ITEM
1.01 ENTRY INTO A MATERIAL DEFINITIVE AGREEMENT.
Merger
Agreement
On
February 11, 2020, Qumu Corporation, a Minnesota corporation (“Qumu”), Synacor, Inc., a Delaware corporation
(“Synacor”), and Quantum Merger Sub I, Inc., a Minnesota corporation and a direct, wholly owned subsidiary
of Synacor (“Merger Sub”), entered into an Agreement and Plan of Merger and Reorganization (the “Merger
Agreement”) for a proposed “merger of equals” transaction, pursuant to which, and subject to the
conditions in the Merger Agreement, Merger Sub will merge with and into Qumu (the “Merger”), with Qumu surviving
the Merger as a wholly owned subsidiary of Synacor. The respective boards of directors of Qumu and Synacor have each unanimously
approved the Merger Agreement. Capitalized terms used but not otherwise defined have the meanings ascribed to such terms in the
Merger Agreement.
Qumu
and Synacor intend, for U.S. federal income tax purposes, that the Merger will qualify as a “reorganization” within
the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended, and the Merger Agreement was adopted as a plan
of reorganization within the meaning of Treasury Regulations Section 1.368-2(g).
Merger
Consideration
Subject
to the terms and conditions set forth in the Merger Agreement, at the effective time of the Merger (the “Effective Time”),
by virtue of the Merger and without any action on the part of Synacor, Qumu, Merger Sub or any holder of any of the securities
of Synacor, Qumu or Merger Sub, each share of common stock, par value $0.01 per share, of Qumu (“Qumu Common Stock”)
issued and outstanding immediately prior to the Effective Time (other than the shares that are owned by Qumu, Synacor or Merger
Sub) will be converted into the right to receive 1.61 (the “Exchange Ratio”) newly issued shares of common
stock, par value $0.01 per share, of Synacor (the “Synacor Common Stock”).
No
fractional shares of Synacor Common Stock will be issued in the Merger, and Qumu shareholders will receive cash in lieu of fractional
shares, as specified in the Merger Agreement. Shares of Synacor Common Stock will be listed on The Nasdaq Global Market.
Immediately
following the completion of the Merger, the Exchange Ratio is expected to result in Synacor stockholders holding approximately
64.4% of the outstanding shares of Synacor Common Stock and former Qumu shareholders holding approximately 35.6% of the outstanding
shares of Synacor Common Stock.
Treatment
of Outstanding Qumu Equity Awards
Immediately
prior to the Effective Time, each currently outstanding Qumu restricted stock award, restricted stock unit and stock option (the
“Qumu Stock Awards”) will become fully vested and any restrictions or risk of forfeiture will lapse. Any Qumu
Common Stock required to be issued to the holder of such Qumu Stock Award following such acceleration of vesting or lapse of restrictions
shall be deemed to be issued and outstanding as of immediately prior to the Effective Time and converted into the right to receive
Synacor Common Stock at the Exchange Ratio.
Subject
to the terms and conditions set forth in the Merger Agreement, at the Effective Time, each currently outstanding Qumu stock option
will terminate and be cancelled, with the holder thereof becoming entitled to receive, on the date on which the Effective Time
occurs, an amount in cash, without interest and subject to applicable withholding, equal to: (i) the excess, if any, of (A) the
last reported sales price on Nasdaq of one share of Qumu Common Stock on the Closing Date over (B) the exercise price per share
of Qumu Common Stock subject to such Qumu stock option multiplied by (ii) the number of shares of Qumu Common Stock subject to
such Qumu stock option at the Effective Time. However, if the exercise price of such Qumu stock option is equal to or greater
than the last reported sales price on Nasdaq on such date, such Qumu stock option will terminate and be cancelled without
any consideration being payable in respect thereof.
At
the Effective Time, by virtue of the Merger and without necessity of any further action, each Qumu equity award that is granted
on or after February 11, 2020, is held by a then current service provider of Qumu and is outstanding immediately prior to the
Effective Time will be assumed by Synacor as specified in the Merger Agreement.
Governance
The
Merger Agreement provides that, upon the closing of the Merger, the board of directors of Synacor (the “New Synacor Board”)
will initially be set at seven authorized directors. Two directors will come from Qumu’s existing board of directors and
four directors, including Synacor Chief Executive Officer Himesh Bhise, will come from Synacor’s existing board of directors.
It is anticipated that one additional director with software experience relevant to the operations of Synacor will be selected
by the New Synacor Board, which such director will be subject to the approval of the New Synacor Board including at least one
of the two directors from Qumu. The identities of the directors to serve on the New Synacor Board, other than Mr. Bhise, have
not been finalized as of the date of this report.
In
addition, upon the closing of the Merger, Synacor’s Chief Executive Officer, Himesh Bhise, will serve as Chief Executive
Officer of the combined company; Qumu’s Chief Executive Officer, Vern Hanzlik, will serve as Chief Revenue Officer, Software
& Services of the combined company; and Synacor’s Chief Financial Officer, Tim Heasley, will serve as Chief Financial
Officer of the combined company.
Conditions
to the Merger
The
consummation of the Merger is subject to customary closing conditions, including (i) the absence of any adverse law or order promulgated,
entered, enforced, enacted or issued by any governmental entity that makes illegal or prohibits the Merger, (ii) the Securities
and Exchange Commission (the “SEC”) shall have declared effective the Form S-4 Registration Statement of Synacor
which will contain the joint proxy statement/prospectus of the parties in connection with the Merger, (iii) the approval of the
Merger Agreement by the affirmative vote of the holders of a majority of the outstanding shares of Qumu Common Stock entitled
to vote thereon, (iv) the approval of the issuance of shares of Synacor Common Stock pursuant to the Merger Agreement by the affirmative
vote of a majority of votes present or represented by proxy at Synacor’s stockholder meeting in connection with the Merger,
(v) the authorization for listing on The Nasdaq Stock Market, subject to official notice of issuance, of the shares of Synacor
Common Stock to be issued in the Merger, (vi) the receipt of certain opinions from legal counsel regarding the intended tax treatment
of the Merger, (vii) subject to certain materiality exceptions, the accuracy of certain representations and warranties of each
of Qumu and Synacor contained in the Merger Agreement and the compliance by each party with the covenants contained in the Merger
Agreement, and (viii) the absence of a material adverse effect with respect to each of Qumu and Synacor.
The
parties expect the Merger will be completed in the second quarter of calendar year 2020.
Certain
Other Terms of the Merger Agreement
Qumu,
Synacor and Merger Sub each have made certain representations, warranties and covenants in the Merger Agreement, including, among
other things, covenants by Qumu and Synacor to conduct their businesses in the ordinary course during the period between the execution
of the Merger Agreement and consummation of the Merger, to refrain from taking certain actions specified in the Merger Agreement,
and to use reasonable best efforts to cause the conditions to the Merger to be satisfied.
Neither
Qumu nor Synacor is permitted to solicit, initiate, induce or knowingly encourage or facilitate, any acquisition proposal from
third parties or to engage in discussions or negotiations with third parties regarding any acquisition proposal. Notwithstanding
this limitation, prior to a party’s requisite shareholder approval, such party may under certain circumstances provide information
to and participate in discussions or negotiations with third parties with respect to an acquisition proposal that its board of
directors has determined in good faith constitutes or is reasonably likely to lead to a superior proposal. Each party’s
board of directors may change its recommendation to its shareholders (subject to the other party’s right to terminate the
Merger Agreement following such change in recommendation) in response to a superior proposal or an intervening event if the board
of directors determines in good faith that the failure to take such action would reasonably be expected to be inconsistent with
the directors’ fiduciary duties under the Minnesota Business Corporation Act or the General Corporation Law of the State
of Delaware, as applicable.
The
Merger Agreement provides for certain termination rights for both Qumu and Synacor. Upon termination of the Merger Agreement under
certain specified circumstances, Qumu or Synacor may be required to pay the other party a termination fee of $2.0 million.
The
foregoing summary does not purport to be a complete description and is qualified in its entirety by reference to the full text
of the Merger Agreement, which is attached hereto as Exhibit 2.1 and is incorporated herein by reference.
The
Merger Agreement has been attached as an exhibit to this Current Report on Form 8-K in order to provide investors and security
holders with information regarding its terms. It is not intended to provide any other factual information about Qumu, Synacor
or their respective subsidiaries and affiliates or to modify or supplement any factual disclosures about Qumu, Synacor or their
respective subsidiaries and affiliates in its public reports filed with the SEC. The Merger Agreement includes representations,
warranties and covenants of Qumu and Synacor that were made solely for the purposes of the Merger Agreement and of specific dates,
were solely for the benefits of the parties thereto, and which may be subject to important qualifications and limitations agreed
to by Qumu and Synacor in connection with the negotiated terms of the Merger Agreement. Moreover, some of those representations
and warranties may not be accurate or complete as of any specified date, may be subject to certain disclosures between the parties
and a contractual standard of materiality different from those generally applicable to Qumu’s or Synacor’s SEC filings.
In addition, the representations and warranties were made for purposes of allocating risk among the parties to the Merger Agreement
and should not be relied upon as establishing factual matters.
Support
Agreements
Simultaneously
with the execution and delivery of the Merger Agreement, certain key shareholders of Qumu
(Harbert Discovery Fund LP, Vern Hanzlik, David G. Ristow and Robert F. Olson), have entered into support agreements
with Synacor (the “Qumu Support Agreements”), pursuant to which such shareholders have agreed, among other
things, to vote their respective shares of Qumu Common Stock in favor of the approval of the Merger Agreement, against any alternative
proposal and against any action or agreement that would reasonably be expected to impede, interfere with, postpone, prevent or
delay the consummation of, the transactions contemplated by the Merger Agreement.
The
persons signing the Qumu Support Agreements currently beneficially own an aggregate of approximately 12% of the outstanding Qumu
Common Stock. The foregoing description of the Qumu Support Agreements does not purport to be complete and is qualified in its
entirety by reference to the form of the Qumu Support Agreement, which is filed herewith as Exhibit 10.1 and is incorporated by
reference herein.
Simultaneously
with the execution and delivery of the Merger Agreement, certain key shareholders of Synacor
(consisting of funds associated with Pacven Walden, Advantage Capital and 180 Degree) have entered into support agreements
with Qumu (the “Synacor Support Agreements”), pursuant to which such shareholders have agreed, among other
things, to vote their respective shares of Synacor Common Stock in favor of the approval of the issuance of shares of Synacor
Common Stock pursuant to the Merger Agreement, against any alternative proposal and against any action or agreement that would
reasonably be expected to impede, interfere with, postpone, prevent or delay the consummation of, the transactions contemplated
by the Merger Agreement.
The
persons signing the Synacor Support Agreements currently beneficially own an aggregate of approximately 24% of the outstanding
Synacor Common Stock. The foregoing description of the Synacor Support Agreements does not purport to be complete and is qualified
in its entirety by reference to the form of Synacor Support Agreement, which is filed herewith as Exhibit 10.2 and is incorporated
by reference herein.