Separation Agreement and Release of Claims

Exhibit 10.12

Via Hand Delivery

Revised April 5, 2010

January 14, 2010

Ted Cahall

22000 AOL Way

Dulles, Virginia 20166

Separation Agreement and Release of Claims

Dear Ted:

This letter will serve as confirmation that your employment with AOL Inc. (together with any successors, subsidiaries, merged entities, parent entities and their respective affiliates, “AOL” or “the Company”) is being terminated without cause. This Separation Agreement and Release of Claims (“Separation Agreement”), upon your signature after your Separation Date, will constitute the complete agreement between you and the Company regarding the terms of your separation from employment.

1. Your employment with the Company will terminate without cause at the close of business May 1, 2010 (your “Separation Date”) and January 14, 2010, the original date of this letter, shall be deemed your notification date (your “Notification Date”). Beginning on your Notification Date, you will remain an employee of the Company through your Separation Date (“Notification Period”). You shall continue to receive your base salary and benefits during this Notification Period. It is expected that you will perform your job satisfactorily. The Company reserves the right to change your Separation Date, but will notify you in writing of any change. If you obtain other employment with AOL or with any Time Warner company within thirty days of your Separation Date, you will not be eligible to receive any of the benefits set forth in this Agreement, unless specified herein, and this Agreement shall become null and void.

2. On the next regularly scheduled pay date following your Separation Date, or sooner if local law requires, you will receive a check for all unpaid wages and any accrued, unused vacation or paid time off from January 1, 2010, or longer if required by state law, due through your Separation Date, less applicable deductions and withholdings.

3. Your medical, dental and vision benefits will continue through the end of the month in which your Separation Date occurs. With respect to the Consolidated Omnibus Budget Reconciliation Act (“COBRA”), your COBRA period will begin on the first day of the month following your Separation Date. You will receive separate information regarding your option to continue health benefits under COBRA after your Separation.

Date. Your Company-paid life insurance will continue through the end of the month in which your Separation Date occurs. All other benefits will terminate on your Separation Date.

4. Prior to your departure on your Separation Date, unless otherwise instructed by an authorized Company representative, you must:

5. In addition, pursuant to your December 15, 2006 Agreement and under the terms and conditions as detailed below, the Company will agree to provide you additional payments and benefits, which you acknowledge are payments and benefits to which you are otherwise not entitled, if you sign this Separation Agreement. If you do not sign this Separation Agreement, you will not receive the additional payments and benefits.

6. In exchange for your execution of this Separation Agreement, the Company will provide you the following and the following terms shall apply:

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In addition to the payments under this paragraph 6, if it shall be determined that any event or any payment, vesting, distribution, or transfer by the Company (or any successor, affiliate or by any other person) to you or for your benefit under the terms of this Agreement or otherwise would be subject to or result in the imposition of the excise tax under Section 4999 of the Code (and any regulations issued thereunder, any successor provision, and any similar provision of state or local income tax law) (collectively, the “Excise Tax”), then the Company shall pay to you a lump sum (“Tax Equalization Payment”) in an amount sufficient that, after payment of the federal, state or local income, employment or other required taxes (other than taxes that may be imposed by Section 409A of the Code)(“Regular Taxes”), you shall receive an amount equal to the Excise Tax. Such payment shall be made within 15 days of the date which you remit such Excise Tax. In determining the amount of any Regular Taxes, the maximum applicable, marginal rate of tax for the year in which the Tax Equalization Payment is payable shall be used. The amount of this Tax Equalization Payment shall be determined by the Company’s independent accountants.

7. The payments and other benefits set forth in paragraph 6 are being offered solely in consideration for your execution of this Separation Agreement, including a release of all claims against the Company as set forth in paragraph 8 below. The payments are not an admission of any wrongdoing by the Company.

8. In exchange for the Company’s agreement as stated above, you agree to release and discharge unconditionally the Company and any successors, subsidiaries, affiliates, related entities, predecessors, merged entities and parent entities, and their respective

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officers, directors, stockholders, employees, benefit plan administrators and trustees, agents, attorneys, insurers, representatives, affiliates, successors and assigns, from any and all claims, actions, causes of action, demands, obligations or damages of any kind arising from your employment with the Company and the separation of that employment or otherwise, including the notice of your termination, whether known or unknown to you, which you ever had or now have upon or by reason of any matter, cause or thing, up to and including the day on which you sign this Separation Agreement. The claims you are waiving include, but are not limited to, all claims arising out of or related to any stock options held by you or granted to you by the Company which are scheduled to vest subsequent to your Separation Date; all claims under Title VII of the Civil Rights Act of 1964, as amended; all claims under the Worker Adjustment and Retraining Notification Act (WARN) or similar state statutes; all claims under the Americans with Disabilities Act; all claims under the Age Discrimination in Employment Act; all claims under the National Labor Relations Act; all claims under the Older Workers Benefit Protection Act (“OWBPA”); all claims under the Family and Medical Leave Act, to the extent permitted by law, all claims under the Employee Retirement Income Security Act; all claims under 42 U.S.C. § 1981; all claims under the Sarbanes-Oxley Act of 2002; all claims under state antidiscrimination laws; except in California, all claims for unreimbursed business expenses; all claims under any principle of common law; all claims concerning any right to reinstatement; and all claims for any type of relief from the Company, whether federal, state or local, whether statutory, regulatory or common law, and whether tort, contract or otherwise, to the fullest extent permitted by law. This release of claims does not affect any claim for workers’ compensation benefits, unemployment benefits or other non-waivable administrative claims, your vested rights, if any, in the Company’s 401(k) plan, your rights to exercise any and all Company stock options held by you that are exercisable as of your Separation Date during the applicable period of exercise and in accordance with all other terms of those options and the stock options plans, agreements, and notices under which such options were granted, or your right to enforce the terms of this Separation Agreement.

Notwithstanding the foregoing, in the event any of the Company’s successors, subsidiaries, affiliates, related entities, predecessors, merged entities and parent entities, and their respective officers, directors, stockholders, employees, benefit plan administrators and trustees, agents, attorneys, insurers, representatives, affiliates, successors and assigns bring any claim against you related to your dealings with the Company, you shall have the right to fully defend against such claims and may bring any counterclaims against such individuals or entities, without regard to this release.

9. In exchange for your agreement and covenants contained in this Agreement, the Company agrees to release and discharge you unconditionally, from any and all claims, action, causes of action, demands, obligations or damages of any kind arising out of or relating to your employment with the Company, the separation of that employment, whether known or unknown to them, which they ever had or now have upon or by reason of any matter, cause or thing, up to and including the day on which the Company signs this Separation Agreement. The claims they are waiving include, but are not limited to, all claims under any principle of common law; regulatory or common law, and whether tort, contract or otherwise, to the fullest extent permitted by law. This release of claims does not affect the Company’s right to enforce the terms of this Separation Agreement.

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10. The Company will provide you, within fifteen (15) days of your signature on this Separation Agreement, a full copy of your personnel file. Within seven (7) days of receipt of the file, you will mark any documents that you would like removed from the personnel file. Those documents marked and any copies of those documents will be removed from the personnel file and personnel records, and shall be held under seal by the Legal Department of the Company. The documents held under seal shall not be released absent Court Order, subpoena or other compulsory process. A release signed by you shall not be sufficient to release the documents; however, a letter requesting the release of the documents from your personal counsel shall be sufficient. Notwithstanding anything in this paragraph, the Company shall not be limited in its right to maintain accurate information in its personnel records in order to appropriately respond to any governmental agency or in any governmental or legal proceeding or to provide its benefit vendors with accurate information. In the event the Company believes that any of the information that you have requested be removed and kept under seal is provided to any governmental agency or in any governmental or legal proceeding or provided to its benefit vendors, the Company shall notify you in writing within 10 days of such event and the reasons therefore.

11. You agree to reasonably assist the Company, in connection with any litigation, investigation or other matter involving your tenure as an employee, officer, or director of the Company, including, but not limited to, meetings with Company representatives and counsel and giving testimony in any legal proceeding involving the Company. The Company will pay you reasonable compensation (to be mutually agreed upon at the time of request for your services) for the time you spend on such matters and reimburse you for all reasonable out-of-pocket expenses incurred in rendering such assistance to the Company.

12. The parties understand and agree that the terms of this Separation Agreement are confidential, and you agree not to disclose to others the terms of this Separation Agreement, except as otherwise permitted by law or with the written consent of each other, provided however, that this paragraph 13 does not preclude disclosure to your immediate family or for purposes of securing professional financial, tax or legal services, and for the Company, on a strictly need to know basis, provided further that, prior to making any such disclosure, the parties will inform any such persons that this confidentiality clause is in effect and that they are also bound by it.

13. The parties agree not to affirmatively encourage or assist any person or entity in litigation against each other in any manner. This provision does not prohibit each party’s response to a valid subpoena for documents or testimony or other lawful process; however, such receiving party agrees to provide the Company with prompt notice of any such subpoena or process. The parties further agree that this Separation Agreement is not admissible in any proceeding except one to enforce the terms of this Separation Agreement.

14. You agree not to make any disparaging or untruthful remarks or statements about the Company, its officers, directors, employees or agents. The Company agrees not to cause its officers or senior executives to make any disparaging or untruthful

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remarks or statements about your employment with the Company, in their official or unofficial capacity. Nothing in this Agreement prevents you or the Company from making truthful statements when required by law, court order, subpoena, or the like, to a governmental agency or body.

15. In accordance with the terms of this Agreement, you agree that in the event you are found in a court of law to be in breach of any of your obligations under this Separation Agreement, the Company may be entitled to receive the full amount paid under paragraph 6 above unless otherwise determined by the court and the Company will be entitled to obtain all other remedies provided by law or equity. In the event the Company is found in a court of law to be in breach of its obligations under this Separation Agreement, you will be entitled to appropriate relief as determined by the court.

16. If any term or clause of this Separation Agreement should ever be determined to be unenforceable, you and the Company agree that this will not affect the enforceability of any other term or clause of this Separation Agreement.

17. If you are under age 40 on your Separation Date:

Pursuant to the Older Workers Benefit Protection Act of 1990 (“OWBPA”), you acknowledge and warrant the following: (i) that you are waiving rights and claims for age discrimination under the ADEA and OWBPA, in exchange for the consideration described above, which is not otherwise due to you; (ii) you have consulted with an attorney before signing this Release and Waiver; (iii) you are not waiving rights or claims for age discrimination that may arise after the effective date of this Release and Waiver; (iv) you have been given a period of at least forty-five (45) days in which to consider this Release and Waiver and the waiver of any claims you have or may have under law, including your rights under the ADEA and OWBPA, before signing below; and (v) you understand that you may revoke the waiver of your age discrimination claims under the ADEA and OWBPA within seven (7) days after your execution of this Release and Waiver, and that such waiver shall not become effective or enforceable until seven (7) days after the date on which you execute this Release and Waiver.

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To revoke, you must send a written statement of revocation delivered by certified mail to AOL Inc., Attn: Gillian Pon, 22110 Pacific Blvd, Dulles, VA 20166. The revocation must be received no later than 5:00 p.m. on the seventh day following your execution of this Separation Agreement. If you do not so revoke, the eighth day following your acceptance will be the “effective date” of this Separation Agreement. If you have not returned the executed Separation Agreement within the time permitted, then the Company’s offer will expire by its own terms at such time.

18. This Agreement shall be governed by and construed and enforced in accordance with the substantive laws of the Commonwealth of Virginia applicable to agreements made and to be performed entirely in Virginia.

To accept the Separation Agreement, you must sign below on or after your Separation Date and return one entire copy to AOL Inc., Attn: Gillian Pon, 22110 Pacific Blvd., Dulles, VA 20166. (An extra copy for your files is enclosed.)

By signing this Separation Agreement, I acknowledge that: I have had the opportunity to review this Separation Agreement carefully with legal or other personal advisors of my own choice; I understand that by signing this Separation Agreement I am releasing the Company of all claims against it; I have read this Separation Agreement and understand its terms; I have been given a reasonable period of time to consider its terms and effect and to ask any questions I may have; I voluntarily agree to the terms of this Separation Agreement.

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