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Volcano Corporation Prices Offering Of $400 Million 1.75% Convertible Senior Notes Due 2017

SAN DIEGO, Dec. 5, 2012 /PRNewswire/ -- Volcano Corporation (NASDAQ: VOLC) today announced the pricing of its public offering of $400 million aggregate principal amount of 1.75% convertible senior notes due December 1, 2017 registered under the Securities Act of 1933, as amended. Prior to August 7, 2017, the notes will be convertible only upon certain circumstances and during certain periods. Upon conversion, holders will receive up to the principal amount of the notes in cash and any excess conversion value in shares of Volcano's common stock. Volcano granted the underwriters of the offering a 13-day option to purchase up to $60 million aggregate principal amount of additional notes. The offering is expected to close on December 10, 2012, subject to customary closing conditions.

The notes will mature on December 1, 2017, unless previously converted in accordance with their terms prior to such date. The notes will be general senior unsecured obligations of Volcano, and interest will be payable semi-annually in cash at a rate of 1.75% per annum on June  1 and December  1 of each year, beginning June 1, 2013. The initial conversion rate of 30.4612 shares of common stock per $1,000 principal amount of notes is equivalent to a conversion price of approximately $32.83 per share of common stock, which is 31% higher than the closing price of Volcano's common stock on December 4, 2012.  The conversion rate is subject to adjustment in certain events, such as distributions of dividends and stock splits.

Volcano estimates that net proceeds from the offering will be approximately $387.1 million, after deducting the underwriters' discounts and estimated transaction expenses associated with the offering and the convertible note hedge transactions and the warrant transactions payable by the company. Volcano expects to use approximately $31.4 million of the net proceeds from the sale of the notes to pay the cost of the convertible note hedge transactions described below (after such cost is partially offset by the proceeds that Volcano expects to receive from the warrant transactions described below) and may use up to $105 million of the net proceeds from the offering to fund repurchases of up to $90 million of its outstanding 2.875% Convertible Senior Notes due 2015 (the "2015 Notes").  Volcano may also use a portion of the net proceeds to invest in or acquire complementary products, businesses or technologies.  The remaining net proceeds are intended for working capital and general corporate purposes. 

In connection with any repurchases of Volcano's outstanding 2015 Notes, Volcano expects to terminate the convertible note hedge transactions and warrant transactions it entered into at the time of the offering of the 2015 Notes in an amount corresponding to the portion of the 2015 Notes so repurchased, and Volcano expects to receive from its counterparty to these transactions a net payment resulting from such partial termination, the amount of which will depend on many factors, including, without limitation, the market price of Volcano's common stock and overall market conditions at the time these transactions are partially terminated. Volcano has been advised by its counterparty to these transactions that it or its affiliate does not expect to unwind its existing hedge positions with respect to these transactions and will instead use these existing hedge positions in connection with establishing its initial hedge positions with respect to the convertible note hedge transactions and warrant transactions entered into in connection with this offering of notes.

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