Get Started for Free Contexxia identifies hard-to-find pieces of information in SEC filings. No more highlighters, no more redlining, no more poring over huge documents. XO GROUP INC. (1062292) 10-Q published on Nov 01, 2018 at 5:09 pm
Reporting Period: Sep 29, 2018
The Merger Agreement provides, among other things and subject to the terms and conditions set forth therein, that Merger Sub will be merged with and into the Company (the “Merger”), with the Company continuing as the surviving corporation and as a wholly owned subsidiary of Parent. The Merger Agreement provides that each share of common stock, par value $0.01 per share, of the Company (“Common Stock”) outstanding immediately prior to the effective time of the Merger (the “Effective Time”) (other than shares of Common Stock owned by the Company in treasury, Parent, Merger Sub, any wholly owned subsidiary of Parent or any subsidiary of the Company, and shares of Common Stock owned by stockholders of the Company who have not voted in favor of the adoption of the Merger Agreement and have properly exercised appraisal rights in accordance with Section 262 of the General Corporation Law of the State of Delaware) will at the Effective Time automatically be cancelled and converted into the right to receive $35.00 in cash, without interest (the “Merger Consideration”), subject to applicable withholding taxes.
Pursuant to the Merger Agreement, as of the Effective Time, each option to acquire shares of Common Stock (“Company Stock Option”) that is outstanding, unexercised and vested immediately prior to the Effective Time will be converted into the right to receive an amount in cash equal to the Merger Consideration in respect of each share of Common Stock underlying such award, less the applicable exercise price. Each unvested Company Stock Option and each compensatory award in respect of a share subject to vesting, repurchase or other lapse restriction (“Company RSA Award”) that is outstanding immediately prior to the Effective Time will be substituted and automatically converted into an award (a “Converted Award”) to receive an amount in cash equal to the product of (a) the total number of shares subject to such Company Stock Option or Company RSA Award, as applicable, immediately prior to the Effective Time and (b) the Merger Consideration (less, in the case of Company Stock Options, the applicable exercise price), which will, subject to certain exceptions, remain subject to the same terms and conditions applicable to the Company Stock Option or Company RSA Award (including vesting terms), except that any payments will be made no later than 30 days following the last day of the quarter in which the Converted Award vests.
The Merger Agreement contains certain termination rights, including, the right of either party to terminate the Merger Agreement if the Merger is not consummated on or before June 24, 2019 (the “Termination Date”), subject to certain limitations and the right of either Parent or the Company to extend the Termination Date for a period of 90 days if, as of such date, any of the closing conditions relating to clearance under the HSR Act, or a legal restraint relating to U.S. antitrust law, are not satisfied. If the Merger Agreement is terminated because the Merger is not consummated on or before the Termination Date (as may be extended) and, at the time of the termination, approval under the HSR Act has not been obtained or there is an injunction or legal prohibition against the Merger under the HSR Act, or if the Merger Agreement is terminated because an injunction or legal prohibition against the Merger under the HSR Act becomes final and non-appealable, Parent must pay the Company a termination fee of $30 million.
retention program). 50% of each retention award will be earned on the closing date and will be payable within 30 days following the closing date and 50% of each retention award will be earned and payable on the first anniversary of the closing date, subject to continued employment through the applicable payment date. If a participant is terminated without cause (or, for executive officers, if the participant resigns with good reason), dies or becomes disabled, subject to the participant’s execution of a release of claims, any unvested portion of the retention award will become earned and payable upon such termination. During the three and nine months ended September 30, 2018, no executive officer has been granted a retention award under this program.
On September 15, 2017, the Company acquired the assets of Veri, Inc., a photo-sharing app focused on weddings and events, in exchange for consideration of $3.5 million, of which approximately $3.2 million was paid in cash during the quarter. The remaining approximately $0.3 million was retained by the Company as a holdback and accrued as a liability to settle indemnification claims made by the Company and its affiliates, should such claims arise. The holdback is included in “Accounts payable and accrued expenses” and “Other liabilities” on the Consolidated Balance Sheets as of September 30, 2018 and December 31, 2017, respectively. The holdback period is 18 months, and the balance of the accrual will either be used to settle indemnification claims or be released to the seller in March 2019. An allocation of purchase price was completed as of December 31, 2017 which resulted in a technology value in the amount of $0.7 million based upon its fair value assessed as of the acquisition date. The technology value is included in “Intangible assets, net” on the Consolidated Balance Sheets as of September 30, 2018 and December 31, 2017. The excess of the purchase price over the fair value of the assets acquired, of approximately $2.8 million, was allocated to goodwill and is expected to be deductible for tax purposes. The goodwill is primarily attributable to the synergies expected to arise after the acquisition.
The announcement and pendency of the Merger could cause disruptions in our business, which may have an adverse effect on our business, financial condition and results of operations, and the market price of our common stock. These risks to our business include the following, all of which could be exacerbated by a delay in the completion of the Merger: (i) the effect of restrictions placed on us and our subsidiaries’ ability to operate our businesses under the Merger Agreement, including our ability to pursue alternatives to the proposed transaction; (ii) the risk of disruption resulting from the proposed transaction, including the diversion of our management’s attention from ongoing business operations; (iii) the effect of the announcement of the proposed transaction on our ability to retain and motivate key personnel and maintain relationships with our customers, partners, suppliers, advertisers, distributors, vendors and others with whom we do business on our operating results and
businesses; (iv) the occurrence of any event, change or other circumstance that could give rise to the termination of the Merger Agreement; and (v) the effect of any legal proceedings instituted against us related to the Merger.