Item 1.01 Entry Into a Material Definitive Agreement.
On June 27, 2016, MeetMe, Inc., a Delaware corporation (the “Company”), MeetMe Sub I, Inc., a Delaware corporation and a wholly-owned subsidiary of the Company (“Merger Sub I”), MeetMe Sub II, LLC, a Delaware limited liability company and a wholly-owned subsidiary of the Company (“Merger Sub II”), Skout, Inc., a California corporation (“Skout”), and Shareholder Representative Services LLC, a Colorado limited liability company, solely in its capacity as the Shareholders’ Representative, entered into an Agreement and Plan of Merger (the “Merger Agreement”). Capitalized terms used herein but not otherwise defined have the meaning set forth in the Merger Agreement.
At the closing of the Merger (the “Closing”), which is expected to take place in October 2016, pursuant to the Merger Agreement, and upon the terms and subject to the conditions thereof, Merger Sub I will merge with and into Skout (the “First Merger”), with Skout surviving the Merger as a wholly owned subsidiary of the Company. Following the Merger, Skout will merge with and into Merger Sub II (the “Second Merger” and, together with the First Merger, the “Merger”), with Merger Sub II surviving as a wholly-owned subsidiary of the Company (the “Effective Time”).
Merger Consideration
The Merger Consideration to be paid by the Company on the Closing Date consists of the following, subject to certain adjustments:
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$28.5 million in cash plus
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5,367,232 shares of Company common stock.
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The ratio of Company common stock to cash within the Merger Consideration may be adjusted as of the Closing Date for tax purposes.
Effect on Stock
At the Effective Time, and subject to the terms and conditions of the Merger Agreement:
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each share of Skout’s issued and outstanding Preferred Stock and Common Stock will be automatically converted into the right to receive a per share amount of Merger Consideration (the “Per Share Merger Consideration”);
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each outstanding vested company option with an exercise price less than the Per Share Merger Consideration will be cancelled and converted into the right to receive the Per Share Merger Consideration less the exercise price; and
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each (i) unvested company option or (ii) vested company option with an exercise price greater than the Per Share Merger Consideration, will be cancelled without payment of any consideration.
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Representations and Warranties
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Covenants
Each of the Company and Skout has made customary representations and warranties in the Merger Agreement and has agreed to customary covenants regarding the operation of the business of Skout and its Subsidiaries prior to the Effective Time. The parties have also agreed to use their reasonable best efforts to consummate the Merger.
Closing Conditions
Consummation of the Merger is subject to certain conditions, including, without limitation:
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consent from 95% of Skout’s Outstanding Shares;
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receipt of a permit from the Commissioner of Business Oversight of the State of California (the “Commissioner”) after the completion of the Hearing (as defined below); and
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the Company’s receipt of financing required to fund the Merger Consideration.
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Termination
The Merger Agreement may be terminated prior to the Closing upon the occurrence or non-occurrence of certain events, including the following:
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by the Company or Skout if the Closing does not occur on the date that is the later of (A) December 27, 2016 and (B) the date upon which the Company receives stockholder consent for its entry into the Merger, if required;
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by the Company or Skout if the other party breaches any of its representations and warranties in the Merger Agreement and that breach is not curable or not cured within 15 days of receiving notice of such breach;
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by Skout if the Company’s Stock is no longer listed on NASDAQ;
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by the Company in the event the Company is required by NASDAQ to solicit stockholder consent for its entry into the Merger; and
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automatically 10 business days after either (A) the Company provides notice to Skout that it is required by NASDAQ to solicit stockholder consent for entry into the Merger and has decided not to seek such consent or (B) the Company seeks but fails to receive Stockholder consent for entry into the Merger Agreement.
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The foregoing description of the Merger Agreement is not complete and is qualified in its entirety by reference to the Merger Agreement, which is attached as Exhibit 2.1 to this report and incorporated herein by reference.
Consulting Agreement
Pursuant to the Merger Agreement, the Company entered into Consulting Agreements, dated June 27, 2016, with each of Christian Wiklund, co-founder and Chief Executive Officer of Skout, and Niklas Lindstrom, co-founder and Chief Technology Officer of Skout (the “Consulting Agreements”), whereby the Company will retain them as consultants to perform certain transitional services for the Company beginning on the first business day following the Closing and ending on the earlier of (A) the one year anniversary of the Closing or (B) the termination of the Consulting Agreements pursuant to the terms therein. In exchange for performing for the Company the transitional services outlined in the Consulting Agreements, the Company will pay to each of Wiklund and Lindstrom a fee of $337,000. In addition, on the one year anniversary of the Closing, each of Wiklund and Lindstrom will be eligible to receive a cash bonus of up to $1.5 million payable if certain performance targets and other conditions are met. The effectiveness of the Consulting Agreements is conditioned upon the occurrence of the Closing.
Non-Competition Agreement
Also pursuant to the Merger Agreement, the Company entered into Non-Competition Agreements, dated June 27, 2016, with each of Wiklund and Lindstrom (the “Non-Competition Agreements”), whereby they, beginning at the Effective Time and ending on the 36-month anniversary of the Effective Time (the “Non-Competition Period”), are restricted from engaging in any business operations or activities that compete directly with the Company’s business anywhere in the world. In exchange for agreeing to be bound by the foregoing restrictions for the Non-Competition Period, the Company will pay to each of Wiklund and Lindstrom $1.5 million in cash. The effectiveness of the Non-Competition Agreements is conditioned upon the occurrence of the Closing.
Additional Information
The Company common stock issued as part of the Merger Consideration (the “Merger Securities”) will be issued pursuant to an exemption from the registration requirements of the Securities Act of 1933, as amended (the “Securities Act”). In this regard, the Company and Skout have agreed to pursue approval of the terms of the Merger through a California fairness hearing pursuant to California Corporations Code, including Sections 25121 and 25142 thereof (the “Hearing”) before the Commissioner.
The purpose of the Hearing is to enable the Commissioner to determine the fairness of the terms and conditions of the Merger Agreement and whether the issuance of a permit to offer and sell securities is fair, just and equitable to all Skout security holders affected pursuant to applicable sections of the California Corporations Code. If the Commissioner determines that the terms and conditions are fair, just and equitable and issues a permit to the Company, then the issuance of the Merger Securities to the holders of Skout securities will not be registered under the Securities Act, in reliance upon the exemption from registration provided in Section 3(a)(10) of the Securities Act.