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AOL INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
During the year ended December 31, 2014, the Company borrowed and repaid $105.0 million under the
Credit Facility Agreement, of which $75.0 million outstanding was repaid through use of the proceeds from the
Notes discussed below. As of December 31, 2014, there were no amounts outstanding under the Credit Facility
Agreement and the available borrowing capacity was $250 million.
Convertible Senior Notes
On August 14, 2014, the Company issued $379.5 million aggregate principal amount of 0.75% convertible
senior notes due September 1, 2019 through a private placement. The Company sold the Notes under a purchase
agreement, dated August 13, 2014, with Goldman, Sachs & Co. (“Goldman Sachs”) and J.P. Morgan Securities
LLC as representatives of the several purchasers. The Notes were issued under an indenture, dated as of
August 19, 2014 (the “Indenture”) between the Company and The Bank of New York Mellon, as trustee.
The net proceeds from the Company’s sale of the Notes were approximately $368.6 million, net of issuance
costs of $10.9 million. The Company used $40.0 million of the net proceeds from this offering to repurchase
shares of its common stock from the purchasers of Notes in this offering in privately negotiated transactions
through Goldman Sachs as its agent. These repurchases are part of the 2014 Stock Repurchase Program discussed
in “Note 7”. The Company used $36.6 million of the net proceeds to pay the cost of the convertible note hedge
transactions (after such cost was partially offset by the proceeds to the Company from the sale of warrants
pursuant to the warrant transactions) as described below under “Note Hedge and Warrant Arrangements.” The
Company used $75.0 million of the net proceeds to repay borrowings under the Credit Facility Agreement
discussed above. The Company expects to use the remaining net proceeds from the offering of the Notes for
general corporate purposes including, but not limited to, additional share repurchases, acquisitions or other
strategic transactions and working capital.
Under the Indenture, the Notes bear interest at a rate of 0.75% per year payable semiannually in arrears in
cash on March 1 and September 1 of each year, beginning on March 1, 2015. The Notes will mature on
September 1, 2019, unless earlier converted or repurchased in accordance with their terms. The Notes rank senior
in right of payment to all of the Company’s indebtedness that is expressly subordinated in right of payment to the
Notes, will rank equally in right of payment with all of the Company’s existing and future liabilities that are not
so subordinated, will be effectively junior to any of the Company’s secured indebtedness to the extent of the
value of the assets securing such indebtedness (including amounts outstanding under the Company’s current
credit facility) and will be structurally subordinated to all indebtedness and other liabilities (including trade
payables) of the Company’s subsidiaries.
If the Company undergoes a fundamental change, subject to certain conditions, holders of the Notes may
require the Company to purchase for cash all or a part of their Notes in principal amounts of $1,000 or a multiple
thereof at a repurchase price equal to 100% of the principal amount of Notes to be repurchased, plus accrued and
unpaid interest to, but excluding, the fundamental change repurchase date. In addition, following certain
corporate events that occur prior to maturity, the Company will increase the conversion rate for a holder who
elects to convert its Notes in connection with such a corporate event in certain circumstances. In such event, an
aggregate of up to 2.3 million additional shares of common stock could be issued upon conversions in connection
with such corporate events, subject to adjustment in the same manner as the conversion rate.
The Notes will be convertible into cash, shares of common stock, or a combination of cash and shares of
common stock, at the Company’s election based on an initial conversion rate of 17.4456 shares of common stock
per $1,000 principal amount of Notes (which is equivalent to an initial conversion price of approximately $57.32
per share of common stock) subject to customary adjustments. Holders may convert their Notes at their option at
anytime prior to the close of business on the business day immediately preceding May 1, 2019 upon the
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