Item 1.01. Entry into a Material Definitive Agreement.
On May 6, 2014, AOL Inc., a Delaware corporation ("AOL"), announced that it and
Clarity Acquisition Corporation, a Delaware corporation and a wholly-owned
subsidiary of AOL ("Merger Sub"), Convertro, Inc., a Delaware corporation (the
"Company") and Fortis Advisors LLC, a Delaware limited liability company, had
entered into an Agreement and Plan of Merger (the "Merger Agreement") dated as
of May 6, 2014. Pursuant to the terms and subject to the conditions of the
Merger Agreement, AOL acquired the Company by means of a merger of Merger Sub
with and into the Company, with the Company becoming a wholly-owned subsidiary
of AOL (the "Merger"). The Merger closed on May 6, 2014.
AOL acquired the Company for a purchase price of approximately $101 million,
subject to adjustment for cash held by the Company at closing and indebtedness
and transaction expenses of the Company that remained unpaid as of closing. The
aggregate purchase price was comprised of approximately $89 million in cash
funded at closing plus approximately $2 million in converted stock awards and a
$10 million earn-out, payable over a period of up to 17 months subject to
satisfaction of certain product development milestones. In addition, a two year
$9 million cash retention bonus pool was established for continuing employees.
The aggregate consideration is allocated among holders of Company preferred
stock, Company common stock, and a warrant to purchase Company common stock.
Vesting for Company stock options held by continuing employees that would vest
through the second anniversary of the closing were accelerated and all vested
Company stock options were cashed out. Unvested Company stock options held by
continuing employees were converted into shares of AOL restricted common stock.
The number of shares of AOL restricted common stock was calculated using a
volume weighted average price for the AOL common stock for the 10 consecutive
trading days prior to the second full trading day prior to the closing of the
Merger. Unvested Company stock options held by non-continuing employees were
cancelled without consideration.
Representations, Warranties and Indemnities
The Merger Agreement contains customary representations and warranties, and
indemnification rights of AOL. A portion of the purchase price was deposited
into escrow to secure the Company's preferred stockholders', common
stockholders', optionholders' and warrantholder's indemnification obligations in
respect of any breach by the Company of its representations, warranties,
covenants and certain other matters.
The Board of Directors of AOL and the Company approved the Merger and Merger
Agreement. In addition, certain preferred and common stockholders of the Company
delivered written consents in favor of the transaction, pursuant to which the
Merger and Merger Agreement were approved by a majority of the preferred and
common stockholders of the Company.
will file a copy of the Merger Agreement as an exhibit to its Form 10-Q for
the quarter ended June 30, 2014
. We encourage you to read the Merger Agreement
for a more complete understanding of the transaction. The foregoing description
of the Merger Agreement is not complete and is qualified in its entirety by
reference to the full text of the Merger Agreement.
Item 2.03. Creation of a Direct Financial Obligation or an Obligation under an
Off-Balance Sheet Arrangement of a Registrant.
On May 5, 2014
, and in connection with the Merger described above AOL
under the terms of its $250 million
secured revolving credit
agreement dated as of July 1, 2013
, together with the lenders named therein and
JPMorgan Chase Bank, N.A
., as administrative agent (the "Credit Agreement"). AOL
previously borrowed $30 million
under the terms of the Credit Agreement during
the quarter ended March 31, 2014
for general corporate purposes and the current
aggregate amount of outstanding borrowings under the Credit Agreement is $105
. There remains $145 million
of capacity in the Credit Agreement.$75 million
of the outstanding borrowings under the Credit Agreement are subject
to the ABR (as defined in the Credit Agreement) interest option resulting in an
interest rate of 4.25% per annum (the "ABR Balance"), and the remaining balance
of outstanding borrowings are subject to the Eurodollar (as defined in the
Credit Agreement) interest option resulting in an interest rate of 2.25% per
expects to convert the ABR Balance under the Credit Agreement to the
Eurodollar interest option as soon as practicable.
The Credit Agreement was filed as Exhibit 10.1 to AOL's
Form 10-Q, filed on
November 5, 2013
. For a summary of the material terms of the Credit Agreement,
including covenants and events of default, which are incorporated into this
Item 2.03 by reference, see AOL's
Current Report on Form 8-K filed on July 8,