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AOL Announces Proposed Private Offering Of $300 Million Of Convertible Senior Notes

AOL Inc. (NYSE: AOL) announced today that it intends to offer, subject to market and other conditions, $300 million aggregate principal amount of Convertible Senior Notes due 2019 (the “notes”) in a private offering. The notes will be offered only to qualified institutional buyers in reliance on Rule 144A under the Securities Act of 1933, as amended (the “Securities Act”). AOL also expects to grant to the initial purchasers of the notes a 30-day option to purchase up to an additional $45 million aggregate principal amount of notes.

AOL expects to use the net proceeds from the offering of the notes to fund the net cost of convertible note hedge transactions and warrant transactions with the hedge counterparties, as described below. AOL also intends to use up to $50 million of the net proceeds of the offering to repurchase shares of its common stock from purchasers of the notes in privately negotiated transactions. These repurchases are part of AOL’s previously announced $150 million share repurchase program. AOL expects the purchase price per share of the common stock repurchased in such transactions to equal the closing price per share of AOL common stock on the date of the pricing of the offering. In addition, following the offering AOL may repurchase additional shares of its common stock pursuant to its stock repurchase program. These repurchases, as well as repurchases from purchasers of notes in the offering, could increase, or prevent a decrease in, the market price of AOL common stock or the notes. AOL expects to use the remainder of the net proceeds for general corporate purposes, which may include share repurchases, acquisitions or other strategic transactions and working capital.

The notes will mature on September 1, 2019, unless earlier repurchased or converted. Prior to May 1, 2019, the notes will be convertible only upon the occurrence of certain events and during certain periods, and thereafter, at any time until the close of business on the second scheduled trading day preceding the maturity date of the notes. Upon any conversion, AOL’s conversion obligation will be settled in cash, shares of AOL common stock, or a combination of cash and shares of AOL common stock, at AOL’s election. The interest rate on, the initial conversion rate of, and other terms of the notes will be determined by negotiations between AOL and the initial purchasers of the notes.

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