Item 1.01. Entry Into a Material Definitive Agreement.
Agreement and Plan of Merger
On December 20, 2018, Glowpoint, Inc., a Delaware corporation (“
Glowpoint
”), entered into an Agreement and Plan of Merger (the “
Merger Agreement
”) with Glowpoint Merger Sub, Inc., a Delaware corporation and a direct wholly-owned subsidiary of Glowpoint (the “
Merger Sub
”), and SharedLabs, Inc., a Delaware corporation (“
SharedLabs
”). The Merger Agreement provides that, among other things and subject to the terms and conditions set forth in the Merger Agreement, (i) Glowpoint will effect a reverse stock split of its shares of common stock, par value $0.0001 per share (“
Common Stock
”), at a ratio to be approved by Glowpoint’s stockholders and board of directors, and which ratio, as set forth in the Merger Agreement, will not be greater than 1-for-30 without SharedLabs’ approval; (ii) the Merger Sub will merge with and into SharedLabs (the “
Merger
”), with SharedLabs surviving as a wholly-owned subsidiary of Glowpoint; and (iii) in connection therewith, each share of capital stock of SharedLabs issued and outstanding immediately prior to the Effective Time (as defined in the Merger Agreement) of the Merger (other than Excluded Shares (as defined in the Merger Agreement)) will be converted into the right to receive shares of Glowpoint’s Common Stock (the “
Merger Consideration
”). Under the terms of the Merger Agreement, the Merger Consideration will consist of an aggregate of 112,802,326 shares of Common Stock (on a pre-reverse stock split basis), subject to certain adjustments based upon the completion by SharedLabs of a private placement of equity securities for at least $5 million of net cash proceeds (the “
SharedLabs Equity Financing
”), the execution of one or more term sheets by SharedLabs with lending institutions for one or more credit facilities aggregating not less than $16 million in borrowing capacity subject to a maximum interest rate (the “
SharedLabs Term Sheet
”), and the working capital of each of Glowpoint and SharedLabs at closing compared to a target working capital for each of Glowpoint and SharedLabs. Warrants to purchase shares of SharedLabs common stock that remain outstanding as of the Effective Time will be converted into warrants to purchase shares of Glowpoint Common Stock, and a portion of the Merger Consideration will be reserved for the future exercise of such warrants. Subject to the adjustments described above, upon consummation of the proposed merger, the stockholders of Glowpoint existing prior to the transaction would collectively own an approximately 34% interest in the combined company and the stockholders of SharedLabs existing prior to the transaction would collectively own an approximately 66% interest in the combined company.
The completion of the Merger is subject to satisfaction or waiver of certain closing conditions, including (i) the receipt of all required approvals of the stockholders of Glowpoint and SharedLabs and any required third-party consents and regulatory clearances, including receipt of required approvals from the NYSE American, (ii) the absence of any governmental order or law that makes consummation of the Merger illegal or otherwise prohibited, (iii) the effectiveness of a Registration Statement on Form S-4 to be filed by Glowpoint pursuant to which the shares of Common Stock to be issued in connection with the Merger are registered with the Securities and Exchange Commission (the “
SEC
”), (iv) the shares of Glowpoint Common Stock to be issued in the merger being approved for listing on the NYSE American stock exchange, (v) the completion of the SharedLabs Equity Financing and the execution by SharedLabs of the SharedLabs Term Sheet, (vi) the satisfaction and termination prior to closing of all contracts or other agreements to which SharedLabs is a party that provide a counterparty with redeemable or contingent common stock or a guaranteed return, (vii) the redemption of each share of issued and outstanding redeemable SharedLabs common stock, (viii) Glowpoint’s redemption, conversion or amendment of the terms of its Series A-2 Preferred Stock, Series B Preferred Stock, and Series C Preferred Stock, and (ix) the receipt by each party of a customary opinion that the Merger will qualify as a “reorganization” within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended. The obligation of each party to consummate the Merger is also conditioned upon the other party’s representations and warranties being true and correct (subject to certain materiality exceptions) and the other party having performed in all material respects its obligations under the Merger Agreement. If SharedLabs fails to meet its obligations under either of its debt or equity financing closing conditions, Glowpoint may elect to proceed to close the merger with a reduction in the shares of its Common Stock to be issued to SharedLabs’ stockholders in the transaction, on terms set forth in the Merger Agreement.
Pursuant to the Merger Agreement, at the Effective Time, (i) each outstanding option to purchase Glowpoint Common Stock granted pursuant to an equity incentive plan of Glowpoint (a “
Glowpoint Option
”) will, to the extent outstanding and unexercised immediately prior thereto, become fully vested and, without any action on the part of any
holder thereof, be automatically canceled in exchange for the right to receive, as soon as reasonably practicable following the Effective Time, the number of shares of Glowpoint Common Stock subject to such Glowpoint Stock Option; (ii) each outstanding share of restricted stock granted pursuant to an equity incentive plan of Glowpoint will, to the extent outstanding and subject to vesting or forfeiture conditions immediately prior thereto, become fully vested or released from such forfeiture conditions and be treated as shares of Glowpoint Common Stock for all purposes; and (iii) each outstanding restricted stock unit granted pursuant to an equity incentive plan of Glowpoint (other than certain restricted stock units excluded in the Merger Agreement) (a “
Glowpoint RSU
”) will, to the extent outstanding and subject to vesting or forfeiture conditions immediately prior thereto, become fully vested or released from such forfeiture conditions and, without any action on the part of any holder thereof, be automatically converted into the right to receive, as soon as reasonably practicable following the Effective Time, the number of shares of Glowpoint Common Stock subject to such Glowpoint RSU.
The Merger Agreement contains customary representations and warranties of Glowpoint and SharedLabs relating to their respective businesses and financial statements and, in the case of Glowpoint, its public filings, in each case generally subject to customary materiality qualifiers. Additionally, the Merger Agreement provides for customary pre-closing covenants of Glowpoint and SharedLabs, including covenants relating to conducting their respective businesses in the ordinary course and to refrain from taking certain actions without the other party’s consent. The Merger Agreement also contains termination rights for each of Glowpoint and SharedLabs, including, among other customary termination provisions, (i) if the consummation of the Merger does not occur on or before May 15, 2019, subject to extensions to not later than December 20, 2019 for the sole purpose of obtaining regulatory clearances, (ii) if the stockholders of Glowpoint or SharedLabs fail to approve the Merger, (iii) subject to certain conditions, if Glowpoint’s board of directors changes its recommendation in favor of the Merger or if Glowpoint wishes to terminate the Merger Agreement to enter into a definitive agreement with respect to a Superior Proposal (as such term is defined in the Merger Agreement), and (iv) if SharedLabs fails to complete the SharedLabs Equity Financing, as applicable. Upon termination of the Merger Agreement under specified circumstances, including the termination by (x) SharedLabs in the event of a change of recommendation by Glowpoint’s board of directors, (y) Glowpoint in order to enter into an agreement providing for a Superior Proposal or (z) SharedLabs in the event of a material breach of certain representations, warranties or covenants of Glowpoint in the Merger Agreement, Glowpoint would be required to reimburse SharedLabs for its transaction expenses up to a cap of $1.0 million and pay to SharedLabs a termination fee equal to $250,000. Upon termination of the Merger Agreement under specified circumstances, including the termination by Glowpoint in the event of a material breach of certain representations, warranties or covenants of SharedLabs in the Merger Agreement, SharedLabs would be required to reimburse Glowpoint for its transaction expenses up to a cap of $1.0 million and pay to Glowpoint a termination fee equal to $250,000. In addition, if the Merger Agreement is terminated because of a failure of SharedLabs to complete the SharedLabs Equity Financing, SharedLabs would be required to reimburse Glowpoint for its transaction expenses up to a cap of $1.0 million. In the event that a terminating party has the right to terminate pursuant to multiple provisions, such terminating party may elect which provision pursuant to which it is terminating the Merger Agreement.
Pursuant to the Merger Agreement, Glowpoint’s board of directors will consist of seven members after the completion of the Merger, of which one member may be appointed by the members of Glowpoint’s board existing prior to closing and the remaining members will be appointed by the members of SharedLabs’ board existing prior to closing.
The Merger Agreement includes a 45-day “go-shop” provision that allows Glowpoint and its advisors to actively solicit and negotiate with other potential acquirers to determine whether they are interested in making a proposal to acquire Glowpoint. Accordingly, Glowpoint will be free to solicit and engage in discussions and negotiations with respect to competing acquisition proposals through February 3, 2019. The Merger Agreement provides that, Glowpoint, during the period from the end of the go-shop period until the Effective Time, and SharedLabs, during the period from the date of the Merger Agreement until the Effective Time, will be subject to certain restrictions on its ability to solicit alternative acquisition proposals from third parties, to provide non-public information to third parties and to engage in discussions with third parties regarding alternative acquisition proposals, subject to customary exceptions. Each of Glowpoint and SharedLabs is required to call a meeting of its stockholders to approve the Merger Agreement, and, subject to certain exceptions, to recommend that its stockholders approve the Merger Agreement.
The board of directors of Glowpoint has unanimously (i) determined that the Merger Agreement and the transactions contemplated thereby are advisable, fair to and in the best interests of Glowpoint and its stockholders, (ii) adopted and approved the Merger Agreement and the transactions contemplated thereby, (iii) directed that the Merger Agreement be submitted to Glowpoint’s stockholders for approval and (iv) resolved to recommend the approval of the Merger Agreement, and the transactions contemplated thereby, by Glowpoint’s stockholders, who will be asked to vote on such approval at a special meeting of the Glowpoint stockholders.
The Merger Agreement has been included to provide investors with information regarding its terms. It is not intended to provide any other factual information about Glowpoint or SharedLabs. The representations, warranties and covenants contained in the Merger Agreement were made only for purposes of the Merger Agreement as of the specific dates therein, were solely for the benefit of the parties to the Merger Agreement, may be subject to limitations agreed upon by the contracting parties, including being qualified by confidential disclosures made for the purposes of allocating contractual risk between the parties to the Merger Agreement instead of establishing these matters as facts, and may be subject to standards of materiality applicable to the contracting parties that differ from those applicable to investors. Investors are not third-party beneficiaries under the Merger Agreement and should not rely on the representations, warranties and covenants or any descriptions thereof as characterizations of the actual state of facts or condition of the parties thereto or any of their respective subsidiaries or affiliates. Moreover, information concerning the subject matter of representations and warranties may change after the date of the Merger Agreement.
The above description of the Merger Agreement and the transactions contemplated thereby is only a summary and does not purport to be complete and is qualified in its entirety by reference to the full text of the Merger Agreement, a copy of which is filed as Exhibit 2.1 to this Current Report on Form 8-K and incorporated herein by reference.
Voting Agreements
On December 20, 2018, in connection with the execution of the Merger Agreement, Glowpoint entered into a voting agreement with each of Jason M. Cory, Mark T. Dinkle and Kishor Khandavalli, each of which is an officer and/or director of SharedLabs, and SharedLabs entered into a voting agreement with each of Patrick J. Lombardi, Kenneth Archer, David Giangano, Peter Holst, James S. Lusk and David Clark, each of which is an officer and/or director of Glowpoint (collectively, the “
Voting Agreements
”). Each Voting Agreement requires, subject to the terms and conditions thereof, that the stockholder subject thereto vote or cause to be voted all Glowpoint or SharedLabs, as applicable, voting capital stock owned by such stockholder in favor of the transactions contemplated by the Merger Agreement. The forms of the Voting Agreements executed by the Glowpoint and SharedLabs stockholders listed above are included as Exhibits B and C, respectively, to the Merger Agreement, which is attached hereto as Exhibit 2.1 and is incorporated herein by reference.
Item 7.01. Regulation FD Disclosure.
On December 21, 2018, Glowpoint issued a press release announcing the execution of the Merger Agreement. A copy of the press release is furnished as Exhibit 99.1 to this Current Report on Form 8-K.
In accordance with General Instruction B.2 of Form 8-K, the information furnished under Item 7.01 of this Current Report on Form 8-K, including Exhibit 99.1, is deemed to be “furnished” and shall not be deemed “filed” for the purpose of Section 18 of the Securities Exchange Act of 1934, as amended (the “
Exchange Act
”), or otherwise subject to the liabilities of that section, nor shall such information and Exhibit be deemed incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Exchange Act.