UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 8-K
CURRENT REPORT PURSUANT TO
SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report: November 1, 2016
(Date of earliest event reported)
Glu Mobile Inc.
(Exact Name of Registrant as Specified in Its Charter)
Delaware
(State or Other Jurisdiction of Incorporation)
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001-33368 |
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91-2143667 |
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(Commission File Number) |
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(IRS Employer Identification No.) |
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500 Howard Street, Suite 300
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94105 |
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(Address of Principal Executive Offices) |
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(Zip Code) |
(415) 800-6100
(Registrant’s Telephone Number, Including Area Code)
Not Applicable
(Former name or former address, if changed since last report.)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Item 1.01 Entry into a Material Definitive Agreement.
On November 2, 2016, Glu Mobile Inc. (“ Glu ”), through Comet Transfer Sub LLC, a Delaware limited liability company and a wholly owned subsidiary of Glu (“ Sub ”), acquired shares (the “ Shares ”) representing approximately 80.6% of the issued and outstanding voting power of Crowdstar Inc., a Delaware corporation (“ Crowdstar ”), pursuant to a Stock Transfer Agreement (the “ Transfer Agreement ”) by and among Glu, Sub, Time Warner Inc. (“ Time ”), Intel Capital Corporation (“ Intel ”) and certain other stockholders (the “ Participating Holders ”) of Crowdstar (the “ Acquisition ”). Crowdstar, which is based in Burlingame, California, employs approximately 90 people and develops fashion and home decor genre games for mobile devices.
Pursuant to the terms of the Transfer Agreement, Glu, through Sub, paid approximately $40.8 million in cash to the Participating Holders in exchange for the Shares, which amount was based on an enterprise value for Crowdstar of approximately $45.5 million. Following the Acquisition, Sub exercised its right, as the holder of a majority of each of the preferred stock and the capital stock of Crowdstar, to appoint each of the five members of the board of directors of Crowdstar. In addition, certain drag-along provisions (the “ Drag-Along ”) specified in a voting agreement by and among Crowdstar, Time, Intel, and certain other stockholders of Crowdstar were triggered. Pursuant to the terms of the Drag-Along, certain other stockholders of Crowdstar (the “ Drag Holders ”) are required to tender their Crowdstar capital stock to Sub on the same terms as the Participating Holders. Glu expects to pay approximately $4.5 million in cash to the Drag Holders in connection with the Drag-Along, and expects to own approximately 98.5% of the issued and outstanding voting power of Crowdstar following full implementation of the Drag-Along. Glu intends to acquire 100% of the outstanding voting power of Crowdstar as soon as practical once the Drag-Along is complete.
The above description of the Transfer Agreement does not purport to be complete and is qualified in its entirety by reference to the Transfer Agreement, which is filed as Exhibit 2.01 to this report and incorporated herein by reference.
The inclusion of the Transfer Agreement with this report is not intended to provide investors with factual information other than the fact of the terms and conditions of the Transfer Agreement. The representations and warranties included in the Transfer Agreement were made by the parties for the purposes of allocating contractual risk among them and not as a means of establishing facts (and as such are subject to different standards of materiality). Only the parties to the Transfer Agreement and specified third-party beneficiaries have a right to enforce the Transfer Agreement or to rely on the representations it contains.
Item 2.01 Completion of Acquisition or Disposition of Assets.
The information set forth above under Item 1.01 is hereby incorporated by reference into this Item 2.01.
Item 2.02 Results of Operations and Financial Condition.
On November 3, 2016, Glu issued a press release announcing its financial results for the third quarter ended September 30, 2016. A copy of the press release is attached as Exhibit 99.01 to this report.
The information in this Item 2.02, including Exhibit 99.01 to this report, shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “ Exchange Act ”), or otherwise subject to the liabilities of that section or Sections 11 and 12(a)(2) of the Securities Act of 1933, as amended (the “ Securities Act ”). The information contained in this Item 2.02 and in the accompanying Exhibit 99.01 shall not be incorporated by reference into any registration statement or other document filed by Glu with the Securities and Exchange Commission, whether made before or after the date of this report, regardless of any general incorporation language in such filing (or any reference to this Current Report on Form 8-K generally), except as shall be expressly set forth by specific reference in such filing.
Item 5.02 Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.
On November 1, 2016, Niccolo de Masi, the current Chief Executive Officer of Glu, was appointed by the Glu Board of Directors (the “ Board ”) to serve as Glu’s Executive Chairman. In connection with his appointment as Executive Chairman, Mr. de Masi resigned from the positions of President and Chief Executive Officer of Glu though he will continue to serve as Glu’s principal executive officer through November 10, 2016. The Board also approved on November 1, 2016 the appointment of Glu’s President of Global Studios, Nick Earl, to serve as Glu’s President and Chief Executive Officer, effective November 10, 2016.
Mr. Earl has served as Glu’s President of Global Studios since November 2015. Mr. de Masi has served as Glu’s President and Chief Executive Officer and as one of Glu’s directors since January 2010. Additional biographical information about Messrs. Earl and de Masi is available in Glu’s definitive proxy statement filed with the Securities and Exchange Commission on April 22, 2016 (the “ Proxy Statement ”).
The compensation terms of Mr. Earl’s appointment have not yet been finalized. Glu will file an amendment to this Current Report on Form 8-K when such terms have been finalized.
In connection with his appointment as Executive Chairman, Glu and Mr. de Masi entered into an Executive Chairman Agreement (the “ Agreement ”) which has a three-year term. While serving as Executive Chairman pursuant to the Agreement, Mr. de Masi will receive a salary based on an annual amount of $375,000, applicable to any such period Mr. de Masi serves solely as the Executive Chairman or otherwise serves as a member of the Board, except that to the extent that Mr. de Masi also serves as Glu’s “principal executive officer,” he will be paid additional salary based on an annual rate of $75,000 for the periods in which he also serves as the principal executive officer. These amounts will be payable in accordance with Glu’s normal payroll practices. Mr. de Masi will no longer be eligible for any annual cash incentive bonus.
Mr. de Masi’s outstanding options and restricted stock units (“ RSUs ”) will continue to vest in accordance with their applicable vesting schedules. Provided that Mr. de Masi is not otherwise employed by another company or entity, he will continue to be eligible to participate in the employee benefit plans currently and hereafter maintained by Glu of general applicability to other executive officers pursuant to the eligibility requirements, terms and conditions of such plans, but in all cases on terms no less favorable than provided to any other officer of Glu. However, Mr. de Masi will not be eligible to receive future grants of Glu equity awards or severance benefit, including under any plan or program generally available to Glu’s executive officers. Mr. de Masi will continue to be covered by the indemnification agreement entered into between him and Glu entered into on October 24, 2013.
In addition, shares of Glu common stock held as of the effective date of the agreement by Mr. de Masi (including shares subject to outstanding options and RSUs) are subject to sale and transfer restrictions during the term of the Agreement with such restrictions lapsing over time and upon certain events (as described more fully in the Agreement).
In addition, if Mr. de Masi’s employment is terminated other than for cause, death or disability, prior to the third anniversary of the Agreement, or if he voluntarily resigns at the request of the Board, and provided he executes a general release in favor of Glu, he will be entitled to the following benefits under the terms of the Agreement:
· Any then unearned portion of his salary, payable based on an annual amount of $375,000, had he continued to provide services Glu through the third anniversary of the Agreement, payable in a lump sum.
· In addition to the shares subject to options and RSUs held by Mr. de Masi that are vested and exercisable in accordance with their terms prior to Mr. de Masi’s termination, each other unexpired award held by Mr. de Masi shall become fully vested and exercisable through all vesting tranches that would otherwise occur prior to November 16, 2019.
· Subject to Mr. de Masi’s eligibility for and timely and proper election of coverage under the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended (“ COBRA ”), and any comparable state law providing for continuation of group health benefits, Mr. de Masi’s then effective group health benefits for Executive and Executive’s COBRA eligible dependents shall be continued at Glu’s cost for all premiums under COBRA for the balance of the period until the third anniversary of the Agreement.
There is no arrangement or understanding with any person pursuant to which Mr. Earl was appointed as Glu’s President and Chief Executive Officer or Mr. de Masi as Glu’s Executive Chairman, and there are no family relationships between Messrs. Earl and de Masi and any director or executive officer of Glu. Additionally, other than the indemnification agreements entered into with all of Glu’s directors and executive officers, and the compensation arrangements that are described in the Proxy Statement under the headings “Compensation Discussion and Analysis,” “Executive Compensation” and “Director Compensation,” since January 1, 2015, there are no transactions or series of similar transactions that would be required to be reported under Item 404(a) of Regulation S-K.
The foregoing description of the Agreement does not purport to be complete and is qualified in its entirety by reference to the full text of the Agreement, which is filed as Exhibit 10.01 to this Current Report on Form 8-K and incorporated herein by reference.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits.
2.01 Stock Transfer Agreement by and among Glu, Time, Intel and certain other stockholders of Crowdstar, dated November 2, 2016.
10.01 Executive Chairman Agreement by and between Glu and Niccolo de Masi, dated November 2, 2016.
99.01 Press release issued by Glu regarding its financial results for the third quarter ended September 30, 2016, dated November 3, 2016.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
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Glu Mobile Inc. |
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Date: November 3, 2016 |
By: |
/s/ Scott J. Leichtner |
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Name: |
Scott J. Leichtner |
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Title: |
Vice President and General Counsel |
Exhibit 2.01
Execution Version
STOCK TRANSFER AGREEMENT
This Stock Transfer Agreement (this “ Agreement ”) is made and entered into as of November 2, 2016 (the “ Agreement Date ”) by and among Glu Mobile Inc. (“ Glu ”), Comet Transfer Sub LLC, a Delaware limited liability company and wholly owned subsidiary of Glu (“ Purchaser ” and, together with Glu, “ Acquiror ”)), Time Warner Inc., a Delaware corporation (“ TWI ”), Intel Capital Corporation, a Delaware corporation (“ ICC ”), Middlefield Ventures, Inc., a Delaware corporation (“ MVI ”), Aviv Nevo, an individual resident of California (“ AN ” and, together with TWI, ICC, and MVI, the “ Initial Participating Holders ”), the other parties subject to the Voting Agreement (as defined below), including the drag-along right set forth in Section 2 thereof (the “ Drag Holders ”), and the other holders of capital stock of Crowdstar Inc. (the “ Company ”) who may from time to time execute counterpart signature pages hereto in connection with one or more Additional Closings (the “ Other Participating Holders ”, together with the Initial Participating Holders, the “ Participating Holders ” and, collectively with the Initial Participating Holders and the Drag Holders, the “ Sellers ”). Certain capitalized terms used herein or in the Exhibits and Schedules hereto are defined in Schedule A or Schedule B hereto.
RECITALS
A. WHEREAS, the Initial Participating Holders own shares of capital stock of the Company (the “ Company Stock ”) representing in excess of 60% of the issued and outstanding preferred stock of the Company and a majority of the voting power of the Company Stock.
B. WHEREAS, upon the terms and conditions set forth in this Agreement, the Initial Participating Holders propose to sell, and Glu proposes to cause Purchaser to purchase, all shares of Company Stock held by such Initial Participating Holders (the “ Majority Shares ”), in exchange for the consideration set forth in this Agreement (the “ Majority Transfer ”).
C. WHEREAS, the Initial Participating Holders constitute the “Required PS Holders” (as defined in the Company’s Amended and Restated Certificate of Incorporation dated May 16, 2013 (the “ Charter ”)).
D. WHEREAS, upon the terms and conditions set forth in this Agreement, Glu proposes to cause Purchaser to purchase all shares of Company Stock held by the Drag Holders (the “ Drag Shares ”) in exchange for the consideration and on the terms set forth in this Agreement (the “ Drag-Along Transfer ”).
E. WHEREAS, Glu may, at its election, cause Purchaser to purchase the remaining capital stock of the Company (the “ Remaining Shares ” and, together with the Majority Shares and the Drag Shares, as well as any Rights (as defined below) covered hereby, the “ Transferred Shares ”), in exchange for the consideration and on the terms set forth in this Agreement (the “ Additional Transfer ” and, collectively with the Majority Transfer and the Drag-Along Transfer or as applicable in each case, the “ Transfer ”).
NOW, THEREFORE, the parties hereby agree as follows.
1. SALE AND PURCHASE OF SHARES . On the applicable Effective Date (as defined below) and subject to the terms and conditions of this Agreement, each Seller hereby agrees to sell to Purchaser, and Purchaser hereby agrees to purchase from each Seller that number of shares of (or Rights for) the Company’s capital stock set forth opposite such Seller’s name on Schedule A hereto at the applicable price per share set forth Schedule A (each such amount as applicable, a “ Purchase Price ”).
2. CLOSING .
2.1 Deliveries by Sellers . Each Seller hereby agrees to deliver to Purchaser at the applicable Closing (as defined below): (a) any share certificate(s) or agreements representing such Seller’s Transferred Shares; (b) an executed copy of this Agreement (if not previously delivered to Purchaser); and (c) one (1) copy of the executed and completed Stock Power and Assignment Separate from Stock Certificate attached hereto as Exhibit A , transferring such Seller’s Transferred Shares to Purchaser at the applicable Effective Date.
2.2 Deliveries by Purchaser . Purchaser hereby agrees to deliver to each Seller at the applicable Closing: (a) an executed copy of this Agreement (if not previously delivered to such Seller) and (b) a check made payable to such Seller or a wire transfer of immediately available funds to an account designated by such Seller, in either case for the Purchase Price then payable in respect of the Transferred Shares acquired from such Seller hereunder.
2.3 Deliveries of Stock Certificate(s) . Each Seller hereby irrevocably instructs the Company to, immediately upon the payment of the Purchase Price payable in respect of the Transferred Shares acquired from such Seller hereunder (which, in the case of the Initial Participating Investors, for the avoidance of doubt, will be the time of the Initial Closing): (a) cancel any stock certificate(s) and/or agreements issued to such Seller representing the Transferred Shares and (b) issue duly executed stock certificates evidencing the Transferred Shares acquired by Purchaser hereunder in Purchaser’s name.
2.4 Closings . The consummation of the purchase and sale of the Transferred Shares pursuant to this Agreement shall take place at separate Closings as set forth in Schedule B hereto (the time and date of each such Closing, an “ Effective Date ” as more fully set forth therein). The parties hereto agree and acknowledge that additional provisions regarding the closing of the transactions contemplated by this Agreement are set forth on Schedule B hereto.
3. REPRESENTATIONS AND WARRANTIES OF GLU AND PURCHASER . Each of Glu and Purchaser represents and warrants to each Seller as follows.
3.1 Authorization. Each of Glu and Purchaser has all necessary power and authority to execute and deliver this Agreement and to carry out its provisions. All action on Glu and Purchaser’s part required for the lawful execution and delivery of this Agreement has been taken. Upon execution and delivery, this Agreement will be a valid and binding obligation of Glu and Purchaser, enforceable in accordance with its terms, except (a) as limited by applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance, or other laws of general application relating to or affecting the enforcement of creditors’ rights generally, and (b) as limited by laws relating to the availability of specific performance, injunctive relief, or other equitable remedies.
3.2 Purchase for Own Account for Investment . Purchaser is purchasing the Transferred Shares for Purchaser’s own account, for investment purposes only and not with a view to, or for sale in connection with, a distribution of the Transferred Shares within the meaning of the Securities Act of 1933, as amended (the “ 1933 Act ”). Purchaser has no present intention of selling or otherwise disposing of all or any portion of the Transferred Shares and, immediately following the applicable Closing, no one other than Purchaser and Glu has any beneficial ownership of any of the Transferred Shares.
3.3 Sophisticated Acquiror . Each of Glu and Purchaser (a) is a sophisticated person familiar with transactions similar to those contemplated by this Agreement, and (b) has independently and without reliance upon any Seller, and based solely on information and advice of advisors Acquiror has deemed appropriate, made its own analysis and decision to enter into this Agreement and to purchase the Transferred Shares. Each of Glu and Purchaser acknowledges that neither any Seller nor any other person has made any express or implied representation or warranty other than those representations and warranties expressly set forth in this Agreement.
3.4 Understanding of Risks . Each of Glu and Purchaser is fully aware of: (a) the highly speculative nature of the Transferred Shares; (b) the financial hazards involved; (c) the lack of liquidity of the Transferred Shares and the restrictions on transferability of the Transferred Shares ( e.g. , that Purchaser may not be able to sell or dispose of the Transferred Shares or use them as collateral for loans); (d) the qualifications and backgrounds of the management of the Company; and (e) the tax consequences of acquiring the Transferred Shares.
3.5 Purchaser’s Qualifications . Each of Glu and Purchaser has a preexisting personal or business relationship with the Company and/or certain of its officers and/or directors of a nature and duration sufficient to make them aware of the character, business acumen and general business and financial circumstances of the Company and/or such officers and directors. By reason of their business or financial experience, each of Glu and Purchaser is capable of evaluating the merits and risks of this purchase, has the ability to protect its own interests in this transaction and is financially capable of bearing a total loss of the Transferred Shares. Each of Glu and Purchaser is an “ accredited investor ” as defined in Rule 501 of Regulation D promulgated under the 1933 Act.
3.6 No General Solicitation . At no time was Glu or Purchaser presented with or solicited by any publicly issued or circulated newspaper, mail, radio, television or other form of general advertising or solicitation in connection with the Transferred Shares.
3.7 Compliance with Securities Laws . Each of Glu and Purchaser understands and acknowledges that, in reliance upon the representations and warranties made by Glu and Purchaser herein, the Transferred Shares are not being registered with the Securities and Exchange Commission (the “ SEC ”) under the 1933 Act or being qualified under the California Corporate Securities Law of 1968, as amended (the “ Law ”), but instead are being transferred under an exemption or exemptions from the registration and qualification requirements of the 1933 Act and the Law or other applicable securities laws which impose certain restrictions on Purchaser’s ability to transfer the Transferred Shares.
3.8 Securities Law Restrictions on Transfer . Each of Glu and Purchaser understands that Purchaser may not transfer any Transferred Shares unless such Transferred Shares are registered under the 1933 Act or qualified under the Law or other applicable securities laws or unless exemptions from such registration and qualification requirements are available. Each of Glu and Purchaser understands that only the Company may file a registration statement with the SEC or the California Commissioner of Corporations or other applicable securities commissioners and that the Company is under no obligation to do so with respect to the Transferred Shares. Each of Glu and Purchaser has also been advised that exemptions from registration and qualification may not be available or may not permit Purchaser to transfer all or any of the Transferred Shares in the amounts or at the times proposed by Purchaser.
3.9 Rule 144 . Purchaser acknowledges that the SEC Rule 144 promulgated under the 1933 Act, which permits certain limited sales of unregistered securities, may not be presently available with respect to the Transferred Shares and, in any event, requires that the Transferred Shares be held for a minimum of six (6) months, and in certain cases one (1) year, after they have been purchased and paid for (within the meaning of the SEC Rule 144), before they may be resold under the SEC Rule 144. Under certain circumstances where such Purchaser is not an “affiliate” as defined under the 1933 Act, the holding period of Seller will carry over to such Purchaser.
4. REPRESENTATIONS AND WARRANTIES OF SELLERS . Each of the Participating Holders (with respect to each of the representations and warranties below) severally and not jointly, as of Closing applicable to such Participating Holder, represents and warrants to Glu and Purchaser, and each of the Drag Holders (only with respect to the representations and warranties in Section 4.4 (Title to Shares) and Section 4.6 (Authority), and in any event only to the extent permissible as “Limited Stockholder Representations” of such Drag Holders pursuant to Section 2.3(a) of the Amended and Restated Voting Agreement dated May 20, 2013 (the “ Voting Agreement ”)), severally and not jointly, as of the Agreement Date and as of the applicable Effective Date, represents and warrants to Glu and Purchaser as follows:
4.1 Transfer for Own Account . Such Seller is selling such Seller’s Transferred Shares for such Seller’s own account only and not with a view to, or for sale in connection with, a distribution of such Transferred Shares within the meaning of the 1933 Act. No portion of the Purchase Price will be received indirectly by the Company.
4.2 No General Solicitation . At no time has such Seller presented Glu or Purchaser with or solicited Glu or Purchaser through any publicly issued or circulated newspaper, mail, radio, television or other form of general advertisement or solicitation in connection with the Transfer.
4.3 No Broker-Dealer . Such Seller has not effected the Transfer by or through a broker-dealer in any public offering.
4.4 Title to Shares . Immediately prior to the Effective Date, such Seller has valid ownership of and title to the Transferred Shares set forth adjacent to such Seller’s name in Schedule A hereto, free and clear of any pledge, lien, security interest, encumbrance, claim or equitable interest, and upon the completion of the Transfer, Purchaser will have valid ownership of and title to such Transferred Shares, free and clear of any pledge, lien, security interest, encumbrance, claim or equitable interest (other than as incurred by Purchaser independently of the transactions contemplated by this Agreement or as imposed by law).
4.5 Authority . Such Seller has full legal right, power and authority to enter into and perform its obligations under this Agreement and to transfer the Transferred Shares under this Agreement. All consents, approvals, authorizations and orders required for such Seller’s execution and delivery of this Agreement and the Transfer under this Agreement with respect to such Seller have been obtained and are in full force and effect. Such Seller, if other than a natural person, has been duly organized and is validly existing and in good standing under the laws of the jurisdiction of its organization as the type of entity that it purports to be. This Agreement constitutes a valid and binding obligation of such Seller enforceable in accordance with its terms, except (a) as limited by applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance, or other laws of general application relating to or affecting the enforcement of creditors’ rights generally, and (b) as limited by laws relating to the availability of specific performance, injunctive relief, or other equitable remedies.
4.6 Applicable Documents . The Initial Participating Holders represent and warrant that the Voting Agreement, ROFR Agreement, IRA, the Intel Side Letter and the other agreements and documents listed on Schedule C hereto (the “ Applicable Documents ”) are the only agreements entered into between the Initial Participating Holders and the Company or between the Initial Participating Holders and other holders of Company Stock in their capacity as stockholders of the Company. The
Initial Participating Holders have made available to Purchaser copies of the Applicable Documents provided to them by the Company, and, to the knowledge of the Initial Participating Holders, such Applicable Documents are true and complete, in full force and effect and have not been amended, superseded, terminated, or modified.
5. NO RELIANCE . Each Seller and Purchaser acknowledges and agrees that neither the Company, nor any of its stockholders, officers, directors, employees, or agents (other than such Seller and Purchaser) have (i) acted as an agent, finder or broker for such Seller or Purchaser or their respective agents with respect to the offer, purchase and/or sale of the Transferred Shares, (ii) made any representations or warranties of any kind, express or implied, to such Seller or Purchaser or their respective agents in connection with the offer, purchase and/or sale of the Transferred Shares or (iii) at any time had any duty to such Seller or Purchaser or their respective agents to disclose any information relating to the Company, its business, or financial condition or relating to any other matters in connection with the offer, purchase and/or sale of the Transferred Shares. In making its decision to enter into this Agreement and to sell the Transferred Shares, each Seller is relying solely on the representations and warranties of Purchaser and Glu set forth in Section 3 (and not on any information provided by the Company or its agents). In making its decision to enter into this Agreement and to purchase the Transferred Shares, Purchaser and Glu are relying solely on the representations and warranties of each Seller set forth in Section 4 (and not on any information provided by the Company or its agents) and Purchaser’s and Glu’s own review of the Applicable Documents. Each party acknowledges and agrees that (a) the other parties hereto currently may have, and later may come into possession of, information with respect to the Company, including the Company’s business, assets, liabilities, results of operations, prospects, financing activity, capital markets activity, and acquisition or sale events, that is not known to such party and that may be material to a decision to purchase or sell the Transferred Shares or the price at which to sell (“ Excluded Information ”), (b) such party has determined to purchase or sell, as applicable to such party, the Transferred Shares, notwithstanding its lack of knowledge of the Excluded Information, (c) the other parties have not made any representation or warranty to such party as to any Excluded Information, the extent it holds Excluded Information, any Excluded Information received, or the transactions contemplated hereby except as expressly set forth herein, and (d) each of the other parties shall have no liability to such party, and such party waives and releases any claims that it might have against the other parties whether under applicable securities laws or otherwise, with respect to the nondisclosure of the Excluded Information in connection with the purchase and sale of the Transferred Shares and the transactions contemplated by this Agreement. Each party hereto acknowledges that he, she or it has consulted its own financial, accounting, legal and tax advisors, and is solely responsible for the decision to enter into this Agreement and sell or buy the Transferred Shares, as applicable. Each party further acknowledges that the value of the Transferred Shares may now or in the future be substantially different (higher or lower) than the price to be paid by Purchaser hereunder, and that the value of the Transferred Shares may significantly appreciate or depreciate over time.
6. COMPLIANCE WITH LAWS AND REGULATIONS . The Transfer will be subject to and conditioned upon compliance by Purchaser with all applicable state and federal laws and regulations and with all applicable requirements of any stock exchange or automated quotation system on which the Company’s Common Stock may be listed or quoted at the time of such issuance or transfer.
7. ASSIGNMENT; BOARD SEATS; WAIVER .
7.1 Assignment of Rights . Without in any way limiting the forgoing, contingent on and effective immediately upon the Initial Closing, each of the Initial Participating Holders hereby assigns and transfers, and Purchaser hereby assumes, all of such Initial Participating Holder’s rights, benefits, interests, liabilities and obligations in and under (i) the Voting Agreement, (ii) the Amended and Restated Right of First Refusal and Co Sale Agreement by and between the Company and the investors
and founders listed therein, dated May 20, 2013 (the “ ROFR Agreement ”), (iii) the Amended and Restated Investor Rights Agreement by and between the Company and the investors listed therein, dated as of May 20, 2013 (the “ IRA ”), (iv) that certain side letter agreement dated May 13, 2011 by and between Intel Capital Corporation and the Company (the “ Intel Side Letter ”), (v) all preemptive rights, options, warrants (including that certain Common Stock Purchase Warrant held by TWI, dated May 20, 2013), conversion privileges or rights (including but not limited to rights of first refusal or similar rights), orally or in writing, to purchase or acquire any securities from the Company including, without limitation, any shares of common stock of the Company, preferred stock of the Company, or any securities convertible into or exchangeable or exercisable for shares of common stock or preferred stock of the Company, (vi) any other rights to board observers or access to financial or other information regarding the Company, and (vii) any and all claims or causes of action of such Initial Participating Holders pursuant to the Applicable Documents that may exist or that may arise hereafter, including any cause of action pursuant to Section 2, the proviso to Section 3.1(c) and Section 4.13 of the Voting Agreement (the “ Relevant Drag-Along Provisions ”). Each Seller hereby assigns and transfers, and Purchaser hereby assumes, any all claims or causes of action of such Seller pursuant to the Applicable Documents that may exist or that may arise hereafter. If any claim or cause action relating to the Relevant Drag-Along Provisions is not effectively assigned to Purchaser pursuant to this Agreement, then solely to the extent available and necessary for enforcement of the Relevant Drag-Along Provisions, each Initial Participating Holder agrees that Purchaser is and shall be subrogated for any such claim or cause of action under the Voting Agreement that is retained by the Initial Participating Holders with respect to the Relevant Drag-Along Provisions. No Seller shall have any further obligation with respect to any of the rights and obligations assigned to Purchaser pursuant to this Agreement and shall not be subject to any liability to any party with respect thereto. It is acknowledged and understood that other than with respect to enforcing the drag-along rights pursuant to Section 2 of the Voting Agreement and related provisions and certain other provisions that survive termination, the Voting Agreement, ROFR Agreement and IRA will terminate upon the Initial Closing.
7.2 Board Seats . TWI’s designee to the Company’s Board of Directors shall resign contingent on and effective immediately upon the Initial Closing. ICC’s designee to the Company’s Board of Directors, if any, shall resign contingent on and effective immediately upon the Initial Closing.
7.3 Waiver . To the extent that the closing of the Majority Transfer constitutes an “Acquisition” that is deemed to be a “Liquidation Transaction” pursuant to Article IV, Section D.3(c) of the Charter that gives the holders of the Preferred Stock the right to receive their applicable Liquidation Preferences under Article IV, Section D.3(a) of the Charter, the Sellers (including the Initial Participating Holders, who hold in excess of 60% of the outstanding shares of Preferred Stock of the Company), hereby acknowledge and agree that the aggregate Purchase Price shall be distributed to the Sellers in accordance with Schedule A attached hereto, and waive any change to the rights, preferences or privileges or powers of the Preferred Stock to receive their applicable Liquidation Preferences under Article IV, Section D.3(a) of the Charter.
7.4 Further Assurances . At any time or from time to time after the date hereof, the parties agree to cooperate with each other, and at the request of any other party, to execute and deliver any further instruments or documents and to take all such further action as the other party may reasonably request in order to evidence or effectuate the consummation of the transactions contemplated by this Agreement (including this Section 7) and to otherwise carry out the intent of the parties under this Agreement (including this Section 7).
7.5 Drag-Along Limitations . Concurrently with the Initial Closing, a notice will be sent to the Company by Time Warner Inc. and Intel Capital Corporation on behalf of the Initial Participating Holders (the “ Drag-Along Demand Notice ”) giving the Company notice of the consummation of the Majority Transfer and demanding that the Company give the Drag-Along Notice (as defined in the Voting Agreement) required by Section 2.1 of the Voting Agreement to each Drag Holder and instruct each Drag Holder to execute and deliver a counterpart signature page to this Agreement and all related documentation to fulfill their obligations under Section 2.1 (including subsection (c) thereof) of the Voting Agreement, and demanding that each Drag Holder fulfill such obligations. Each of Glu, Purchaser and the Participating Holders acknowledges and agrees that this Agreement is intended to comply with the provisions of Section 2 of the Voting Agreement, including the limitations specified in Section 2.3 thereof. Accordingly and notwithstanding any provision of this Agreement to the contrary, and solely with respect to the Drag Holders, in the event that any provision of this Agreement is deemed to not comply with the provisions of Section 2 of the Voting Agreement, including the limitations specified in Section 2.3 thereof, then such provision of this Agreement shall deemed to be automatically amended, solely as to the Drag Holders, to the extent necessary comply with Section 2 of the Voting Agreement.
8. GENERAL PROVISIONS.
8.1 Successors and Assigns; Assignment . Except as otherwise provided in this Agreement, this Agreement, and the rights and obligations of the parties hereunder, will be binding upon and inure to the benefit of their respective successors, assigns, heirs, executors, administrators and legal representatives. No Seller may assign, whether voluntarily or by operation of law, any of its rights and obligations under this Agreement, except with the prior written consent of Purchaser
8.2 Governing Law . This Agreement will be governed by and construed in accordance with the laws of the State of Delaware, without giving effect to that body of laws pertaining to conflict of laws.
8.3 Dispute Resolution . The parties (a) hereby irrevocably and unconditionally submit to the jurisdiction of the federal or state courts located in the District Court of the District of Delaware for the purpose of any suit, action or other proceeding arising out of or based upon this Agreement, (b) agree not to commence any suit, action or other proceeding arising out of or based upon this Agreement except in the federal or state courts located in the District Court of the District of Delaware, and (c) hereby waive, and agree not to assert, by way of motion, as a defense, or otherwise, in any such suit, action or proceeding, any claim that it is not subject personally to the jurisdiction of the above-named courts, that its property is exempt or immune from attachment or execution, that the suit, action or proceeding is brought in an inconvenient forum, that the venue of the suit, action or proceeding is improper or that this Agreement or the subject matter hereof may not be enforced in or by such court.
8.4 Notices . Any and all notices required or permitted to be given to a party pursuant to the provisions of this Agreement will be in writing and will be effective and deemed to provide such party sufficient notice under this Agreement on the earliest of the following: (a) at the time of personal delivery, if delivery is in person; (b) one (1) business day after deposit with an express overnight courier for United States deliveries, or two (2) business days after such deposit for deliveries outside of the United States; or (c) three (3) business days after deposit in the United States mail by certified mail (return receipt requested) for United States deliveries. All notices for delivery outside the United States will be sent by express courier. All notices not delivered personally will be sent with postage and/or other charges prepaid and properly addressed to the party to be notified at the address set forth below the signature lines of this Agreement or at such other address as such other party may designate by one of the indicated means of notice herein to the other party hereto. A “ business day ” shall be a day, other than Saturday or Sunday, when the banks in the city of San Francisco are open for business. Notices to Purchaser shall also be made with a copy to Glu, and all notices to Glu shall be marked “Attention: General Counsel”. Notices to either Glu or Purchaser shall be sent with a copy to:
Fenwick & West LLP
Silicon Valley Center
801 California Street
Mountain View, CA 94041
Attention: David A. Bell, Esq.
Email: [Email]
8.5 Further Assurances . The parties agree to execute such further documents and instruments and to take such further actions as may be reasonably necessary to carry out the purposes and intent of this Agreement.
8.6 Titles and Headings . The titles, captions and headings of this Agreement are included for ease of reference only and will be disregarded in interpreting or construing this Agreement. Unless otherwise specifically stated, all references herein to “sections”, “schedules” and “exhibits” will mean “sections”, “schedules” and “exhibits” to this Agreement.
8.7 Entire Agreement . This Agreement and the documents referred to herein, constitute the entire agreement and understanding of the parties with respect to the subject matter of this Agreement, and supersede all prior understandings and agreements, whether oral or written, between or among the parties hereto with respect to the specific subject matter hereof.
8.8 Severability . If any provision of this Agreement is determined by any court or arbitrator of competent jurisdiction to be invalid, illegal or unenforceable in any respect, such provision will be enforced to the maximum extent possible given the intent of the parties hereto. If such clause or provision cannot be so enforced, such provision shall be stricken from this Agreement and the remainder of this Agreement shall be enforced as if such invalid, illegal or unenforceable clause or provision had (to the extent not enforceable) never been contained in this Agreement. Notwithstanding the forgoing, if the value of this Agreement based upon the substantial benefit of the bargain for any party is materially impaired, which determination as made by the presiding court or arbitrator of competent jurisdiction shall be binding, then both parties agree to substitute such provision(s) through good faith negotiations.
8.9 Amendment and Waivers . This Agreement may be amended, any provision hereof may be waived, by a written agreement executed by Glu and Purchaser on the one hand, and at least TWI and ICC on the other hand. Any amendment or waiver effected in accordance with this section will be binding upon all parties hereto and each of their respective successors and assigns. No delay or failure to require performance of any provision of this Agreement shall constitute a waiver of that provision as to that or any other instance. No waiver granted under this Agreement as to any one provision herein shall constitute a subsequent waiver of such provision or of any other provision herein, nor shall it constitute the waiver of any performance other than the actual performance specifically waived. Notwithstanding anything to the contrary contained herein, if Purchaser purchases additional Company Stock pursuant to this Agreement, any seller of such Company Stock may become a party to this Agreement by executing and delivering an additional counterpart signature page to this Agreement and shall be deemed a “Seller” hereunder.
8.10 Cost of Enforcement . If any party to this Agreement seeks to enforce its rights under this Agreement by legal proceedings against any other party to this Agreement, the non-prevailing party or parties named in such legal proceedings shall pay all costs and expenses incurred by the prevailing party or parties, including, without limitation, all reasonable attorneys’ fees.
8.11 Counterparts; Facsimile Signatures . This Agreement may be executed in any number of counterparts, each of which when so executed and delivered will be deemed an original, and all of which together shall constitute one and the same agreement. This Agreement may be executed and delivered by facsimile or as an attachment to an email and upon such delivery, a copy of the signature will be deemed to have the same effect as if the original signature had been delivered to the other party.
[Signature page follows]
IN WITNESS WHEREOF , Glu, Purchaser, and each Seller have each executed this Stock Transfer Agreement, effective as of the Agreement Date.
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GLU MOBILE INC.: |
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By: |
/s/ Scott J. Leichtner |
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Name: |
Scott J. Leichtner |
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Title: |
VP & General Counsel |
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Address: |
500 Howard Street, Suite 300 |
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San Francisco, CA 94105 |
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PURCHASER:
COMET TRANSFER SUB LLC
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PARTICIPATING HOLDERS |
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TIME WARNER INC. |
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By: |
/s/ Rachel Lam |
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Print Name: |
Rachel Lam |
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Title: |
Senior Vice President |
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Address: |
Time Warner Inc. |
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One Time Warner Center |
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New York, NY 10019 |
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with a copy (which shall not constitute notice) to: |
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One Time Warner Center |
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New York, NY 10019 |
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Attention: Deputy General Counsel |
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PARTICIPATING HOLDERS |
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By: |
/s/ Aviv Nevo |
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Address: |
c/o Office of Viv Nevo I NV Investments, Inc. |
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[Address] |
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with a copy (which shall not constitute notice) to: |
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One Time Warner Center |
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New York, NY 10019 |
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Attention: Deputy General Counsel |
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DRAG HOLDERS
EXHIBIT A
STOCK POWER
AND ASSIGNMENT SEPARATE FROM CERTIFICATE
(SELLER)
Seller Stock Power and Assignment
Separate From Stock Certificate
FOR VALUE RECEIVED and pursuant to that certain Stock Transfer Agreement dated as of November 2, 2016 (the “ Agreement ”), the undersigned hereby sells, assigns and transfers unto Comet Transfer Sub LLC, and in the amounts, set forth on Schedule A to the Agreement, an aggregate of shares of Stock of Crowdstar Inc., a Delaware corporation (the “ Company ”), standing in the undersigned’s name on the books of the Company represented by Certificate No(s). and delivered herewith, and does hereby irrevocably constitute and appoint the Secretary of the Company as the undersigned’s attorney-in-fact, with full power of substitution, to transfer said stock on the books of the Company.
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Dated: |
[ ] |
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(Signature) |
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(Please Print Name) |
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(Please Print Title) |
SCHEDULE A
SALE AND PURCHASE OF SHARES
Each Seller set forth below agrees to sell, and Purchaser agrees to purchase, pursuant to the terms and conditions of the Agreement, the shares of Company Stock set forth opposite such Seller’s name below in exchange for the following consideration per share:
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Series 1 Preferred Stock: |
$0.80 |
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Series 2 Preferred Stock: |
$2.02 * |
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Series 3 Preferred Stock: |
$2.02 |
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Common Stock: |
$0.36 |
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ITM Right: |
ITM Price |
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OOTM Right: |
$0.00 |
* The per share price for the Series 2 Preferred Stock is on an as-converted to common stock basis.
For purposes hereof:
(i) “ Right ” means each right to acquire a share of capital stock of the Company, including pursuant to any option, warrant other security convertible or exercisable for share of capital stock of the Company.
(ii) “ ITM Price ” means the price per share of such capital stock set forth above less the exercise price per share of such capital stock pursuant to the applicable Right; or if a convertible Right, the price per share of such capital stock set forth above for each share of such capital issuable upon cashless conversion of such Right.
(iii) “ ITM Right ” means each vested Right for which the exercise price or other consideration to be paid in respect of such capital stock upon exercise or conversion of such right is less than the Purchase Price for such capital stock as set above (i.e., the Right is “in-the-money”) or upon the conversion of which the holder shall be entitled to a positive number of shares of such capital stock, if immediately exercised.
(iv) “ OOTM Right ” means each Right that is unvested or for which the exercise price or other consideration to be paid in respect of such capital stock upon exercise or conversion of such right is less than the Purchase Price for such capital stock as set above (i.e., the Right is out-of-the-money) or upon the conversion of which the holder shall be entitled to no shares of such capital stock, if immediately exercised.
To the extent that any Right is non-transferrable, Seller agrees that such Right shall be forfeited as of the applicable Closing in exchange for payment of any purchase price applicable thereto in accordance with the foregoing.
This Schedule A may be amended from time to time by Acquiror to add additional Sellers, without obtaining the signature, consent or permission of any of the other Sellers.
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Number of
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Warrants,
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Total
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Initial Participating Holders |
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Time Warner Inc. |
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4,713,674 |
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7,542,836 |
1 |
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366,698 |
2 |
$ |
24,758,150.20 |
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Intel Capital Corporation |
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1,206,854 |
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5,035,484 |
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— |
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196,175 |
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$ |
12,680,145.76 |
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Middlefield Ventures, Inc. |
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986,433 |
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— |
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$ |
1,992,594.66 |
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Aviv Nevo |
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222,070 |
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452,569 |
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$ |
1,362,770.78 |
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Drag Holders |
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Suren Markosian |
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317,701 |
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1,087,395 |
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$ |
1,033,218.22 |
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Jeffrey C. Tseng |
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158,850 |
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564,855 |
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2,854,868 |
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$ |
524,224.80 |
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YouWeb, LLC |
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622,302 |
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301,712 |
6 |
1,251,802 |
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27,717 |
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437,721 |
7 |
$ |
2,887,481.68 |
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Arvind Peter Relan |
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26,538 |
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1,071,172 |
8 |
$ |
9,553.68 |
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Leslie E. Wright |
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48,940 |
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360,310 |
9 |
$ |
17,618.40 |
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9City Asia Limited |
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— |
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165,242 |
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— |
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$ |
59,487.12 |
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Other Participating Holders |
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[ · ] |
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1 This number of shares represents 590,151 shares of Series 2 Preferred Stock held by such holder on an as converted to Common Stock basis based on the Company’s calculations of the applicable Series Preferred Conversion Rate under the Charter.
2 This number of shares represents vested warrants to purchase common stock of the Company (“ Warrants ”).
3 This number of shares represents 393,976 shares of Series 2 Preferred Stock held by such holder on an as converted to Common Stock basis based on the Company’s calculations of the applicable Series Preferred Conversion Rate under the Charter.
4 This number of shares represents 35,409 shares of Series 2 Preferred Stock held by such holder on an as converted to Common Stock basis based on the Company’s calculations of the applicable Series Preferred Conversion Rate under the Charter.
5 This number of shares represents (i) vested options to purchase common stock of the Company (“ Vested Options ”) and (ii) unvested options to purchase common stock of the Company (“ Unvested Options ”) for 208,104 shares.
6 This number of shares represents 23,606 shares of Series 2 Preferred Stock held by such holder on an as converted to Common Stock basis based on the Company’s calculations of the applicable Series Preferred Conversion Rate under the Charter.
7 This number of shares represents (i) Vested Options to purchase 384,951 shares and (ii) Warrants to purchase 52,770 shares.
8 This number of shares represents (i) Vested Options to purchase 714,422 shares and (ii) Unvested Options to purchase 356,760.
9 This number of shares represents (i) Vested Options to purchase 351,393 shares and (ii) Unvested Options to purchase 8,917 shares.
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Number of
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Number of
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Warrants,
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Total
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[ · ] |
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SCHEDULE B
CLOSINGS
1.1 Initial Closing; Majority Transfer . The purchase and sale of the Majority Shares contemplated hereby (the “ Initial C losing ”) shall take place on the Agreement Date, effective at the time of the giving of the Drag-Along Demand Notice, copying Acquiror, via electronic mail as contemplated by the Voting Agreement. The Initial Closing shall take place remotely via the electronic exchange of documents and signatures or as otherwise agreed upon by Acquiror on the one hand, and TWI and ICC on the other hand. The date on which the Initial Closing occurs is herein referred to as the “ Initial C losing Date ,” which shall be deemed the “Effective Date” for the Initial Participating Holders.
1.2 Drag-Along Closing; Drag-Along Transfer . The purchase and sale of the Drag Shares contemplated hereby (the “ Drag-Along C losing ”) shall take place (i) as promptly as practicable (and in any event within twenty (20) Business Days) after the Initial Closing or (ii) at such other time and date as Acquiror may determine. The Drag-Along Closing shall take place remotely via the electronic exchange of documents and signatures or as otherwise agreed upon by Acquiror on the one hand, and each Drag Holder on the other hand. The date on which the Drag-Along Closing occurs with respect to each applicable Drag Holder shall be deemed the “Effective Date” for such Drag Holder. Each Seller at the Drag-Along Closing will execute a counterpart signature page to this Agreement and related documents, and become a party to, and bound by, this Agreement. Each such Seller shall be deemed to be a Seller for all purposes under this Agreement as of the date of the Drag-Along Closing. Such Drag Holders may be added as parties hereto without obtaining the signature, consent or permission of any of the other Sellers.
1.3 Additional Closings . At any time and from time to time following the Initial Closing, Acquiror may, at one or more additional closings (each an “ Additional Closing ” and together with the Initial Closing and the Drag-Along Closing, each, a “ Closing ”), without obtaining the signature, consent or permission of any of the other Sellers, offer and purchase at the applicable purchase price per share set forth on Schedule A to this Agreement, including in connection with a tender offer or individual sales and purchases. The date on which an Additional Closing occurs with respect to an additional Seller shall be deemed the “Effective Date” for such Seller. Each Seller at each Additional Closing will execute counterpart signature pages to this Agreement and related documents and become a party to, and bound by, this Agreement. Each such Seller shall be deemed to be a Seller for all purposes under this Agreement as of the date of the applicable Additional Closing.
SCHEDULE C
STOCKHOLDER AGREEMENTS
Common Stock Purchase Warrant held by TWI, dated May 20, 2013 .
Exhibit 10.01
Execution Version
Glu Mobile Inc.
Executive Chairman Agreement
This Executive Chairman Agreement (this “ Agreement ”) is entered into by and between Glu Mobile Inc. (“ Company ”) and Niccolo de Masi (“ Executive ”) and sets forth the terms of Executive’s continued service with the Company. This Agreement is effective as of November 2, 2016 (the “ Effective Date ”).
WHEREAS, Executive has been employed by the Company as its President and Chief Executive Officer pursuant to the Executive Employment Agreement by and between the Company and Executive dated January 4, 2010 (the “ Employment Agreement ”), in addition to serving as the Chairman of the Company’s Board of Directors since July 2014;
WHEREAS, Executive and the Company are parties to a Change of Control Severance Agreement by and between the Company and Executive dated January 4, 2010 (the “ Severance Agreement ”);
WHEREAS, Executive and the Company now wish for Executive to transition from Executive’s role as the Company’s President and Chief Executive Officer to become the Executive Chairman of the Company’s Board of Directors (the “ Executive Chairman ”) of the Company and, if requested by the Board of Directors (the “ Board ”), to serve as the Company’s “ principal executive officer ” as contemplated under applicable U.S. securities laws and regulations;
WHEREAS, Executive and the Company intend for this Agreement to govern the terms of Executive’s continued service with the Company as its Executive Chairman and, as applicable, its “principal executive officer” and, accordingly, to supersede and replace in their entirety the Employment Agreement, the Severance Agreement and any provision regarding Executive’s entitlement to vesting acceleration of the Company Options or Company RSUs (as such terms are defined in Section 5(b)(i) below) set forth in the written agreements governing such awards;
NOW THEREFORE, in consideration of the promises and the terms and conditions set forth in this Agreement, the parties agree as follows:
1. Position and Duties. Beginning on the Effective Date, Executive will serve as the Company’s Executive Chairman. During the Service Period (as defined in Section 2 below), at the Board’s request, and subject to the next sentence, Executive may also serve as the Company’s “principal executive officer” in addition to his service as the Company’s Executive Chairman, or as a member of the Company’s Board but not Executive Chairman (but including non-executive “Chairman”). If requested by the Board, Executive agrees to serve in the additional capacity as the Company’s “principal executive officer” for up to six (6) months immediately following the Effective Date. During Executive’s service under this Agreement as Executive Chairman and/or the Company’s “principal executive officer”, Executive shall report to the Board and have duties appropriate and consistent with such position(s), as determined by the Board. Executive agrees, upon the request by a majority of the Board, to promptly resign as Executive Chairman and/or from the Board and any and all positions he may hold with respect to the Company or any subsidiary of the Company.
2. Service Period . Subject to Sections 1 and 4, Executive will serve as the Company’s Executive Chairman, or otherwise as non-executive Chairman or simply as a member of the Board, and, as applicable, the Company’s “principal executive officer”, for the three (3) year period commencing on the Effective Date (such three (3) year period, the “ Service Period ”).
3. Outside Activities . Executive’s service as the Company’s Executive Chairman will not be an exclusive, full-time role. Concurrently with his service under this Agreement, Executive may (a) serve as a member of the board of directors of one other company or entity and/or (b) accept a full-time executive position with another company or companies, provided, in any case Executive’s service in such Board of Director or executive position does not (i) materially interfere with Executive’s duties and obligations under this Agreement and (ii) does not result in a conflict of interest with his duties and obligations under this Agreement or would otherwise result in a violation or require a waiver under the Company’s Code of Business Conduct and Ethics.
4. At-Will Employment . Executive and the Company understand and acknowledge that in his capacity as the Company’s Executive Chairman and, as applicable, the Company’s “principal executive officer”, Executive’s employment with the Company constitutes employment “at-will,” and the employment relationship between the Company and Executive may be terminated at any time, for any or no reason. The preceding sentence does not apply to Executive’s position in the capacity as a member of the Board, as that is not an employment relationship standing alone.
5. Compensation and Benefits.
(a) Remuneration . While providing services to the Company pursuant to this Agreement, the Company shall pay the Executive (i) based on an annual amount of $375,000, applicable to any such period Executive serves solely as the Company’s Executive Chairman or other member of the Company’s Board (the “ Base Executive Chairman Remuneration ”), except that (ii) to the extent that Executive also serves as the Company’s “principal executive officer,” Executive shall be paid additional salary based on an annual amount of $75,000 (in excess of the Base Executive Chairman Remuneration) for such portion(s) of the Service Period (the “ Additional PEO Remuneration ”, and collectively, as then applicable, the “ Remuneration ”), payable in accordance with the Company’s normal payroll practices.
(b) Company Options and Company RSUs .
(i) Options for shares of the Company’s common stock (“ Company Options ”) and restricted stock units for shares of the Company’s common stock (“ Company RSUs ”) held by Executive are governed by written award agreements that are substantially similar to the standard forms of such award agreements publicly filed by the Company with respect to the Company’s Amended and Restated 2007 Equity Incentive Plan (the “ 2007 Plan ”). Exhibit A shows Executive’s awards that are outstanding as of the Effective Date and the respective applicable vesting schedule. Executive’s Company Options and Company RSUs will continue to vest in accordance with their applicable vesting schedule, subject to Executive’s continued service with the Company and the terms and conditions of the Company’s 2007 Plan and the applicable written award agreement governing the Company Options or Company RSUs (other than with respect to any provision thereof providing for acceleration of vesting), and may be subject to accelerated vesting under Section 5(b)(ii) and Section 6(b) of this Agreement. If Executive completes three consecutive years of service as Executive Chairman from the Effective Date, he shall vest in those Company RSUs that would otherwise have vested before November 16, 2019.
(ii) In the event of a Corporate Transaction (as defined in the 2007 Plan) the vesting of all of Executive’s Company Options and Company RSUs shall fully accelerate, and such awards shall become exercisable (as applicable) and free of all restrictions (other than those set forth in the Company’s Insider Trading Policy, as then in effect, or imposed by applicable law, including federal securities laws and regulations) in full prior to the consummation of such Corporate Transaction.
(iii) Additional Restriction on Sale or other Transfer of Options and Restricted Stock Units . Executive agrees that, in addition to any restriction on sale or transfer set forth under the 2007 Plan, the written award agreement governing the Company Options or Company RSUs or pursuant to Company policy (including the Company’s Insider Trading Policy) or applicable law, Executive shall not, during the effectiveness of this Agreement, offer, sell, transfer (other than for estate planning purposes, in which case Executive shall first notify the Company of such transfer and provide the Company the ability to place transfer restrictions similar to the Additional Restriction upon such transferred shares) contract to sell, pledge, grant any option to purchase, make any short sale or otherwise dispose of any shares of Company stock, rights for or shares subject to rights to acquire Company stock, held by or otherwise beneficially owned by Executive on the Effective Date, including but not limited to shares held by Executive or in trust or subject to Company Options and Company RSUs (the “ Shares ”), except in payment of applicable taxes and withholdings due in connection with the vesting, exercise or settlement of a Company Option or Company RSUs (the foregoing restriction, the “ Additional Restriction ”). Unless otherwise set forth in Section 9, to the extent applicable, the Additional Restriction shall lapse with respect to (a) 10% of the Eligible Shares (as defined below) on the Effective Date, (b) an additional 10% of the Eligible Shares on each six (6) month anniversary of the Effective Date and (c) 100% of the Eligible Shares on the earlier to occur of Executive’s Cessation, consummation of a Corporate Transaction (as defined in the 2007 Plan) or the three (3) year anniversary of the Effective Date. For purposes hereof “ Eligible Shares ” shall mean the Shares that are owned outright or are vested under any Company Option or Company RSUs held by Executive of the Effective Date plus, as of the relevant measurement date, Shares that have become vested under any Company Option or Company RSUs held by Executive since the prior measurement date. Notwithstanding the foregoing and notwithstanding anything to the contrary in Section 9, Executive must comply with the Additional Restriction with respect to all Shares, including Shares with respect to which the Additional Restriction has lapsed pursuant to the immediately preceding sentence, during any period Executive serves as the Company’s “principal executive officer” under this Agreement (it being understood that following such service, Executive shall be credited with any lapse that shall have occurred prior to or during such service as the Company’s “principal executive officer”). Executive acknowledges that for so long as he serves as the Company’s “principal executive officer” Executive shall be deemed an “officer” of the Company within the meaning of Section 16 of, and Rule 16a-1(f) of the rules promulgated under, the Securities Exchange Act of 1934, as amended, and an “executive officer” of the Company within the meaning of Item 401(b) of Regulation S-K, Rule 3b-7 promulgated under the Exchange Act, and Rule 405 promulgated under the Securities Act of 1933, as amended.
(c) Employee Benefits . During Executive’s employment as the Company’s “Executive Chairman” and/or “principal executive officer” with the Company and Executive is not otherwise employed by another company or entity, Executive will continue to be eligible to participate in the employee benefit plans currently and hereafter maintained by the Company of general applicability to other executive officers of the Company, pursuant to the eligibility requirements, terms and conditions of such plans, but in all cases on terms no less favorable than provided to any other officer of the Company. It is expected (but not required) that while Executive is employed, his duties will involve a minimum work schedule of 30 hours per week (whether or not in the Company’s offices), thereby (assuming the expectation holds true) making him eligible for health benefits under the Company’s health plan as in effect on the Effective Date. The Company reserves the right to cancel or change the benefit plans and programs it offers to its employees at any time. For the avoidance of doubt, Executive will no longer be eligible for any annual cash incentive bonus, nor shall Executive be eligible to receive future grants of Company equity awards or severance benefit, including under any plan or program generally available to the Company’s executive officers.
(d) Voluntary Resignation as Executive Chairman . For the avoidance of doubt, in the event Executive voluntarily resigns his position as Executive Chairman (with such resignation not at the request of the Board) other than for Good Reason (as defined below), Executive shall, upon such resignation, not be entitled to any further payment of any Remuneration and vesting with respect to all outstanding Company Options and Company RSUs shall immediately cease and the unvested portion of the Company Options and Company RSUs shall be forfeited by Executive. In the event of such a voluntary resignation, Executive will be entitled to the compensation that is provided to members of the Board while Executive continues to serve on the Board.
6. Payments and Benefits upon Cessation of Service as Board Member . In the event of Executive’s Cessation, other than as set forth in Section 9 or 5(d), and provided Executive delivers to the Company a signed agreement and general release of claims in favor of the Company in substantially the form attached hereto as Exhibit B (the “ Release ”) and satisfies all conditions to make the Release effective, then the Executive shall be entitled to the following payments and benefits (which shall be payable by the Company on the fifth (5 th ) day following the Cessation Date, and if such day follows on a holiday or weekend, the next business day):
(a) Cash Payment . Any then-unearned portion of the Base Executive Chairman Remuneration, payable based on an annual amount of $375,000, with respect to the remaining balance of the Service Period had Executive continued to provide services to the Company through such date, payable in a lump sum.
(b) Acceleration . In addition to the shares subject to Company Options and Company RSUs held by Executive that are vested and exercisable (as applicable) in accordance with their terms prior to Executive’s Cessation, each other unexpired award held by Executive shall become fully vested and exercisable through all vesting tranches that would otherwise occur prior to November 16, 2019.
(c) COBRA Benefit . Subject to Executive’s eligibility for and timely and proper election of coverage under the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended (“ COBRA ”) and any comparable state law providing for continuation of group health benefits, Executive’s then-effective group health benefits for Executive and Executive’s COBRA-eligible dependents shall be continued at the Company’s cost for all premiums under COBRA (the monthly cost of such premiums, the “ COBRA Premium ”) for the balance of the Service Period (the “ Non-Cash COBRA ”), provided that, if the Company determines that it cannot provide the Non-Cash COBRA without violating applicable law or incurring additional expense under applicable law (including, without limitation, Section 2716 of the Public Health Service Act), the Company will provide Executive, in lieu thereof, a taxable lump sum payment for the balance of the Service Period (the “ Cash COBRA ”), which payment will equal 200% of the applicable COBRA premium for the Executive and any dependents. The number of months of Cash COBRA to be paid, in any case, shall be reduced by the number of months of Non-Cash COBRA previously paid by the Company.
7. Expenses Relating to the Performance of Services . The Company will, in accordance with applicable Company policies and guidelines, reimburse Executive for all reasonable and necessary expenses incurred by Executive in connection with the performance of services as the Company’s Executive Chairman and/or “principal executive officer,” but in all cases on terms no less favorable than provided to any other officer or director of the Company.
8. Employee Inventions and Confidentiality Agreement . Executive acknowledges and agrees that Executive continues to be bound by the Employee Invention Assignment and Confidentiality Agreement (the “ Employee Inventions and Confidentiality Agreement ”) previously entered into by and between Executive and the Company, and shall be bound thereby at any time that Executive is employed by the Company, including as Executive Chairman and or the Company’s “principal executive officer”. The foregoing obligations and restrictions shall be in addition to Executive’s obligation to fulfill his fiduciary duties as an officer or member of the Board.
9. Termination of Services for Cause, Death, Disability or Voluntary Resignation . In the event of any termination of Executive’s services by the Company for Cause or in the event of the Executive’s death, disability (as such term is defined in Section 22(e)(3) of the Code, as defined in Section 10 below) or voluntary resignation from service at any time and for any reason, the Executive will be paid only (i) any earned but unpaid Remuneration, payable based on the annual amount then in effect, (ii) other unpaid vested amounts or benefits under the compensation, incentive and benefit plans of the Company in which Executive participates, and (iii) reimbursement for all reasonable and necessary expenses incurred by Executive in connection with his performance of services on behalf of the Company in accordance with applicable Company policies and guidelines for senior officers and members of the Board, in each case as of the effective date of such termination of employment. Executive will be allowed to exercise his vested Company Options, if any, during the time period set forth in, and in accordance with, the 2007 Plan and the governing stock option agreement(s). It is understood and acknowledged that, in the event of a termination of Executive’s services that is not a Cessation, the Additional Restriction shall continue to apply, but (i) if the Executive voluntarily resigns from his service as Executive Chairman without Good Reason, dies, or becomes disabled, the Additional Restriction shall not apply, but Executive shall instead be subject to a lock-up as to his equity holdings for a period thereafter of six months, during which Executive agrees to sell no more than one-half of the shares (or shares subject to derivative equity securities) held by him as of such resignation during any three month period, (ii) if Executive experiences a Cessation or voluntarily resigns from his service as Executive Chairman with Good Reason, the Additional Restriction shall not apply.
10. Definitions.
(a) “ Cause ” means (i) Executive’s committing of an act of gross negligence, including misappropriation, embezzlement or fraud, that materially adversely affects the Company or any of the Company’s customers, suppliers or partners, (ii) his willful misconduct in the performance of services for the Company or breach of fiduciary duty involving personal profit (other than unintentional, immaterial breaches that are promptly cured after written notice to Executive), (iii) his being convicted of, or pleading no contest to, any felony , (iv) any material breach of any agreement with the Company by him that remains uncured for thirty (30) days after written notice by the Company to him, unless that breach is incapable of cure, in which case no cure period shall be permitted, or any other material unauthorized use or disclosure of the Company’s confidential information or trade secrets involving personal benefit, or (v) his failure to follow the lawful and reasonable directions of the Board; provided that, at any point when Executive no longer serves as Executive Chairman, “principal executive officer,” or otherwise as an employee of the Company, and serves only as a member of the Board, “ Cause ” shall instead mean a breach of fiduciary duties as a director such that he would not be entitled to indemnification under applicable law.
(b) “ Cessation ” means (a) Executive ceases to serve as a member of the Board at any time prior to the three (3) year anniversary of the Effective Date (the effective date of such cessation, the “ Cessation Date ”), provided that such cessation is (I) at the written request of the majority of the members of the Board (or made by a majority of the Board at a properly called meeting thereof), (II) due to Executive not being recommended by the Company or the Board for reelection or not being reelected to the Board by the Company’s stockholders, (III) following a material breach of this Agreement by the Company of which Executive has notified the Company within 90 days after such breach in writing that it has materially breached this Agreement (specifying the provision(s) breached and the circumstances constituting such breach), the Company has failed to cure such breach within 30 days following such notice, and the Executive has resigned and ceased service within fifteen (15) days of such failure to cure,
or (IV) following a material diminution in Executive’s assigned duties as Executive Chairman, provided that Executive first notifies the Company within 30 days after such material diminution in writing that such event has occurred and the Company has failed to cure such diminution within 30 days following such notice, and Executive has resigned and ceased service within fifteen (15) days of such failure to cure (a resignation fulfilling all of the requirements of clause (a) (III) or (a)(IV) shall be deemed for “ Good Reason ”), or (b) Executive ceases to serve as Executive Chairman at the written request of the majority of the members of the Board (or made by a majority of the Board at a properly called meeting thereof). For the avoidance of doubt, (i) except as provided above in this Section 10(b), any voluntary termination of Executive’s service or termination of Executive’s service for Executive’s death or disability or (ii) termination of Executive’s status as a “principal executive officer” while still serving as Executive Chairman or as a member of the Board shall, in each case, not constitute a Cessation under this Agreement.
(c) “ Code ” means the United States Internal Revenue Code of 1986, as amended.
11. Miscellaneous .
(a) Arbitration and Class Action Waiver . Executive and the Company agree to submit to mandatory binding arbitration any and all claims arising out of or related to Executive’s employment or service with the Company and the termination thereof, including, but not limited to, claims for unpaid wages, wrongful termination, torts, stock or Company options, Company RSUs or other ownership interest in the Company, and/or discrimination (including harassment) based upon any federal, state or local ordinance, statute, regulation or constitutional provision, except that each party may, at its, his or her option, seek injunctive relief in court related to the improper use, disclosure or misappropriation of a party’s private, proprietary, confidential or trade secret information (collectively, “ Arbitrable Claims ”). Further, to the fullest extent permitted by law, Executive and the Company agree that no class or collective actions can be asserted in arbitration or otherwise. All claims, whether in arbitration or otherwise, must be brought solely in Executive’s or the Company’s individual capacity, and not as a plaintiff or class member in any purported class or collective proceeding. Nothing in this Arbitration and Class Action Waiver section, however, restricts your right, if any, to file in court a representative action under California Labor Code Sections 2698, et seq.
SUBJECT TO THE ABOVE PROVISO, THE PARTIES HEREBY WAIVE ANY RIGHTS THEY MAY HAVE TO TRIAL BY JURY IN REGARD TO ARBITRABLE CLAIMS. THE PARTIES FURTHER WAIVE ANY RIGHTS THEY MAY HAVE TO PURSUE OR PARTICIPATE IN A CLASS OR COLLECTIVE ACTION PERTAINING TO ANY ARBITRABLE CLAIMS BETWEEN EXECUTIVE AND THE COMPANY.
This Agreement does not restrict Executive’s right to file administrative claims Executive may bring before any government agency where, as a matter of law, the parties may not restrict Executive’s ability to file such claims (including, but not limited to, the National Labor Relations Board, the Equal Employment Opportunity Commission and the Department of Labor). However, the parties agree that, to the fullest extent permitted by law, arbitration shall be the exclusive remedy for the subject matter of such administrative claims. The arbitration shall be conducted in Santa Clara County, California through JAMS before a single neutral arbitrator, in accordance with the JAMS employment arbitration rules then in effect. The JAMS rules may be found and reviewed at http://www.jamsadr.com/rules-employment-arbitration. If Executive is unable to access these rules, Executive should please let the Company know and the Company will provide Executive with a hardcopy. The arbitrator shall issue a written decision that contains the essential findings and conclusions on which the decision is based. In the event of arbitration relating to this Agreement or Executive’s service with the Company, each of Executive and the Company will bear its own costs, including, without limitation, attorneys’ fees.
(b) Indemnification . Subject to applicable law, the Company will provide Executive indemnification to the maximum extent permitted by the Company’s Certificate of Incorporation and Bylaws, in addition to coverage under any directors and officers insurance policies maintained by the Company, with such indemnification to be on terms determined by the Board or any of its committees, but in no case less favorable than those provided to any other executive officer or director of the Company. Executive will continue to be covered by any indemnification by and between Executive and the Company, which, if applicable, continues in full force and effect.
(c) Section 409A . To the extent (a) any payments to which Executive becomes entitled under this Agreement, or any agreement or plan referenced herein, in connection with Executive’s termination of employment with the Company constitute deferred compensation subject to Section 409A of the Code and (b) Executive is deemed at the time of such termination of employment to be a “specified” employee under Section 409A of the Code, then such payment or payments will not be made or commence until the earlier of (i) the expiration of the six (6)-month period measured from the date of Executive’s termination and (ii) the date of Executive’s death following such termination; provided, however, that such deferral will be effected only to the extent required to avoid adverse tax treatment to Executive, including (without limitation) the additional twenty percent (20%) tax for which Executive would otherwise be liable under Section 409A(a)(1)(B) of the Code in the absence of such deferral. Upon the expiration of the applicable deferral period, any payments which would have otherwise been made during that period (whether in a single sum or in installments) in the absence of this paragraph will be paid to Executive or Executive’s beneficiary in one lump sum (without interest).
To the extent that any provision of this Agreement is ambiguous as to its exemption or compliance with Section 409A, the provision will be read in such a manner so that all payments hereunder are exempt from Section 409A to the maximum permissible extent, and for any payments where such construction is not tenable, that those payments comply with Section 409A to the maximum permissible extent. To the extent any payment under this Agreement may be classified as a “short-term deferral” within the meaning of Section 409A, such payment will be deemed a short-term deferral, even if it may also qualify for an exemption from Section 409A under another provision of Section 409A.
Payments pursuant to this Agreement (or referenced in this Agreement) are intended to constitute separate payments for purposes of Section 1.409A-2(b)(2) of the regulations under Section 409A.
Notwithstanding the foregoing, in the event the Company determines that any compensation or benefits payable under this Agreement may be subject to Section 409A, the Company will work in good faith with Executive to adopt such amendments to this Agreement, or to adopt such policies and procedures or take such other actions that the Company determines are necessary or appropriate, to avoid the imposition of taxes under Section 409A.
(d) Limitation on Payments Under Code Section 280G . In the event that the payments and other benefits provided for in this Agreement or otherwise payable to the Executive (i) constitute “parachute payments” within the meaning of Section 280G of the Code, and (ii) would be subject to the excise tax imposed by Section 4999 of the Code (the “ Excise Tax ”), then Executive’s benefits under this Agreement shall be either:
(i) delivered in full; or
(ii) delivered as to such lesser extent that would result in no portion of such benefits being subject to the Excise Tax, by reducing payments in the following order: first a pro rata reduction of (i) cash payments subject to Section 409A of the Code as deferred compensation and (ii) cash payments not subject to Section 409A of the Code, and second a pro rata cancellation of (i) equity award compensation subject to Section 409A of the Code as deferred compensation and (ii) equity award compensation not subject to Section 409A of the Code. In the event that acceleration of vesting of equity award compensation is to be reduced, such acceleration of vesting shall be cancelled in the reverse order of the date of grant;
whichever of the foregoing amounts in (i) or (ii) above, taking into account the applicable federal, state and local income taxes and the Excise Tax, results in the receipt by Executive on an after-tax basis, of the greatest amount of benefits, notwithstanding that all or some portion of such benefits may be taxable under Section 4999 of the Code.
Unless the Company and the Executive otherwise agree in writing, any determination required under this Section shall be made in writing by the Company’s independent public accountants (the “ Accountants ”), whose determination shall be conclusive and binding upon the Executive and the Company for all purposes. For purposes of making the calculations required by this Section, the Accountants may make reasonable assumptions and approximations concerning applicable taxes and may rely on reasonable, good faith interpretations concerning the application of Section 280G and 4999 of the Code. The Company and the Executive shall furnish to the Accountants such information and documents as the Accountants may reasonably request in order to make a determination under this Section. The Company shall bear all costs the Accountants may reasonably incur in connection with any calculations contemplated by this Section.
(e) Severability . If any provision of this Agreement shall be found by any arbitrator or court of competent jurisdiction to be invalid or unenforceable, then the parties hereby waive such provision to the extent of its invalidity or unenforceability, and agree that all other provisions in this Agreement shall continue in full force and effect.
(f) No Waiver . The failure by either party at any time to require performance or compliance by the other of any of its obligations or agreements shall in no way affect the right to require such performance or compliance at any time thereafter. The waiver by either party of a breach of any provision hereof shall not be taken or held to be a waiver of any preceding or succeeding breach of such provision or as a waiver of the provision itself. No waiver of any kind shall be effective or binding, unless it is in writing and is signed by the party against whom such waiver is sought to be enforced.
(g) Assignment . This Agreement and all rights hereunder are personal to Executive and may not be transferred or assigned by Executive at any time. The Company may assign its rights, together with its obligations hereunder, to any parent, subsidiary, affiliate or successor, or in connection with any sale, transfer or other disposition of all or substantially all of its business and assets, provided, however, that any such assignee assumes the Company’s obligations hereunder.
(h) Withholding . All sums payable to Executive hereunder shall be in United States Dollars and shall be reduced by applicable federal, state, local and other withholding and similar taxes and payments required by applicable law.
(i) Agreements Superseded . This Agreement supersedes and replaces in their entirety the Employment Agreement, the Severance Agreement and any provision regarding Executive’s entitlement to vesting acceleration of the Company Options or Company RSUs set forth in the written agreements governing such awards, which agreements and provisions, respectively, shall be of no further force or effect.
(j) Amendment . This Agreement may only be amended, modified or waived, in whole or in part, in a writing executed by both Executive and the Company (as authorized by the Board).
(k) Binding Nature . This Agreement shall be binding upon, and inure to the benefit of, the successors and personal representatives of the respective parties hereto. Executive acknowledges that Executive has had the opportunity to discuss this matter with and obtain advice from his private attorney, has had sufficient time to, and has carefully read and fully understands all the provisions of this Agreement, and is knowingly and voluntarily entering into this Agreement.
(l) Counterparts . This Agreement may be executed in two or more counterparts, each of which shall be deemed to be an original but all of which, taken together, constitute one and the same agreement.
(m) Indemnification Agreement . This Agreement shall not be deemed in any way to limit or supersede the Indemnity Agreement entered into between the Company and Executive on October 24, 2013, and the Company agrees that any amendment or replacement to the form of Indemnity Agreement generally applicable to the members of the Board shall be made available to Executive (such Indemnity Agreement as it may be amended or replaced, the “ Indemnity Agreement ”) .
(n) Governing Law . This Agreement and the rights and obligations of the parties hereto shall be construed in accordance with the laws of the State of California, without giving effect to the principles of conflict of laws.
[SIGNATURE PAGE TO EXECUTIVE CHAIRMAN AGREEMENT FOLLOWS]
IN WITNESS WHEREOF, the Company and Executive have executed this Agreement as of the date indicated below.
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GLU MOBILE INC. |
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EXECUTIVE |
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/s/ Benjamin T. Smith, IV |
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/s/ Niccolo de Masi |
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Name: Benjamin T. Smith, IV |
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Niccolo de Masi |
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Title: Compensation Committee, Chair |
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Date: |
November 2, 2016 |
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Date |
November 2, 2016 |
[SIGNATURE PAGE TO EXECUTIVE CHAIRMAN AGREEMENT]
Exhibit A
EXECUTIVE’S COMPANY OPTIONS AND COMPANY RSUS
AS OF THE EFFECTIVE DATE
Exhibit B
GENERAL RELEASE OF CLAIMS
General Release Of Claims
This General Release of Claims (this “ Agreement ”) is entered into as of [ ], by and between Niccolo de Masi (“ you ”) and Glu Mobile Inc. (the “ Company ”), collectively referred to herein as the “ Parties ”. Capitalized terms used herein, but not defined herein, shall have the meanings ascribed to them in the Executive Chairman Agreement by and between you and the Company dated November 2, 2016 (the “ Employment Agreement ”).
Recitals
WHEREAS, you have been providing services to the Company as its Executive Chairman [and “principal executive officer”] pursuant to the Employment Agreement, and you and the Company now wish to effect a Cessation of your services as Executive Chairman [and “principal executive officer;”]
WHEREAS, pursuant to the Employment Agreement, you and the Company agreed that upon your Cessation, you would be entitled to certain payments and benefits thereunder;
WHEREAS, you and the Company wish to set forth in writing the terms of your Cessation, and the Company wishes to receive from you a general release of all claims against the Company;
WHEREAS, the Parties, and each of them, wish to resolve any and all disputes, claims, complaints, grievances, charges, actions, petitions and demands that you may have against the Company as defined herein, including, but not limited to, any and all claims arising or in any way related to your employment or service with, or separation from, as applicable, the Company, and you and the Company desire to embody in this Agreement the terms, conditions and benefits to be provided in connection with your termination of employment or service with the Company;
NOW THEREFORE, in consideration of the promises made herein, the Parties hereby agree as follows:
Agreement
A. Cessation
1. Cessation Date . Your Cessation is effective as of the close of business on [ ] (your “ Cessation Date ”). The Company shall pay to you all amounts and benefits that have accrued or were earned but remain unpaid through your Cessation Date in respect of Remuneration, payable based on the annual amount then in effect, and unreimbursed expenses, including accrued and unused vacation, on the Cessation Date, regardless of whether you sign this Agreement.
2. Consideration for Release . Subject to your compliance with the terms and conditions of this Agreement, and provided you deliver to the Company this signed Agreement and satisfy all conditions to make the Release effective, the Company shall provide you with the payments and acceleration set forth under Section 6 of the Employment Agreement as compensation for the Release set forth herein.
3. Employee Inventions and Confidentiality Agreement . You acknowledge and agree that you continue to be bound by the Employee Invention Assignment and Confidentiality Agreement previously entered into by and between you and the Company.
B. Release
In consideration of the payments and benefits provided and to be provided to you by the Company under this Agreement, and in connection with your Cessation, by your signature below you agree to the following general release (the “ Release ”).
1. On behalf of yourself, your heirs, executors, administrators, successors, and assigns, you hereby fully and forever generally release and discharge the Company, its current, former and future parents, subsidiaries, affiliated companies, related entities, employee benefit plans, and their fiduciaries, predecessors, successors, officers, directors, shareholders, agents, employees and assigns (collectively, for purposes of this Section B, the “ Company ”) from any and all claims, causes of action, and liabilities up through the date of your execution of this Release. The claims subject to this Release include, but are not limited to, those relating to your employment or service with the Company and/or any predecessor to the Company and the termination, as applicable, of such employment or service. All such claims (including related attorneys’ fees and costs) are barred without regard to whether those claims are based on any alleged breach of a duty arising in statute, contract, or tort. This expressly includes waiver and release of any rights and claims arising under any and all laws, rules, regulations, and ordinances, including, but not limited to: Title VII of the Civil Rights Act of 1964; the Americans With Disabilities Act; the Age Discrimination in Employment Act; the Fair Labor Standards Act; the National Labor Relations Act; the Family and Medical Leave Act; the Employee Retirement Income Security Act of 1974, as amended (“ ERISA ”); the Workers Adjustment and Retraining Notification Act; the California Fair Employment and Housing Act (if applicable); the provisions of the California Labor Code (if applicable); the Equal Pay Act of 1963; and any similar law of any other state or governmental entity. You further waive any rights under Section 1542 of the Civil Code of the State of California or any similar state statute. Section 1542 states: “A general release does not extend to claims which the creditor does not know or suspect to exist in his or her favor at the time of executing the release, which, if known to him or her, must have materially affected his or her settlement with the debtor.” This Release does not extend to, and has no effect upon, any benefits that have accrued, and to which you have become vested or otherwise entitled to, under any employee benefit plan, program or policy sponsored or maintained by the Company, or to your right to indemnification by the Company, and continued coverage by the Company’s director’s and officer’s liability insurance policy, to any claim that arises after the date of this Agreement.
2. In understanding the terms of the Release and your rights, you have been advised to consult with an attorney of your choice prior to executing the Release. You understand that nothing in the Release shall prohibit you from exercising legal rights that are, as a matter of law, not subject to waiver such as: (a) your rights under applicable workers’ compensation laws; (b) your right, if any, to seek unemployment benefits; (c) your right to indemnity under the Indemnity Agreement, the Company’s certificate of incorporation or bylaws, California Labor Code section 2802 or other applicable state-law right to indemnity; and (d) your right to file a charge or complaint with a government agency such as but not limited to the Equal Employment Opportunity Commission, the National Labor Relations Board, the Department of Labor, the California Department of Fair Employment and Housing, or other applicable state agency. Moreover, you will continue to be indemnified for your actions taken while employed by, or providing services to, the Company to the same extent as other then-current or former directors and officers of the Company under the Company’s Certificate of Incorporation and Bylaws and any director or officer indemnification agreement between you and the Company, if any, and you will continue to be covered by the Company’s director’s and officer’s liability insurance policy as in effect from time to time to the same extent as other then-current or former directors and officers of the Company, each subject to the requirements of the laws of the State of California.
3. You understand and agree that the Company will not provide you with the payments and benefits under this Agreement (including as referenced herein and made under the Employment Agreement) unless you execute the Release. You also understand that you have received or will receive, regardless of the execution of the Release, all wages owed to you together with any accrued but unused vacation pay, less applicable withholdings and deductions, earned through your termination date.
4. As part of your existing and continuing obligations to the Company, you have returned to the Company all Company documents (and all copies thereof) and other Company property that you have had in your possession at any time, including but not limited to the Company’s files, notes, drawings, records, business plans and forecasts, financial information, specification, computer-recorded information, tangible property (including, but not limited to, computers, laptops, pagers, etc.), credit cards, entry cards, identification badges and keys; and any materials of any kind which contain or embody any proprietary or confidential information of the Company (and all reproductions thereof). You understand that, even if you did not sign the Release, you are still bound by any and all confidential/proprietary/trade secret information, non-disclosure and inventions assignment agreement(s) signed by you in connection with your employment or service with the Company, or with a predecessor or successor of the Company pursuant to the terms of such agreement(s). Notwithstanding the preceding, if you desire, for the three years from the Effective Date, you may retain any Company-issued mobile device or computer (subject to your obligations under Section 3 above), it being understood that the device remains property of the Company and must be made available to the Company upon request consistent with other property owned by the Company and used by its service providers.
5. You represent and warrant that you are the sole owner of all claims relating to your employment or service with the Company and/or with any predecessor of the Company, and that you have not assigned or transferred any claims relating to your employment or service to any other person or entity.
6. You understand and agree that the Release shall not be construed at any time as an admission of liability or wrongdoing by either the Company or yourself.
7. You agree that during the three (3) year period following your Cessation Date you will not make any negative or disparaging statements or comments, either as fact or as opinion, about the Company, its employees, officers, directors, shareholders, vendors, products or services, business, technologies, market position or performance. The Company (including its subsidiaries and affiliates) agrees that during the three (3) year period following your Cessation Date it will not make, and agrees to cause the executive officers, directors and authorized spokespersons of the Company to refrain from making, any negative or disparaging statements or comments, either as fact or as opinion, about you (or authorizing any statements or comments to be reported as being attributed to the Company). Nothing in this paragraph shall prohibit you or the Company from providing truthful information in response to a subpoena or other legal process.
8. This Release shall become effective on the date of its execution by you. You understand that the payments and benefits under this Agreement (including as referenced herein and made under the Employment Agreement) will become available to you at such time after the Effective Date.
9. In executing the Release, you acknowledge that you have not relied upon any statement made by the Company, or any of its representatives or employees, with regard to the Release unless the representation is specifically included herein. Furthermore, the Release contains our entire understanding regarding eligibility for payments and benefits and supersedes any or all prior representation and agreement regarding the subject matter of the Release. However, the Release does not modify, amend or supersede written Company agreements that are consistent with enforceable provisions of this Release such as your proprietary information and invention assignment agreement, and any stock, stock option and/or stock purchase agreements between the Company and you. Once effective and enforceable, this agreement can only be changed by another written agreement signed by you and an authorized representative of the Company.
C. Miscellaneous
1. Arbitration and Class Action Waiver . You and the Company agree to submit to mandatory binding arbitration any and all claims arising out of or related to your employment or service with the Company and the termination thereof, including, but not limited to, claims for unpaid wages, wrongful termination, torts, stock or stock options or other ownership interest in the Company, and/or discrimination (including harassment) based upon any federal, state or local ordinance, statute, regulation or constitutional provision, except that each party may, at its, his or her option, seek injunctive relief in court related to the improper use, disclosure or misappropriation of a party’s private, proprietary, confidential or trade secret information (collectively, “ Arbitrable Claims ”). Further, to the fullest extent permitted by law, you and the Company agree that no class or collective actions can be asserted in arbitration or otherwise. All claims, whether in arbitration or otherwise, must be brought solely in your or the Company’s individual capacity, and not as a plaintiff or class member in any purported class or collective proceeding. Nothing in this Arbitration and Class Action Waiver section, however, restricts your right, if any, to file in court a representative action under California Labor Code Sections 2698, et seq.
SUBJECT TO THE ABOVE PROVISO, THE PARTIES HEREBY WAIVE ANY RIGHTS THEY MAY HAVE TO TRIAL BY JURY IN REGARD TO ARBITRABLE CLAIMS. THE PARTIES FURTHER WAIVE ANY RIGHTS THEY MAY HAVE TO PURSUE OR PARTICIPATE IN A CLASS OR COLLECTIVE ACTION PERTAINING TO ANY ARBITRABLE CLAIMS BETWEEN YOU AND THE COMPANY.
This Agreement does not restrict your right to file administrative claims you may bring before any government agency where, as a matter of law, the parties may not restrict your ability to file such claims (including, but not limited to, the National Labor Relations Board, the Equal Employment Opportunity Commission and the Department of Labor). However, the parties agree that, to the fullest extent permitted by law, arbitration shall be the exclusive remedy for the subject matter of such administrative claims. The arbitration shall be conducted in Santa Clara County, California through JAMS before a single neutral arbitrator, in accordance with the JAMS employment arbitration rules then in effect. The JAMS rules may be found and reviewed at http://www.jamsadr.com/rules-employment-arbitration. If you are unable to access these rules, please let the Company know and the Company will provide you with a hardcopy. The arbitrator shall issue a written decision that contains the essential findings and conclusions on which the decision is based. In the event of arbitration relating to this Agreement or your service with the Company, each of you and the Company will bear its own costs, including, without limitation, attorneys’ fees.
2. Indemnification . Subject to applicable law, the Company will provide you indemnification to the maximum extent permitted by the Company’s Certificate of Incorporation and Bylaws, in addition to coverage under any directors and officers insurance policies maintained by the Company, with such indemnification to be on terms determined by the Board or any of its committees, but in no case less favorable than those provided to any other executive officer or director of the Company. You will continue to be covered by any indemnification by and between you and the Company, which, if applicable, continues in full force and effect.
3. Section 409A . To the extent (a) any payments to which Executive becomes entitled under this Agreement, or any agreement or plan referenced herein, in connection with Executive’s termination of employment with the Company constitute deferred compensation subject to Section 409A of the Code and (b) Executive is deemed at the time of such termination of employment to be a “specified” employee under Section 409A of the Code, then such payment or payments will not be made or commence until the earlier of (i) the expiration of the six (6)-month period measured from the date of Executive’s termination and (ii) the date of Executive’s death following such termination; provided, however, that such deferral will be effected only to the extent required to avoid adverse tax treatment to Executive, including (without limitation) the additional twenty percent (20%) tax for which Executive would otherwise be liable under Section 409A(a)(1)(B) of the Code in the absence of such deferral. Upon the expiration of the applicable deferral period, any payments which would have otherwise been made during that period (whether in a single sum or in installments) in the absence of this paragraph will be paid to Executive or Executive’s beneficiary in one lump sum (without interest).
To the extent that any provision of this Agreement is ambiguous as to its exemption or compliance with Section 409A, the provision will be read in such a manner so that all payments hereunder are exempt from Section 409A to the maximum permissible extent, and for any payments where such construction is not tenable, that those payments comply with Section 409A to the maximum permissible extent. To the extent any payment under this Agreement may be classified as a “short-term deferral” within the meaning of Section 409A, such payment will be deemed a short-term deferral, even if it may also qualify for an exemption from Section 409A under another provision of Section 409A.
Payments pursuant to this Agreement (or referenced in this Agreement) are intended to constitute separate payments for purposes of Section 1.409A-2(b)(2) of the regulations under Section 409A.
Notwithstanding the foregoing, in the event the Company determines that any compensation or benefits payable under this Agreement may be subject to Section 409A, the Company will work in good faith with you to adopt such amendments to this Agreement, or to adopt such policies and procedures or take such other actions that the Company determines are necessary or appropriate, to avoid the imposition of taxes under Section 409A.
4. Limitation on Payments Under Code Section 280G . In the event that the payments and other benefits provided for in this Agreement or otherwise payable to the you (i) constitute “parachute payments” within the meaning of Section 280G of the Code, and (ii) would be subject to the excise tax imposed by Section 4999 of the Code (the “ Excise Tax ”), then your benefits under this Agreement shall be either:
(a) delivered in full; or
(b) delivered as to such lesser extent that would result in no portion of such benefits being subject to the Excise Tax, by reducing payments in the following order: first a pro rata reduction of (i) cash payments subject to Section 409A of the Code as deferred compensation and (ii) cash payments not subject to Section 409A of the Code, and second a pro rata cancellation of (i) equity award compensation subject to Section 409A of the Code as deferred compensation and (ii) equity award compensation not subject to Section 409A of the Code. In the event that acceleration of vesting of equity award compensation is to be reduced, such acceleration of vesting shall be cancelled in the reverse order of the date of grant;
whichever of the foregoing amounts in (a) and (b) above, taking into account the applicable federal, state and local income taxes and the Excise Tax, results in the receipt by you on an after-tax basis, of the greatest amount of benefits, notwithstanding that all or some portion of such benefits may be taxable under Section 4999 of the Code.
Unless the Company and you otherwise agree in writing, any determination required under this Section shall be made in writing by the Company’s independent public accountants (the “ Accountants ”), whose determination shall be conclusive and binding upon you and the Company for all purposes. For purposes of making the calculations required by this Section, the Accountants may make reasonable assumptions and approximations concerning applicable taxes and may rely on reasonable, good faith interpretations concerning the application of Section 280G and 4999 of the Code. The Company and you shall furnish to the Accountants such information and documents as the Accountants may reasonably request in order to make a determination under this Section. The Company shall bear all costs the Accountants may reasonably incur in connection with any calculations contemplated by this Section.
5. Severability . If any provision of this Agreement shall be found by any arbitrator or court of competent jurisdiction to be invalid or unenforceable, then the parties hereby waive such provision to the extent of its invalidity or unenforceability, and agree that all other provisions in this Agreement shall continue in full force and effect.
6. No Waiver . The failure by either party at any time to require performance or compliance by the other of any of its obligations or agreements shall in no way affect the right to require such performance or compliance at any time thereafter. The waiver by either party of a breach of any provision hereof shall not be taken or held to be a waiver of any preceding or succeeding breach of such provision or as a waiver of the provision itself. No waiver of any kind shall be effective or binding, unless it is in writing and is signed by the party against whom such waiver is sought to be enforced.
7. Assignment . This Agreement and all rights hereunder are personal to you and may not be transferred or assigned by you at any time. The Company may assign its rights, together with its obligations hereunder, to any parent, subsidiary, affiliate or successor, or in connection with any sale, transfer or other disposition of all or substantially all of its business and assets, provided, however, that any such assignee assumes the Company’s obligations hereunder.
8. Withholding . All sums payable to you hereunder shall be in United States Dollars and shall be reduced by applicable federal, state, local and other withholding and similar taxes and payments required by applicable law.
9. Entire Agreement . This Agreement constitutes the entire and only agreement and understanding between the parties relating to Cessation and the termination, as applicable, of your employment or service with the Company.
10. Amendment . This Agreement may only be amended, modified or waived, in whole or in part, in a writing executed by both you and the Company (as authorized by the Board).
11. Binding Nature . This Agreement shall be binding upon, and inure to the benefit of, the successors and personal representatives of the respective parties hereto. You acknowledge that you have had the opportunity to discuss this matter with and obtain advice from his private attorney, have had sufficient time to, and have carefully read and fully understand all the provisions of this Agreement, and are knowingly and voluntarily entering into this Agreement.
12. Counterparts . This Agreement may be executed in two or more counterparts, each of which shall be deemed to be an original but all of which, taken together, constitute one and the same agreement.
13. Governing Law . This Agreement and the rights and obligations of the parties hereto shall be construed in accordance with the laws of the State of California, without giving effect to the principles of conflict of laws.
IN WITNESS WHEREOF, the Parties have executed this Agreement as of the date indicated below.
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GLU MOBILE INC. |
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Name: Benjamin T. Smith, IV |
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Niccolo de Masi |
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Title: Compensation Committee, Chair |
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Date: |
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[SIGNATURE PAGE TO GENERAL RELEASE AGREEMENT]
Exhibit 99.01
Glu Reports Third Quarter 2016 Financial Results
· Q3 revenue of $51.4 million and Q3 Bookings of $51.3 million
· Acquired controlling interest in Crowdstar, owner and operator of flagship fashion and styling game, Covet Fashion , as well as Design Home , a new title in beta
· CEO succession: Nick Earl named CEO; Niccolo de Masi named Executive Chairman
· Cash and cash equivalents of $147.5 million and no debt as of September 30, 2016
SAN FRANCISCO, Calif. — November 3, 2016 — Glu Mobile Inc. (NASDAQ:GLUU), a leading global developer and publisher of free-to-play games for smartphone and tablet devices, today announced financial results for its third quarter ended September 30, 2016.
“Our third quarter bookings were driven by the continued traction of Tap Sports Baseball 2016 , Cooking Dash 2016 and Racing Rivals , as well as the launch of Gordon Ramsay Dash and ongoing success of Kim Kardashian: Hollywood ,” stated Niccolo de Masi, Executive Chairman of Glu. “While our third quarter results included royalty impairments from underperforming titles, we believe that we made meaningful progress on our evergreen strategy of deepening monetization of our biggest spenders and most engaged players in our genre-leading live games.”
De Masi continued, “As I transition to the Company’s Executive Chairman I will work to ensure a smooth handover to newly named Chief Executive Officer, Nick Earl. Nick is a video game industry veteran with a proven track record of creating hit games and I am confident in his ability to lead Glu in the future.”
“I am very excited about being named CEO and am confident in our ability to grow longer-term given Glu’s strength in free-to-play mobile games,” stated Nick Earl. Earl continued “Through our acquisition of a controlling interest in Crowdstar, we are pleased that we will be adding Covet Fashion , their flagship fashion and styling game. With more than 35 million lifetime installs to date, we are excited at the prospect of adding this evergreen type title to our portfolio. In addition, we are very optimistic about the potential of Design Home , a new game from Crowdstar that is currently showing promising performance in beta testing in Canada. We expect the acquisition to be accretive given Crowdstar’s history of profitability combined with the synergies we expect to realize.”
Third Quarter 2016 Financial Highlights:
· Revenue: Total revenue was $51.4 million in the third quarter of 2016 compared to $63.3 million in the third quarter of 2015.
· Bookings: Total bookings were $51.3 million in the third quarter of 2016, compared to $64.4 million in the third quarter of 2015. Bookings do not reflect the deferral of certain game revenue that Glu recognizes over the estimated useful lives of paying users of Glu’s games and excludes changes in deferred revenue and litigation settlement proceeds.
· Gross Margin: Gross margin was negative (9)% in the third quarter of 2016 compared to 53% in the third quarter of 2015. Gross margin included $29.8 million in prepaid royalty impairments during the third quarter of 2016.
· Net Income/(Loss) and EPS: Net loss was $(43.7) million for the third quarter of 2016 compared to net income of $158,000 for the third quarter of 2015. EPS loss was $(0.33) for the third quarter of 2016, based on 133.1 million weighted-average basic and diluted shares outstanding, compared to EPS of approximately breakeven for the third quarter of 2015, based on 131.5 million weighted-average diluted shares outstanding.
· Cash and Cash Flows : As of September 30, 2016, Glu had cash and cash equivalents of $147.5 million and no debt. Cash flows used in operations were $(9.8) million for the third quarter of 2016 compared to $(7.8) million used in the third quarter of 2015.
We are still evaluating the results of our annual goodwill impairment assesment and expect to have this finalized prior to filing our Quarterly Report on Form 10-Q on November 9, 2016.
A reconciliation of GAAP to non-GAAP financial measures used by company management to assess the Company’s operating results has been provided in the financial statement tables included in this press release. An explanation of these measures is also included below under the heading “Use of Non-GAAP Financial Measures.”
Recent Developments and Strategic Initiatives:
· Today, we announced that we acquired a controlling interest in Crowdstar, a leader in fashion and styling games for women.
· Today, we announced the transition of Nick Earl to CEO and Niccolo de Masi to Executive Chairman.
· In September, we announced the acquisition of community driven app, Poke Radar .
“Our core catalog titles continued to be the primary drivers of our third quarter bookings,” stated Eric R. Ludwig, Chief Operating Officer and Chief Financial Officer. “We are excited about the acquisition of a controlling interest in Crowdstar and are confident that Glu can execute its long-term growth strategy, particularly given our strong balance sheet.”
Business Outlook as of November 3, 2016:
The following forward-looking statements reflect expectations as of November 3, 2016. Results may be materially different and are affected by many factors, such as: consumer demand for mobile entertainment and specifically Glu’s products; consumer demand for smartphones, tablets and next-generation platforms; our ability to improve the monetization of our titles to create evergreen games and continue to successfully launch and update new games; development delays on Glu’s products; continued uncertainty in the global economic environment; competition in the industry; storefront featuring; changes in foreign exchange rates; Glu’s effective tax rate and other factors detailed in this release and in Glu’s SEC filings.
Fourth Quarter Expectations — Quarter Ending December 31, 2016:
Glu does not provide guidance on a GAAP basis primarily due to the fact that Glu is unable to predict, with reasonable accuracy, future changes in its deferred revenue and corresponding cost of revenue. The amount of Glu’s deferred revenue and cost of revenue for any given period is difficult to predict due to differing estimated useful lives of paying users across games, variability of monthly revenue, platform commissions and royalties by game and unpredictability of revenue from new game releases. Future changes in deferred revenue and deferred cost of revenue are uncertain and could be material to Glu’s results computed in accordance with GAAP. Accordingly, Glu is unable to provide a reconciliation of the non-GAAP financial measure guidance to the corresponding GAAP measure without unreasonable effort.
· Bookings are expected to be between $46.0 million and $48.0 million.
· Adjusted gross margin (as previously defined) is expected to be approximately 64.6%.
· Adjusted operating expenses are expected to be between $40.0 million and $40.3 million.
· Depreciation expense is expected to be $0.8 million.
· Income tax is expected to be an expense of approximately $0.3 million.
· Stock-based compensation expense is expected to be $3.5 million and amortization of intangible assets is expected to be $2.2 million.
· Weighted-average common shares outstanding are expected to be approximately 134.0 million basic and diluted.
2016 Expectations — Full Year Ending December 31, 2016:
Glu does not provide guidance on a GAAP basis primarily due to the fact that Glu is unable to predict, with reasonable accuracy, future changes in its deferred revenue and corresponding cost of revenue. The amount of Glu’s deferred revenue and cost of revenue for any given period is difficult to predict due to differing estimated useful lives of paying users across games, variability of monthly revenue, platform commissions and royalties by game and unpredictability of revenue from new game releases. Future changes in deferred revenue and deferred cost of revenue are uncertain and could be material to Glu’s results computed in accordance with GAAP. Accordingly, Glu is unable to provide a reconciliation of the non-GAAP financial measure guidance to the corresponding GAAP measure without unreasonable effort.
· Bookings are expected to be between $202.2 million and $204.2 million.
· Adjusted gross margin (as previously defined) is expected to be approximately 48%.
· Adjusted operating expenses are expected to range from $147.3 million to $147.6 million.
· Depreciation expense is expected to be $2.9 million.
· Income tax expense is expected to be $0.5 million.
· Stock-based compensation expense is expected to be $13.1 million, amortization and impairment of intangible assets is expected to be $14.2 million and restructuring charges are expected to be $2.3 million.
· Weighted-average common shares outstanding are expected to be approximately 131.9 million basic and diluted.
· We expect to have cash and short-term investments at December 31, 2016 of at least $80.0 million.
Quarterly Conference Call
Glu will discuss its quarterly results via teleconference today at 1:30 p.m. Pacific Time (4:30 p.m. Eastern Time). Please dial (866) 582-8907, or if out side the U.S., (760) 298-5046, with conference ID # 84580416 to access the conference call at least five minutes prior to the 1:30 p.m. Pacific Time start time. A live webcast and replay of the call will also be available on the investor relations portion of the company’s website at www.glu.com/investors. An audio replay will be available between 4:30 p.m. Pacific Time, November 3, 2016, and 8:59 p.m. Pacific Time, November 10, 2016, by calling (855) 859-2056, or (404) 537-3406, with conference ID # 84580416.
Disclosure Using Social Media Channels
Glu currently announces material information to its investors using SEC filings, press releases, public conference calls and webcasts. Glu uses these channels as well as social media channels to announce information about the company, games, employees and other issues. Given SEC guidance regarding the use of social media channels to announce material information to investors, Glu is notifying investors, the media, its players and others interested in the company that in the future, it might choose to communicate material information via social media channels or, it is possible that information it discloses through social media channels may be deemed to be material. Therefore, Glu encourages investors, the media, players and others interested in Glu to review the information posted on the company forum (http://ggnbb.glu.com/forum.php) and the company Facebook site (https://www.facebook.com/glumobile), the company twitter account (https://twitter.com/glumobile) and Mr. de Masi’s twitter account (https://twitter.com/niccolodemasi). Investors, the media, players or other interested parties can subscribe to the company blog and twitter feed and Mr. de Masi’s twitter feed at the addresses listed above. Any updates to the list of social media channels Glu will use to announce material information will be posted on the Investor Relations page of the company’s website at www.glu.com/investors.
Use of Non-GAAP Financial Measures
To supplement Glu’s unaudited condensed consolidated financial data presented in accordance with GAAP, Glu uses certain non-GAAP measures of financial performance. The presentation of these non-GAAP financial measures is not intended to be considered in isolation from, as a substitute for, or superior to, the financial information prepared and presented in accordance with GAAP, and may be different from non-GAAP financial measures used by other companies. In addition, these non-GAAP measures have limitations in that they do not reflect all of the amounts associated with Glu’s results of operations as determined in accordance with GAAP. The non-GAAP financial measures used by Glu include historical and estimated Bookings, Adjusted cost of revenue, Adjusted operating expenses, Adjusted gross profit, Adjusted gross margin, and Adjusted operating expense. These non-GAAP financial measures exclude the following items from Glu’s unaudited consolidated statements of operations:
· Change in deferred revenue and deferred cost of revenue;
· Amortization and impairment of intangible assets;
· Non-cash warrant expense;
· Stock-based compensation expense;
· Restructuring charges;
· Litigation settlement proceeds and costs;
· Transitional costs;
· Change in fair value of strategic investments; and
· Foreign currency exchange gains and losses primarily related to the revaluation of assets and liabilities.
Bookings do not reflect the deferral of certain game revenue that Glu recognizes over the estimated useful lives of paying users of Glu’s games and excludes changes in deferred revenue and litigation settlement proceeds.
Glu may consider whether significant items that arise in the future should also be excluded in calculating the non-GAAP financial measures it uses.
Glu believes that these non-GAAP financial measures, when taken together with the corresponding GAAP financial measures, provide meaningful supplemental information regarding Glu’s performance by excluding certain items that may not be indicative of Glu’s core business, operating results or future outlook. Glu’s management uses, and believes that investors benefit from referring to, these non-GAAP financial measures in assessing Glu’s operating results, as well as when planning, forecasting and analyzing future periods. These non-GAAP financial measures also facilitate comparisons of Glu’s performance to prior periods.
Cautions Regarding Forward-Looking Statements
This news release contains forward-looking statements, including those regarding our “Business Outlook as of November 3, 2016” (“Fourth Quarter Expectations — Quarter Ending December 31, 2016” and “2016 Expectations — Full Year Ending December 31, 2016”), and the statements regarding that we believe that we made meaningful progress on our evergreen strategy of deepening monetization of our biggest spenders and most engaged players in our genre-leading live games; that Mr. de Masi will work to ensure a smooth handover to Mr. Earl; that Mr. de Masi is confident in Mr. Earl’s ability to lead Glu in the future; that Mr. Earl is confident in Glu’s ability to grow longer-term given its strength in free-to-play mobile games; that we are very optimistic about the potential of Design Home; that we expect the acquisition to be accretive given Crowdstar’s history of profitability combined with synergies we expect to realize; and that we are confident that Glu can execute its long-term growth strategy, particularly given our strong balance sheet. These forward-looking statements are subject to material risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements. Investors should consider important risk factors, which include: the risks identified under “Business Outlook as of November 3, 2016”; the risk that Glu will be unable to successfully integrate CrowdStar and its employees and achieve expected synergies; the risk that Glu will have difficulty retaining key Crowdstar employees; the risk that Glu does not realize the anticipated strategic benefits from our celebrity partnerships; the risk that the number of social followers of our celebrity partners does not correlate to strong performance for our celebrity titles; the risk that consumer demand for smartphones, tablets and next-generation platforms does not grow as significantly as we anticipate or that we will be unable to capitalize on any such growth; the risk that we do not realize a sufficient return on our investment with respect to our efforts to develop free-to-play games for smartphones, tablets and next-generation platforms, the risk that we will not be able to maintain our good relationships with Apple and Google; the risk that our development expenses for games for smartphones, tablets and next-generation platforms are greater than we anticipate; the risk that our recently and newly launched games are less popular than anticipated or decline in popularity and monetization rate more quickly than we anticipate; the risk that our newly released games will be of a quality less than desired by reviewers and consumers; the risk that the mobile games market, particularly with respect to free-to-play gaming, is smaller than anticipated; the risk that we may lose a key intellectual property license; the risk that we are unable to recruit and retain qualified personnel for developing and maintaining the games in our product pipeline resulting in reduced monetization of a game, product launch delays or games being eliminated from our pipeline altogether; and other risks detailed under the caption “Risk Factors” in our Form 10-Q filed with the Securities and Exchange Commission on August 9, 2016 and our other SEC filings. You can locate these reports through our website at http://www.glu.com/investors. We are under no obligation, and expressly disclaim any obligation, to update or alter our forward-looking statements whether as a result of new information, future events or otherwise.
About Glu Mobile
Glu Mobile (NASDAQ:GLUU) is a leading global developer and publisher of free-to-play games for smartphone and tablet devices. Glu is focused on creating compelling original IP games such as CONTRACT KILLER, COOKING DASH, DEER HUNTER, DINER DASH, DINO HUNTER: DEADLY SHORES, ETERNITY WARRIORS, FRONTLINE COMMANDO, RACING RIVALS, TAP SPORTS BASEBALL, and TAP SPORTS FOOTBALL, and branded IP games including BRITNEY SPEARS: AMERICAN DREAM, GORDON RAMSAY DASH, KENDALL & KYLIE, KIM KARDASHIAN: HOLLYWOOD, and SNIPER X WITH JASON STATHAM on the App Store, Google Play, Amazon Appstore, Facebook, Mac App Store, and Windows Phone. Glu’s unique technology platform enables its titles to be accessible to a broad audience of consumers globally. Founded in 2001, Glu is headquartered in San Francisco with U.S. offices outside Seattle and in San Mateo, Portland and Long Beach, and international locations in Canada, China, India, Japan, and Russia. Consumers can find high-quality entertainment wherever they see the ‘g’ character logo or at www.glu.com.
For live updates, please follow Glu via Twitter at www.twitter.com/glumobile or become a Glu fan at www.facebook.com/glumobile.
CONTRACT KILLER, COOKING DASH, DEER HUNTER, DINER DASH, DINO HUNTER: DEADLY SHORES, ETERNITY WARRIORS, FRONTLINE COMMANDO, RACING RIVALS, TAP SPORTS BASEBALL, TAP SPORTS FOOTBALL, SNIPER X, GLU, GLU MOBILE, and the ‘g’ character logo are trademarks of Glu Mobile Inc.
Glu Mobile Inc.
Consolidated Balance Sheets
(in thousands)
(unaudited)
|
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September 30, |
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December 31, |
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2016 |
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2015 |
|
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ASSETS |
|
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||
|
Cash and cash equivalents |
|
$ |
147,515 |
|
$ |
180,542 |
|
|
Accounts receivable, net |
|
14,161 |
|
17,956 |
|
||
|
Prepaid royalties |
|
10,464 |
|
23,715 |
|
||
|
Prepaid expenses and other current assets |
|
18,392 |
|
14,841 |
|
||
|
Total current assets |
|
190,532 |
|
237,054 |
|
||
|
|
|
|
|
|
|
||
|
Property and equipment, net |
|
5,539 |
|
5,447 |
|
||
|
Restricted cash |
|
1,162 |
|
1,498 |
|
||
|
Long-term prepaid royalties |
|
31,877 |
|
46,944 |
|
||
|
Other long-term assets |
|
3,866 |
|
1,386 |
|
||
|
Intangible assets, net |
|
10,891 |
|
22,767 |
|
||
|
Goodwill |
|
88,108 |
|
87,890 |
|
||
|
Total assets |
|
$ |
331,975 |
|
$ |
402,986 |
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|
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LIABILITIES AND STOCKHOLDERS’ EQUITY |
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Accounts payable |
|
$ |
10,647 |
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$ |
9,386 |
|
|
Accrued liabilities |
|
1,646 |
|
1,654 |
|
||
|
Accrued compensation |
|
9,342 |
|
7,100 |
|
||
|
Accrued royalties |
|
7,769 |
|
21,032 |
|
||
|
Accrued restructuring |
|
381 |
|
342 |
|
||
|
Deferred revenue |
|
32,426 |
|
31,112 |
|
||
|
Total current liabilities |
|
62,211 |
|
70,626 |
|
||
|
Long-term accrued royalties |
|
21,384 |
|
24,347 |
|
||
|
Other long-term liabilities |
|
1,331 |
|
1,585 |
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||
|
Total liabilities |
|
84,926 |
|
96,558 |
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|
|
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|
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Common stock |
|
14 |
|
13 |
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||
|
Additional paid-in capital |
|
568,396 |
|
557,748 |
|
||
|
Accumulated other comprehensive income/(loss) |
|
113 |
|
(85 |
) |
||
|
Accumulated deficit |
|
(321,474 |
) |
(251,248 |
) |
||
|
Stockholders’ equity |
|
247,049 |
|
306,428 |
|
||
|
Total liabilities and stockholders’ equity |
|
$ |
331,975 |
|
$ |
402,986 |
|
Glu Mobile Inc.
Condensed Consolidated Statements of Operations
(in thousands, except per share data)
(unaudited)
|
|
|
Three Months Ended |
|
Nine Months Ended |
|
||||||||
|
|
|
September 30, |
|
September 30, |
|
September 30, |
|
September 30, |
|
||||
|
|
|
2016 |
|
2015 |
|
2016 |
|
2015 |
|
||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue |
|
$ |
51,381 |
|
$ |
63,250 |
|
$ |
154,272 |
|
$ |
188,870 |
|
|
|
|
|
|
|
|
|
|
|
|
||||
|
Cost of revenue: |
|
|
|
|
|
|
|
|
|
||||
|
Platform commissions, royalties and other |
|
18,918 |
|
25,890 |
|
57,771 |
|
73,431 |
|
||||
|
Impairment of prepaid royalties and minimum guarantees |
|
29,836 |
|
1,555 |
|
29,984 |
|
1,644 |
|
||||
|
Impairment and amortization of intangible assets |
|
7,320 |
|
2,360 |
|
11,981 |
|
7,228 |
|
||||
|
Total cost of revenue |
|
56,074 |
|
29,805 |
|
99,736 |
|
82,303 |
|
||||
|
Gross (loss)/profit |
|
(4,693 |
) |
33,445 |
|
54,536 |
|
106,567 |
|
||||
|
|
|
|
|
|
|
|
|
|
|
||||
|
Operating expenses: |
|
|
|
|
|
|
|
|
|
||||
|
Research and development |
|
20,080 |
|
16,304 |
|
61,113 |
|
52,855 |
|
||||
|
Sales and marketing |
|
10,104 |
|
12,302 |
|
33,663 |
|
37,511 |
|
||||
|
General and administrative |
|
7,011 |
|
4,419 |
|
22,091 |
|
19,254 |
|
||||
|
Amortization of intangible assets |
|
— |
|
31 |
|
— |
|
190 |
|
||||
|
Restructuring charge |
|
57 |
|
— |
|
2,279 |
|
— |
|
||||
|
Total operating expenses |
|
37,252 |
|
33,056 |
|
119,146 |
|
109,810 |
|
||||
|
|
|
|
|
|
|
|
|
|
|
||||
|
(Loss)/income from operations |
|
(41,945 |
) |
389 |
|
(64,610 |
) |
(3,243 |
) |
||||
|
|
|
|
|
|
|
|
|
|
|
||||
|
Interest and other expense, net: |
|
|
|
|
|
|
|
|
|
||||
|
Interest income |
|
12 |
|
15 |
|
58 |
|
34 |
|
||||
|
Other expense |
|
(1,665 |
) |
(167 |
) |
(5,695 |
) |
(644 |
) |
||||
|
Interest and other (expense), net |
|
(1,653 |
) |
(152 |
) |
(5,637 |
) |
(610 |
) |
||||
|
|
|
|
|
|
|
|
|
|
|
||||
|
(Loss)/income before income taxes |
|
(43,598 |
) |
237 |
|
(70,247 |
) |
(3,853 |
) |
||||
|
Income tax benefit/(provision) |
|
(129 |
) |
(79 |
) |
21 |
|
(374 |
) |
||||
|
Net (loss)/income |
|
$ |
(43,727 |
) |
$ |
158 |
|
$ |
(70,226 |
) |
$ |
(4,227 |
) |
|
|
|
|
|
|
|
|
|
|
|
||||
|
Net (loss)/income per share — basic and diluted |
|
|
|
|
|
|
|
|
|
||||
|
Basic |
|
$ |
(0.33 |
) |
$ |
0.00 |
|
$ |
(0.54 |
) |
$ |
(0.04 |
) |
|
Diluted |
|
$ |
(0.33 |
) |
$ |
0.00 |
|
$ |
(0.54 |
) |
$ |
(0.04 |
) |
|
|
|
|
|
|
|
|
|
|
|
||||
|
Weighted average common shares outstanding - basic and diluted |
|
|
|
|
|
|
|
|
|
||||
|
Basic |
|
133,110 |
|
127,287 |
|
131,160 |
|
115,775 |
|
||||
|
Diluted |
|
133,110 |
|
131,486 |
|
131,160 |
|
115,775 |
|
||||
|
|
|
|
|
|
|
|
|
|
|
||||
|
Stock-based compensation expense included in: |
|
|
|
|
|
|
|
|
|
||||
|
Research and development |
|
$ |
1,135 |
|
$ |
868 |
|
$ |
3,165 |
|
$ |
2,464 |
|
|
Sales and marketing |
|
263 |
|
277 |
|
747 |
|
777 |
|
||||
|
General and administrative |
|
1,692 |
|
1,911 |
|
5,684 |
|
4,976 |
|
||||
|
Total stock-based compensation expense |
|
$ |
3,090 |
|
$ |
3,056 |
|
$ |
9,596 |
|
$ |
8,217 |
|
Glu Mobile Inc.
GAAP to Adjusted Results Reconciliation
(in thousands, except per share data)
(unaudited)
|
|
|
For the Three Months Ended |
|
|||||||||||||||||||
|
|
|
March 31, |
|
June 30, |
|
September 30, |
|
December 31, |
|
March 31, |
|
June 30, |
|
September 30, |
|
|||||||
|
|
|
2015 |
|
2015 |
|
2015 |
|
2015 |
|
2016 |
|
2016 |
|
2016 |
|
|||||||
|
GAAP gross profit/(loss) |
|
$ |
40,726 |
|
$ |
32,396 |
|
$ |
33,445 |
|
$ |
35,596 |
|
$ |
31,841 |
|
$ |
27,388 |
|
$ |
(4,693 |
) |
|
Impairment and amortization of intangible assets in cost of revenue |
|
2,434 |
|
2,434 |
|
2,360 |
|
2,325 |
|
2,324 |
|
2,336 |
|
7,320 |
|
|||||||
|
Non-cash warrant benefit/(expense) |
|
93 |
|
135 |
|
1,896 |
|
(116 |
) |
9 |
|
(32 |
) |
(6 |
) |
|||||||
|
Adjusted gross profit (redfined)* |
|
43,253 |
|
34,965 |
|
37,701 |
|
37,805 |
|
34,174 |
|
29,692 |
|
2,621 |
|
|||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
|
Change in deferred revenue and litigation settlement proceeds |
|
(7,023 |
) |
1,329 |
|
1,174 |
|
(3,135 |
) |
(530 |
) |
2,575 |
|
(102 |
) |
|||||||
|
Change in deferred platform commissions and royalty expense |
|
2,819 |
|
(321 |
) |
(780 |
) |
1,497 |
|
(676 |
) |
(348 |
) |
(198 |
) |
|||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
|
Adjusted gross profit (as previously defined)* |
|
$ |
39,049 |
|
$ |
35,973 |
|
$ |
38,095 |
|
$ |
36,167 |
|
$ |
32,968 |
|
$ |
31,919 |
|
$ |
2,321 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
|
GAAP operating expense |
|
38,214 |
|
38,540 |
|
33,056 |
|
38,654 |
|
41,026 |
|
40,868 |
|
37,252 |
|
|||||||
|
Stock-based compensation |
|
(2,129 |
) |
(3,032 |
) |
(3,056 |
) |
(3,469 |
) |
(3,545 |
) |
(2,961 |
) |
(3,090 |
) |
|||||||
|
Amortization of intangible assets in operating expenses |
|
(127 |
) |
(32 |
) |
(31 |
) |
(11 |
) |
— |
|
— |
|
— |
|
|||||||
|
Litigation costs and settlement proceeds |
|
— |
|
(476 |
) |
390 |
|
— |
|
— |
|
— |
|
— |
|
|||||||
|
Transitional costs |
|
(72 |
) |
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
|||||||
|
Restructuring charge |
|
— |
|
— |
|
— |
|
(1,075 |
) |
(106 |
) |
(2,116 |
) |
(57 |
) |
|||||||
|
Adjusted operating expense |
|
35,886 |
|
35,000 |
|
30,359 |
|
34,099 |
|
37,375 |
|
35,791 |
|
34,105 |
|
|||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
|
Adjusted operating expense break-out: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
|
GAAP research and development expense |
|
$ |
18,243 |
|
$ |
18,308 |
|
$ |
16,304 |
|
$ |
20,001 |
|
$ |
20,312 |
|
$ |
20,721 |
|
$ |
20,080 |
|
|
Stock-based compensation |
|
(760 |
) |
(836 |
) |
(868 |
) |
(1,099 |
) |
(1,194 |
) |
(837 |
) |
(1,135 |
) |
|||||||
|
Adjusted research and development expense |
|
17,483 |
|
17,472 |
|
15,436 |
|
18,902 |
|
19,118 |
|
19,884 |
|
18,945 |
|
|||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
|
GAAP sales and marketing expense |
|
12,438 |
|
12,771 |
|
12,302 |
|
10,729 |
|
12,624 |
|
10,935 |
|
10,104 |
|
|||||||
|
Stock-based compensation |
|
(218 |
) |
(282 |
) |
(277 |
) |
(305 |
) |
(292 |
) |
(191 |
) |
(263 |
) |
|||||||
|
Adjusted sales and marketing expense |
|
12,220 |
|
12,489 |
|
12,025 |
|
10,424 |
|
12,332 |
|
10,744 |
|
9,841 |
|
|||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
|
GAAP general & administrative expense |
|
7,406 |
|
7,429 |
|
4,419 |
|
6,838 |
|
7,984 |
|
7,096 |
|
7,011 |
|
|||||||
|
Transitional costs |
|
(72 |
) |
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
|||||||
|
Stock-based compensation |
|
(1,151 |
) |
(1,914 |
) |
(1,911 |
) |
(2,065 |
) |
(2,059 |
) |
(1,933 |
) |
(1,692 |
) |
|||||||
|
Litigation costs |
|
— |
|
(476 |
) |
|
390 |
|
— |
|
— |
|
— |
|
— |
|
||||||
|
Adjusted general and administrative expense |
|
$ |
6,183 |
|
$ |
5,039 |
|
$ |
2,898 |
|
$ |
4,773 |
|
$ |
5,925 |
|
$ |
5,163 |
|
$ |
5,319 |
|
*We have provided Adjusted gross profit (as previously defined) and Adjusted gross profit (redefined) in this earnings release. The only difference between the two measures is the inclusion (Adjusted gross profit (redefined)) or exclusion (Adjusted gross profit (as previously defined)) of the impact from revenue and cost of revenue deferrals accounting treatment on our products. This is the last quarter we will report Adjusted gross profit (as previously defined) and going forward, we will only be providing GAAP and Adjusted gross profit (redefined) results.
Glu Mobile Inc.
Adjusted EBITDA
(in thousands)
(unaudited)
|
|
|
For the Three Months Ended |
|
|||||||||||||||||||
|
|
|
March 31, |
|
June 30, |
|
September 30, |
|
December 31, |
|
March 31, |
|
June 30, |
|
September 30, |
|
|||||||
|
|
|
2015 |
|
2015 |
|
2015 |
|
2015 |
|
2016 |
|
2016 |
|
2016 |
|
|||||||
|
GAAP net income/(loss) |
|
$ |
1,124 |
|
$ |
(5,509 |
) |
$ |
158 |
|
$ |
(2,958 |
) |
$ |
(8,550 |
) |
$ |
(17,949 |
) |
$ |
(43,727 |
) |
|
Non-cash warrant expense/(benefit) |
|
93 |
|
135 |
|
1,896 |
|
(116 |
) |
9 |
|
(32 |
) |
(6 |
) |
|||||||
|
Impairment and amortization of intangible assets in cost of revenue |
|
2,561 |
|
2,466 |
|
2,391 |
|
2,336 |
|
2,324 |
|
2,336 |
|
7,320 |
|
|||||||
|
Depreciation |
|
706 |
|
732 |
|
718 |
|
706 |
|
656 |
|
720 |
|
768 |
|
|||||||
|
Stock-based compensation |
|
2,129 |
|
3,032 |
|
3,056 |
|
3,469 |
|
3,545 |
|
2,961 |
|
3,090 |
|
|||||||
|
Transitional costs |
|
72 |
|
— |
|
— |
|
— |
|
— |
|
— |
|
— |
|
|||||||
|
Litigation costs and settlement proceeds |
|
— |
|
476 |
|
(390 |
) |
— |
|
— |
|
— |
|
— |
|
|||||||
|
Restructuring charge |
|
— |
|
— |
|
— |
|
1,075 |
|
106 |
|
2,116 |
|
57 |
|
|||||||
|
Foreign currency exchange (gain)/loss |
|
290 |
|
186 |
|
167 |
|
149 |
|
(148 |
) |
(182 |
) |
1,035 |
|
|||||||
|
Change in fair value of strategic investments |
|
— |
|
— |
|
— |
|
— |
|
(300 |
) |
4,660 |
|
630 |
|
|||||||
|
Interest and other expense |
|
(6 |
) |
(12 |
) |
(15 |
) |
(15 |
) |
(21 |
) |
(25 |
) |
(12 |
) |
|||||||
|
Income tax provision/(benefit) |
|
1,104 |
|
(809 |
) |
79 |
|
(234 |
) |
(166 |
) |
16 |
|
129 |
|
|||||||
|
Total Adjusted EBITDA (redfined)* |
|
$ |
8,073 |
|
$ |
697 |
|
$ |
8,060 |
|
$ |
4,412 |
|
$ |
(2,545 |
) |
$ |
(5,379 |
) |
$ |
(30,716 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
|
Change in deferred revenue and litigation settlement proceeds |
|
(7,023 |
) |
1,329 |
|
1,174 |
|
(3,135 |
) |
(530 |
) |
2,575 |
|
(102 |
) |
|||||||
|
Change in deferred platform commissions and royalty expense |
|
2,819 |
|
(321 |
) |
(780 |
) |
1,497 |
|
(676 |
) |
(348 |
) |
(198 |
) |
|||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
|
Total Adjusted EBITDA (as previously defined)* |
|
$ |
3,869 |
|
$ |
1,705 |
|
$ |
8,454 |
|
$ |
2,774 |
|
$ |
(3,751 |
) |
$ |
(3,152 |
) |
$ |
(31,016 |
) |
*We have provided Adjusted EBITDA (as previously defined) and Adjusted EBITDA (redefined) in this earnings release. The only difference between the two measures is the inclusion (Adjusted EBITDA (redefined)) or exclusion (Adjusted EBITDA (as previously defined)) of the impact from revenue and cost of revenue deferrals accounting treatment on our products. This is the last quarter we will report Adjusted EBITDA (as previously defined) and going forward, we will only be providing GAAP net Income/(loss) and Adjusted EBITDA (redefined) results.
In addition to the reasons stated above, which are generally applicable to each of the items Glu excludes from its non-GAAP financial measures, Glu believes it is appropriate to exclude certain items for the following reasons:
Change in Deferred Revenue and Deferred Cost of Revenue . At the date we sell certain premium games and micro-transactions, Glu has an obligation to provide additional services and incremental unspecified digital content in the future without an additional fee. In these cases, we recognize the revenue and any associated cost of revenue, including platform commissions and royalties, on a straight-line basis over the estimated life of the paying user. Internally, Glu’s management excludes the impact of the changes in deferred revenue and deferred cost of revenue related to its premium and free-to-play games in its non-GAAP financial measures when evaluating the company’s operating performance, when planning, forecasting and analyzing future periods, and when assessing the performance of its management team. Glu believes that excluding the impact of the changes in deferred revenue and deferred cost of revenue from its operating results is important to facilitate comparisons to prior periods and to understand Glu’s operations.
Amortization and Impairment of Intangible Assets. When analyzing the operating performance of an acquired entity or intangible asset, Glu’s management focuses on the total return provided by the investment (i.e., operating profit generated from the acquired entity as compared to the purchase price paid) without taking into consideration any allocations made for accounting purposes. Because the purchase price for an acquisition necessarily reflects the accounting value assigned to intangible assets (including acquired in-process technology and goodwill), when analyzing the operating performance of an acquisition in subsequent periods, Glu’s management excludes the GAAP impact of acquired intangible assets to its financial results. Glu believes that such an approach is useful in understanding the long-term return provided by an acquisition and that investors benefit from a supplemental non-GAAP financial measure that excludes the accounting expense and non-cash charge associated with acquired intangible assets.
Non-cash Warrant Expense. In the first and third quarters of 2016 and the full year of 2015, Glu recorded a non-cash charge related to the vesting of warrants to purchase shares of common stock issued to brand holders as part of third party licensing, development and publishing arrangements. These charges were computed using the Black-Scholes valuation model and were recorded in cost of revenue. When evaluating the performance of its consolidated results, Glu does not consider non-cash warrant expense as it places a greater emphasis on overall stockholder dilution rather than the accounting charges associated with the vesting of any warrants. As the non-cash warrant expense impacts comparability from period to period Glu believes that investors benefit from a supplemental non-GAAP financial measure that excludes these charges.
Stock-Based Compensation Expense. Glu applies the fair value provisions of ASC 718, Compensation-Stock Compensation (“ASC 718”). ASC 718 requires the recognition of compensation expense, using a fair-value based method, for costs related to all share-based payments. Glu’s management team excludes stock-based compensation expense from its short and long-term operating plans. In contrast, Glu’s management team is held accountable for cash-based compensation and such amounts are included in its operating plans. Further, when considering the impact of equity award grants, Glu places a greater emphasis on overall stockholder dilution rather than the accounting charges associated with such grants. Glu believes it is useful to provide a non-GAAP financial measure that excludes stock-based compensation in order to better understand the long-term performance of its business.
Restructuring Charges. Glu undertook restructuring activities in the first, second and third quarters of 2016 and the fourth quarter of 2015 and recorded cash restructuring charges due to the termination of certain employees in Asia and certain U.S. offices. Glu recorded the severance costs as an operating expense when it communicated the benefit arrangement to the employee and no significant future services, other than a minimum retention period, were required of the employee to earn the termination benefits. Additionally, Glu recorded restructuring charges upon exiting portions of certain facilities in Asia and the US in the second and third quarters of 2016. Glu believes that these restructuring charges do not reflect its ongoing operations and that investors benefit from a supplemental non-GAAP financial measure that excludes these charges.
Litigation Settlement Proceeds and Costs. These proceeds and expenses consist primarily of one-time settlement payments received from, and legal fees incurred in connection with, intellectual property infringement matters. Glu has treated the settlement proceeds as a multiple element arrangement and has allocated a significant portion of the proceeds to revenue as deemed royalty revenue for the settlement of past infringement. The residual proceeds have been allocated to contra general and administrative expenses and offset legal fees incurred. Glu excludes these proceeds and costs from its non-GAAP measures as these proceeds and costs are isolated, unpredictable and not expected to recur regularly, and Glu believes that these proceeds and costs have no direct correlation to the operation of its ongoing core business.
Transitional Costs. GAAP requires expenses to be recognized for various types of events associated with a business acquisition such as legal, accounting and other deal related expenses. Glu has incurred various costs related to the acquisition and integration of PlayFirst and Cie Games into Glu’s operations. Glu recorded these acquisition and transitional costs as operating expenses when they were incurred. Glu believes that these acquisition and transitional costs affect comparability from period to period and that investors benefit from a supplemental non-GAAP financial measure that excludes these expenses.
Change in Fair Value of Strategic Investments . From time to time, Glu makes strategic investments. Glu’s management excludes the impact of any losses and gains on such investments when evaluating Glu’s operating performance, when planning, forecasting and analyzing future periods, and when assessing the performance of its management team. In addition, Glu believes that excluding the impact of such losses and gains on these investments from its operating results is important to facilitate comparisons to prior periods.
Foreign Currency Exchange Gains and Losses. Foreign currency exchange gains and losses represent the net gain or loss that Glu has recorded for the impact of currency exchange rate movements on cash and other assets and liabilities denominated in foreign currencies related to the revaluation of assets and liabilities. Accordingly, foreign currency exchange gains and losses are generally unpredictable and can cause Glu’s reported results to vary significantly. Due to the unusual magnitude of these gains and losses, and the fact that Glu has not engaged in hedging or taken other actions to reduce the likelihood of incurring a sizeable net gain or loss in future periods, Glu excludes foreign exchange gains and losses for comparability purposes. Glu believes that these gains and losses do not reflect its ongoing operations and that investors benefit from a supplemental non-GAAP financial measure that excludes these items, enabling investors to compare Glu’s core operating results in different periods without this variability. Foreign exchange gains/(losses) recognized during 2015 and the first three quarters of 2016 were as follows (in thousands):
|
March 31, 2015 |
|
$ |
(290 |
) |
|
June 30, 2015 |
|
(186 |
) |
|
|
September 30, 2015 |
|
(167 |
) |
|
|
December 31, 2015 |
|
(149 |
) |
|
|
FY 2015 |
|
$ |
(792 |
) |
|
|
|
|
|
|
|
March 31, 2016 |
|
$ |
148 |
|
|
June 30, 2016 |
|
182 |
|
|
|
September 30, 2016 |
|
(1,035 |
) |
|
|
FY 2016 |
|
$ |
(705 |
) |
Investor Relations:
Seth Potter
ICR, Inc.
646-277-1230
ir@glu.com