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AOL Announces Pricing Of $330 Million Private Offering Of 0.75% Convertible Senior Notes And Pricing Of Private Note Hedge Transactions And Warrant Sales

The holders of the notes will have the ability to require AOL to repurchase all or any portion of their notes for cash in the event of a fundamental change. In such case, the repurchase price would be 100% of the principal amount of the notes being repurchased plus any accrued and unpaid interest.

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. The notes will be convertible at an initial conversion rate of 17.4456 shares of AOL common stock per $1,000 principal amount of the notes, which is equivalent to an initial conversion price of approximately $57.32 per share, which represents a conversion premium of approximately 35% to the last reported sale price of $42.46 per share of AOL common stock on the NYSE on August 13, 2014. In addition, following certain corporate transactions that occur prior to the maturity date, AOL will, in certain circumstances, increase the conversion rate for a holder that elects to convert its notes in connection with such corporate transaction. 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.

In connection with the offering of the notes, AOL has entered into privately negotiated convertible note hedge transactions with certain initial purchasers of the notes or their affiliates (the “hedge counterparties”). The convertible note hedge transactions will cover, subject to customary anti-dilution adjustments, the number of shares of AOL common stock that will initially underlie the notes. AOL has also entered into separate privately negotiated warrant transactions with the hedge counterparties relating to the same number of shares of AOL common stock. The strike price of the warrant transactions will initially be $84.92 per share, which represents a 100% premium to the last reported sale price of AOL common stock on the NYSE on August 13, 2014. In addition, if the initial purchasers exercise their option to purchase additional notes, AOL may sell additional warrants and use a portion of the proceeds from the sale of the additional notes and from the sale of the additional warrants to enter into additional convertible note hedge transactions. The convertible note hedge transactions are expected to reduce the potential dilution with respect to AOL common stock and/or offset cash payments AOL is required to make in excess of the principal amount of converted notes upon conversion of the notes. However, the warrant transactions will have a dilutive effect with respect to AOL common stock to the extent that the market price per share of AOL common stock exceeds the applicable strike price of the warrants on any expiration date of the warrants.

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