to develop, our competitors may be able to offer search results that are, or that are perceived to be,
substantially similar or better than those generated by our search services. This may force us to compete in different ways with our
competitors and to expend significant resources in order to remain competitive.

   We generate our revenue almost entirely from advertising, and the reduction in spending by or loss of advertisers could
seriously harm our business.
      We generated approximately 99% of our revenues in 2005 from our advertisers. Our advertisers can generally terminate their
contracts with us at any time. Advertisers will not continue to do business with us if their investment in advertising with us does not
generate sales leads, and ultimately customers, or if we do not deliver their advertisements in an appropriate and effective manner. If
we are unable to remain competitive and provide value to our advertisers, they may stop placing ads with us, which would negatively
affect our revenues and business.
                                                                    22
   We rely on our Google Network members for a significant portion of our revenues, and we benefit from our association with
them. The loss of these members could adversely affect our business.
      We provide advertising, web search and other services to members of our Google Network. The revenues generated from the
fees advertisers pay us when users click on ads that we have delivered to our Google Network members’ web sites or as ads are
displayed represented 44% of our revenues in 2005. We consider this network to be critical to the future growth of our revenues.
However, some of the participants in this network may compete with us in one or more areas. Therefore, they may decide in the
future to terminate their agreements with us. If our Google Network members decide to use a competitor’s or their own web search or
advertising services, our revenues would decline.

      Our agreements with a few of the largest Google Network members account for a significant portion of revenues derived from
our AdSense program. In addition, advertising and other fees generated from one Google Network member, AOL, primarily through
our AdSense program, accounted for approximately 9% of our revenues in 2005. On December 20, 2005, AOL, Google and Time
Warner entered into a letter agreement under which Google will acquire a five percent indirect equity interest in AOL in exchange for
$1 billion in cash, and AOL and Google will expand their strategic alliance. If our relationship with AOL were terminated or
renegotiated on terms less favorable to us, our business could be adversely affected.

      Also, certain of our key network members operate high-profile web sites, and we derive tangible and intangible benefits from
this affiliation. If one or more of these key relationships is terminated or not renewed, and is not replaced with a comparable
relationship, our business would be adversely affected.

     Our business and operations are experiencing rapid growth. If we fail to effectively manage our growth, our business and
operating results could be harmed and we may have to incur significant expenditures to address the additional operational and
control requirements of this growth.
     We have experienced, and continue to experience, rapid growth in our headcount and operations, which has placed, and will
continue to place, significant demands on our management, operational and financial infrastructure. If we do not effectively manage
our growth, the quality of our products and services could suffer, which could negatively affect our brand and operating results. Our
expansion and growth in international markets heightens these risks as a result of the particular challenges of supporting a rapidly
growing business in an environment of multiple languages, cultures, customs, legal systems, alternative dispute systems, regulatory
systems and commercial infrastructures. To effectively manage this growth, we will need to continue to improve our operational,
financial and management controls and our reporting systems and procedures. These systems enhancements and improvements will
require significant capital expenditures and allocation of valuable management resources. If the improvements are not implemented
successfully, our ability to manage our growth will be impaired and we may have to make significant additional expenditures to
address these issues, which could harm our financial position. The required improvements include:
     •   Enhancing our information and communication systems to ensure that our offices around the world are well coordinated and
         that we can effectively communicate with our growing base of users, advertisers and Google Network members.
     •   Enhancing systems of internal controls to ensure timely and accurate reporting of all of our operations.
     •   Ensuring enhancements to our systems of internal controls are scalable to our anticipated growth in headcount and
         operations.
     •   Standardizing systems of internal controls and ensuring they are consistently applied at each of our operations around the
         world.
     •   Improving our information technology infrastructure to maintain the effectiveness of our search and ad systems.
                                                                  23
  We are required to evaluate our internal control over financial reporting under Section 404 of the Sarbanes Oxley Act of 2002,
and any adverse results from such evaluation could result in a loss of investor confidence in our financial reports and have an
adverse effect on our stock price.
      Pursuant to Section 404 of the Sarbanes-Oxley Act of 2002, we have furnished a report in Item 9A of this Form 10-K by our
management on our internal control over financial reporting. This report contains, among other matters, our conclusion that our
internal controls over financial reporting were effective as of December 31, 2005 and a statement that our auditors have issued an
attestation report on management’s assessment of such internal controls.

      Although we have concluded that our internal controls over financial reporting were effective as of December 31, 2005, there
can be no assurances that we will reach the same conclusion at the end of future years. If our management identifies one or more
material weaknesses in our internal control over financial reporting, we will be unable to assert such internal control is effective. If we
are unable to assert that our internal control over financial reporting is effective, or if our auditors are unable to attest that our
management’s report is fairly stated or they are unable to express an opinion on the effectiveness of our internal controls, we could
lose investor confidence in the accuracy and completeness of our financial reports, which would have an adverse effect on our stock
price.

  We are migrating critical financial functions to a third-party provider. If this transition is not successful, our business and
operations could be disrupted and our operating results could be harmed.
      We have entered into an arrangement to transfer our worldwide billing, collection and credit evaluation functions to a third-party
service provider, Bertelsmann AG, and are currently in the process of implementing this arrangement. However, we cannot be sure
that the arrangement will be completed and implemented successfully or at all. The third-party provider will also help track, on an
automated basis, a majority of our growing number of AdSense revenue share agreements. These functions are critical to our
operations and involve sensitive interactions between us and our advertisers and members of our Google Network. If we do not
successfully implement this project, our business, reputation and operating results could be harmed. We have no experience managing
and implementing this type of large-scale, cross-functional, international infrastructure project. We also may not be able to integrate
all of our systems and processes with those of the third-party service provider on a timely basis, or at all. Even if this integration is
completed on time, the service provider may not perform to agreed-upon service levels. Failure of the service provider to perform
satisfactorily could disrupt our operations, result in customer dissatisfaction and adversely affect operating results. We will implement
monitoring controls over the systems and processes of the third-party vendor. However, there may be more risk than if we maintained
and operated the controls ourselves. If we need to find an alternative source for performing these functions, we may have to expend
significant resources in doing so, and we cannot guarantee this would be accomplished in a timely manner or without significant
additional disruption to our business.

  Our business depends on a strong brand, and if we are not able to maintain and enhance our brand, our ability to expand our
base of users, advertisers and Google Network members will be impaired and our business and operating results will be harmed.
      We believe that the brand identity that we have developed has significantly contributed to the success of our business. We also
believe that maintaining and enhancing the “Google” brand is critical to expanding our base of users, advertisers and Google Network
members. Maintaining and enhancing our brand may require us to make substantial investments and these investments may not be
successful. If we fail to promote and maintain the “Google” brand, or if we incur excessive expenses in this effort, our business,
operating results and financial condition will be materially and adversely affected. We anticipate that, as our market becomes
increasingly competitive, maintaining and enhancing our brand may become increasingly difficult and expensive. Maintaining and
enhancing our brand will depend largely on our ability to be a technology leader and to continue to provide high quality products and
services, which we may not do successfully.
                                                                    24
      People have in the past expressed, and may in the future express, objections to aspects of our products. For example, people
have raised privacy concerns relating to the ability of our Gmail email service to match relevant ads to the content of email messages.
In addition, some individuals and organizations have raised objections to and sued us in connection with our scanning of copyrighted
materials from library collections for use in our Google Book Search product. Aspects of our future products may raise similar public
concerns. Publicity regarding such concerns could harm our brand. In addition, members of the Google Network and other third
parties may take actions that could impair the value of our brand. We are aware that third parties, from time to time, use “Google” and
similar variations in their domain names without our approval, and our brand may be harmed if users and advertisers associate these
domains with us.

  Proprietary document formats may limit the effectiveness of our search technology by preventing our technology from
accessing the content of documents in such formats which could limit the effectiveness of our products and services.
      A large amount of information on the Internet is provided in proprietary document formats such as Microsoft Word. The
providers of the software application used to create these documents could engineer the document format to prevent or interfere with
our ability to access the document contents with our search technology. This would mean that the document contents would not be
included in our search results even if the contents were directly relevant to a search. These types of activities could assist our
competitors or diminish the value of our search results. The software providers may also seek to require us to pay them royalties in
exchange for giving us the ability to search documents in their format. If the software provider also competes with us in the search
business, they may give their search technology a preferential ability to search documents in their proprietary format. Any of these
results could harm our brand and our operating results.

  New technologies could block our ads, which would harm our business.
      Technologies may be developed that can block the display of our ads. Most of our revenues are derived from fees paid to us by
advertisers in connection with the display of ads on web pages. As a result, ad-blocking technology could, in the future, adversely
affect our operating results.

  Our corporate culture has contributed to our success, and if we cannot maintain this culture as we grow, we could lose the
innovation, creativity and teamwork fostered by our culture, and our business may be harmed.
      We believe that a critical contributor to our success has been our corporate culture, which we believe fosters innovation,
creativity and teamwork. As our organization grows, and we are required to implement more complex organizational management
structures, we may find it increasingly difficult to maintain the beneficial aspects of our corporate culture. This could negatively
impact our future success. In addition, our initial public offering has created disparities in wealth among Google employees, which
may adversely impact relations among employees and our corporate culture in general.

  Our intellectual property rights are valuable, and any inability to protect them could reduce the value of our products, services
and brand.
      Our patents, trademarks, trade secrets, copyrights and all of our other intellectual property rights are important assets for us.
There are events that are outside of our control that pose a threat to our intellectual property rights as well as to our products and
services. For example, effective intellectual property protection may not be available in every country in which our products and
services are distributed or made available through the Internet. Also, the efforts we have taken to protect our proprietary rights may
not be sufficient or effective. Any significant impairment of our intellectual property rights could harm our business or our ability to
compete. Also, protecting our intellectual property rights is costly and time consuming. Any increase in the unauthorized use of our
intellectual property could make it more expensive to do business and harm our operating results.
                                                                   25
      Although we seek to obtain patent protection for our innovations, it is possible we may not be able to protect some of these
innovations. In addition, given the costs of obtaining patent protection, we may choose not to protect certain innovations that later
turn out to be important. Furthermore, there is always the possibility, despite our efforts, that the scope of the protection gained will
be insufficient or that an issued patent may be deemed invalid or unenforceable. Finally, third parties increasingly have and will
continue to allege that Google products and services infringe their patent rights.

    We also face risks associated with our trademarks. For example, there is a risk that the word “Google” could become so
commonly used that it becomes synonymous with the word “search.” If this happens, we could lose protection for this trademark,
which could result in other people using the word “Google” to refer to their own products, thus diminishing our brand.

      We also seek to maintain certain intellectual property as trade secrets. The secrecy could be compromised by third parties, or
intentionally or accidentally by our employees, which would cause us to lose the competitive advantage resulting from these trade
secrets.

  We are, and may in the future be, subject to intellectual property rights claims, which are costly to defend, could require us to
pay damages and could limit our ability to use certain technologies in the future.
      Companies in the Internet, technology and media industries own large numbers of patents, copyrights, trademarks and trade
secrets and frequently enter into litigation based on allegations of infringement or other violations of intellectual property rights. As
we face increasing competition and become increasingly high profile, the possibility of intellectual property rights claims against us
grows. Our technologies may not be able to withstand any third-party claims or rights against their use. Any intellectual property
claims, with or without merit, could be time-consuming, expensive to litigate or settle and could divert resources and attention. In
addition, many of our agreements with members of our Google Network require us to indemnify these members for certain third-party
intellectual property infringement claims, which would increase our costs as a result of defending such claims and may require that
we pay damages if there were an adverse ruling in any such claims. An adverse determination also could prevent us from offering our
products and services to others and may require that we procure substitute products or services for these members.

      With respect to any intellectual property rights claim, we may have to pay damages or discontinue the practices found to be in
violation of a third party’s rights. We may have to seek a license to continue such practices, which may not be available on reasonable
terms and may significantly increase our operating expenses. A license to continue such practices may not be available to us at all. As
a result, we may also be required to develop alternative non-infringing technology or practices or discontinue the practices. The
development of alternative non-infringing technology or practices could require significant effort and expense. If we cannot obtain a
license to continue such practices or develop alternative technology or practices for the infringing aspects of our business, we may be
forced to limit our product and service offerings and may be unable to compete effectively. Any of these results could harm our brand
and operating results.

     From time to time, we receive notice letters from patent holders alleging that certain of our products and services infringe their
patent rights. Some of these have resulted in litigation against us. Companies have also filed trademark infringement and related
claims against us over the display of ads in response to user queries that include trademark terms.

     The outcomes of these lawsuits have differed from jurisdiction to jurisdiction. Courts in France have held us liable for allowing
advertisers to select certain trademarked terms as keywords. We are appealing those decisions. We were also subject to two lawsuits
in Germany on similar matters where the courts held that we are not liable for the actions of our advertisers prior to notification of
trademark rights. We are litigating or have recently litigated similar issues in other cases in the U.S., France, Germany, Israel, Italy
and Austria.

     In order to provide users with more useful ads, in 2004 we revised our trademark policy in the U.S. and Canada. Under our
revised policy, we no longer disable ads due to selection by our advertisers of trademarks as
                                                                    26
keyword triggers for the ads. We are currently defending this policy in trademark infringement lawsuits in the United States.
Defending these lawsuits is consuming time and resources. Adverse results in these lawsuits may result in, or even compel, a change
in this practice which could result in a loss of revenue for us, which could harm our business.

      Certain entities have also filed copyright claims against us, alleging that features of certain of our products, including Google
Web Search, Google News, Google Image Search, and Google Book Search, infringe their rights. Adverse results in these lawsuits
may include awards of damages and may also result in, or even compel, a change in our business practices, which could result in a
loss of revenue for us or otherwise harm our business. In addition, generally speaking, any time that we have a product or service that
links to or hosts material in which others allege to own copyrights, we face the risk of being sued for copyright infringement or
related claims. Because these products and services comprise the majority of our products and services, the risk of potential harm
from such lawsuits is substantial.

  Expansion into international markets is important to our long-term success, and our inexperience in the operation of our
business outside the U.S. increases the risk that our international expansion efforts will not be successful.
      We opened our first office outside the U.S. in 2001 and have only limited experience with operations outside the U.S. Expansion
into international markets requires management attention and resources. In addition, we face the following additional risks associated
with our expansion outside the U.S.:
     •   Challenges caused by distance, language and cultural differences and in doing business with foreign agencies and
         governments.
     •   Difficulties in developing products and services in different languages and for different cultures.
     •   Longer payment cycles in some countries.
     •   Credit risk and higher levels of payment fraud.
     •   Legal and regulatory restrictions.
     •   Currency exchange rate fluctuations.
     •   Foreign exchange controls that might prevent us from repatriating cash earned in countries outside the U.S.
     •   Political and economic instability and export restrictions.
     •   Potentially adverse tax consequences.
     •   Higher costs associated with doing business internationally.
     •   Additional U.S. and other regulatory requirements and increased complexity in complying with existing and new regulatory
         requirements.

     These risks could harm our international expansion efforts, which would in turn harm our business and operating results.

  We compete internationally with local information providers and with U.S. competitors who are currently more successful than
we are in various markets, and if we fail to compete effectively in international markets, our business will be harmed.
      We face different market characteristics and competition outside the U.S. In certain markets, other web search, advertising
services and Internet companies have greater brand recognition, more users and more search traffic than we have. Even in countries
where we have a significant user following, we may not be as successful in generating advertising revenue due to slower market
development, our inability to provide attractive local advertising services or other factors. In order to compete, we need to improve
our brand recognition and our
                                                                   27
selling efforts internationally and build stronger relationships with advertisers. We also need to better understand our international
users and their preferences. If we fail to do so, our global expansion efforts may be more costly and less profitable than we expect.

  Our business may be adversely affected by malicious third-party applications that interfere with, or exploit security flaws in, our
products and services.
      Our business may be adversely affected by malicious applications that make changes to our users’ computers and interfere with
the Google experience. These applications have in the past attempted, and may in the future attempt, to change our users’ Internet
experience, including hijacking queries to Google.com, altering or replacing Google search results, or otherwise interfering with our
ability to connect with our users. The interference often occurs without disclosure to or consent from users, resulting in a negative
experience that users may associate with Google. These applications may be difficult or impossible to uninstall or disable, may
reinstall themselves and may circumvent other applications’ efforts to block or remove them. In addition, we offer a number of
products and services that our users download to their computers or that they rely on to store information and transmit information to
others over the Internet. These products and services are subject to attack by viruses, worms and other malicious software programs,
which could jeopardize the security of information stored in a user’s computer or in our computer systems and networks. The ability
to reach users and provide them with a superior experience is critical to our success. If our efforts to combat these malicious
applications are unsuccessful, or if our products and services have actual or perceived vulnerabilities, our reputation may be harmed
and our user traffic could decline, which would damage our business.

  If we fail to detect click fraud or other invalid clicks, we could lose the confidence of our advertisers, thereby causing our
business to suffer.
      We are exposed to the risk of fraudulent clicks and other invalid clicks on our ads from a variety of potential sources. We have
regularly refunded fees that our advertisers have paid to us that were later attributed to click fraud and other invalid clicks, and we
expect to do so in the future. Invalid clicks are clicks that we have determined are not intended by the user to link to the underlying
content, such as inadvertent clicks on the same ad twice and clicks resulting from click fraud. Click fraud occurs when a user
intentionally clicks on a Google AdWords ad displayed on a web site for a reason other than to view the underlying content. If we are
unable to stop these invalid clicks, these refunds may increase. If we find new evidence of past invalid clicks we may issue refunds
retroactively of amounts previously paid to our Google Network members. This would negatively affect our profitability, and these
invalid clicks could hurt our brand. If invalid clicks are not detected, the affected advertisers may experience a reduced return on their
investment in our advertising programs because the invalid clicks will not lead to potential revenue for the advertisers. This could
lead the advertisers to become dissatisfied with our advertising programs, which has led to litigation, could lead to further litigation
and could lead to a loss of advertisers and revenues.

   Index spammers could harm the integrity of our web search results, which could damage our reputation and cause our users to
be dissatisfied with our products and services.
       There is an ongoing and increasing effort by “index spammers” to develop ways to manipulate our web search results. For
example, because our web search technology ranks a web page’s relevance based in part on the importance of the web sites that link
to it, people have attempted to link a group of web sites together to manipulate web search results. We take this problem very
seriously because providing relevant information to users is critical to our success. If our efforts to combat these and other types of
index spamming are unsuccessful, our reputation for delivering relevant information could be diminished. This could result in a
decline in user traffic, which would damage our business.

  Privacy concerns relating to our technology could damage our reputation and deter current and potential users from using our
products and services.
     From time to time, concerns may be expressed about whether our products and services compromise the privacy of users and
others. Concerns about our practices with regard to the collection, use, disclosure or security
                                                                    28
of personal information or other privacy-related matters, even if unfounded, could damage our reputation and operating results. While
we strive to comply with all applicable data protection laws and regulations, as well as our own posted privacy policies, any failure or
perceived failure to comply may result in proceedings or actions against us by government entities or others, which could potentially
have an adverse affect on our business. Laws related to data protection continue to evolve. It is possible that certain jurisdictions may
enact laws or regulations that impact our ability to offer our products and services in those jurisdictions, which could harm our
business.

   Our business is subject to a variety of U.S. and foreign laws that could subject us to claims or other remedies based on the
nature and content of the information searched or displayed by our products and services, and could limit our ability to provide
information regarding regulated industries and products.
      The laws relating to the liability of providers of online services for activities of their users are currently unsettled both within the
U.S. and abroad. Claims have been threatened and filed under both U.S. and foreign law for defamation, libel, invasion of privacy and
other data protection claims, tort, unlawful activity, copyright or trademark infringement, or other theories based on the nature and
content of the materials searched and the ads posted or the content generated by our users. From time to time we have received
notices from individuals who do not want their names or web sites to appear in our web search results when certain keywords are
searched. It is also possible that we could be held liable for misinformation provided over the web when that information appears in
our web search results. If one of these complaints results in liability to us, it could be potentially costly, encourage similar lawsuits,
distract management and harm our reputation and possibly our business. In addition, increased attention focused on these issues and
legislative proposals could harm our reputation or otherwise affect the growth of our business.

      The application to us of existing laws regulating or requiring licenses for certain businesses of our advertisers, including, for
example, distribution of pharmaceuticals, adult content, financial services, alcohol or firearms, can be unclear. Existing or new
legislation could expose us to substantial liability, restrict our ability to deliver services to our users, limit our ability to grow and
cause us to incur significant expenses in order to comply with such laws and regulations.

      Several other federal laws could have an impact on our business. Compliance with these laws and regulations is complex and
may impose significant additional costs on us. For example, the Digital Millennium Copyright Act has provisions that limit, but do
not eliminate, our liability for listing or linking to third-party web sites that include materials that infringe copyrights or other rights,
so long as we comply with the statutory requirements of this act. The Children’s Online Protection Act and the Children’s Online
Privacy Protection Act restrict the distribution of materials considered harmful to children and impose additional restrictions on the
ability of online services to collect information from minors. In addition, the Protection of Children from Sexual Predators Act of
1998 requires online service providers to report evidence of violations of federal child pornography laws under certain circumstances.
Any failure on our part to comply with these regulations may subject us to additional liabilities.

     We also face risks associated with international data protection. The interpretation and application of data protection laws in
Europe and elsewhere are still uncertain and in flux. It is possible that these laws may be interpreted and applied in a manner that is
inconsistent with our data practices. If so, in addition to the possibility of fines, this could result in an order requiring that we change
our data practices, which in turn could have a material effect on our business.

     We also face risks from legislation that could be passed in the future.

       We also face risks due to failure to enforce or legislate, particularly in the area of network neutrality, where governments might
fail to protect the Internet’s basic neutrality as to the services and sites that users can access through the network. Such a failure could
limit Google’s ability to innovate and deliver new features and services, which could harm our business.
                                                                      29
  If we were to lose the services of Eric, Larry, Sergey or our senior management team, we may not be able to execute our
business strategy.
      Our future success depends in a large part upon the continued service of key members of our senior management team. In
particular, our CEO Eric Schmidt and our founders Larry Page and Sergey Brin are critical to the overall management of Google as
well as the development of our technology, our culture and our strategic direction. All of our executive officers and key employees
are at-will employees, and we do not maintain any key-person life insurance policies. The loss of any of our management or key
personnel could seriously harm our business.

  The initial option grants to many of our senior management and key employees are fully vested. Therefore, these employees
may not have sufficient financial incentive to stay with us, we may have to incur costs to replace key employees who leave, and our
ability to execute our business model could be impaired if we cannot replace departing employees in a timely manner.
      Many of our senior management personnel and other key employees have become, or will soon become, substantially vested in
their initial stock option grants. While we often grant additional stock options to management personnel and other key employees
after their hire dates to provide additional incentives to remain employed by us, these follow-on grants are typically much smaller
than the initial grants. Employees may be more likely to leave us after their initial option grant fully vests, especially if the shares
underlying the options have significantly appreciated in value relative to the option exercise price. We have not given any additional
stock grants to Eric, Larry or Sergey, and Eric, Larry and Sergey are fully vested in their existing grants. If any members of our senior
management team leave the company, our ability to successfully operate our business could be impaired. We also may have to incur
significant costs in identifying, hiring, training and retaining replacements for departing employees.

  We rely on highly skilled personnel and, if we are unable to retain or motivate key personnel or hire qualified personnel, we
may not be able to grow effectively.
     Our performance is largely dependent on the talents and efforts of highly skilled individuals. Our future success depends on our
continuing ability to identify, hire, develop, motivate and retain highly skilled personnel for all areas of our organization. Competition
in our industry for qualified employees is intense, and we are aware that certain of our competitors have directly targeted our
employees. Our continued ability to compete effectively depends on our ability to attract new employees and to retain and motivate
our existing employees.

      We have in the past maintained a rigorous, highly selective and time-consuming hiring process. We believe that our approach to
hiring has significantly contributed to our success to date. As we grow, our hiring process may prevent us from hiring the personnel
we need in a timely manner. In addition, as we become a more mature company, we may find our recruiting efforts more challenging.
The incentives to attract, retain and motivate employees provided by our option grants may not be as effective as in the past and our
current and future compensation arrangements, which include cash bonuses, may not be successful in attracting new employees and
retaining and motivating our existing employees. In addition, we have recently introduced new stock award programs, and under
these new programs new employees will be issued a portion of their stock awards in the form of restricted stock units. These
restricted stock units will vest based on individual performance, as well as the exercise price of their stock options as compared to that
of other employees who started at about the same time. These new stock awards programs may not provide adequate incentives to
attract, retain and motivate outstanding performers. If we do not succeed in attracting excellent personnel or retaining or motivating
existing personnel, we may be unable to grow effectively.

  Our CEO and our two founders run the business and affairs of the company collectively, which may harm their ability to
manage effectively.
     Eric, our CEO, and Larry and Sergey, our founders and presidents, currently provide leadership to the company as a team. Our
bylaws provide that our CEO and our presidents will together have general supervision,
                                                                   30
direction and control of the company, subject to the control of our board of directors. As a result, Eric, Larry and Sergey tend to
operate the company collectively and to consult extensively with each other before significant decisions are made. This may slow the
decision-making process, and a disagreement among these individuals could prevent key strategic decisions from being made in a
timely manner. In the event our CEO and our two founders are unable to continue to work well together in providing cohesive
leadership, our business could be harmed.

    We have a short operating history and a relatively new business model in an emerging and rapidly evolving market. This makes
it difficult to evaluate our future prospects and may increase the risk that we will not continue to be successful.
      We first derived revenue from our online search business in 1999 and from our advertising services in 2000, and we have only a
short operating history with our cost-per-click advertising model, which we launched in 2002 and our new cost-per-impression
advertising model which we launched in the second quarter of 2005. As a result, we have very little operating history for you to
evaluate in assessing our future prospects. Also, we derive nearly all of our revenues from online advertising, which is an immature
industry that has undergone rapid and dramatic changes in its short history. You must consider our business and prospects in light of
the risks and difficulties we will encounter as an early-stage company in a new and rapidly evolving market. We may not be able to
successfully address these risks and difficulties, which could materially harm our business and operating results.

  We may have difficulty scaling and adapting our existing architecture to accommodate increased traffic and technology
advances or changing business requirements, which could lead to the loss of users, advertisers and Google Network members, and
cause us to incur expenses to make architectural changes.
      To be successful, our network infrastructure has to perform well and be reliable. The greater the user traffic and the greater the
complexity of our products and services, the more computing power we will need. In 2005, we spent substantial amounts and we
expect this spending to continue as we purchase or lease data centers and equipment and upgrade our technology and network
infrastructure to handle increased traffic on our web sites and to roll out new products and services. This expansion is expensive and
complex and could result in inefficiencies or operational failures. If we do not implement this expansion successfully, or if we
experience inefficiencies and operational failures during the implementation, the quality of our products and services and our users’
experience could decline. This could damage our reputation and lead us to lose current and potential users, advertisers and Google
Network members. The costs associated with these adjustments to our architecture could harm our operating results. Cost increases,
loss of traffic or failure to accommodate new technologies or changing business requirements could harm our operating results and
financial condition.

   We rely on bandwidth providers, data centers or other third parties for key aspects of the process of providing products and
services to our users, and any failure or interruption in the services and products provided by these third parties could harm our
ability to operate our business and damage our reputation.
      We rely on third-party vendors, including data center and bandwidth providers. Any disruption in the network access or
colocation services provided by these third-party providers or any failure of these third-party providers to handle current or higher
volumes of use could significantly harm our business. Any financial or other difficulties our providers face may have negative effects
on our business, the nature and extent of which we cannot predict. We exercise little control over these third-party vendors, which
increases our vulnerability to problems with the services they provide. We license technology and related databases from third parties
to facilitate aspects of our data center and connectivity operations including, among others, Internet traffic management services. We
have experienced and expect to continue to experience interruptions and delays in service and availability for such elements. Any
errors, failures, interruptions or delays experienced in connection with these third-party technologies and information services could
negatively impact our relationship with users and adversely affect our brand and our business and could expose us to liabilities to
third parties.
                                                                   31
     Our systems are also heavily reliant on the availability of electricity, which also comes from third-party providers. If we were to
experience a major power outage, we would have to rely on back-up generators. These back-up generators may not operate properly
through a major power outage and their fuel supply could also be inadequate during a major power outage. This could result in a
disruption of our business.

  Interruption or failure of our information technology and communications systems could impair our ability to effectively
provide our products and services, which could damage our reputation and harm our operating results.
      Our provision of our products and services depends on the continuing operation of our information technology and
communications systems. Any damage to or failure of our systems could result in interruptions in our service. Interruptions in our
service could reduce our revenues and profits, and our brand could be damaged if people believe our system is unreliable. Our
systems are vulnerable to damage or interruption from earthquakes, terrorist attacks, floods, fires, power loss, telecommunications
failures, computer viruses, computer denial of service attacks or other attempts to harm our systems, and similar events. Some of our
data centers are located in areas with a high risk of major earthquakes. Our data centers are also subject to break-ins, sabotage and
intentional acts of vandalism, and to potential disruptions if the operators of these facilities have financial difficulties. Some of our
systems are not fully redundant, and our disaster recovery planning cannot account for all eventualities. The occurrence of a natural
disaster, a decision to close a facility we are using without adequate notice for financial reasons or other unanticipated problems at our
data centers could result in lengthy interruptions in our service.

      We have experienced system failures in the past and may in the future. For example, in November 2003 we failed to provide
web search results for approximately 20% of our traffic for a period of about 30 minutes. Any unscheduled interruption in our service
puts a burden on our entire organization and would result in an immediate loss of revenue. If we experience frequent or persistent
system failures on our web sites, our reputation and brand could be permanently harmed. The steps we have taken to increase the
reliability and redundancy of our systems are expensive, reduce our operating margin and may not be successful in reducing the
frequency or duration of unscheduled downtime.

   More individuals are using non-PC devices to access the Internet, and versions of our web search technology developed for
these devices may not be widely adopted by users of these devices.
     The number of people who access the Internet through devices other than personal computers, including mobile telephones,
hand-held calendaring and email assistants, and television set-top devices, has increased dramatically in the past few years. The lower
resolution, functionality and memory associated with alternative devices make the use of our products and services through such
devices difficult. If we are unable to attract and retain a substantial number of alternative device users to our web search services or if
we are slow to develop products and technologies that are more compatible with non-PC communications devices, we will fail to
capture a significant share of an increasingly important portion of the market for online services.

  Payments to certain of our Google Network members have exceeded the related fees we receive from our advertisers.
      We have entered into, and may continue to enter into, minimum fee guarantee agreements with a small number of Google
Network members. In these agreements, we promise to make minimum payments to the Google Network member for a pre-negotiated
period of time, typically from three months to a year or more. It is difficult to forecast with certainty the fees that we will earn under
our agreements, and sometimes the fees we earn fall short of the minimum guarantee payment amounts. Also, increasing competition
for arrangements with web sites that are potential Google Network members could result in our entering into more of these minimum
fee guarantee agreements under which guaranteed payments exceed the fees we receive from advertisers whose ads we place on those
Google Network member sites. In each period to date, the aggregate fees we have earned
                                                                    32
under these agreements have exceeded the aggregate amounts we have been obligated to pay these Google Network members.
However, individual agreements have resulted in guaranteed minimum and other payments to certain Google Network members in
excess of the related fees we receive from advertisers. We expect that some individual agreements will continue to result in
guaranteed minimum and other payments to certain Google Network members in excess of the related fees we receive from
advertisers, which will adversely affect our profitability. However, we expect that the aggregate fees we will earn under agreements
with guaranteed minimum and other payments will exceed the aggregate amounts we will be obligated to pay these Google Network
members.

   To the extent our revenues are paid in foreign currencies, and currency exchange rates become unfavorable, we may lose some
of the economic value of the revenues in U.S. dollar terms.
     As we expand our international operations, more of our customers may pay us in foreign currencies. Conducting business in
currencies other than U.S. dollars subjects us to fluctuations in currency exchange rates. If the currency exchange rates were to
change unfavorably, the value of net receivables we receive in foreign currencies and later convert to U.S. dollars after the
unfavorable change would be diminished. This could have a negative impact on our reported operating results. Hedging strategies,
such as forward contracts, options and foreign exchange swaps related to transaction exposures, that we have implemented or may
implement to mitigate this risk may not eliminate our exposure to foreign exchange fluctuations. Additionally, hedging programs
expose us to risks that could adversely affect our operating results, including the following:
     •   We have limited experience in implementing or operating hedging programs. Hedging programs are inherently risky and we
         could lose money as a result of poor trades.
     •   We may be unable to hedge currency risk for some transactions because of a high level of uncertainty or the inability to
         reasonably estimate our foreign exchange exposures.
     •   We may be unable to acquire foreign exchange hedging instruments in some of the geographic areas where we do business,
         or, where these derivatives are available, we may not be able to acquire enough of them to fully offset our exposure.

  We may have exposure to greater than anticipated tax liabilities.
      Our future income taxes could be adversely affected by earnings being lower than anticipated in jurisdictions where we have
lower statutory rates and higher than anticipated in jurisdictions where we have higher statutory rates, by changes in the valuation of
our deferred tax assets and liabilities, or by changes in tax laws, regulations, accounting principles or interpretations thereof. Our
determination of our tax liability (like any company’s determination of its tax liability) is subject to review by applicable tax
authorities. Any adverse outcome of such a review could have an adverse effect on our operating results and financial condition. In
addition, the determination of our worldwide provision for income taxes and other tax liabilities requires significant judgment and in
the ordinary course of our business, there are many transactions and calculations where the ultimate tax determination is uncertain.
Although we believe our estimates are reasonable, the ultimate tax outcome may differ from the amounts recorded in our financial
statements and may materially affect our financial results in the period or periods for which such determination is made.

  We rely on insurance to mitigate some risks and, to the extent the cost of insurance increases or we are unable or choose not to
maintain sufficient insurance to mitigate the risks facing our business, our operating results may be diminished.
     We contract for insurance to cover certain potential risks and liabilities. In the current environment, insurance companies are
increasingly specific about what they will and will not insure. It is possible that we may not be able to get enough insurance to meet
our needs, may have to pay very high prices for the coverage we do get or may not be able to acquire any insurance for certain types
of business risk. In addition, we have in the past and may in the future choose not to obtain insurance for certain risks facing our
business. This could leave us
                                                                   33
exposed to potential claims. If we were found liable for a significant claim in the future, our operating results could be negatively
impacted. Also, to the extent the cost of maintaining insurance increases, our operating results will be negatively affected.

  Acquisitions could result in operating difficulties, dilution and other harmful consequences.
      We do not have a great deal of experience acquiring companies and the companies we have acquired have typically been small.
We have evaluated, and expect to continue to evaluate, a wide array of potential strategic transactions. From time to time, we may
engage in discussions regarding potential acquisitions. Any of these transactions could be material to our financial condition and
results of operations. In addition, the process of integrating an acquired company, business or technology may create unforeseen
operating difficulties and expenditures and is risky. The areas where we may face risks include:
     •   The need to implement or remediate controls, procedures and policies appropriate for a larger public company at companies
         that prior to the acquisition lacked these controls, procedures and policies.
     •   Diversion of management time and focus from operating our business to acquisition integration challenges.
     •   Cultural challenges associated with integrating employees from the acquired company into our organization.
     •   Retaining employees from the businesses we acquire.
     •   The need to integrate each company’s accounting, management information, human resource and other administrative
         systems to permit effective management.

     Foreign acquisitions involve unique risks in addition to those mentioned above, including those related to integration of
operations across different cultures and languages, currency risks and the particular economic, political and regulatory risks
associated with specific countries.

      Also, the anticipated benefit of many of our acquisitions may not materialize. Future acquisitions or dispositions could result in
potentially dilutive issuances of our equity securities, the incurrence of debt, contingent liabilities or amortization expenses, or write-
offs of goodwill, any of which could harm our financial condition. Future acquisitions may require us to obtain additional equity or
debt financing, which may not be available on favorable terms or at all.

  We occasionally become subject to commercial disputes that could harm our business by distracting our management from the
operation of our business, by increasing our expenses and, if we do not prevail, by subjecting us to potential monetary damages
and other remedies.
      From time to time we are engaged in disputes regarding our commercial transactions. These disputes could result in monetary
damages or other remedies that could adversely impact our financial position or operations. Even if we prevail in these disputes, they
may distract our management from operating our business and the cost of defending these disputes would reduce our operating
results.

  We have to keep up with rapid technological change to remain competitive in our rapidly evolving industry.
     Our future success will depend on our ability to adapt to rapidly changing technologies, to adapt our services to evolving
industry standards and to improve the performance and reliability of our services. Our failure to adapt to such changes would harm
our business. New technologies and advertising media could adversely affect us. In addition, the widespread adoption of new Internet,
networking or telecommunications technologies or other technological changes could require substantial expenditures to modify or
adapt our services or infrastructure.
                                                                    34
   Our business depends on increasing use of the Internet by users searching for information, advertisers marketing products and
services and web sites seeking to earn revenue to support their web content. If the Internet infrastructure does not grow and is not
maintained to support these activities, our business will be harmed.
      Our success will depend on the continued growth and maintenance of the Internet infrastructure. This includes maintenance of a
reliable network backbone with the necessary speed, data capacity and security for providing reliable Internet services. Internet
infrastructure may be unable to support the demands placed on it if the number of Internet users continues to increase, or if existing or
future Internet users access the Internet more often or increase their bandwidth requirements. In addition, viruses, worms and similar
programs may harm the performance of the Internet. The Internet has experienced a variety of outages and other delays as a result of
damage to portions of its infrastructure, and it could face outages and delays in the future. These outages and delays could reduce the
level of Internet usage as well as our ability to provide our solutions.

  We have incurred and will continue to incur increased costs as a result of being a public company.
      As a public company, we have incurred and will continue to incur significant legal, accounting and other expenses that we did
not incur as a private company. We will continue to incur costs associated with our public company reporting requirements. We also
have incurred and will continue to incur costs associated with corporate governance requirements, including requirements under the
Sarbanes-Oxley Act of 2002, as well as rules implemented by the Securities and Exchange Commission and The Nasdaq National
Market. These rules and regulations have increased our legal and financial compliance costs and made some activities more time-
consuming and costly. We expect these rules and regulations will continue to make it more difficult and more expensive for us to
maintain director and officer liability insurance and we may be required to accept reduced policy limits and coverage or incur
substantially higher costs to obtain the same or similar coverage. As a result, it may be more difficult for us to attract and retain
qualified individuals to serve on our board of directors or as executive officers. We are currently evaluating and monitoring
developments with respect to these rules, and we cannot predict or estimate the amount of additional costs we may incur or the timing
of such costs.

  Changes in accounting rules for stock-based compensation may adversely affect our operating results, our stock price and our
competitiveness in the employee marketplace.
     We have a history of using employee stock options and other stock-based compensation to hire, motivate and retain our
employees. In December 2004, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards
No. 123R, “Share-Based Payment,” which requires us, starting January 1, 2006, to measure compensation costs for all stock-based
compensation (including stock options) at fair value and to recognize these costs as expenses in our statements of income. The
recognition of these expenses in our statements of income will have a negative effect on our earnings per share, which could
negatively impact our future stock price. In addition, if we reduce or alter our use of stock-based compensation to minimize the
recognition of these expenses, our ability to recruit, motivate and retain employees may be impaired, which could put us at a
competitive disadvantage in the employee marketplace.

Risks Related to Ownership of our Common Stock
  The trading price for our Class A common stock has been and may continue to be volatile.
      The trading price of our Class A common stock has been volatile since our initial public offering and will likely continue to be
volatile. The trading price of our Class A common stock may fluctuate widely in response to various factors, some of which are
beyond our control. These factors include:
     •   Quarterly variations in our results of operations or those of our competitors.
     •   Announcements by us or our competitors of acquisitions, new products, significant contracts, commercial relationships or
         capital commitments.
                                                                   35
     •   Disruption to our operations or those of our Google Network members or our data centers.
     •   The emergence of new sales channels in which we are unable to compete effectively.
     •   Our ability to develop and market new and enhanced products on a timely basis.
     •   Commencement of, or our involvement in, litigation.
     •   Any major change in our board or management.
     •   Changes in governmental regulations or in the status of our regulatory approvals.
     •   Recommendations by securities analysts or changes in earnings estimates.
     •   Announcements about our earnings that are not in line with analyst expectations, the likelihood of which is enhanced
         because it is our policy not to give guidance on earnings.
     •   Announcements by our competitors of their earnings that are not in line with analyst expectations.
     •   The volume of shares of Class A common stock available for public sale.
     •   Sales of stock by us or by our stockholders.
     •   Short sales, hedging and other derivative transactions on shares of our Class A common stock.
     •   General economic conditions and slow or negative growth of related markets.

     In addition, the stock market in general, and the market for technology companies in particular, have experienced extreme price
and volume fluctuations that have often been unrelated or disproportionate to the operating performance of those companies. These
broad market and industry factors may seriously harm the market price of our Class A common stock, regardless of our actual
operating performance. In the past, following periods of volatility in the overall market and the market price of a company’s
securities, securities class action litigation has often been instituted against these companies. This litigation, if instituted against us,
could result in substantial costs and a diversion of our management’s attention and resources.

  We do not intend to pay dividends on our common stock.
     We have never declared or paid any cash dividend on our capital stock. We currently intend to retain any future earnings and do
not expect to pay any dividends in the foreseeable future.

   The concentration of our capital stock ownership with our founders, executive officers and our directors and their affiliates will
limit your ability to influence corporate matters.
      Our Class B common stock has ten votes per share and our Class A common stock has one vote per share. As of December 31,
2005 our founders, executive officers and directors (and their affiliates) together owned shares of Class A common stock and Class B
common stock representing approximately 78% of the voting power of our outstanding capital stock. In particular, as of
December 31, 2005, our two founders and our CEO, Larry, Sergey and Eric, controlled approximately 84% of our outstanding Class
B common stock, representing approximately 69% of the voting power of our outstanding capital stock. Larry, Sergey and Eric
therefore have significant influence over management and affairs and over all matters requiring stockholder approval, including the
election of directors and significant corporate transactions, such as a merger or other sale of our company or its assets, for the
foreseeable future. In addition, because of this dual class structure, our founders, directors, executives and employees will continue to
be able to control all matters submitted to our stockholders for approval even if they come to own less than 50% of the outstanding
shares of our common stock. This concentrated control limits your ability to influence corporate matters and, as a result, we may take
actions that our stockholders do not view as beneficial. As a result, the market price of our Class A common stock could be adversely
affected.
                                                                     36
   Provisions in our charter documents and under Delaware law could discourage a takeover that stockholders may consider
favorable.
     Provisions in our certificate of incorporation and bylaws may have the effect of delaying or preventing a change of control or
changes in our management. These provisions include the following:
     •   Our certificate of incorporation provides for a dual class common stock structure. As a result of this structure our founders,
         executives and employees have significant influence over all matters requiring stockholder approval, including the election
         of directors and significant corporate transactions, such as a merger or other sale of our company or its assets. This
         concentrated control could discourage others from initiating any potential merger, takeover or other change of control
         transaction that other stockholders may view as beneficial.
     •   Our board of directors has the right to elect directors to fill a vacancy created by the expansion of the board of directors or
         the resignation, death or removal of a director, which prevents stockholders from being able to fill vacancies on our board of
         directors.
     •   Our stockholders may not act by written consent. As a result, a holder, or holders, controlling a majority of our capital stock
         would not be able to take certain actions without holding a stockholders’ meeting.
     •   Our certificate of incorporation prohibits cumulative voting in the election of directors. This limits the ability of minority
         stockholders to elect director candidates.
     •   Stockholders must provide advance notice to nominate individuals for election to the board of directors or to propose
         matters that can be acted upon at a stockholders’ meeting. These provisions may discourage or deter a potential acquiror
         from conducting a solicitation of proxies to elect the acquiror’s own slate of directors or otherwise attempting to obtain
         control of our company.
     •   Our board of directors may issue, without stockholder approval, shares of undesignated preferred stock. The ability to issue
         undesignated preferred stock makes it possible for our board of directors to issue preferred stock with voting or other rights
         or preferences that could impede the success of any attempt to acquire us.

      As a Delaware corporation, we are also subject to certain Delaware anti-takeover provisions. Under Delaware law, a corporation
may not engage in a business combination with any holder of 15% or more of its capital stock unless the holder has held the stock for
three years or, among other things, the board of directors has approved the transaction. Our board of directors could rely on Delaware
law to prevent or delay an acquisition of us.
                                                                   37
ITEM 1B.       UNRESOLVED STAFF COMMENTS
     We have received no written comments regarding our periodic or current reports from the staff of the SEC that were issued 180
days or more preceding the end of our 2005 fiscal year that remained unresolved.

ITEM 2.        PROPERTIES
      We lease approximately 1.3 million square feet of space in our headquarters in Mountain View, California. We also lease
additional research and development, sales and support offices in Amsterdam, Ann Arbor, Atlanta, Bangalore, Beijing, Belo
Horizonte, Boston, Cambridge, Chapel Hill, Chicago, Copenhagen, Dallas, Denver, Detroit, Dublin, Duesseldorf, Frankfurt,
Hamburg, Hong Kong, Hyderabad, Irvine, Istanbul, Kirkland, London, Madrid, Melbourne, Mexico City, Milan, Montreal, Mountain
View, Mumbai, Munich, New York, Oslo, Paris, Rome, Santa Monica, Sao Paolo, Seattle, Seoul, Shanghai, Stockholm, Sydney, Tel-
Aviv, Tokyo, Toronto, Trondheim, Warsaw, Washington D.C. and Zurich. We operate data centers in the United States, the European
Union and Asia pursuant to various lease agreements and co-location arrangements.

     In addition, we own land and buildings primarily near our headquarters in Mountain View, California. The total square footage
of our owned buildings is approximately 644,000.

ITEM 3.        LEGAL PROCEEDINGS
      Certain companies have filed trademark infringement and related claims against us over the display of ads in response to user
queries that include trademark terms. The outcomes of these lawsuits have differed from jurisdiction to jurisdiction. Courts in France
have held us liable for allowing advertisers to select certain trademarked terms as keywords. We are appealing those decisions. We
were also subject to two lawsuits in Germany on similar matters where the courts held that we are not liable for the actions of our
advertisers prior to notification of trademark rights. We are litigating or recently have litigated similar issues in other cases in the
U.S., France, Germany, Israel, Italy and Austria. Adverse results in these lawsuits may result in, or even compel, a change in this
practice which could result in a loss of revenue for us, which could harm our business.

      Certain entities have also filed copyright claims against us, alleging that features of certain of our products, including Google
Web Search, Google News, Google Image Search, and Google Book Search, infringe their rights. Adverse results in these lawsuits
may include awards of damages and may also result in, or even compel, a change in our business practices, which could result in a
loss of revenue for us or otherwise harm our business.

     From time to time, we have been and may also become a party to other litigation and subject to claims incident to the ordinary
course of business, including intellectual property claims (in addition to the trademark and copyright matters noted above), labor and
employment claims, breach of contract claims, and other matters.

     Although the results of litigation and claims cannot be predicted with certainty, we believe that the final outcome of the matters
discussed above will not have a material adverse effect on our business, consolidated financial position, results of operations or cash
flow. Regardless of the outcome, litigation can have an adverse impact on us because of defense costs, diversion of management
resources and other factors.

ITEM 4.        SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
     No matters were submitted to a vote of our security holders during the fourth quarter of 2005.
                                                                    38
                                                                PART II

ITEM 5.       MARKET FOR THE REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND
              ISSUER PURCHASES OF EQUITY SECURITIES
      Our Class A common stock has been quoted on The Nasdaq National Market under the symbol “GOOG” since August 19, 2004.
Prior to that time, there was no public market for our stock. The following table sets forth for the indicated periods the high and low
sales prices per share for our Class A common stock on The Nasdaq National Market.

Fiscal Year 2005 Quarters Ended:                                                                                       High        Low
March 31, 2005                                                                                                       $216.80     $172.57
June 30, 2005                                                                                                         309.25      179.84
September 30, 2005                                                                                                    320.95      273.35
December 31, 2005                                                                                                     446.21      290.68

Fiscal Year 2004 Quarters Ended:                                                                                       High        Low
September 30, 2004                                                                                                   $135.02     $ 95.96
December 31, 2004                                                                                                     201.60      128.90

      Our Class B common stock is neither listed nor publicly traded.

Holders of Record
      As of February 28, 2006, there were approximately 1,496 stockholders of record of our Class A common stock, and the closing
price of our Class A common stock was $362.62 per share as reported by The Nasdaq National Market. Because many of our shares
of Class A common stock are held by brokers and other institutions on behalf of stockholders, we are unable to estimate the total
number of stockholders represented by these record holders. As of February 28, 2006, there were approximately 148 stockholders of
record of our Class B common stock.

Dividend Policy
     We have never declared or paid any cash dividend on our common stock. We currently intend to retain any future earnings and
do not expect to pay any dividends in the foreseeable future.

Unregistered Sales of Equity Securities
    In October 2005, we issued 22,500 shares of Class A common stock, with an aggregate value of $7,170,300, to an individual in
connection with the purchase of technology from such individual.

      The issuance of such common stock was exempt from registration under the Securities Act of 1933 in reliance on Section 4(2)
of the Securities Act of 1933 as transactions by an issuer not involving any public offering. The recipient represented his intention to
acquire the securities for investment only and not with a view to or for sale in connection with any distribution thereof and
appropriate legends were affixed to the share certificates issued in such transaction. The sale of these securities was made without
general solicitation or advertising.

Purchases of Equity Securities by Google
      Pursuant to the terms of our 1998 Stock Plan, 2000 Stock Plan, 2003 Stock Plan, 2003 Stock Plan (No. 2), 2003 Stock Plan (No.
3), 2004 Stock Plan and equity incentive plans assumed through acquisitions (collectively referred to as our “Stock Plans”), options
may typically be exercised prior to vesting. We have the right to
                                                                   39
repurchase unvested shares from service providers upon their termination, and it is generally our policy to do so. The following table
provides information with respect to purchases made by us of shares of our Class A common stock during the three month period
ended December 31, 2005:
                                                                                                                       Maximum Number (or
                                                                                                                        Approximate Dollar
                                                                                         Total Number of Shares        Value) of Shares that
                                                                   Average Price          Purchased as Part of         May Yet Be Purchased
                                     Total Number of Shares          Paid per             Publicly Announced            Under the Plans or
Period                                    Purchased (1)               Share                Plans or Programs                Programs
October 1 – 31                                      5,936          $        3.94                  —                             —
November 1 – 30                                    24,306          $        0.98                  —                             —
December 1 – 31                                     3,547          $        0.30                  —                             —
     Total                                         33,789          $        1.43                  —                             —

(1)      All shares were originally purchased from us by employees pursuant to exercises of unvested stock options. During the months
         listed above, we routinely repurchased the shares from our service providers upon their termination of employment pursuant to
         our right to repurchase unvested shares at the original exercise price under the terms of our Stock Plans and the related stock
         option agreements.
                                                                       40
ITEM 6.     SELECTED FINANCIAL DATA
      You should read the following selected consolidated financial data in conjunction with “Management’s Discussion and Analysis
of Financial Condition and Results of Operations” and our consolidated financial statements and the related notes appearing
elsewhere in this Form 10-K.

      The consolidated statements of income data for the years ended December 31, 2003, 2004 and 2005, and the consolidated
balance sheet data at December 31, 2004 and 2005, are derived from our audited consolidated financial statements appearing
elsewhere in this Form 10-K. The consolidated statements of income data for the years ended December 31, 2001 and 2002, and the
consolidated balance sheet data at December 31, 2001, 2002 and 2003, are derived from our audited consolidated financial statements
that are not included in this Form 10-K. The historical results are not necessarily indicative of the results to be expected in any future
period.

                                                                                               Year Ended December 31,
                                                                        2001          2002              2003              2004               2005
                                                                                         (in thousands, except per share data)
Consolidated Statements of Income Data:
Revenues                                                           $ 86,426      $439,508          $1,465,934        $3,189,223        $6,138,560
Costs and expenses:
      Cost of revenues                                                  14,228       131,510             625,854         1,457,653         2,571,509
      Research and development                                          16,500        31,748              91,228           225,632           483,978
      Sales and marketing                                               20,076        43,849             120,328           246,300           439,741
      General and administrative                                        12,275        24,300              56,699           139,700           335,345
      Stock-based compensation (1)                                      12,383        21,635             229,361           278,746           200,709
      Contribution to Google Foundation                                    —             —                   —                 —              90,000
      Non-recurring portion of settlement of disputes with
          Yahoo                                                         —             —                   —             201,000               —
Total costs and expenses                                             75,462       253,042           1,123,470         2,549,031         4,121,282
Income from operations                                               10,964       186,466             342,464           640,192         2,017,278
Interest income (expense) and other, net                               (896)       (1,551)              4,190            10,042           124,399
Income before income taxes                                           10,068       184,915             346,654           650,234         2,141,677
Provision for income taxes                                            3,083        85,259             241,006           251,115           676,280
Net income                                                         $ 6,985       $ 99,656          $ 105,648         $ 399,119         $1,465,397
Net income per share (2)
      Basic                                                        $      0.07   $      0.86       $         0.77    $        2.07     $        5.31
      Diluted                                                      $      0.04   $      0.45       $         0.41    $        1.46     $        5.02
Number of shares used in per share calculation(2)
      Basic                                                             94,523       115,242             137,697          193,176           275,844
      Diluted                                                          186,776       220,633             256,638          272,781           291,874

(1)   Stock-based compensation, consisting of amortization of deferred stock-based compensation related to the values of restricted
      shares, certain restricted stock units and options issued to employees, as well as the values of other restricted stock units and
      options issued to employees and non-employees, is allocated in the table that follows.

                                                                                                         Year Ended December 31,
                                                                                     2001         2002            2003        2004            2005
                                                                                                              (in thousands)
Cost of revenues                                                                 $   876       $ 1,065       $  8,557       $ 11,314       $ 5,579
Research and development                                                           4,440         8,746        138,377        169,532        115,532
Sales and marketing                                                                1,667         4,934         44,607         49,449         28,411
General and administrative                                                         5,400         6,890         37,820         48,451         51,187
                                                                                 $12,383       $21,635       $229,361       $278,746       $200,709

(2)   See Note 1 of Notes to Consolidated Financial Statements included in this Form 10-K for information regarding the computation
      of per share amounts.
                                                                    41
                                                                           As of December 31,
                                                     2001        2002          2003             2004         2005
                                                                             (in thousands)
Consolidated Balance Sheet Data:
Cash, cash equivalents and marketable securities   $ 33,589    $146,331    $ 334,718        $2,132,297    $ 8,034,247
Total assets                                         84,457     286,892      871,458         3,313,351     10,271,813
Total long-term liabilities                           8,044       9,560       33,365            43,927        107,472
Redeemable convertible preferred stock warrant          —        13,871       13,871               —              —
Deferred stock-based compensation                   (15,833)    (35,401)    (369,668)         (249,470)      (119,015)
Total stockholders’ equity                           50,152     173,953      588,770         2,929,056      9,418,957
                                                        42
ITEM 7.     MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
            OPERATIONS
     In addition to historical information, this report contains forward-looking statements within the meaning of Section 27A of the
Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These statements include, among other things,
statements concerning our expectations:
     •    regarding the growth of our operations, business and revenues and the growth rate of our revenues and costs and expenses;
     •    that seasonal fluctuations in Internet usage and traditional advertising seasonality are likely to affect our business;
     •    that growth in advertising revenues from our web sites may exceed that from our Google Network members’ web sites;
     •    that we expect to employ a significant number of temporary employees;
     •    regarding our expansion into international markets and international revenues as a percentage of total revenues;
     •    regarding our income tax rates, tax liabilities, the proportion of our earnings we expect our Irish subsidiary to recognize
          and our expectations with respect to our provision for income taxes as a result of disqualifying dispositions;
     •    that research and development, sales and marketing (including promotional and advertising) and general and
          administrative expenses will increase in the future;
     •    our plans to increase the number of international sales personnel;
     •    our expectations regarding the settlement of a class-action lawsuit and our accounting for it;
     •    regarding our future stock-based compensation charges and anticipated increases in cash compensation per employee;
     •    regarding the amount our expected future stock awards will represent as a percentage of common shares then outstanding;
     •    our expectations with respect to making minimum revenue share payments under certain AdSense agreements;
     •    regarding our expectations with respect to our operating margins;
     •    that we will continue to pay most of the Google AdSense fees we receive from advertisers to our Google Network members;
     •    regarding our spending on property and equipment, including costs related to information technology infrastructure and
          land and buildings;
     •    regarding the sufficiency of our existing cash, cash equivalents, marketable securities and cash generated from operations;
     •    regarding the impact of accounting pronouncements;
     •    regarding the timing and nature of our expanded strategic relationship with AOL, including our indirect equity investment
          in AOL;
     •    regarding our expected further contributions to the Google Foundation and investments in other philanthropic endeavors;

as well as other statements regarding our future operations, financial condition and prospects and business strategies. These
forward-looking statements are subject to certain risks and uncertainties that could cause our actual results to differ materially from
those reflected in the forward-looking statements. Factors that could cause or contribute to such differences include, but are not
limited to, those discussed in this report, and in particular, the risks discussed in Item 1A, Risk Factors. We undertake no obligation
to revise or publicly release the results of any revision to these forward-looking statements. Given these risks and uncertainties,
readers are cautioned not to place undue reliance on such forward-looking statements.
                                                                    43
Overview
     Google is a global technology leader focused on improving the ways people connect with information. Our innovations in web
search and advertising have made our web site a top Internet destination and our brand one of the most recognized in the world. Our
mission is to organize the world’s information and make it universally accessible and useful. We serve three primary constituencies:
     •   Users. We provide users with products and services that enable people to more quickly and easily find, create and organize
         information that is useful to them.
     •   Advertisers. We provide advertisers our Google AdWords program, an auction-based advertising program that enables them
         to deliver relevant ads targeted to search results or web content. Our AdWords program provides advertisers with a cost-
         effective way to deliver ads to customers across Google sites and through the Google Network under our AdSense program.
     •   Web sites. We provide members of our Google Network our Google AdSense program, which allows these members to
         deliver AdWords ads that are relevant to the search results or content on their web sites. We share most of the fees these ads
         generate with our Google Network members—creating an important revenue stream for them.

How We Generate Revenue
     We derive most of our revenues from fees we receive from our advertisers.

      Our original business model consisted of licensing our search engine services to other web sites. In the first quarter of 2000, we
introduced our first advertising program. Through our direct sales force we offered advertisers the ability to place text-based ads on
our web sites targeted to our users’ search queries under a program called Premium Sponsorships. Advertisers paid us based on the
number of times their ads were displayed on users’ search results pages, and we recognized revenue at the time these ads appeared. In
the fourth quarter of 2000, we launched Google AdWords, an online self-service program that enables advertisers to place targeted
text-based ads on our web sites. AdWords customers originally paid us based on the number of times their ads appeared on users’
search results pages. In the first quarter of 2002, we began offering AdWords exclusively on a cost-per-click basis, which means that
an advertiser pays us only when a user clicks on one of its ads. AdWords is also available through our direct sales force.

      Effective beginning the first quarter of 2004 until the end of the first quarter of 2005, the AdWords cost-per-click pricing
structure was the only pricing structure available to our advertisers. However, during the second quarter of 2005, we launched an
AdWords cost-per-impression program that enables advertisers to pay us based on the number of times their ads appear on Google
Network members’ sites specified by the advertiser. For advertisers using our AdWords cost-per-click pricing, we recognize as
revenue the fees charged advertisers each time a user clicks on one of the text-based ads that appears next to the search results on our
web sites, or next to the search results or content on Google Network members’ sites. For advertisers using our AdWords cost-per-
impression pricing, we recognize as revenue the fees charged advertisers each time their ads are displayed on the Google Network
members’ sites. In addition, in the third quarter of 2005, we launched the Google Publication Ads Program through which we
distribute our advertisers’ ads for publication in the magazines of our Google Network members. We recognize as revenue the fees
charged advertisers when their ads are published in magazines. Our AdWords agreements are generally terminable at any time by our
advertisers.

      Google AdSense is the program through which we distribute our advertisers’ AdWords ads for display on the web sites of our
Google Network members. Our AdSense program includes AdSense for search and AdSense for content. AdSense for search,
launched in the first quarter of 2002, is our service for distributing relevant ads from our advertisers for display with search results on
our Google Network members’ sites. AdSense for content, launched in the first quarter of 2003, is our service for distributing ads
from our advertisers that are relevant to content on our Google Network members’ sites. Our advertisers pay us a fee each time a user
clicks on one of
                                                                    44
our advertisers’ ads displayed on Google Network members’ web sites or, for those advertisers who choose our cost-per-impression
pricing, as their ads are displayed. To date, we have paid most of these advertiser fees to the members of the Google Network, and we
expect to continue doing so for the foreseeable future. We recognize these advertiser fees as revenue and the portion of the advertiser
fee we pay to our Google Network members as traffic acquisition costs under cost of revenues. In some cases, we guarantee our
Google Network members minimum revenue share payments. Members of the Google Network do not pay any fees associated with
the use of our AdSense program on their web sites. Some of our Google Network members separately license our search technology
and pay related licensing fees to us. Our agreements with Google Network members consist largely of uniform online “click-wrap”
agreements that members enter into by interacting with our registration web sites. Agreements with our larger members are
individually negotiated. The click-wrap agreements have no stated term and are terminable at will. The negotiated agreements vary in
duration. Both the click-wrap agreements and the negotiated agreements contain provisions requiring us to share with the Google
Network member a portion of the advertiser fees generated by users clicking on ads on the Google Network member’s web site. The
click-wrap agreements have uniform revenue share terms. The negotiated agreements vary as to revenue share terms and are heavily
negotiated.

     We believe the factors that influence the success of our advertising programs include the following:
     •   The relevance, objectivity and quality of our search results.
     •   The number and type of searches initiated at our web sites.
     •   The number and type of searches initiated at, as well as the number of visits to and the content of, our Google Network
         members’ web sites.
     •   The advertisers’ return on investment (ad cost per sale or cost per conversion) from advertising campaigns on our web sites
         or our Google Network members’ web sites compared to other forms of advertising.
     •   The number of advertisers and the breadth of items advertised.
     •   The total and per click advertising spending budgets of each advertiser.
     •   The monetization of (or generation of revenue from) traffic on our web sites and our Google Network members’ web sites.

     We believe that the monetization of traffic on our web sites and our Google Network members’ web sites is affected by the
following factors:
     •   The relevance and quality of ads displayed with each search results page on our web sites and our Google Network
         members’ web sites, as well as with each content page on our Google Network members’ web sites.
     •   The number and prominence of ads displayed with each search results page on our web sites and our Google Network
         members’ web sites, as well as with each content page on our Google Network members’ web sites.
     •   The rate at which our users and users of our Google Network members’ web sites click on advertisements.
     •   Our minimum fee per click.

     Advertising revenues made up 97%, 99% and 99% of our revenues in 2003, 2004 and 2005. We derive the balance of our
revenues from the license of our web search technology, the license of our search solutions to enterprises and the sale and license of
other products and services.
                                                                   45
Trends in Our Business
      Our business has grown rapidly since inception, resulting in substantially increased revenues, and we expect that our business
will continue to grow. However, our revenue growth rate has generally declined over time, and we expect it will continue to do so as
a result of increasing competition and the difficulty of maintaining growth rates as our revenues increase to higher levels. In addition,
the main focus of our advertising programs is to provide relevant and useful advertising to our users, reflecting our commitment to
constantly improve their overall web experience. As a result, we may take steps to improve the relevance of the ads displayed on our
web sites, such as removing ads that generate low click-through rates, that could negatively affect our near-term advertising revenues.

      Both seasonal fluctuations in Internet usage and traditional retail seasonality have affected, and are likely to continue to affect,
our business. Internet usage generally slows during the summer months, and commercial queries typically increase significantly in the
fourth calendar quarter of each year. These seasonal trends have caused and will likely continue to cause, fluctuations in our quarterly
results, including fluctuations in sequential revenue growth rates. Prior to the second quarter of 2004, these seasonal trends may have
been masked by the substantial quarter over quarter growth of Internet traffic focused on commercial transactions and ultimately by
the substantial quarter over quarter growth in our revenues. In addition, in the third quarters of 2004 and 2005 these seasonal trends
may have been masked by certain monetization improvements to our advertising programs, as well as by the continued expansion of
our global advertiser base and partner network. Our seasonality is further discussed below in Quarterly Results of Operations.

     From the inception of the Google Network in 2002 through the first quarter of 2004, the growth in advertising revenues from our
Google Network members’ web sites exceeded that from our web sites, which had a negative impact on our operating margins. The
operating margin we realize on revenues generated from ads placed on our Google Network members’ web sites through our AdSense
program is significantly lower than revenue generated from ads placed on our web sites. This lower operating margin arises because
most of the advertiser fees from ads served on Google Network member web sites are shared with our Google Network members,
leaving only a portion of these fees for us. However, beginning in the second quarter of 2004, growth in advertising revenues from
our web sites has exceeded that from our Google Network members’ web sites. We expect that this will continue in the foreseeable
future although the relative rate of growth in revenues from our web sites compared to the rate of growth in revenues from our Google
Network members’ web sites may vary over time.

      Our operating margin may decrease as we invest in building the necessary employee and systems infrastructures required to
manage our anticipated growth. We have experienced and expect to continue to experience substantial growth in our operations as we
invest significantly in our research and development programs, expand our user, advertiser and Google Network member bases and
increase our presence in international markets, as well as promote the distribution of our Google toolbar and other products in order to
make our services easier to access. This growth has required us to continually hire new personnel and make substantial investments in
property and equipment. Our full-time employee headcount has grown from 3,021 at December 31, 2004 to 5,680 at December 31,
2005. Also, we have employed a significant number of temporary employees in the past and expect to continue to do so in the
foreseeable future. Our capital expenditures have grown from $319.0 million in 2004 to $838.2 million in 2005. Our investments in
property and equipment, including information technology infrastructure and land and buildings, will likely be significantly greater in
2006 compared to 2005. Our capital spending between periods may fluctuate significantly depending on the availability and price of
suitable property and equipment. Management of our growth will continue to require the devotion of significant employee and other
resources. We may not be able to manage this growth effectively. Finally, investments in our business are generally made with a
focus on our long-term operations. Accordingly, there may be little or no linkage between our spending and our revenues in any
particular quarter.

     Our international revenues have grown as a percentage of our total revenues to 39% in 2005 from 34% in 2004. This increase in
the percentage of our revenues derived from international markets results largely from
                                                                   46
increased acceptance of our advertising programs in international markets, an increase in our direct sales resources and customer
support operations in international markets and our continued progress in developing versions of our products tailored for these
markets. Although we expect to continue to make investments in international markets, they may not result in an increase in our
international revenues as a percentage of total revenues in 2006 or thereafter.

      We currently anticipate that our effective tax rate will decrease to approximately 30% in 2006 from 31.6% in 2005, primarily
because we expect that our Irish subsidiary will recognize proportionately more of our earnings in 2006 as compared to 2005, and
such earnings are taxed at a lower statutory tax rate than in the U.S. However, if future earnings recognized by our Irish subsidiary are
not as proportionately great as we expect, our effective tax rate will be higher than we currently expect.

Results of Operations
     The following is a more detailed discussion of our financial condition and results of operations for the periods presented.

     The following table presents our historical operating results as a percentage of revenues for the periods indicated:

                                                                      Year Ended December 31,                   Three Months Ended
                                                                                                         September 30,        December 31,
                                                               2003            2004             2005         2005                 2005
                                                                                                                    (unaudited)
Consolidated Statement of Income Data:
Revenues                                                      100.0%          100.0%            100.0%         100.0%              100.0%
Costs and expenses:
      Cost of revenues                                         42.7            45.7             41.9            41.4                 40.4
      Research and development                                  6.2             7.1              7.9             9.6                  8.2
      Sales and marketing                                       8.2             7.7              7.1             6.7                  8.1
      General and administrative                                3.9             4.4              5.4             5.9                  5.9
      Stock-based compensation                                 15.6             8.7              3.3             2.9                  3.0
      Contribution to Google Foundation                        —                —                1.5             —                    4.7
      Non-recurring portion of settlement of disputes
          with Yahoo                                           —                6.3              —               —                    —
Total costs and expenses                                       76.6            79.9             67.1            66.5                 70.3
Income from operations                                         23.4            20.1             32.9            33.5                 29.7
Interest income and other, net                                  0.2             0.3              2.0             1.3                  3.6
Income before income taxes                                     23.6            20.4             34.9            34.8                 33.3
Net income                                                      7.2%           12.5%            23.9%           24.1%                19.4%

                                                                   47
Revenues
     The following table presents our revenues, by revenue source, for the periods presented:

                                                                           Year Ended December 31,                       Three Months Ended
                                                                                                                    September 30,    December 31,
                                                                    2003             2004              2005             2005             2005
                                                                                                                             (unaudited)
                                                                                                   (in thousands)
Advertising Revenues
      Google web sites                                        $ 792,063           $1,589,032       $3,377,060       $ 884,679        $1,098,213
      Google Network web sites                                   628,600           1,554,256        2,687,942           675,012         798,573
Total advertising revenues                                     1,420,663           3,143,288        6,065,002         1,559,691       1,896,786
Licensing and other revenues                                      45,271              45,935           73,558            18,765          22,307
Revenues                                                      $1,465,934          $3,189,223       $6,138,560       $ 1,578,456      $1,919,093

     The following table presents our revenues, by revenue source, as a percentage of total revenues for the periods presented:

                                                                  Year Ended December 31,                          Three Months Ended
                                                                                                           September 30,            December 31,
                                                           2003            2004             2005               2005                     2005
                                                                                                                        (unaudited)
Advertising Revenues
     Google web sites                                        54%            50%              55%                     56%                     57%
     Google Network web sites                                43             49               44                      43                      42
           Total advertising revenues                        97             99               99                      99                      99
                 Google web sites as % of
                     advertising revenues                   56              51              56                      57                      58
                 Google Network web sites as %
                     of advertising revenues                44              49              44                      43                      42
Licensing and other revenues                                 3%              1%              1%                      1%                      1%

     Growth in our revenues from 2004 to 2005 and from 2003 to 2004 resulted primarily from growth in advertising revenues. The
advertising revenue growth resulted primarily from increases in the total number of paid clicks and ads displayed through our
programs, rather than from changes in the average fees realized. The increase in the number of paid clicks was due to an increase in
aggregate traffic both on our web sites and those of our Google Network members, an increase in the number of Google Network
members, certain improvements in the monetization of traffic on our web sites and our Google Network member sites, and the
continued expansion of our global advertiser base.

       Growth in our revenues from the three months ended September 30, 2005 to the three months ended December 31, 2005 resulted
primarily from growth in revenues from ads on our web sites and growth in revenues from ads on our Google Network members’ web
sites. The advertising revenue growth resulted primarily from increases in the total number of paid clicks, rather than from changes in
the average fees realized. Our revenues grew by 14.0% from the three month period ended June 30, 2005 to the three month period
ended September 30, 2005, but grew by 21.6% from the three month period ended September 30, 2005 to the three month period
ended December 31, 2005. The reasons for the increases in the sequential quarter revenue growth rates are described in the following
two paragraphs.

      Growth in advertising revenues from our web sites from the three months ended September 30, 2005 to the three months ended
December 31, 2005 was $213.5 million or 24.1% compared to $147.5 million or 20.0% from the three months ended June 30, 2005 to
the three months ended September 30, 2005. The increase in the
                                                                   48
growth rate for the fourth quarter of 2005 is primarily the result of increased traffic, substantially due to seasonality, as well as certain
improvements in the monetization of traffic on our web sites and the continued expansion of our global advertiser base.

      Growth in advertising revenues from our Google Network members’ web sites from the three months ended September 30, 2005
to the three months ended December 31, 2005 was $123.6 million or 18.3%, compared to $44.8 million or 7.1% from the three
months ended June 30, 2005 to the three months ended September 30, 2005. The increase in the growth rate for the fourth quarter of
2005 is primarily attributable to increased traffic, substantially due to seasonality, as well as certain improvements in the monetization
of traffic and the continued expansion of our global advertiser base and partner network.

     Revenues realized through the Google Publication Ads Program were not material.

    Licensing and other revenues increased by $3.5 million or 18.9% from the three months ended September 30, 2005 to the three
months ended December 31, 2005 primarily as a result of increased sales of our Search Appliances.

     We believe that the increase in the number of paid clicks is the result of the relevance and quality of both the search results and
advertisements displayed, which results in more searches, advertisers, Google Network members and other partners, and ultimately,
more paid clicks. We expect that our revenue growth rates will generally decline in the future as a result of increasing competition
and the difficulty of maintaining growth rates as our revenues increase to higher levels.

      We expect to settle a class-action lawsuit in Arkansas which will require us to pay attorneys’ fees and issue AdWords credits for
a total of up to $90 million. The AdWords credits will be accounted for as a reduction to revenues in the periods they are redeemed
(the attorneys’ fees will be expensed, most likely in the first quarter of 2006).

Revenues by Geography
     Domestic and international revenues as a percentage of consolidated revenues, determined based on the billing addresses of our
advertisers, are set forth below.

                                                                        Year Ended December 31,                  Three Months Ended
                                                                                                          September 30,          December 31,
                                                                 2003            2004             2005        2005                   2005
                                                                                                                      (unaudited)
United States                                                     71%              66%             61%              61%                   62%
United Kingdom                                                    10%              13%             14%              15%                   14%
Rest of the world                                                 19%              21%             25%              24%                   24%

      The slight decrease in the United Kingdom revenues as a percentage of total revenues from the three months ended
September 30, 2005 to the three months ended December 31, 2005 is attributable to seasonal trends as well as an unfavorable impact
to revenues due to the strengthening of the dollar relative to the British Pound in the fourth quarter compared to the third quarter.
Advertising spending in certain verticals (advertising segments) in the United Kingdom decreased from the three months ended
September 30, 2005 to the three months ended December 31, 2005 due to seasonality. In addition, we experienced an unfavorable
impact to other international revenues due to the strengthening of the dollar relative to other foreign currencies primarily the Euro and
the Japanese Yen. Had foreign exchange rates remained constant from the three months ended September 30, 2005 to the three
months ended December 31, 2005, our revenues would have been $12.2 million, or 0.6% higher.

    The yearly growth in international revenues is the result of our efforts to provide search results to international users and deliver
more ads from non-U.S. advertisers. While international revenues accounted for
                                                                        49
approximately 34% of our total revenues in 2004 and 39% in 2005, more than half of our user traffic came from outside the U.S.
Although we expect to continue to make investments in international markets, they may not result in an increase in our international
revenues as a percentage of total revenues in 2006 or thereafter. See Note 13 of Notes to Consolidated Financial Statements included
as part of this Form 10-K for additional information about geographic areas.

Costs and Expenses
     Cost of Revenues. Cost of revenues consists primarily of traffic acquisition costs. Traffic acquisition costs consist of amounts
ultimately paid to our Google Network members, as well as to partners who direct search queries to our web sites. These amounts are
primarily based on revenue share arrangements under which we pay our Google Network members and other partners a portion of the
fees we receive from our advertisers. In addition, certain AdSense agreements obligate us to make guaranteed minimum revenue
share payments to Google Network members based on their achieving defined performance terms, such as number of search queries
or advertisements displayed. We amortize guaranteed minimum revenue share prepayments (or accrete an amount payable to our
Google Network member if the payment is due in arrears) based on the number of search queries or advertisements displayed on the
Google Network member’s web site or the actual revenue share amounts, whichever is greater. In addition, concurrent with the
commencement of a small number of AdSense and other agreements, we have purchased certain items from, or provided other
consideration to, our Google Network members and partners. We have determined that certain of these amounts are prepaid traffic
acquisition costs and are amortized on a straight-line basis over the terms of the related agreements.

     The following table presents our traffic acquisition costs (dollars in millions), and traffic acquisition costs as a percentage of
advertising revenues, for the periods presented.

                                                                   Year Ended December 31,                         Three Months Ended
                                                                                                            September 30,        December 31,
                                                          2003              2004               2005             2005                 2005
                                                                                                                       (unaudited)
Traffic acquisition costs                               $526.5            $1,228.7           $2,114.9       $     529.9          $    628.9
Traffic acquisition costs as a percentage of
   advertising revenues                                      37%                   39%                35%            34%                  33%

     In addition, cost of revenues consists of the expenses associated with the operation of our data centers, including depreciation,
labor, energy and bandwidth costs. Cost of revenues also includes credit card and other transaction fees related to processing
customer transactions, expenses related to the amortization of purchased and licensed technologies as well as expenses related to
acquiring content on our web sites.

      Cost of revenues increased by $121.6 million to $775.4 million (or 40.4% of revenues) in the three months ended December 31,
2005, from $653.8 million (or 41.4% of revenues) in the three months ended September 30, 2005. This increase in dollars was
primarily the result of additional traffic acquisition costs and the depreciation of additional information technology assets purchased
in the current and prior periods and additional data center costs required to manage more Internet traffic, advertising transactions and
new products and services. There was an increase in traffic acquisition costs of $99.1 million primarily resulting from more advertiser
fees generated through our AdSense program, as well as an increase in data center costs of $17.0 million primarily resulting from the
depreciation of additional information technology assets purchased in the current and prior periods. The decrease in cost of revenues
as a percentage of revenues, as well as traffic acquisition costs as a percentage of advertising revenues, was primarily the result of
proportionately greater revenues from our web sites compared to our Google Network members’ web sites.

      Cost of revenues increased by $1,113.8 million to $2,571.5 million (or 41.9% of revenues) in 2005, from $1,457.7 million (or
45.7% of revenues) in 2004. This increase in dollars was primarily the result of additional traffic acquisition costs, the depreciation of
additional information technology assets purchased in the current
                                                                     50
and prior periods, additional data center costs, additional credit card and other transaction fees, and additional expenses related to
acquiring content on our web sites. There was an increase in traffic acquisition costs of $886.3 million primarily resulting from more
advertiser fees generated through our AdSense program and an increase in data center costs of $138.3 million primarily resulting from
the depreciation of additional information technology assets purchased in the current and prior periods as well as additional labor
required to manage the data centers. In addition, there was an increase in credit card and other transaction processing fees of $36.7
million resulting from more advertiser fees being generated through AdWords. The decrease in cost of revenues as a percentage of
revenues, as well as traffic acquisition costs as a percentage of advertising revenues, was primarily the result of proportionately
greater revenues from our web sites compared to our Google Network members’ web sites.

      Cost of revenues increased by $831.8 million to $1,457.7 million (or 45.7% of revenues) in 2004, from $625.9 million (or
42.7% of revenues) in 2003. The increase in dollars was primarily the result of an increase in traffic acquisition costs of $702.1
million primarily resulting from more advertiser fees generated through our AdSense program, as well as an increase in data center
costs of $88.7 million primarily resulting from the depreciation of additional information technology assets purchased in the current
and prior periods and other data center costs required to manage more Internet traffic, advertising transactions and new products and
services. In addition, there was an increase in credit card and other transaction processing fees of $26.0 million resulting from more
advertiser fees generated through AdWords. The increase in cost of revenues as a percentage of revenues, as well as traffic acquisition
costs as a percentage of advertising revenues, was primarily the result of proportionately greater revenues from our Google Network
members’ web sites compared to our web sites.

     We expect cost of revenues to continue to increase in dollars in 2006 compared to 2005, primarily as a result of forecasted
increases in traffic acquisition costs, data center costs and content acquisition costs. However, traffic acquisition costs as a percentage
of advertising revenues may fluctuate in the future based on a number of factors, including the following:
     •   the relative growth rates of revenues from our web sites and from our Google Network members’ web sites;
     •   whether we are able to enter into more AdSense arrangements that provide for lower revenue share obligations or whether
         increased competition for arrangements with existing and potential Google Network members results in less favorable
         revenue share arrangements; and
     •   whether we share with existing and new partners proportionately more of the aggregate advertising fees that we earn from
         paid clicks derived from search queries these partners direct to our web sites.

     Research and Development. Research and development expenses consist primarily of compensation and related costs for
personnel responsible for the research and development of new products and services, as well as significant improvements to existing
products and services. We expense research and development costs as they are incurred.

      Research and development expenses increased by $5.4 million to $157.1 million (or 8.2% of revenues) in the three months
ended December 31, 2005, from $151.7 million (or 9.6% of revenues) in the three months ended September 30, 2005. This increase in
dollars was primarily due to an increase in labor and facilities related costs of $16.7 million, primarily as a result of a 14% and 48%
increase in research and development headcount from September 30, 2005 and June 30, 2005 to December 31, 2005. In addition,
depreciation and related expenses increased by $5.4 million primarily as a result of additional information technology assets
purchased over the six months ended December 31, 2005. Professional services expenses increased by $1.4 million. These increases
were substantially offset by a $19.6 million decrease in in-process research and development expenses recognized as a result of
acquisitions from the three months ended September 30, 2005 to the three months ended December 31, 2005. Note 4 of Notes to
Consolidated Financial Statements included as part of this Form 10-K describes further purchased in-process research and
development expenses.
                                                                    51
      Research and development expenses increased by $258.4 million to $484.0 million (or 7.9% of revenues) in 2005, from $225.6
million (or 7.1% of revenues) in 2004. This increase was primarily due to an increase in labor and facilities related costs of $188.2
million as a result of a 119% increase in research and development headcount. In addition, depreciation and related expenses
increased by $42.3 million primarily as a result of increasing dollar amounts of information technology assets purchased during 2004
and 2005. Also, in-process research and development expenses increased by $10.7 million as a result of acquisitions, and professional
services increased $9.0 million.

      Research and development expenses increased by $134.4 million to $225.6 million (or 7.1% of revenues) in 2004, from $91.2
million (or 6.2% of revenues) in 2003. This increase was primarily due to an increase in labor and facilities related costs of $98.7
million as a result of a 106% increase in research and development headcount. In addition, depreciation and related expenses
increased by $28.2 million primarily as a result of increasing dollar amounts of information technology assets purchased during 2003
and 2004.

      We anticipate that research and development expenses will continue to increase in dollar amount and may increase as a
percentage of revenues in 2006 and future periods because we expect to hire more research and development personnel and build the
infrastructure required to support the development of new, and improve existing, products and services.

     Sales and Marketing. Sales and marketing expenses consist primarily of compensation and related costs for personnel engaged
in customer service and sales and sales support functions, as well as promotional and advertising expenditures.

     Sales and marketing expenses increased $49.8 million to $154.8 million (or 8.1% of revenues) in the three months ended
December 31, 2005, from $105.0 million (or 6.7% of revenues) in the three months ended September 30, 2005. This increase was
primarily due to an increase in promotional and advertising expenses of $28.4 million, a majority of which were related to Google
Toolbar and other product distribution costs and an increase in labor and facilities related costs of $16.2 million mostly as a result of a
12% and 23% increase in sales and marketing headcount from September 30, 2005 and June 30, 2005 to December 31, 2005. The
increase in sales and marketing personnel was a result of our on-going efforts to secure new, and to provide support to our existing
users, advertisers and Google Network members on a worldwide basis. For instance, we have hired personnel to help our advertisers
maximize their return on investment through the selection of appropriate keywords and have promoted the distribution of the Google
Toolbar and other products in order to make our services easier to access.

      Sales and marketing expenses increased $193.4 million to $439.7 million (or 7.1% of revenues) in 2005, from $246.3 million (or
7.7% of revenues) in 2004. This increase in dollars was primarily due to an increase in labor and facilities related costs of $101.6
million mostly as a result of a 58% increase in sales and marketing headcount. In addition, promotional and advertising expenses
increased $65.2 million, depreciation and related expenses increased $13.0 million, office related expenses increased $6.5 million and
travel-related expenses increased $6.0 million. The increase in sales and marketing personnel, promotional, advertising, depreciation,
office-related and travel-related expenses was a result of our on-going efforts to secure new, and to provide support to our existing,
users, advertisers and Google Network members, on a worldwide basis, as well as promote the distribution of the Google Toolbar and
other products in order to make our services easier to access.

      Sales and marketing expenses increased $126.0 million to $246.3 million (or 7.7% of revenues) in 2004, from $120.3 million (or
8.2% of revenues) in 2003. This increase in dollars was primarily due to an increase in labor and facilities related costs of $91.8
million mostly as a result of a 74% increase in sales and marketing headcount. In addition, promotional and advertising expenses
increased $17.3 million and travel-related expenses increased $3.3 million. The increase in sales and marketing personnel and
advertising, promotional and travel-related expenses was a result of our on-going efforts to secure new, and to provide support to our
existing, users, advertisers and Google Network members, on a worldwide basis.
                                                                    52
      We anticipate sales and marketing expenses will continue to increase in dollar amount and may increase as a percentage of
revenues in 2006 and future periods as we continue to expand our business on a worldwide basis. A significant portion of these
expected increases relate to our plan to increase promotional and advertising expenditures, primarily toolbar and other product
distributions, as well as add support personnel to increase the level of service we provide to our advertisers and Google Network
members. We also plan to add a significant number of international sales personnel to support our worldwide expansion.

      General and Administrative. General and administrative expenses consist primarily of compensation and related costs for
personnel and facilities related to our finance, human resources, facilities, information technology and legal organizations, and fees
for professional services. Professional services are principally comprised of outside legal, audit and information technology
consulting and outsourcing services.

      General and administrative expenses increased $21.7 million to $114.1 million (or 5.9% of revenues) in the three months ended
December 31, 2005, from $92.4 million (or 5.9% of revenues) in the three months ended September 30, 2005. This increase in dollars
was primarily due to an increase in labor and facilities related costs of $10.8 million, primarily as a result of a 16% and 38% increase
in headcount from September 30, 2005 and June 30, 2005 to December 31, 2005, an increase in professional services fees of $5.1
million and an increase in depreciation and related expenses of $2.1 million. The additional personnel, professional services fees and
depreciation and related expenses are the result of the growth of our business.

      General and administrative expenses increased $195.6 million to $335.3 million (or 5.4% of revenues) in 2005, from $139.7
million (or 4.4% of revenues) in 2004. This increase in dollars was primarily due to an increase in labor and facilities related costs of
$98.3 million, primarily as a result of an 101% increase in headcount, an increase in professional services fees of $58.7 million, an
increase in depreciation and related expenses of $10.1 million, an increase in bad debt expenses of $8.2 million, an increase in travel
and related expenses of $4.7 million and an increase in office and related expenses of $4.3 million. The additional personnel,
professional services fees, depreciation, bad debt, travel and office and related expenses are the result of the growth of our business.

      General and administrative expenses increased $83.0 million to $139.7 million (or 4.4% of revenues) in 2004, from $56.7
million (or 3.9% of revenues) in 2003. This increase in dollars was primarily due to an increase in labor and facilities related costs of
$43.1 million, primarily as a result of an 85% increase in headcount, an increase in professional services fees of $25.4 million, an
increase in depreciation and related expenses of $7.9 million and an increase in the amortization of intangibles of $4.7 million. The
additional personnel, professional services fees and depreciation and related expenses are the result of the growth of our business.

      As we expand our business and incur additional expenses associated with being a public company, we believe general and
administrative expenses will increase in dollar amount and may increase as a percentage of revenues in 2006 and in future periods.
Also, we expect to settle a class-action lawsuit in Arkansas which will require us to pay attorneys’ fees and issue AdWords credits for
a total of up to $90 million. The attorneys’ fees will be expensed, most likely in the first quarter of 2006 (the AdWords credits will be
accounted for as a reduction to revenues in the periods they are redeemed).

      Stock-Based Compensation. Prior to our initial public offering, we typically granted stock options at exercise prices equal to or
less than the value of the underlying stock as determined by our board of directors on the date of option grant. For purposes of
financial accounting, we applied hindsight within each year or quarter prior to our initial public offering to arrive at reassessed values
for the shares underlying these options. We recorded the difference between the exercise price of an option awarded to an employee
and the reassessed value of the underlying shares on the date of grant as deferred stock-based compensation. The determination of the
reassessed value of stock underlying options is discussed in detail below in Critical Accounting Policies and Estimates—Stock-Based
Compensation, included elsewhere in this Form 10-K. We recognized compensation expense as we amortized the deferred stock-
based compensation amounts on an accelerated basis over the related vesting periods, primarily four or five years.
                                                                    53
     After our initial public offering in August 2004, options have been primarily granted at exercise prices equal to the fair market
value of the underlying stock on the date of option grant and, accordingly, related stock-based compensation recognized has been
immaterial.

     Also, in the fourth quarter of 2004, we began granting restricted stock units (“RSUs”) to certain employees under our Founders’
Award and other programs. RSUs under our Founders’ Award program are issued to individuals on teams that have made
extraordinary contributions to Google. Stock-based compensation has been measured based on the fair values of the underlying shares
on the dates of grant and recognized on an accelerated basis over the four year vesting periods. In the second quarter of 2005, we
began granting RSUs to all newly hired employees. Primarily, these RSUs vest from zero to 37.5 percent of the number granted
amount at the end of each of the four years from date of hire based on the employee’s performance. We recognized compensation
expense for these RSUs under the variable method based on the fair market value of the underlying shares at the end of each quarter
within the vesting periods.

      In addition, in the past we have awarded options to non-employees to purchase our common stock. Stock-based compensation
related to non-employees is measured on a fair-value basis using the Black-Scholes-Merton valuation model as the options are earned.

      The above is a discussion of the accounting for our stock awards through the end of 2005 under the accounting rules then in
effect. For a discussion of the accounting for our stock awards under SFAS No. 123R (revised 2004), Share-based Payment which we
adopted beginning January 1, 2006, see Effect of Recent Accounting Pronouncement included elsewhere in this Form 10-K.

     Stock-based compensation increased $11.9 million to $58.2 million (or 3.0% of revenues) in the three months ended
December 31, 2005 from $46.3 million (or 2.9% of revenues) in the three months ended September 30, 2005. This increase was due
to more RSUs outstanding and a greater fair market value of our stock at December 31, 2005 compared to September 30, 2005, which
increased the compensation expense related to outstanding RSUs accounted for under the variable method and options held by non-
employees. This increase was partially offset by less amortization of deferred stock-based compensation amounts from prior periods.

      Stock-based compensation decreased $78.0 million to $200.7 million (or 3.3% of revenues) in 2005 from $278.7 million (or
8.7% of revenues) in 2004. This decrease was primarily driven by a decrease in the level of stock option grants during 2005 and the
immediately preceding quarters, as well as a substantial decrease in the intrinsic values of these options on the dates of grant,
compared to the first half of 2004 and prior periods. This decrease was partially offset by $46.7 million of stock-based compensation
that we recognized in 2005 compared to $1.7 million in 2004 related to all RSUs which we first granted in the fourth quarter of 2004,
as well as increased compensation expense related to options held by non-employees as a result of a greater average fair market value
of our stock in 2005 compared to 2004.

     Stock-based compensation increased $49.3 million to $278.7 million (or 8.7% of revenues) in 2004 from $229.4 million (or
15.6% of revenues) in 2003. The increase in dollars was primarily driven by the generally larger differences between the exercise
prices and the reassessed values of the underlying common stock on the dates of grant, partially offset by a decrease in the level of
stock option grants, in periods immediately prior to our initial public offering. This increase was also partially offset by a decrease of
$6.9 million to $3.9 million of stock-based compensation recognized in 2004 related to the modification of terms of former
employees’ stock option agreements.

     For stock options and equity awards outstanding at December 31, 2005, we expect stock-based compensation to be
approximately $342.4 million in 2006, $183.9 million in 2007, $105.3 million in 2008, $44.4 million in 2009 and $0.7 million
thereafter. These amounts do not include stock-based compensation related to stock awards that have been and may be granted to
employees and directors subsequent to
                                                                    54
December 31, 2005 and stock awards that have been or may be granted to non-employees. Stock-based compensation related to these
awards will be different from our expectations to the extent forfeiture rates are different from what we have anticipated. In addition,
we expect stock awards issued in 2006 and in annual periods for the foreseeable future thereafter to be approximately one to one and
a half percent of common shares then outstanding.

     We recorded stock-based compensation expense for the fair values of stock options earned by non-employees of $15.8 million,
$15.0 million and $30.0 million in 2003, 2004 and 2005. At December 31, 2005, there were 202,090 unvested options held by non-
employees with a weighted-average exercise price of $3.59 and a weighted-average 25 months remaining vesting period. These
options primarily vest on a monthly and ratable basis. No options or other stock awards that vest over time were granted to non-
employees in the year ended December 31, 2005.

    See Note 1 of Notes to Consolidated Financial Statements, as well as Critical Accounting Policies and Estimates and Effect of
Recent Accounting Pronouncements, included elsewhere in this Form 10-K for additional information about stock-based
compensation.

Contribution to Google Foundation
     In the three months ended December 31, 2005, we made a non-recourse, non-refundable $90.0 million cash contribution to the
Google Foundation, a nonprofit related party of Google. As a result, this contribution was recorded as an expense in the period made.
We do not expect to make further donations to the Google Foundation for the foreseeable future. See Note 9 of Notes to Consolidated
Financial Statements included as part of this Form 10-K for additional information about the Google Foundation.

Non-recurring Portion of Settlement of Disputes with Yahoo
      On August 9, 2004, we and Yahoo entered into a settlement agreement resolving two disputes that had been pending between
us. The first dispute concerned a lawsuit filed by Yahoo’s wholly-owned subsidiary, Overture Services, Inc., against us in April 2002
asserting that certain services infringed Overture’s U.S. Patent No. 6,269,361. In our court filings, we denied that we infringed the
patent and alleged that the patent was invalid and unenforceable.

     The second dispute concerned a warrant held by Yahoo to purchase 3,719,056 shares of our stock in connection with a June
2000 services agreement. Pursuant to a conversion provision in the warrant, in June 2003 we issued 1,229,944 shares to Yahoo.
Yahoo contended it was entitled to a greater number of shares, while we contended that we had fully complied with the terms of the
warrant.

      As part of the settlement, Overture dismissed its patent lawsuit against us and has granted us a fully-paid, perpetual license to
the patent that was the subject of the lawsuit and several related patent applications held by Overture. The parties also mutually
released any claims against each other concerning the warrant dispute. In connection with the settlement of these two disputes, we
issued to Yahoo 2,700,000 shares of Class A common stock.

     We incurred a non-recurring non-cash charge of $201.0 million in the third quarter of 2004 related to this settlement. The non-
cash charge included among other items, the value of shares associated with the settlement of the warrant dispute. See Note 6 of
Notes to Consolidated Financial Statements included in this Form 10-K for additional information about the settlement of disputes
with Yahoo.

Interest Income and Other, Net
      Interest income and other of $70.2 million in the three months ended December 31, 2005 was primarily comprised of $68.3
million of interest income earned on our significantly greater average cash, cash equivalents
                                                                    55
and marketable securities balances during the fourth quarter of 2005 compared to the third quarter. These higher balances were
primarily a result of the $4.3 billion raised under our follow-on public offering completed in September 2005. In addition, we
recognized $1.4 million of rental income related to buildings we own and $1.1 million of other income related to grants received from
a foreign jurisdiction because we created new employment in that country. These income sources were partially offset by $400,000 of
net foreign exchange losses as a result of (i) the forward contracts we entered into to purchase U.S. dollars with foreign currencies to
offset the foreign exchange risk on certain intercompany assets and (ii) the net monetary assets denominated in currencies other than
the local currencies, and by $200,000 of other expenses.

      Interest income and other of $124.4 million in 2005 was primarily comprised of $121.0 million of interest income earned on our
significantly greater average cash, cash equivalents and marketable securities balances during 2005 compared to 2004, primarily as a
result of the $4.3 billion raised under our follow-on public offering completed in September 2005, as well as $1.6 billion of cash
flows provided by operating activities, less purchases of property and equipment. We recognized $6.2 million of net foreign exchange
gains as a result of (i) the forward contracts we entered into to purchase U.S. dollars with foreign currencies to offset the foreign
exchange risk on certain intercompany assets and (ii) the net monetary assets denominated in currencies other than the local
currencies. In addition, we recognized $1.5 million of rental income related to buildings we own and $1.1 million of other income
related to grants received from a foreign jurisdiction because we created new employment in that country. These income sources were
also offset by $4.6 million of realized losses on sales of marketable securities and $800,000 of interest and other expenses.

      Interest income and other of $10.0 million in 2004 was primarily comprised of $16.0 million of interest income earned on our
significantly greater average cash, cash equivalents and marketable securities balances and $1.9 million of other income related to
grants received from a foreign jurisdiction because we created new employment in that country. These income sources were partially
offset by approximately $6.7 million of net foreign exchange losses as a result of (i) the forward contracts we entered into to purchase
U.S. dollars with Euros to offset the foreign exchange risk on certain intercompany assets and (ii) the net monetary assets
denominated in currencies other than the local currencies. These income sources were also offset by $300,000 of realized losses on
sales of marketable securities and $900,000 of interest expense incurred on equipment loans and leases, including the amortization of
the fair value of warrants issued to lenders in prior years.

Provision for Income Taxes
      Our provision for income taxes increased to $267.6 million in the three months ended December 31, 2005 from $168.8 million
in the three months ended September 30, 2005. The increase in our provision for income taxes primarily resulted from an increase in
our effective tax rate, or our provision for income taxes as a percentage of our income before income taxes, to 41.8% in the three
months ended December 31, 2005 from 30.7% in the three months ended September 30, 2005. This increase was primarily because,
relative to our expectations, proportionately more of our earnings were recognized in the U.S. than by our subsidiaries outside the
U.S. in the fourth quarter of 2005 compared to the third quarter, and such earnings were taxed at a higher statutory tax rate than
outside the U.S. The proportionately lower earnings recognized by our subsidiaries outside the U.S. was primarily a result of
proportionately more expenses recognized by these subsidiaries than by the U.S. in the fourth quarter compared to the third quarter.
The increase in our provision for income taxes also resulted from increases in Federal and state income taxes, driven by higher
taxable income period over period.

      Our provision for income taxes increased to $676.3 million in 2005 from $251.1 million in 2004. The increase in our provision
for income taxes primarily resulted from increases in Federal and state income taxes, driven by higher taxable income period over
period. However, our effective tax rate, or our provision for income taxes as a percentage of our income before income taxes,
decreased to 31.6% in 2005 from 38.6% in 2004. This decrease is primarily because proportionately more of our earnings were
recognized by our subsidiaries outside of the U.S. compared to in the U.S. in 2005 compared to 2004, and such earnings were taxed at
a lower weighted average statutory tax rate than in the U.S. In addition, we realized a $42.2 million and $55.4 million reduction
                                                                   56
to our provision for income taxes in 2004 and 2005 as a result of disqualifying dispositions related to cumulative stock-based
compensation recognized for all of our incentive stock options. Without these discrete benefits, our effective tax rate would have been
higher than 31.6% in 2005 and 38.6% in 2004. We do not expect further significant reductions to our provision for income taxes as a
result of disqualifying dispositions that may occur in the future related to incentive stock options currently outstanding.

      Our provision for income taxes increased to $251.1 million in 2004 from $241.0 million in 2003. However, our effective tax
rate, or our provision for income taxes as a percentage of our income before income taxes, decreased to 38.6% in 2004 from 69.5% in
2003. This decrease is primarily a result of reductions to our provision for income taxes after our initial public offering in August
2004 related to certain stock-based compensation and disqualifying dispositions on incentive stock options. After our initial public
offering and through the end of the year, we reduced our provision for income taxes by $23.0 million and $70.0 million as a result of
stock-based compensation recognized during and prior to this period related to unexercised non-qualified stock options. In addition,
we reduced our provision for income taxes by $42.2 million as a result of disqualifying dispositions that occurred after our initial
public offering related to cumulative stock-based compensation recognized for all of our incentive stock options. No reductions were
made to our provision for income taxes in 2003 related to stock-based compensation. Without these reductions in 2004, our provision
for income taxes would have been increased by approximately $135.2 million, which would have increased our effective tax rate by
20 percentage points. The difference between this adjusted tax rate in 2004 and the actual rate of 69.5% in 2003 is primarily a result
of less stock-based compensation as a percentage of income before income taxes in 2004 compared to 2003.

      Our effective tax rate in 2006 is expected to be approximately 30%, but could fluctuate significantly on a quarterly basis and
could be adversely affected to the extent earnings are lower than anticipated in countries where we have lower statutory rates and
higher than anticipated in countries where we have higher statutory rates, by changes in the valuation of our deferred tax assets or
liabilities, or by changes in tax laws, regulations, accounting principles, or interpretations thereof. In addition, we are subject to the
continuous examination of our income tax returns by the Internal Revenue Service and other tax authorities. We regularly assess the
likelihood of adverse outcomes resulting from these examinations to determine the adequacy of our provision for income taxes.

     See Critical Accounting Policies and Estimates included elsewhere in this Form 10-K for additional information about our
provision for income taxes.

     A reconciliation of the federal statutory income tax rate to our effective tax rate is set forth in Note 12 of Notes to Consolidated
Financial Statements included in this Form 10-K.
                                                                    57
Quarterly Results of Operations
      You should read the following tables presenting our quarterly results of operations in conjunction with the consolidated financial
statements and related notes contained elsewhere in this Form 10-K. We have prepared the unaudited information on the same basis
as our audited consolidated financial statements. You should also keep in mind, as you read the following tables, that our operating
results for any quarter are not necessarily indicative of results for any future quarters or for a full year.

      The following table presents our unaudited quarterly results of operations for the eight quarters ended December 2005. This
table includes all adjustments, consisting only of normal recurring adjustments, that we consider necessary for fair presentation of our
financial position and operating results for the quarters presented. Both seasonal fluctuations in Internet usage and traditional retail
seasonality have affected, and are likely to continue to affect, our business. Internet usage generally slows during the summer months,
and commercial queries typically increase significantly in the fourth calendar quarter of each year. These seasonal trends have caused
and will likely continue to cause, fluctuations in our quarterly results, including fluctuations in sequential revenue growth rates. Prior
to the second quarter of 2004, these seasonal trends may have been masked by the substantial quarter over quarter growth of Internet
traffic focused on commercial transactions and ultimately by the substantial quarter over quarter growth in our revenues.

                                                                                                                    Quarter Ended
                                                                 Mar 31,       Jun 30,           Sep 30,       Dec 31,       Mar 31,      Jun 30,            Sep 30,        Dec 31,
                                                                  2004          2004              2004          2004          2005         2005               2005           2005
                                                                                                       (in thousands, except per share amounts)
                                                                                                                      (unaudited)
Consolidated Statements of Income Data:
Revenues                                                        $ 651,623     $ 700,212          $ 805,887     $ 1,031,501   $ 1,256,516   $ 1,384,495   $ 1,578,456    $ 1,919,093
Costs and expenses:
         Cost of revenues                                           315,398       326,377            362,099       453,779       545,208       597,095        653,826        775,381
         Research and development (1)                                35,019        45,762             57,409        87,442        79,412        95,772        151,721        157,072
         Sales and marketing                                         47,904        56,777             65,512        76,107        82,952        97,024        104,996        154,769
         General and administrative                                  21,506        25,577             40,774        51,843        57,266        71,568         92,434        114,077
             Stock-based compensation (2)                            76,473        74,761             67,981        59,531        48,908        47,338         46,308         58,154
         Contribution to Google Foundation                              —             —                  —             —             —             —              —           90,000
         Non-recurring portion of settlement of disputes with
             Yahoo                                                   —             —              201,000            —             —             —              —              —
Total costs and expenses                                         496,300       529,254            794,775        728,702       813,746       908,797      1,049,285      1,349,453
Income from operations                                           155,323       170,958             11,112        302,799       442,770       475,698        529,171        569,640
Interest income (expense) and other, net                             300        (1,498)             3,866          7,374        13,686        19,722         20,797         70,193
Income before income taxes                                       155,623       169,460             14,978        310,173       456,456       495,420        549,968        639,833
Provision (benefit) for income taxes (3)                          91,650        90,397            (37,005)       106,073        87,263       152,606        168,786        267,625
Net income                                                      $ 63,973      $ 79,063           $ 51,983      $ 204,100     $ 369,193     $ 342,814     $ 381,182      $ 372,208
Net income per share:
        Basic                                                   $      0.42   $      0.51        $      0.25   $      0.78   $      1.39   $      1.27   $       1.39   $       1.28
        Diluted                                                 $      0.24   $      0.30        $      0.19   $      0.71   $      1.29   $      1.19   $       1.32   $       1.22


(1) The results for the quarters ended December 31, 2004 and September 30, 2005 include $10.4 million and $20.8 million of in-process research and development expense
    related to acquisitions.
(2) Stock-based compensation, consisting of amortization of deferred stock-based compensation related to the values of restricted shares, certain restricted stock units and
    options issued to employees, as well as the values of other restricted stock units and options issued to employees and non-employees, is allocated in the table that follows.

                                                                                            58
                                                                                                                         Quarter Ended
                                                                                   Mar 31,      Jun 30,     Sep 30,     Dec 31,     Mar 31,    Jun 30,         Sep 30,      Dec 31,
                                                                                    2004         2004         2004       2004        2005       2005            2005         2005
                                                                                                             (in thousands, except per share amounts)
                                                                                                                            (unaudited)
Cost of revenues                                                                   $ 5,076      $ 2,546     $ 1,996 $ 1,696 $ 1,573 $ 1,024                   $ 1,328      $ 1,654
Research and development                                                             46,265       45,836      42,120     35,310      29,299     27,362          26,072       32,799
Sales and marketing                                                                  14,146       13,431      11,580     10,292        6,536     7,522           6,491        7,863
General and administrative                                                           10,986       12,948      12,285     12,233      11,500     11,430          12,417       15,838
                                                                                   $ 76,473     $ 74,761    $ 67,981 $ 59,531 $ 48,908 $ 47,338               $ 46,308     $ 58,154


(3) A reduction to our provision for income taxes of $46.0 million and $24.0 million was recorded in the third and fourth quarters of 2004 related to certain stock-based
    compensation charges recorded prior to the initial public offering. In addition, a reduction to our provision for income taxes of $42.2 million and $48.5 million was
    recorded in the fourth quarter of 2004 and the first quarter of 2005 as a result of disqualifying dispositions related to cumulative stock-based compensation recognized for
    all of our incentive stock options. We do not expect further significant reductions to our provision for income taxes as a result of disqualifying dispositions that may occur
    in the future related to incentive stock options currently outstanding.

     The following table presents our unaudited quarterly results of operations as a percentage of revenues for the eight quarters
ended December 31, 2005.

                                                                                                                   Quarter Ended
                                                                     Mar 31,        Jun 30,       Sep 30,        Dec 31,    Mar 31,           Jun 30,       Sep 30,       Dec 31,
                                                                      2004           2004          2004           2004       2005              2005          2005          2005
As Percentage of Revenues:
Revenues                                                                100.0%        100.0%        100.0%         100.0%         100.0%        100.0%        100.0%        100.0%
Costs and expenses:
Cost of revenues                                                          48.4          46.6          44.9          44.0           43.4          43.1          41.4          40.4
Research and development (1)                                               5.4           6.5           7.1           8.5            6.3           6.9           9.6           8.2
Sales and marketing                                                        7.4           8.1           8.1           7.4            6.6           7.0           6.7           8.1
General and administrative                                                 3.3           3.7           5.1           5.0            4.6           5.2           5.9           5.9
Stock-based compensation (2)                                              11.7          10.7           8.5           5.8            3.9           3.4           2.9           3.0
Contribution to Google Foundation                                         —              —             —             —              —             —             —             4.7
Non-recurring portion of settlement of disputes with Yahoo                —              —            24.9           —              —             —             —            —
Total costs and expenses                                                  76.2          75.6          98.6          70.7           64.8          65.6          66.5          70.3
Income from operations                                                    23.8          24.4           1.4          29.3           35.2          34.4          33.5          29.7
Interest income (expense) and other, net                                   0.1          (0.2)          0.5           0.7            1.1           1.4           1.3           3.6
Income before income taxes                                                23.9          24.2           1.9          30.0           36.3          35.8          34.8          33.3
Net income                                                                 9.8%         11.3%          6.5%         19.8%          29.4%         24.8%         24.1%         19.4%


(1) The results for the quarters ended December 31, 2004 and September 30, 2005 include $10.4 million and $20.8 million of in-process research and development expense
    related to acquisitions.
(2) Stock-based compensation, consisting of amortization of deferred stock-based compensation related to the values of restricted shares, certain restricted stock units and
    options issued to employees, as well as the values of other restricted stock units and options issued to employees and non-employees, is allocated in the table that follows.

                                                                                                                Quarter Ended
                                                                 Mar 31,          Jun 30,       Sep 30,       Dec 31,    Mar 31,            Jun 30,        Sep 30,        Dec 31,
                                                                  2004             2004          2004          2004        2005              2005           2005           2005
Cost of revenues                                                     0.8%             0.4%          0.3%          0.2%        0.1%              0.1%           0.1%           0.1%
Research and development                                             7.1              6.5           5.2           3.4         2.4               2.0            1.6            1.7
Sales and marketing                                                  2.1              1.9           1.5           1.0         0.5               0.5            0.4            0.4
General and administrative                                           1.7              1.9           1.5           1.2         0.9               0.8            0.8            0.8
                                                                    11.7%            10.7%          8.5%          5.8%        3.9%              3.4%           2.9%           3.0%

                                                                                        59
  Liquidity and Capital Resources
     In summary, our cash flows were:

                                                                                                        Year Ended December 31,
                                                                                              2003              2004              2005
                                                                                                             (in thousands)
Net cash provided by operating activities                                                   395,445        $      977,044     $ 2,459,422
Net cash used in investing activities                                                      (313,954)           (1,901,356)     (3,358,193)
Net cash provided by financing activities                                                     8,090             1,194,618       4,370,830

      As a result of the completion of our initial public offering in August 2004 and our follow-on stock offering in September 2005,
we raised $1,161.1 million and $4,287.2 million of net proceeds. At December 31, 2005, we had $8,034.2 million of cash, cash
equivalents and marketable securities, compared to $2,132.3 million and $334.7 million at December 31, 2004 and 2003. Cash
equivalents and marketable securities are comprised of highly liquid debt instruments of municipalities in the U.S. and the U.S.
government and its agencies, as well as an equity investment. Note 2 of Notes to Consolidated Financial Statements included as part
of this Form 10-K describes further the composition of our cash, cash equivalents and marketable securities.

      Our principal sources of liquidity are our cash, cash equivalents and marketable securities, as well as the cash flow that we
generate from our operations. At December 31, 2005 and December 31, 2004, we had unused letters of credit for $14.6 million and
$14.4 million. We believe that our existing cash, cash equivalents, marketable securities and cash generated from operations will be
sufficient to satisfy our currently anticipated cash requirements through at least the next 12 months. Our liquidity could be negatively
affected by a decrease in demand for our products and services. In addition, we may make acquisitions or license products and
technologies complementary to our business and may need to raise additional capital through future debt or equity financing to
provide for greater flexibility to fund any such acquisitions and licensing activities. Additional financing may not be available at all or
on terms favorable to us.

      Cash provided by operating activities in 2005 primarily consisted of net income adjusted for certain non-cash and other items
including depreciation, amortization, in-process research and development, stock-based compensation, tax benefits from stock-based
award activity and the effect of changes in working capital and other activities. Cash provided by operating activities in 2005 was
$2,459.4 million and consisted of net income of $1,465.4 million, adjustments for non-cash and other items of $950.3 million and
cash provided by working capital and other activities of $43.7 million. Adjustments for non-cash and other items primarily consisted
of $256.8 million of depreciation and amortization expense on property and equipment and $200.7 million of stock-based
compensation, $433.7 million of tax benefits from stock-based award activity, which represents a portion of the $552.5 million
reduction to income taxes payable that we realized over 2005 related to the exercise, sale or vesting of these awards. Working capital
activities primarily consisted of an increase of $372.3 million in accounts receivable due to growth in fees billed to our advertisers, an
increase of $247.4 million in accounts payable and accrued expenses due to the increase in purchases of property and equipment,
other general expenditures as well as increase in compensation as a result of the growth in the number of employees, an increase of
$93.3 million in accrued revenue share due to the growth in our AdSense programs and the timing of payments made to our Google
Network members and a net decrease in income taxes receivable and deferred income taxes of $87.4 million.

      Cash provided by operating activities in 2004 primarily consisted of net income adjusted for certain non-cash and other items
including depreciation, amortization, stock-based compensation, tax benefits from stock-based award activity, the non-recurring
portion of our settlement of disputes with Yahoo and the effect of changes in working capital and other activities. Cash provided by
operating activities in 2004 was $977.0 million and consisted of net income of $399.1 million, adjustments for non-cash and other
items of $831.1 million and offset by $253.2 million used in working capital and other activities. Adjustments for non-cash and other
items primarily included $278.7 million of stock-based compensation, $191.6 million of tax benefits from
                                                                    60
stock-based award activity, which contributed to a net increase in income taxes receivable on our balance sheet and which lowered
the amount of income taxes we paid in 2004, and $201.0 million related to the non-recurring portion of the settlement of disputes with
Yahoo. Working capital activities primarily consisted of a net increase in income taxes receivable and deferred income taxes of
$125.2 million primarily due to tax benefits resulting from the exercises of warrants, certain stock-based compensation charges and
disqualifying dispositions on incentive stock options. In addition, working capital activities consisted of an increase of $156.9 million
in accounts receivable due to the growth in fees billed to our advertisers.

      Cash provided by operating activities in 2003 was $395.4 million and consisted of net income of $105.6 million, adjustments for
non-cash and other items of $296.0 million and $6.2 million used by working capital and other activities. Working capital and other
activities primarily consisted of an increase of $90.4 million in accounts receivable due to the growth in fees billed our advertisers and
an increase of $58.9 million in prepaid revenue share, expenses and other assets, due primarily to an increase of $35.5 million related
to prepaid revenue share, as a result of several significant prepayments made in the fourth quarter of 2003, as well as an increase of
$11.0 million of restricted cash relating to our operating leases. This was partially offset by an increase of $74.6 million in accrued
revenue share due to the growth in our AdSense programs and the timing of payments made to our Google Network members and an
increase of $31.1 million in accrued expenses and other liabilities primarily due to an increase in annual bonuses as a result of the
growth in the number of employees. These bonuses were paid in the first quarter of 2004.

      As we expand our business internationally, we have offered payment terms to certain advertisers that are standard in their
locales, but longer than terms we would generally offer to our domestic advertisers. This may increase our working capital
requirements and may have a negative effect on cash flow provided by our operating activities. In addition, now that we have become
a public company, our cash-based compensation per employee has increased and will likely continue to increase (primarily in the
form of variable bonus awards and other incentive arrangements) in order to retain and attract employees. As part of our philanthropic
program, we made a $90.0 million cash contribution to the Google Foundation, a nonprofit related party, in the fourth quarter of 2005.
We do not expect to make additional contributions to the Google Foundation for the foreseeable future.

     In addition, new accounting rules we adopted on January 1, 2006 require the benefits of tax deductions in excess of recognized
compensation expense to be reported as a cash flow from financing activities, rather than as a cash flow from operating activities, as
was prescribed under accounting rules applicable through December 31, 2005. This requirement will likely significantly reduce and
increase the amounts we record as net cash provided by operating activities and net cash provided by financing activities,
respectively. Total cash flow will remain unchanged from what would have been reported under prior accounting rules. See also
Effect of Recent Accounting Pronouncements included elsewhere in this report.

      Cash used in investing activities in 2005 of $3,358.2 million was attributable to net purchases of marketable securities of
$2,418.7 million, capital expenditures of $838.2 million and cash consideration used in acquisitions and other investments of $101.3
million, net of cash acquired. Cash used in investing activities in 2004 of $1,901.4 million was attributable to net purchases of
marketable securities of $1,523.5 million, capital expenditures of $319.0 million and cash consideration used in acquisitions and other
investments of $58.9 million. Cash used in investing activities in 2003 of $314.0 million was attributable to capital expenditures of
$176.8 million, net purchases of marketable securities of $97.2 million and net cash consideration used in acquisitions of $40.0
million.

      Our investments in property and equipment, including information technology infrastructure and land and buildings, will likely
be significantly greater in 2006 compared to 2005.

      In addition, we expect to spend a significant amount of cash on acquisitions and other investments from time to time. Through
these acquisitions and investments, we acquire businesses, engineering teams, technologies, strategic relationships and other assets.
For instance, in December 2005 we agreed to purchase a
                                                                   61
five percent indirect equity interest in AOL for $1.0 billion in cash. In addition, we simultaneously agreed to enter into certain arms-
length commercial arrangements with AOL. We have substantially completed negotiations with respect to definitive agreements
governing this $1 billion investment in AOL, and currently expect that the investment will close in the second quarter of 2006. Also,
in February 2006 we completed our acquisition of all of the outstanding equity interests in dMarc Broadcasting, Inc. for total up-front
cash consideration of $102.0 million. In addition, we are obligated to make additional cash payments of up to $1,136.0 million if
certain performance targets are met through December 31, 2008. Since these contingent payments are based on the achievement of
performance targets, actual payments may be substantially lower. Note 14 of Notes to Consolidated Financial Statements included as
part of this Form 10-K describes further the material terms of these agreements.

      Also, as part of our philanthropic program, we expect to make equity and other investments in for-profit enterprises that aim to
alleviate poverty, improve the environment or achieve other socially or economically progressive objectives. We expect these
investments to be made primarily in cash and to be approximately $175.0 million over the three years ending December 31, 2008.

      Cash provided by financing activities in 2005 of $4,370.8 million was due primarily to net proceeds from our follow-on stock
offering of $4,287.2 million, after consideration of related issuance costs of $66.8 million. Cash provided by financing activities in
2004 of $1,194.6 million was due primarily to net proceeds from the initial public offering of $1,161.1 million, after consideration of
related issuance costs of $41.0 million. Cash provided by financing activities in 2003 of $8.1 million was due to proceeds from the
issuance of common stock pursuant to stock option exercises of $15.5 million, net of repurchases, offset by repayment of equipment
loan and lease obligations of $7.4 million.

Contractual Obligations as of December 31, 2005

                                                                                                  Payments due by period
                                                                                           Less than       13-48         49-60    More than
                                                                               Total       12 months      months         months   60 months
                                                                                                      (in millions)
                                                                                                      (unaudited)
Guaranteed minimum revenue share payments                                    $ 234.3       $ 179.5        $ 54.8        $ —       $   —
Operating lease obligations                                                     668.3         39.2         183.1          62.4      383.6
Purchase obligations                                                            109.7         37.1          71.8           0.8        —
Other long-term liabilities reflected on our balance sheet under GAAP            44.3         21.3          14.9           1.2        6.9
Total contractual obligations                                                $1,056.6      $ 277.1        $324.6        $ 64.4    $ 390.5

    The above table does not include contingent consideration that may be paid pursuant to asset purchases or business
combinations.

  Guaranteed Minimum Revenue Share Payments
     In connection with our AdSense revenue share agreements, we are periodically required to make non-cancelable guaranteed
minimum revenue share payments to a small number of our Google Network members over the term of the respective contracts.
Under our contracts, these guaranteed payments can vary based on our Google Network members achieving defined performance
terms, such as number of advertisements displayed or search queries. In some cases, certain guaranteed amounts will be adjusted
downward if our Google Network members do not meet their performance terms and, in some cases, these amounts will be adjusted
upward if they exceed their performance terms. The amounts included in the table above assume that the historical upward
performance adjustments with respect to each contract will continue, but do not make a similar assumption with respect to downward
adjustments. We believe these amounts best represent a reasonable
                                                                   62
estimate of the future minimum guaranteed payments. Actual guaranteed payments may differ from the estimates presented above. To
date, total advertiser fees generated under these AdSense agreements have exceeded the total guaranteed minimum revenue share
payments. Five of our Google Network members account for approximately 88% of the total future guaranteed minimum revenue
share payments and 10 of our Google Network members account for 95% of these payments. At December 31, 2005, our aggregate
outstanding non-cancelable minimum guarantee commitments totaled $234.3 million and these commitments are expected to be
settled through 2007.

     In addition, in connection with some other AdSense agreements, we have agreed to make an aggregate of $5.2 million of
minimum revenue share payments through 2007. This amount is not included in the above table since we generally have the right to
cancel these agreements at any time. Because we sometimes cancel agreements that perform poorly, we do not expect to make all of
these minimum revenue share payments.

  Operating Leases
     We have entered into various other non-cancelable operating lease agreements for our offices and certain of our data centers
throughout the U.S. and internationally with original lease periods expiring between 2006 and 2021. We recognize rent expense on
our operating leases on a straight-line basis at the commencement of the lease. Certain of these leases have free or escalating rent
payment provisions. We recognize rent expense under such leases on a straight-line basis over the term of the lease.

      During 2003, we entered into a nine-year sublease for our headquarters in Mountain View, California. According to the terms of
the sublease, we began making payments in April 2005 and payments will increase at three percent per annum thereafter. The lease
terminates on December 31, 2012; however, we may exercise two five-year renewal options at our discretion. We have an option to
purchase the property for approximately $172.4 million, which is exercisable in 2006.

  Purchase Obligations
      Purchase obligations represent non-cancelable contractual obligations at December 31, 2005. In addition, we had $71.0 million
of open purchase orders for which we have not received the related services or goods at December 31, 2005. This amount is not
included in the above table since we have the right to cancel the purchase orders upon 10 days notice prior to the date of delivery. The
majority of our purchase obligations are related to data center operations. These non-cancelable contractual obligations and open
purchase orders amounts do not include payments we may be obligated to make to vendors upon their attainment of milestones under
the related agreements.

Other long-term liabilities
      Other long-term liabilities consist of deferred rent liabilities related to certain operating leases and royalty payments related to
certain licensing agreements.

Off-Balance Sheet Entities
     At December 31, 2005 and 2004, we were not involved with any variable interest entities, as defined by the Financial
Accounting Standards Board (FASB) Interpretation No. 46 (Revised 2003), Consolidation of Variable Interest Entities—An
Interpretation of ARB No. 51, having a significant effect on the financial statements.

Critical Accounting Policies and Estimates
     We prepare our consolidated financial statements in accordance with accounting principles generally accepted in the U.S. In
doing so, we have to make estimates and assumptions that affect our reported amounts
                                                                     63
of assets, liabilities, revenues and expenses, as well as related disclosure of contingent assets and liabilities. In many cases, we could
reasonably have used different accounting policies and estimates. In some cases changes in the accounting estimates are reasonably
likely to occur from period to period. Accordingly, actual results could differ materially from our estimates. To the extent that there
are material differences between these estimates and actual results, our financial condition or results of operations will be affected.
We base our estimates on past experience and other assumptions that we believe are reasonable under the circumstances, and we
evaluate these estimates on an ongoing basis. We refer to accounting estimates of this type as critical accounting policies and
estimates, which we discuss further below. We have reviewed our critical accounting policies and estimates with the audit committee
of our board of directors.

  Income Taxes
      We are subject to income taxes in both the United States and numerous foreign jurisdictions. Significant judgment is required in
evaluating our tax positions and determining our provision for income taxes. During the ordinary course of business, there are many
transactions and calculations for which the ultimate tax determination is uncertain. We establish reserves for tax-related uncertainties
based on estimates of whether, and the extent to which, additional taxes and interest will be due. These reserves are established when,
despite our belief that our tax return positions are fully supportable, we believe that certain positions are likely to be challenged and
may not be sustained on review by tax authorities. We adjust these reserves in light of changing facts and circumstances, such as the
closing of a tax audit. The provision for income taxes includes the impact of reserve provisions and changes to reserves that are
considered appropriate, as well as the related net interest.

      Our effective tax rates differ from the statutory rate primarily due to the tax impact of foreign operations, research and
experimentation tax credits, state taxes, and certain benefits realized related to stock option activity (see also Incentive Stock Options,
“Disqualifying Dispositions” below). The effective tax rate was 31.6% and 38.6% for 2005 and 2004. Our future effective tax rates
could be adversely affected by earnings being lower than anticipated in countries where we have lower statutory rates and higher than
anticipated in countries where we have higher statutory rates, by changes in the valuation of our deferred tax assets or liabilities, or by
changes in tax laws, regulations, accounting principles, or interpretations thereof. In addition, we are subject to the continuous
examination of our income tax returns by the Internal Revenue Service and other tax authorities. We regularly assess the likelihood of
adverse outcomes resulting from these examinations to determine the adequacy of our provision for income taxes.

  Stock-Based Compensation
  Accounting for Stock-Based Awards to Employees
      Prior to the initial public offering, we typically granted stock options at exercise prices equal to or less than the value of the
underlying stock as determined by our board of directors on the date of option grant. For purposes of financial accounting, we applied
hindsight within each year or quarter prior to our initial public offering to arrive at reassessed values for the shares underlying these
options as of the dates of option grant. After the initial public offering, we have primarily granted options at exercise prices equal to
the fair market values of the underlying stock on the dates of option grant. There are two measures of value of our common stock that
were relevant to our accounting for equity compensation relating to our compensatory equity grants prior to our initial public offering:
     •   The “board-determined value” is the per share value of our common stock determined by our board of directors at the time
         the board made an equity grant, taking into account a variety of factors, including our historical and projected financial
         results, comparisons of comparable companies, risks facing us, as well as the liquidity of the common stock.
     •   The “reassessed value” is the per share value of our common stock determined by us in hindsight solely for the purpose of
         financial accounting for employee stock-based compensation.
                                                                    64
      We recorded deferred stock-based compensation to the extent that the reassessed value of the stock at the date of grant exceeded
the exercise price of the option. The reassessed values for accounting purposes were determined based on a number of factors and
methodologies. One of the significant methods we used to determine the reassessed values for the shares underlying options is
through a comparison of price multiples of our historical and forecasted earnings to certain public companies involved in the same or
similar lines of business. The market capitalizations of these companies increased significantly from January 2003 through July 2004
which contributed significantly to the increase in the reassessed values of our shares. We also considered our financial performance
and growth, primarily since January 2003. Our revenue and earnings growth rates contributed significantly to the increase in the
reassessed values of our shares. The reassessed values of our shares increased more significantly in dollar and percentage terms in
earlier periods compared to later ones which are reflective of the related revenue and earnings growth rates. We also retained third-
party advisors to provide two contemporaneous valuation analyses since January 2003 and used this information to support our own
valuation analyses. Please note that these reassessed values are inherently uncertain and highly subjective. If we had made different
assumptions, our deferred stock-based compensation amount, stock-based compensation expense, in-process research and
development expense, net income, net income per share and recorded goodwill amounts could have been significantly different.

      We have accounted for stock options issued to our employees and directors using the intrinsic value method under Accounting
Principles Board Opinion No. 25, Accounting for Stock Issued to Employees. The alternative is the fair value method as prescribed by
Statement of Financial Accounting Standards No. 123, Accounting for Stock-based Compensation. If we had used the fair value
method, our net income would have been reduced by approximately $14.8 and $102.6 million in the years ended December 31, 2004
and 2005. These amounts are substantially less than the differences the separate application of these two methods would have on net
income in future periods. This is primarily because the differences between the fair values of options granted prior to our initial public
offering determined using the Black-Scholes-Merton method (BSM) and the related reassessed intrinsic values on the dates of grant
were generally insignificant; whereas these differences were, and are expected to continue to be, significant for options granted after
the initial public offering. Also, the assumptions we make under the BSM method, such as expected term and stock-price volatility,
have and will have a significant effect on the determination of the fair values of options granted after the initial public offering.

      For instance, our assumptions about stock-price volatility have been based exclusively on the implied volatilities of publicly
traded options to buy our stock with contractual terms closest to the expected life of options granted to our employees. In addition,
our assumptions about the expected term have been based primarily on that of companies that have option vesting and contractual
terms, expected stock volatility and employee demographics and physical locations that are similar to ours. We have used this
comparable data because we have limited relevant historical information to support the expected exercise behavior of our employees
who have been granted options recently. This relevant historical information is limited because our stock has been publicly traded
since only August 2004, and the fair market value of our stock has increased substantially during this time. Accordingly, the exercise
behavior of employees who have been granted options recently may be different from that of employees who have exercised their
significantly in-the-money options after the initial public offering.

     If our expected term and stock-price volatility assumptions were different, the determination of the fair value of our stock
options on the date of grant could be materially different.

      See Note 1 of Notes to Consolidated Financial Statements for additional information about stock-based compensation, as well as
the anticipated effects on our financial results after our adoption of Statement of Financial Accounting Standards No. 123 (revised
2004), Share-Based Payment (“SFAS 123R”) beginning January 1, 2006.
                                                                   65
  Accounting for Stock-Based Awards to Non-employees
      We measure the fair value of options to purchase our common stock granted to non-employees throughout the vesting period as
they are earned, at which time we recognize a charge to stock-based compensation. The fair value is determined using the BSM
option-pricing model, which considers the exercise price relative to the reassessed values (for periods before the initial public
offering) or the fair market values (for periods after the initial public offering) of the underlying stock, the expected stock price
volatility, the expected life of the option, the risk-free interest rate and the dividend yield. As discussed above, the reassessed values
of the underlying stock were based on assumptions of matters that are inherently highly uncertain and subjective. If we had made
different assumptions about the reassessed value of our stock (for periods before the initial public offering), expected life or stock-
price volatility rates, the related stock-based compensation expense and our net income and net income per share amounts would have
been different.

  Incentive Stock Options, “Disqualifying Dispositions”
      The recipient of an incentive stock option must hold the resultant shares for at least two years from the date of grant and one
year from the date of exercise in order to receive favorable “capital gains” tax treatment on any profit realized from the sale of those
shares. If this holding period is not met, then all or a portion of the profit realized by the individual is taxed at ordinary income tax
rates. If we include this profit in an individual’s taxable compensation, then we can deduct it as compensation expense on our
corporate tax return. These benefits have been recorded as a reduction to our income taxes payable or increase to our income taxes
receivable, which has ultimately improved our net cash provided by operating activities. In addition, we have applied the portfolio
method to determine the portion of this benefit that is recorded as a reduction to our provision for income taxes as it is more
practicable than the alternative individual award method discussed below. Under the portfolio method, to the extent the cumulative
stock-based compensation recognized related to all incentive stock options multiplied by the statutory tax rate is greater than the
cumulative disqualifying disposition benefit, the reduction to our provision for income taxes will equal the related reduction to
income taxes payable or increase to our income taxes receivable. In 2004, the increase to our income taxes receivable for
disqualifying dispositions equaled the reduction to our provision for income taxes of $42.2 million. In 2005, the increase to our
income taxes receivable or decrease in income taxes payable for disqualifying dispositions of $314.2 million exceeded the reduction
to our provision for income taxes of $55.4 million. This difference of $258.8 million was recorded as an increase to additional paid-in
capital on our balance sheet. We do not expect for the foreseeable future further significant reductions to our provision for income
taxes as a result of disqualifying dispositions that may occur in the future related to incentive stock options currently outstanding.

      As mentioned above, an alternative to the portfolio method is the individual award method. Under the individual award method,
to the extent the cumulative stock-based compensation recognized under any particular incentive stock option grant multiplied by the
statutory tax rate is greater than the related cumulative disqualifying disposition benefit, the reduction to our provision for income
taxes will equal the related reduction to income taxes payable or increase to our income taxes receivable for that particular grant.
However, once and to the extent the cumulative disqualifying disposition benefit recognized under any particular incentive stock
option grant exceeds the related cumulative stock-based compensation multiplied by the statutory tax rate, the disqualifying
disposition benefit will be recorded as additional paid-in capital on our balance sheet rather than as a reduction to our provision for
income taxes. If we had used the individual award method rather than the portfolio method, the reduction to our provision for income
taxes related to disqualifying dispositions would have been less than the $55.4 million realized in 2005.

      In December 2004, the Financial Accounting Standards Board (FASB) issued SFAS 123R. Under SFAS 123R, we will be
required to use the individual award method to account for any disqualifying dispositions related to any incentive stock options
granted after December 31, 2005 (See also Effect of Recent Accounting Pronouncements, below). As a result, we do not expect that
the application of this method to our accounting for disqualifying dispositions related to incentive stock options currently outstanding
will effect our provision for income taxes or our effective tax rate for the foreseeable future.
                                                                   66
  Effect of Recent Accounting Pronouncements
      In December 2004, the Financial Accounting Standards Board issued SFAS 123R which addresses the accounting for share-
based payment transactions in which an enterprise receives employee services in exchange for equity instruments of the enterprise or
liabilities that are based on the fair value of the enterprise’s equity instruments or that may be settled by the issuance of such equity
instruments. SFAS 123R eliminates the ability to account for share-based compensation transactions using the intrinsic value method
under Accounting Principles Board Opinion No. 25 (“APB 25”), Accounting for Stock Issued to Employees, and generally would
require instead that such transactions be accounted for using a fair-value-based method. SFAS 123R requires the use of an option
pricing model for estimating fair value, which is amortized to expense over the service periods. In April 2005, the Securities and
Exchange Commission amended the compliance dates for SFAS 123R. In accordance with this amendment, we have adopted the
requirements of SFAS 123R beginning January 1, 2006.

      If we had adopted the provisions of SFAS 123 at the beginning of 2004, net income would have been reduced by approximately
$14.8 million and $102.6 million in 2004 and 2005. The additional stock-based compensation, net of income taxes, that would have
been recognized under SFAS 123 in 2004 (and to a lesser extent, in 2005) is a function of the generally insignificant differences
between the intrinsic values of stock options granted prior to the initial public offering and the related fair values on the dates of grant
determined using the BSM method. After the initial public offering, we have primarily granted stock options with no intrinsic value
and expect to continue to do so in the foreseeable future. As the fair values of these options on the dates of grant are and will be
significantly greater than the related intrinsic values, we will recognize significantly greater stock-based compensation after the
adoption of SFAS 123R than we would have recognized had we continued to apply APB 25, and significantly greater than the
aforementioned additional stock-based compensation amounts, net of income taxes. The stock-based compensation we will recognize
after the adoption of SFAS 123R will also be affected by the number and type of stock-based awards granted in the future and the
assumptions used under the BSM method for determining the fair values of options.

      The provision for income taxes includes a reduction for disqualifying dispositions on incentive stock options using the portfolio
rather than the individual award method. The portfolio method was used because it was more practicable to do so. SFAS 123R
requires the use of the individual award method, which we will use to account for any disqualifying dispositions related to any
incentive stock options granted after December 31, 2005. If we had used the individual award method, our net income would have
been reduced further than the aforementioned $102.6 million in 2005 had we adopted the provisions of SFAS 123.

      We will adopt the provisions of SFAS 123R using the modified-prospective-transition method. Under this method, we will
recognize stock-based compensation over the related service periods for any stock-awards issued after December 31, 2005, as well as
for all stock awards issued prior to January 1, 2006 for which the requisite service has not been provided as of the date we adopt the
requirements of SFAS 123R. Stock-based compensation will be measured based on the fair values of all stock awards on the dates of
grant.

      We will continue to recognize stock-based compensation after the date of adoption of SFAS 123R using the accelerated method
for all stock awards issued prior to January 1, 2006, other than RSUs issued to new employees that vest based on the employee’s
performance for which we will use the straight-line method. We have elected to recognize stock-based compensation after the date of
adoption of SFAS 123R using the straight-line method for all stock awards issued after January 1, 2006, which will result in the
recognition of less stock-based compensation over at least the next several years compared to that which would have been recognized
had we continued to use the accelerated method.

     As noted above, prior to the adoption of SFAS 123R, we accounted for RSUs issued to new employees that vest based on the
employee’s performance under the variable method, under which stock-based compensation is measured based on the fair value of the
underlying shares at the end of each quarter within the vesting periods. As noted above, upon adoption of SFAS 123R stock-based
compensation will be measured based on the fair
                                                                     67
values of the underlying shares on the dates of grant for all such outstanding RSUs. As a result, to the extent the fair value of the
underlying shares is greater at the vesting dates compared to the dates of grant, then we would recognize less stock-based
compensation in periods after the adoption of SFAS 123R then we would have had we continued to use the variable method.

      SFAS 123R requires that the deferred stock-based compensation on our balance sheet on the date of adoption be netted against
additional paid-in capital. At December 31, 2005, we had $119.0 million of deferred stock-based compensation on our balance sheet.

      For stock awards outstanding at December 31, 2005, we expect stock-based compensation to be approximately $342.4 million in
2006, $183.9 million in 2007, $105.3 million in 2008, $44.4 million in 2009 and $0.7 million thereafter. These amounts do not
include stock-based compensation related to stock awards that have been and may be granted to employees and directors subsequent
to December 31, 2005 and stock awards that have been or may be granted to non-employees. In addition, stock-based compensation
related to these awards will be different from our expectations to the extent forfeiture rates are different from what we have
anticipated. In addition, we expect stock awards issued in 2006 and in annual periods for the foreseeable future thereafter to be
approximately one to one and a half percent of common shares then outstanding.

      Statement 123(R) also requires the benefits of tax deductions in excess of recognized compensation expense to be reported as a
cash flow from financing activities, rather than as a cash flow from operating activities, as was prescribed under accounting rules
applicable through December 31, 2005 and presented as tax benefits from stock-based award activity in the consolidated statements
of cash flows. This requirement will likely significantly reduce and increase the amounts we record as net cash provided by operating
activities and net cash provided by financing activities, respectively. Total cash flow will remain unchanged from what would have
been reported under prior accounting rules.

     In March 2005, the Securities and Exchange Commission issued Staff Accounting Bulletin No. 107. In accordance with this
Bulletin, effective January 1, 2006 we will no longer present stock-based compensation separately on our statements of income.
Instead we will present stock-based compensation in the same lines as cash compensation paid to the same individuals.

      In May 2005, the FASB issued SFAS No. 154, Accounting Changes and Error Corrections, a replacement of Accounting
Principles Board Opinion No. 20, Accounting Changes, and SFAS No. 3, Reporting Accounting Changes in Interim Financial
Statements (“SFAS 154”). SFAS 154 changes the requirements for the accounting for, and reporting of, a change in accounting
principle. Previously, voluntary changes in accounting principles were generally required to be recognized by way of a cumulative
effect adjustment within net income during the period of the change. SFAS 154 requires retrospective application to prior periods’
financial statements, unless it is impracticable to determine either the period-specific effects or the cumulative effect of the change.
SFAS 154 is effective for accounting changes made in fiscal years beginning after December 15, 2005; however, the statement does
not change the transition provisions of any existing accounting pronouncements. We do not believe that the adoption of SFAS 154 on
January 1, 2006 will have a material effect on our financial position, cash flows or results of operations.

     In November 2005, the FASB issued FASB Staff Position (FSP) Nos. FAS 115-1 and FAS 124-1, The Meaning of Other-Than-
Temporary Impairment and its Application to Certain Investments. FSP Nos. FAS 115-1 and FAS 124-1 amend SFAS No. 115,
Accounting for Certain Investments in Debt and Equity Securities, SFAS No. 124, Accounting for Certain Investments Held by Not-
for-Profit Organizations, as well as APB Opinion No. 18, The Equity Method of Accounting for Investments in Common Stock. This
guidance nullifies certain requirements of EITF 03-1, The Meaning of Other-Than-Temporary Impairment and its Application to
Certain Investments. FSP Nos. FAS 115-1 and FAS 124-1 include guidance for evaluating and recording impairment losses on debt
and equity investments, as well as new disclosure requirements for investments that are deemed to be temporarily impaired. FSP Nos.
FAS 115-1 and FAS 124-1 also require an other-than-temporary impaired debt securities to be written
                                                                    68
down to its impaired value, which becomes the new cost basis. FSP Nos. FAS 115-1 and FAS 124-1 are effective for fiscal years
beginning after December 15, 2005. We do not believe that adoption of FSP Nos. FAS 115-1 and FAS 124-1 on January 1, 2006 will
have a material effect on our financial position, cash flows or results of operations.

ITEM 7A.       QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     We are exposed to financial market risks, including changes in currency exchange rates and interest rates.

  Foreign Exchange Risk
      Our exposure to foreign currency transaction gains and losses is the result of certain net receivables due from our foreign
subsidiaries and customers being denominated in currencies other than the U.S. dollar, primarily the British Pound, the Euro and the
Japanese Yen, as well as cash denominated in currencies other than the local currency of the subsidiary. Our foreign subsidiaries
conduct their businesses in local currency. Effective January 2004, we began to bill our international online sales through a foreign
subsidiary, which has lowered our exposure to foreign currency transaction gains and losses. In addition, effective January 2004 our
board of directors approved a foreign exchange hedging program designed to minimize the future potential impact due to changes in
foreign currency exchange rates. The program allows for the hedging of transaction exposures. The types of derivatives that can be
used under the policy are forward contracts, options and foreign exchange swaps. The primary vehicle we use are forward contracts.
We also generate revenue in certain countries in Asia where there are limited forward currency exchange markets, thus making these
exposures difficult to hedge. We have entered into forward foreign exchange contracts to offset the foreign exchange risk on certain
intercompany assets, as well as cash denominated in currencies other than the local currency of the subsidiary. The notional principal
of forward exchange contracts to purchase U.S. dollars with foreign currencies was $477.0 million at December 31, 2005. There were
no other forward exchange contracts outstanding at December 31, 2005.

      Our exposure to foreign currency translation gains and losses arises from the translation of net assets of our subsidiaries to U.S.
dollars during consolidation. We recognized translation losses of $18.0 million in 2005 primarily as a result of generally weakening
foreign currencies against the U.S. dollar.

      We considered the historical trends in currency exchange rates and determined that it was reasonably possible that adverse
changes in exchange rates of 10% for all currencies could be experienced in the near term. These changes would have resulted in an
adverse impact on income before taxes of approximately $2.2 million and $1.7 million at December 31, 2005 and December 31,
2004, respectively. The adverse impact at December 31, 2005 is after consideration of the offsetting effect of approximately $63.3
million from forward exchange contracts in place for the month of December 2005. These reasonably possible adverse changes in
exchange rates of 10% were applied to total monetary assets denominated in currencies other than the local currencies at the balance
sheet dates to compute the adverse impact these changes would have had on our income before taxes in the near term.

  Interest Rate Risk
     We invest in a variety of securities, consisting primarily of investments in interest-bearing demand deposit accounts with
financial institutions, tax-exempt money market funds and highly liquid debt securities of municipalities. By policy, we limit the
amount of credit exposure to any one issuer.

     Investments in both fixed rate and floating rate interest earning products carry a degree of interest rate risk. Fixed rate securities
may have their fair market value adversely impacted due to a rise in interest rates, while floating rate securities may produce less
income than predicted if interest rates fall. Due in part to these factors, our income from investments may decrease in the future.
                                                                    69
     We considered the historical volatility of short term interest rates and determined that it was reasonably possible that an adverse
change of 100 basis points could be experienced in the near term. A hypothetical 1.00% (100 basis-point) increase in interest rates
would have resulted in a decrease in the fair values of our investment securities of approximately $60.4 million and $19.0 million at
December 31, 2005 and December 31, 2004, respectively. The increase in this amount from December 31, 2004 to December 31,
2005 is due to the substantial increase in our investment balances as a result of proceeds from our follow-on stock offering completed
in September 2005.

ITEM 8.     FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

                                                              Google Inc.
                                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
                                                               Contents

                                                                                                                                    Page
Reports of Ernst & Young LLP, Independent Registered Public Accounting Firm                                                           71
Financial Statements
     Consolidated Balance Sheets                                                                                                      73
     Consolidated Statements of Income                                                                                                74
     Consolidated Statements of Redeemable Convertible Preferred Stock Warrant and Stockholders’ Equity                               75
     Consolidated Statements of Cash Flows                                                                                            76
     Notes to Consolidated Financial Statements                                                                                       77
                                                                   70
                                         REPORT OF ERNST & YOUNG LLP,
                                INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Stockholders
Google Inc.

      We have audited the accompanying consolidated balance sheets of Google Inc. as of December 31, 2005 and 2004, and the
related consolidated statements of income, redeemable convertible preferred stock warrant and stockholders’ equity, and cash flows
for each of the three years in the period ended December 31, 2005. Our audits also included the financial statement schedule listed in
the Index at Item 15(a) 2. These financial statements and schedule are the responsibility of the Company’s management. Our
responsibility is to express an opinion on these financial statements and schedule based on our audits.

      We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States).
Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management,
as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our
opinion.

      In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial
position of Google Inc. at December 31, 2005 and 2004, and the consolidated results of its operations and its cash flows for each of
the three years in the period ended December 31, 2005, in conformity with U.S. generally accepted accounting principles. Also, in our
opinion, the related financial statement schedule, when considered in relation to the basic financial statements taken as a whole,
presents fairly in all material respects the information set forth therein.

      We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the
effectiveness of Google Inc.’s internal control over financial reporting as of December 31, 2005, based on criteria established in
Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and
our report dated March 10, 2006 expressed an unqualified opinion thereon.

                                                                       /s/   ERNST & Y OUNG LLP

San Francisco, California
March 10, 2006
                                                                  71
                                          REPORT OF ERNST & YOUNG LLP,
                                 INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Stockholders
Google Inc.

      We have audited management’s assessment, included in the accompanying Management’s Report on Internal Control over
Financial Reporting, that Google Inc. maintained effective internal control over financial reporting as of December 31, 2005, based on
criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the
Treadway Commission (the COSO criteria). Google Inc.’s management is responsible for maintaining effective internal control over
financial reporting and for its assessment of the effectiveness of internal control over financial reporting. Our responsibility is to
express an opinion on management’s assessment and an opinion on the effectiveness of the company’s internal control over financial
reporting based on our audit.

      We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States).
Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control
over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control
over financial reporting, evaluating management’s assessment, testing and evaluating the design and operating effectiveness of
internal control, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit
provides a reasonable basis for our opinion.

      A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the
reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally
accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that
(1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the
assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial
statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being
made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance
regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a
material effect on the financial statements.

     Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,
projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of
changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

       In our opinion, management’s assessment that Google Inc. maintained effective internal control over financial reporting as of
December 31, 2005, is fairly stated, in all material respects, based on the COSO criteria. Also, in our opinion, Google Inc. maintained,
in all material respects, effective internal control over financial reporting as of December 31, 2005, based on the COSO criteria.

     We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the
2005 consolidated financial statements of Google Inc. and our report dated March 10, 2006 expressed an unqualified opinion thereon.

                                                                         /s/   ERNST & Y OUNG LLP

San Francisco, California
March 10, 2006
                                                                    72
                                                             Google Inc.
                                             CONSOLIDATED BALANCE SHEETS
                                                (In thousands, except par value)

                                                                                                             December 31,
                                                                                                      2004                  2005
Assets
Current assets:
      Cash and cash equivalents                                                                   $ 426,873          $ 3,877,174
      Marketable securities                                                                        1,705,424           4,157,073
      Accounts receivable, net of allowances of $3,962 and $14,852                                   311,836             687,976
      Income taxes receivable                                                                         70,509                 —
      Deferred income taxes, net                                                                      19,463              49,341
      Prepaid revenue share, expenses and other assets                                               159,360             229,507
      Total current assets                                                                         2,693,465           9,001,071
Property and equipment, net                                                                          378,916             961,749
Goodwill                                                                                             122,818             194,900
Intangible assets, net                                                                                71,069              82,783
Deferred income taxes, net, non-current                                                               11,590                 —
Prepaid revenue share, expenses and other assets, non-current                                         35,493              31,310
      Total assets                                                                                $3,313,351         $10,271,813
Liabilities and Stockholders’ Equity
Current liabilities:
      Accounts payable                                                                            $    32,672        $      115,575
      Accrued compensation and benefits                                                                82,631               198,788
      Accrued expenses and other current liabilities                                                   64,111               114,377
      Accrued revenue share                                                                           122,544               215,771
      Deferred revenue                                                                                 36,508                73,099
      Income taxes payable                                                                                —                  27,774
      Current portion of equipment leases                                                               1,902                   —
      Total current liabilities                                                                       340,368               745,384
Deferred revenue, long-term                                                                             7,443                10,468
Liability for stock options exercised early, long-term                                                  5,982                 2,083
Deferred income taxes, net                                                                                —                  35,419
Other long-term liabilities                                                                            30,502                59,502
Commitments and contingencies
Stockholders’ equity:
      Class A and Class B common stock, $0.001 par value: 9,000,000 shares authorized at
          December 31, 2004 and December 31, 2005, 266,917, and 293,027 shares issued and
          outstanding, excluding 7,605, and 3,303 shares subject to repurchase (see Note 10) at
          December 31, 2004 and December 31, 2005                                                        267                 293
      Additional paid-in capital                                                                   2,582,352           7,477,792
      Deferred stock-based compensation                                                             (249,470)           (119,015)
      Accumulated other comprehensive income                                                           5,436               4,019
      Retained earnings                                                                              590,471           2,055,868
      Total stockholders’ equity                                                                   2,929,056           9,418,957
Total liabilities and stockholders’ equity                                                        $3,313,351         $10,271,813

                                                      See accompanying notes.
                                                                  73
                                                            Google Inc.
                                        CONSOLIDATED STATEMENTS OF INCOME
                                          (In thousands, except per share amounts)

                                                                                                Year Ended December 31,
                                                                                     2003                2004                 2005
Revenues                                                                         $1,465,934          $3,189,223      $6,138,560
Costs and expenses:
      Cost of revenues                                                              625,854           1,457,653       2,571,509
      Research and development                                                       91,228             225,632         483,978
      Sales and marketing                                                           120,328             246,300         439,741
      General and administrative                                                     56,699             139,700         335,345
      Stock-based compensation (1)                                                  229,361             278,746         200,709
      Contribution to Google Foundation                                                 —                   —            90,000
      Non-recurring portion of settlement of disputes with Yahoo                        —               201,000             —
Total costs and expenses                                                          1,123,470           2,549,031       4,121,282
Income from operations                                                              342,464             640,192       2,017,278
Interest income and other, net                                                        4,190              10,042         124,399
Income before income taxes                                                          346,654             650,234       2,141,677
Provision for income taxes                                                          241,006             251,115         676,280
Net income                                                                       $ 105,648           $ 399,119       $1,465,397
Net income per share:
      Basic                                                                      $        0.77       $      2.07     $           5.31
      Diluted                                                                    $        0.41       $      1.46     $           5.02
Number of shares used in per share calculations:
      Basic                                                                          137,697             193,176              275,844
      Diluted                                                                        256,638             272,781              291,874

(1)   Stock-based compensation is allocated as follows (see Note 1):
                                                                                                 Year Ended December 31,
                                                                                         2003             2004                 2005
Cost of revenues                                                                     $  8,557            $ 11,314         $  5,579
Research and development                                                              138,377             169,532          115,532
Sales and marketing                                                                    44,607              49,449           28,411
General and administrative                                                             37,820              48,451           51,187
                                                                                     $229,361            $278,746         $200,709




                                                      See accompanying notes.
                                                                   74
                                                                              Google Inc.
      CONSOLIDATED STATEMENTS OF REDEEMABLE CONVERTIBLE PREFERRED STOCK WARRANT AND
                                   STOCKHOLDERS’ EQUITY
                                        (in thousands)
                          Redeemable                                                        Notes
                          Convertible                              Class A and Additional Receivable              Accumulated
                        Preferred Stock       Convertible            Class B    Paid-In     from      Deferred       Other                         Total
                           Warrant          Preferred Stock      Common Stock   Capital    Officer/  Stock Based Comprehensive        Retained Stockholders’
                        Shares Amount      Shares Amount         Shares Amount Amount Stockholders Compensation     Income            Earnings    Equity
Balance at
    December 31,
    2002                   —   $ 13,871    70,432 $ 44,346       145,346 $   145 $     83,410 ($   4,300) ($    35,401) $      49 $     85,704 $     173,953
Issuance of common
    stock in
    connection with
    acquisitions           —       —          —          —         2,546         3     84,289        —          (10,752)      —            —          73,540
Issuance of
    convertible
    preferred stock        —       —         1,230       —          —        —            —          —             —          —            —            —
Stock-based award
    activity               —       —          —          —        12,974      13      557,520        —         (323,515)      —            —         234,018
Comprehensive
    income:
Change in
    unrealized gain
    (loss) on
    available-for-
    sale investments       —       —          —          —          —        —            —          —             —           (51)        —             (51)
Foreign currency
    translation
    adjustment             —       —          —          —          —        —            —          —             —        1,662          —           1,662
Net income                 —       —          —          —          —        —            —          —             —          —        105,648       105,648
Total
    comprehensive
    income                 —       —          —          —          —        —            —          —             —          —            —         107,259
Balance at
    December 31,
    2003                   —     13,871    71,662     44,346     160,866     161      725,219      (4,300)     (369,668)    1,660      191,352       588,770
Issuance of common
    stock in
    connection with
    initial public
    offering, Yahoo
    settlement and
    acquisitions, net      —       —          —          —        17,029      18     1,414,651       —           (1,538)      —            —       1,413,131
Stock-based award
    activity               —       —          —          —         9,788         9    362,634        —         121,736        —            —         484,379
Issuance of
    preferred stock
    upon exercise of
    warrant                —    (13,871)     7572      35581        —        —            —          —             —          —            —          35,581
Conversion of
    convertible
    preferred shares
    to common
    shares                 —       —       (79,234)   (79,927)    79,234      79       79,848        —             —          —            —            —
Payment of
    stockholder’s
    note receivable        —       —          —          —          —        —            —        4,300           —          —            —           4,300
Comprehensive
    income:
Change in
    unrealized gain
    (loss) on
    available-for-
    sale
    investments, net
    of tax effect of
    $2,612                 —       —          —          —          —        —            —          —             —        (3,796)        —          (3,796)
Foreign currency
    translation
    adjustment, net
    of tax effect of
    $1,128                 —       —          —          —          —        —            —          —             —        7,572          —           7,572
Net income                 —       —          —          —          —        —            —          —             —          —        399,119       399,119
Total
    comprehensive
income                  —       —   —       —      —        —           —        —           —            —            —       402,895
Balance at
    December 31,
    2004                —       —   —       —   266,917     267   2,582,352      —       (249,470)      5,436      590,471    2,929,056
Issuance of common
    stock in
    connection with
    follow-on public
    offering and
    acquisitions, net   —       —   —       —    14,869      15   4,316,022      —         (2,036)        —            —      4,314,001
Stock-based award
    activity            —       —   —       —    11,241      11    579,418       —       132,491          —            —       711,920
Comprehensive
    income:
Change in
    unrealized gain
    (loss) on
    available-for-
    sale
    investments, net
    of tax effect of
    $11,404             —       —   —       —      —        —           —        —           —         16,580          —        16,580
Foreign currency
    translation
    adjustment, net
    of tax effect of
    $1,372              —       —   —       —      —        —           —        —           —         (17,997)         —       (17,997)
Net income              —       —   —       —      —        —           —        —           —             —      1,465,397   1,465,397
Total
    comprehensive
    income              —       —   —       —      —        —           —        —           —            —            —      1,463,980
Balance at
    December 31,
    2005                —   $   —   —   $   —   293,027 $   293 $7,477,792 $     —   $   (119,015) $    4,019 $2,055,868 $    9,418,957


                                                       See accompanying notes.
                                                                   75
                                                             Google Inc.
                                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                                                   (In thousands)

                                                                                               Year Ended December 31,
                                                                                    2003              2004                      2005
Operating activities
Net income                                                                        $ 105,648       $   399,119            $ 1,465,397
Adjustments:
      Depreciation and amortization of property and equipment                       43,851            128,523                   256,812
      Amortization of intangibles and warrants                                      11,198             19,950                    37,000
      In-process research and development                                           11,618             11,343                    22,040
      Stock-based compensation                                                     229,361            278,746                   200,709
      Tax benefits from stock-based award activity                                     —              191,570                   433,724
      Non-recurring portion of settlement of disputes with Yahoo                       —              201,000                       —
Changes in assets and liabilities, net of effects of acquisitions:
            Accounts receivable                                                    (90,385)           (156,928)                (372,290)
            Income taxes, net                                                       (6,319)           (125,227)                  87,400
            Prepaid revenue share, expenses and other assets                       (58,913)            (99,779)                 (51,663)
            Accounts payable                                                        36,699             (13,516)                  80,631
            Accrued expenses and other liabilities                                  31,104              86,374                  166,764
            Accrued revenue share                                                   74,603              33,872                   93,347
            Deferred revenue                                                         6,980              21,997                   39,551
Net cash provided by operating activities                                          395,445             977,044                2,459,422
Investing activities
Purchases of property and equipment                                                (176,801)         (318,995)                  (838,217)
Purchase of marketable securities                                                  (316,599)       (4,134,576)               (12,675,880)
Maturities and sales of marketable securities                                       219,404         2,611,078                 10,257,214
Acquisitions, net of cash acquired and purchases of intangible and other assets     (39,958)          (58,863)                  (101,310)
Net cash used in investing activities                                              (313,954)       (1,901,356)                (3,358,193)
Financing activities
Proceeds from exercise of stock options, net                                         15,476           12,001                  85,026
Proceeds from exercise of warrants                                                      —             21,944                     —
Net proceeds from public offerings                                                      —          1,161,080               4,287,229
Payment of note receivable from office/stockholder                                      —              4,300                     —
Payments of principal on capital leases and equipment loans                          (7,386)          (4,707)                 (1,425)
Net cash provided by financing activities                                             8,090        1,194,618               4,370,830
Effect of exchange rate changes on cash and cash equivalents                          1,662            7,572                 (21,758)
Net increase in cash and cash equivalents                                            91,243          277,878               3,450,301
Cash and cash equivalents at beginning of year                                       57,752          148,995                 426,873
Cash and cash equivalents at end of year                                          $ 148,995       $ 426,873              $ 3,877,174
Supplemental disclosures of cash flow information
Cash paid for interest                                                            $ 1,739         $       709            $          216
Cash paid for taxes                                                               $ 247,422       $   183,776            $      153,628
Acquisition related activities:
Issuance of equity in connection with acquisitions, net of deferred stock-based
   compensation                                                                   $ 73,540        $    25,714            $       22,407

                                                      See accompanying notes.
                                                                  76
                                                             Google Inc.
                                  NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1.     Google Inc. and Summary of Significant Accounting Policies
  Nature of Operations
     We were incorporated in California in September 1998. We were reincorporated in the State of Delaware in August 2003. We
provide highly targeted advertising and global Internet search solutions as well as intranet solutions via an enterprise search
appliance.

  Basis of Consolidation
     The consolidated financial statements include the accounts of Google and our wholly-owned subsidiaries. All intercompany
balances and transactions have been eliminated.

  Use of Estimates
      The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United
States requires us to make estimates and assumptions that effect the amounts reported and disclosed in the financial statements and
the accompanying notes. Actual results could differ materially from these estimates. On an ongoing basis, we evaluate our estimates,
including those related to the accounts receivable allowance, fair values of marketable securities, fair values of acquired intangible
assets and goodwill, useful lives of intangible assets and property and equipment, fair values of options to purchase our common
stock and income taxes, among others. In addition, we used estimates to value common stock prior to our initial public offering for
the purpose of determining stock-based compensation (see below). We base our estimates on historical experience and on various
other assumptions that are believed to be reasonable, the results of which form the basis for making judgments about the carrying
values of assets and liabilities.

     Prior to our initial public offering, we typically granted stock options at exercise prices equal to the values of the underlying
stock as determined by our board of directors on the date of option grant. For purposes of financial accounting for stock-based
compensation, management applied hindsight within each year or quarter to arrive at reassessed values for the shares underlying these
options and those issued under other transactions that were higher than the values determined by the board. These reassessed values
were determined based on a number of factors, including input from advisors, our historical and forecasted operating results and cash
flows, and comparisons to publicly-held companies. The reassessed values were used to determine the amount of stock-based
compensation recognized related to stock and stock option grants to employees and non-employees, the amount of expense related to
stock warrants issued to third-parties and the purchase prices of our acquisitions.

  Revenue Recognition
     The following table presents our revenues:

                                                                                                        Year Ended December 31,
                                                                                                 2003              2004           2005
                                                                                                             (in thousands)
Advertising revenues:
     Google web sites                                                                        $ 792,063       $1,589,032      $3,377,060
     Google Network web sites                                                                   628,600       1,554,256       2,687,942
           Total advertising revenues                                                         1,420,663       3,143,288       6,065,002
Licensing and other revenues                                                                     45,271          45,935          73,558
Revenues                                                                                     $1,465,934      $3,189,223      $6,138,560

                                                                  77
                                                              Google Inc.
                           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
      In the first quarter of 2000, we introduced our first advertising program through which we offered advertisers the ability to place
text-based ads on Google web sites targeted to users’ search queries. Advertisers paid us based on the number of times their ads were
displayed on users’ search results pages and we recognized revenue at the time these ads appeared. In the fourth quarter of 2000, we
launched Google AdWords, an online self-service program that enables advertisers to place text-based ads on Google web sites.
AdWords is also available through our direct sales force. AdWords advertisers originally paid us based on the number of times their
ads appeared on users’ search results pages. In the first quarter of 2002, we began offering AdWords exclusively on a cost-per-click
basis, so that an advertiser pays us only when a user clicks on one of its ads. We recognize as revenue the fees charged advertisers
each time a user clicks on one of the text-based ads that are displayed next to the search results on Google web sites. From January 1,
2004 until the end of the first quarter of 2005, the AdWords cost-per-click pricing structure was the only structure available to our
advertisers. However, during the second quarter of 2005, we launched an AdWords program that enables advertisers to pay us based
on the number of times their ads appear on Google Network member sites specified by the advertiser. We recognize as revenue the
fees charged advertisers each time their ads are displayed on the Google Network member sites. In addition, in the third quarter of
2005, we launched the Google Publication Ads Program through which we distribute our advertisers’ ads for publication in the
magazines of our Google Network members. We recognize as revenue the fees charged advertisers when ads are published in these
magazines.

       Google AdSense is the program through which we distribute our advertisers’ ads for display on the web sites of our Google
Network members. In accordance with Emerging Issues Task Force (“EITF”) Issue No. 99-19, Reporting Revenue Gross as a
Principal Versus Net as an Agent, we recognize as revenues the fees charged advertisers each time a user clicks on one of the text-
based ads that are displayed next to the search results or on the content pages of our Google Network members’ web sites and, for
those advertisers who use our cost-per impression pricing, the fees charged advertisers each time an ad is displayed on our members’
sites. These revenues, along with those related to the fees charged advertisers for ads published in the magazines of our Google
Network members, is reported on a gross basis primarily because we are the primary obligor to our advertisers.

      We generate fees from search services through a variety of contractual arrangements, which include per-query search fees and
search service hosting fees. Revenues from set-up and support fees and search service hosting fees are recognized on a straight-line
basis over the term of the contract, which is the expected period during which these services will be provided. Our policy is to
recognize revenues from per-query search fees in the period queries are made and results are delivered.

     We provide search services pursuant to certain AdSense agreements. We believe that search services and revenue share
arrangements represent separate units of accounting pursuant to EITF 00-21 Revenue Arrangements with Multiple Deliverables.
These separate services are provided simultaneously to the Google Network member and are recognized as revenues in the periods
provided.

      We also generate fees from the sale and license of our Search Appliance, which includes hardware, software and 12 to 24
months of post-contract support. We recognize revenue in accordance with Statement of Position 97-2, Software Revenue
Recognition, as amended. For transactions in which the elements are not sold separately, sufficient vendor-specific objective evidence
of fair value does not exist for the allocation of revenue. As a result, commencing with the delivery of the hardware and software, the
fee for the entire arrangement is recognized ratably over the term of the post-contract support arrangement.

    Deferred revenue is recorded when payments are received in advance of our performance in the underlying agreement on the
accompanying consolidated balance sheets.
                                                                   78
                                                               Google Inc.
                           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
  Cost of Revenues
      Cost of revenues consists primarily of traffic acquisition costs. Traffic acquisition costs consist of amounts ultimately paid to
Google Network members, as well as to partners who direct search queries to our web site. These amounts are primarily based on
revenue share arrangements under which we pay our Google Network members and other partners a portion of the fees we receive
from our advertisers. In addition, certain AdSense agreements obligate us to make guaranteed minimum revenue share payments to
Google Network members based on their achieving defined performance terms, such as number of search queries or advertisements
displayed. We amortize guaranteed minimum revenue share prepayments (or accrete an amount payable to a Google Network
member if the payment is due in arrears) based on the number of search queries or advertisements displayed on the Google Network
member’s web site or the actual revenue share amounts, whichever is greater. In addition, concurrent with the commencement of a
small number of AdSense and other agreements, we have purchased certain items from, or provided other consideration to, our
Google Network members and partners. We have determined that certain of these amounts are prepaid traffic acquisition costs and are
amortized on a straight-line basis over the terms of the related agreements. Traffic acquisition costs were $526.5 million, $1,228.7
million and $2,114.9 million in 2003, 2004 and 2005.

     In addition, cost of revenues consists of the expenses associated with the operation of our data centers, including depreciation,
labor, energy and bandwidth costs. Cost of revenues also includes credit card and other transaction fees relating to processing
customer transactions, expenses related to the amortization of purchased and licensed technologies as well as expenses related to
acquiring content on our web sites.

  Stock-based Compensation
      Deferred stock-based compensation is recorded for certain stock awards issued to employees, and is amortized to expense over
the related vesting periods. In addition, stock-based compensation is recorded directly to expense for certain other stock awards issued
to employees and non-employees and is recognized over the related vesting periods.

     As permitted by Statement of Financial Accounting Standards (“SFAS”) No. 123, Accounting for Stock-based Compensation
(“SFAS 123”), we account for employee stock-based compensation in accordance with Accounting Principles Board Opinion
(“APB”) No. 25, Accounting for Stock Issued to Employees (“APB 25”), and related interpretations. Under APB 25, deferred stock-
based compensation for options granted to employees is equal to its intrinsic value, determined as the difference between the exercise
prices and the values of the underlying stock on the dates of grant.

      Prior to the initial public offering, we typically granted stock options at exercise prices equal to or less than the values of the
underlying stock as determined by our board of directors on the dates of option grant. For purposes of financial accounting, we
applied hindsight within each year or quarter prior to our initial public offering to arrive at reassessed values for the shares underlying
these options and recorded deferred stock-based compensation equal to the difference between these reassessed values and the
exercise prices. After the initial public offering, we have primarily granted options at exercise prices equal to the fair market value of
the underlying stock on the dates of option grant. We have recorded deferred stock-based compensation for these options equal to any
difference between the exercise prices and the fair market values of the underlying stock on the dates of grant.

     Deferred stock-based compensation for restricted shares and restricted stock units (“RSUs”) under our Founders’ Award and
other programs is equal to the fair value of the underlying stock on the date of grant. These restricted shares have been issued to
employees in connection with an acquisition of a business and vest
                                                                    79
                                                              Google Inc.
                          NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
primarily over a fifteen month period from the date of the acquisition. RSUs under our Founders’ Award program are issued to
individuals on teams that have made extraordinary contributions to Google. These RSUs vest on a ratable basis over the sixteen
quarters from date of grant. RSUs issued under certain other programs vest on a ratable basis over periods of up to five years. We
issued 84,772 and 142,989 restricted shares and RSUs under our Founders’ Awards and certain other program in 2004 and 2005, net
of cancellations. At December 31, 2005, there were 192,238 of these restricted shares and RSUs outstanding. Shares will be issued on
the dates of vest net of the statutory withholding requirements to be paid for by us on behalf of our employees. As a result, the actual
number of shares issued will be less than the aforementioned number of RSUs outstanding.

      In connection with restricted shares, RSUs under our Founders’ Award and certain other programs and stock options with
intrinsic values granted to employees, we recorded deferred stock-based compensation of $153.8 million and $40.0 million for the
years ended December 31, 2004 and 2005.

      Net amortization of deferred stock-based compensation totaled $213.5 million, $263.7 million and $143.0 million in 2003, 2004,
and 2005. Deferred stock-based compensation is being amortized using the accelerated vesting method, in accordance with SFAS
123, EITF 96-18, Accounting for Equity Instruments That Are Issued to Other Than Employees for Acquiring, or in connection with
Selling, Goods or Services (“EITF 96-18”), and Financial Accounting Standards Board Interpretation No. 28 (“FIN 28”), over the
vesting period of each respective restricted share, RSU and stock option, primarily over four or five years.

      Under a program begun in 2005, RSUs issued to new employees vest from zero to 37.5 percent of the number granted at the end
of each of the four years from date of hire based on the employee’s performance. We expect that substantially all employees will vest
25 percent of the number granted at the end of each year. We account for stock-based compensation related to these RSUs under the
variable method in accordance with the provisions of FIN 28. Under this method, we record no deferred stock-based compensation
but measure and record stock-based compensation based on the fair value of the underlying shares at the end of each quarter within
the vesting periods. We recognized $27.7 million of stock-based compensation related to these RSUs in 2005. At December 31, 2005,
there were 696,611 of these RSUs outstanding. Shares will be issued on the dates of vest net of the statutory withholding
requirements to be paid for by us on behalf of our employees. As a result, the actual number of shares issued will be less than the
aforementioned number of RSUs outstanding.

      We account for stock awards issued to non-employees in accordance with the provisions of SFAS 123 and EITF 96-18. Under
SFAS 123 and EITF 96-18, we use the Black-Scholes-Merton method to measure the fair values of options granted to non-employees
at each vesting date to determine the appropriate charge to stock-based compensation.

     We recorded stock-based compensation expense for the fair values of stock options earned by non-employees of $15.8 million,
$15.0 million and $30.0 million in 2003, 2004 and 2005. At December 31, 2005, there were 202,090 unvested options held by non-
employees with a weighted-average exercise price of $3.59 and a weighted-average 25 months remaining vesting period. These
options primarily vest on a monthly and ratable basis. No options or other stock awards that vest over time were granted to non-
employees in the year ended December 31, 2005.

     Pro forma information regarding net income has been determined as if we had accounted for our employee stock options under
the method prescribed by SFAS 123. The resulting effect on pro forma net income disclosed may not be representative of the effects
on net income in future years. See also the discussion under “Effect of Recent Accounting Pronouncements” below.
                                                                   80
                                                              Google Inc.
                           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
     Had compensation cost for options granted under the option plans (see Note 10) been determined based on the fair value method
prescribed by SFAS 123, our net income and net income per share would have been adjusted to the pro forma amounts below (in
thousands, except per share data):

                                                                                                           Year Ended December 31,
                                                                                                 2003              2004               2005
Net income, as reported                                                                      $ 105,648          $ 399,119         $1,465,397
Add: Stock-based employee compensation expense included in reported net income,
  net of related tax effects                                                                     213,545            171,380           117,924
Deduct: Total stock-based employee compensation expense under the fair value
  based method for all awards, net of related tax effects                                     (215,946)          (186,138)          (220,525)
Net income, pro forma                                                                        $ 103,247          $ 384,361         $1,362,796
Net income per share:
      As reported—basic                                                                      $      0.77        $      2.07       $      5.31
      Pro forma—basic                                                                        $      0.75        $      1.99       $      4.94
      As reported—diluted                                                                    $      0.41        $      1.46       $      5.02
      Pro forma—diluted                                                                      $      0.40        $      1.41       $      4.67

     For purposes of the above pro forma calculation, the value of each option granted through December 31, 2005 was estimated on
the date of grant using the Black-Scholes-Merton pricing model with the following weighted-average assumptions:

                                                                                                                 Year Ended December 31,
                                                                                                             2003         2004          2005
Risk-free interest rate                                                                                      2.11%        2.77%         3.86%
Expected volatility                                                                                            75%          69%           36%
Expected life (in years)                                                                                      3.0          3.0           3.1
Dividend yield                                                                                               —             —             —

     The weighted-average fair value of an option granted in 2003, 2004 and 2005, was $29.12, $63.27 and $78.58, using the Black-
Scholes-Merton pricing model.

  Stock Options Exercised Early
      Options granted under plans other than the 2004 Stock Plan may be exercised prior to vesting. Upon the exercise of an option
prior to vesting, the exercising optionee is required to enter into a restricted stock purchase agreement with us, which provides that we
have a right to repurchase the shares purchased upon exercise of the option at the original exercise price; provided, however, that its
right to repurchase these shares will lapse in accordance with the vesting schedule included in the optionee’s option agreement. In
accordance with EITF 00-23, Issues Related to Accounting for Stock Compensation under APB Opinion No. 25 and FASB
Interpretation No. 44, stock options granted or modified after March 21, 2002, which are subsequently exercised for cash prior to
vesting are treated differently from prior grants and related exercises. The consideration received for an exercise of an option granted
after the effective date of this guidance is considered to be a deposit of the exercise price and the related dollar amount is recorded as
a liability. The shares and liability are only reclassified into equity on a ratable basis as the award vests. We have applied this
guidance and recorded a liability on the consolidated balance sheets relating to 7,605,222 and 3,303,067 of options granted
subsequent to March 21, 2002 that were exercised and are unvested at December 31, 2004 and 2005. Furthermore, these shares are
not presented as outstanding on the accompanying consolidated statements of redeemable convertible preferred
                                                                   81
                                                              Google Inc.
                           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
stock warrant and stockholders’ equity and consolidated balance sheets. Instead, these shares are disclosed as outstanding options in
Note 10 to these financial statements.

  Net Income per Share
      We compute net income per share in accordance with SFAS 128, Earnings per Share. Under the provisions of SFAS 128, basic
net income per share is computed using the weighted average number of common shares outstanding during the period except that it
does not include unvested common shares subject to repurchase or cancellation. Diluted net income per share is computed using the
weighted average number of common shares and, if dilutive, potential common shares outstanding during the period. Potential
common shares consist of the incremental common shares issuable upon the exercise of stock options, warrants, restricted shares,
restricted stock units, unvested common shares subject to repurchase or cancellation and convertible preferred stock. The dilutive
effect of outstanding stock options, restricted shares, restricted stock units and warrants is reflected in diluted earnings per share by
application of the treasury stock method. Convertible preferred stock is reflected on an if-converted basis.

    The following table sets forth the computation of basic and diluted net income per share (in thousands, except per share
amounts):

                                                                                                          Year Ended December 31,
                                                                                                   2003           2004            2005
Basic and diluted net income per share:
      Numerator:
            Net income                                                                          $105,648       $399,119       $1,465,397
      Denominator:
            Weighted average common shares outstanding                                            168,093       210,877           282,622
            Less: Weighted average unvested common shares subject to repurchase or
               cancellation                                                                       (30,396)      (17,701)           (6,778)
                  Denominator for basic calculation                                               137,697       193,176           275,844
                  Effect of dilutive securities
            Add:
                  Weighted average convertible preferred shares                                    71,128        47,584              —
                  Weighted average stock options and warrants, restricted shares,
                     restricted stock units and unvested common shares subject to
                     repurchase or cancellation                                                    47,813         32,021         16,030
                  Denominator for diluted calculation                                             256,638        272,781        291,874
Net income per share, basic                                                                     $    0.77      $    2.07      $    5.31
Net income per share, diluted                                                                   $    0.41      $    1.46      $    5.02

  Certain Risks and Concentrations
     Our revenues are principally derived from online advertising, the market for which is highly competitive and rapidly changing.
Significant changes in this industry or changes in customer buying behavior could adversely affect our operating results.

    Financial instruments that potentially subject us to concentrations of credit risk consist principally of cash equivalents,
marketable securities and accounts receivable. Cash equivalents and marketable securities consist
                                                                   82
                                                              Google Inc.
                           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
primarily of money market funds and highly liquid debt instruments of municipalities in the U.S. and the U.S. government and its
agencies held with four financial institutions. Accounts receivable are typically unsecured and are derived from revenues earned from
customers primarily located in the U.S. In 2004 and 2005, we generated approximately 66% and 61% of our revenues from customers
based in the U.S. with the majority of customers outside of the U.S. located in Europe and Japan. Many of our Network members are
in the Internet industry. To appropriately manage this risk, we perform ongoing evaluations of customer credit and limit the amount of
credit extended, but generally no collateral is required. We maintain reserves for estimated credit losses and these losses have
generally been within our expectations.

     Advertising and other revenues generated from America Online, Inc. (“AOL”) accounted for 16%, 12% and 9% of revenues,
primarily through our AdSense program, in 2003, 2004 and 2005. See Note 14, “Subsequent Events” below for further discussion
regarding our relationship with AOL. No advertiser or other Google Network member generated greater than 10% of revenues in
these periods.

  Fair Value of Financial Instruments
     The carrying amounts of our financial instruments, including cash and cash equivalents, marketable securities, accounts
receivable, accounts payable and accrued liabilities, approximate fair value because of their generally short maturities.

  Cash and Cash Equivalents and Marketable Securities
      We invest our excess cash in money market funds and in highly liquid debt instruments of U.S. municipalities, corporations and
the U.S. government and its agencies. All highly liquid investments with stated maturities of three months or less from date of
purchase are classified as cash equivalents; all highly liquid investments with stated maturities of greater than three months are
classified as marketable securities.

      We determine the appropriate classification of our investments in marketable debt and equity securities at the time of purchase
and reevaluate such designation at each balance sheet date. Our marketable debt and equity securities have been classified and
accounted for as available for sale. We may or may not hold securities with stated maturities greater than twelve months until
maturity. In response to changes in the availability of and the yield on alternative investments as well as liquidity requirements, we
occasionally sell these securities prior to their stated maturities. As these debt and equity securities are viewed by us as available to
support current operations, based on the provisions of Accounting Research Bulletin No. 43, Chapter 3A, Working Capital-Current
Assets and Liabilities, equity securities, as well as debt securities with maturities beyond 12 months (such as our auction rate
securities) are classified as current assets in the accompanying consolidated balance sheets. These securities are carried at fair value,
with the unrealized gains and losses, net of taxes, reported as a component of stockholders’ equity, except for unrealized losses
determined to be other than temporary which are recorded as interest income and other, net. Any realized gains or losses on the sale
of marketable securities are determined on a specific identification method, and such gains and losses are reflected as a component of
interest income and other, net.

  Non-Marketable Equity Securities
      We have accounted for non-marketable equity security investments at historical cost because we do not have significant
influence over the investees. These investments, are recorded in the accompanying consolidated balance sheets as a component of
prepaid revenue share, expenses and other assets, non-current. They are subject to a periodic impairment review. To the extent any
impairment is considered other-than-
                                                                   83
                                                                Google Inc.
                           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
temporary, the investment is written down to its fair value and the loss is recorded as interest income and other, net. We found no
such impairment to our non-marketable equity securities during any of the years presented.

  Accounts Receivable
     Accounts receivable are recorded at the invoiced amount and are non-interest bearing. We maintain an allowance for doubtful
accounts to reserve for potentially uncollectible receivables. We review the accounts receivable by amounts due by customers which
are past due to identify specific customers with known disputes or collectibility issues. In determining the amount of the reserve, we
make judgments about the creditworthiness of significant customers based on ongoing credit evaluations. We also maintain a sales
allowance to reserve for potential credits issued to customers. The amount of the reserve is determined based on historical credits
issued.

  Property and Equipment
      Property and equipment are stated at cost less accumulated depreciation and amortization. Depreciation is computed using the
straight-line method over the estimated useful lives of the assets, generally two to five years. Buildings are depreciated over periods
up to 25 years. Equipment under capital leases and leasehold improvements are amortized over the shorter of the lease term or the
estimated useful lives of the assets. Construction in process is primarily related to the building of production equipment servers and
leasehold improvements. Depreciation for these assets commences once they are placed in service.

  Long-Lived Assets Including Goodwill and Other Acquired Intangible Assets
     We review property and equipment and certain identifiable intangibles, excluding goodwill, for impairment whenever events or
changes in circumstances indicate the carrying amount of an asset may not be recoverable. Recoverability of these assets is measured
by comparison of carrying amounts to the future undiscounted cash flows the assets are expected to generate. If property and
equipment and certain identifiable intangibles are considered to be impaired, the impairment to be recognized equals the amount by
which the carrying value of the asset exceeds its fair market value. We have made no adjustments to our long-lived assets in any of
the years presented.

     In accordance with SFAS No. 142, Goodwill and Other Intangible Assets, we test our goodwill for impairment at least annually
or more frequently if events or changes in circumstances indicate that this asset may be impaired. The tests were based on our single
operating segment and reporting unit structure. We found no impairment in any of the years presented.

      SFAS No. 142 also requires that intangible assets with definite lives be amortized over their estimated useful lives and reviewed
for impairment whenever events or changes in circumstances indicate an asset’s carrying value may not be recoverable in accordance
with SFAS No. 144, Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of. We are
currently amortizing our acquired intangible assets with definite lives over periods ranging from one to five years. No events or
changes in circumstances have occurred that would require an impairment test for these assets in any of the years presented.

  Income Taxes
      We recognize income taxes under the liability method. Deferred income taxes are recognized for differences between the
financial reporting and tax bases of assets and liabilities at enacted statutory tax rates in effect for the years in which the differences
are expected to reverse. The effect on deferred taxes of a change in tax rates is recognized in income in the period that includes the
enactment date.
                                                                     84
                                                               Google Inc.
                           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
  Foreign Currency
      Generally, the functional currency of our international subsidiaries is the local currency. The financial statements of these
subsidiaries are translated to U.S. dollars using month-end rates of exchange for assets and liabilities, and average rates of exchange
for revenues, costs and expenses. Translation gains and losses are deferred and recorded in accumulated other comprehensive income
as a component of stockholders’ equity. We recorded $1.7 million, $7.6 million of net translation gains and $18.0 million of net
translation losses in 2003, 2004 and 2005. Net gains and losses resulting from foreign exchange transactions are recorded as interest
income and other, net. We recognized $2.1 million of net gains, $6.7 million of net losses and $6.2 million of net gains resulting from
foreign exchange transactions in 2003, 2004 and 2005. These gains and losses are net of those realized on forward foreign exchange
contracts.

  Derivative Financial Instruments
      We enter into forward foreign exchange contracts with financial institutions to reduce the risk that our cash flows and earnings
will be adversely affected by foreign currency exchange rate fluctuations. This program is not designed for trading or speculative
purposes. No foreign currency hedge transactions were entered into prior to 2004.

      In accordance with SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities, we recognize derivative
instruments accounted for as hedges as either assets or liabilities on the balance sheet at fair value. The forward exchange contracts
we have entered into have not been accounted for as hedges and, therefore, changes in the fair values of these instruments are
recorded as interest income and other, net. Neither the cost nor the fair value of these forward foreign exchange contracts was
material at December 31, 2005. The notional principal of forward foreign exchange contracts to purchase U.S. dollars with foreign
currencies was $477.0 million at December 31, 2005. There were no other forward foreign exchange contracts outstanding at
December 31, 2005.

  Promotional and Advertising Expenses
     We expense promotional and advertising costs in the period in which they are incurred. For the years ended December 31, 2003,
2004 and 2005 promotional and advertising expenses totaled approximately $20.9 million, $37.7 million and $104.3 million.

  Effect of Recent Accounting Pronouncements
      In December 2004, the Financial Accounting Standards Board issued SFAS No. 123 (revised 2004) (“SFAS 123R”), Share-
Based Payment, that addresses the accounting for share-based payment transactions in which an enterprise receives employee services
in exchange for equity instruments of the enterprise or liabilities that are based on the fair value of the enterprise’s equity instruments
or that may be settled by the issuance of such equity instruments. SFAS 123R eliminates the ability to account for share-based
compensation transactions using the intrinsic value method under Accounting Principles Board Opinion No. 25 (“APB 25”),
Accounting for Stock Issued to Employees, and generally would require instead that such transactions be accounted for using a fair-
value-based method. SFAS 123R requires the use of an option pricing model for estimating fair value, which is amortized to expense
over the service periods. In April 2005, the Securities and Exchange Commission amended the compliance dates for SFAS 123R. In
accordance with this amendment, we have adopted the requirements of SFAS 123R beginning January 1, 2006.

     If we had adopted the provisions of SFAS 123 at the beginning of 2004, net income would have been reduced by approximately
$14.8 million and $102.6 million in 2004 and 2005. The additional stock-based
                                                                    85
                                                                Google Inc.
                           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
compensation, net of income taxes, that would have been recognized under SFAS 123 in 2004 (and to a lesser extent, in 2005) is a
function of the generally insignificant differences between the intrinsic values of stock options granted prior to the initial public
offering and the related fair values on the dates of grant determined using the Black-Scholes-Merton (BSM) method. After the initial
public offering, we have primarily granted stock options with no intrinsic value and expect to continue to do so in the foreseeable
future. As the fair values of these options on the dates of grant are and will be significantly greater than the related intrinsic values, we
will recognize significantly greater stock-based compensation after the adoption of SFAS 123R than we would have recognized if we
had continued to apply APB 25, and significantly greater than the aforementioned additional stock-based compensation amounts, net
of income taxes. The stock-based compensation we will recognize after the adoption of SFAS 123R will also be affected by the
number and type of stock-based awards granted in the future and the assumptions used under the BSM method for determining the
fair values of options.

      The provision for income taxes includes a reduction for disqualifying dispositions on incentive stock options using the portfolio
rather than the individual award method. The portfolio method was used because it was more practicable to do so. SFAS 123R
requires the use of the individual award method, which we will use to account for any disqualifying dispositions related to any
incentive stock options granted after December 31, 2005. If we had used the individual award method, our net income would have
been reduced further than the aforementioned $102.6 million in 2005 had we adopted the provisions of SFAS 123.

      We will adopt the provisions of SFAS 123R using the modified-prospective-transition method. Under this method, we will
recognize stock-based compensation over the related service periods for any stock-awards issued after December 31, 2005, as well as
for all stock awards issued prior to January 1, 2006 for which the requisite service has not been provided as of the date we adopt the
requirements of SFAS 123R. Stock-based compensation will be measured based on the fair values of all stock awards on the dates of
grant.

      We will continue to recognize stock-based compensation after the date of adoption of SFAS 123R using the accelerated method
for all stock awards issued prior to January 1, 2006, other than RSUs issued to new employees that vest based on the employee’s
performance for which we will use the straight-line method. We have elected to recognize stock-based compensation after the date of
adoption of SFAS 123R using the straight-line method for all stock awards issued after January 1, 2006, which will result in the
recognition of less stock-based compensation over at least the next several years compared to that which would have been recognized
had we continued to use the accelerated method.

      As noted above, prior to the adoption of SFAS 123R, we accounted for RSUs issued to new employees that vest based on the
employee’s performance under the variable method, under which stock-based compensation is measured based on the fair value of the
underlying shares at the end of each quarter within the vesting periods. As noted above, upon adoption of SFAS 123R stock-based
compensation will be measured based on the fair values of the underlying shares on the dates of grant for all such outstanding RSUs.
As a result, to the extent the fair value of the underlying shares is greater at the vesting dates compared to the dates of grant, then we
would recognize less stock-based compensation in periods after the adoption of SFAS 123R then we would have had we continued to
use the variable method.

      SFAS 123R requires that the deferred stock-based compensation on our balance sheet on the date of adoption be netted against
additional paid-in capital. At December 31, 2005, we had $119.0 million of deferred stock-based compensation on our balance sheet.

     For stock awards outstanding at December 31, 2005, we expect stock-based compensation to be approximately $342.4 million in
2006, $183.9 million in 2007, $105.3 million in 2008, $44.4 million in 2009
                                                                     86
                                                              Google Inc.
                          NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
and $0.7 million thereafter. These amounts do not include stock-based compensation related to stock awards that have been and may
be granted to employees and directors subsequent to December 31, 2005 and stock awards that have been or may be granted to non-
employees. Stock-based compensation related to these awards will be different from our expectations to the extent forfeiture rates are
different from what we have anticipated.

     Statement 123(R) also requires the benefits of tax deductions in excess of recognized compensation expense to be reported as a
cash flow from financing activities, rather than as a cash flow from operating activities, as was prescribed under accounting rules
applicable through December 31, 2005 and presented as tax benefits from stock-based award activity on the accompanying
consolidated statements of cash flows. This requirement will likely significantly reduce and increase the amounts we record as net
cash provided by operating activities and net cash provided by financing activities, respectively. Total cash flow will remain
unchanged from what would have been reported under prior accounting rules.

     In March 2005, the Securities and Exchange Commission issued Staff Accounting Bulletin No. 107. In accordance with this
Bulletin, effective January 1, 2006 we will no longer present stock-based compensation separately on our statements of income.
Instead we will present stock-based compensation in the same lines as cash compensation paid to the same individuals.

      In May 2005, the FASB issued SFAS No. 154, Accounting Changes and Error Corrections, a replacement of Accounting
Principles Board Opinion No. 20, Accounting Changes, and SFAS No. 3, Reporting Accounting Changes in Interim Financial
Statements (“SFAS 154”). SFAS 154 changes the requirements for the accounting for, and reporting of, a change in accounting
principle. Previously, voluntary changes in accounting principles were generally required to be recognized by way of a cumulative
effect adjustment within net income during the period of the change. SFAS 154 requires retrospective application to prior periods’
financial statements, unless it is impracticable to determine either the period-specific effects or the cumulative effect of the change.
SFAS 154 is effective for accounting changes made in fiscal years beginning after December 15, 2005; however, the statement does
not change the transition provisions of any existing accounting pronouncements. We do not believe that the adoption of SFAS 154 on
January 1, 2006 will have a material effect on our financial position, cash flows or results of operations.

     In November 2005, the FASB issued FASB Staff Position (FSP) Nos. FAS 115-1 and FAS 124-1, The Meaning of Other-Than-
Temporary Impairment and its Application to Certain Investments. FSP Nos. FAS 115-1 and FAS 124-1 amend SFAS No. 115,
Accounting for Certain Investments in Debt and Equity Securities, SFAS No. 124, Accounting for Certain Investments Held by Not-
for-Profit Organizations, as well as APB Opinion No. 18, The Equity Method of Accounting for Investments in Common Stock. This
guidance nullifies certain requirements of EITF 03-1, The Meaning of Other-Than-Temporary Impairment and its Application to
Certain Investments. FSP Nos. FAS 115-1 and FAS 124-1 include guidance for evaluating and recording impairment losses on debt
and equity investments, as well as new disclosure requirements for investments that are deemed to be temporarily impaired. FSP Nos.
FAS 115-1 and FAS 124-1 also require an other-than-temporary impaired debt securities to be written down to its impaired value,
which becomes the new cost basis. FSP Nos. FAS 115-1 and FAS 124-1 are effective for fiscal years beginning after December 15,
2005. We do not believe that adoption of FSP Nos. FAS 115-1 and FAS 124-1 on January 1, 2006 will have a material effect on our
financial position, cash flows or results of operations.
                                                                   87
                                                             Google Inc.
                          NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Note 2.     Cash, Cash Equivalents and Marketable Securities
     Cash, cash equivalents and marketable securities consists of the following (in thousands):

                                                                                                                   As of December 31,
                                                                                                                 2004             2005
Cash and cash equivalents:
      Cash                                                                                                   $ 394,460       $1,588,515
      Cash equivalents:
            Municipal securities                                                                                   2,951             —
            U.S. government notes and agencies                                                                    18,997       2,281,858
            Money market mutual funds                                                                             10,465           6,801
                  Total cash and cash equivalents                                                                426,873       3,877,174
Marketable securities:
      Municipal securities                                                                                    1,616,684       1,203,209
      U.S. government notes and agencies                                                                          5,163       2,906,698
      U.S. corporate securities                                                                                  83,577             —
      Equity security                                                                                               —            47,166
                  Total marketable securities                                                                 1,705,424       4,157,073
Total cash, cash equivalents and marketable securities                                                       $2,132,297      $8,034,247

      The following table summarizes unrealized gains and losses related to our investments in marketable securities designated as
available-for-sale (in thousands):

                                                                                                  December 31, 2004
                                                                                                Gross          Gross
                                                                                Adjusted      Unrealized    Unrealized
                                                                                 Cost           Gains          Losses          Fair Value
Municipal securities                                                          $1,622,883      $       118     $ (6,317)      $1,616,684
U.S. government notes and agencies                                                 5,211              —            (48)           5,163
U.S. corporate securities                                                         83,741              —           (164)          83,577
      Total marketable securities                                             $1,711,835      $       118     $ (6,529)      $1,705,424

                                                                                                     December 31, 2005
                                                                                                    Gross         Gross
                                                                                   Adjusted       Unrealized   Unrealized
                                                                                    Cost            Gains        Losses        Fair Value
Municipal securities                                                             $1,219,078       $     28     $(15,897)     $1,203,209
U.S. government notes and agencies                                                2,911,410            418       (5,130)      2,906,698
Equity security                                                                       5,000         42,166          —            47,166
      Total marketable securities                                                $4,135,488       $ 42,612     $(21,027)     $4,157,073

     Gross unrealized gains and losses on cash equivalents were not material at December 31, 2004 and 2005. We found no other-
than-temporary impairments to our marketable securities during 2004 and 2005. We have not experienced any significant realized
gains or losses on our investments in the periods presented.
                                                                 88
                                                              Google Inc.
                          NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
      The following table summarizes the estimated fair value of our investments in marketable securities designated as available-for-
sale classified by the contractual maturity date of the security (in thousands):

                                                                                                                                  As of December 31,
                                                                                                                                2004             2005
Due within 1 year                                                                                                           $ 340,771          $ 970,073
Due within 1 year through 5 years                                                                                              853,604          2,967,148
Due within 5 years through 10 years                                                                                             65,017             59,122
Due after 10 years                                                                                                             446,032            160,730
     Total marketable securities                                                                                            $1,705,424         $4,157,073

      In accordance with EITF 03-1, The Meaning of Other-Than-Temporary Impairment and Its Application to Certain Investments,
the following table shows gross unrealized losses and fair value for those investments that were in an unrealized loss position as of
December 31, 2004 and 2005, aggregated by investment category and the length of time that individual securities have been in a
continuous loss position (in thousands):

                                                                                                    2004
                                                            Less than 12 Months              12 Months or Greater                          Total
                                                            Fair          Unrealized          Fair       Unrealized               Fair             Unrealized
Security Description                                        Value           Loss             Value         Loss                   Value              Loss
U.S. government notes and agencies                      $    5,163       $    (48)       $   —             $        —         $    5,163           $    (48)
Municipal securities                                     1,192,096         (6,176)        18,116                   (141)       1,210,212             (6,317)
U.S. corporate securities                                   25,877           (164)           —                      —             25,877               (164)
      Total                                             $1,223,136       $ (6,388)       $18,116           $       (141)      $1,241,252           $ (6,529)

                                                                                                        2005
                                                               Less than 12 Months               12 Months or Greater                      Total
                                                                Fair        Unrealized            Fair       Unrealized            Fair            Unrealized
Security Description                                           Value          Loss                Value        Loss                Value             Loss
U.S. government notes and agencies                          $2,099,408       $ (5,130)       $    —            $    —          $2,099,408          $ (5,130)
Municipal securities                                           607,990         (7,705)        513,425            (8,192)        1,121,415           (15,897)
      Total                                                 $2,707,398       $(12,835)       $513,425          $ (8,192)       $3,220,823          $(21,027)

Note 3.       Interest Income and Other, Net
      The components of interest income and other, net were as follows:

                                                                                                                          Year Ended December 31,
                                                                                                                   2003             2004          2005
                                                                                                                               (in thousands)
Interest income                                                                                                $ 2,663          $15,996            $121,038
Interest expense                                                                                                (1,931)            (862)               (776)
Other                                                                                                            3,458           (5,092)              4,137
      Interest income and other, net                                                                           $ 4,190          $10,042            $124,399

                                                                   89
                                                             Google Inc.
                           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Note 4.     Acquisitions
      During the year ended December 31, 2005, we acquired all of the voting interests of nine companies and substantially all of the
assets of six other companies. Ten of these transactions were accounted for as business combinations. Because the remaining five
transactions were with companies considered to be development stage enterprises, they were accounted for as asset purchases in
accordance with EITF Issue No. 98-3, Determining Whether a Nonmonetary Transaction Involves Receipt of Productive Assets or of
a Business. The total purchase price for these business combinations and asset purchases was $130.5 million and consisted of cash
payments of $83.1 million and the issuance of 11,354 fully vested shares of our Class A common stock valued at $2.0 million on the
dates of the acquisitions. In addition, the total purchase price includes $24.6 million of cash and 89,265 shares of our Class A
common stock valued at $20.4 million on the dates of the acquisitions, payable and issuable upon, or restricted until, the attainment of
certain performance milestones. We determined that this consideration was part of the purchase price in accordance with EITF Issue
No. 95-8, Accounting for Contingent Consideration Paid to the Shareholders of an Acquired Enterprise in a Purchase Business
Combination. As these specific performance milestones were determined to be attainable beyond a reasonable doubt as of the dates of
the acquisitions, the related consideration was recorded as part of the purchase price as of those dates. In addition, we purchased a
patent for $400,000 in cash. The total purchase price of the above transactions was allocated as follows (in thousands):

Goodwill                                                                                                                     $ 72,082
Patents and developed technology                                                                                               39,940
Customer contracts and other                                                                                                    8,750
Net assets acquired                                                                                                             4,390
Deferred tax liabilities                                                                                                      (16,667)
Purchased-in-process research and development                                                                                  22,040
      Total                                                                                                                  $130,535

      Purchased in process research and development of $22.0 million in 2005 was expensed upon acquisition because technological
feasibility had not been established and no future alternative uses existed. This amount is included in research and development
expenses on the accompanying consolidated income statement and $1.2 million of it is deductible for tax purposes.

      Goodwill includes but is not limited to the synergistic value and potential competitive benefits that we can realize from the
acquisitions, any future products that may arise from the related technology, as well as the skilled and specialized workforce acquired
related to the transactions accounted for as business combinations. Approximately $9.4 million of the amount recorded as goodwill in
2005 is deductible for tax purposes.

      The developed technology, customer contracts and other intangible assets acquired during 2005 have a weighted-average useful
life of 3.1 years from the date of acquisition. The amortization of these intangibles is not deductible for tax purposes.

      Subject to the satisfaction of certain terms and conditions described in various purchase agreements, we will be obligated to
make cash payments of up to $66.4 million contingent upon the attainment of certain performance milestones in the future. We
determined that this consideration was part of the purchase price in accordance with EITF Issue No. 95-8, Accounting for Contingent
Consideration Paid to the Shareholders of an Acquired Enterprise in a Purchase Business Combination. As these specific
performance milestones were not determined to be attainable beyond a reasonable doubt as of the dates of the acquisitions, the related
consideration will only be recorded as part of the purchase price if and when the milestones are met. Most of this additional purchase
price is ultimately expected to be recognized as research and development expense.
                                                                  90
                                                             Google Inc.
                          NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
      In addition, subject to the satisfaction of certain terms and conditions described in various purchase agreements, we will be
obligated to make additional cash payments of up to $3.4 million, as well as issue up to 9,845 fully vested shares of our Class A
common stock valued at $2.0 million contingent upon certain former employees of acquired companies continued employment with
us and in some cases their attainment of certain performance milestones in the future. We determined that this consideration was not
part of the purchase price in accordance with EITF Issue No. 95-8, Accounting for Contingent Consideration Paid to the
Shareholders of an Acquired Enterprise in a Purchase Business Combination. As a result, it will be recognized as post-acquisition
compensation expense pursuant to the terms and conditions set forth in the related agreements.

     Pro forma information has not been provided because acquisitions in 2005 were not considered material.

Note 5.     Goodwill and Other Intangible Assets
     The changes in the carrying amount of goodwill for the two years ended December 31, 2005, are as follows (in thousands):

Balance as of December 31, 2003                                                                                                    $ 87,442
Goodwill acquired during year                                                                                                        35,376
Balance as of December 31, 2004                                                                                                     122,818
Goodwill acquired during year                                                                                                        72,082
Balance as of December 31, 2005                                                                                                    $194,900

     Information regarding our acquisition-related intangible assets that are being amortized is as follows (in thousands):

                                                                                                             As of December 31, 2004
                                                                                                   Gross                                 Net
                                                                                                  Carrying        Accumulated          Carrying
                                                                                                  Amount          Amortization          Value
Patents and developed technology                                                                 $ 80,473         $    17,995          $62,478
Customer contracts and other                                                                       17,355               8,764            8,591
      Total                                                                                      $ 97,828         $    26,759          $71,069

                                                                                                             As of December 31, 2005
                                                                                                   Gross                                 Net
                                                                                                  Carrying        Accumulated          Carrying
                                                                                                  Amount          Amortization          Value
Patents and developed technology                                                                 $120,413         $    46,272          $74,141
Customer contracts and other                                                                       26,145              17,503            8,642
      Total                                                                                      $146,558         $    63,775          $82,783

     Patents and developed technology and customer contracts and other have weighted-average useful lives from the date of
purchase of 3.2 and 2.2 years.

      Amortization expense of acquisition-related intangible assets for the years ended December 31, 2003, 2004 and 2005 was $6.3
million, $19.9 million and $37.0 million.
                                                                  91
                                                             Google Inc.
                          NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
      Estimated amortization expense for acquisition-related intangible assets on our December 31, 2005 consolidated balance sheet
for each of the next five years is as follows (in thousands):

2006                                                                                                                           $36,245
2007                                                                                                                            28,763
2008                                                                                                                            15,659
2009                                                                                                                             1,282
2010                                                                                                                               834
                                                                                                                               $82,783

Note 6.     Settlement of Disputes with Yahoo
      On August 9, 2004, we entered into a settlement agreement with Yahoo resolving two disputes that had been pending between
us. The first dispute concerned a lawsuit filed by Yahoo’s wholly-owned subsidiary, Overture Services, Inc., against us in April 2002
asserting that certain services infringed Overture’s U.S. Patent No. 6,269,361. In our court filings, we denied that we infringed the
patent and alleged that the patent was invalid and unenforceable.

     The second dispute concerned a warrant held by Yahoo to purchase 3,719,056 shares of our stock in connection with a June
2000 services agreement. Pursuant to a conversion provision in the warrant, we in June 2003 issued 1,229,944 shares to Yahoo.
Yahoo contended it was entitled to a greater number of shares, while we contended that we had fully complied with the terms of the
warrant.

      As part of the settlement, Overture dismissed its patent lawsuit against us and has granted us a fully-paid, perpetual license to
the patent that was the subject of the lawsuit and several related patent applications held by Overture. The parties also mutually
released any claims against each other concerning the warrant dispute. In connection with the settlement of these two disputes, we
issued to Yahoo 2,700,000 shares of Class A common stock. We used the $85.00 per share price of the initial public offering to arrive
at total settlement consideration of $229.5 million.

     We engaged a third-party valuation consultant to assist management in the allocation of the value of the settlement consideration
and the determination of the useful lives of the capitalized assets. The following table provides our allocation of the settlement
consideration (in thousands):

Non-recurring portion of settlement of disputes with Yahoo                                                                    $201,000
Intangible assets                                                                                                               28,500
      Total consideration                                                                                                     $229,500

      In the year ended December 31, 2004, we recognized the $201.0 million non-recurring charge related to the settlement of the
warrant dispute and other items. The non-cash charge associated with these shares was required because the shares were issued after
the warrant was converted. We realized a related income tax benefit of $82.0 million in 2004. We also capitalized $28.5 million
related to certain intangible assets obtained in this settlement.
                                                                  92
                                                            Google Inc.
                          NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Note 7.    Property and Equipment
     Property and equipment consist of the following (in thousands):

                                                                                                                  As of December 31,
                                                                                                                2004            2005
Information technology assets                                                                                 $504,127      $ 949,758
Construction in process                                                                                         49,350         211,088
Land and buildings                                                                                                 —           124,752
Leasehold improvements                                                                                          17,617         115,108
Furniture and fixtures                                                                                          11,974          16,719
Total                                                                                                          583,068       1,417,425
Less accumulated depreciation and amortization                                                                 204,152         455,676
Property and equipment, net                                                                                   $378,916      $ 961,749

Note 8.    Commitments and Contingencies
  Operating Leases
     We have entered into various non-cancelable operating lease agreements for certain of our offices and data centers throughout
the world with original lease periods expiring between 2006 and 2021. We are committed to pay a portion of the buildings’ operating
expenses as determined under the agreements. Certain of these arrangements have free or escalating rent payment provisions. We
recognize rent expense under such arrangements on a straight line basis.

      During 2003, we entered into a nine year sublease agreement for our headquarters in Mountain View, California. According to
the terms of the sublease, we began making payments in April 2005 and payments will increase at three percent per annum thereafter.
The lease terminates on December 31, 2012, however, we may exercise two five year renewal options at our discretion. We have an
option to purchase the property for approximately $172.4 million, which is exercisable in 2006. At December 31, 2004 and
December 31, 2005, we were in compliance with our financial covenants under the lease.

      At December 31, 2005, future minimum payments under non-cancelable operating leases, along with sublease income amounts,
are as follows over each of the next five years and thereafter (in thousands):

                                                                                                                                Net
                                                                                                  Operating     Sub-lease     Operating
                                                                                                   Leases        Income        Leases
2006                                                                                             $ 44,482       $ 5,274      $ 39,208
2007                                                                                               62,000         4,889        57,111
2008                                                                                               65,777         3,436        62,341
2009                                                                                               65,892         2,274        63,618
2010                                                                                               63,869         1,455        62,414
Thereafter                                                                                        386,628         3,000       383,628
Total minimum payments required                                                                  $688,648       $20,328      $668,320

     Rent expense under operating leases was $9.8 million, $27.1 million and $41.2 million in 2003, 2004, and 2005. Sub-lease
income was not material in any year presented.
                                                                93
                                                             Google Inc.
                          NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
     The above minimum payments at December 31, 2005 under non-cancelable operating lease commitments and the above rent
expense amounts do not include amounts related to certain non-cancelable service contracts for our data centers. The non-cancelable
commitments under these service contracts at December 31, 2005 are included below under purchase obligations.

  AdSense Agreements
      In connection with AdSense revenue share agreements, we are periodically required to make non-cancelable guaranteed
minimum revenue share payments to a small number of our Google Network members over the term of the respective contracts.
These guaranteed payments can vary based on the Google Network members achieving defined performance terms, such as number
of advertisements displayed or search queries. In some cases, certain guaranteed amounts will be adjusted downward if the Google
Network members do not meet their performance terms and, in some cases, these amounts will be adjusted upward if they exceed
their performance terms. In all of these AdSense agreements, if a Google Network member were unable to perform under the
contract, such as being unable to provide search queries, as defined under the terms of that agreement, then we would not be obligated
to make any non-cancelable guaranteed minimum revenue share payments to that member.

  Purchase Obligations
     Additionally, we had $109.7 million of other non-cancelable contractual obligations and $71.0 million of open purchase orders
for which we had not received the related services or goods at December 31, 2005. We have the right to cancel these open purchase
orders upon 10 days notice prior to the date of delivery. The majority of these purchase obligations are related to data center
operations. These non-cancelable contractual obligations and open purchase orders amounts do not include payments we may be
obligated to make based upon vendors achieving certain milestones. Future minimum payments under non-cancelable contractual
obligations are as follows: $37.1 million in less than 12 months, $71.8 million in 13–48 months and $0.8 million in 49–60 months.

  Letters of Credit
    At December 31, 2005 and associated with several leased facilities, we had unused letters of credit for $14.6 million. At
December 31, 2005, we were in compliance with our financial covenants under the letters of credit.

  Indemnifications
      In the normal course of business to facilitate transactions of our services and products, we indemnify certain parties, including
advertisers, Google Network members and lessors, with respect to certain matters. We have agreed to hold certain parties harmless
against losses arising from a breach of representations or covenants, or out of intellectual property infringement or other claims made
against certain parties. These agreements may limit the time within which an indemnification claim can be made and the amount of
the claim. In addition, we have entered into indemnification agreements with our officers and directors, and our bylaws contain
similar indemnification obligations to our agents.

      It is not possible to determine the maximum potential amount under these indemnification agreements due to the limited history
of prior indemnification claims and the unique facts and circumstances involved in each particular agreement. Historically, payments
made by us under these agreements have not had a material impact on our operating results, financial position, or cash flows.
                                                                  94
                                                               Google Inc.
                           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
  Other Legal Matters
      Certain companies have filed trademark infringement and related claims against us over the display of ads in response to user
queries that include trademark terms. The outcomes of these lawsuits have differed from jurisdiction to jurisdiction. Courts in France
have held us liable for allowing advertisers to select certain trademarked terms as keywords. We are appealing those decisions. We
were also subject to two lawsuits in Germany on similar matters where the courts held that we are not liable for the actions of our
advertisers prior to notification of trademark rights. We are litigating or recently have litigated similar issues in other cases in the
U.S., France, Germany, Israel, Italy and Austria. Adverse results in these lawsuits may result in, or even compel, a change in this
practice which could result in a loss of revenue for us, which could harm our business.

      Certain entities have also filed copyright claims against us, alleging that features of certain of our products, including Google
Web Search, Google News, Google Image Search, and Google Book Search, infringe their rights. Adverse results in these lawsuits
may include awards of damages and may also result in, or even compel, a change in our business practices, which could result in a
loss of revenue for us or otherwise harm our business.

     From time to time, we have been and may also become a party to other litigation and subject to claims incident to the ordinary
course of business, including intellectual property claims (in addition to the trademark and copyright matters noted above), labor and
employment claims, breach of contract claims, and other matters.

     Although the results of litigation and claims cannot be predicted with certainty, we believe that the final outcome of the matters
discussed above will not have a material adverse effect on our business, consolidated financial position, results of operations or cash
flow. Regardless of the outcome, litigation can have an adverse impact on us because of defense costs, diversion of management
resources and other factors.

Note 9.     Google Foundation
     The Google Foundation (the “Foundation”), a private foundation, was formed in the third quarter of
2004. The Foundation’s mission is to fund and support philanthropic programs focused on poverty and the environment. In the fourth
quarter of 2005, we funded the Foundation with a non-recourse, non-refundable cash donation of $90.0 million.

    The Board of Directors of the Foundation currently consists of three members, two of whom are directors and all of whom are
employees of Google. We have also recently selected an executive director of the Foundation who we expect will soon join the
Foundation board and will also be an employee of Google.

     Since the Foundation’s inception, we have provided at no charge certain resources to the Foundation such as office space.

Note 10.    Stockholders’ Equity
  Public Offerings
     In August 2004, we issued 14,142,135 shares of Class A common stock upon the closing of our initial public offering for
proceeds of $1.161 billion, net of related costs of $41.0 million. In September 2005, we issued 14,759,265 shares of Class A common
stock upon the closing of our follow-on public offering for proceeds of $4.287 billion, net of related costs of $66.8 million.
                                                                    95
                                                              Google Inc.
                          NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
  Class A and Class B Common Stock
      Our Board of Directors has authorized two classes of common stock, Class A and Class B. At December 31, 2005, there were
6,000,000,000 and 3,000,000,000 shares authorized and 203,335,233 and 92,995,411 shares legally outstanding of Class A and Class
B common stock. The rights of the holders of Class A and Class B common stock are identical, except with respect to voting. Each
share of Class A common stock is entitled to one vote per share. Each share of Class B common stock is entitled to ten votes per
share. Shares of Class B common stock may be converted at any time at the option of the stockholder and automatically convert upon
sale or transfer to Class A common stock. We refer to Class A and Class B common stock as common stock throughout the notes to
these financial statements, unless otherwise noted.

     At December 31, 2004 and December 31, 2005 there were 30,269,249 and 24,221,509 shares of common stock reserved for
future issuance, as presented in the following table:

                                                                                                             December 31,   December 31,
                                                                                                                 2004           2005
Outstanding options to purchase common stock                                                                  18,000,279     15,286,579
Options to purchase, and shares of, common stock available for grant and issuance                              4,663,748      5,631,863
Unvested shares related to options granted and exercised subsequent to March 21, 2002 to purchase
  common stock                                                                                                 7,605,222      3,303,067
      Total common stock reserved for future issuance                                                         30,269,249     24,221,509

  Stock Plans
      We maintain the 1998 Stock Plan, the 2000 Stock Plan, the 2003 Stock Plan, the 2003 Stock Plan (No. 2) and the 2003 Stock
Plan (No. 3), the 2004 Stock Plan and plans assumed through acquisitions which are collectively referred to as the “Stock Plans.”
Under our Stock Plans, incentive and nonqualified stock options or rights to purchase common stock may be granted to eligible
participants. Options must generally be priced to be at least 85% of the Class A common stock’s fair market value at the date of grant
(100% in the case of incentive stock options). Options are generally granted for a term of ten years. Options granted under the Stock
Plans primarily vest 25% after the first year of service and ratably each month over the remaining 36 month period contingent upon
employment with us on the date of vest. Options granted under plans other than the 2004 Stock Plan may be exercised prior to
vesting. There were 3,642,242 shares of common stock outstanding and subject to repurchase related to the Stock Plans at
December 31, 2005. Of this total, 339,175 and 3,303,067 shares are related to options granted through and after March 21, 2002; the
latter amount is presented as reserved for future issuance in the table above in accordance with EITF 00-23. We have also issued
restricted stock units (“RSUs”) and restricted shares under our Stock Plans. An RSU award is an agreement to issue shares of our
stock at the time of vest. The weighted-average grant date fair value of the shares underlying all RSUs and restricted shares granted in
2004 and 2005 was $150.89 and $297.58. See further discussion of RSUs and restricted shares under Note 1 above.

    In April and May 2005, our Board of Directors and stockholders approved an additional seven million shares of Class A
common stock for issuance under our 2004 Stock Plan.
                                                                  96
                                                            Google Inc.
                           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
      The following table summarizes the activity under our Stock Plans:

                                                                                                            Options Outstanding
                                                                                               Shares                               Weighted-
                                                                                             Available          Number of            Average
                                                                                             for Grant           Shares            Exercise Price
Balance at December 31, 2002                                                                  8,805,684         22,924,476         $      0.29
     Additional options authorized                                                           16,034,880                —                   —
     Options granted                                                                        (19,846,158)        19,846,158         $      2.65
     Options exercised                                                                              —          (13,145,075)        $      0.54
     Options canceled                                                                           274,955           (274,955)        $      1.50
     Options repurchased                                                                        170,794                —           $      0.29
Balance at December 31, 2003                                                                  5,440,155         29,350,604         $      2.47
     Additional options authorized                                                            6,531,143                —                   —
     Options granted                                                                         (4,775,058)         4,775,058         $     85.95
     Options exercised                                                                              —           (8,033,820)        $      1.67
     Options canceled                                                                             1,750           (486,341)        $      4.30
     Options expired                                                                         (2,422,510)               —                   —
Balance at December 31, 2004                                                                  4,775,480         25,605,501         $     24.41
     Additional options authorized                                                            7,000,000                —                   —
     Options granted                                                                         (5,335,542)         5,335,542         $    266.70
     Options exercised                                                                              —          (11,511,586)        $     11.79
     Options canceled                                                                           167,582           (839,811)        $     49.30
Balance at December 31, 2005                                                                  6,607,520         18,589,646         $    113.51

      The number of options outstanding at December 31, 2004 and 2005 includes 7,605,222 and 3,303,067 of options granted and
exercised subsequent to March 21, 2002 that are unvested at December 31, 2004 and 2005, in accordance with EITF 00-23. However,
the computations of the weighted-average exercise prices in the table above do not consider these unvested shares. Also, the number
of shares available for grant does not include 111,732 and 975,657 of total RSUs and certain other restricted shares, net of
cancellations, in 2004 and 2005. After consideration of these RSUs and restricted shares, 4,663,748 and 5,631,863 shares were
available for future grant at December 31, 2004 and 2005.

      The following table summarizes additional information regarding outstanding and exercisable options at December 31, 2005:

                                                                      Options Outstanding                                Options Exercisable
                                                              Unvested
                                                               Options
                                                             Granted and                     Weighted-
                                                              Exercised                       Average      Weighted                    Weighted
                                                  Total     Subsequent to                    Remaining     Average                     Average
                                                Number of     March 21,       Number of         Life       Exercise    Number of       Exercise
Range of Exercise Prices                         Shares         2002           Shares         (Years)       Price       Shares          Price
$0.01–$85.00                                   12,026,676     3,303,067      8,723,609            7.4      $ 13.89     8,447,401       $ 13.59
$117.84–$198.41                                 2,803,994           —        2,803,994            9.0      $ 176.24      199,451       $ 164.01
$205.96–$298.91                                 1,888,667           —        1,888,667            9.5      $ 272.62          —              —
$300.97–$398.15                                 1,704,329           —        1,704,329            9.7      $ 314.21        1,630       $ 318.68
$404.22–$426.69                                   165,980           —          165,980            9.9      $ 418.47          —              —
$0.01–$426.69                                  18,589,646     3,303,067     15,286,579            8.2      $ 113.51    8,648,482       $ 17.12

                                                                 97
                                                              Google Inc.
                          NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Note 11.    401(k) Plan
      We have a 401(k) Savings Plan (the “401(k) Plan”) that qualifies as a deferred salary arrangement under Section 401 (k) of the
Internal Revenue Code. Under the 401(k) Plan, participating employees may elect to contribute up to 60% of their eligible
compensation, subject to certain limitations. We match employee contributions up to $2,200 per year. Employee and our
contributions are fully vested when contributed. We contributed approximately $1.7 million, $4.4 million and $8.4 million during
2003, 2004 and 2005, respectively.

Note 12.    Income Taxes
     Income before income taxes included income (loss) from foreign operations of approximately $(6.5) million, $(42.3) million and
$590.8 million for 2003, 2004 and 2005.

     The provision for income taxes consisted of the following (in thousands):

                                                                                                            Year Ended December 31,
                                                                                                     2003            2004           2005
Current:
      Federal                                                                                      $187,686       $215,503         $506,322
      State                                                                                          52,336         68,004          141,101
      Foreign                                                                                           965          1,581            7,694
            Total                                                                                   240,987        285,088          655,117
Deferred:
      Federal                                                                                           712        (18,310)          14,273
      State                                                                                            (693)       (15,663)           6,890
            Total                                                                                        19        (33,973)          21,163
Provision for income taxes                                                                         $241,006       $251,115         $676,280

     The reconciliation of federal statutory income tax rate to our effective income tax rate is as follows (in thousands):

                                                                                                         Year Ended December 31,
                                                                                                  2003            2004              2005
Expected provision at federal statutory rate, 35%                                              $121,329        $227,582        $ 749,588
State taxes, net of federal benefit                                                              33,568          34,022           96,194
Stock based compensation expense                                                                 79,764          18,703           25,058
Disqualifying dispositions of incentive stock options                                               —           (36,221)         (46,092)
Foreign rate differential                                                                         3,249          16,370         (134,185)
In process research and development                                                               4,066           3,970            7,714
Federal research credit utilization                                                              (2,433)         (6,317)         (12,287)
Tax exempt interest                                                                                (750)         (4,755)         (20,177)
Other permanent differences                                                                       2,213          (2,239)          10,467
Provision for income taxes                                                                     $241,006        $251,115        $ 676,280

                                                                   98
                                                              Google Inc.
                           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
  Deferred Tax Assets
      Deferred income taxes reflect the net effects of temporary differences between the carrying amounts of assets and liabilities for
financing reporting purposes and the amounts used for income tax purposes. Significant components of our deferred tax assets and
liabilities are as follows (in thousands):

                                                                                                                    As of December 31,
                                                                                                                  2004             2005
Deferred tax assets:
      Deferred compensation                                                                                    $ 68,242         $      —
      State taxes                                                                                                 6,090                —
      Deferred revenue                                                                                            2,046              2,904
      Accruals and reserves not currently deductible                                                             15,574             33,072
      Tax credits                                                                                                   —               11,047
      Charitable contribution carryforwards                                                                         —               16,471
      Other                                                                                                          48                 58
             Total deferred tax assets                                                                           92,000             63,552
Deferred tax liabilities:
      Depreciation                                                                                              (46,076)         (15,014)
      Identified intangibles                                                                                     (9,885)         (20,286)
      Unrealized gains/(losses) on investments and other                                                            793          (10,786)
      Other                                                                                                      (5,779)          (3,544)
             Total deferred tax liabilities                                                                     (60,947)         (49,630)
Net deferred tax assets                                                                                        $ 31,053         $ 13,922

      The American Jobs Creation Act of 2004 (the Act), enacted on October 22, 2004, provides for a temporary 85% dividends
received deduction on certain foreign earnings repatriated during either 2004 or 2005. We did not elect this provision in 2004 nor in
2005. The deduction would result in an approximate 5.25% federal tax rate on the repatriated earnings. To qualify for the deduction,
the earnings must be reinvested in the United States pursuant to a domestic reinvestment plan established by our chief executive
officer and approved by our board of directors. Certain other criteria in the Act must be satisfied as well.

      No provision has been made for federal income taxes on $533.7 million of gross cumulative unremitted earnings through
December 31, 2005 of our foreign subsidiaries since we plan to indefinitely reinvest all such earnings. If these earnings were
distributed to the U.S. in the form of dividends or otherwise, then we would be subject to U.S. income taxes of approximately $208.9
million (subject to an adjustment for foreign tax credits).

      As of December 31, 2005, we had $18.4 million of California research and development tax credit carryforwards which does not
expire. In addition, we had $37.5 million and $36.1 million of federal and state charitable contribution carryforwards which if not
utilized, will expire in 2011.

Note 13.    Information about Geographic Areas
      Our chief operating decision-makers (i.e., chief executive officer and his direct reports) review financial information presented
on a consolidated basis, accompanied by disaggregated information about revenues by geographic region for purposes of allocating
resources and evaluating financial performance. There are no segment managers who are held accountable for operations, operating
results and plans for levels or components below the consolidated unit level. Accordingly, we consider ourselves to be in a single
reporting segment and operating unit structure.
                                                                   99
                                                               Google Inc.
                           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
      Revenues by geography are based on the billing address of the advertiser. The following table sets forth revenues and long-lived
assets by geographic area (in thousands):

                                                                                                          Year Ended December 31,
                                                                                                   2003            2004              2005
Revenues:
     United States                                                                             $1,038,409      $2,119,043         $3,756,886
     United Kingdom                                                                               141,508         402,802            878,110
     Rest of the world                                                                            286,017         667,378          1,503,564
           Total revenues                                                                      $1,465,934      $3,189,223         $6,138,560

                                                                                                             As of December 31,
                                                                                                   2003             2004             2005
Long-lived assets:
     United States                                                                             $ 267,348       $ 552,857          $1,080,236
     International                                                                                43,876          67,029             190,506
           Total long-lived assets                                                             $ 311,224       $ 619,886          $1,270,742

Note 14.    Subsequent Events
  Acquisition of dMarc Broadcasting, Inc.
     On February 17, 2006, we completed our acquisition of all of the outstanding equity interests in dMarc Broadcasting, Inc., a
privately held company, for total up-front cash consideration of $102.0 million. In addition, we are obligated to make additional cash
payments of up to $1.136 billion if certain product integration, net revenue and advertising inventory targets are met through
December 31, 2008. Since these contingent payments are based on the achievement of performance targets, actual payments may be
substantially lower. Substantially all of the payments will be accounted for as part of the purchase price for the transaction.

  Investment in America Online, Inc.
      On December 20, 2005, we entered into a letter agreement (“Letter Agreement”) with Time Warner Inc. and America Online,
Inc. (“AOL”) pursuant to which we agreed to purchase a five percent equity interest in a wholly owned subsidiary of Time Warner
that will own all of the outstanding equity interests in AOL for $1.0 billion in cash, subject to certain conditions, including entering
into definitive agreements with respect to certain commercial arrangements described in the Letter Agreement. We have substantially
completed negotiations with respect to definitive agreements governing this $1.0 billion investment in AOL and currently expect that
the investment will close in the second quarter of 2006.

      Our investment in this non-marketable equity security will be accounted for at historical cost. In addition, this investment will be
subject to a periodic impairment review. To the extent any impairment is considered other-than-temporary, this investment would be
written down to its fair value and the loss would be recorded in “interest income and other, net.”

     Beginning on July 1, 2008, we will have certain rights to require a registration of these shares for sale in a public offering. If we
exercise this right, Time Warner, the parent of AOL, will have the right to purchase our interests for cash or shares of Time Warner
stock based on an appraised fair market value of our equity interest in AOL in lieu of conducting a public offering. In addition, in the
event of a sale of all or substantially all of the assets of AOL, Time Warner would cause the distribution to us of our pro rata portion
of such sale.

     At the time we entered into the Letter Agreement, we also agreed to enter into certain arms-length commercial arrangements
with AOL pursuant to the Letter Agreement.
                                                                   100
ITEM 9.     CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
            DISCLOSURE
     Not applicable.

ITEM 9A.       CONTROLS AND PROCEDURES
  (a) Evaluation of disclosure controls and procedures.
      Our management, with the participation of our chief executive officer and chief financial officer, evaluated the effectiveness of
our disclosure controls and procedures pursuant to Rule 13a-15 under the Securities Exchange Act of 1934 as amended (the
“Exchange Act”). In designing and evaluating the disclosure controls and procedures, management recognized that any controls and
procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control
objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and
that we are required to apply our judgment in evaluating the benefits of possible controls and procedures relative to our costs.

      Based on that evaluation, our chief executive officer and chief financial officer concluded that, as of December 31, 2005, our
disclosure controls and procedures are effective to provide reasonable assurance that information required to be disclosed by us in the
reports that we file or submit under the Exchange Act (i) is accumulated and communicated to our management, including our chief
executive officer and chief financial officer, as appropriate, to allow timely decisions regarding required disclosure, and (ii) is
recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission rules and
forms.

  (b) Changes in internal control over financial reporting.
     There were no changes in our internal control over financial reporting that occurred during the period covered by this Annual
Report on Form 10-K that have materially affected, or are reasonably likely to materially affect, our internal control over financial
reporting.

  (c) Management’s report on internal control over financial reporting.
      Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as defined in
Exchange Act Rule 13a-15(f). Management conducted an evaluation of the effectiveness of our internal control over financial
reporting based on the framework in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations
of the Treadway Commission. Based on this evaluation, management concluded that our internal control over financial reporting was
effective as of December 31, 2005. Management reviewed the results of their assessment with our Audit Committee. Management’s
assessment of the effectiveness of our internal control over financial reporting as of December 31, 2005 has been audited by Ernst &
Young LLP, an independent registered public accounting firm, as stated in their report which is included in Part IV, Item 15 of this
Form 10-K.

ITEM 9B.       OTHER INFORMATION
     Not applicable.
                                                                  101
                                                               PART III

ITEM 10.       DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
      The information required by this item concerning our directors, compliance with Section 16 of the Securities and Exchange Act
of 1934 and our code of ethics that applies to our principal executive officer, principal financial officer and principal accounting
officer is incorporated by reference to the information set forth in the sections entitled “Election of Directors,” “Section 16(a)
Beneficial Ownership Reporting Compliance” and “Election of Directors—Corporate Governance Matters—Code of Conduct” in our
Proxy Statement for our 2006 Annual Meeting of Stockholders to be filed with the Securities and Exchange Commission not later
than 120 days after the fiscal year ended December 31, 2005 (the “2006 Proxy Statement”).

     The information required by this item concerning our executive officers is set forth under the heading “Executive Officers of the
Registrant” in Part I of this Annual Report on Form 10-K.

ITEM 11.       EXECUTIVE COMPENSATION
     The information required by this item is incorporated by reference to the information set forth in the sections entitled “Election
of Directors—Director Compensation” and “Executive Compensation” in the 2006 Proxy Statement.

ITEM 12.       SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
               STOCKHOLDER MATTERS
     The information required by this item is incorporated by reference to the information set forth in the sections entitled “Security
Ownership of Certain Beneficial Owners and Management” and “Equity Compensation Plan Information” in the 2006 Proxy
Statement.

ITEM 13.       CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
     The information required by this item is incorporated by reference to the information set forth in the section entitled “Certain
Transactions” in the 2006 Proxy Statement.

ITEM 14.       PRINCIPAL ACCOUNTANT FEES AND SERVICES
     The information required by this item is incorporated by reference to the information set forth in the section entitled
“Ratification of Appointment of Independent Registered Public Accounting Firm—Accounting Fees” in the 2006 Proxy Statement.
                                                                  102
                                                                      PART IV

ITEM 15.         EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) We have filed the following documents as part of this Form 10-K:
1. Consolidated Financial Statements
        Reports of Ernst & Young LLP, Independent Registered Public Accounting Firm                                                71
        Financial Statements
             Consolidated Balance Sheets                                                                                           73
             Consolidated Statements of Income                                                                                     74
             Consolidated Statements of Redeemable Convertible Preferred Stock Warrant and Stockholders’ Equity                    75
             Consolidated Statements of Cash Flows                                                                                 76
             Notes to Consolidated Financial Statements                                                                            77

2. Financial Statement Schedules
      Schedule II: Valuation and Qualifying Accounts

     All other schedules have been omitted because they are not required, not applicable, or the required information is otherwise
included.

                                                    Schedule II: Valuation and Qualifying Accounts
                                                                                                     Charged to        Write-
                                                                                     Balance at      Expenses/           Offs
                                                                                    Beginning of      Against           Net of      Balance at
Allowance for Doubtful Accounts and Sales Credits                                      Year           Revenue         Recoveries   End of Year
                                                                                                           (In thousands)
Year ended December 31, 2003                                                        $    2,297       $ 6,106          $ (3,733)    $ 4,670
Year ended December 31, 2004                                                        $    4,670       $ 5,387          $ (6,095)    $ 3,962
Year ended December 31, 2005                                                        $    3,962       $ 18,264         $ (7,374)    $ 14,852

Note:    Additions to the allowance for doubtful accounts are charged to expense. Additions to the allowance for sales credits are
         charged against revenues.

3. Exhibits. See Item 15(b) below.
(b) Exhibits. We have filed, or incorporated into the Form 10-K by reference, the exhibits listed on the accompanying Index to
Exhibits immediately following the signature page of this Form 10-K.

(c) Financial Statement Schedule. See Item 15(a) above.
                                                                         103
                                                           SIGNATURES

    Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this
Annual Report on Form 10-K to be signed on its behalf by the undersigned, thereunto duly authorized, on March 16, 2006.

                                                                                 GOOGLE INC.

                                                                                 By:              /s/   ERIC E. SCHMIDT
                                                                                                         Eric E. Schmidt
                                                                                             Chairman of the Executive Committee and
                                                                                                     Chief Executive Officer


                                                     POWER OF ATTORNEY

      KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Eric E.
Schmidt and George Reyes, jointly and severally, his or her attorney-in-fact, with the power of substitution, for him or her in any and
all capacities, to sign any amendments to this Annual Report on Form 10-K and to file the same, with exhibits thereto and other
documents in connection therewith, with the Securities and Exchange Commission, hereby ratifying and confirming all that each of
said attorneys-in-fact, or his or her substitute or substitutes, may do or cause to be done by virtue hereof.

     Pursuant to the requirements of the Securities Exchange Act of 1934, this Annual Report on Form 10-K has been signed below
by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.

                               Signature                                          Title                                     Date


               /s/         ERIC E. S CHMIDT                Chairman of the Executive Committee and                   March 16, 2006
                            Eric E. Schmidt                  Chief Executive Officer (Principal Executive
                                                             Officer)

                /s/        GEORGE REYES                    Chief Financial Officer (Principal Financial and          March 16, 2006
                             George Reyes                    Accounting Officer)

                    /s/     SERGEY BRIN                    President of Technology, Assistant Secretary              March 16, 2006
                              Sergey Brin                     and Director

                     /s/     LARRY PAGE                    President of Products, Assistant Secretary and            March 16, 2006
                              Larry Page                      Director

                /s/        L. JOHN DOERR                   Director                                                  March 16, 2006
                             L. John Doerr

               /s/         MICHAEL MORITZ                  Director                                                  March 16, 2006
                            Michael Moritz

               /s/         K. R AM SHRIRAM                 Director                                                  March 16, 2006
                            K. Ram Shriram

              /s/      JOHN L. H ENNESSY                   Director                                                  March 16, 2006
                           John L. Hennessy

                                                                  104
                 Signature                   Title        Date


/s/     ARTHUR D. LEVINSON        Director           March 16, 2006
             Arthur D. Levinson

  /s/        PAUL S. O TELLINI    Director           March 16, 2006
               Paul S. Otellini


 /s/     SHIRLEY TILGHMAN         Director           March 16, 2006
              Shirley Tilghman


       /s/    ANN M ATHER         Director           March 16, 2006
                Ann Mather

                                       105
Exhibit                                                                                  Incorporated by reference herein
Number                                Description                                         Form                              Date
 3.01        Third Amended and Restated Certificate of Incorporation of   Registration Statement on Form S-l,        August 9, 2004
             Registrant as filed August 24, 2004                          as amended (File No. 333-114984)
 3.02        Amended and Restated Bylaws of Registrant, effective as of   Registration Statement on Form S-l,        August 9, 2004
             August 24, 2004                                              as amended (File No. 333-114984)
 4.01        Investor Rights Agreement dated May 31, 2002                 Registration Statement on Form S-l,        April 29, 2004
                                                                          as amended (File No. 333-114984)
 4.01.1      Amendment to Investor Rights Agreement dated August 17,      Registration Statement on Form S-l,        August 18, 2004
             2004                                                         as amended (File No. 333-114984)
 4.02        Specimen Class A Common Stock certificate                    Registration Statement on Form S-l,        August 18, 2004
                                                                          as amended (File No. 333-114984)
 4.03        Specimen Class B Common Stock certificate                  Registration Statement on Form S-l,          August 18, 2004
                                                                        as amended (File No. 333-114984)
10.01       Form of Indemnification Agreement entered into between      Registration Statement on Form S-l,          July 12, 2004
            Registrant, its affiliates and its directors and officers   as amended (File No. 333-114984)
10.02     ♥ 1998 Stock Plan, as amended, and form of stock option       Registration Statement on Form S-l,          April 29, 2004
            agreement                                                   as amended (File No. 333-114984)
10.03       1999 Stock Option/Stock Issuance Plan, as amended, and form Registration Statement on Form S-l,          April 29, 2004
            of stock option agreement                                   as amended (File No. 333-114984)
10.04     ♥ 2000 Stock Plan, as amended, and form of stock option         Registration Statement on Form S-l,        April 29, 2004
            agreement                                                     as amended (File No. 333-114984)
10.05        2003 Stock Plan, as amended, and form of stock option        Registration Statement on Form S-l,        April 29, 2004
             agreement                                                    as amended (File No. 333-114984)
10.06        2003 Stock Plan (No. 2) and form of stock option agreement   Registration Statement on Form S-l,        April 29, 2004
                                                                          as amended (File No. 333-114984)
10.07        2003 Stock Plan (No. 3) and form of stock option agreement   Registration Statement on Form S-l,        April 29, 2004
                                                                          as amended (File No. 333-114984)
10.08        Intentionally skipped
10.08.1 ♥ 2004 Stock Plan—Stock Option Agreement                          Annual Report on Form 10-K                 March 30, 2005
10.08.2 ♥ 2004 Stock Plan—Restricted Stock Unit Agreement                 Annual Report on Form 10-K                 March 30, 2005
10.09        Google Technology Sublease Agreement dated July 9, 2003      Registration Statement on Form S-l,        April 29, 2004
             by and between Silicon Graphics, Inc. and Registrant         as amended (File No. 333-114984)
10.09.1      Amendment No. 1 to Sublease dated November 18, 2003 by       Registration Statement on Form S-l,        April 29, 2004
             and between Silicon Graphics, Inc. and Registrant            as amended (File No. 333-114984)
10.09.2      Amendment No. 2 to Sublease dated December 17, 2003 by       Registration Statement on Form S-l,        April 29, 2004
             and between Silicon Graphics, Inc. and Registrant            as amended (File No. 333-114984)
10.09.3      Landlord-Subtenant Agreement dated July 9, 2003 by and     Registration Statement on Form S-l,          April 29, 2004
             among WXIII/Amphitheatre Realty, L.L.C., Silicon Graphics, as amended (File No. 333-114984)
             Inc. and Registrant
10.09.4      Second Amendment to Commercial Lease dated July 9, 2003      Registration Statement on Form S-l,        April 29, 2004
             by and among WXIII/Amphitheatre Realty, L.L.C., Silicon      as amended (File No. 333-114984)
             Graphics, Inc. and Registrant
10.09.5      Amendment to Commercial Lease dated April 19, 2001 by and Registration Statement on Form S-l,           April 29, 2004
             among the Goldman Sachs Group, Inc., Silicon Graphics, Inc. as amended (File No. 333-114984)
             and Silicon Graphics Real Estate, Inc.
10.09.6      Lease between the Goldman Sachs Group, Inc. and Silicon      Registration Statement on Form S-l,        April 29, 2004
             Graphics, Inc. dated December 29, 2000                       as amended (File No. 333-114984)
10.09.7      Nondisturbance and Attornment Agreement between              Registration Statement on Form S-l,        April 29, 2004
             Registrant and WXIII/Amphitheatre Realty, L.L.C.             as amended (File No. 333-114984)
Exhibit                                                                                     Incorporated by reference herein
Number                                              Description                              Form                              Date
10.10      † Amended and Restated License Agreement dated October 13, Registration Statement on Form S-l, August 16, 2004
             2003 by and between The Board of Trustees of the Leland  as amended (File No. 333-114984)
             Stanford Junior University and Registrant
10.10.1        License Agreement dated July 2, 2001 by and between The       Registration Statement on Form S-l, August 18, 2004
               Board of Trustees of the Leland Stanford Junior University    as amended (File No. 333-114984)
               and Registrant
10.11          Employment Agreement dated March 14, 2001 by and              Registration Statement on Form S-1, August 9, 2004
               between Eric Schmidt and Google Inc.                          as amended (File No. 333-114984)
10.12          2003 Equity Incentive Plan and form of stock option           Registration Statement on Form S-l, July 26, 2004
               agreement                                                     as amended (File No. 333-114984)
10.13          Lifescape Solutions, Inc. 2001 Stock Plan and form of stock   Registration Statement on Form S-8        September 24, 2004
               option agreement                                              (File No. 333-119282)
10.14          Picasa, Inc. Employee Bonus Plan                              Registration Statement on Form S-8        September 29, 2004
                                                                             (File No. 333-119378)
10.15          Keyhole, Inc. 2000 Equity Incentive Plan and form of stock    Registration Statement on Form S-8        October 29, 2004
               option agreement                                              (File No. 333-120099)
10.16      ♥ 2005 Senior Executive Bonus Plan                                Current Report on Form 8-K                February 18, 2005
10.17      ♥ Google Inc. 2004 Stock Plan, as amended.                        Current Report on Form 8-K                May 16, 2005
10.18      ♥ Letter agreement between the Company and Shirley Tilghman Current Report on Form 8-K                      October 6, 2006
             dated August 16, 2005.
10.19      ♥ Letter agreement between the Company and Ann Mather             Current Report on Form 8-K                November 29, 2005
             dated November 8, 2005.
10.20      * Amended and Restated Limited Liability Company
             Agreement of AOL Holdings LLC
10.21      * Contribution Agreement among Time Warner Inc., Google
             Inc. and America Online, Inc.
10.22      * Google Registration Rights Agreement among Time Warner
             Inc., AOL Holdings LLC and Google Inc.
21.01      * List of subsidiaries of Registrant
23.01      * Consent of Ernst & Young LLP, Independent Registered
             Public Accounting Firm
24.01      * Power of Attorney (incorporated by reference to the signature
             page of this Annual Report on Form 10-K)
31.01      * Certification of Chief Executive Officer pursuant to Exchange
             Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to
             Section 302 of the Sarbanes-Oxley Act of 2003
31.02      * Certification of Chief Financial Officer pursuant to Exchange
             Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to
             Section 302 of the Sarbanes-Oxley Act of 2003
32.01      ‡ Certifications of Chief Executive Officer and Chief Financial
             Officer pursuant to 18 U.S.C. Section 1350, as adopted
             pursuant to Section 906 of the Sarbanes-Oxley Act of 2003

♥Indicates management compensatory plan, contract or arrangement.
† Confidential treatment has been granted for portions of this exhibit.
* Filed herewith.
‡ Furnished herewith.
                                                           Exhibit 10.20




AMENDED AND RESTATED LIMITED LIABILITY COMPANY AGREEMENT

                          OF

                    AOL HOLDINGS LLC
                                               TABLE OF CONTENTS

                                                                        Page
                                                       ARTICLE I
                                                      Defined Terms
SECTION 1.01.   Definitions                                               1
SECTION 1.02.   Terms and Usage Generally                                11
                                                       ARTICLE II
                                                      General Matters
SECTION 2.01.   Formation                                                12
SECTION 2.02.   Name                                                     12
SECTION 2.03.   Term                                                     12
SECTION 2.04.   Registered Agent and Registered Office                   12
SECTION 2.05.   Principal Place of Business                              12
SECTION 2.06.   Purposes and Powers                                      12
SECTION 2.07.   Books and Records                                        13
                                                     ARTICLE III
                                                         Members
SECTION 3.01.   Members                                                  13
SECTION 3.02.   Powers of Members                                        13
SECTION 3.03.   Membership Interests                                     13
SECTION 3.04.   Voting Rights                                            14
SECTION 3.05.   Liability of Members, Managers, Etc                      14
                                                       ARTICLE IV
                                                       Governance
SECTION 4.01.   Board of Managers                                        18
SECTION 4.02.   Officers                                                 18
SECTION 4.03.   Matters Requiring Google Consent                         18
SECTION 4.04.   Successor Covenants                                      20
SECTION 4.05.   Termination                                              20
                                                             i
                                                          ARTICLE V
                          Capital Contributions; New Issuances; Preemptive Rights; Guarantee Fee
SECTION 5.01.   Initial Capital Contributions                                                                    20
SECTION 5.02.   New Issuances of Equity Capital                                                                  21
SECTION 5.03.   Preemptive Rights                                                                                21
SECTION 5.04.   Guarantee Fee                                                                                    22
                                                          ARTICLE VI
                                                    Distributions; Assets Sales
SECTION 6.01.   Distributions                                                                                    23
SECTION 6.02.   Withholding                                                                                      23
SECTION 6.03.   Asset Sales                                                                                      23
                                                          ARTICLE VII
          Transfer of Membership Interests; Tag-Along Rights; Drag-Along Rights; Sale of AOL Audience Business
SECTION 7.01.   Transfer of Membership Interests Generally                                                       23
SECTION 7.02.   Effect of Permitted Transfer                                                                     24
SECTION 7.03.   Securities Law Matters                                                                           24
SECTION 7.04.   Transfers by a Google Entity                                                                     24
SECTION 7.05.   Transfers by a Time Warner Entity                                                                25
SECTION 7.06.   Company IPO; Distributions                                                                       28
                                                         ARTICLE VIII
                           Transfers to Specified Purchasers; Buy-Out Rights and Related Matters
SECTION 8.01.   Transfers to Specified Purchasers                                                                28
SECTION 8.02.   Time Warner Change of Control                                                                    29
SECTION 8.03.   Google IPO Demand Right                                                                          29
SECTION 8.04.   Appraisal Process, etc                                                                           30
SECTION 8.05.   Company IPO; Distributions                                                                       33
                                                          ARTICLE IX
                                                      Certain Other Matters
SECTION 9.01.   Conversion of the Company to a Corporation                                                       33
SECTION 9.02.   Sale of AOL                                                                                      33
SECTION 9.03.   Dissolution                                                                                      33
                                                                ii
SECTION 9.04.    Liquidation                                            33
SECTION 9.05.    Resignation                                            34
SECTION 9.06.    Tax Matters                                            34
SECTION 9.07.    Google Information Rights                              34
                                                       ARTICLE X
                                                       Miscellaneous
SECTION 10.01.   Notices                                                36
SECTION 10.02.   Failure to Pursue Remedies                             37
SECTION 10.03.   Cumulative Remedies                                    37
SECTION 10.04.   Parties in Interest                                    37
SECTION 10.05.   Headings                                               37
SECTION 10.06.   Severability                                           37
SECTION 10.07.   Counterparts                                           37
SECTION 10.08.   Entire Agreement                                       37
SECTION 10.09.   Governing Law; Waiver of Jury Trial                    37
SECTION 10.10.   Confidentiality                                        38
SECTION 10.11.   Amendments                                             38
SECTION 10.12.   Absence of Presumption                                 39


SCHEDULES
Schedule A       Members, Percentage Interest and Membership Interest


EXHIBITS
Exhibit A        Form of Adoption Agreement
Exhibit B        Representations and Warranties
Exhibit C        Certificate
                                                            iii
                                                                              This Amended and Restated Limited Liability Company
                                                                         Agreement (this “Agreement”) of AOL Holdings LLC, a
                                                                         Delaware limited liability company (the “Company”), is
                                                                         dated as of [      ], 2006, among Time Warner Inc., a
                                                                         Delaware corporation, Google Inc., a Delaware corporation
                                                                         (“Google”), AOL LLC, a Delaware limited liability company
                                                                         (“AOL”), and TW AOL Holdings Inc., a Virginia
                                                                         corporation (“NewCo”).

            WHEREAS, the Company has been formed as a limited liability company under the Delaware Limited Liability Company
Act (6 Del. C. § 18 101, et seq.), as amended from time to time (the “Delaware Act”), pursuant to the Certificate of Formation, as
filed in the office of the Secretary of State of the State of Delaware, and is currently governed by the Limited Liability Company
Agreement of the Company, dated as of February 8, 2006 (the “Original Agreement”), entered into by Time Warner Inc., a Delaware
corporation;

          WHEREAS the Initial Members have entered into a Contribution Agreement; and

          WHEREAS the Initial Members desire to enter into this Agreement to set forth certain agreements relating to the
ownership, management and operation of the Company.

           NOW, THEREFORE, in consideration of the agreements and obligations set forth herein and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the Members hereby continue the Company pursuant to
and in accordance with the Delaware Act, as provided herein, and hereby agree to amend and restate the Original Agreement as
follows:

                                                             ARTICLE I
                                                            Defined Terms

          SECTION 1.01. Definitions. Unless the context otherwise requires, the terms defined in this Article I shall, for the
purposes of this Agreement, have the meanings herein specified.

          “Additional Member” shall have the meaning set forth in Section 3.01(b).

           “Additional Membership Interests” shall mean any Membership Interests that are acquired after the initial capital
contributions made by the Initial Members pursuant to the Contribution Agreement.

           “Adoption Agreement” shall mean an agreement, substantially in the form of Exhibit A, confirming the agreement of a
Person to be bound by the terms and provisions of this Agreement.
                                                                   1
            “Affiliate” shall mean, with respect to any Person, any other Person that directly or through one or more intermediaries,
controls, is controlled by or is under common control with, the specified Person. As used in this definition, the term
“control” (including with correlative meanings, “controls”, “controlled by” and “under common control with”) shall mean, with
respect to any Person, the possession, directly or indirectly, of the power to direct or cause the direction of the management or
policies of such Person, whether through ownership of securities or partnership, membership, limited liability company, or other
ownership interests, by contract or otherwise. For purposes of this Agreement, neither the Company nor any entity controlled, directly
or indirectly, by the Company shall be an Affiliate of any Member.

          “Agreement” shall have the meaning set forth in the preamble hereof.

          “AOL” shall mean AOL LLC, a Delaware limited liability company.

          “AOL Entity” shall mean the Company and any direct or indirect subsidiary of the Company.

           “Audience Business” shall mean the business unit of AOL that develops, programs and markets content, tools and services
for users of the web sites, portals and services comprising the AOL Network and earns revenue primarily through selling online
advertising on the AOL Network as well as from selling advertisements on third party web sites through Advertising.com’s network
and through other relationships with third party web sites. The AOL Network is an online network that is comprised of a variety of
websites, portals and services including the AOL service, low cost ISP services, AOL.com, AIM, Moviefone, MapQuest, ICQ and
Netscape.com.

          “Audience Business Transfer” shall mean the Transfer of all or substantially all of the assets comprising the Audience
Business or the Transfer of at least 95% of the Equity Interests of any AOL Entity which holds all or substantially all of the assets
comprising the Audience Business; provided, however, that the Transfer of (i) all or substantially all the assets of AOL or the
Company or (ii) any Equity Interests in the Company shall not be deemed to be an “Audience Business Transfer”.

          “Board of Managers” shall have the meaning set forth in Section 4.01(a).

          “Business Day” shall mean any day other than (a) a Saturday or Sunday and (b) any day on which banks located in New
York City are authorized or required by applicable law to be closed for the conduct of regular banking business.

           “Certificate of Formation” shall mean the Certificate of Formation of the Company and any and all amendments thereto
and restatements thereof filed on behalf of the Company with the office of the Secretary of State of the State of Delaware pursuant to
the Delaware Act.

           “Change of Control” shall mean the occurrence of any of the following events: (a) a Person or “group” (within the meaning
of Section 13(d) and 14(d) of the Exchange Act) acquiring or having beneficial ownership of securities having a majority of
                                                                    2
the ordinary voting power of Time Warner or (b) the sale of all or substantially all of the assets of Time Warner.

          “Change of Control Demand Notice” shall have the meaning set forth in Section 8.02.

          “Change of Control Notice” shall have the meaning set forth in Section 8.02.

          “Change of Control Transaction” shall have the meaning set forth in Section 8.02.

          “Code” shall mean the Internal Revenue Code of 1986, as amended from time to time.

          “Company” shall have the meaning set forth in the preamble hereof.

          “Company IPO Notice” shall have the meaning set forth in Section 8.03.

            “Consolidated EBITDA” shall mean, for any period, Consolidated Net Income of the Company and its subsidiaries for
such period plus, without duplication and to the extent reflected as a charge in the statement of such Consolidated Net Income of the
Company and its subsidiaries for such period, the sum of (a) income tax expense, (b) interest expense, amortization or writeoff of debt
discount and debt issuance costs and commissions, discounts and other fees and charges associated with Indebtedness,
(c) depreciation and amortization expense, (d) amortization of intangibles (including, but not limited to, goodwill) and organization
costs, (e) any extraordinary, unusual or non-recurring non-cash expenses or losses (including, whether or not otherwise includable as
a separate item in the statement of such Consolidated Net Income for such period, non-cash losses on sales of assets outside of the
ordinary course of business), and (f) minority interest expense in respect of preferred stock of subsidiaries of the Company, and
minus, to the extent included in the statement of such Consolidated Net Income for such period, the sum of (a) interest income and
(b) any extraordinary, unusual or non-recurring income or gains (including, whether or not otherwise includable as a separate item in
the statement of such Consolidated Net Income for such period, gains on the sales of assets outside of the ordinary course of
business), all as determined on a consolidated basis.

           “Consolidated Leverage Ratio” shall mean, as at the last day of any period, the ratio of (a) Consolidated Total Debt on such
day to (b) Consolidated EBITDA for such period.

            “Consolidated Net Income” shall mean, for any period, the consolidated net income (or loss) of the Company and its
subsidiaries determined on a consolidated basis in accordance with GAAP; provided that there shall be excluded, without duplication
(a) the income (or deficit) of any Person accrued prior to the date it becomes a subsidiary of the Company or is merged into or
consolidated with the Company or any of its subsidiaries or that such other Person’s assets are acquired by the Company or any of its
subsidiaries, (b)
                                                                   3
the income (or deficit) of any Person in which the Company or any of its subsidiaries has an ownership interest, except to the extent
that any such income is actually received by the Company or its subsidiaries in the form of dividends or similar distributions and
(c) the undistributed earnings of any subsidiary of the Company to the extent that the declaration or payment of dividends or similar
distributions by such subsidiary is not at the time permitted by the terms of its charter or any agreement or instrument, judgment,
decree, order, statute, rule, governmental regulation or other requirement of law applicable to such subsidiary.

           “Consolidated Total Debt” shall mean, at any date, the aggregate principal amount of Indebtedness of the Company and its
subsidiaries minus (a) the aggregate principal amount of any such Indebtedness that is payable either by its terms or at the election of
the obligor in equity securities of the Company or the proceeds of options in respect of such equity securities and (b) the aggregate
amount of cash and cash equivalents held by the Company or any of its subsidiaries in excess of $38,000,000, all determined on a
consolidated basis in accordance with GAAP.

         “Contribution Agreement” shall mean the Contribution Agreement dated as of [              ], among Time Warner, Google and
America Online, Inc., as amended from time to time.

          “Definitive Agreements” shall mean the following agreements entered pursuant to the Letter Agreement:

          (i) the Web Search Services Agreement dated May 1, 2002 between Google and AOL, as amended by Amendment
Number One dated July 3, 2002, Amendment Number Two dated October 1, 2003, Amendment Number Three dated April 7, 2004,
Amendment Number Four dated June 2, 2004, Amendment Number Five dated November 29, 2004, Amendment Number Six dated
February 28, 2005, Seventh Amendment to the Web Services Agreement dated March 28, 2005, the Eighth Amendment to Web
Search Services Agreement dated March 31, 2005 and Amendment Number Nine dated               , 2006 (the “Web Search
Agreement”);

          (ii) the Marketplace Agreement dated                , 2006 between Google and AOL;

          (iii) the Display Advertising Agreement dated                , 2006 between Google and AOL;

          (iv) the Distribution and Marketing Agreement dated                 , 2006 between Google and AOL;

          (v) the Instant Messaging Development and Distribution Agreement dated                   , 2006 between Google and AOL;

         (vi) the Amended and Restated Interactive Marketing Agreement dated October 1, 2003, as amended (the “IMA”) as
amended previously by that certain First Amendment to the IMA dated December 15, 2003, the Second Amendment to IMA dated
                                                                   4
March 30, 2004, the Third Amendment to Amended end Restated Interactive Marketing Agreement dated April 7, 2004, the Fourth
Amendment to IMA dated June 1, 2004, the Fifth Amendment to IMA dated June 14, 2004, the Addendum One to the Second
Amendment to IMA dated October 5, 2004, the Sixth Amendment to IMA dated December 17, 2004, the Seventh Amendment to
IMA dated March 28, 2005, the Eighth Amendment to IMA dated April 28, 2005, the Ninth Amendment to IMA dated December 15,
2005 and the Tenth Amendment to IMA dated             , 2006;

           (vii) the Interactive Marketing Agreement dated October 15, 2004 between AOL (UK) Limited, AOL Deutschland
GmbH & Co KG, AOL France SNC, Google Ireland Limited and Google, Inc. as amended by a letter agreement dated January 11,
2005, the Second Amendment dated May 12, 2005, the Third Amendment dated June 15, 2005, the Fourth Amendment dated
September 30, 2005 and the Fifth Amendment dated                , 2006;

             (viii) the Video Search Agreement dated              , 2006 between Google and AOL; and

             (ix) the Cooperation Agreement dated              , 2006 between Google and Time Warner.

            The term Definitive Agreements shall also include the following agreement when executed by AOL and Google: the
agreement contemplated by the WiFi term sheet attached as Exhibit E to the Letter Agreement. In all cases, the term Definitive
Agreements shall also include any amendments to the agreements listed above that are entered into by Google and AOL following the
date of this Agreement.

             “Delaware Act” shall have the meaning set forth in the preamble hereof.

             “Distributions” shall mean distributions of cash or other property made by the Company with respect to the Membership
Interests.

             “Drag Along Notice” shall have the meaning set forth in Section 7.05(c).

         “Drag Along Portion” shall mean, with respect to any Google Entity, the number of Membership Interests held by such
Google Entity multiplied by a fraction, the numerator of which is the number of Membership Interests proposed to be sold by the
Time Warner Entities in a Drag Along Sale pursuant to Section 7.05(c) and the denominator of which is the total number of
Membership Interests then held by all Time Warner Entities.

           “Drag Along Sale” shall mean one or more Time Warner Entities propose to Transfer any Membership Interests
representing more than 50% of all of the Membership Interests to any Person(s) that are not Affiliates of Time Warner (other than in
connection with an Excluded Distribution), but excluding a transaction that is subject to the provisions of Section 8.01.

             “Eligible Exchange” means either the New York Stock Exchange or the Nasdaq National Market.
                                                                    5
           “Equity Interest” shall have the meaning set forth in Section 8.01(a).

           “Equity Security” of a Person means any capital stock of such Person (including stock of a Person that is a corporation or a
limited liability company interest or membership interest in a Person that is a limited liability company) and any security convertible
into, exercisable for or exchangeable for capital stock of such Person, or any other right to acquire capital stock or any other Equity
Security of such Person.

           “Exchange Act” shall mean the United States Securities Exchange Act of 1934.

           “Excluded Distribution” shall mean a distribution (by pro rata distribution or dividend, by exchange offer/”split-off” or by
any comparable means) of direct or indirect Equity Interests of the Company or Conversion Stock (as defined in the Google
Registration Rights Agreement) to the holders of Time Warner common stock or the holders of capital stock of any parent entity of
Time Warner.

           “Fair Market Value” of the aggregate Membership Interests held by all Google Entities shall be computed based on the
estimated trading price of one share of common stock of the Company assuming (a) the conversion of the Company to a corporation
in accordance with Section 9.01, (b) the initial public offering of the Company, (c) the full distribution to the public of the common
stock of the Company held by all Google Entities and (d) the establishment of a settled trading market therefor on an Eligible
Exchange. In determining the foregoing: (i) the financial impact of the Company’s commercial agreements with the Members will be
taken into consideration; (ii) there will be no discount included in any such valuation as a result of the illiquidity of the common stock
or Membership Interests, as applicable, assumed distributed to the public as described in clause (c) above; (iii) there will be no
discount included in any such valuation as a result of any breaches of Section 4.03; (iv) in the case of a transaction contemplated by
Section 8.01, any applicable control premium that is paid or payable in the transaction will be considered (and applied to a pro rata
portion of such Membership Interests based on the total number of Equity Interests proposed to be Transferred to a Specified
Purchaser (calculated as a percentage of the total number of Equity Interests held by the Time Warner Entities); (v) in the case of a
transaction contemplated by Section 8.01, the implied or stipulated value of the Membership Interests from the terms of the
transaction will be considered but shall not be determinative; and (vi) the effects, if any, of any TW Guarantee Obligations will not be
considered.

           “Financial Investor” shall mean any Person that (a) has no contractual relationship with AOL or any subsidiary of AOL
that accounted for more than 1% of the consolidated gross revenues of AOL and its consolidated subsidiaries for the preceding fiscal
year, (b) does not conduct (and has no Affiliate which conducts) any business that engages in substantial competition with AOL or
any subsidiary of AOL, which business accounted for more than 1% of the consolidated gross revenues of AOL and its consolidated
subsidiaries for the preceding fiscal year, (c) does not conduct (and has no Affiliate which conducts) any business that engages in
substantial competition with Time Warner or any subsidiary of Time Warner, which business accounted for more than 10% of
                                                                    6
the consolidated gross revenues of Time Warner and its consolidated subsidiaries for the preceding fiscal year and (d) is an
institutional investor specified in Exchange Act Rule 13d-1(b)(1)(ii) or is a Professional Investor.

          “GAAP” shall mean generally accepted accounting principles in the United States.

        “Google Consent” shall mean the written consent of the Google Entities that are Members holding a majority of the
Membership Interests held by all Google Entities.

          “Google Designee” shall have the meaning set forth in Section 8.04(a).

           “Google Entity” shall mean (a) Google, (b) any Person to whom any Google Entity Transfers all or any part of its
Membership Interests in accordance with Section 7.04(a) and (c) any Person to whom any Google Entity Transfers all or any part of
its Membership Interests in accordance with Section 7.04(b), in each case for so long as such Google Entity holds any Membership
Interests.

           “Google Registration Rights Agreement” shall mean the registration rights agreement between Google and the Company,
dated as of the date hereof.

           “Governmental Authority” shall mean the government of the United States, any other nation or any political subdivision
thereof, whether state or local, and any agency, authority, instrumentality, regulatory body, court, central bank or other entity
exercising executive, legislative, judicial, taxing, regulatory or administrative powers or functions of or pertaining to government.

            “Indebtedness” shall have the meaning given such term in that certain Amended and Restated Five-year Credit Agreement,
dated as of July 8, 2002, and amended and restated as of February 17, 2006 (the “Credit Agreement”), among Time Warner, and Time
Warner International Finance Limited, a company organized under the laws of the United Kingdom, the several banks and other
financial institutions from time to time parties to such agreement, Bank of America, N.A. and BNP Paribas, as co-syndication agents,
The Bank of Tokyo-Mitsubishi UFJ LTD. New York Branch and Deutsche Bank AG New York Branch, as co-documentation agents
and Citibank, N.A., as administrative agent, without regard to any amendments, restatements, modifications, supplements or
replacements after February 17, 2006; provided, however, that the parenthetical with respect to Restricted Subsidiaries (as defined in
the Credit Agreement) in clause (g) of the Indebtedness definition in the Credit Agreement (relating to Guarantee Obligations (as
defined in the Credit Agreement)) shall not apply for purposes of this definition.

          “Initial Members” shall mean Time Warner, NewCo and Google.

        “Intermediate Subsidiary” shall mean any direct or indirect subsidiary of Time Warner that directly or indirectly holds any
Membership Interests.
                                                                   7
        “Letter Agreement” shall mean the letter agreement (and attached term sheets), dated as of December 20, 2005, among
Time Warner Inc., Google Inc., and America Online, Inc., as amended.

           “Manager” shall have the meaning set forth in Section 4.01(b).

           “Member” shall mean any Initial Member and any Additional Member until such Initial Member or Additional Member, as
applicable, ceases to be a Member of the Company in accordance with the terms of this Agreement.

           “Membership Interest” shall mean a unit of limited liability company interest in the Company.

           “Participation Notice” shall have the meaning set forth in Section 5.03.

        “Percentage Interest” of any Member shall mean the product of the quotient of the number of Membership Interests held by
such Member divided by the total number of outstanding Membership Interests multiplied by 100.

           “Person” shall mean any individual, corporation, association, partnership (general or limited), joint venture, trust, estate,
limited liability company or other legal entity or organization.

             “Professional Investor” shall mean any entity that is commonly referred to as a “private equity fund” or a “venture capital
firm”. This definition is intended to apply to any entity that (i) qualifies under an exclusion from the definition of “investment
company” under Section 3(c)(1) or 3(c)(7) of the Investment Company Act of 1940, (ii) is intended to be of limited duration and
(iii) is primarily in the business of using capital to purchase assets, businesses or securities with the intention of profiting (or enabling
its general or limited partners, members or shareholders to profit) from the resale of such assets, businesses or securities or, in the
case of non-controlling investments, from distributions from entities in which such non-controlling investments are made.

           “Qualified Public Offering” shall mean the closing of a bona fide, firm commitment, underwritten public offering of
common stock of the Company (following conversion of the Company to a corporation pursuant to the terms of Section 9.01)
pursuant to an effective registration statement under the Securities Act; provided, however, that (a) the shares of common stock issued
in such offering are (following consummation of such offering) registered on or listed for trading on, as applicable, an Eligible
Exchange and (b) if such public offering is an offering of common stock of the Company that is initiated by the Company (and not the
subject of a Demand Registration pursuant to Section 2.1 of the Google Registration Rights Agreement that is not deemed to be a
Company Registration pursuant to Section 2.2(e) of the Google Registration Rights Agreement), the number of shares of common
stock sold in such offering shall be equal to or greater than 10% of the issued and outstanding shares of common stock immediately
following consummation of such offering.
                                                                      8
             “Qualified Distribution” shall mean the closing of the distribution (by pro rata distribution or dividend, by exchange
offer/”split-off” or by any comparable means) of at least 80% of common stock of the Company (following conversion of the
Company to a corporation pursuant to the terms of Section 9.01) to the public holders of the common stock of Time Warner;
provided, however, that the shares of common stock so distributed are (upon consummation of such distribution) registered on or
listed for trading on, as applicable, an Eligible Exchange.

          “Registration Statement” shall have the meaning set forth in Section 8.04(d).

          “Securities Act” shall mean the United States Securities Act of 1933.

          “Specified Purchaser” shall mean any “Named Competitor” as defined in any relevant Definitive Agreement.

          “Specified Purchaser Notice” shall have the meaning set forth in Section 8.01(b).

          “Subscription Notice” shall have the meaning set forth in Section 5.03(a).

          “Subscription Period” shall have the meaning set forth in Section 5.03(a).

          “Successor Covenants” shall have the meaning set forth in Section 4.04.

          “Tag Along Notice” shall have the meaning set forth in Section 7.05(b).

          “Tag Along Portion” of a Time Warner Entity or Google Entity, as applicable, participating in a Tag Along Sale shall
mean the product of:
                                                                   9
           (a) the aggregate number of Membership Interests proposed to be sold in a Tag Along Sale pursuant to Section 7.05(b),
multiplied by

            (b) a fraction, the numerator of which is the number of Membership Interests held by a participating Time Warner Entity or
participating Google Entity, as the case may be, and the denominator of which is the aggregate number of Membership Interests then
held by all Time Warner Entities and all Google Entities.

         The Google Entities may reallocate their respective Tag Along Portions among each other in their discretion. The Time
Warner Entities may reallocate their respective Tag Along Portions among each other in their discretion.

           “Tag Along Sale” shall mean a Time Warner Entity proposes to Transfer any Membership Interests to any Person that is
not an Affiliate of Time Warner (other than in connection with an Excluded Distribution).

           “Term Sheet Agreements” means the following agreements reflected in (a) the WiFi term sheet attached as Exhibit E to the
Letter Agreement; (b) the content availability term sheet attached as Exhibit H to the Letter Agreement; and (c) the video term sheet
attached as Exhibit J to the Letter Agreement; provided, however, that if any of the foregoing term sheets is reduced to a written
agreement that is executed by AOL and Google as contemplated by the Letter Agreement, such term sheet shall no longer be a “Term
Sheet Agreement”.

           “Time Warner” shall mean Time Warner Inc., a Delaware corporation, unless and until any of the following events occur:
(a) any Person the common stock of which is registered under Section 12 of the Exchange Act becomes the beneficial owner of more
than 50% of the total outstanding equity interests of Time Warner Inc. and Time Warner Inc. ceases to have its common stock
registered under the Exchange Act and listed on a national securities exchange, in which case “Time Warner” shall mean such Person,
(b) Time Warner Inc. consolidates with or merges with or into, or Transfers all or substantially all its assets to, any Person the
common stock of which is registered under Section 12 of the Exchange Act, in which case “Time Warner” shall mean such Person, or
(c) Time Warner Inc. Transfers all (but not less than all) of its equity interests in the Company, directly or indirectly, to any Person
the common stock of which is registered under Section 12 of the Exchange Act, in which case “Time Warner” shall mean such
Person.

          “Time Warner Designee” shall have the meaning set forth in Section 8.04(a).

          “Time Warner Entity” shall mean (a) NewCo, (b) Time Warner, (c) any Affiliate of Time Warner to whom any Time
Warner Entity Transfers all or any part of its Membership Interests in accordance with Section 7.05(a) and (d) any Intermediate
Subsidiary, in each case for so long as any such Time Warner Entity holds, directly or indirectly, any Membership Interests.
                                                                  10
         “Time Warner Registration Rights Agreement” shall mean the registration rights agreement between Time Warner and the
Company, dated as of the date hereof.

          “Time Warner Share Price” shall mean, for a particular date, the average VWAP of Time Warner common stock for the 20
consecutive Trading Days immediately preceding such date.

             “Transfer” shall mean any sale, assignment, transfer or other disposition, direct or indirect, by operation of law or
otherwise.

          “Trading Day” shall mean, for a particular equity security, a day on which trading prices for such equity security are
quoted on the Eligible Exchange on which such equity security is traded.

            “TW Guarantee Obligation” shall mean any guarantee by an AOL Entity of any Indebtedness, liabilities or obligations
payable or performable by Time Warner or any Affiliate of Time Warner (other than an AOL Entity or any Person controlled by an
AOL Entity), including without limitation any assurance, agreement, letter of responsibility, letter or awareness, undertaking or
arrangement given by any such AOL Entity to an obligee of Time Warner or any Affiliate of Time Warner (other than an AOL Entity
or any Person controlled by an AOL Entity) with respect to the payment or performance of an obligation by, or the financial condition
of, Time Warner or any Affiliate of Time Warner (other than an AOL Entity or any Person controlled by an AOL Entity) whether
direct or indirect or contingent.

          “VWAP” means, for any Trading Day, the volume weighted average price of the Time Warner common stock for such
Trading Day on the Eligible Exchange on which such common stock is then listed or quoted (and if such common stock is listed on
more than one Eligible Exchange, then the Eligible Exchange on which the 30-day trailing volume is greater) as reported by
Bloomberg Financial L.P. (calculated by taking the weighted average of the prices of each trade on a Trading Day on such Eligible
Exchange and based on a Trading Day from 9:30 a.m. Eastern Time to 4:00 p.m. Eastern Time).

            SECTION 1.02. Terms and Usage Generally. All references herein to an “Article”, “Section” or “Schedule” shall refer to
an Article or a Section of, or a Schedule to, this Agreement. Whenever the words “include”, “includes” or “including” are used in this
Agreement, they shall be deemed to be followed by the words “without limitation”. The words “hereto”, “hereof”, “herein” and
“hereunder” and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any
particular provision of this Agreement. All terms defined in this Agreement shall have the defined meanings when used in any
certificate or other document made or delivered pursuant hereto unless otherwise defined therein. The definitions contained in this
Agreement are applicable to the singular as well as the plural forms of such terms and to the masculine as well as to the feminine and
neuter genders of such terms. Any agreement, instrument or statute defined or referred to herein or in any agreement or instrument
that is referred to herein shall mean such agreement, instrument or statute as from time to time amended, modified or supplemented,
including (in the case of agreements or instruments) by waiver
                                                                     11
or consent in writing and (in the case of statutes) by succession of comparable successor statutes and references to all attachments
thereto and instruments incorporated therein. References to a Person are also to its permitted successors and assigns.

                                                              ARTICLE II
                                                            General Matters

           SECTION 2.01. Formation. (a) Pursuant to the provisions of the Delaware Act, the Company was formed on February 8,
2006, by the filing in the Office of the Secretary of State of the State of Delaware of a Certificate of Formation (which filing is hereby
approved and ratified in all respects).

            (b) Each officer of the Company appointed by the Board of Managers pursuant to Section 4.02 is hereby designated as an
“authorized person”, within the meaning of Section 18-201 of the Delaware Act, to execute, deliver and file, or cause the execution,
delivery and filing of, all certificates, notices or other instruments (and any amendments and/or restatements thereof) required or
permitted by the Delaware Act to be filed in the office of the Secretary of State of the State of Delaware and any other certificates,
notices or other instruments (and any amendments or restatements thereof) necessary for the Company to qualify to do business in a
jurisdiction in which the Company may wish to conduct business.

        SECTION 2.02. Name. The name of the Company shall be “AOL Holdings LLC”. Without the need to amend this
Agreement, the Board of Managers may change the name of the Company from time to time in its sole discretion.

           SECTION 2.03. Term. The term of the Company commenced on February 8, 2006, with the filing of the Certificate of
Formation in the office of the Secretary of State of the State of Delaware, and shall continue perpetually unless the Company is
dissolved pursuant to Section 9.03.

           SECTION 2.04. Registered Agent and Registered Office. The Company’s registered agent for service of process shall be
Corporation Service Company, and the address of the registered agent and the address of the registered office of the Company in the
State of Delaware shall be 2711 Centerville Road, Suite 400, Wilmington, Delaware 19808. Such registered agent and such registered
office may be changed from time to time by the Board of Managers.

          SECTION 2.05. Principal Place of Business. As of the date of this Agreement, the principal place of business of the
Company shall be located in Dulles, Virginia. Thereafter, the principal place of business of the Company shall be in such location as
the Board of Managers may designate from time to time.

           SECTION 2.06. Purposes and Powers. The Company is formed for the object and purpose of, and the nature of the
business to be conducted and promoted by the Company is, engaging in any act or activity for which limited liability companies may
be formed under the Delaware Act. The Company shall have the power and authority to take
                                                                   12
any and all actions necessary, appropriate, proper, advisable, incidental or convenient to or for the furtherance of the purposes set
forth in this Section 2.06.

           SECTION 2.07. Books and Records. At all times during the continuance of the Company, the Company shall maintain or
cause to be maintained proper and complete books and records in which shall be entered fully and accurately all transactions and
other matters relating to the Company’s business in the detail and completeness customary and usual for businesses of the type
engaged in by the Company.

                                                              ARTICLE III
                                                                Members

            SECTION 3.01. Members. (a) Upon the execution of this Agreement, the sole Members of the Company shall be the Initial
Members. Following the execution of this Agreement, no Person shall be admitted as a Member and no Additional Membership
Interests shall be issued by the Company except as expressly provided in this Agreement.

            (b) After the date of this Agreement, a Person shall only be admitted as a Member (such Person, an “Additional Member”)
if such Person is (i) a permitted transferee of a Membership Interest in accordance with Article VII or (ii) issued any Membership
Interests in accordance with Section 5.02.

           (c) The name and mailing address of each Member, its Percentage Interest and the number of Membership Interests held by
such Member shall be listed on Schedule A. An officer designated by the Board of Managers pursuant to Section 4.02 shall update
Schedule A from time to time as necessary to accurately reflect changes in the Membership Interest and Percentage Interest of any
Member to reflect the consummation of any action taken in accordance with this Agreement. Any amendment or revision to
Schedule A made to reflect an action taken in accordance with this Agreement shall not be deemed an amendment to this Agreement.
Any reference in this Agreement to Schedule A shall be deemed to be a reference to Schedule A as amended and in effect from time
to time. The Company shall provide the Members with any amendment or revision of Schedule A (including any subsequent
amendments or revisions thereto) within three days of such amendment or revision.

          SECTION 3.02. Powers of Members. Members shall not have the authority to transact any business in the Company’s
name or bind the Company by virtue of their status as Members.

           SECTION 3.03. Membership Interests. (a) The Membership Interests shall for all purposes be personal property in
accordance with Section 18-701 of the Delaware Act. No holder of a Membership Interest or Member shall have any interest in
specific Company assets, including any assets contributed to the Company by such Member as part of any capital contribution. Each
Member waives any and all rights that it may have to maintain an action for partition of the Company’s property.
                                                                   13
           (b) Each Membership Interest shall have the same rights and privileges and shall rank equally and be identical in all
respects as to all matters. Membership Interests may be divided into partial Membership Interests and shall constitute one class.
Subject to the authority of the Board of Managers as set forth in this Agreement, each Membership Interest shall represent a right to
Distributions, in each case in accordance with this Agreement and the Delaware Act.

           (c) All Membership Interests shall be evidenced by certificates in accordance with Section 18-702 of the Delaware Act,
substantially in the form of Exhibit C or such other form approved by the Board of Managers.

            SECTION 3.04. Voting Rights. (a) Subject to Sections 4.03 and 7.04(b), no Member shall have any voting rights except in
connection with (a) the designation and removal of Managers in accordance with Section 4.01(b), (b) the dissolution of the Company
in accordance with Section 9.03 and (c) any amendment of this Agreement in accordance with Section 10.11. The Members shall vote
together as a single class on all matters on which they are specifically entitled to vote pursuant to this Agreement, and each Member
shall be entitled to one vote for each Membership Interest held by such Member (and a partial vote for any partial Membership
Interest). The Company shall provide written notice to all Members of any meeting at which a vote will be held at least five Business
Days prior thereto, which notice shall describe the business to be considered, the actions to be taken and the matters to be voted on at
the meeting in reasonable detail. At any meeting of the Members, the presence, in person or by proxy, of Members holding a majority
of the outstanding Membership Interests shall constitute a quorum. If any business considered, action taken or matter voted on was
not described in the written notice provided to all Members of such meeting, within three Business Days of such meeting the
Company shall provide written notice to the Members describing in reasonable detail such business consideration taken or matter
voted on. Any action permitted or required to be taken by the Members may be taken without a meeting, without prior notice and
without a vote if a consent or consents in writing, setting forth the action so taken, shall be signed by Members holding a majority of
the outstanding Membership Interests. Within three Business Days of taking of action by Members without a meeting by less than
unanimous written consent, the Company shall provide written notice of the taking of such action to those Members who have not
consented in writing to the taking of such action, which notice shall describe the actions taken in reasonable detail.

           (b) Notwithstanding Section 3.04(a), a Member that is a Financial Investor that was Transferred Membership Interests
pursuant to Section 7.04(b) shall not have any right to consent to any action under Section 4.03, nor shall any such Financial Investor
be considered a “Google Entity” for purposes of the definition of “Google Consent”, unless such Financial Investor was Transferred
20% or more of the Membership Interests then held by all Google Entities pursuant to Section 7.04(b).

         SECTION 3.05. Liability of Members, Managers, Etc. (a) Except to the extent provided in the Delaware Act, none of the
Members or any Manager shall have any personal liability for the debts, obligations or liabilities of the Company.
                                                                  14
            (b) To the fullest extent permitted by applicable law (including Section 18-1101 of the Delaware Act), notwithstanding any
other provision of this Agreement or otherwise of applicable law, including any in equity or at law, no Member, Manager, officer or
employee of the Company (collectively, the “Covered Persons”), shall have any fiduciary duty to the Company, the Members or the
Managers (or any other person or entity bound by this Agreement) by reason of this Agreement or the Company or in its capacity as a
Covered Person, except that a Covered Person shall be subject to the implied contractual covenant of good faith and fair dealing and
(to the extent expressly specified herein or therein) to the covenants and express obligations set forth in this Agreement, the
Contribution Agreement, the Google Registration Rights Agreement and the Time Warner Registration Rights Agreement. To the
fullest extent permitted by applicable law (including Section 18-1101 of the Delaware Act), no Member or Manager shall be liable,
including under any legal or equitable theory of fiduciary duty or other theory of liability, to the Company, any Member, any
Manager or any other person or entity bound by this Agreement for any losses, claims, damages or liabilities incurred by reason of
any act or omission performed or omitted by such Member or Manager in its capacity as a Member or Manager, except that (i) a
Member or Manager shall be liable for any act or omission that constitutes a violation of the implied contractual covenant of good
faith and fair dealing and (ii) a Member shall be liable for any breach by such Member of the covenants and express obligations set
forth in this Agreement, the Contribution Agreement, the Google Registration Rights Agreement or the Time Warner Registration
Rights Agreement. The provisions of this Agreement, to the extent that they restrict or eliminate the duties and liabilities of a Member
or Manager otherwise existing at law or in equity, are agreed by the parties hereto to replace such other duties and liabilities of such
Member or Manager. A Member or Manager shall be fully protected in relying in good faith upon the records of the Company and
upon such information, opinions, reports or statements presented to the Company by any Person as to matters which such Member or
Manager reasonably believes are within such Person’s professional or expert competence.

            (c) (i) Each Person who was or is made a party or is threatened to be made a party to or is otherwise involved in any action,
suit or proceeding, whether civil, criminal, administrative or investigative, by reason of the fact that he is or was a Member, Manager
or officer of the Company or is or was serving at the request of the Company as a director, officer, employee or agent of another
limited liability company or of a corporation, partnership, joint venture, trust or other enterprise, including service with respect to an
employee benefit plan (hereinafter an “Indemnitee”), whether the basis of such proceeding is alleged action in an official capacity as a
Member, Manager, director, officer, employee or agent or in any other capacity while serving as a Member, Manager, director,
officer, employee or agent, shall be indemnified and held harmless by the Company if the Indemnitee acted in good faith and in a
manner the Indemnitee reasonably believed to be in or not opposed to the best interests of the Company, and, with respect to any
criminal action or proceeding, had no reasonable cause to believe the Indemnitee’s conduct was unlawful, against all expense,
liability and loss (including attorneys’ fees, judgments, fines, ERISA excise taxes or penalties and amounts paid in settlement)
reasonably incurred or suffered by such Indemnitee in connection therewith; provided, however, that except as provided in
Section 3.05(e) with respect to proceedings to enforce rights to indemnification, the Company shall indemnify any such Indemnitee in
connection with a proceeding (or
                                                                   15
part thereof) initiated by such Indemnitee only if such proceeding (or part thereof) was authorized by the Board of Managers. In
addition, no Member shall be entitled to be indemnified if any such expense, liability or loss was caused by a breach by such Member
of the covenants and express obligations set forth in this Agreement, the Contribution Agreement, the Google Registration Rights
Agreement or the Time Warner Registration Rights Agreement.

            (ii) The Company shall indemnify any Indemnitee who was or is a party or is threatened to be made a party to any
threatened, pending or completed action or suit by or in the right of the Company to procure a judgment in its favor by reason of the
fact that the Indemnitee is or was an Indemnitee, against expenses (including attorneys’ fees) actually and reasonably incurred by the
Indemnitee in connection with the defense or settlement of such action or suit if the Indemnitee acted in good faith and in a manner
the Indemnitee reasonably believed to be in or not opposed to the best interests of the Company, except that no indemnification shall
be made in respect of any claim, issue or matter as to which the Indemnitee shall have been adjudged to be liable to the Company
unless and only to the extent that the Delaware Court of Chancery or the court in which such action or suit was brought shall
determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, such Indemnitee
is fairly and reasonably entitled to indemnity for such expenses which the Delaware Court of Chancery or such other court shall deem
proper.

            (d) The right to indemnification conferred in Section 3.05(c) shall include the right to be paid by the Company the
expenses (including attorney’s fees) incurred in defending any such proceeding in advance of its final disposition; provided, however,
that an advancement of expenses incurred by an Indemnitee shall be made only upon delivery to the Company of an undertaking, by
or on behalf of such Indemnitee, to repay all amounts so advanced if it shall ultimately be determined by final judicial decision from
which there is no further right to appeal that such Indemnitee is not entitled to be indemnified for such expenses under this
Section 3.05(d) or otherwise. Such undertaking shall be an unlimited, unsecured general obligation of an Indemnitee, and shall be
accepted without reference to such Indemnitee’s ability to make repayment. The rights to indemnification and to the advancement of
expenses conferred in Section 3.05(c) and this Section 3.05(d) shall be contract rights and such rights shall continue as to an
Indemnitee who has ceased to fall within the definition of “Indemnitee” and shall inure to the benefit of the Indemnitee’s heirs,
executors and administrators. Any repeal or modification of any of the provisions of this Section 3.05 shall not adversely affect any
right or protection of an Indemnitee existing at the time of such repeal or modification.

           (e) If a claim under Section 3.05(c) or 3.05(d) is not paid in full by the Company within 60 calendar days after a written
claim has been received by the Company, except in the case of a claim for an advancement of expenses, in which case the applicable
period shall be 20 calendar days, the Indemnitee may at any time thereafter bring suit against the Company to recover the unpaid
amount of the claim. If successful in whole or in part in any such suit, or in a suit brought by the Company to recover an advancement
of expenses pursuant to the terms of an undertaking, the Indemnitee shall also be entitled to be paid the expenses of prosecuting or
defending such suit. In (i) any suit brought by the
                                                                   16
Indemnitee to enforce a right to indemnification hereunder (but not in a suit brought by the Indemnitee to enforce a right to an
advancement of expenses) it shall be a defense that, and (ii) any suit brought by the Company to recover an advancement of expenses
pursuant to the terms of an undertaking, the Company shall be entitled to recover such expenses upon a final adjudication that, the
Indemnitee has not met the applicable standard for indemnification set forth in Sections 3.05(c) and 3.05(d). Neither the failure of the
Company (including its Board of Managers, independent legal counsel, or its Members) to have made a determination prior to the
commencement of such suit that indemnification of the Indemnitee is proper in the circumstances because the Indemnitee has met the
standard of conduct for entitlement to indemnification, nor an actual determination by the Company (including its Board of Managers,
independent legal counsel, or its Members) that the Indemnitee has not met the standard of conduct for entitlement to indemnification,
shall create a presumption that the Indemnitee has not met such standard of conduct or, in the case of such a suit brought by the
Indemnitee, be a defense to such suit. In any suit brought by the Indemnitee to enforce a right to indemnification or to an
advancement of expenses hereunder, or brought by the Company to recover an advancement of expenses pursuant to the terms of an
undertaking, the burden of proving that the Indemnitee is not entitled to be indemnified, or to such advancement of expenses, under
this Section 3.05 or otherwise shall be on the Company. The termination of a proceeding by judgment, order, settlement, conviction,
or upon a plea of nolo contendere or its equivalent shall not of itself create a presumption that a Member, Manager or officer acted in
such a manner as to make him or her ineligible for indemnification.

           (f) The rights to indemnification and to the advancement of expenses conferred in this Section 3.05 shall not be exclusive
of any other right which any Person may have or hereafter acquire under any statute, this Agreement, any other agreement, any vote
of Managers or otherwise. However, no person shall be entitled to indemnification by the Company by virtue of the fact that such
person is actually indemnified by another entity, including an insurer.

           (g) The Company may maintain insurance, at its expense, to protect itself and any Member, Manager, director, officer,
employee or agent of the Company or another limited liability company, corporation, partnership, joint venture, trust or other
enterprise against any expense, liability or loss, whether or not the Company would have the power to indemnify such Person against
such expense, liability or loss under the Delaware Act.

           (h) The Company may, to the extent authorized from time to time by the Board of Managers, grant rights to
indemnification and to the advancement of expenses to any person or entity not mandatorily entitled to indemnification under this
Section 3.05 and grant rights to indemnification and to the advancement of expenses in addition to those granted in this Section 3.05
to any person or entity mandatorily entitled to indemnification under this Section 3.05, in each case as long as such person or entity
has met the standard of conduct set forth in Section 3.05(b).
                                                                  17
                                                            ARTICLE IV
                                                             Governance

            SECTION 4.01. Board of Managers. (a) The Company shall have a board of managers (the “Board of Managers”). The
Members hereby designate the Board of Managers as the managers (within the meaning of the Delaware Act) of the Company, with
exclusive rights and responsibilities to direct the business of the Company. The Board of Managers shall have the power to do any
and all acts necessary or convenient to or for the furtherance of the purposes described herein, including all powers, statutory or
otherwise, possessed by managers under the laws of the State of Delaware.

         (b) The Board of Managers shall be comprised of 3 members (each, a “Manager”). As of the date of this Agreement, the
Managers shall be Jeffrey L. Bewkes, Jonathan F. Miller and Wayne H. Pace. Thereafter, subject to Section 3.04(b), each of the
Managers shall be designated and removed at any time by the Members holding a majority of the outstanding Membership Interests.
A Manager shall hold office until his or her successor is designated or until his or her earlier death, resignation or removal.

           (c) Any Manager may attend a meeting of the Board of Managers in person, by telephone or any other electronic
communication device. At any meeting of the Board of Managers, the presence, in person or by proxy, of a majority of the Managers
shall constitute a quorum. A Manager entitled to vote at any meeting of the Board of Managers may authorize another Person,
including another Manager, to act in place of that Manager by proxy. The Board of Managers may act by written consent in lieu of a
meeting in accordance with Section 18-404 of the Delaware Act.

           (d) At any meeting of the Board of Managers, any action taken by the Board of Managers shall require the approval of a
majority of the Managers present, in person or by proxy, at such meeting. Each Manager shall be entitled to one vote.

           SECTION 4.02. Officers. The officers of the Company as of the date of this Agreement shall continue to act in such
capacity. Thereafter, the Board of Managers may from time to time appoint (and subsequently remove) individuals to act on behalf of
the Company as “officers” or “agents” of the Company within the meaning of Section 18-407 of the Delaware Act to conduct the day-
to-day management of the Company with such general or specific authority as the Board of Managers may specify.

           SECTION 4.03. Matters Requiring Google Consent. For so long as any Google Entity holds any Membership Interests,
none of the following actions shall be taken by the Board of Managers, the Company or any subsidiary of the Company (whether by
merger, consolidation, reorganization or otherwise) without prior Google Consent:

          (a) Distributions by the Company to Members, other than Distributions to Members (i) in proportion to their respective
Percentage Interest in the form of cash or securities or (ii) as expressly contemplated by the Contribution Agreement or any Definitive
Agreement;
                                                                  18
           (b) the Company, AOL or any AOL Entity, on the one hand, and any Member or Affiliate of a Member, on the other hand,
entering into any agreement or other transaction except (i) as specifically contemplated in any Definitive Agreement, (ii) as
specifically contemplated in any Term Sheet Agreement, (iii) for Distributions by the Company to Members in accordance with this
Agreement, (iv) for issuances of Equity Securities by the Company in accordance with this Agreement, (v) for de minimis
transactions in the ordinary course of business consistent with past practice, (vi) for agreements and transactions on terms no less
favorable than could be obtained from unaffiliated third parties of the Company on an arm’s-length basis and (vii) as expressly
contemplated by the terms of the tax matters agreement, dated the date hereof, between Time Warner and the Company;

            (c) any issuance of Equity Securities in AOL or any direct or indirect subsidiary of the Company that has a direct or
indirect interest in AOL;

         (d) any amendment to, or waiver of, any provision of this Agreement or the limited liability company agreement of AOL, if
such amendment or waiver would be adverse to the interests of the Google Entities as Members of the Company;

           (e) any voluntary bankruptcy, liquidation or dissolution of any Intermediate Subsidiary, the Company or AOL or any of
their respective direct or indirect subsidiaries, in each case if any such bankruptcy, liquidation or dissolution would have a material
adverse effect on the enforceability of any of the rights afforded to the Google Entities (or any of them) under this Agreement;

           (f) any disposition of assets outside the ordinary course of business consistent with past practice in excess of $100,000,000
(individually or in the aggregate in the case of a series of related dispositions) that is not for fair market value;

           (g) subject to Section 9.01, any change of legal form of the Company or AOL, if such change of legal form would be
adverse to the interests of the Google Entities as Members of the Company; provided, however, that any change of legal form that
does not fully preserve (or that otherwise impairs or dilutes in any way the effectiveness of ) the rights and protections afforded to the
Google Entities (or any of them) under this Agreement shall be deemed to be adverse to the interests of the Google Entities as
Members of the Company;

           (h) the incurrence by the Company or any of its subsidiaries of Indebtedness (other than TW Guarantee Obligations) if the
Consolidated Leverage Ratio of the Company exceeds 4.5 to 1, calculated as of the end of the Company’s last complete fiscal quarter
for the four fiscal quarter period then ended, on a pro forma basis as if the incurrence of such Indebtedness, together with any other
Indebtedness incurred since the last day of the prior fiscal period, had occurred on the last day of such four fiscal quarter period and
after giving effect to the use of proceeds of such Indebtedness (to the extent such proceeds were used to pay down or otherwise
discharge Indebtedness); provided, however, that (x) neither the Company nor any of its direct or indirect subsidiaries shall (i) enter
into any TW Guarantee Obligation other than (A) TW Guarantee Obligations
                                                                    19
existing as of the date of this Agreement and disclosed on Schedule D to the Contribution Agreement, (B) guarantees of any new
Time Warner Inc. commercial paper program, subject to a maximum aggregate principal amount of Time Warner Inc. commercial
paper having the benefit of a TW Guarantee Obligation of $5 billion, and (C) guarantees of any new, amended or modified Time
Warner Inc. bank credit facility, subject to a maximum aggregate principal amount of Time Warner Inc. bank debt having the benefit
of a TW Guarantee Obligation plus the amount of outstanding Time Warner Inc. commercial paper having the benefit of a TW
Guarantee Obligation of $7 billion or (ii) permit the aggregate outstanding principal amount of the Indebtedness guaranteed pursuant
to such TW Guarantee Obligations to exceed $22.6 billion and (y) with respect to the TW Guarantee Obligations described in Item 1
of Schedule D to the Contribution Agreement, the Company and Time Warner shall not agree to any extension of the maturity of any
of the underlying Indebtedness unless the relevant TW Guarantee Obligation is released; or

            (i) any allocation of overhead (or other costs or expenses allocated for financial accounting purposes) of Time Warner
Entities to the Company and AOL in a manner or in proportions that are inconsistent with the ordinary course of business consistent
with past practices, unless such allocation is (i) in connection with a transaction that is otherwise permitted under Section 4.03(b) and
such allocation complies with the requirements of Section 4.03(b)(v) or 4.03(b)(vi), as applicable, or (ii) required by a change in
GAAP.

           SECTION 4.04. Successor Covenants. The covenants set forth in Section 4.03 shall, upon the conversion of the Company
into a corporation (the “Conversion Successor Corporation”) pursuant to Section 9.01, be included in the certificate of incorporation
of the Conversion Successor Corporation for the benefit of the Google Entities as stockholders thereof with the same terms set forth
in Section 4.03 except with such modifications as are necessary for such covenants to apply to a corporation with the same effect that
such covenants apply to the Company (the “Successor Covenants”); provided, however, that the Successor Covenants shall terminate
upon a Qualified Public Offering or a Qualified Distribution.

           SECTION 4.05. Termination. Section 4.03, or the Successor Covenants, shall terminate upon a Qualified Public Offering
or a Qualified Distribution.

                                                              ARTICLE V
                               Capital Contributions; New Issuances; Preemptive Rights; Guarantee Fee

            SECTION 5.01. Initial Capital Contributions. The limited liability company interest issued to Time Warner under the
Original Agreement is hereby canceled. Simultaneous with such cancellation, pursuant to the Contribution Agreement, each Initial
Member has made an initial capital contribution to the Company in exchange for the issuance by the Company of Membership
Interests to each such Initial Member as set forth on Schedule A.
                                                                   20
           SECTION 5.02. New Issuances of Equity Capital. Subject to the terms of this Agreement, the Board of Managers may
determine the form, timing and terms of any new issuance of equity capital (including Membership Interests) of the Company to any
Person and will notify the Members of such decision. Any such Person shall be required to become a party to this Agreement as a
Member, and shall have all the rights and obligations of a Member hereunder, by executing an Adoption Agreement in the form of
Exhibit A or in such other form that is satisfactory to the Board of Managers; provided, however, that the Google Consent shall be
required for any other form of adoption agreement that would be adverse to the interests of the Google Entities as Members of the
Company.

           SECTION 5.03. Preemptive Rights. (a) Subject to Section 8.01, if the Company or AOL proposes to issue any new Equity
Securities of the Company or AOL (“Proposed Issuance”) to any Person (including any Member), the Company shall deliver to each
Member a written notice (a “Subscription Notice”) describing the terms of such Proposed Issuance (including a detailed description of
the terms, amount and price of the Equity Securities proposed to be issued, and other material terms, conditions and limitations of
such Proposed Issuance) at least 60 calendar days prior to the closing date of such Proposed Issuance (the “Subscription Period”).
Notwithstanding the foregoing, no Member shall be entitled to exercise participation rights under this Section 5.03 if the
consideration for the Proposed Issuance is (i) all or substantially all of the assets of an operating business or (ii) Equity Securities that
in the aggregate convey a majority of the ordinary voting power of an entity all or substantially all of the assets of which are utilized
in an operating business.

           (b) Each Member shall have the option, exercisable at any time during the first 45 calendar days of the Subscription Period
by delivering a written notice (a “Participation Notice”) to the Company within such 45 day period, to subscribe for any amount of
such Equity Securities up to such Member’s existing Percentage Interest of the Equity Securities proposed to be issued in the
Proposed Issuance on the same terms and conditions and subject to the same agreements and for the same consideration, as those of
the Proposed Issuance (subject to the exceptions indicated in Sections 5.03(c) and 5.03(d)).

           (c) If, subject to the last sentence of Section 5.03(a), the consideration to be paid in the Proposed Issuance includes
consideration other than cash, only the Google Entities shall be entitled to exercise participation rights under this Section 5.03 and
may elect to pay the cash equivalent value of such non-cash consideration for the Equity Securities. The cash equivalent value of the
non-cash consideration will be determined as follows:

            (i) In the event that such non-cash consideration consists of any publicly-traded securities, such securities shall be valued
as follows: (A) if the securities are then traded on an Eligible Exchange (or a similar national quotation system), then the value of the
securities shall be deemed to be the VWAP of the securities on such exchange or system over the 10 trading day period ending five
trading days prior to the closing of the Proposed Issuance; and (B) if the securities are actively traded over-the-counter, then the value
of the securities shall be deemed to be the VWAP of the securities over the 10 trading
                                                                     21
day period ending five trading days prior to the closing of the Proposed Issuance. The Subscription Notice shall contain an estimate of
the value to be determined in accordance with the terms of this Section 5.03(c)(i), which estimate shall be based on the same
methodology described in this Section 5.03(c)(i), except that the references to “prior to the closing of the Proposed Issuance” shall be
substituted with “prior to the date of the Subscription Notice” (and the Subscription Notice shall clearly state that such price is an
estimate on that basis, and that any participation decisions evidenced by Participation Notices shall be deemed to include an
agreement to participate on the basis of a value determined in accordance with this Section 5.03(c)(i) rather than the estimate used for
the Subscription Notice).

           (ii) Otherwise, the value of such non-cash consideration shall be determined by a nationally recognized investment banker
or appraiser retained by the Board of Managers of the Company.

            (d) Notwithstanding anything to the contrary contained herein, (i) if the terms and conditions of the Proposed Issuance
include in any material respect any non financial requirements which would be impracticable for a Member to satisfy, then such
Member will not be required to satisfy such terms and conditions; and (ii) if a Member delivers a Participation Notice within the 45
day period described in Section 5.03(b) electing to subscribe for any amount of the Equity Securities that are the subject of the
Proposed Issuance, but due to required regulatory approvals or consents necessary to consummate the transaction such Member
cannot lawfully purchase such Equity Securities by the date specified in the Subscription Notice, such Member and the Company
shall use reasonable efforts to obtain all regulatory approvals and consents to consummate the closing of the purchase of the Equity
Securities as soon as practicable and in any event within one year after receipt of the Subscription Notice.

            (e) Notwithstanding the foregoing, if one or more Members does not deliver a Participation Notice to the Company within
the first 45 days of the Subscription Period, the Company may issue any such Equity Securities that are not subject to a Participation
Notice to any Person on the same terms and conditions, subject to the same agreements and for the same consideration, as those set
forth in the Subscription Notice.

          (f) This Section 5.03 shall terminate in the event of a Qualified Public Offering or a Qualified Distribution.

            SECTION 5.04. Guarantee Fee. On April 15 of each year, commencing April 15, 2007, Time Warner shall pay an annual
fee to the Company equal to 0.25% of the aggregate principal amount of outstanding Indebtedness of Time Warner or any Affiliate of
Time Warner (other than an AOL Entity) that is guaranteed by a TW Guarantee Obligation for the 12 months ended on the
immediately preceding March 31 (which payment shall be based on a weighted average month-end aggregate principal amount of
such outstanding Indebtedness during such 12-month period). Time Warner shall not be entitled to any additional Membership
Interests or other consideration for any such payment.
                                                                  22
                                                            ARTICLE VI
                                                     Distributions; Assets Sales

           SECTION 6.01. Distributions. Subject to Section 4.03(a), Sections 18-607 and 18-804 of the Delaware Act and other
applicable law, the Board of Managers may declare Distributions to the Members in proportion to their respective Percentage Interest,
at such times as it deems appropriate, in its sole discretion.

            SECTION 6.02. Withholding. Notwithstanding anything in this Agreement to the contrary, the Company is authorized to
take any and all actions that are necessary or appropriate to ensure that the Company satisfies any and all withholding and tax
payment obligations under Section 1441, 1442, 1445 or any other provision of the Code or other applicable law. Without limiting the
generality of the foregoing, the Company may withhold any amount that it determines is required by law to be withheld from
Distributions to any Member. Any such withheld amounts shall be timely paid over to the appropriate taxing authority. Each Member
will timely provide any certification or file any agreement that is required by any taxing authority in order to avoid any withholding
obligation that would otherwise be imposed on the Company, and shall indemnify the Company for any withholding tax liability
imposed on the Company with respect to such Member, except for any penalties or interest resulting from the Company’s negligent
failure to withhold or pay over amounts withheld.

           SECTION 6.03. Asset Sales. If either the Company or AOL Transfers all or substantially all of its assets, subject to
Sections 18-607 and 18-804 of the Delaware Act, the Board of Managers will cause the Company to make a Distribution to the
Members in proportion to their respective Percentage Interests of the consideration received from such Transfer. Notwithstanding the
foregoing or Section 6.01 (but subject to Sections 18-607 and 18-804 of the Delaware Act, as applicable), such Distribution to the
Google Entities shall be equal to the product of (A) the gross proceeds of such Transfer (after deduction of expenses of sale and any
amounts necessary to discharge retained liabilities (other than any liabilities for income taxes resulting from such asset Transfer)
required to be paid out of such proceeds) and (B) the Percentage Interest of the Google Entities.

                                                            ARTICLE VII
             Transfer of Membership Interests; Tag-Along Rights; Drag-Along Rights; Sale of AOL Audience Business

           SECTION 7.01. Transfer of Membership Interests Generally. Except for a Transfer specifically permitted by this
Agreement, a Member may not, directly or indirectly, Transfer any Membership Interests held by such Member without the written
consent of the other Members. To the fullest extent permitted by applicable law, any purported Transfer of Membership Interests in
breach of this Agreement shall be null and void, and neither the Company nor the Members shall recognize the same, whether for the
purpose of making Distributions or otherwise. Any Member who Transfers or attempts to Transfer any Membership Interests except
in compliance herewith shall be liable to, and
                                                                  23
shall indemnify and hold harmless, the Company and the other Members for all costs, expenses, damages and other liabilities
resulting therefrom.

            SECTION 7.02. Effect of Permitted Transfer. Any Transfer of a Membership Interest that complies with this Agreement
shall be effective to assign the right to become a Member, and, without the need for any action or consent of any other Person, a
transferee of such Membership Interest shall automatically be admitted as a Member upon its execution of an Adoption Agreement.
As a condition to the Company’s obligation to effect a Transfer permitted hereunder, any transferee of Membership Interests shall be
required to become a party to this Agreement as a Member, and shall have all the rights and obligations of a Member hereunder, by
executing an Adoption Agreement in the form of Exhibit A or in such other form that is satisfactory to the Board of Managers.

           SECTION 7.03. Securities Law Matters. Each Member understands that the Company has not registered the Membership
Interests under any United States Federal or state securities or blue sky laws. No Member shall Transfer any Membership Interest at
any time if such action would constitute a violation of any United States Federal or state securities or blue sky laws or a breach of the
conditions to any exemption from registration of the Membership Interests under any such laws or a breach of any undertaking or
agreement of a Member entered into pursuant to such laws or in connection with obtaining an exemption thereunder, and the
Company shall not Transfer upon its books any Membership Interests unless prior thereto the Company has received (or the Board of
Managers has waived in writing the requirement that the Company receive) an opinion of counsel in form and substance reasonably
satisfactory to the Company that such transaction is in compliance with this Section 7.03. Any certificate representing a Membership
Interest shall bear appropriate legends restricting the sale or other Transfer of such Membership Interest in accordance with applicable
United States Federal or state securities or blue sky laws and in accordance with the provisions of this Agreement.

           SECTION 7.04. Transfers by a Google Entity. (a) Permitted Transfers to Wholly Owned Subsidiaries. Any Google Entity
may at any time Transfer all or any part of its Membership Interests to any Person that is (directly or indirectly) wholly owned by
Google (other than director’s qualifying shares); provided, however, that if at any time subsequent to such Transfer any such Person
ceases to be wholly owned (directly or indirectly) by Google, then such Person shall automatically cease to be a Member (whether for
the purpose of making Distributions or otherwise) and all Membership Interests held by such Person shall be deemed to be
automatically Transferred back to Google or such other Google Entity that is (directly or indirectly) wholly owned by Google as may
be designated by Google.

            (b) Permitted Transfer Upon Sale of Audience Business. If the Company effects an Audience Business Transfer to any
Person(s) (other than any direct or indirect wholly-owned subsidiary of the Company), each of the Google Entities acting together
shall thereafter have the right, subject to the terms of Section 7.04(c), to Transfer in a private placement to not more than 15 Financial
Investors (provided that for purposes of determining the number of Financial Investors, any affiliated investor entities shall be treated
as a single Financial Investor) all (but not less than all) of the Membership Interests
                                                                    24
then held by all Google Entities. The Google Entities may provide prospective Financial Investor transferees with the information
previously delivered to the Google Entities pursuant to Section 9.07, subject to customary confidentiality agreements.

          (c) Right of First Refusal In Favor of Time Warner Entities.

           (i) Prior to consummation of any proposed Transfer contemplated in Section 7.04(b) (a “Proposed Transfer”), each Google
Entity shall make a written offer to Transfer all (but not less than all) of such Membership Interests to each Time Warner Entity on
the same terms and conditions, subject to the same agreements and for the same consideration, as proposed to be Transferred to such
Financial Investors in the Proposed Transfer (the “First Refusal Notice”). A written notice delivered by Google to Time Warner shall
be deemed to constitute delivery of a First Refusal Notice to all of the Time Warner Entities. Such First Refusal Notice must identify
the proposed Financial Investor transferees.

           (ii) Each Time Warner Entity (acting alone or in concert with any other Time Warner Entity) shall have 30 calendar days
from the delivery of the First Refusal Notice to notify each Google Entity of its acceptance of such offer. If the Time Warner Entities
do not notify the Google Entities of their acceptance in full of the offer to purchase all (but not less than all) of such Membership
Interests within such 30 day period, the Google Entities shall thereafter have the right to Transfer such Membership Interests to such
Financial Investors in accordance with Section 7.04(b) at a cash purchase price no less than the cash price offered to each Time
Warner Entity in the First Refusal Notice and on such other terms and conditions that are not more favorable to such Financial
Investors than those offered to each Time Warner Entity.

          SECTION 7.05. Transfers by a Time Warner Entity. (a) Any Time Warner Entity may at any time Transfer all or any part
of its Membership Interests to any Person, subject to the terms, conditions and limitations of this Agreement.

          (b) Tag Along Rights of Google Entities. If a Time Warner Entity proposes to Transfer any Membership Interests in a Tag
Along Sale, any Google Entity may, at its option, elect to exercise its rights under this Section 7.05(b).

           (i) In the event of a proposed Tag Along Sale, such Time Warner Entity (or Time Warner on its behalf) shall deliver to
each Google Entity: (A) a written notice of the terms and conditions of such Tag Along Sale (a “Tag Along Notice”) and offer each
Google Entity the opportunity to participate in such Tag Along Sale on the same terms and conditions, subject to the same agreements
and for the same consideration, as such Time Warner Entity, (B) the purchase agreement (or similar instrument of transfer), including
all attachments and schedules, that is the subject of such Tag Along Sale and (C) a summary of the material terms of any other
proposed contemporaneous or related commercial or similar arrangements between any Time Warner Entity (or any Affiliate of Time
Warner, other than the Company and any direct or indirect subsidiary of the Company) and the proposed transferee in such Tag Along
Sale, subject to customary confidentiality agreements. The consideration stated in the Tag Along Notice shall not be conclusive to
                                                                  25
the extent that there exists any such arrangements that constitute a transfer of value from the proposed transferee in such Tag Along
Sale to the relevant Time Warner Entity (or Affiliate). In such event, the consideration to be paid for the Membership Interests of any
Google Entity shall take into account the value to the relevant Time Warner Entity (or Affiliate) of such arrangements (applied pro
rata based on the total number of Membership Interests outstanding), as determined by a nationally recognized investment banker or
appraiser retained by the Board of Managers.

             (ii) From the date of the delivery of all of the information described in Section 7.05(b)(i)(B), until the date that is 30
calendar days thereafter (the “Tag Along Election Period”), each Google Entity shall have the right, exercisable by written notice
delivered by such Google Entity to such Time Warner Entity within such Tag Along Election Period, to request that such Time
Warner Entity include in the Tag Along Sale the number of Membership Interests as is specified in such notice; provided, however,
that if the aggregate number of Membership Interests proposed to be sold by such Time Warner Entity and each participating Google
Entity in the Tag Along Sale exceeds the number of Membership Interests that can be sold on the terms and conditions set forth in the
Tag Along Notice, then only the Tag Along Portion of Membership Interests held by such Time Warner Entity and each participating
Google Entity shall be sold pursuant to the Tag Along Sale. All out of pocket costs and expenses incurred by each Google Entity in
connection with a Tag Along Sale shall be paid by such Google Entity. In connection with any Tag Along Sale, the closing of the sale
of Membership Interests held by any Time Warner Entity and the closing of the sale of Membership Interests held by any
participating Google Entity shall each occur on the same date.

            (iii) The closing of the sale of such Membership Interests of the Time Warner Entity (and, if applicable, the Google
Entities) in the transaction described in the Tag Along Notice must occur within 90 calendar days from the date of the Tag Along
Notice, and if such closing does not occur within such 90 day period, the Time Warner Entity may not Transfer such Membership
Interests without complying again in full with the provisions of this Section 7.05(b), including but not limited to delivering a new Tag
Along Notice; provided, however, that the passage of such 90-day period shall be extended to the extent necessary to obtain all
necessary regulatory approvals applicable to the Tag Along Sale and tolled for any part thereof during which any party to the Tag
Along Sale shall be subject to a nonfinal order, decree, ruling or action relating to the receipt of regulatory approvals applicable to the
Tag Along Sale.

           (iv) Notwithstanding the foregoing, any Time Warner Entity that delivers a Tag Along Notice pursuant to this Section 7.05
(b) may at any time prior to consummation of a Tag Along Sale terminate the proposed sale and the related tag along rights of the
Google Entities.

           (c) Drag Along Burden of Google Entities. If one or more Time Warner Entities proposes to effect a Drag Along Sale, such
Time Warner Entity(ies) may, at their option, require any Google Entity holding Membership Interests to Transfer in such Drag
Along Sale its respective Drag Along Portion of the Membership Interests then held by such Google Entity on the same terms and
conditions, subject to the same agreements and
                                                                    26
for the same consideration, as such Time Warner Entity pursuant to the terms of this Section 7.05(c).

            (i) In the event of a proposed Drag Along Sale, the Time Warner Entities that are parties to such sale (or Time Warner on
their behalf) shall provide to each Google Entity not later than the 30th day prior to the proposed Drag Along Sale: (A) a written
notice of the terms and conditions of such Drag Along Sale (a “Drag Along Notice”) together with a statement asserting each Google
Entities’ obligation to participate in such Drag Along Sale on the same terms and conditions, subject to the same agreements and for
the same consideration, as such Time Warner Entity, (B) the purchase agreement (or similar instrument of transfer), including all
attachments and schedules, that is the subject of such Drag Along Sale and (C) a summary of the material terms of any other proposed
contemporaneous or related commercial or similar arrangements between any Time Warner Entity (or any Affiliate of Time Warner,
other than the Company and any direct or indirect subsidiary of the Company) and the proposed transferee in such Drag Along Sale,
subject to customary confidentiality agreements. The consideration stated in the Drag Along Notice shall not be conclusive to the
extent that there exists any such arrangements that constitute a transfer of value from the proposed transferee in such Drag Along Sale
to the relevant Time Warner Entity (or Affiliate). In such event, the consideration to be paid for the Membership Interests of any
Google Entity shall take into account the value to the relevant Time Warner Entity (or Affiliate) of such arrangements (applied pro
rata based on the total number of Membership Interests outstanding), as determined by a nationally recognized investment banker or
appraiser retained by the Board of Managers.

            (ii) Each Google Entity that receives a Drag Along Notice shall be required to participate in the Drag Along Sale on the
terms and conditions set forth in the Drag Along Notice (subject to Section 7.05(c)(iii)); provided, however, that notwithstanding
anything to the contrary contained herein, no Google Entity shall be subject to the provisions of this Section 7.05(c) if in the Drag
Along Sale the Google Entity: (A) is required to make any representations or warranties in such Drag Along Sale other than as to such
Google Entity’s ownership and authority to sell, free of liens, claims and encumbrances, the Membership Interests proposed to be sold
by such Google Entity, and as to the due authorization, execution, delivery and enforceability of the definitive documents entered into
by such Google Entity in connection with such Drag Along Sale; (B) is required to be subject to an obligation for indemnification or
other liability that is in excess of either (I) the aggregate purchase price that the Google Entity actually receives in such transaction or
(II) the obligation for indemnification or other liability applicable to the Time Warner Entities in the Drag Along Sale (as
appropriately adjusted for the relative portion of the Drag Along Sale that is represented by the Drag Along Portion); or (C) is subject
to any obligations that are materially different and adverse as compared to any Time Warner Entities in such transaction. All out of
pocket costs and expenses incurred by any Google Entity in connection with a Drag Along Sale shall be paid by such Google Entity.
In connection with any Drag Along Sale, the closing of the sale of Membership Interests held by any Time Warner Entity and the
closing of the sale of Membership Interests held by any Google Entity shall each occur on the same date.
                                                                    27
           (iii) Notwithstanding the foregoing, any Time Warner Entity that delivers a Drag Along Notice pursuant to this
Section 7.05(c) may at any time prior to consummation of a Drag Along Sale terminate the proposed sale and any concomitant drag
along obligations of the Google Entities.

            (d) For the purpose of Sections 7.05(b) and 7.05(c) (and the defined terms used therein), any Transfer of any direct or
indirect equity interest in any Time Warner Entity (other than Time Warner), or any issuance by any Time Warner Entity (other than
Time Warner) of any equity interest, shall be deemed a Transfer by such Time Warner Entity of a pro rata portion of the Membership
Interests held by any direct or indirect subsidiary of such Time Warner Entity that directly or indirectly holds any Membership
Interests. For purposes of this Section 7.05, a merger, consolidation, combination or similar transaction involving a Person (other than
Time Warner) shall be deemed to effect a Transfer of the equity interests therein by the holders thereof, and any such proposed
transaction shall be deemed to be a proposed Transfer of the equity interests therein by the holders thereof. For purposes of this
Section 7.05, any transfer of voting power or dispositive power over any equity interests shall be deemed to be a Transfer of such
equity interests.

           SECTION 7.06. Company IPO; Distributions. In the event of a Qualified Public Offering or a Qualified Distribution, the
provisions of Sections 7.01, 7.04 and 7.05 shall terminate.

                                                            ARTICLE VIII
                               Transfers to Specified Purchasers; Buy-Out Rights and Related Matters

            SECTION 8.01. Transfers to Specified Purchasers. (a) If (i) any Time Warner Entity proposes to Transfer any Membership
Interests or securities convertible into, exchangeable for or exercisable for any Membership Interests or any other rights to acquire
any Membership Interests (an “Equity Interest”) to a Specified Purchaser, (ii) the Company proposes to issue or Transfer any Equity
Interest to a Specified Purchaser or (iii) the Company proposes to Transfer to a Specified Purchaser any Equity Interest in AOL or in
any direct or indirect subsidiary of the Company that holds any Equity Interest in AOL or any securities convertible into or
exercisable for such Equity Interests or any other rights to acquire any such Equity Interests, then such Time Warner Entity or the
Company, as the case may be, shall provide written notice of the terms and conditions of such proposal (including the proposed
Transfer or issuance price) to each Google Entity and each Google Entity shall have the right to object to any such Transfer or
issuance for a period of 30 calendar days following receipt of such notice by providing written notice thereof to such Time Warner
Entity or the Company, as the case may be, within such 30-day period.

           (b) If any Google Entity makes an objection in accordance with Section 8.01(a), then such Time Warner Entity or the
Company, as the case may be, shall not have the right to engage in such Transfer or issuance unless, prior to such Transfer or
issuance, a Time Warner Entity purchases (or causes to be purchased) all (but not less than all) of the Membership Interests then held
by all Google Entities at the price per
                                                                  28
Membership Interest determined in accordance with Section 8.04. The relevant Time Warner Entity or the Company, as the case may
be, shall promptly provide written notice of any Google Entity objection (a “Specified Purchaser Notice”) to each Member.

            (c) For the purpose of this Section 8.01 (and the defined terms used herein), any Transfer of any direct or indirect Equity
Interest in any Time Warner Entity (other than Time Warner), or any issuance by any Time Warner Entity (other than Time Warner)
of any Equity Interest, to a Specified Purchaser shall be deemed a Transfer by such Time Warner Entity of its Membership Interests
to such Specified Purchaser. For purposes of this Section 8.01, a merger, consolidation, combination or similar transaction involving a
Person (other than Time Warner) shall be deemed to have effected a Transfer of the equity interests therein by the holders thereof,
and any such proposed transaction shall be deemed to be a proposed Transfer of the equity interests therein by the holders thereof. For
purposes of this Section 8.01, any transfer of voting power or dispositive power over any equity interests shall be deemed to be a
Transfer of such equity interests.

           (d) Notwithstanding the foregoing, the provisions of this Section 8.01 shall not apply in the event of any Transfer of 100%
of the outstanding Membership Interests to any Person; provided, however, that a Time Warner Entity shall provide written notice to
each Google Entity five calendar days in advance of the signing of any definitive agreement providing for any such Transfer to a
Specified Purchaser.

           (e) This Section 8.01 shall terminate upon consummation of a Transfer of Membership Interests by the Google Entities
pursuant to Section 7.04(b).

            SECTION 8.02. Time Warner Change of Control. (a) If any Person proposes to consummate any transaction or series of
transactions that will result in a Change of Control of Time Warner in favor of any Specified Purchaser (a “Change of Control
Transaction”), then a Time Warner Entity shall provide written notice of such proposal (a “Change of Control Notice”) to each
Google Entity and each Google Entity shall have the right to require a Time Warner Entity to purchase (or cause to be purchased) all
(but not less than all) of the Membership Interests then held by all Google Entities in accordance with Section 8.04. In order to
exercise its rights under this Section 8.02, any such Google Entity must deliver a written notice thereof (a “Change of Control
Demand Notice”) to each Time Warner Entity within 30 calendar days of receipt by such Google Entity of a Change of Control
Notice. For the avoidance of doubt, a Change of Control Transaction may be consummated at any time after a Change of Control
Notice is delivered to each Google Entity pursuant to this Section 8.02.

           (b) This Section 8.02 shall terminate upon consummation of a Transfer of Membership Interests by the Google Entities
pursuant to Section 7.04(b).

            SECTION 8.03. Google IPO Demand Right. If any Google Entity makes an “IPO Demand” (as such term is defined in the
Google Registration Rights Agreement), then any Time Warner Entity shall be entitled to purchase (or cause to be purchased) all (but
not less than all) of the Membership Interests then held by all Google Entities in accordance with Section 8.04 (the “IPO Call Right”).
In order to exercise the IPO Call
                                                                  29
Right under this Section 8.03, any such Time Warner Entity must deliver a written notice thereof (a “Company IPO Notice”) to each
Google Entity at any time after the IPO Demand and prior to the effectiveness of the registration statement filed in connection with
such IPO Demand.

        SECTION 8.04. Appraisal Process, etc. In the event of the proposed purchase of all (but not less than all) of the
Membership Interests then held by all Google Entities pursuant to Section 8.01, 8.02 or 8.03:

           (a) Within five Business Days of delivery of a Specified Purchaser Notice, a Change of Control Demand Notice or a
Company IPO Notice in accordance with this Article VIII: (i) a Time Warner Entity designated by the Time Warner Entities (the
“Time Warner Designee”) will select a nationally recognized investment banker or appraiser (the “First Appraiser”) and (ii) a Google
Entity designated by the Google Entities (the “Google Designee”) will select a nationally recognized investment banker or appraiser
(the “Second Appraiser”). The First Appraiser, the Second Appraiser and the Third Appraiser (as defined below) are referred to
herein individually as an “Appraiser” and collectively as the “Appraisers.” The date when the First Appraiser and the Second
Appraiser have been identified is referred to herein as the “Start Date.” The Time Warner Entities and the Google Entities will (and
the Time Warner Entities will cause the Company and AOL and their respective officers, representatives and Affiliates to):
(1) cooperate with any Appraisers appointed under this Section 8.04, (2) provide the same non-public information regarding the
Company to all of the Appraisers, (3) provide to each such Appraiser the information on Schedule B, (4) provide to each such
Appraiser the information that the Appraisers mutually agree in writing is necessary for a determination of Fair Market Value and
(5) provide to each such Appraiser any information regarding the Company that either Appraiser reasonably requests; provided,
however, that (x) each such Appraiser must enter into a suitable confidentiality agreement, (y) no Person shall be required to make
available pursuant to clause (5) above any information not maintained and collected by an AOL Entity in the ordinary course of its
business or to deliver information in any format not used by an AOL Entity in the ordinary course of its business and (z) no Time
Warner Entity shall have any obligation to deliver any information regarding the Company that has been prepared by a Time Warner
Entity.

          (b) Within 30 calendar days of the Start Date, the First Appraiser and the Second Appraiser will each determine its
preliminary view of the Fair Market Value. On or prior to the 45th calendar day after the Start Date, the First Appraiser and the
Second Appraiser will each deliver to each of the Time Warner Designee and the Google Designee its written report concerning the
Fair Market Value (the “Initial Reports”).

           (i) If the higher Fair Market Value set forth in the Initial Reports determined under this Section 8.04(b) (the “High Value”)
is not more than 110% of the lower Fair Market Value determined under this Section 8.04(b) (the “Low Value”), then the Fair Market
Value will be the average of the High Value and the Low Value.

          (ii) If the High Value is more than 110% of the Low Value, then, not more than 60 calendar days after the Start Date, the
First Appraiser and the Second Appraiser
                                                                   30
will together designate another nationally recognized investment banker or appraiser (the “Third Appraiser”), who will make a
determination between the High Value and the Low Value as to which of them is closer to the Third Appraiser’s estimate of the Fair
Market Value. The Third Appraiser’s choice between the High Value and the Low Value (the “Third Value”) shall be the Fair Market
Value, and will be presented in the Third Appraiser’s written report (the “Third Report”) to each of the Time Warner Entities and the
Google Entities not more than 30 calendar days after the Third Appraiser is designated.

           (iii) The Time Warner Designee shall pay the fees and expenses of the First Appraiser. The Google Designee shall pay the
fees and expenses of the Second Appraiser. The Company shall pay the reasonable fees and expenses of the Third Appraiser. The Fair
Market Value determined by the procedures outlined in this Section 8.04(b) shall be final and binding upon the parties for purposes of
the transaction that triggered such procedures under Section 8.01, 8.02 or 8.03 (as applicable) and may not be challenged by any party
absent fraud.

            (c) The relevant Time Warner Entity shall determine in its sole discretion whether to use cash or common stock of Time
Warner (or a combination of cash and common stock of Time Warner; provided, however, that common stock shall constitute at least
75% of any such combination) for a purchase pursuant to Section 8.01, 8.02 or 8.03; provided, however, that such Time Warner
Entity may only elect to pay with common stock of Time Warner if the issuance of such common stock of Time Warner is registered
on an effective registration statement filed with the Securities and Exchange Commission such that such common stock is freely
tradable by the Google Entities under the Securities Act on an Eligible Exchange in accordance with this Article VIII. Such
determination shall be made by written notice to the Google Entities (i) in the case of Section 8.01 or 8.02, by the later of (A) three
Business Days prior to the consummation of the Transfer or issuance to a Specified Purchaser or the Change of Control Transaction,
as the case may be, that is giving rise to the purchase, and (B) two Business Days following the final determination of Fair Market
Value in accordance with Section 8.04 and (ii) in the case of Section 8.03, within two Business Days of the final determination of Fair
Market Value in accordance with this Section 8.04. If the relevant Time Warner Entity fails to make such determination, the purchase
price shall be payable all in cash. If the relevant Time Warner Entity determines to pay using common stock of Time Warner, such
common stock shall be valued at the Time Warner Share Price as of the date that is six Business Days prior to the date of the closing
of such purchase.

            (d) The closing of any purchase (i) under Section 8.01 or 8.02 shall occur on the later of (A) the day of consummation of
the Transfer or issuance to a Specified Purchaser or the Change of Control Transaction, as the case may be, that is giving rise to the
purchase, and (B) 10 calendar days following final determination of Fair Market Value (if any portion of the purchase price is being
paid in common stock of Time Warner) and three Business Days following final determination of Fair Market Value (if the purchase
price is being paid in cash) and (ii) under Section 8.03 shall occur within 10 calendar days following final determination of Fair
Market Value (if any portion of the purchase price is being paid in common stock of Time Warner) and three Business Days
following final determination of Fair Market Value (if the purchase price is being paid in cash); provided,
                                                                  31
however, that if the purchase price is being paid with a combination of cash and common stock, the closing of the purchase shall be
bifurcated so that the respective closing dates for the cash and common stock portions of the purchase price, and the transfer of a pro
rata portion of the total number of Google Membership Interests being sold, occur in accordance with the applicable time periods set
forth above. At the closing, each Google Entity shall transfer the requisite number of its Membership Interests to the relevant Time
Warner Entity or its designees, and the relevant Time Warner Entity shall (1) deliver to each Google Entity the requisite number of
duly authorized, fully paid and nonassessable shares of common stock of Time Warner that have been registered pursuant to a
registration statement that has been declared effective under the Securities Act (the “Registration Statement”) and which are freely
tradable on an Eligible Exchange and Time Warner and the relevant Time Warner Entity shall make to each of the Google Entities the
representations and warranties set forth on Exhibit B and (2) make (or cause to be made) the requisite cash payment to each Google
Entity. Notwithstanding anything to the contrary in this Agreement, if the relevant Time Warner Entity has determined to use
common stock of Time Warner for a purchase pursuant to Section 8.01, 8.02 or 8.03, but the closing of such purchase does not occur
by the last day of the applicable period set forth in this Section 8.04(d) (the “Payment Date”), then on the Payment Date the relevant
Time Warner Entity shall pay cash for such Membership Interests.

            (e) The relevant Time Warner Entity shall pay (or cause to be paid) (i) all customary expenses in connection with the
preparation, filing and declaration of effectiveness of the Registration Statement (including, without limitation, all registration,
qualification and filing fees, printing expenses, escrow fees, fees and disbursements for counsel to the Time Warner Entities, blue sky
fees and expenses, and expenses of any regular or special audits incident to or required by any such registration) and (ii) all out of
pocket expenses incurred by the Google Entities (including reasonable fees and disbursements for one special counsel for the Google
Entities, reasonable brokerage and underwriting fees or commissions and market rate hedging costs, but excluding any taxes)
associated with the sale and hedging by any Google Entity of the common stock of Time Warner received pursuant to this
Section 8.04 in an amount not to exceed (A) the lesser of (x) $10,000,000 and (y) 1.0% of the Time Warner Share Price multiplied by
the number of shares of common stock of Time Warner received pursuant to this Section 8.04 or (B) if the Google Entity sells or
hedges less than all of the common stock of Time Warner received pursuant to this Section 8.04, the pro rata portion of the amount
determined pursuant to clause (A).

             (f) In the event of a proposed purchase pursuant to Section 8.01 or 8.02, at any time prior to the consummation thereof the
proposed Transfer or issuance to a Specified Purchaser or the Change of Control Transaction, as the case may be, that is giving rise to
the purchase may be terminated without liability to any Google Entity, whereupon the related purchase rights and obligations under
Section 8.01 or 8.02 shall terminate with respect to such transaction, but such related purchase rights shall continue to apply with
respect to any future transactions. At any time prior to delivery of a Company IPO Notice, the Google Entities may withdraw their
request for registration prior to the effectiveness of the registration statement filed in connection with such IPO Demand without
liability to any Time Warner Entity, whereupon the related purchase rights and
                                                                   32
obligations under Section 8.03 shall terminate with respect to such IPO Demand, but such related purchase rights shall continue to
apply with respect to any future IPO Demand.

           SECTION 8.05. Company IPO; Distributions. The provisions of this Article VIII (other than this Section 8.05) shall
terminate immediately prior to a Qualified Public Offering or Qualified Distribution.

                                                            ARTICLE IX
                                                        Certain Other Matters

           SECTION 9.01. Conversion of the Company to a Corporation. Without the need for any action or consent of any Member,
the Board of Managers shall have the right to authorize the conversion of the legal form of the Company to a corporation in
accordance with Section 18-216 of the Delaware Act in the event of a (a) Qualified Public Offering or (b) Qualified Distribution. In
connection with any such Qualified Public Offering or Qualified Distribution, the Members will be entitled to receive common stock
of the Company in exchange for their Membership Interests in the same proportions as their respective Membership Interests
immediately prior to such Qualified Public Offering or Qualified Distribution. The Members and the Company intend any conversion
of the Company to a corporation under the Delaware Act to qualify as a reorganization under Section 368(a)(1)(F) of the Code.
Neither the Company nor any Member shall take any position inconsistent with such characterization on any return or filing or
otherwise with any taxing authority unless otherwise required by applicable law.

           SECTION 9.02. Sale of AOL. If the Company Transfers to any unaffiliated Person 100% of its Equity Interests in AOL
(provided that such Transfer is in compliance with the requirements of this Agreement), Sections 4.03(b), 4.03(c), 4.03(d), 4.03(e),
4.03(g), 5.03, 7.04(b), 8.01(a)(iii) and 9.07 (but not Section 6.03), to the extent applicable to AOL, shall become void and have no
effect with respect to AOL.

           SECTION 9.03. Dissolution. The Company shall dissolve upon the first to occur of the following: (a) subject to
Section 3.04(b) and to any applicable Google Consent requirements of Section 4.03(e), the approval of the Members then holding a
majority of the outstanding Membership Interests to dissolve the Company; (b) at any time there are no Members unless the Company
is continued without dissolution in accordance with the Delaware Act; and (c) the entry of a decree of dissolution under Section 18-
802 of the Delaware Act. The Company shall terminate when all its assets, after payment of or due provision for all debts, liabilities
and obligations of the Company, shall have been distributed to the Members in the manner provided for in Article VI and the
Certificate of Formation shall have been canceled in the manner required by the Delaware Act.

           SECTION 9.04. Liquidation. (a) Subject to the applicable Google Consent requirements of Section 4.03(e), following
dissolution pursuant to Section 9.03, all the business and affairs of the Company shall be liquidated and wound up. The Board of
Managers shall act as liquidating trustee and wind up the affairs of the Company pursuant to this Agreement.
                                                                  33
           (b) The proceeds of the liquidation of the Company will be distributed (i) first, to creditors of the Company (including
Members who are creditors), to the extent otherwise permitted by law in satisfaction of all the Company’s debts and liabilities
(whether by payment or by making reasonable provision for payment thereof), and (ii) second, to each Member in accordance with
the principles of Section 6.03.

        SECTION 9.05. Resignation. Other than by Transferring in accordance with this Agreement all its Membership Interests, a
Member may not resign from the Company.

            SECTION 9.06. Tax Matters. It is the intention of the Members that the Company be treated as a corporation for U.S. tax
purposes. The Company shall make a timely election to classify the Company as a corporation for U.S. Federal income tax purposes
in accordance with the provisions of Treasury Regulation Section 301.7701-3, effective no later than the date hereof. Neither the
Company nor any Member shall take any position inconsistent with treating the Company as a corporation for United States Federal,
state and local income tax purposes unless otherwise required by applicable law.

           SECTION 9.07. Google Information Rights. (a) Quarterly Financial Statements. The Company shall deliver to each
Google Entity, within 60 calendar days after the end of each quarterly fiscal period in each fiscal year of the Company (other than the
last quarterly fiscal period of each such fiscal year):

          (i) an unaudited balance sheet as at the end of such quarter; and

          (ii) an unaudited income statement and statement of cash flows for such quarter and fiscal year to date;

for the Company and its subsidiaries (on a consolidated basis), excluding footnotes thereto, setting forth in each case, in comparative
form, the financial statement for the corresponding period in the previous fiscal year (provided that such comparative financial
statements need only be included for the quarterly periods beginning after January 1, 2006), all prepared in accordance with GAAP
(applicable to non-public companies) consistently applied and Time Warner’s published accounting policies, subject to changes
resulting from normal year-end adjustments (that are not expected to be material in amount or significance).

            (b) Annual Financial Statements. The Company shall deliver to each Google Entity, within 90 days after the end of each
fiscal year of the Company:

          (i) an unaudited balance sheet as at the end of such year; and

          (ii) an unaudited income statement and statement of cash flows for such year;

for the Company and its subsidiaries (on a consolidated basis), including any footnotes thereto, prepared in accordance with GAAP
(applicable to non-public companies)
                                                                   34
consistently applied and Time Warner’s published accounting policies (except as otherwise disclosed in the footnotes).

            (c) Reconciliation Reports. The Company shall deliver to each Google Entity, simultaneously with the delivery of the
financial statements described in Sections 9.07(a) and 9.07(b), a report that reconciles the information contained in such financial
statements to the segment disclosures relating to the Company’s operations that Time Warner reports in its filings with the Securities
and Exchange Commission on Forms 10-K and 10-Q.

           (d) Summary Financial Projections. The Company shall deliver to each Google Entity, as soon as practicable, but in any
event when provided to the board of directors of Time Warner or the Board of Managers of the Company, the summary financial
projections of the Company (and AOL) that are included in the annual operating or business plan presented to the board of directors
of Time Warner or the Board of Managers of the Company, for (at least) the next fiscal year and, as soon as presented to the board of
directors of Time Warner or the Board of Managers of the Company, any revised summary financial projections of the Company (and
AOL) and, if applicable, any versions of such financial projections that are approved by the board of directors of Time Warner or the
Board of Managers of the Company if different from those presented to the board of directors of Time Warner or the Company that
have previously been furnished to the Google Entities.

           (e) Affiliate Transactions. The Company shall deliver to each Google Entity, within 90 days after the end of each fiscal
year of the Company, an annual report summarizing the value of any transaction or agreement (or related series of transactions or
agreements) described under Section 4.03(b)(vi) the value of which exceeds $5,000,000.

          (f) Company IPO; Distributions. The provisions of this Section 9.07 shall terminate upon a Qualified Public Offering or a
Qualified Distribution.

           (g) Inspection Rights. Each Google Entity or its duly authorized representatives shall have the right, during normal
business hours and upon seven Business Days prior written notice to the Company, to inspect and copy the Company’s books and
records at the requesting Google Entity’s expense; provided that (i) the Company shall not be required to make available materials
that the Company reasonably determines would, if made available, pose a material competitive risk to the Company if disclosed to
such Google Entity; provided that the Company delivers a written certification of such determination to the requesting Google Entity
together with a general description of the nature of the materials withheld and the nature of the competitive risk; and (ii) such
inspection may be requested by a Google Entity only for the purpose of determining compliance with the terms of this Agreement.

            (h) Limitation on Other Rights. The rights of the Google Entities under this Section 9.07 are to the exclusion of any other
rights to information that may be available to the Google Entities under the Delaware Act (including pursuant to
                                                                   35
Section 18-305 of the Delaware Act) or common law in their capacities as Members of the Company.

           (i) Transfer of Information Rights to Financial Investors. Notwithstanding any other provision of this Section 9.07,
Financial Investors that are Transferred Membership Interests pursuant to Section 7.04(b) shall be entitled to delivery of information
under this Section 9.07; provided, that only Financial Investors that are Transferred 20% or more of the Membership Interests then
held by all Google Entities pursuant to Section 7.04(b) shall be entitled to delivery of information under Section 9.07(d) and 9.07(e)
or inspection rights under Section 9.07(g) (for the avoidance of doubt, no other Financial Investor described under Section 7.04(b)
shall be entitled to delivery of such information or such inspection rights, as applicable, whether by virtue of its status as a Member or
otherwise).

                                                              ARTICLE X
                                                             Miscellaneous

           SECTION 10.01. Notices. All notices and other communications required or permitted hereunder shall be in writing and
shall be mailed by registered or certified mail, postage prepaid, sent by facsimile or otherwise delivered by hand or by messenger
addressed:

     (a) if given to the Company, to the following address (and fax number):
           AOL Holdings LLC c/o AOL LLC
           22000 AOL Way
           Dulles, VA 20166
           Attention: General Counsel
                     SVP Mergers and Acquisitions
           Fax: (703) 265-1105

    (b) if given to any Member, to the person and at the address (and, if applicable, fax number) set forth opposite its name on
Schedule A, or at such other address (and, if applicable, fax number) as such Member may hereafter designate by written notice to the
Company.

           All such notices shall be deemed to have been delivered and given for all purposes (i) on the delivery date if delivered by
confirmed facsimile, (ii) on the delivery date if delivered personally to the party to whom the same is directed, (iii) one (1) business
day after deposit with a commercial overnight carrier, with written verification of receipt, or (iv) five (5) business days after the
mailing date, whether or not actually received, if sent by U.S. mail, return receipt requested, postage and charges prepaid, or any other
means of rapid mail delivery for which a receipt is available addressed to the receiving party as specified on the signature page of this
Agreement. Changes of the person to receive
                                                                   36
notices or the place of notification shall be effectuated pursuant to a notice given under this Section 10.01.

            SECTION 10.02. Failure to Pursue Remedies. The failure of any party to seek redress for breach of, or to insist upon the
strict performance of, any provision of this Agreement shall not prevent a subsequent act, which would have originally constituted a
breach, from having the effect of an original breach.

           SECTION 10.03. Cumulative Remedies. The rights and remedies provided by this Agreement are cumulative and the use
of any one right or remedy by any party shall not preclude or waive its right to use any or all other remedies. Said rights and remedies
are given in addition to any other rights the parties may have by law, statute, ordinance or otherwise.

           SECTION 10.04. Parties in Interest. This Agreement shall be binding upon and inure to the benefit of all the parties hereto
and their successors and assigns, and their legal representatives. No Member may assign this Agreement or any of its rights, interests
or obligations in connection with a Transfer of Membership Interests hereunder except to the extent such rights, interests and
obligations relate to Membership Interests and the Transfer of such Membership Interests is provided for or contemplated herein.
Nothing in this Agreement, express or implied, is intended to confer upon any Person other than the Members or their respective
permitted successors or assigns or, to the extent provided by this Agreement, the Members’ respective Affiliates, any rights or
remedies under or by reason of this Agreement.

            SECTION 10.05. Headings. The headings and subheadings in this Agreement are included for convenience and
identification only and are in no way intended to describe, interpret, define or limit the scope, extent or intent of this Agreement or
any provision hereof.

            SECTION 10.06. Severability. The invalidity or unenforceability of any particular provision of this Agreement shall not
affect the other provisions hereof, and this Agreement shall be construed in all respects as if such invalid or unenforceable provision
were omitted.

            SECTION 10.07. Counterparts. This Agreement may be executed in any number of counterparts with the same effect as if
all parties hereto had signed the same document. All counterparts shall be construed together and shall constitute one instrument.

           SECTION 10.08. Entire Agreement. This Agreement (and the Definitive Agreements, Google Registration Rights
Agreement, Letter Agreement and Contribution Agreement) constitutes the entire agreement among the parties hereto pertaining to
the subject matter hereof and supersedes all prior agreements and understandings pertaining thereto.

           SECTION 10.09. Governing Law. This Agreement and the rights of the parties hereto shall be interpreted in accordance
with the laws of the State of Delaware, and
                                                                    37
all rights and remedies shall be governed by such laws without regard to principles of conflict of laws. In the event of a conflict
between any provision of this Agreement and any non-mandatory provision of the Delaware Act, the provisions of this Agreement
shall control and take precedence. To the fullest extent permitted by applicable law, each of the parties hereto irrevocably agrees that
any legal action or proceeding arising out of this Agreement shall be brought only in the state or United States Federal courts located
in the State of Delaware. Each party hereto irrevocably consents to the service of process outside the territorial jurisdiction of such
courts in any such action or proceeding by the mailing of such documents by registered United States mail, postage prepaid, if to the
Company, to the address of its principal place of business, and if to any Member, to the respective address for such Member set forth
on Schedule A.

           SECTION 10.10. Confidentiality. Each Member expressly acknowledges that such Member may receive confidential and
proprietary information relating to the Company (including pursuant to Section 9.07), including information relating to the
Company’s financial condition and business plans, and that the disclosure of such confidential information to a third party would
cause irreparable injury to the Company. Except with the prior written consent of the Company, no Member shall disclose any such
information to a third party (other than (i) on a “need to know” basis to any Affiliate or any employee, agent, representative or
contractor of such Member or its Affiliates or (ii) in connection with any disclosure made to a prospective Financial Investor
transferee in accordance with Section 7.04(b) (each of whom shall agree to maintain the confidentiality of such information)), and
each Member shall use reasonable efforts to preserve the confidentiality of such information. The obligations of a Member under this
Section 10.10 shall survive the termination of this Agreement or cessation of a Member’s status as a Member for a period of five
years. Information exchanged between Members shall be non-confidential unless exchanged pursuant to a separate confidentiality
agreement executed between such Members. Notwithstanding the foregoing, a Member shall not be bound by the confidentiality
obligations in this Section 10.10 with respect to any information that is currently or becomes: (a) required to be disclosed by such
Member pursuant to applicable law, including federal or state securities laws, or a domestic national securities exchange rule (but in
each case only to the extent of such requirement); (b) required to be disclosed in order to protect such Member’s interest in the
Company or enforce such Member’s rights under this Agreement (but in each case only to the extent of such requirement and only
after consultation with the Company); (c) publicly known or available in the absence of any improper or unlawful action on the part
of such Member; (d) known or available to such Member via legitimate means other than through or on behalf of the Company or the
other Members.

           SECTION 10.11. Amendments. Subject to the applicable Google Consent requirements of Section 4.03(d), this Agreement
may be amended or waived from time to time by an instrument in writing signed by the Members holding a majority of the
outstanding Membership Interests; provided that the Google Consent will also be required to effect any amendment or waiver of the
provisions set forth in Section 4.03 or this Section 10.11.
                                                                   38
           SECTION 10.12. Absence of Presumption. The parties hereto have participated jointly in the negotiation and drafting of
this Agreement and, in the event an ambiguity or question of intent or interpretation arises, this Agreement shall be construed as if
drafted jointly by such parties and no presumption or burden of proof shall arise favoring or disfavoring any party by virtue of the
authorship of any of the provisions of this Agreement.
                                                                  39
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first stated above.


                                                                 TIME WARNER INC.
                                                                   by
                                                                        Name:
                                                                        Title:


                                                                 TW AOL HOLDINGS INC.
                                                                   by
                                                                        Name:
                                                                        Title:


                                                                 GOOGLE INC.
                                                                   by
                                                                        Name:
                                                                        Title:


                                                                 AOL LLC
                                                                   by
                                                                        Name:
                                                                        Title:
                                                    40
                                                                                                    SCHEDULE A

                                   Members, Percentage Interests and Membership Interests

                           Name                                          Percentage Interest   Membership Interests
Time Warner Inc.                                                                2.5%                  2.5
One Time Warner Center
New York, NY 10019
Attention: General Counsel
          SVP Mergers and Acquisitions
Fax: (212) 484-7167

TW AOL Holdings Inc.                                                           92.5%                  92.5
c/o Time Warner Inc.
New York, NY 10019
Attention: General Counsel
          SVP Mergers and Acquisitions
Fax: (212) 484-7167

Google Inc.                                                                       5%                     5
1600 Amphitheatre Parkway
Mountain View, CA 94043
Attention: General Counsel
Fax: 650-963-3257
                                                            41
                                                                                                                        EXHIBIT A

                                                   Form of Adoption Agreement

                                                                              This ADOPTION AGREEMENT (this “Adoption
                                                                        Agreement”) is executed pursuant to the terms of the Limited
                                                                        Liability Company Agreement of AOL Holdings LLC (the
                                                                        “Company”) dated as of [ ], 2006, a copy of which is
                                                                        attached hereto and is incorporated herein by reference (the
                                                                        “LLC Agreement”), by the undersigned (the “Additional
                                                                        Member”). By execution and delivery of this Adoption
                                                                        Agreement, the Additional Member agrees as follows:

        SECTION 1. Acknowledgment. The Additional Member acknowledges that such Additional Member is acquiring
Membership Interests (as defined in the LLC Agreement) in the Company subject to the terms and conditions of the LLC Agreement.

           SECTION 2. Agreement. The Additional Member (a) agrees that all Membership Interests in the Company acquired by
such Additional Member shall be bound by and subject to the terms of the LLC Agreement and (b) hereby adopts the LLC Agreement
with the same force and effect as if it were originally a party thereto.

           SECTION 3. Notice. Any notice required to be provided by the LLC Agreement shall be given to the Additional Member
at the address listed beside such Additional Member’s signature below.

           SECTION 4. Governing Law. This Adoption Agreement and the rights of the parties hereto shall be interpreted in
accordance with the laws of the State of Delaware, and all rights and remedies shall be governed by such laws without regard to
principles of conflict of laws.

          Executed and dated this      day of                .

                                                                     Additional Member:

                                                                     ___________________________________________

Address for Notices:
_________________________________
_________________________________
                                                                                                                            EXHIBIT B

                                                   [Representations and Warranties]

(a) The common stock of Time Warner issued to the Google Entities (the “TW Common Stock”) is validly issued, fully paid and
nonassessable.

(b) The TW Common Stock is free of any liens or encumbrances, other than any liens or encumbrances created by or imposed upon
the Google Entities.

(c) All corporate action on the part of the Time Warner and its directors, officers and stockholders necessary for the authorization,
sale, issuance and delivery of the TW Common Stock has been taken.

(d) A registration statement (the “Registration Statement”) in respect of the TW Common Stock has been filed with the Securities and
Exchange Commission (the “Commission”) and declared effective by the Commission; and no stop order suspending the
effectiveness of the Registration Statement has been issued and no proceeding for that purpose has been initiated or threatened by the
Commission. The Registration Statement, and the prospectus contained therein, conform in all material respects to the requirements
of the Securities Act of 1933 and the rules and regulations of the Commission thereunder and do not, as of the effective date, contain
any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements
therein not misleading; provided, however, that this representation and warranty shall not apply to any statements or omissions made
in reliance upon and in conformity with information furnished in writing by the Google Entities.
                         Exhibit 10.21




CONTRIBUTION AGREEMENT

        AMONG

   TIME WARNER INC.

      GOOGLE INC.

          and

  AMERICA ONLINE, INC.
                                               TABLE OF CONTENTS

                                                                                         Page
                                                        ARTICLE I
                                                 Pre-Closing Actions
SECTION 1.01.   Formation of NewCo                                                         1
SECTION 1.02.   Contribution of AOL to NewCo                                               1
SECTION 1.03.   Conversion of AOL                                                          1
SECTION 1.04.   Formation of HoldCo                                                        1
SECTION 1.05.   AOL Transfers to NewCo                                                     2
                                                     ARTICLE II
                                                 Closing Date Actions
SECTION 2.01.   NewCo Borrowing                                                            3
SECTION 2.02.   Closing                                                                    4
SECTION 2.03.   Time and Place of Closing                                                  5
                                                     ARTICLE III
                               General Representations and Warranties of Time Warner
SECTION 3.01.   Organization, Standing and Power                                           5
SECTION 3.02.   Authority; Execution and Delivery; Enforceability                          5
SECTION 3.03.   No Conflicts; Consents                                                     6
SECTION 3.04.   Membership Interests                                                       7
SECTION 3.05.   Equity Interests in AOL                                                    7
                                                     ARTICLE IV
                               Specified Representations and Warranties of Time Warner
SECTION 4.01.   AOL Subsidiaries                                                           7
SECTION 4.02.   SEC Documents                                                              8
SECTION 4.03.   Absence of Certain Changes or Events                                       8
SECTION 4.04.   Compliance with Applicable Laws                                            9
SECTION 4.05.   Ownership of Permits; Title to Assets                                      9
SECTION 4.06.   Adequacy of Internal Controls                                              9
                                                            i
                                                       ARTICLE V
                                        Representations and Warranties of Google
SECTION 5.01.    Organization, Standing and Power                                   9
SECTION 5.02.    Authority; Execution and Delivery; Enforceability                 10
SECTION 5.03.    No Conflicts; Consents                                            10
SECTION 5.04.    Accredited Investor                                               10
                                                      ARTICLE VI
                                                  Pre-Closing Covenants
SECTION 6.01.    Best Efforts                                                      11
SECTION 6.02.    Regulatory Filings                                                11
                                                      ARTICLE VII
                                                  Additional Covenants
SECTION 7.01.    Contribution of AOLA Assets                                       11
SECTION 7.02.    Cash Contribution                                                 11
SECTION 7.03.    Tax Characterization                                              12
                                                     ARTICLE VIII
                                                  Conditions Precedent
SECTION 8.01.    Conditions to each Party’s Obligations                            12
SECTION 8.02.    Conditions to Obligations of Google                               12
SECTION 8.03.    Conditions to Obligations of Time Warner, Etc                     13
                                                      ARTICLE IX
                                                   Termination; Waiver
SECTION 9.01.    Termination                                                       13
SECTION 9.02.    Extension; Waiver                                                 15
                                                       ARTICLE X
                                                      Miscellaneous
SECTION 10.01.   Survival of Representations and Warranties                        15
SECTION 10.02.   Definitions                                                       15
SECTION 10.03.   Notices                                                           16
SECTION 10.04.   Failure to Pursue Remedies                                        17
                                                              ii
SECTION 10.05.   Cumulative Remedies                         17
SECTION 10.06.   Parties in Interest                         17
SECTION 10.07.   Headings                                    18
SECTION 10.08.   Severability                                18
SECTION 10.09.   Counterparts                                18
SECTION 10.10.   Entire Agreement                            18
SECTION 10.11.   Governing Law; Waiver of Jury Trial         18
SECTION 10.12.   Absence of Presumption                      18
                                                       iii
SCHEDULES
Schedule A   Initial Members and Membership Interests
Schedule B   Minority and Non-AOL Investments
Schedule C   HoldCo Adjusted Balance Sheet
Schedule D   AOL Guarantees


EXHIBITS
Exhibit A    Form of Adoption Agreement
Exhibit B    Form of Limited Liability Company Agreement of AOL
Exhibit C    Form of Amended and Restated Limited Liability Company Agreement of HoldCo
Exhibit D    Form of Tax Matters Agreement
Exhibit E    Form of Google Registration Rights Agreement
Exhibit F    Form of Time Warner Registration Rights Agreement
                                                        iv
                                                                             This Contribution Agreement and Plan of
                                                                        Reorganization (this “Agreement”), dated as of March [ ],
                                                                        2006, is entered into among TIME WARNER INC., a
                                                                        Delaware corporation (“Time Warner”), GOOGLE INC., a
                                                                        Delaware corporation (“Google”), and AMERICA ONLINE,
                                                                        INC., a Delaware corporation (“AOL”).

           WHEREAS the parties hereto have entered into a letter agreement (and attached term sheets) (the “Letter Agreement”),
dated as of December 20, 2005, whereby the parties have agreed to use their best efforts to consummate the transactions described in
the Letter Agreement.

           NOW, THEREFORE, in consideration of the agreements, representations and warranties, covenants and other provisions
contained in this Agreement, the parties hereto, intending to be legally bound, hereby agree as follows:

                                                            ARTICLE I
                                                        Pre-Closing Actions

     SECTION 1.01. Formation of NewCo. (a) Prior to the Closing (as defined in Section 2.03), Time Warner shall form a Virginia
corporation (“NewCo”) pursuant to and in accordance with the Virginia Stock Corporation Act.

           (b) Promptly thereafter, Time Warner shall cause NewCo to become a party to this Agreement and adopt this Agreement
with the same force and effect as if it were originally a party hereto by executing the form of Adoption Agreement attached as
Exhibit A.

      SECTION 1.02. Contribution of AOL to NewCo. As soon as practicable following the formation of NewCo and in any event
prior to the Closing, Time Warner shall contribute all of the outstanding equity interests of AOL to NewCo in exchange for all the
equity interests in NewCo.

     SECTION 1.03. Conversion of AOL. Following the contribution pursuant to Section 1.02 and in any event prior to the Closing,
NewCo shall cause AOL to convert to a limited liability company pursuant to and in accordance with the Delaware Limited Liability
Company Act. The limited liability company agreement of AOL shall be in the form of Exhibit B. The transactions described in
Sections 1.01, 1.02 and 1.03 of this Agreement, in the aggregate, shall be the “AOL Reorganization.”

      SECTION 1.04. Formation of HoldCo. (a) Prior to the Closing, Time Warner shall form a Delaware limited liability company
(“HoldCo”) pursuant to and in accordance with the Delaware Limited Liability Company Act. In connection therewith, HoldCo shall
issue to Time Warner 100% of the limited liability company interests (“Membership Interests”) in HoldCo.
         (b) Promptly thereafter and in any event prior to the Closing, Time Warner shall cause HoldCo to become a party to this
Agreement and adopt this Agreement with the same force and effect as if it were originally a party hereto by executing the form of
Adoption Agreement attached as Exhibit A.

           (c) Prior to the Closing Date (as defined in Section 2.03), HoldCo shall not carry on any business or conduct any operations
other than the execution of this Agreement, the performance of its obligations hereunder and matters ancillary thereto.

      SECTION 1.05. AOL Transfers to NewCo. Following the conversion of AOL pursuant to Section 1.03, but in any event prior to
the contribution of AOL to HoldCo pursuant to Section 2.02 and the Closing:

           (a) AOL shall transfer to NewCo all of the minority and non-AOL investments set forth on Schedule B (the “Schedule B
Investments”). If any transfer of a Schedule B Investment requires the consent or other action of a third party, then such transfer shall
be made subject to such consent being obtained or action being taken. AOL shall use commercially reasonable efforts to secure any
such consent or other action on or prior to the Closing Date. If any such consent is not obtained or action not taken prior to the
Closing, the Closing shall nonetheless take place on the terms set forth herein and, thereafter, AOL shall continue to use
commercially reasonable efforts to secure such consent or other action as promptly as practicable after the Closing. With respect to
such Schedule B Investments, the parties to this Agreement hereby agree that, as of the close of business on the business day
immediately preceding the Closing Date, NewCo shall (i) have (without infringing upon the legal rights of such third party or
violating any applicable Law (as defined in Section 3.03(a)) the economic claims, rights and benefits under such Schedule B
Investment and all other rights (including voting rights) resulting from or incidental to ownership of such Schedule B Investment and
(ii) assume any related economic burden with respect to such Schedule B Investment. The parties hereto intend to treat each such
arrangement as if NewCo is the owner of such Schedule B Investment as of the close of business on the business day immediately
preceding the Closing Date for U.S. Federal income tax purposes. None of Time Warner, Google, AOL, NewCo or HoldCo or any of
their respective affiliates shall take any position inconsistent with such characterization on any return or filing or otherwise with any
taxing authority unless otherwise required by applicable Law.

           (b) AOL shall transfer to NewCo all cash and cash equivalents held by AOL or any of its U.S. subsidiaries as of the close
of business on the business day immediately preceding the Closing Date.

           (c) Time Warner shall cause all indebtedness (including all accrued and unpaid interest) outstanding at AOL or any of its
subsidiaries as of the close of business on the business day immediately preceding the Closing Date that is not owed by or to Time
Warner or any affiliate of Time Warner to be discharged or assumed by Time Warner or any affiliate of Time Warner (other than
HoldCo, AOL or any subsidiary of HoldCo or AOL). This Section 1.05(c) shall not apply to (i) the indebtedness outstanding as of the
close of business on the business day immediately preceding the Closing Date described
                                                                    2
as “Current Portion of Long Term Notes Payable and Capital Leases”, “Long Term Notes Payable” and “Other Long Term
Liabilities” of AOL, each as set forth on the consolidated balance sheet of AOL as of January 31, 2006, attached to the letter, dated as
of the date of this Agreement, from Time Warner to Google (the “Disclosure Letter”) and (ii) any guarantees by AOL of indebtedness
of affiliates of AOL listed on Schedule D (in the applicable maximum principal amount of indebtedness set forth on Schedule D, such
guarantees of indebtedness in the principal amount set forth on Schedule D being hereinafter referred to as the “Affiliate
Guarantees”).

            (d) Time Warner shall cause (i) all receivables and payables (including all accrued and unpaid expenses) of AOL or any of
its subsidiaries owed by or to Time Warner or any affiliate of Time Warner (other than HoldCo, AOL or any subsidiary of HoldCo or
AOL) outstanding as of the close of business on the business day immediately preceding the Closing Date to be distributed to or
assumed by Time Warner or any affiliate of Time Warner (other than HoldCo, AOL or any subsidiary of HoldCo or AOL) and (ii) all
indebtedness (including all accrued and unpaid interest) outstanding at AOL or any of its subsidiaries as of the close of business on
the business day immediately preceding the Closing Date that is owed by or to Time Warner or any affiliate of Time Warner (other
than HoldCo, AOL or any subsidiary of HoldCo or AOL) to be discharged or assumed by Time Warner or any affiliate of Time
Warner (other than HoldCo, AOL or any subsidiary of HoldCo or AOL). This Section 1.05(d) shall not apply to (i) any outstanding
operational intercompany trade receivable or trade payable incurred in the ordinary course of business, (ii) any International Debt and
(iii) any non-operational intercompany receivables (including all accrued and unpaid expenses) that are owed by Time Warner or any
affiliate of Time Warner (other than HoldCo, AOL or any subsidiary of HoldCo or AOL) to any non-U.S. subsidiary of AOL.

            (e) For purposes of Sections 1.05(b), 1.05(c) and 1.05(d), and the definitions of “International Debt” and “Net International
Debt”, (i) AOL Europe Sarl and its subsidiaries shall be deemed subsidiaries of AOL and (ii) America Online Latin America, Inc. and
its subsidiaries, Africana.com, Inc. and any entity listed on Schedule B shall be deemed not to be a subsidiary of AOL.

           (f) By way of illustration, if the several transactions contemplated by this Section 1.05 were effected as of January 31,
2006, the adjusted balance sheet of HoldCo would be as set forth in Schedule C.

                                                              ARTICLE II
                                                         Closing Date Actions

     SECTION 2.01. NewCo Borrowing. (a) On the Closing Date but prior to the Closing, NewCo shall borrow from third party
lenders an amount (the “Loan”) equal to $1,000,000,000 less the amount of Estimated Net International Debt (calculated in
accordance with Section 2.01(b)).
                                                                    3
           (b) On the Closing Date, Time Warner shall estimate the amount of the Net International Debt outstanding as of the close
of business on the business day immediately preceding the Closing Date. The amount of that estimate, minus $50,000,000, shall be
the “Estimated Net International Debt”.

     SECTION 2.02. Closing. At the Closing, the following transactions shall occur simultaneously:

         (a) Cancellation of Membership Interests. The initial Membership Interests issued to Time Warner upon the formation of
HoldCo (as described under Section 1.04(a)) shall be canceled.

           (b) Time Warner Contribution. Time Warner shall unconditionally and irrevocably contribute to HoldCo, and HoldCo shall
unconditionally and irrevocably accept from Time Warner, all of Time Warner’s right, title and interest to all of the outstanding
equity interests of AOL Europe Sarl held by Time Warner or any of its subsidiaries other than any interests held by AOL or any of its
subsidiaries.

           (c) NewCo Contribution. NewCo shall unconditionally and irrevocably contribute to HoldCo, and HoldCo shall
unconditionally and irrevocably accept from NewCo, all of NewCo’s right, title and interest to AOL. In connection with such
contribution, NewCo shall assign and HoldCo shall assume all of NewCo’s rights and obligations in connection with the Loan.

          (d) Google Contribution. Google shall unconditionally and irrevocably contribute to HoldCo, and HoldCo shall
unconditionally and irrevocably accept from Google, cash in the amount of $1,000,000,000.

           (e) Issue of Membership Interests. In connection with the contributions described in Sections 2.02(b), 2.02(c) and 2.02(d),
HoldCo shall issue to each of Time Warner, NewCo and Google the total number of Membership Interests set forth next to such
party’s name on Schedule A. The contributions, assumptions and issuances described in Section 2.02(b), Section 2.02(c), Section 2.02
(d) and this Section 2.02(e), in the aggregate, shall be the “HoldCo Contribution”.

           (f) Amended and Restated LLC Agreement. Time Warner, NewCo and Google shall execute the amended and restated
limited liability company agreement of HoldCo substantially in the form attached as Exhibit C (the “HoldCo Operating Agreement”).

           (g) Tax Matters Agreement. Time Warner and HoldCo shall execute the tax matters agreement substantially in the form
attached as Exhibit D.

           (h) Registration Rights Agreements. Time Warner, Google and HoldCo shall execute the registration rights agreement
substantially in the form attached as Exhibit E (the “Google Registration Rights Agreement”). Time Warner, NewCo and HoldCo
shall execute the registration rights agreement substantially in the form attached as Exhibit
                                                                  4
F (the “Time Warner Registration Rights Agreement” and, together with the Google Registration Rights Agreement, the “Registration
Rights Agreements”).

      SECTION 2.03. Time and Place of Closing. The closing (the “Closing”) of the transactions set forth in Section 2.02 shall take
place at the offices of Cravath, Swaine & Moore LLP, 825 Eighth Avenue, New York, New York 10019 15 business days after the
date hereof provided that the conditions set forth in Article VIII have been satisfied (or, to the extent permitted by Law, waived by the
party or parties entitled to the benefits thereof) or as soon thereafter as is practicable after the conditions set forth in Article VIII have
been satisfied (or, to the extent permitted by Law, waived by the party or parties entitled to the benefits thereof), or at such other
place, time and date as shall be agreed in writing between Time Warner and Google. The date on which the Closing occurs is referred
to in this Agreement as the “Closing Date”.

                                                               ARTICLE III
                                        General Representations and Warranties of Time Warner

                                          Time Warner represents and warrants to Google that:

     SECTION 3.01. Organization, Standing and Power. (a) Each of Time Warner and AOL is validly existing and in good standing
under the laws of Delaware and has full corporate power and authority and possesses all governmental franchises, licenses, permits,
authorizations and approvals necessary to enable it to own, lease or otherwise hold its properties and assets, and to conduct its
businesses as presently conducted, other than such franchises, licenses, permits, authorizations and approvals the lack of which,
individually or in the aggregate, have not had and could not reasonably be expected to have a material adverse effect on Time Warner
or AOL, as the case may be.

           (b) Upon formation, each of NewCo and HoldCo will be validly existing and in good standing under the laws of Virginia
and Delaware, respectively, and will have all requisite power and authority and possess all governmental franchises, licenses, permits,
authorizations and approvals necessary to enable it to own, lease or otherwise hold its properties and assets, and to conduct its
businesses as then conducted, other than such franchises, licenses, permits, authorizations and approvals the lack of which,
individually or in the aggregate, have not had and could not reasonably be expected to have a material adverse effect on NewCo or
HoldCo, as the case may be.

     SECTION 3.02. Authority; Execution and Delivery; Enforceability. (a) Each of Time Warner and AOL has all requisite
corporate power and authority to execute and deliver this Agreement, the Time Warner Registration Rights Agreement and the
HoldCo Operating Agreement (in each case, to the extent a party thereto), to perform their respective obligations hereunder and
thereunder and to consummate the transactions contemplated hereby and thereby. The execution and delivery by Time Warner and
AOL of this Agreement, the Time Warner Registration Rights Agreement and the HoldCo Operating Agreement (in each case, to the
extent a party thereto), the performance of their obligations hereunder and thereunder and the consummation by Time Warner and
AOL of
                                                                      5
the transactions contemplated hereby and thereby have been or will be duly authorized by all necessary corporate action on the part of
Time Warner, NewCo, HoldCo and AOL (in each case, to the extent a party thereto). Each of Time Warner and AOL has duly
executed and delivered this Agreement, and this Agreement constitutes its legal, valid and binding obligation, enforceable against it in
accordance with its terms.

           (b) Upon formation of NewCo and HoldCo and execution by them of an Adoption Agreement: each of NewCo and
HoldCo will have all requisite power and authority to execute and deliver its respective Adoption Agreement, its respective
Registration Rights Agreement, the HoldCo Operating Agreement (by NewCo) and the AOL Operating Agreement (by HoldCo), to
perform their respective obligations hereunder and thereunder, and to consummate the transactions contemplated hereby and thereby;
the execution and delivery by NewCo and HoldCo of its respective Adoption Agreement, its respective Registration Rights
Agreement, the HoldCo Operating Agreement (by NewCo) and the AOL Operating Agreement (by HoldCo), the performance by
NewCo and HoldCo of their respective obligations hereunder and thereunder and the consummation by NewCo and HoldCo of the
transactions contemplated hereby and thereby will have been duly authorized by all necessary corporate action on the part of NewCo
and HoldCo; each of NewCo and HoldCo will have duly executed its respective Adoption Agreement, its respective Registration
Rights Agreement, the HoldCo Operating Agreement (by NewCo) and the AOL Operating Agreement (by HoldCo); and their
respective Adoption Agreements, this Agreement, their respective Registration Rights Agreements, the HoldCo Operating Agreement
(for NewCo) and the AOL Operating Agreement (for HoldCo) will constitute the legal, valid and binding obligation of each of
NewCo and HoldCo, enforceable against NewCo and HoldCo in accordance with its terms.

      SECTION 3.03. No Conflicts; Consents. (a) The execution and delivery by Time Warner, AOL, NewCo and HoldCo of the
Transaction Agreements to which they are respectively parties do not, and the performance of their respective obligations hereunder
and thereunder and the consummation of the transactions contemplated hereby and thereby and compliance with the terms hereof and
thereof will not, conflict with, or result in any violation of or default (with or without notice or lapse of time, or both) under, or give
rise to a right of termination, cancelation or acceleration of any obligation or to loss of a material benefit under, or to increased,
additional, accelerated or guaranteed rights or entitlements of any person under, or result in the creation of any lien upon any of the
respective properties or assets of AOL or HoldCo under, any provision of (i) the certificate of incorporation, by-laws or other
constitutive documents of Time Warner, AOL, NewCo or HoldCo, (ii) any contract, lease, license, indenture, note, bond, agreement,
permit, concession, franchise or other instrument (a “Contract”) to which Time Warner, AOL, NewCo or HoldCo is a party or by
which any of its respective properties or assets is bound or (iii) any material judgment, order or decree (“Judgment”) or material
statute, law (including common law), ordinance, rule or regulation (“Law”) applicable to Time Warner, AOL, NewCo or HoldCo or
its respective properties or assets, other than, in the case of clauses (ii) and (iii) above, any such items that, individually or in the
aggregate, have not had and could not reasonably be expected to have a material adverse effect on AOL or HoldCo, as the case may
be.
                                                                     6
            (b) No material consent, approval, license, permit, order or authorization (“Consent”) of, or registration, declaration or
filing with, or permit from, any Federal, state, local or foreign government or any court of competent jurisdiction, administrative
agency or commission or other governmental authority or instrumentality, domestic or foreign (a “Governmental Entity”) is required
to be obtained or made by or with respect to Time Warner, AOL, NewCo or HoldCo in connection with the execution, delivery and
performance of the Transaction Agreements to which they are respectively parties or the consummation of the transactions
contemplated hereby and thereby.

      SECTION 3.04. Membership Interests. (a) Prior to the Closing, all issued and outstanding Membership Interests of HoldCo shall
be held by Time Warner. As of the Closing Date, HoldCo shall not be subject to any Contract requiring it to issue any Membership
Interests or any security convertible into or exchangeable for Membership Interests, other than this Agreement.

           (b) All Membership Interests of HoldCo to be issued at the Closing shall be duly authorized, validly issued, fully paid and
nonassessable, and shall be issued in compliance with all applicable Federal, state, foreign, or local statutes, laws, rules, or
regulations, including federal and state securities laws, and shall not be issued in violation of any applicable preemptive or similar
rights.

           (c) Schedule A reflects all of the Membership Interests of HoldCo issued and outstanding as of immediately following the
Closing.

      SECTION 3.05. Equity Interests in AOL. As of the Closing, all of the outstanding limited liability company interests of AOL
shall be validly issued and fully paid and nonassessable and shall be owned by HoldCo free and clear of all liens. AOL is not subject
to any Contract requiring it to issue any equity security or any security convertible into or exchangeable for any equity security.

                                                             ARTICLE IV
                                      Specified Representations and Warranties of Time Warner

          Time Warner represents and warrants to Google as of December 20, 2005 (or as of December 31, 2005, in the case of the
December 31, 2005 financial statements described in Sections 4.02(b) and 4.02(c)), that, except as disclosed in writing by Time
Warner to Google on or prior to December 20, 2005:

      SECTION 4.01. AOL Subsidiaries. (a) Except as, individually or in the aggregate, has not had and could not reasonably be
expected to have a material adverse effect on AOL, each subsidiary of AOL is validly existing and in good standing under the laws of
the jurisdiction in which it is organized and has full corporate power and authority and possesses all governmental franchises,
licenses, permits, authorizations and approvals necessary to enable it to own, lease or otherwise hold its properties and assets, and to
conduct its businesses as presently conducted.
                                                                   7
           (b) Except as, individually or in the aggregate, has not had and could not reasonably be expected to have a material adverse
effect on AOL, all the outstanding shares of capital stock of each subsidiary of AOL have been validly issued and are fully paid and
nonassessable and are owned by AOL free and clear of all liens.

     SECTION 4.02. SEC Documents. (a) The information pertaining to AOL in each of the reports, schedules, forms, statements
and other documents required to be filed by Time Warner with the SEC since January 1, 2005 (the “SEC Documents”), complied in
all material respects with the then applicable requirements of the United States Securities Exchange Act of 1934 (the “Exchange
Act”) and the applicable rules and regulations of the SEC promulgated thereunder, and, at the time of filing, did not contain any
untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made, not misleading. The AOL segment financial
information included in the SEC Documents complied as to form in all material respects with the then applicable accounting
requirements and the published rules and regulations of the SEC with respect thereto and fairly presented the results of operations and
financial position of the AOL business segment of Time Warner as of the dates and for the periods indicated therein, subject to the
absence of line items and notes.

           (b) The separate unaudited balance sheet and statements of income and cash flows of AOL at and as of September 30, 2005
and December 31, 2005 (the “AOL Financials”) that are attached to the Disclosure Letter, have been prepared in accordance with
U.S. generally acceptable accounting principles (“GAAP”) applied on a consistent basis throughout the periods indicated (except that
the AOL Financials do not contain footnotes that may be required by GAAP) . The AOL Financials are true and correct in all material
respects and present fairly AOL’s financial condition, operating results and cash flows as of the dates and during the periods indicated
therein, subject to the absence of footnotes.

          (c) A true and accurate reconciliation of the AOL Financials to the AOL business segment disclosures contained in the
Time Warner Quarterly Report on Form 10-Q for the period ended September 30, 2005 and the Annual Report on Form 10-K for the
period ended December 31, 2005 is attached to the Disclosure Letter.

           (d) Except as set forth in the Disclosure Letter, the assets that form the basis of the operating results reflected in the AOL
Financials that are owned by Time Warner and its subsidiaries are owned by AOL and its subsidiaries.

     SECTION 4.03. Absence of Certain Changes or Events. (a) Between September 30, 2005 and December 20, 2005, there has not
been any event, change, effect or development that, individually or in the aggregate, has had or could reasonably be expected to have
a material adverse effect on AOL, other than events, changes, effects and developments relating to the economy in general or to
AOL’s industry in general and not specifically relating to AOL or adversely affecting AOL in a manner disproportionate to the effect
on other participants in AOL’s industry.
                                                                     8
           (b) Except as set forth in the Disclosure Letter or as specifically contemplated by this Agreement, between September 30,
2005 and the date of this Agreement, the AOL Business has been operated in the ordinary course of business consistent with past
practice in all material respects.

          (c) Except as set forth in the Disclosure Letter, between September 30, 2005 and the date of this Agreement, there has not
been any Prohibited Action.

      SECTION 4.04. Compliance with Applicable Laws. AOL is in compliance with all applicable Laws, except for instances of
noncompliance that, individually or in the aggregate, have not had and could not reasonably be expected to have a material adverse
effect on AOL.

      SECTION 4.05. Ownership of Permits; Title to Assets. AOL possesses all permits necessary for the conduct of its business
except for such permits the absence of which, individually or in the aggregate, has not had and could not reasonably be expected to
have a material adverse effect on AOL. AOL has good and marketable title to all its assets except (a) for such assets as are no longer
used or useful in the ordinary course of business and (b) where the failure to have such good and marketable title, individually or in
the aggregate, has not had and could not reasonably be expected to have a material adverse effect on AOL.

     SECTION 4.06. Adequacy of Internal Controls. AOL has established and maintains effective internal control over financial
reporting, which internal control over financial reporting includes those policies and procedures that (a) pertain to the maintenance of
records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of AOL; (b) provide
reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with
generally accepted accounting principles; and (c) provide reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use or disposition of AOL’s assets that could have a material effect on AOL’s financial statements. AOL
maintains sufficient documentation to provide reasonable support for its assessment of effective internal control over financial
reporting. Internal control over financial reporting includes self-monitoring mechanisms, and actions taken to correct deficiencies as
they are identified. AOL assesses its internal control over financial reporting based on criteria for effective internal control over
financial reporting described in “Internal Control-Integrated Framework” issued by the Committee of Sponsoring Organizations of
the Treadway Commission.

                                                             ARTICLE V
                                              Representations and Warranties of Google

                                         Google represents and warrants to Time Warner that:

     SECTION 5.01. Organization, Standing and Power. Google is validly existing and in good standing under the laws of Delaware
and has full corporate power and
                                                                   9
authority and possesses all governmental franchises, licenses, permits, authorizations and approvals necessary to enable it to own,
lease or otherwise hold its properties and assets, and to conduct its businesses as presently conducted, other than such franchises,
licenses, permits, authorizations and approvals the lack of which, individually or in the aggregate, have not had and could not
reasonably be expected to have a material adverse effect on Google’s ability to perform its obligations under the Transaction
Agreements to which Google is a party.

     SECTION 5.02. Authority; Execution and Delivery; Enforceability. Google has all requisite corporate power and authority to
execute and deliver the Transaction Agreements to which Google is a party, to perform its obligations hereunder and thereunder and
to consummate the transactions contemplated hereby and thereby. The execution and delivery by Google of the Transaction
Agreements to which it is a party, the performance by Google of its obligations hereunder and thereunder and the consummation by
Google of the transactions contemplated hereby and thereby have been duly authorized by all necessary corporate action on the part
of Google. Google has duly executed and delivered the Transaction Agreements to which Google is a party, and such Transaction
Agreements constitute its legal, valid and binding obligation, enforceable against it in accordance with their terms.

      SECTION 5.03. No Conflicts; Consents. (a) The execution and delivery by Google of the Transaction Agreements to which
Google is a party do not, the performance by Google of its obligations hereunder and thereunder and the consummation of the
transactions contemplated hereby and thereby and compliance with the terms hereof and thereof will not, conflict with, or result in
any violation of or default (with or without notice or lapse of time, or both) under, or give rise to a right of termination, cancelation or
acceleration of any obligation or to loss of a material benefit under, or to increased, additional, accelerated or guaranteed rights or
entitlements of any person under, or result in the creation of any lien upon any of the properties or assets of Google under, any
provision of (i) its certificate of incorporation or by-laws, (ii) any material Contract to which Google is a party or by which any of its
properties or assets is bound or (iii) any material Judgment or material Law applicable to Google or its properties or assets, other than,
in the case of clauses (ii) and (iii) above, any such items that, individually or in the aggregate, have not had and could not reasonably
be expected to have a material adverse effect on Google’s ability to consummate the transactions contemplated hereby and thereby.

            (b) No material Consent of, or registration, declaration or filing with, or permit from, any Federal, state, local or foreign
government or any court of competent jurisdiction, administrative agency or commission or other Governmental Entity is required to
be obtained or made by or with respect to Google in connection with the execution, delivery and performance of the Transaction
Agreements to which Google is a party, the performance by Google of its obligations hereunder and thereunder or the consummation
of the transactions contemplated hereby and thereby.

    SECTION 5.04. Accredited Investor. Google hereby acknowledges and confirms that (a) the issuance of Membership Interests
by HoldCo pursuant to this Agreement has not been and will not be registered under the United States Securities Act of 1933 (the
                                                                    10
“Securities Act”), and is being made in reliance upon Federal and state exemptions for transactions not involving a public offering,
(b) it is an institutional “accredited investor” (as defined in Regulation D under the Securities Act) and (c) it has such knowledge and
experience in financial and business matters so that Google is capable of evaluating the merits and risks of its investment in HoldCo.

                                                             ARTICLE VI
                                                        Pre-Closing Covenants

      SECTION 6.01. Best Efforts. Each of the parties shall use their best efforts to cause the consummation of the transactions
contemplated by this Agreement to occur. In connection therewith, each of the parties shall take any and all steps necessary to avoid
or eliminate each and every impediment under any competition or other Law that may be asserted by any Governmental Entity or
other party (including defending any claim through litigation) unless any such step could reasonably be expected to have a material
adverse effect on any of the parties hereto.

     SECTION 6.02. Regulatory Filings. Each of the parties shall make all regulatory filings required in connection with the
transactions contemplated by this Agreement as soon as practicable following the date hereof.

                                                             ARTICLE VII
                                                         Additional Covenants

      SECTION 7.01. Contribution of AOLA Assets. As soon as practicable following the Closing and following the effective date of
America Online Latin America, Inc.’s Joint Plan of Reorganization of and Liquidation pursuant to Chapter 11 of the United States
Bankruptcy Code (the “Plan”), Time Warner shall contribute, or cause to be contributed, to NewCo all of the assets, including any
and all real or personal property of any nature, of America Online Caribbean Basin, Inc. and AOL Puerto Rico Management Services,
Inc. (collectively, “AOL Puerto Rico”) received by Time Warner pursuant to the Plan (the “AOL Puerto Rico Assets”) . Immediately
thereafter, NewCo shall contribute the AOL Puerto Rico Assets to HoldCo and HoldCo shall contribute the AOL Puerto Rico Assets
to AOL. None of Time Warner, NewCo or HoldCo shall be entitled to any additional Membership Interests or other consideration for
such contribution. The parties hereto intend to treat the contributions described in this Section 7.01 of the AOL Puerto Rico Assets by
Time Warner to NewCo and by NewCo to HoldCo as transactions described under Section 351 of the Code. None of Time Warner,
Google, AOL, NewCo or HoldCo or any of their respective affiliates shall take any position inconsistent with such characterizations
on any return or filing or otherwise with any taxing authority unless otherwise required by applicable Law.

    SECTION 7.02. Cash Contribution. As soon as practicable following the Closing, Time Warner shall (a) calculate the total
amount of Net International Debt outstanding as of the close of business on the business day immediately preceding the Closing Date
and
                                                                   11
(b) contribute (or cause to be contributed) to HoldCo cash in an amount equal to the excess of (i) the amount of such Net International
Debt over (ii) the amount of Estimated Net International Debt. The amount due from Time Warner under this Section 7.02 shall bear
interest from and including the Closing Date to but excluding the date of payment thereof at the rates from time to time prevailing
under the Loan. No additional Membership Interests or other consideration shall be issued to Time Warner or NewCo in exchange for
such contribution. The parties hereto intend to treat any contribution of cash to HoldCo pursuant to this Section 7.02 as pursuant to
the HoldCo Contribution and, therefore, as a transaction described under Section 351 of the Code. None of Time Warner, Google,
AOL, NewCo or HoldCo or any of their respective affiliates shall take any position inconsistent with such characterization on any
return or filing or otherwise with any taxing authority unless otherwise required by applicable Law.

      SECTION 7.03. Tax Characterization. Each of Time Warner, Google, AOL, NewCo and HoldCo intends that (a) the AOL
Reorganization constitute a reorganization described in Section 368(a)(1)(F) of the Internal Revenue Code of 1986, as amended from
time to time (the “Code”), and (b) the HoldCo Contribution constitute a transaction described under Section 351 of the Code. None of
Time Warner, Google, AOL, NewCo or HoldCo or any of their respective affiliates shall take any position inconsistent with such
characterizations on any return or filing or otherwise with any taxing authority unless otherwise required by applicable Law.

                                                              ARTICLE VIII
                                                           Conditions Precedent

      SECTION 8.01. Conditions to each Party’s Obligations. The respective obligation of each party to effect the transactions set
forth in Section 2.02 is subject to the satisfaction or waiver on or prior to the Closing Date of the following conditions:

           (a) Definitive Agreements. Each Definitive Agreement (as such term is defined in the Letter Agreement), other than the
Definitive Agreements with respect to the Content Availability Term Sheet, the Video Term Sheet and the WiFi Term Sheet (as such
terms are defined in the Letter Agreement), shall have been executed by the parties thereto and be in full force and effect.

           (b) Legal Restraints. No Governmental Entity shall have issued any order, decree or ruling, and no law shall be in effect,
enjoining, restraining or otherwise prohibiting any transaction contemplated by this Agreement.

     SECTION 8.02. Conditions to Obligations of Google. The obligation of Google to effect the transactions set forth in
Section 2.02 is subject to the satisfaction or waiver on or prior to the Closing Date of the following conditions:

           (a) Representations and Warranties. The representations and warranties of Time Warner in this Agreement that are
qualified as to materiality shall be true and correct, and those not so qualified shall be true and correct in all material respects, in each
case at
                                                                     12
and as of the Closing Date, with the same force and effect as if made as of the Closing Date (other than the representations and
warranties contained in Article IV, which need be true and correct only as of December 20, 2005, or December 31, 2005, as
applicable).

          (b) Performance of Obligations of Time Warner, Etc. Each of Time Warner, AOL, NewCo and HoldCo shall have
performed in all material respects all obligations required to be performed by it under this Agreement at or prior to the Closing.

           (c) Absence of Prohibited Actions. There shall not have been taken since December 20, 2005 any Prohibited Action which
has not been cured by the Closing.

     SECTION 8.03. Conditions to Obligations of Time Warner, Etc. The obligation of each of Time Warner, AOL, NewCo and
HoldCo to effect the transactions set forth in Section 2.02 is subject to the satisfaction or waiver on or prior to the Closing Date of the
following conditions:

           (a) Representations and Warranties. The representations and warranties of Google in this Agreement that are qualified as to
materiality shall be true and correct, and those not so qualified shall be true and correct in all material respects, in each case at and as
of the Closing Date, with the same force and effect as if made as of the Closing Date.

          (b) Performance of Obligations of Google. Google shall have performed in all material respects all obligations required to
be performed by it under this Agreement at or prior to the Closing.

                                                              ARTICLE IX
                                                           Termination; Waiver

     SECTION 9.01. Termination. This Agreement may be terminated at any time prior to the Closing:

           (a) by mutual written consent of Time Warner and Google;

           (b) by either Time Warner or Google:

                (i) if the Closing shall not have occurred by December 31, 2006;

                 (ii) if any Governmental Entity issues an order, decree or ruling or taken any other action permanently enjoining,
           restraining or otherwise prohibiting any transaction contemplated by this Agreement or any Definitive Agreement and such
           order, decree, ruling or other action shall have become final or nonappealable; or

                (iii) if there is (A) a Change of Control (as defined in Section 10.02) of Time Warner, AOL, NewCo or HoldCo to a
           Specified Purchaser and (B) as a result thereof Time Warner or Google terminates any Definitive Agreement or any term
           sheet attached to the Letter Agreement;
                                                                    13
(c) by Google:

      (i) if Google is not in material breach of its obligations under this Agreement and there has been a breach of any
representation, warranty, covenant or agreement of Time Warner contained in this Agreement such that the conditions set
forth in Section 8.02(a) or 8.02(b) would not be satisfied and such breach has not been cured within 30 calendar days after
written notice thereof to Time Warner; provided, however, that no cure period shall be required for a breach which by its
nature cannot be cured; or

     (ii) unless cured within 30 calendar days of notice thereof from Google to Time Warner (or, if earlier, by the Closing
Date), if any of the following actions is taken (or since December 20, 2005 has been taken) without the prior written
consent of Google (each of the following, a “Prohibited Action”):

          (A) distributions to any members or stockholders of HoldCo or AOL, other than as contemplated by this
      Agreement;

           (B) HoldCo or AOL, on the one hand, and Time Warner or any affiliate of Time Warner (other than HoldCo,
      AOL or any entity controlled by HoldCo or AOL), on the other hand, entering into any agreement or other
      transaction except (i) as contemplated by this Agreement or any Definitive Agreement, (ii) for de minimis
      transactions in the ordinary course of business consistent with past practice and (iii) for agreements and transactions
      on terms no less favorable than could be obtained from unaffiliated third parties of HoldCo or AOL, as the case may
      be, on an arm’s-length basis;

           (C) any issuance of equity capital (or securities convertible into or exercisable for equity capital) in AOL,
      HoldCo or any direct or indirect subsidiary of HoldCo that has a direct or indirect interest in AOL, other than as
      contemplated by this Agreement;

            (D) any bankruptcy, liquidation or dissolution of HoldCo or AOL;

            (E) any disposition by AOL of assets outside the ordinary course of business consistent with past practice in
      excess of $100,000,000 (individually or in the aggregate in the case of a series of related dispositions) that is not for
      fair market value;

            (F) the incurrence by HoldCo, AOL or any of their direct or indirect subsidiaries of indebtedness (other than
      the Affiliate Guarantees) that would require a “Google Consent” under Section 4.03(h) of the amended and restated
      limited liability company agreement of HoldCo (as attached as Exhibit C) if that agreement were in effect and AOL
      were a subsidiary of HoldCo at the time of
                                                        14
                 incurrence; or

                      (G) any Transfer (as defined in the HoldCo Operating Agreement) of the Audience Business of AOL; or

           (d) by Time Warner if Time Warner is not in material breach of its obligations under this Agreement and there has been a
breach of any representation, warranty, covenant or agreement of Google contained in this Agreement such that the conditions set
forth in Section 8.03(a) or 8.03(b) would not be satisfied and such breach has not been cured within 30 calendar days after written
notice thereof to Google; provided, however, that no cure period shall be required for a breach which by its nature cannot be cured.

      SECTION 9.02. Extension; Waiver. At any time on or prior to the Closing Date, the parties may (a) extend the time for
performance of any of the obligations or other acts of the other parties, (b) waive any inaccuracies in the representations and
warranties contained in this Agreement or (c) waive compliance with any of the covenants, agreements or conditions contained in this
Agreement. Any agreement on the part of a party to any such extension or waiver shall be valid only if set forth in an instrument in
writing signed on behalf of such party.

                                                            ARTICLE X
                                                           Miscellaneous

      SECTION 10.01. Survival of Representations and Warranties. The representations and warranties of the parties hereto contained
in this Agreement shall survive indefinitely; provided, however, that none of the representations and warranties of Time Warner
contained in Article IV shall survive the Closing.

     SECTION 10.02. Definitions. For purposes of this Agreement:

          “AOL Business” shall mean the business that generated the operating results reflected in the AOL Financials.

         “AOL Operating Agreement” shall mean the Limited Liability Company Agreement of AOL LLC entered into among the
members of AOL in the form attached hereto as Exhibit B.

           “Audience Business” shall mean the business unit of AOL that develops, programs and markets content, tools and services
for users of the web sites, portals and services comprising the AOL Network and earns revenue primarily through selling online
advertising on the AOL Network as well as from selling advertisements on third party web sites through Advertising.com’s network
and through other relationships with third party web sites. The AOL Network is an online network that is comprised of a variety of
websites, portals and services including the AOL service, low cost ISP services, AOL.com, AIM, Moviefone, MapQuest, ICQ and
Netscape.com.
                                                                 15
             A “Change of Control” of an entity shall mean (a) the sale or other disposition of more than 40% of the economic interest
in or voting power of that entity in a transaction or series of related transactions or (b) the sale of all or substantially all the assets of
that entity.

          “HoldCo Operating Agreement” shall mean the Amended and Restated Limited Liability Company Agreement of AOL
Holdings LLC entered into among the members of HoldCo in the form attached hereto as Exhibit C.

           “International Debt” shall mean non-operational intercompany payables (including all accrued and unpaid expenses) that
are owed by any non-U.S. subsidiary of AOL to Time Warner or any affiliate of Time Warner (other than HoldCo, AOL or any
subsidiary of HoldCo or AOL).

          A “material adverse effect” on a party shall mean a material adverse effect on the business, assets, condition (financial or
otherwise) or results of operations of such party and its subsidiaries, taken as a whole.

           “Net International Debt” shall mean (a) the amount of the International Debt minus (b)(i) the amount of all cash and cash
equivalents held by non-U.S. subsidiaries of AOL and minus (ii) the amount of all non-operational intercompany receivables
(including all accrued and unpaid expenses) that are owed by Time Warner or any affiliate of Time Warner (other than HoldCo, AOL
or any subsidiary of HoldCo or AOL) to any non-U.S. subsidiary of AOL, in each case calculated as of the close of business on the
business day immediately preceding the Closing Date. The amount of Net International Debt shall be expressed in U.S. dollars
assuming the conversion of all International Debt, cash and cash equivalents into U.S. dollars at the exchange rates prevailing on the
Closing Date.

           “Specified Purchaser” shall mean any “Named Competitor” as defined in any relevant Definitive Agreement.

        “Transaction Agreements” shall mean this Agreement, the Registration Rights Agreements, the Adoption Agreements, the
HoldCo Operating Agreement and the AOL Operating Agreement.

     SECTION 10.03. Notices. All notices provided for in this Agreement shall be in writing, duly signed by the party giving such
notice, and shall be delivered as follows:
                                                                      16
          (a) if given to Time Warner, AOL, NewCo or HoldCo, to the following address (and fax number):
           Time Warner Inc.
           One Time Warner Center
           New York, NY 10019
           Attention: General Counsel
                      SVP Mergers and Acquisitions
           Fax: (212) 484-7167

          (b) if given to Google, to the following address (and fax number):
           Google Inc.
           1600 Amphitheater Parkway
           Mountain View, CA 94043
           Attention: David C. Drummond
                      Senior Vice President, Corporate Development
           Fax: (650) 963-3257
           with a copy to (which shall not constitute notice):
           Donald Harrison
           Corporate Counsel, M&A and Securities
           Fax: (650) 649-1920

           All such notices shall be deemed to have been delivered and given for all purposes (i) on the delivery date if delivered by
confirmed facsimile, (ii) on the delivery date if delivered personally to the party to whom the same is directed, (iii) one (1) business
day after deposit with a commercial overnight carrier, with written verification of receipt, or (iv) five (5) business days after the
mailing date, whether or not actually received, if sent by U.S. mail, return receipt requested, postage and charges prepaid, or any other
means of rapid mail delivery for which a receipt is available addressed to the receiving party as specified on the signature page of this
Agreement. Changes of the person to receive notices or the place of notification shall be effectuated pursuant to a notice given under
this Section 10.03.

     SECTION 10.04. Failure to Pursue Remedies. The failure of any party to seek redress for breach of, or to insist upon the strict
performance of, any provision of this Agreement shall not prevent a subsequent act, which would have originally constituted a breach,
from having the effect of an original breach.

     SECTION 10.05. Cumulative Remedies. The rights and remedies provided by this Agreement are cumulative and the use of any
one right or remedy by any party shall not preclude or waive its right to use any or all other remedies. Said rights and remedies are
given in addition to any other rights the parties may have by law, statute, ordinance or otherwise.

      SECTION 10.06. Parties in Interest. This Agreement shall be binding upon and inure to the benefit of all the parties hereto and,
to the extent provided by this Agreement, their affiliates, their permitted successors and assigns, and their legal representatives.
Nothing in this Agreement, express or implied, is intended to confer upon any Person other than the parties hereto or their respective
permitted successors or assigns or, to the extent
                                                                   17
provided by this Agreement, their affiliates, any rights or remedies under or by reason of this Agreement.

     SECTION 10.07. Headings. The headings and subheadings in this Agreement are included for convenience and identification
only and are in no way intended to describe, interpret, define or limit the scope, extent or intent of this Agreement or any provision
hereof.

      SECTION 10.08. Severability. The invalidity or unenforceability of any particular provision of this Agreement shall not affect
the other provisions hereof, and this Agreement shall be construed in all respects as if such invalid or unenforceable provision were
omitted.

      SECTION 10.09. Counterparts. This Agreement may be executed in any number of counterparts with the same effect as if all
parties hereto had signed the same document. All counterparts shall be construed together and shall constitute one instrument.

     SECTION 10.10. Entire Agreement. This Agreement constitutes the entire agreement among the parties hereto pertaining to the
subject matter hereof and supersedes all prior agreements and understandings pertaining thereto.

     SECTION 10.11. Governing Law. This Agreement and the rights of the parties hereto shall be interpreted in accordance with the
laws of the State of New York, and all rights and remedies shall be governed by such laws without regard to principles of conflict of
laws. Each of the parties hereto irrevocably agrees that any legal action or proceeding arising out of this Agreement or any transaction
contemplated hereby shall be brought only in the State or United States Federal courts located in the State of New York. Each party
hereto irrevocably consents to the service of process outside the territorial jurisdiction of such courts in any such action or proceeding
by the mailing of such documents by registered United States mail, postage prepaid, to the respective address set forth in
Section 10.03.

      SECTION 10.12. Absence of Presumption. The parties hereto have participated jointly in the negotiation and drafting of this
Agreement and, in the event an ambiguity or question of intent or interpretation arises, this Agreement shall be construed as if drafted
jointly by such parties and no presumption or burden of proof shall arise favoring or disfavoring any party by virtue of the authorship
of any of the provisions of this Agreement.
                                                                   18
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first stated above.

                                                                 TIME WARNER INC.
                                                                   by
                                                                        Name:
                                                                        Title:

                                                                 GOOGLE INC.
                                                                   by
                                                                        Name:
                                                                        Title:

                                                                 AMERICA ONLINE, INC.
                                                                   by
                                                                        Name:
                                                                        Title:
                                                    19
                                                                                   SCHEDULE A

                 Initial Members and Membership Interests

Initial Member                                              Membership Interests
Time Warner                                                         2.5
  NewCo                                                             92.5
   Google                                                            5
                                   20
                                                                                                                        EXHIBIT A

                                                  [Form of Adoption Agreement]

                                                This ADOPTION AGREEMENT (this “Adoption Agreement”) is executed pursuant
                                          to the terms of the Contribution Agreement, dated as of March [ ], 2006, a copy of which is
                                          attached hereto and is incorporated herein by reference (the “Contribution Agreement”), by
                                          the undersigned. By execution and delivery of this Adoption Agreement, the undersigned
                                          agrees as follows:

          SECTION 1. Acknowledgment. The undersigned acknowledges that it is becoming a party to the Contribution Agreement.

         SECTION 2. Agreement. The undersigned (a) agrees that it shall be bound by and subject to the terms of the Contribution
Agreement and (b) hereby adopts the Contribution Agreement with the same force and effect as if it were originally a party thereto.

          Executed and dated this      day of                          .


                                                                    [HoldCo] [NewCo]:


                                                                    ___________________________________________
                                       Exhibit 10.22


GOOGLE REGISTRATION RIGHTS AGREEMENT

            MARCH __, 2006
                                                  TABLE OF CONTENTS

                                                                      Page
Section 1 Definitions                                                   1
     1.1 Certain Definitions                                            1
Section 2 Registration Rights                                           4
     2.1 Request for Registration.                                      4
     2.2 Company Registration.                                          7
     2.3 Registration Procedures                                        9
     2.4 Indemnification and Contribution.                             12
     2.5 Information by Holder                                         14
     2.6 Rule 144 Reporting and Administration                         14
     2.7 Market Stand-Off Agreement                                    15
     2.8 Transfer or Assignment of Registration Rights                 15
     2.9 Limitations on Subsequent Registration Rights                 15
     2.10 Termination of Registration Rights                           15
Section 3 Miscellaneous                                                15
     3.1 Amendment                                                     15
     3.2 Notices                                                       15
     3.3 Governing Law; Waiver of Jury Trial                           17
     3.4 Successors and Assigns                                        17
     3.5 Entire Agreement                                              17
     3.6 Delays or Omissions                                           17
     3.7 Severability                                                  17
     3.8 Titles and Subtitles                                          17
     3.9 Counterparts                                                  18
     3.10 Telecopy Execution and Delivery                              18
     3.11 No Impairment                                                18
     3.12 Confidentiality                                              18
                                                          i
                                              REGISTRATION RIGHTS AGREEMENT

     This Registration Rights Agreement (this “Agreement”) is made as of March __, 2006, by and among Time Warner Inc., a
Delaware corporation, AOL Holdings LLC, a Delaware limited liability company (“Holdco”), and Google Inc., a Delaware
corporation (“Google”). Unless otherwise defined herein, capitalized terms used in this Agreement have the meanings ascribed to
them in Section 1 hereof.

                                                              RECITALS

     WHEREAS, Google, Time Warner Inc. and America Online, Inc. have entered into a Contribution Agreement, dated as of
[        ] (the “Contribution Agreement”).

    WHEREAS, pursuant to the Contribution Agreement Google will be issued limited liability company interests in Holdco (the
“Securities”) in exchange for one billion dollars ($1,000,000,000) in cash.

    WHEREAS, it is a condition to the closing of the sale of the Securities to Google pursuant to the Contribution Agreement that
Holdco and Google execute and deliver this Agreement.

                                                             AGREEMENT

    NOW, THEREFORE, in consideration of the mutual promises and covenants set forth herein and in the Contribution
Agreement, and other consideration, the receipt and adequacy of which is hereby acknowledged, the parties hereto agree as follows:

                                                                Section 1
                                                               Definitions

     1.1 Certain Definitions. As used in this Agreement, the following terms shall have the meanings set forth below:

              (a) “business day” shall mean any day other than a Saturday or Sunday or a day on which banks in New York, New York
are closed.

          (b) “Commission” shall mean the Securities and Exchange Commission or any other federal agency at the time
administering the Securities Act.

              (c) “Company” shall mean Holdco; provided that following the Entity Conversion, “Company” shall mean the Conversion
Entity.

              (d) “Contribution Agreement” shall have the meaning set forth in the Recitals.

              (e) “Conversion Entity” shall mean the corporation resulting from the Entity Conversion.

            (f) “Conversion Stock” shall mean the Common Stock of the Conversion Entity issued in exchange for the membership
interests of Holdco upon the Entity Conversion.

           (g) “Distribution” shall mean a distribution (by pro rata distribution or dividend, by exchange offer/”split-off” or by any
comparable means) of direct or indirect equity interests of Holdco or Conversion Stock to the holders of TW Common Stock or the
holders of capital stock of any parent entity of TW; provided that such equity interests or Conversion Stock are (immediately
following such distribution) registered under the Exchange Act and registered on or listed for trading on, as applicable, an Eligible
Exchange.

          (h) “Eligible Exchange” shall mean either the New York Stock Exchange or the Nasdaq National Market.

           (i) “Entity Conversion” shall mean the conversion of Holdco from a limited liability company to a corporation pursuant to
Section 9.01 of the Operating Agreement.

           (j) “Exchange Act” shall mean the Securities Exchange Act of 1934, as amended, or any similar successor federal statute
and the rules and regulations thereunder, all as the same shall be in effect from time to time.

          (k) “Google” shall mean Google Inc., a Delaware corporation.

          (l) “Holder” shall mean any Google Entity (as such term is defined in the Operating Agreement) that is a holder of
Registrable Securities.

          (m) “Indemnified Party” shall have the meaning set forth in Section 2.4(c).

          (n) “Indemnifying Party” shall have the meaning set forth in Section 2.4(c).

           (o) “Initial Public Offering” shall mean the closing of the Conversion Entity’s first public offering of its common stock
pursuant to an effective registration statement under the Securities Act.

          (p) “Initiating Holder” shall mean any Holder making a Demand Registration Request pursuant to Section 2.1.

          (q) “Inspectors” shall have the meaning set forth in Section 2.3(k).

           (r) “IPO Demand” shall mean a request for registration pursuant to Section 2.1 which registration would constitute the
Initial Public Offering of the Company.

           (s) “Material Adverse Effect” on the Company shall mean a material adverse effect on the business, assets, condition
(financial or otherwise) or results of operations of the Company and its subsidiaries, taken as a whole.

             (t) “Minimum Amount” shall mean (i) if in connection with an IPO Demand, the lesser of: (x) an amount of Registrable
Securities the aggregate market value of which is equal to $200 million or more, as determined and certified in writing by the
proposed managing underwriter of the Initial Public Offering, and (y) 40% of the Registrable Securities then held by the Holders and
(ii) if in connection with a Demand Registration Request made after the Initial Public Offering or the Distribution, as the case may be,
the lesser of: (x) an amount of Registrable Securities the aggregate value of which is equal to $100 million or more based on the
closing sale prices of Conversion Stock on an Eligible Exchange, as reported in The Wall Street Journal, Northeastern edition, for
each of the twenty (20) consecutive Trading Days immediately preceding such Demand Registration Request and (y) 20% of the
Registrable Securities then held by the Holders.

          (u) “Operating Agreement” shall mean the Amended and Restated Limited Liability Company Agreement of Holdco, as
such may be amended from time to time in accordance with the provisions thereof.
                                                                   -2-
            (v) “Other Selling Stockholders” shall mean persons other than Holders (including any Time Warner Entity (as such term
is defined in the Operating Agreement)) who either: (i) by virtue of agreements with the Company, are entitled to include their Other
Shares in any registration subject to this Agreement or (ii) hold Other Shares sought to be included in a registration subject to this
Agreement.

           (w) “Other Shares” shall mean shares of common stock or other equity interests of the Company, other than Registrable
Securities, with respect to which registration rights have been granted or are otherwise sought to be included in a registration subject
to this Agreement.

            (x) The terms “register,” “registered” and “registration” refer to a registration effected by preparing and filing a
registration statement in compliance with the Securities Act or the Exchange Act, and the declaration or ordering of the effectiveness
of such registration statement by the Commission.

            (y) “Registrable Securities” shall mean (i) shares of Conversion Stock issued or issuable pursuant to the conversion of the
Securities upon the Entity Conversion; (ii) any Conversion Stock otherwise acquired by the Holders after the date hereof in a manner
that is not in violation of the Operating Agreement; and (iii) any common stock issued as a dividend or other distribution with respect
to or in exchange for or in replacement of the shares referenced in clause (i) or (ii) above; provided, however, that Registrable
Securities shall not include any securities described in clause (i), (ii) or (iii) above which (A) have previously been registered under
the Securities Act, (B) have been sold to the public either pursuant to an effective registration statement or Rule 144 under the
Securities Act or (C) have been sold in a private transaction in which the transferor’s rights under this Agreement are not validly
assigned pursuant to Section 2.8.

           (z) “Registration Expenses” shall mean all expenses incurred in effecting any registration pursuant to this Agreement,
including, without limitation, all registration, qualification, and filing fees, printing expenses, escrow fees, fees and disbursements of
counsel for the Company and one special counsel for the Holders, blue sky fees and expenses, and expenses of any regular or special
audits incident to or required by any such registration, but shall not include Selling Expenses and fees and disbursements of additional
counsel for the Holders.

         (aa) “Rule 144” shall mean Rule 144 as promulgated by the Commission under the Securities Act, as such Rule may be
amended from time to time, or any similar successor rule that may be promulgated by the Commission.

         (bb) “Rule 145” shall mean Rule 145 as promulgated by the Commission under the Securities Act, as such Rule may be
amended from time to time, or any similar successor rule that may be promulgated by the Commission.

         (cc) “Rule 415” shall mean Rule 415 as promulgated by the Commission under the Securities Act, as such Rule may be
amended from time to time, or any similar successor rule that may be promulgated by the Commission.

           (dd) “Securities” shall have the meaning set forth in the Recitals.

           (ee) “Securities Act” shall mean the Securities Act of 1933, as amended, or any similar successor federal statute and the
rules and regulations thereunder, all as the same shall be in effect from time to time.

           (ff) “Selling Expenses” shall mean all underwriting discounts, brokers or other selling commissions and stock transfer
taxes applicable to the sale of Registrable Securities, and fees
                                                                   -3-
     and disbursements of counsel for any Holder (other than the fees and disbursements of one special counsel to the Holders
     included in Registration Expenses).

            (gg) “Shelf Registration” shall mean a registration on Form S-3 (or any successor thereto) or any other appropriate form
pursuant to Rule 415 under the Securities Act (or any successor rule that may be adopted by the Commission) providing for the sale
of securities on a delayed or continuous basis.

           (hh) “Suspension Period” shall have the meaning set forth in Section 2.3(d).

          (ii) “Trading Day” shall mean, for a particular equity security, a day on which trading prices for such equity security are
quoted on the Eligible Exchange on which such equity security is traded.

            (jj) “TW” shall mean Time Warner Inc., a Delaware corporation, unless and until any of the following events occur: (i) any
person the common stock of which is registered under Section 12 of the Exchange Act becomes the beneficial owner of more than
50% of the total outstanding equity interests of Time Warner Inc. and Time Warner Inc. ceases to have its common stock registered
under the Exchange Act and listed on a national securities exchange, in which case “TW” shall mean such person, (ii) Time Warner
Inc. consolidates with or merges with or into, or transfers all or substantially all its assets to, any person the common stock of which is
registered under Section 12 of the Exchange Act, in which case “TW” shall mean such person, or (iii) Time Warner Inc. transfers all
(but not less than all) of its equity interests in the Company, directly or indirectly, to any person the common stock of which is
registered under Section 12 of the Exchange Act, in which case “TW” shall mean such person.

           (kk) “TW Common Stock” shall mean the common stock of TW.

           (ll) “Withdrawn Registration” shall have the meaning set forth in Section 2.1(f).

                                                               Section 2
                                                          Registration Rights

     2.1 Request for Registration.

            (a) Request for Registration. Subject to the conditions set forth in this Section 2.1, if the Company shall receive from
Initiating Holders a written request (a “Demand Registration Request”) signed by such Initiating Holders that the Company effect
any registration with respect to not less than a Minimum Amount of the Registrable Securities (such request shall state the number of
shares of Registrable Securities to be disposed of and the intended methods of disposition of such shares by such Initiating Holders,
including the proposed managing underwriters, if any), the Company will as soon as practicable (but in any event within sixty
(60) calendar days of the Demand Registration Request), file such registration and use its reasonable best efforts to cause such
registration to become effective (including, without limitation, filing pre-effective and post-effective amendments, appropriate
qualifications under applicable blue sky or other state securities laws, and appropriate compliance with the Securities Act and/or
Exchange Act and any other governmental regulations or requirements) and to permit or facilitate the sale and distribution of such
Registrable Securities. Upon receipt of such request, the Company shall promptly deliver notice of such request to all other Holders
who each shall then have twenty (20) calendar days to notify the Company in writing of their desire to be included in such
registration. If the request for registration contemplates an underwritten public offering, the Company shall state such in the written
notice and, in such event, the right of any such other Holder to participate in such registration shall be conditioned upon such
                                                                    -4-
     Holder’s participation in such underwritten public offering and the inclusion of such Holder’s Registrable Securities in the
     underwritten public offering to the extent provided herein.

           (b) Limitations on Requested Registration. No Holder shall make (or be deemed to have made) a Demand Registration
Request (and, with respect to Section 2.1(b)(iv), the Company shall not be obligated to file a preliminary registration statement)
pursuant to this Section 2.1:

                (i) prior to the earlier of: (A) July 1, 2008, (B) one hundred eighty (180) calendar days following the effective date
of the Company’s Initial Public Offering and (C) ninety (90) calendar days following a Distribution;

                  (ii) after the Company has effected three (3) such registrations pursuant to this Section 2.1; provided, however, that
the Company shall only be required to effect two (2) such registrations pursuant to this Section 2.1 following the Initial Public
Offering or Distribution (counting for all purposes of this Section 2.1(b)(ii) only registrations which have been declared or ordered
effective and pursuant to which either: (A) all securities registered thereunder have been sold, or (B) the registration statement
relating thereto has been effective and not suspended for the applicable period set forth in Section 2.3(a));

                    (iii) during the period starting with the date thirty (30) calendar days (sixty (60) calendar days in the case of an IPO
Demand) prior to the Company’s reasonably estimated date of filing of, and ending on the date ninety (90) calendar days (one
hundred eighty (180) calendar days in the case of an IPO Demand or such shorter period to which any officer or director of the
Company or holder of at least five percent (5%) of the Company’s outstanding securities is subject pursuant to a lockup restriction
similar to that described in Section 2.7) immediately following the effective date of, any registration statement pertaining to securities
offered by the Company (other than a registration of securities on Form S-8 (as promulgated under the Securities Act), a registration
of securities on Form S-4 (as promulgated under the Securities Act), a registration of securities in a Rule 145 transaction, or a
registration of securities with respect to an employee benefit plan (including in each case pursuant to successor forms and rules)),
provided that the Company is actively employing in good faith its reasonable best efforts to cause such registration statement to be
filed (if not already filed) and to become effective and the managing underwriter(s) of such offering certifies in writing that the
registration of Registrable Securities would have, in its reasonable estimation, a material adverse effect on the marketability of the
offering for which such registration statement was filed; or

                   (iv) if the Company shall furnish to the Holders a certificate signed by any executive officer of the Company stating
that in the good faith judgment of the Board of Directors of the Company, by majority vote, it would be materially detrimental to the
Company for such registration statement to be filed in the near future and that it is, therefore, in the best interests of the Company to
defer the filing of such registration statement, then the Company shall have the right to defer such filing for a period of not more than
ninety (90) calendar days after receipt of the Demand Registration Request; provided, however, that the Company shall not defer its
obligation in this manner for more than an aggregate of one hundred twenty (120) calendar days in any consecutive twelve-month
period; or

           (c) Other Shares. The registration statement filed pursuant to the request of the Initiating Holders may, subject to the
provisions of Sections 2.1(d) and 2.9, include Other Shares, and may include securities of the Company being sold for the account of
the Company.

           (d) Form of Registration; Underwriting.

               (i) The Initiating Holders shall determine the method of distribution of the Registrable Securities covered by a
Demand Registration Request pursuant to this Section 2.1, whether
                                                                    -5-
by means of an underwritten offering or any other lawful means, and the Initiating Holders shall determine the form of the registration
statement to be used in connection therewith, whether an underwritten or non-underwritten offering on Form S-1 or Form S-3, or a
Shelf Registration, subject to the Company’s eligibility to utilize such form of registration statement under the Securities Act;
provided, however, that (A) any such method of distribution (other than a firm commitment underwritten public offering or an
offering from time to time through the facilities of an Eligible Exchange (including so-called “block trades”) pursuant to a Shelf
Registration)) shall be reasonably acceptable to the Company, (B) the IPO Demand must be for a firm commitment underwritten
public offering, (C) the Company shall not be required to file a Shelf Registration until after the first anniversary of an Initial Public
Offering and (D) if the Company is selling securities for its own account in an Initial Public Offering, any such method of distribution
shall be mutually agreed between the Company and the Initiating Holders. The right of any Holder to include all or any portion of its
Registrable Securities in such registration pursuant to this Section 2.1 shall be conditioned upon such Holder’s participation in such
underwriting and the inclusion of such Holder’s Registrable Securities to the extent provided herein. If the Company shall request
inclusion in any registration pursuant to Section 2.1 of securities being sold for its own account, or if Other Selling Stockholders shall
request inclusion in any registration pursuant to Section 2.1, the Initiating Holders shall, on behalf of all Holders, offer to include
such securities in the underwriting and such offer shall be conditioned upon the participation of the Company or such Other Selling
Stockholders in such underwriting and the inclusion of the Company’s and Other Selling Stockholders’ other securities of the
Company and their acceptance of the further applicable provisions of this Section 2 (including Sections 2.1(g) and 2.7). The
Company shall (together with all Holders and Other Selling Stockholders proposing to distribute their securities through such
underwriting) enter into an underwriting agreement in customary form with the representative of the underwriter or underwriters
selected for such underwriting by the holders of a majority of the Registrable Securities held by the Initiating Holders. Such
representative or representatives must be reasonably acceptable to the Company, and if the representative or representatives selected
by the Initiating Holders are not reasonably acceptable to the Company there must be two “co-lead” representatives, both of which
must be underwriters of national reputation, one of which is selected by the Initiating Holders and the other of which is selected by
the Company.

                   (ii) Notwithstanding any other provision of this Section 2.1, if the managing underwriter(s) advises the Initiating
Holders in writing that marketing factors require a limitation on the number of shares to be underwritten, the number of shares of
securities that are entitled to be included in the registration and underwriting shall be allocated as follows: (A) first, to the Holders
requesting to include Registrable Securities in such registration statement based on the pro rata percentage of Registrable Securities
held by such Holders relative to all other Holders requesting to include Registrable Securities in such registration statement,
(B) second, to the Other Selling Stockholders requesting to include Other Shares in such registration statement based on the pro rata
percentage of Other Shares held by such Other Selling Stockholders relative to all the Other Selling Stockholders requesting to
include Other Shares in such registration statement, and (C) third, to the Company. For avoidance of doubt, no securities of the
Company or Other Shares shall be included in a registration under this Section 2.1 unless all Registrable Securities that are requested
to be included in such registration are so included.

                   (iii) If a person who has requested inclusion in such registration as provided above does not agree to the terms of
any such underwriting, such person shall be excluded therefrom by written notice from the Company, the managing underwriter(s) or
the Initiating Holders. The securities so excluded shall also be withdrawn from such registration. If securities are so withdrawn from
the registration and if the number of shares to be included in such registration was previously reduced as a result of marketing factors
pursuant to this Section 2.1(d), then the Company shall offer to all Holders and Other Selling Stockholders who have retained rights
to include securities in the registration the right to include additional Registrable Securities and Other Shares in the registration in an
aggregate amount
                                                                    -6-
equal to the number of shares so withdrawn, with such shares to be allocated among such Holders and Other Selling Stockholders
requesting additional inclusion, in the manner set forth in Section 2.1(d)(ii).

             (e) Company Standstill. The Company may not (in the case of a request for registration pursuant to Section 2.1 which is
for an underwritten public offering, without the consent of the managing underwriter(s)) cause any other registration of securities for
sale for its own account (other than a registration effected solely to implement an employee benefit plan or a transaction to which
Rule 145 of the Securities Act is applicable) to become effective within (i) one hundred eighty (180) calendar days following the
effective date of any registration pursuant to this Section 2.1 if such registration is in connection with the Initial Public Offering (or
such shorter period as is required by the managing underwriters, if any), or (ii) sixty (60) calendar days following the effective date of
any other registration pursuant to this Section 2.1 that is not in connection with the Initial Public Offering (or such shorter period as is
required by the managing underwriters, if any).

             (f) Right to Terminate Registration. The holders of a majority of the Registrable Securities held by the Initiating Holders to
be included in a registration pursuant to this Section 2.1 shall have the right to terminate or withdraw any registration under this
Section 2.1 prior to the effectiveness of such registration whether or not the Company, any Holder or Other Selling Stockholder has
elected to include securities in such registration (a “Withdrawn Registration”), in which case the Company will no longer be required
to proceed with the registration; provided, however, that such Withdrawn Registration shall be counted as a registration for the
purposes of Section 2.1(b)(ii) unless either: (i) the withdrawal by the Holders occurs prior to the initial filing of a preliminary
registration statement with the Commission with respect to such registration, (ii) there is a Material Adverse Effect on the Company
after the filing date of the most recent annual report or, if later, the most recent quarterly report, of TW filed with the Commission on
a Form 10-K or Form 10-Q, as the case may be, filed prior to the making of the relevant Demand Registration Request pursuant to
Section 2.1 (the “Last SEC Report”), (iii) the Last SEC Report includes an untrue statement of a material fact or omits to state a
material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which
they were made, not misleading, relating to a Material Adverse Effect or (iv) in the event the Company has not previously filed a
periodic report under the Exchange Act, the withdrawal occurs following a Material Adverse Effect that was not known to the
Initiating Holders prior to the making of the relevant Demand Registration Request.

           (g) Expenses of Registration. All Registration Expenses incurred in connection with registrations pursuant to Section 2.1
shall be borne by the Company; provided, however, that the Initiating Holders and Other Selling Stockholders (and not the Company)
shall be required to pay for all expenses (including Registration Expenses) of any Withdrawn Registration (unless the withdrawal is
pursuant to Section 2.1(f)(iii) or 2.1(f)(iv); provided that, in the event of a withdrawal pursuant to Section 2.1(f)(iv), the relevant
Material Adverse Effect existed at the time of the relevant Demand Registration Request) pro rata among each other on the basis of
the number of Registrable Securities or Other Shares proposed to be registered. All Selling Expenses relating to securities registered
on behalf of the Holders or Other Selling Stockholders pursuant to Section 2.1 shall be borne by the holders of securities included in
such registration pro rata among each other on the basis of the number of Registrable Securities or Other Shares so registered.

     2.2 Company Registration.

          (a) Company Registration. If the Company shall determine to register any of its securities either for its own account or the
account of a security holder or holders, other than a registration pursuant to a Demand Registration Request (including a registration
contemplated by Section 2.1(b)(iii)), a registration of securities on Form S-8, a registration on Form S-4 (as
                                                                    -7-
promulgated under the Securities Act), a registration of securities in a Rule 145 (as promulgated under the Securities Act) transaction,
a registration of securities solely with respect to an employee benefit plan, or a registration relating to the offer and sale of debt
securities (including in each case pursuant to successor forms and rules), the Company will:

                  (i) give to the Holders written notice thereof at least twenty (20) calendar days prior to the filing of a registration
therefore; and

                 (ii) include in such registration (and any related qualification under blue sky laws or other compliance), and in any
underwriting involved therein, all the Registrable Securities specified in a written request by the Holders made within twenty
(20) calendar days after receipt of such written notice from the Company.

Notwithstanding the foregoing, if any such registration is being filed to effect the registration of a Distribution, the Holders shall not
be entitled to include in such registration any Registrable Securities held by the Holders.

           (b) Underwriting.

                   (i) If the registration of which the Company gives notice is for a registered public offering involving an
underwriting, the Company shall so advise the Holders as a part of the written notice given pursuant to Section 2.2(a)(i). In such
event, the right of any Holder to registration pursuant to this Section 2.2 shall be conditioned upon such Holder’s participation in such
underwriting and the inclusion of such Holder’s Registrable Securities in the underwriting to the extent provided herein. All Holders
proposing to distribute their securities through such underwriting shall (together with the Company and the Other Selling
Stockholders) enter into an underwriting agreement in customary form with the representative of the underwriter or underwriters
selected by the Company.

                   (ii) Notwithstanding any other provision of this Section 2.2, if the underwriters advise the Company in writing that
marketing factors require a limitation on the number of shares to be underwritten, the underwriters may (subject to the limitations set
forth below) limit the number of Registrable Securities to be included in the registration and underwriting. The Company shall so
advise all holders of securities requesting registration, and the number of shares of securities that are entitled to be included in the
registration and underwriting shall be allocated, as follows: (A) first, to the Company for securities being sold for its own account,
and (B) second, to the Holders and Other Selling Stockholders requesting to include Registrable Securities or Other Shares in such
registration statement based on the aggregate pro rata percentage of Registrable Securities and Other Shares held by such Holders and
Other Selling Stockholders, on a pari passu basis. Notwithstanding the foregoing, no such exclusion or allocation shall reduce the
amount of securities of the Holders included in such registration statement below fifty percent (50%) of the total amount of securities
included in such registration statement for the account of the persons other than the Company.

                   (iii) If a Holder or Other Selling Stockholder who has requested inclusion in such registration as provided above
does not agree to the terms of any such underwriting, such person shall also be excluded therefrom by written notice from the
Company or the managing underwriter(s). The Registrable Securities or Other Shares so excluded shall also be withdrawn from such
registration. If securities are so withdrawn from the registration and if the number of shares of Registrable Securities or Other Shares
to be included in such registration was previously reduced as a result of marketing factors pursuant to Section 2.2(b), the Company
shall then offer to all Holders and Other Selling Stockholders who have retained the right to include securities in the registration the
right to include additional securities in the registration in an aggregate amount equal to the number of shares so
                                                                    -8-
withdrawn, with such shares to be allocated among the persons requesting additional inclusion, in the manner set forth in Section 2.2
(b)(ii).

            (c) Right to Terminate Registration. The Company shall have the right to terminate or withdraw any registration initiated
by it under this Section 2.2 prior to the effectiveness of such registration whether or not any Holder or Other Selling Stockholder has
elected to include securities in such registration.

            (d) Expenses of Registration. All Registration Expenses incurred in connection with any registrations pursuant to this
Section 2.2 shall be borne by the Company. All Selling Expenses relating to securities registered on behalf of the Holders or Other
Selling Stockholders pursuant to this Section 2.2 shall be borne by the holders of securities included in such registration pro rata
among each other on the basis of the number of Registrable Securities or Other Shares so registered, and it shall be a further condition
to the participation of Other Selling Stockholders in such registration that they have agreed in writing to pay their pro rata portion of
such Selling Expenses.

            (e) Effect of Registration. Notwithstanding any other provision of this Agreement, the Holders hereby agree that if the
Company initiates a registration of equity securities for its own account in compliance with the provisions of Section 2.1(b)(iii) after
the making of the IPO Demand but prior to the filing of the preliminary registration statement therefor, then, so long as the Company
complies with the provisions of Section 2.1(b)(iii), such registration shall be deemed a Company registration that shall be governed
by the terms of this Section 2.2 (and not by the terms of Section 2.1 other than the provisions of Section 2.1(b)(iii)) and such
registration shall preempt the IPO Demand in accordance with Section 2.1(b)(iii) so long as the Company complies with the
provisions of Section 2.1(b)(iii).

      2.3 Registration Procedures. In the case of each registration effected by the Company pursuant to Section 2.1 and each
registration effected by the Company pursuant to Section 2.2 in which any Holder participates, the Company will keep each
participating Holder advised in writing as to the initiation of each registration and as to the completion thereof, and will, subject to
Sections 2.1(g) and 2.2(d), at its expense:

            (a) prepare and file with the Commission pre-effective amendments and post-effective amendments to such registration
statement and such amendments to the prospectus used in connection therewith as may be necessary to maintain the effectiveness of
such registration or as may be required by the rules, regulations or instructions applicable to the registration form utilized by the
Company or by the Securities Act or the Exchange Act or the rules and regulations thereunder necessary to keep such registration
statement effective for up to thirty (30) calendar days or, in the case of a Shelf Registration, three hundred sixty (360) calendar days,
and cause the prospectus as so supplemented to be filed pursuant to Rule 424 under the Securities Act, and to otherwise comply with
the provisions of the Securities Act with respect to the disposition of all Registrable Securities covered by such registration statement
until the earlier of: (i) such 30th or 360th calendar day, as applicable, and (ii) such time as all Registrable Securities covered by such
registration statement have ceased to be Registrable Securities; provided that a reasonable time before filing a registration statement
or prospectus, or any amendments or supplements thereto, the Company will furnish to each participating Holder, the managing
underwriter(s) (if applicable) and their respective counsel for review and comment, copies of all documents proposed to be filed and
will not file any such documents to which any of them reasonably object prior to the filing thereof;

           (b) furnish to each participating Holder such number of copies of such registration statement and of each amendment and
post-effective amendment thereto (in each case including all exhibits), any prospectus or prospectus supplement and such other
documents as such participating
                                                                    -9-
Holder may reasonably request in order to facilitate the disposition of the Registrable Securities by such participating Holder (the
Company hereby consenting to the use of the prospectus or any amendment or supplement thereto in connection with such
disposition);

           (c) register or qualify such Registrable Securities covered by such registration statement under such other securities or blue
sky laws of such jurisdictions as the participating Holders reasonably request, and do any and all other acts and things which may be
reasonably necessary or advisable to enable the participating Holders to consummate the disposition in such jurisdictions of the
Registrable Securities owned by the participating Holders, except that the Company will not for any such purpose be required to
qualify generally to do business as a foreign corporation, to subject itself to taxation or to consent to general service of process in any
such jurisdiction where, but for the requirements of this paragraph, it would not be obligated to be so qualified or to be so subject to
taxation or to general service of process;

            (d) promptly notify each participating Holder at any time (a “Suspension Period”) when a prospectus relating to any such
Registrable Securities is required to be delivered under the Securities Act and the Company has become aware that the prospectus
included in such registration statement, as then in effect, includes an untrue statement of a material fact or omits to state a material
fact required to be stated therein or necessary to make the statements therein not misleading in light of the circumstances then
existing. As promptly thereafter as is practicable using reasonable best efforts, the Company shall prepare and file, and furnish to each
participating Holder a reasonable number of copies of an amendment to such registration statement and/or supplement to the related
prospectus as may be necessary so that, as thereafter delivered to the purchasers of such Registrable Securities, such prospectus shall
not include an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the
statements therein not misleading in light of the circumstances then existing; provided that, in the event that an executive officer of
the Company determines in good faith that the disclosure of such information as would result in such prospectus not including an
untrue statement of material fact or omitting to state a material fact required to be stated therein or necessary to make the statements
therein not misleading would be materially detrimental to the Company, the Company shall be permitted to delay the filing of such
corrective amendment or supplement for a period of time not to exceed one hundred twenty (120) days; and provided further, that the
time during which such registration statement shall remain effective pursuant to Section 2.3(a) (if applicable) will be extended by the
number of calendar days that any Holder is prevented from selling because it is unable to deliver a prospectus as a result of a
Suspension Period;

           (e) notify each participating Holder at any time:

                  (i) when any preliminary prospectus, final prospectus or prospectus supplement or post-effective amendment has
been filed, and, with respect to the registration statement or any post-effective amendment, when the same has become effective;

                   (ii) of any request by the Commission for amendments or supplements to the registration statement or the prospectus
or for additional information;

               (iii) of the receipt by the Company of any written comments to the registration statement or the prospectus from the
Commission (and the Company shall provide such comments and any responses thereto to a participating Holder upon request);

                   (iv) of the issuance by the Commission of any stop order of which the Company or its counsel is aware or should be
aware suspending the effectiveness of the registration statement or any order preventing the use of a related prospectus, or the
initiation or any threats of any proceedings for such purposes; and
                                                                   -10-
                 (v) of the receipt by the Company of any written notification of the suspension of the qualification of any of the
Registrable Securities for sale in any jurisdiction or the initiation or any threats of any proceeding for that purpose;

          (f) otherwise comply with all applicable rules and regulations of the Commission, and make available to each participating
Holder an earnings statement which shall satisfy the provisions of Section 11(a) of the Securities Act; provided that the Company will
be deemed to have complied with this Section 2.3(f) if it has satisfied the provisions of Rule 158 under the Securities Act;

            (g) cause all such Registrable Securities to be listed on any Eligible Exchange on which the Company’s common stock is
then listed, if such Registrable Securities are not already so listed and if such listing is then permitted under the rules of such Eligible
Exchange, and to provide a transfer agent and registrar and a CUSIP number for such Registrable Securities covered by such
registration statement no later than the effective date of such registration statement;

           (h) enter into agreements (including underwriting agreements) and in connection therewith:

                 (i) make such representations and warranties to each participating Holder and the underwriters, if any, in form,
substance and scope as are customarily made by issuers to underwriters in comparable underwritten offerings;

                  (ii) use all reasonable efforts to obtain opinions of counsel to the Company thereof (which counsel and opinions (in
form, scope and substance) will be reasonably satisfactory to the managing underwriter(s), if any, and the participating Holders)
addressed to the participating Holders and the underwriters, if any, covering the matters customarily covered in opinions requested in
comparable underwritten offerings and such other matters as may be reasonably requested by the participating Holders and the
managing underwriter(s), if any;

                 (iii) use all reasonable efforts to obtain “cold comfort” letters and bring-downs thereof from the Company’s
independent certified public accountants addressed to the participating Holders and the underwriters, if any, such letters to be in
customary form and covering matters of the type customarily covered in “cold comfort” letters by independent accountants in
connection with underwritten offerings;

                  (iv) if requested, provide indemnification in accordance with the provisions and procedures of Section 2.4 to all
parties to be indemnified pursuant to said section; and

                 (v) deliver such documents and certificates as may be reasonably requested by the participating Holders and the
managing underwriter(s), if any, to evidence compliance with any customary conditions contained in the underwriting agreement or
other agreement entered into by the Company;

provided, however, that the Company shall not be obligated to take any of the actions under this Section 2.3(h) more than an
aggregate of three times in connection with registrations pursuant to Section 2.1;

            (i) cooperate with each participating Holder and the managing underwriter(s) or underwriters or agents, if any, to facilitate,
to the extent reasonable under the circumstances, the timely preparation and delivery of certificates (not bearing any restrictive
legends) representing the Registrable Securities to be sold under such registration statement, and enable such Registrable Securities to
be in such denominations and registered in such names as the managing underwriter(s) or underwriters or agents, if any, or any
participating Holder may request;
                                                                    -11-
            (j) if reasonably requested by the managing underwriter(s) or underwriters or the participating Holders, incorporate in a
prospectus supplement or post-effective amendment such information as the managing underwriter(s) and the participating Holders
agree should be included therein relating to the plan of distribution with respect to such Registrable Securities, including without
limitation information with respect to the purchase price being paid by such underwriters and with respect to any other terms of the
underwritten offering of the Registrable Securities to be sold in such offering and make all required filings of such prospectus
supplement or post-effective amendment as promptly as practicable upon being notified of the matters to be incorporated in such
prospectus supplement or post-effective amendment;

           (k) provide each participating Holder, any underwriter participating in any disposition pursuant to such registration
statement and any attorney, accountant or other agent retained by such participating Holder or underwriter (collectively, the
“Inspectors”) reasonable access, during normal business hours and upon prior notification, to appropriate officers of the Company
and the Company’s subsidiaries to ask questions and to obtain information reasonably requested by any such Inspector and make
available for inspection all financial and other records and other information, pertinent corporate documents and properties of any of
the Company and its subsidiaries and affiliates as may be reasonably necessary to enable them to exercise their due diligence
responsibilities;

           (l) in the event of the issuance of any stop order of which the Company or its counsel is aware or should be aware
suspending the effectiveness of the registration statement or of any order suspending or preventing the use of any related prospectus
or suspending the qualification of any Registrable Securities included in the registration statement for sale in any jurisdiction, the
Company will use its reasonable best efforts promptly to obtain its withdrawal; and the period for which the registration statement
will be kept effective will be extended by a number of calendar days equal to the number of calendar days between the issuance and
withdrawal of any stop orders;

          (m) only in the event of a registration in connection with an Initial Public Offering, reasonably cooperate to make available
members of senior management of the Company to participate in a customary “road show” with potential purchasers of the
Registrable Securities, which “road show” shall last no longer than seven (7) calendar days and shall not require more than four
(4) members of senior management of the Company to make investor presentations; and

          (n) cause an Entity Conversion prior to effectiveness of the registration statement if such Entity Conversion has not
occurred prior to such time.

     2.4 Indemnification and Contribution.

           (a) To the extent permitted by law, the Company will indemnify and hold harmless each Holder, each of its officers,
directors and partners, legal counsel, and accountants and each person controlling such Holder within the meaning of Section 15 of
the Securities Act, with respect to which registration, qualification, or compliance has been effected pursuant to this Section 2, and
each underwriter, if any, and each of its officers, directors, and each person who controls within the meaning of Section 15 of the
Securities Act any underwriter, against all expenses, claims, losses, damages, and liabilities (or actions, proceedings, or settlements in
respect thereof) arising out of or based on: (i) any untrue statement (or alleged untrue statement) of a material fact contained or
incorporated by reference in any preliminary prospectus, final prospectus, summary prospectus, “issuer free writing prospectus” as
defined in Rule 433 of the Securities Act, offering circular, or other document (including any related registration statement,
notification, or the like) incident to any such registration, qualification, or compliance, (ii) any omission (or alleged omission) to state
therein a material fact required to be stated therein or necessary to make the statements therein not misleading,
                                                                    -12-
or (iii) any violation (or alleged violation) by the Company of the Securities Act, any state securities laws or any rule or regulation
thereunder applicable to the Company and relating to action or inaction required of the Company in connection with any offering
covered by such registration, qualification, or compliance, and the Company will reimburse each such Holder, each of its officers,
directors, partners, legal counsel, and accountants and each person controlling such Holder, each such underwriter, each of its
officers, directors, and each person who controls any such underwriter, for any legal and any other expenses reasonably incurred in
connection with investigating and defending or settling any such claim, loss, damage, liability, or action; provided that the Company
will not be liable in any such case to the extent that any such claim, loss, damage, liability, or action arises out of or is based on any
untrue statement or omission based upon written information furnished to the Company by such Holder, any of such Holder’s
officers, directors, partners, legal counsel or accountants, any person controlling such Holder, such underwriter or any person who
controls any such underwriter and stated to be specifically for use therein; and provided, further, that, the obligations of the Company
contained in this Section 2.4(a) shall not apply to amounts paid in settlement of any such loss, claim, damage, liability, or action if
such settlement is effected without the consent of the Company (which consent shall not be unreasonably withheld).

             (b) To the extent permitted by law, each Holder will, if Registrable Securities held by such Holder are included in the
securities as to which such registration, qualification, or compliance is being effected, indemnify and hold harmless the Company,
each of its directors, officers, partners, legal counsel, and accountants and each underwriter, if any, of the Company’s securities
covered by such a registration statement, each person who controls the Company or such underwriter within the meaning of
Section 15 of the Securities Act, each other such Holder, and each of their officers, directors, and partners, and each person
controlling such Holder, against all claims, losses, damages and liabilities (or actions, proceedings, or settlements in respect thereof)
arising out of or based on: (i) any untrue statement (or alleged untrue statement) of a material fact contained or incorporated by
reference in any such preliminary prospectus, final prospectus, summary prospectus, “issuer free writing prospectus” as defined in
Rule 433 of the Securities Act, offering circular, or other document (including any related registration statement, notification, or the
like) incident to any such registration, qualification, or compliance, or (ii) any omission (or alleged omission) to state therein a
material fact required to be stated therein or necessary to make the statements therein not misleading, and will reimburse the
Company and such Holders, directors, officers, partners, legal counsel, and accountants, persons, underwriters, or control persons for
any legal or any other expenses reasonably incurred in connection with investigating or defending any such claim, loss, damage,
liability, or action, in each case to the extent, but only to the extent, that such untrue statement (or alleged untrue statement) or
omission (or alleged omission) is made in such preliminary prospectus, final prospectus, summary prospectus, issuer free writing
prospectus, offering circular, or other document (including any related registration statement, notification, or the like) in reliance upon
and in conformity with written information furnished to the Company by such Holder and stated to be specifically for use therein;
provided, however, that the obligations of such Holder contained in this Section 2.4(b) shall not apply to amounts paid in settlement
of any such loss, claim, damage, liability or action if such settlement is effected without the consent of such Holder (which consent
shall not be unreasonably withheld); provided, further, that in no event shall any indemnity under this Section 2.4 exceed the net
proceeds from the offering received by such Holder unless such liability arises out of or is based on wilful misconduct by such
Holder.

            (c) Each party entitled to indemnification under this Section 2.4 (the “Indemnified Party”) shall give notice to the party
required to provide indemnification (the “Indemnifying Party”) promptly after such Indemnified Party has actual knowledge of any
claim as to which indemnity may be sought, and shall permit the Indemnifying Party to assume the defense of such claim or any
litigation resulting therefrom; provided that counsel for the Indemnifying Party,
                                                                   -13-
who shall conduct the defense of such claim or any litigation resulting therefrom, shall be approved by the Indemnified Party (whose
approval shall not be unreasonably withheld), and the Indemnified Party may participate in such defense at such party’s expense; and
provided further that the failure of any Indemnified Party to give notice as provided herein shall not relieve the Indemnifying Party of
its obligations under this Section 2.4, to the extent such failure is not prejudicial. No Indemnifying Party, in the defense of any such
claim or litigation, shall, except with the consent of each Indemnified Party, consent to entry of any judgment or enter into any
settlement that does not include as an unconditional term thereof the giving by the claimant or plaintiff to such Indemnified Party of a
release from all liability in respect to such claim or litigation. Each Indemnified Party shall furnish such information regarding itself
or the claim in question as an Indemnifying Party may reasonably request in writing and as shall be reasonably required in connection
with defense of such claim and litigation resulting therefrom.

            (d) If the indemnification provided for in this Section 2.4 is held by a court of competent jurisdiction to be unavailable to
an Indemnified Party with respect to any loss, liability, claim, damage, or expense referred to herein, then the Indemnifying Party, in
lieu of indemnifying such Indemnified Party hereunder, shall contribute to the amount paid or payable by such Indemnified Party as a
result of such loss, liability, claim, damage, or expense in such proportion as is appropriate to reflect the relative fault of the
Indemnifying Party on the one hand and of the Indemnified Party on the other in connection with the statements or omissions that
resulted in such loss, liability, claim, damage, or expense as well as any other relevant equitable considerations provided, that, in no
event shall any contribution by a Holder under this Section 2.4(d) exceed the net proceeds from the offering received by such Holder
unless such liability arises out of or is based on wilful misconduct by such Holder. The relative fault of the Indemnifying Party and of
the Indemnified Party shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a
material fact or the omission to state a material fact relates to information supplied by the Indemnifying Party or by the Indemnified
Party and the parties’ relative intent, knowledge, access to information, and opportunity to correct or prevent such statement or
omission.

           (e) Notwithstanding the foregoing, to the extent that the provisions on indemnification and contribution contained in the
underwriting agreement entered into in connection with the underwritten public offering are in conflict with the foregoing provisions,
the provisions in the underwriting agreement shall control.

     2.5 Information by Holder. Each Holder of Registrable Securities shall furnish to the Company such information regarding such
Holder and the distribution proposed by such Holder as the Company may request in writing and as shall be reasonably required in
connection with any registration, qualification, or compliance referred to in this Section 2.

     2.6 Rule 144 Reporting and Administration.

          (a) If the Company registers a class of securities under Section 12 of the Exchange Act or shall commence to file reports
under Section 13 or 15(d) of the Exchange Act, the Company agrees to use all reasonable efforts to:

                  (i) make and keep “public information” regarding the Company available as such term is defined in Rule 144 under
the Securities Act; and

                 (ii) so long as a Holder owns any Registrable Securities, furnish to such Holder forthwith upon written request a
written statement by the Company as to its compliance with the reporting requirements of the Exchange Act.
                                                                  -14-
           (b) From and after an Initial Public Offering, the Company shall use all reasonable efforts to facilitate and expedite
transfers of Registrable Securities pursuant to Rule 144 under the Securities Act, which efforts shall include timely notice to its
transfer agent to expedite such transfers of Registrable Securities.

      2.7 Market Stand-Off Agreement. Each Holder hereby agrees that such Holder shall not sell or otherwise transfer, or make any
short sale of, any common stock (or other securities) of the Company held by such Holder (other than those included in the
registration) during the one hundred eighty (180) calendar day period following the effective date of the Initial Public Offering;
provided that, all officers and directors of the Company and all holders of at least five percent (5%) of the Company’s outstanding
securities are bound by and have entered into similar agreements. The obligations described in this Section 2.7 shall not apply to a
registration relating solely to employee benefit plans on Form S-l or Form S-8 or similar forms that may be promulgated in the future,
or a registration relating solely to a transaction on Form S-4 or similar forms that may be promulgated in the future.

     2.8 Transfer or Assignment of Registration Rights. The rights to cause the Company to register securities granted to a Holder by
the Company under this Section 2 may be transferred or assigned by a Holder only to a transferee or assignee of Registrable
Securities which is a permitted transferee pursuant to the applicable terms of the Operating Agreement.

      2.9 Limitations on Subsequent Registration Rights. From and after the date of this Agreement, the Company shall not, without
the prior written consent of Google or those Holders holding a majority of the Registrable Securities, enter into any agreement with
any holder or prospective holder of any securities of the Company giving such holder or prospective holder any registration rights the
terms of which are senior to, or which otherwise impair, the registration rights granted to the Holders hereunder.

      2.10 Termination of Registration Rights. The right of any Holder to request registration or inclusion in any registration pursuant
to Sections 2.1 or 2.2 shall terminate on the date that is the earlier of (i) four (4) years after the closing of the Company’s Initial
Public Offering and (ii) the first date following the second anniversary of the closing of the Company’s Initial Public Offering on
which (x) the Conversion Stock of the Company has been listed on an Eligible Exchange for two years and remains so listed and
(y) the Company is eligible to use Form S-3 under the Securities Act.

                                                              Section 3
                                                             Miscellaneous

      3.1 Amendment. Except as expressly provided herein, neither this Agreement nor any term hereof may be amended, waived,
discharged or terminated other than by a written instrument referencing this Agreement and signed by the Company and the Holders
holding a majority of the Registrable Securities. Any such amendment, waiver, discharge or termination effected in accordance with
this paragraph shall be binding upon each Holder and each future holder of all such Registrable Securities.

      3.2 Notices. All notices and other communications required or permitted hereunder shall be in writing and shall be mailed by
registered or certified mail, postage prepaid, sent by facsimile or otherwise delivered by hand or by messenger addressed:
                                                                   -15-
          (a) if to Google, to:
                 1600 Amphitheater Parkway
                 Mountain View, CA 94043
                 Facsimile: (650) 649-1920
                 Attention: David C. Drummond, Senior Vice President, Corporate Development
                 Attention: Donald Harrison, Corporate Counsel, M&A and Securities
                 with a copy to (which shall not constitute notice):
                 Wilson Sonsini Goodrich & Rosati,
                 Professional Corporation
                 650 Page Mill Road
                 Palo Alto, CA 94034
                 Facsimile: (650) 493-6811
                 Attention: David J. Segre

          (b) if to the Company, to:
                 AOL Holdings LLC
                 c/o AOL LLC
                 22000 AOL Way
                 Dulles, VA 20166
                 Facsimile: (703) 265-1105
                 Attention: General Counsel; SVP Mergers and Acquisitions
                 with a copy to (which shall not constitute notice):
                 Cravath, Swaine & Moore LLP
                 825 Eighth Avenue
                 New York, NY 10019
                 Facsimile: (212) 474-3700
                 Attention: Richard Hall

           (c) if to any Holder (other than Google), at such address or facsimile number shown in the Company’s records, or, until
any such person so furnishes an address or facsimile number to the Company, then to and at the address of the last holder of such
shares for which the Company has contact information in its records.

       Each such notice or other communication shall be deemed to have been delivered and given for all purposes (i) on the delivery
date if delivered by confirmed facsimile, (ii) on the delivery date if delivered personally to the party to whom the same is directed,
(iii) one (1) business day after deposit with a commercial overnight carrier, with written verification of receipt, or (iv) five
(5) business days after the mailing date, whether or not actually received, if sent by U.S. mail, return receipt requested, postage and
charges prepaid, or any other means of rapid mail delivery for which a receipt is available addressed to the receiving party as
specified on the signature page of this Agreement. Changes of the
                                                                  -16-
person to receive notices or the place of notification shall be effectuated pursuant to a notice given under this Section 3.2.

      3.3 Governing Law. This Agreement and the rights of the parties hereto shall be interpreted in accordance with the laws of the
State of New York, and all rights and remedies shall be governed by such laws without regard to principles of conflict of laws. To the
fullest extent permitted by applicable law, each of the parties hereto irrevocably agrees that any legal action or proceeding arising out
of this Agreement shall be brought only in the state or United States Federal courts located in the State of New York. Each party
hereto irrevocably consents to the service of process outside the territorial jurisdiction of such courts in any such action or proceeding
by the mailing of such documents by registered United States mail, postage prepaid, to the respective address set forth in Section 3.2.

      Successors and Assigns. Without the prior written consent of the Company and Holders holding a majority of the Registrable
Securities, this Agreement, and any and all rights, duties and obligations hereunder, shall not be assigned, transferred, delegated or
sublicensed by any party hereto to any third party (except as expressly permitted pursuant to Section 2.8). Any attempt by a party to
assign, transfer, delegate or sublicense any rights, duties or obligations that arise under this Agreement, other than as permitted by the
immediately preceding sentence, shall be void. Except as otherwise provided herein, the provisions of this Agreement shall inure to
the benefit of, and be binding upon, the successors, assigns, heirs, executors and administrators of the parties hereto.

     3.4 Entire Agreement. This Agreement and the exhibits hereto and the applicable provisions set forth in the Operating
Agreement constitute the full and entire understanding and agreement between the parties with regard to the subjects hereof. No party
hereto shall be liable or bound to any other party in any manner with regard to the subjects hereof or thereof by any warranties,
representations or covenants except as specifically set forth herein.

      3.5 Delays or Omissions. Except as expressly provided herein, no delay or omission to exercise any right, power or remedy
accruing to any party to this Agreement upon any breach or default of any other party under this Agreement shall impair any such
right, power or remedy of such non-defaulting party, nor shall it be construed to be a waiver of any such breach or default, or an
acquiescence therein, or of or in any similar breach or default thereafter occurring, nor shall any waiver of any single breach or
default be deemed a waiver of any other breach or default theretofore or thereafter occurring. Any waiver, permit, consent or
approval of any kind or character on the part of any party of any breach or default under this Agreement, or any waiver on the part of
any party of any provisions or conditions of this Agreement, must be in writing and shall be effective only to the extent specifically
set forth in such writing. All remedies, either under this Agreement or by law or otherwise afforded to any party to this Agreement,
shall be cumulative and not alternative.

     3.6 Severability. If any provision of this Agreement becomes or is declared by a court of competent jurisdiction to be illegal,
unenforceable or void, portions of such provision, or such provision in its entirety, to the extent necessary, shall be severed from this
Agreement, and such court will replace such illegal, void or unenforceable provision of this Agreement with a valid and enforceable
provision that will achieve, to the extent possible, the same economic, business and other purposes of the illegal, void or
unenforceable provision. The balance of this Agreement shall be enforceable in accordance with its terms.

     3.7 Titles and Subtitles. The titles and subtitles used in this Agreement are used for convenience only and are not to be
considered in construing or interpreting this Agreement. All references in this Agreement to sections, paragraphs and exhibits shall,
unless otherwise provided, refer to sections and paragraphs hereof and exhibits attached hereto.
                                                                   -17-
     3.8 Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be enforceable against
the parties that execute such counterparts, and all of which together shall constitute one instrument.

      3.9 Telecopy Execution and Delivery. A facsimile, telecopy or other reproduction of this Agreement may be executed by one or
more parties hereto and delivered by such party by facsimile or any similar electronic transmission device pursuant to which the
signature of or on behalf of such party can be seen. Such execution and delivery shall be considered valid, binding and effective for
all purposes. At the request of any party hereto, all parties hereto agree to execute and deliver an original of this Agreement as well as
any facsimile, telecopy or other reproduction hereof.

     3.10 No Impairment. The Company agrees that it shall not amend its charter documents (e.g., certificate of formation, operating
agreement, certificate of incorporation, bylaws) or enter into or amend any agreement if such amendment or agreement would
materially impair or otherwise adversely affect the rights of the Holders pursuant to this Agreement.

      3.11 Confidentiality. Each Holder expressly acknowledges that such Holder may receive confidential and proprietary
information relating to the Company, including information relating to the Company’s financial condition and business plans, and that
the disclosure of such confidential information to a third party would cause irreparable injury to the Company. Except with the prior
written consent of the Company, no Holder shall disclose any such information to a third party (other than (i) on a “need to know”
basis to any affiliate or any employee, agent, representative or contractor of such Holder or its affiliates or (ii) in connection with any
disclosure made to a prospective Financial Investor transferee as defined in and in accordance with Section 7.04(b) of that certain
Amended and Restated Limited Liability Company Agreement, by and among the parties hereto and certain additional persons, dated
as of the date hereof (each of whom shall agree to maintain the confidentiality of such information)), and each Holder shall use
reasonable efforts to preserve the confidentiality of such information. The obligations of a Holder under this Section 3.12 shall
survive the termination of this Agreement or cessation of a Holder’s status as a Holder for a period of five years. Information
exchanged between Holders shall be non-confidential unless exchanged pursuant to a separate confidentiality agreement executed
between such Holders. Notwithstanding the foregoing, a Holder shall not be bound by the confidentiality obligations in this
Section 3.12 with respect to any information that is currently or becomes: (a) required to be disclosed by such Holder pursuant to
applicable law, including federal or state securities laws, or a domestic national securities exchange rule (but in each case only to the
extent of such requirement); (b) required to be disclosed in order to protect such Holder’s interest in the Company or enforce Holder’s
rights under this Agreement (but in each case only to the extent of such requirement and only after consultation with the Company);
(c) publicly known or available in the absence of any improper or unlawful action on the part of such Holder; or (d) known or
available to such Holder via legitimate means other than through or on behalf of the Company or the other Holders.


                                             [Remainder of Page Intentionally Left Blank]
                                                                   -18-
       IN WITNESS WHEREOF, the parties hereto have executed this Registration Rights Agreement effective as of the day and year
first above written.

                                                                            TIME WARNER INC.

                                                                            By:

                                                                            Name:

                                                                            Title:


                                                                            “COMPANY”
                                                                            AOL HOLDINGS, LLC

                                                                            By:

                                                                            Name:

                                                                            Title: Chief Executive Officer


                                                                            “GOOGLE”
                                                                            GOOGLE, INC.

                                                                            By:

                                                                            Name:

                                                                            Title:


[SIGNATURE PAGE FOR THE REGISTRATION RIGHTS AGREEMENT]
                                                                        Exhibit 21.01

                                                     Google Inc.,
                                               a Delaware corporation

                                                     Subsidiaries

•   @Last Software, Inc., a Delaware corporation
•   Applied Semantics, Inc., a California corporation
•   dMarc Broadcasting, Inc., a Delaware corporation
•   Google International LLC, a Delaware limited liability company
•   Google LLC, a Delaware limited liability company
•   Ignite Logic, Inc., a Delaware corporation
•   Kaltix Corporation, a Delaware corporation
•   Liquid Acquisition Corp. 2, a Delaware corporation
•   Neotonic Software Corporation, a California corporation
•   Orkut.com, LLC, a Delaware limited liability company
•   Picasa LLC, a Delaware limited liability company
•   Upstartle, LLC, a Delaware limited liability company
•   Urchin Software Corporation, a Delaware corporation
•   Where2 LLC, a Delaware limited liability company
•   ZipDash, Inc., a Delaware corporation
•   Google (Hong Kong) Limited
•   Google Akwan Internet Ltda.
•   Google Australia Pty Limited
•   Google Brasil Internet Ltda
•   Google Canada Corporation
•   Google Denmark ApS
•   Google France SarL
•   Google Germany GmbH
•   Google International GmbH
•   Google Ireland Holdings Limited
•   Google Ireland Limited
•   Google Italy s.r.l.
•   Google Japan Inc.
•   Google Korea, LLC.
•   Google Mexico S. de R.L. de C.V.
•   Google Netherlands B.V.
•   Google Netherlands Holdings B.V.
•   Google Online India Private Limited
•   Google Spain, S.L.
•   Google Sweden AB
•   Google Switzerland GmbH
•   Google UK Limited
•   Reqwireless Inc.
                                                                                                                       Exhibit 23.01

                                       CONSENT OF ERNST & YOUNG LLP,
                               INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We consent to the incorporation by reference in the Registration Statements (Form S-8 Nos. 333-127451, 333-124350, 333-120099,
333-119378, 333-119282 and 333-117715; and Form S-3 No. 333-127648) of our reports dated March 10, 2006, with respect to the
consolidated financial statements and schedule of Google Inc., Google Inc. management’s assessment of the effectiveness of internal
control over financial reporting, and the effectiveness of internal control over financial reporting of Google Inc., included in the
Annual Report (Form 10-K) for the year ended December 31, 2005.

                                                                     /s/   ERNST & YOUNG LLP

San Francisco, California
March 10, 2006
                                                                                                                              Exhibit 31.01

                                                           CERTIFICATION

I, Eric E. Schmidt, certify that:
     1.    I have reviewed this annual report on Form 10-K of Google Inc.;
     2.    Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact
           necessary to make the statements made, in light of the circumstances under which such statements were made, not
           misleading with respect to the period covered by this report;
     3.    Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in
           all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods
           presented in this report;
     4.    The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and
           procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as
           defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
           (a)    Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed
                  under our supervision to ensure that material information relating to the registrant, including its consolidated
                  subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual
                  report is being prepared;
           (b)    Designed such internal control over financial reporting, or caused such internal control over financial reporting to be
                  designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and
                  the preparation of financial statements for external purposes in accordance with generally accepted accounting
                  principles;
           (c)    Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our
                  conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by
                  this report based on such evaluation; and
           (d)    Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during
                  the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that
                  has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial
                  reporting; and
     5.    The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control
           over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or
           persons performing the equivalent functions):
           (a)    All significant deficiencies and material weaknesses in the design or operation of internal control over financial
                  reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and
                  report financial information; and
           (b)    Any fraud, whether or not material, that involves management or other employees who have a significant role in the
                  registrant’s internal control over financial reporting.

Date: March 16, 2006

                                                                                    /S/ ERIC E. S CHMIDT
                                                                                    Eric E. Schmidt
                                                                                    Chairman of the Executive Committee and
                                                                                    Chief Executive Officer
                                                                                                                              Exhibit 31.02

                                                           CERTIFICATION

I, George Reyes, certify that:
     1.    I have reviewed this annual report on Form 10-K of Google Inc.;
     2.    Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a
           material fact necessary to make the statements made, in light of the circumstances under which such statements were made,
           not misleading with respect to the period covered by this report;
     3.    Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in
           all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods
           presented in this report;
     4.    The registrant’s other certifying officers and I are responsible for establishing and maintaining disclosure controls and
           procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as
           defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
           (a)    Designed such disclosure controls and procedures or caused such disclosure controls and procedures to be designed
                  under our supervision, to ensure that material information relating to the registrant, including its consolidated
                  subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual
                  report is being prepared;
           (b)    Designed such internal control over financial reporting, or caused such internal control over financial reporting to be
                  designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and
                  the preparation of financial statements for external purposes in accordance with generally accepted accounting
                  principles;
           (c)    Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our
                  conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by
                  this report based on such evaluation; and
           (d)    Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during
                  the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that
                  has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial
                  reporting; and
     5.    The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control
           over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or
           persons performing the equivalent functions):
           (a)    All significant deficiencies and material weaknesses in the design or operation of internal control over financial
                  reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and
                  report financial information; and
           (c)    Any fraud, whether or not material, that involves management or other employees who have a significant role in the
                  registrant’s internal control over financial reporting.

Date: March 16, 2006

                                                                                    /S/ GEORGE REYES
                                                                                    George Reyes
                                                                                    Chief Financial Officer
                                                                                                                        Exhibit 32.01

                CERTIFICATION OF CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICER

                                                   PURSUANT TO
                                               18 U.S.C. SECTION 1350,
                                             AS ADOPTED PURSUANT TO
                                  SECTION 906 OF THE SARBANES-OXLEY ACT OF 2003

      I, Eric E. Schmidt, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2003, that the Annual Report of Google Inc. on Form 10-K for the fiscal year ended December 31, 2005 fully complies with the
requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that information contained in this Form 10-K
fairly presents in all material respects the financial condition and results of operations of Google Inc.

                                                                     By:    /S/ ERIC E. S CHMIDT
Date: March 16, 2006                                                 Name: Eric E. Schmidt
                                                                     Title: Chairman of the Executive Committee and
                                                                            Chief Executive Officer

      I, George Reyes, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2003, that the Annual Report of Google Inc. on Form 10-K for the fiscal year ended December 31, 2005 fully complies with the
requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that information contained in this Form 10-K
fairly presents in all material respects the financial condition and results of operations of Google Inc.

                                                                     By:    /S/ GEORGE REYES
Date: March 16, 2006                                                 Name: George Reyes
                                                                     Title: Chief Financial Officer

								
To top