As filed with the Securities and Exchange Commission on April 17, 2018
(Exact Name of Registrant as Specified in its Articles of Association)
|
|
|
||
Cayman Islands | 7372 | N/A | ||
(State or other jurisdiction of
incorporation or organization) |
(Primary Standard Industrial
Classification Code Number) |
(I.R.S. Employer
Identification Number) |
(Address, Including Zip Code, and Telephone Number, Including Area Code, of Registrants Principal Executive Offices)
(Name, Address, Including Zip Code, and Telephone Number, Including Area Code, of Agent for Service)
Copies to:
|
|
|
Dennis M. Myers, P.C.
Kirkland & Ellis LLP 300 North LaSalle Chicago, Illinois 60654 (312) 862-2000 |
David Peinsipp
Cooley LLP 3175 Hanover Street Palo Alto, California 94304 (650) 843-5000 |
Approximate date of commencement of proposed sale to the public: As soon as practicable after the effective date of this Registration Statement.
If the securities being registered on this form are being offered in connection with the formation of a holding company and there is compliance with General Instruction G, check the following box. o
If this form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o
If this form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of large accelerated filer, accelerated filer, smaller reporting company, and emerging growth company in Rule 12b-2 of the Exchange Act.
|
|
|
Large accelerated filer o | Accelerated filer x | |
Non-accelerated filer o (Do not check if a smaller reporting company) | Smaller reporting company o | |
Emerging growth company x |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act. o
If applicable, place an X in the box to designate the appropriate rule provision relied upon in conducting this transaction:
Exchange Act Rule 13e-4(i) (Cross-Border Issuer Tender Offer) o
Exchange Act Rule 14d-1(d) (Cross Border Third-Party Tender Offer) o
|
|
|
|
|
||||||||||||
Title of Each Class of Securities to be Registered |
Amount
to be Registered |
Proposed Maximum
Offering Price Per Share |
Proposed Maximum
Aggregate Offering Price |
Amount of Registration Fee (4) | ||||||||||||
Ordinary Shares, par value $0.0001 per share | 6,370,000 (1)(2) | $ | 12.23 | (3) | $ | 77,905,100 | (3) | $ | 9,699.18 | |||||||
Warrants to purchase Ordinary Shares | 12,250,000 | (5) | N/A | N/A | N/A | (6) |
(1) | Represents the maximum number of Ordinary Shares of the registrant that may be issued directly to (i) holders of warrants who tender their warrants pursuant to the Offer (as defined below) and (ii) holders of warrants who do not tender their warrants pursuant to the Offer and, pursuant to the Warrant Amendment (as defined below), if approved, may receive Ordinary Shares of the registrant in the event the registrant exercises its right to convert the warrants into Ordinary Shares. |
(2) | Pursuant to Rule 416 under the Securities Act (the Securities Act), the registrant is also registering an indeterminate number of additional shares of Ordinary Shares issuable by reason of any stock dividend, stock split, recapitalization or other similar transaction. |
(3) | Estimated pursuant to Rule 457(f)(1) under the Securities Act, and solely for the purpose of calculating the registration fee, the proposed maximum offering price is $12.23, which is the average of the high and low prices of Ordinary Shares on April 13, 2018, on the New York Stock Exchange. |
(4) | Calculated by multiplying the estimated aggregate offering price of the securities being registered by 0.0001245. |
(5) | Represents the maximum number of warrants that may be amended pursuant to the Warrant Amendment (as defined below). |
(6) | No additional registration fee is payable pursuant to Rule 457(g) under the Securities Act. |
The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the Registration Statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.
The information in this document may change. The registrant may not complete the offer and issue these securities until the registration statement filed with the United States Securities and Exchange Commission is effective. This document is not an offer to sell these securities and it is not soliciting an offer to buy these securities, nor shall there be any sale of these securities, in any jurisdiction in which such offer, solicitation or sale is not permitted or would be unlawful prior to registration or qualification under the securities laws of any such
jurisdiction.
Until the Expiration Date (as defined below), we are offering to the holders of our warrants as described below the opportunity to receive 0.26 ordinary shares, par value of $0.0001 per share (Ordinary Shares) of Cision Ltd. (Cision) in exchange for each of our outstanding warrants tendered by the holder and exchanged pursuant to the offer (the Offer). The Offer is being made to:
| All holders of our publicly traded warrants to purchase our Ordinary Shares, which were originally issued as warrants to purchase the common stock, $0.0001 par value, of Capitol Acquisition Corp. III (Capitol) in connection with the initial public offering of Capitols securities on October 13, 2015 (the Capitol IPO) and automatically converted into warrants to purchase Ordinary Shares of Cision on June 29, 2017, upon the consummation of the business combination (the Business Combination) contemplated by that certain merger agreement, dated as of March 19, 2017, by and among Cision, Capitol, Canyon Holdings S.à r.l. (Predecessor), Canyon Holdings (Cayman), L.P. (Cision Owner) and Capitol Acquisition Merger Sub., Inc., which entitle such warrant holders to purchase one Ordinary Share for a purchase price of $11.50, subject to adjustments, referred to as the Public Warrants. Our Ordinary Shares are listed on the New York Stock Exchange (NYSE) under the symbol CISN, and our Public Warrants are listed on NYSE American under the symbol CISN.WS. As of April 13, 2018, 16,250,000 Public Warrants were outstanding. Pursuant to the Offer, we are offering up to an aggregate of 4,225,000 of our Ordinary Shares in exchange for the Public Warrants. |
| All holders of certain of our warrants to purchase Ordinary Shares that were privately issued in connection with the Capitol IPO or the consummation of our Business Combination based on an exemption from registration under the Securities Act of 1933, as amended (the Securities Act), referred to as the Private Warrants. The Private Warrants entitle the holders to purchase one Ordinary Share for a purchase price of $11.50, subject to adjustments. The terms of the Private Warrants are identical to the Public Warrants, except that such Private Warrants are exercisable on a cashless basis and are not redeemable by us, in each case so long as they are still held by the initial holders or their affiliates. The Public Warrants and Private Warrants are referred to collectively as the Warrants. The Private Warrants were issued to certain sponsors of Capitol (the Capitol Sponsors) in connection with the Capitol IPO and additional warrants were issued to Cision Owner in connection with the consummation of the Business Combination. As of April 13, 2018, 8,250,000 Private Warrants were outstanding. Pursuant to the Offer, we are offering up to an aggregate of 2,145,000 of our Ordinary Shares in exchange for the Private Warrants. |
Each Warrant holder whose Warrants are exchanged pursuant to the Offer will receive 0.26 of our Ordinary Shares for each Warrant tendered by such holder and exchanged. No fractional Ordinary Shares will be issued pursuant to the Offer. In lieu of issuing fractional shares, any holder of Warrants who would otherwise have been entitled to receive fractional shares pursuant to the Offer will, after aggregating all such fractional shares of such holder, be paid in cash (without interest) in an amount equal to such fractional part of a share multiplied by the last sale price of our Ordinary Shares on NYSE on the last trading day of the Offer Period (as defined below). Our obligation to complete the Offer is not conditioned on the receipt of a minimum number of tendered Warrants.
Concurrently with the Offer, we are also soliciting consents (the Consent Solicitation) from holders of the Warrants to amend (the Warrant Amendment) the Amended and Restated Warrant Agreement, dated as of October 17, 2017, by and between Cision and Continental Stock Transfer & Trust Company (the Warrant Agreement), which governs all of the Warrants to permit the Company to require that each outstanding Warrant be converted into 0.234 Ordinary Shares, which is a ratio 10% less than the ratio applicable to the Offer. Pursuant to the terms of the Warrant Agreement, the consent of holders of at least a majority of the outstanding Warrants is required to approve the Warrant Amendment, with the Public Warrant
holders and Private Warrant holders voting together. Therefore, one of the conditions to the adoption of the Warrant Amendment is the receipt of the consent of holders of at least a majority of the outstanding Warrants. You may not consent to the Warrant Amendment without tendering your Warrants in the Offer and you may not tender your Warrants without consenting to the Warrant Amendment. The consent to the Warrant Amendment is a part of the letter of transmittal and consent relating to the Warrants, and therefore by tendering your warrants for exchange you will deliver to us your consent. You may revoke your consent at any time prior to the Expiration Date (as defined below) by withdrawing the Warrants you have tendered.
The Capitol Sponsors and Cision Owner have advised us that they intend to tender all of the Private Warrants held by them in the Offer. Collectively, the Capitol Sponsors and Cision Owner hold approximately 94.5% of the Private Warrants, representing approximately 31.8% of the total Warrants outstanding. See the section of this Prospectus/Offer to Exchange entitled The Offer and Consent Solicitation Transactions and Agreements Concerning Our Securities.
The Offer and Consent Solicitation is made solely upon the terms and conditions in this Prospectus/Offer to Exchange and in the related letter of transmittal and consent (as it may be supplemented and amended from time to time, the Letter of Transmittal and Consent). The Offer and Consent Solicitation will be open until 11:59 p.m., Eastern Daylight Time, on May 15, 2018, or such later time and date to which we may extend (the period during which the Offer and Consent Solicitation is open, giving effect to any withdrawal or extension, is referred to as the Offer Period, and the date and time at which the Offer Period ends is referred to as the Expiration Date). The Offer and Consent Solicitation is not made to those holders who reside in states or other jurisdictions where an offer, solicitation or sale would be unlawful.
We may withdraw the Offer and Consent Solicitation only if the conditions to the Offer and Consent Solicitation are not satisfied or waived prior to the Expiration Date. Promptly upon any such withdrawal, we will return the tendered Warrants to the holders (and the consent to the Warrant Amendment will be revoked).
You may tender some or all of your Warrants into the Offer. If you elect to tender Warrants in response to the Offer and Consent Solicitation, please follow the instructions in this Prospectus/Offer to Exchange and the related documents, including the Letter of Transmittal and Consent. If you tender Warrants, you may withdraw your tendered Warrants at any time before the Expiration Date and retain them on their current terms or amended terms if the Warrant Amendment is approved, by following the instructions in this Prospectus/Offer to Exchange. In addition, tendered Warrants that are not accepted by us for exchange by May 29, 2018, may thereafter be withdrawn by you until such time as the Warrants are accepted by us for exchange. If you withdraw the tender of your Warrants, your consent to the Warrant Amendment will be withdrawn as a result.
Warrants not exchanged for our Ordinary Shares pursuant to the Offer will remain outstanding subject to their current terms or amended terms if the Warrant Amendment is approved. We reserve the right to redeem any of the Warrants, as applicable, pursuant to their current terms at any time, including prior to the completion of the Offer and Consent Solicitation, and if the Warrant Amendment is approved, we intend to require the conversion of all outstanding Warrants to Ordinary Shares as provided in the Warrant Amendment. Our Public Warrants are currently listed on NYSE American under the symbol CISN.WS; however, NYSE may delist our Public Warrants if, following the completion of the Offer and Consent Solicitation, the extent of public distribution or the aggregate market value of outstanding Warrants has become so reduced as to make further listing inadvisable.
The Offer and Consent Solicitation is conditioned upon the effectiveness of a registration statement on Form S-4 that we filed with the Securities and Exchange Commission (the SEC) regarding the Ordinary Shares issuable upon exchange of the Warrants pursuant to the Offer. This Prospectus/Offer to Exchange forms a part of the registration statement.
Our board of directors has approved the Offer and Consent Solicitation. However, neither we nor any of our management, our board of directors, or the information agent, the exchange agent or the dealer manager for the Offer and Consent Solicitation is making any recommendation as to whether holders of Warrants should tender Warrants for exchange in the Offer and consent to the Warrant Amendment in the Consent Solicitation. Each holder of a Warrant must make its own decision as to whether to exchange some or all of its Warrants and consent to the Warrant Amendment.
All questions concerning the terms of the Offer and Consent Solicitation should be directed to the dealer manager:
Citigroup Global Markets Inc.
388 Greenwich Street
New York, New York 10013
United States of America
Attention: Liability Management Group
Collect: (212) 723-6106
Toll-free: (800) 558-3745
All questions concerning exchange procedures and requests for additional copies of this Prospectus/Offer to Exchange, the Letter of Transmittal and Consent or the Notice of Guaranteed Delivery should be directed to the information agent:
D.F. King & Co., Inc.
48 Wall Street, 22
nd
Floor
New York, New York 10005
Banks and Brokers Call Collect: (212) 269-5550
All Others Call Toll-Free: (800) 967-4607
Email: cision@dfking.com
We will amend our offering materials, including this Prospectus/Offer to Exchange, to the extent required by applicable securities laws to disclose any material changes to information previously published, sent or given to Warrant holders.
The securities offered by this Prospectus/Offer to Exchange involve risks. Before participating in the Offer and consenting to the Warrant Amendment, you are urged to read carefully the section entitled Risk Factors beginning on page 7 of this Prospectus/Offer to Exchange.
Neither the Securities and Exchange Commission nor any state securities commission or any other regulatory body has approved or disapproved of these securities or determined if this Prospectus/Offer to Exchange is truthful or complete. Any representation to the contrary is a criminal offense.
Through the Offer, we are soliciting your consent to the Warrant Amendment. By tendering your Warrants, you will be delivering your consent to the proposed Warrant Amendment, which consent will be effective upon our acceptance of the Warrants for exchange.
The dealer manager for the Offer and Consent Solicitation is:
This Prospectus/Offer to Exchange is dated April 17, 2018.
i
This Prospectus/Offer to Exchange is a part of the registration statement that we filed on Form S-4 with the Securities and Exchange Commission. You should read this Prospectus/Offer to Exchange, including the detailed information regarding our company, Ordinary Shares and Warrants, and the financial statements and the notes to those statements that appear elsewhere in this Prospectus/Offer to Exchange and any applicable prospectus supplement.
You should rely only on the information contained in this Prospectus/Offer to Exchange and in any accompanying prospectus supplement. We have not authorized anyone to provide you with information different from that contained in this Prospectus/Offer to Exchange. If anyone makes any recommendation or representation to you, or gives you any information, you must not rely upon that recommendation, representation or information as having been authorized by us. We and the dealer manager take no responsibility for, and can provide no assurance as to the reliability of, any other information that others may give you. You should not assume that the information in this Prospectus/Offer to Exchange or any prospectus supplement is accurate as of any date other than the date on the front of those documents. You should not consider this Prospectus/Offer to Exchange to be an offer or solicitation relating to the securities in any jurisdiction in which such an offer or solicitation relating to the securities is not authorized. Furthermore, you should not consider this Prospectus/Offer to Exchange to be an offer or solicitation relating to the securities if the person making the offer or solicitation is not qualified to do so, or if it is unlawful for you to receive such an offer or solicitation.
Unless the context requires otherwise, in this Prospectus/Offer to Exchange, we use the terms the Company, Cision, our company, we, us, our, and similar references to refer to Cision Ltd. and its subsidiaries.
ii
Some of the statements made in this Prospectus/Offer to Exchange constitute forward-looking statements within the meaning of the federal securities laws. Such forward-looking statements include, but are not limited to, statements regarding our or our managements expectations, hopes, beliefs, intentions or strategies regarding the future. In addition, any statements that refer to projections, forecasts or other characterizations of future events or circumstances, such as statements about our future financial performance, including any underlying assumptions, are forward-looking statements. The words anticipate, believe, continue, could, estimate, expect, future, goal, intend, likely, may, might, plan, possible, potential, predict, project, seek, should, would, will, approximately, shall and similar expressions may identify forward-looking statements, but the absence of these words does not mean that a statement is not forward-looking. Forward-looking statements contained in this Prospectus/Offer to Exchange include, but are not limited to, statements about:
| our estimates of the size of the markets for our products and services; |
| the rate and degree of market acceptance of our products and services; |
| the success of other technologies that compete with our products and services or that may become available in the future; |
| the efficacy of our sales and marketing efforts; |
| the volatility of currency exchange rates; |
| volatility of the market price and liquidity of our Ordinary Shares and other of our securities; |
| our ability to effectively scale and adapt our technology; |
| our ability to identify and integrate acquisitions and technologies into our platform; |
| our plans to continue to expand internationally; |
| the performance and security of our services; |
| our ability to maintain the listing of our securities on a national securities exchange; |
| potential litigation involving Cision; |
| our ability to retain and attract qualified employees and key personnel; |
| our ability to maintain, protect and enhance our brand and intellectual property; |
| general economic conditions; |
| the result of future financing efforts; |
| the approval of the Warrant Amendment and our ability to require that all outstanding Warrants be exchanged for Ordinary Shares; |
| the exchange of Warrants for Ordinary Shares pursuant to the Offer, which will increase the number of shares eligible for future resale in the public market and result in dilution to our shareholders; |
| the lack of a third-party determination that the Offer or the Consent Solicitation is fair to Warrant holders; and |
| other risks and uncertainties set forth in the Risk Factors section of this Prospectus/Offer to Exchange. |
We caution you that the foregoing list may not contain all of the forward-looking statements made in this Prospectus/Offer to Exchange.
The forward-looking statements contained in this Prospectus/Offer to Exchange are based on our current expectations and beliefs concerning future developments and their potential effects on us. You should not
iii
place undue reliance on these forward-looking statements in deciding whether to invest in our securities. We cannot assure you that future developments affecting us will be those that we have anticipated. These forward-looking statements involve a number of risks, uncertainties (some of which are beyond our control) or other assumptions, including the risk factors set forth on page 7 of this Prospectus/Offer to Exchange, that may cause our actual results or performance to be materially different from those expressed or implied by these forward-looking statements. Should one or more of these risks or uncertainties materialize, or should any of our assumptions prove incorrect, actual results may vary in material respects from those projected in these forward-looking statements.
In addition, statements that we believe and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based upon information available to us as of the date of this Prospectus/Offer to Exchange, and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These statements are inherently uncertain, and investors are cautioned not to unduly rely upon these statements.
You should read this Prospectus/Offer to Exchange with the understanding that our actual future results, levels of activity, performance and achievements may be materially different from what we expect. We qualify all of our forward-looking statements by these cautionary statements.
Forward-looking statements speak only as of the date they were made. We undertake no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required under applicable securities laws.
iv
In this Registration Statement:
Business Combination means that certain business combination contemplated by that certain merger agreement, dated as of March 19, 2017, by and among Cision, Capitol, our Predecessor, Cision Owner and Capitol Acquisition Merger Sub., Inc. and consummated as of June 29, 2017.
Capitol means Capitol Acquisition Corp. III.
Capitol IPO means the initial public offering of Capitols securities on October 13, 2015.
Capitol Sponsors mean certain sponsors of Capitol.
Cision means Cision Ltd., an exempted company incorporated in the Cayman Islands with limited liability.
Cision Board means the board of directors of Cision.
Cision Owner means Canyon Holdings (Cayman), L.P.
Consent Solicitation means the solicitation of consent from the holders of the Warrants to approve the Warrant Amendment.
Expiration Date means 11:59 p.m., Eastern Daylight Time on May 15, 2018.
Letter of Transmittal and Consent means the letter of transmittal and consent (as it may be supplemented and amended from time to time) related to the Offer and Consent Solicitation.
Offer means the opportunity to receive 0.26 Ordinary Shares in exchange for each of our outstanding warrants, up to an aggregate of (i) 4,225,000 of Ordinary Shares in exchange for all 16,250,000 Public Warrants and (ii) 2,145,000 of Ordinary Shares in exchange for all 8,250,000 Private Warrants.
Offer Period means the period during which the Offer and Consent Solicitation is open, giving effect to any withdrawal or extension.
Ordinary Shares means the ordinary shares, with a par value of $0.0001 per share, of Cision.
Predecessor means Canyon Holdings S.à r.l., our accounting predecessor.
Private Warrants mean our warrants to purchase Ordinary Shares that were privately issued to the Capitol Sponsors in connection with the Capitol IPO and to Cision Owner in connection with the consummation of our Business Combination, entitling each holder to purchase one Ordinary Share for a purchase price of $11.50, subject to adjustments.
Public Warrants mean our publicly traded warrants to purchase our Ordinary Shares that were originally issued as warrants to purchase the common stock of Capitol and automatically converted into warrants to purchase Ordinary Shares in connection with the consummation of our Business Combination on June 29, 2017, entitling each holder to purchase one Ordinary Share for a purchase price of $11.50, subject to adjustments.
Warrant Agreement means the Amended and Restated Warrant Agreement, dated as of October 17, 2017, by and between Cision and Continental Stock Transfer & Trust Company.
Warrant Amendment means the an amendment to the Warrant Agreement permitting Cision to require that each outstanding Warrant be converted into 0.234 Ordinary Shares, which is a ratio 10% less than the ratio applicable to the Offer.
Warrants mean the Public Warrants and the Private Warrants.
v
In this Prospectus/Offer to Exchange, unless otherwise stated, the terms the Company, Cision, we, us or our refer to Cision Ltd. and its subsidiaries. Except where noted, references to our business, operations, properties, financial results, operating and other information relating to periods prior to the consummation of the Business Combination on June 29, 2017, refer to the business, operations, properties, financial results, operating and other information of Canyon Holdings S.à r.l., our accounting predecessor.
This summary provides a brief overview of the key aspects of the Offer and Consent Solicitation. Because it is only a summary, it does not contain all of the detailed information contained elsewhere in this Prospectus/Offer to Exchange or in the documents included as exhibits to the registration statement that contains this Prospectus/Offer to Exchange. Accordingly, you are urged to carefully review this Prospectus/Offer to Exchange in its entirety (including all documents filed as exhibits to the registration statement that contains this Prospectus/Offer to Exchange, which may be obtained by following the procedures set forth herein in the section entitled Where You Can Find Additional Information).
Our Company |
Cision Ltd., an exempted company incorporated in the Cayman Islands with limited liability, a leading global provider of PR software, media distribution, media intelligence and related professional services. Public relations and communications professionals use our products and services to help manage, execute and measure their strategic PR and communications programs. |
Corporate Contact Information |
Our principal executive offices are located at 130 E. Randolph Street, 7 th Floor, Chicago, Illinois 60601, and our telephone number is (312) 922-2400. |
Warrants that qualify for the Offer |
Public Warrants |
As of April 13, 2018, we had outstanding Public Warrants to purchase an aggregate of 16,250,000 of our Ordinary Shares. The Public Warrants were originally issued in connection with the Capitol IPO and automatically converted into warrants to acquire Ordinary Shares upon the consummation of the Business Combination. Pursuant to the Offer, we are offering up to an aggregate of 4,225,000 of our Ordinary Shares in exchange for all of the Public Warrants. |
Private Warrants |
As of April 13, 2018, we had outstanding Private Warrants to purchase an aggregate of 8,250,000 of our Ordinary Shares. The Private Warrants were issued to the Capitol Sponsors in connection with the Capitol IPO and additional warrants were issued to Cision Owner in connection with the consummation of the Business Combination. Pursuant to the Offer, we are offering up to an aggregate of 2,145,000 of our Ordinary Shares in exchange for all of the Private Warrants. |
General Terms of the Warrants |
Each Warrant entitles such warrant holder to purchase one Ordinary Share for a purchase price of $11.50, subject to adjustments pursuant to the Warrant Agreement. We may call the Public Warrants or the Private Warrants, if no longer held |
1
by their initial holders or their affiliates, for redemption, at any time while the Warrants are exercisable, upon not less than 30 days prior written notice of redemption to each Warrant holder, at $0.01 per warrant, if and only if the last sale price of our Ordinary Shares has been $18.00 per Ordinary Share on each of 20 trading days within a 30 consecutive trading day period and if, and only if, there is a current registration statement in effect with respect to the Ordinary Shares underlying the Warrants available throughout the 30-day redemption period. If we call the Warrants for redemption, we will have the option to require any holder that wishes to exercise its warrant to do so on a cashless basis. The terms of the Private Warrants are identical to the Public Warrants, except that such Private Warrants are exercisable on a cashless basis and are not redeemable by us, in each case so long as they are still held by the initial holders or their affiliates. The Warrants expire on June 29, 2023. |
Market Price of Our Ordinary Shares |
Our Ordinary Shares are listed on the NYSE under the symbol CISN, and the Public Warrants are listed on the NYSE American under the symbol CISN.WS. See The Offer and Consent Solicitation Market Price, Dividends and Related Shareholder Matters beginning on page 44 . |
The Offer |
Each Warrant holder whose Warrants are exchanged pursuant to the Offer will receive 0.26 of our Ordinary Shares for each Warrant so exchanged. No fractional Ordinary Shares will be issued pursuant to the Offer. In lieu of issuing fractional shares, any holder of Warrants who would otherwise have been entitled to receive fractional shares pursuant to the Offer will, after aggregating all such fractional shares of such holder, be paid cash (without interest) in an amount equal to such fractional part of a share multiplied by the last sale price of our Ordinary Shares on the NYSE on the last trading day of the Offer Period. Our obligation to complete the Offer is not conditioned on the receipt of a minimum number of tendered Warrants. |
Holders of the Warrants tendered for exchange will not have to pay any of the exercise price for the tendered Warrants in order to receive Ordinary Shares in the exchange. |
The Ordinary Shares issued in exchange for the Warrants will be unrestricted and freely transferable, as long as the holder is not an affiliate of ours and was not an affiliate of ours within the three months prior to the proposed transfer of such shares. |
The Offer is being made to all Warrant holders except those holders who reside in states or other jurisdictions where an offer, solicitation or sale would be unlawful (or would require further action in order to comply with applicable securities laws). |
The Consent Solicitation |
In order to tender Warrants in the Offer and Consent Solicitation, holders are required to consent (by executing the Letters of Transmittal and Consent or requesting that their broker or nominee consent on their behalf) to an amendment to the Warrant Agreement governing the Warrants as set forth in |
2
the Warrant Amendment attached as Annex A. If approved, the Warrant Amendment would permit the Company to require that all remaining outstanding Warrants not tendered in the Offer be converted into Ordinary Shares at a ratio of 0.234 Ordinary Shares per Warrant (a ratio which is 10% less than the ratio applicable to the offer), thus eliminating all of the Warrants. |
Purpose of the Offer and Consent Solicitation |
The purpose of the Offer and Consent Solicitation is to attempt to simplify our corporate structure and reduce the potential dilutive impact of the Warrants, thereby providing us with more flexibility for financing our operations in the future. See The Offer and Consent Solicitation Background and Purpose of the Offer and Consent Solicitation beginning on page 43 . |
Offer Period |
The Offer and Consent Solicitation will expire on the Expiration Date, which is 11:59 p.m., Eastern Daylight Time, on May 15, 2018, or such later time and date to which we may extend. All Warrants tendered for exchange pursuant to the Offer and Consent Solicitation, and all required related paperwork, must be received by the exchange agent by the Expiration Date, as described in this Prospectus/Offer to Exchange. |
If the Offer Period is extended, we will make a public announcement of such extension by no later than 9:00 a.m., Eastern Daylight Time, on the next business day following the Expiration Date as in effect immediately prior to such extension. |
We may withdraw the Offer and Consent Solicitation only if the conditions of the Offer and Consent Solicitation are not satisfied or waived prior to the Expiration Date. Promptly upon any such withdrawal, we will return the tendered Warrants (and the related consent to the Warrant Amendment will be revoked). We will announce our decision to withdraw the Offer and Consent Solicitation by disseminating notice by public announcement or otherwise as permitted by applicable law. See The Offer General Terms Offer Period on page 36 . |
Amendments to the Offer and Consent Solicitation |
We reserve the right at any time or from time to time to amend the Offer and Consent Solicitation, including by increasing or (if the conditions to the Offer are not satisfied) decreasing the exchange ratio of Ordinary Shares issued for every Warrant exchanged or by changing the terms of the Warrant Amendment. If we make a material change in the terms of the Offer and Consent Solicitation or the information concerning the Offer and Consent Solicitation, or if we waive a material condition of the Offer and Consent Solicitation, we will extend the Offer and Consent Solicitation to the extent required by Rules 13e-4(d)(2) and 13e-4(e)(3) under the Securities Exchange Act of 1934, as amended (the Exchange Act). See The Offer General Terms Amendments to the Offer and Consent Solicitation. |
3
Conditions to the Offer and Consent Solicitation |
The Offer is subject to customary conditions, including the effectiveness of the registration statement of which this document is a part and there being no action or proceeding, statute, rule, regulation or order that would challenge or restrict the making or completion of the Offer. The Offer is not conditioned upon the receipt of a minimum number of tendered Warrants, however. The Consent Solicitation is conditioned upon receiving the consent of holders of at least a majority of the outstanding Warrants (which is the minimum number required to amend the Warrant Agreement). We may waive some of the conditions to the Offer. See The Offer and Consent Solicitation General Terms Conditions to the Offer and Consent Solicitation on page 37 . |
Withdrawal Rights |
If you tender your Warrants and change your mind, you may withdraw your tendered Warrants (and thereby revoke the related consent to the Warrant Amendment) at any time prior to the Expiration Date, as described in greater detail in the section entitled The Offer and Consent Solicitation Withdrawal Rights beginning on page 42 . If the Offer Period is extended, you may withdraw your tendered Warrants (and your related consent to the Warrant Amendment will be automatically revoked as a result) at any time until the extended Expiration Date. In addition, tendered Warrants that are not accepted by us for exchange by May 29, 2018 may thereafter be withdrawn by you until such time as the Warrants are accepted by us for exchange. |
Participation by Directors, Executive Officers and Affiliates |
Although certain affiliates who are holders of our Private Warrants have advised us that they expect to participate in the Offer, none of our directors, executive officers or affiliates are required to participate in the Offer. See The Offer and Consent Solicitation Interests of Directors, Executive Officers and Others. |
Federal and State Regulatory
Approvals |
Other than compliance with the applicable federal and state securities laws, no federal or state regulatory requirements must be complied with and no federal or state regulatory approvals must be obtained in connection with the Offer and Consent Solicitation. |
Absence of Appraisal or Dissenters Rights |
Holders of the Warrants do not have any appraisal or dissenters rights under applicable law in connection with the Offer and Consent Solicitation. |
U.S. Federal Income Tax Consequences of the Offer |
Subject to the passive foreign investment company (PFIC) rules, for those holders of Warrants participating in the Offer and for any holders of Warrants subsequently exchanged for Ordinary Shares pursuant to the terms of the Warrant Amendment, we intend to treat your exchange of Warrants for |
4
our Ordinary Shares as a recapitalization within the meaning of Section 368(a)(1)(E) of the Code pursuant to which (i) you should not recognize any gain or loss on the exchange of Warrants for shares of our Ordinary Shares, (ii) your aggregate tax basis in the Ordinary Shares received in the exchange should equal your aggregate tax basis in your Warrants surrendered in the exchange (except to the extent of any tax basis allocated to a fractional share for which a cash payment is received in connection with the Offer), and (iii) your holding period for the Ordinary Shares received in the exchange should include your holding period for the surrendered Warrants. However, because there is a lack of direct legal authority regarding the U.S. federal income tax consequences of the exchange of Warrants for our Ordinary Shares, there can be no assurance in this regard and alternative characterizations are possible by the IRS or a court, including ones that would require U.S. holders to recognize taxable income. |
Although the issue is not free from doubt, we intend to treat all Warrants not exchanged for Ordinary Shares in the Offer as having been exchanged for new Warrants pursuant to the Warrant Amendment and to treat such deemed exchange as a recapitalization within the meaning of Section 368(a)(1)(E) of the Code, pursuant to which, subject to the PFIC rules, (i) you should not recognize any gain or loss on the deemed exchange of Warrants for new Warrants, (ii) your aggregate tax basis in the new Warrants deemed to be received in the exchange should equal your aggregate tax basis in your existing Warrants surrendered in the exchange, and (iii) your holding period for the new Warrants deemed to be received in the exchange should include your holding period for the surrendered Warrants. Because there is a lack of direct legal authority regarding the U.S. federal income tax consequences of the deemed exchange of Warrants for new Warrants pursuant to the Warrant Amendment, there can be no assurance in this regard and alternative characterizations by the IRS or a court are possible, including ones that would require U.S. holders to recognize taxable income. See The Offer Material U.S. Federal Income Tax Consequences beginning on page 48 . |
No Recommendation |
None of Cision, our board of directors, our management, the dealer manager, the exchange agent, the information agent or any other person makes any recommendation on whether you should tender or refrain from tendering all or any portion of your Warrants or consent to the Warrant Amendment, and no one has been authorized by any of them to make such a recommendation. |
Risk Factors |
For risks related to the Offer and Consent Solicitation, please read the section entitled Risk Factors beginning on page 7 of this Prospectus/Offer to Exchange. |
5
Exchange Agent |
The exchange agent for the Offer and Consent Solicitation is: |
Continental Stock Transfer & Trust Company
1 State Street, 30 th Floor New York, NY 10004 Facsimile: (212) 616-7616 |
Dealer Manager |
The dealer manager for the Offer and Consent Solicitation is: |
Citigroup Global Markets Inc.
388 Greenwich Street New York, New York 10013 United States of America Attention: Liability Management Group Collect: (212) 723-6106 Toll-free: (800) 558-3754 |
We have other business relationships with the dealer manager, as described in The Offer and Consent Solicitation Dealer Manager. |
Additional Information |
We recommend that our Warrant holders review the registration statement on Form S-4, of which this Prospectus/Offer to Exchange forms a part, including the exhibits, that we have filed with the SEC in connection with the Offer and Consent Solicitation and our other materials that we have filed with the SEC, before making a decision on whether to accept the Offer and consent to the Warrant Amendment. All reports and other documents we have filed with the SEC can be accessed electronically on the SECs website at www.sec.gov. |
You should direct (1) questions about the terms of the Offer and Consent Solicitation to the dealer manager at its addresses and telephone number listed above and (2) questions about the exchange procedures and requests for additional copies of this Prospectus/Offer to Exchange, the Letter of Transmittal and Consent or Notice of Guaranteed Delivery to the information agent at the below address and phone number: |
D.F. King & Co., Inc.
48 Wall Street, 22 nd Floor New York, New York 10005 Banks and Brokers Call Collect: (212) 269-5550 All Others Call Toll-Free: (800) 967-4607 Email: cision@dfking.com |
6
An investment in our securities involves a high degree of risk. You should carefully consider the risks described below before making an investment decision. Our business, prospects, financial condition or operating results could be harmed by any of these risks, as well as other risks not currently known to us or that we currently consider immaterial. The trading price of our securities could decline due to any of these risks, and, as a result, you may lose all or part of your investment. As used in the risks described in this subsection, references to we, us and our are intended to refer to Cision unless the context clearly indicates otherwise.
We face intense competition from numerous large and small businesses. This competition includes both product and price competition. Increased competition may result in a decline in our market share thereby adversely affecting our operating results. The markets in which we operate are fragmented, competitive and rapidly evolving, and there are limited barriers to entry to certain segments of those markets. We expect the intensity of competition to increase in the future as existing competitors develop their capabilities and as new companies enter our markets. If we are unable to compete effectively, it will be difficult for us to maintain our market share and pricing rates and add and retain customers, and our business, financial condition and results of operations will be seriously harmed.
Increased competition could result in pricing pressure, reduced sales or lower margins. We face intense price competition in all areas of our business. In particular, the cloud-based PR services business, the media intelligence business and the media distribution business are characterized by intense price competition. Our profit margin, and therefore our profitability, is dependent on the rates we are able to charge for our services. We have in the past lowered prices, and may need to do so in the future, to attempt to gain or maintain market share. These strategies have not always been successful and have at times hurt operating performance. Additionally, we have also been, and may once again be, required to adjust pricing to respond to actions by competitors, which could adversely impact operating results. The rates we are able to charge for our services are affected by a number of factors, including competition, volume fluctuations, productivity of employees and processes, the value our customers derive from our services and general economic and political conditions. We are also subject to potential price competition from new competitors and from existing competitors. If we are unable to compete successfully in respect to the pricing of our services and products, our business, financial condition and operating results may be adversely affected.
Our competitors may be able to respond more quickly than we can to new or changing opportunities, technologies, standards or customer requirements or devote greater resources to the promotion and sale of their products and services than we can. To the extent our competitors have an existing relationship with a potential customer, that customer may be unwilling to switch vendors due to existing time and financial commitments with our competitors.
We also expect that new competitors will enter the cloud-based PR services and distribution market with competing products. Many of these potential competitors have established or may establish business, financial or strategic relationships among themselves or with existing or potential customers, alliance partners or other third parties or may combine and consolidate to become more formidable competitors with better resources. It is possible that these new competitors could rapidly acquire significant market share.
If we are unable to compete successfully in this environment, our business, financial condition and operating results will be adversely affected.
Our business performance is impacted by a number of factors, including economic and market volatility, changes in PR and marketing spending patterns, budgets and priorities, general economic conditions in North America, Latin America, Europe, the Middle East and Asia, and other factors that are generally beyond our control. To the extent that global or national economic conditions weaken, our business is likely to be
7
negatively impacted. Adverse market conditions could reduce customer demand for our services and the ability of our customers, suppliers and other counterparties to meet their obligations to us. A reduction in customer demand for our products and services due to economic conditions or other market factors could adversely affect our business, financial condition and operating results.
Our businesses depend on the integrity and performance of the technology, computer, cloud and communications systems supporting them. We manage our services and serve our customers from a limited number of data center facilities and/or cloud computing services facilities located within the United States and abroad. If the systems on which we depend cannot expand to cope with increased demand or otherwise fail to perform, we could experience unanticipated disruptions in service, slower response times and delays in the introduction of new products and services. These systems may be vulnerable to damage or service interruption resulting from human error, intentional bad acts, cybersecurity attacks, earthquakes, hurricanes, floods, fires, war, terrorist attacks, power losses, hardware failures, systems failures, telecommunications failures and similar events. Given our position in the global PR and media intelligence industry, we may be more likely than other companies to be a direct target, or an indirect casualty, of such events.
These consequences could result in service outages, financial losses, decreased customer service and satisfaction and regulatory sanctions. The solutions we provide are susceptible to telecommunication system failures, data corruption or virus attacks, and they have experienced systems failures and delays in the past and could experience future systems failures and delays. We have, for example, experienced temporary system outages and service degradation related to telecommunication, cloud computing and network provider interruptions, denial-of-service attacks and equipment failures.
Although we currently maintain and expect to maintain multiple computer facilities that are designed to provide redundancy and back-up to reduce the risk of system disruptions and have facilities in place that are expected to maintain service during a system disruption, such systems and facilities may prove inadequate. If unanticipated events occur, we may need to expand and upgrade our technology, transaction processing systems and network infrastructure. We do not know whether we will be able to accurately project the rate, timing or cost of any increases, or expand and upgrade our systems and infrastructure to accommodate any increases in a timely manner.
While we have programs in place to identify and minimize our exposure to vulnerabilities and work in collaboration with the technology industry to share corrective measures with our business partners, we cannot guarantee that such events will not occur in the future. Any system issue that causes an interruption in services, decreases the responsiveness of our services or otherwise affects our services could impair our reputation, damage our brand name, result in regulatory penalties and other liability, and negatively impact our business, financial condition and operating results.
To the extent that any of our vendors or other third-party service providers experience difficulties, materially change their business relationship with us or are unable for any reason to perform their obligations, our business or our reputation may be materially adversely affected.
The PR software and media intelligence industries are characterized by rapidly changing technology, evolving industry and regulatory standards, new product and service introductions, frequent enhancements to existing products and services, the emergence of competitors, the adoption of new services and products and changing customer demands, needs and preferences. We must complete development of, successfully implement and maintain platforms that have the functionality, performance, capacity, reliability and speed required by our business, as well as by our customers. While we intend to launch new products and initiatives and continue to explore and pursue opportunities to strengthen our business and grow our company, we may not be able to keep up with rapid technological and other competitive changes affecting our industry. For example, we must continue to enhance our platforms to remain competitive, and our business will be negatively affected if our platforms or the technology solutions we sell to our customers fail to function as expected. If we are unable to develop our platforms to include other products and markets, or if our platforms do not have the required
8
functionality, performance, capacity, reliability and speed required by our customers, we may not be able to compete successfully. We may spend substantial time and money developing new products and initiatives. If these products and initiatives are not successful, we may not be able to offset their costs, which could have an adverse effect on our business, financial condition and operating results. Further, our failure to anticipate or respond adequately to changes in technology and customer preferences or any significant delays in product development efforts, could have a material adverse effect on our business, financial condition and operating results.
In our technology operations, we have invested substantial amounts in the development of system platforms and in the rollout of our platforms. For the year ended December 31, 2017, we spent $22.1 million on research and development activities and $15.0 million in capitalized software development costs, and such figures may increase in the future as we strive to develop new products and solutions for our customers. Although investments are carefully planned, there can be no assurance that the demand for such platforms will justify the related investments and that the future levels of transactions executed on these platforms will be sufficient to generate an acceptable return on such investments. We also cannot guarantee that we will be able to compete effectively with new vendors, or that products, services or technologies developed by others will not render our services non-competitive or obsolete. If we fail to generate adequate revenue from planned system platforms or new products or services, or if we fail to do so within the envisioned timeframe, it could have an adverse effect on our results of operations and financial condition. In addition, customers may delay purchases in anticipation of new products or enhancements.
Our credit facilities contain operating covenants and financial covenants that may limit managements discretion with respect to certain business matters. Among other things, these covenants will restrict our ability to incur additional debt, pay dividends, redeem stock, change the nature of our business, sell or otherwise dispose of assets, make acquisitions or investments, and merge or consolidate with other entities. As a result of these covenants and restrictions, we will be limited in how we conduct our business and we may be unable to raise additional debt or other financing to compete effectively or to take advantage of new business opportunities. In addition, our credit facilities contain covenants that require us to comply with a number of financial ratios, the breach of which could trigger a default that could, in turn, trigger defaults under other debt obligations. The terms of any future indebtedness we may incur could include more restrictive covenants. Failure to comply with such restrictive covenants may lead to default and acceleration under our credit facilities and may impair our ability to conduct business. We may not be able to maintain compliance with these covenants in the future and, if we fail to do so, we may be unable to obtain waivers from the lenders and/or amend the covenants. See Managements Discussion and Analysis of Financial Condition and Results of Operations Liquidity and Capital Resources for a description of our credit facilities.
We depend on the availability of adequate capital to maintain and develop our business. Although we believe that we can meet our current capital requirements from internally generated funds, cash on hand and available borrowings under our revolving credit facility, we may finance future acquisitions by issuing additional equity and/or debt, and if the capital and credit markets experience volatility, access to capital or credit may not be available on terms acceptable to us or at all.
Limited access to capital or credit in the future could have an impact on our ability to refinance debt, maintain our credit rating, meet our regulatory capital requirements, engage in strategic initiatives, make acquisitions or strategic investments in other companies or react to changing economic and business conditions. If we are unable to fund our capital or credit requirements, it could have an adverse effect on our business, financial condition and operating results.
In addition to our debt obligations, we will need to continue to invest in our operations for the foreseeable future to integrate acquired businesses and to fund new initiatives. If we do not achieve the expected
9
operating results, we will need to reallocate our cash resources. This may include borrowing additional funds to service debt payments, which may impair our ability to make investments in our business or to integrate acquired businesses.
Should we need to raise funds by issuing additional equity, our equity holders will suffer dilution. In addition, announcement or implementation of future transactions by us or others could have a material effect on the price of our equity. Should we need to raise funds by incurring additional debt, we may become subject to covenants even more restrictive than those contained in our credit facilities and our other debt instruments. The issuance of additional debt could increase our leverage substantially. We could face financial risks associated with incurring additional debt, particularly if the debt results in significant incremental leverage. Additional debt may reduce our liquidity, curtail our access to financing markets, impact our standing with credit agencies and increase the cash flow required for debt service.
Any incremental debt incurred to finance an acquisition could also place significant constraints on the operation of our business. Furthermore, if adverse economic conditions occur, we could experience decreased revenues from our operations which could affect our ability to satisfy financial and other restrictive covenants to which we are subject under our existing indebtedness.
We must rationalize, coordinate and integrate the operations of our acquired businesses, including PR Newswire, Bulletin Intelligence, Argus, CEDROM, Prime and other acquisitions we make in the future. This process involves complex technological, operational and personnel-related challenges, which are time-consuming and expensive and may disrupt our business. The difficulties, costs and delays that could be encountered may include:
| difficulties, costs or complications in combining the companies operations, including technology platforms, which could lead to us not achieving the synergies we anticipate or to customers not renewing their contracts with us as we integrate platforms; |
| inability to maintain uniform standards, controls, procedures and policies as we attempt to integrate the acquired businesses; |
| difficulty streamlining operations or eliminating redundancies, resulting in the failure to achieve expected cost savings; |
| incompatibility of systems and operating methods; |
| reliance on a deal partner for transition services, including billing services; |
| inability to use capital assets efficiently to develop the business of the combined company; |
| difficulties of complying with government-imposed regulations in the United States and abroad, which may be conflicting; |
| resolving possible inconsistencies in standards, controls, procedures and policies, business cultures and compensation structures; |
| the diversion of managements attention from ongoing business concerns and other strategic opportunities; |
| difficulties in operating acquired businesses in parallel with similar businesses that we operated previously; |
| difficulties in operating businesses we have not operated before; |
| difficulties of integrating multiple acquired businesses simultaneously; |
| inability to continue providing actionable intelligence to the Government or private industry, whether through unreliable intelligence channels, competition from rival intelligence-producing entities, security breaches affecting us or others that disrupt our ability to acquire such intelligence, or decisions of the recipients of such information to no longer receive it; |
10
| the retention of key employees and management, including key management of the companies that we acquire; |
| the implementation of disclosure controls, internal controls and financial reporting systems at non-U.S. subsidiaries to enable us to comply with generally accepted accounting principles in the United States (U.S. GAAP); |
| the coordination of geographically separate organizations; |
| the coordination and consolidation of ongoing and future research and development efforts; |
| possible tax costs or inefficiencies associated with integrating the operations of a combined company; |
| pre-tax restructuring and revenue investment costs; |
| the retention of strategic partners and attracting new strategic partners; and |
| negative impacts on employee morale and performance as a result of job changes, reassignments and reductions in force. |
For these reasons, we may not achieve the anticipated financial and strategic benefits from our acquisitions. Actual cost savings and synergies may be lower than we expect and may take a longer time to achieve than we anticipate, and we may fail to realize the anticipated benefits of acquisitions.
Information security risks have generally increased in recent years, in part because of the proliferation of new technologies and the use of the Internet, and the increased sophistication and activity of organized crime, hackers, terrorists, activists, cybercriminals and other external parties, some of which may be linked to terrorist organizations or hostile foreign governments. For example, a cybercriminal could use cybersecurity threats to gain access to sensitive information about another company or to alter or disrupt news or information to be distributed by PR Newswire. Cybersecurity attacks are becoming more sophisticated and include malicious software, ransomware, attempts to gain unauthorized access to data and other electronic security breaches that could lead to disruptions in critical systems, unauthorized release of confidential or otherwise protected information and corruption of data, substantially damaging our reputation. Any person who circumvents our security measures could steal proprietary or confidential customer information or cause interruptions in our operations. We incur significant costs to protect against security breaches, and may incur significant additional costs to alleviate problems caused by any breaches. Our failure to prevent security breaches, or well-publicized security breaches affecting the Internet in general, could significantly harm our reputation and business and financial results.
Certain laws and regulations regarding data security affecting our customers impose requirements regarding the security of information maintained by these customers, as well as notification to persons whose personal information is accessed by an unauthorized third party. Certain laws may also require us to protect the security of our employees personal data.
As a result of any continuing legislative initiatives and customer demands, we may have to modify our operations with the goal of further improving data security. The cost of compliance with these laws and regulations is high and is likely to increase in the future. Any such modifications may result in increased expenses and operating complexity, and we may be unable to increase the rates we charge for our services sufficiently to offset these increases. Any failure on our part to comply with these laws, regulations and standards can result in negative publicity and diversion of management time and effort and may subject us to significant liabilities and other penalties.
If customer confidential information, including material non-public information or personal data we maintain, is inappropriately disclosed due to an information security breach, or if any person, including any of our employees, negligently disregards or intentionally breaches controls or procedures with which we are responsible for complying with respect to such data or otherwise mismanages or misappropriates that data, we may have substantial liabilities to our clients. Any incidents with respect to the handling of such information
11
could subject us to litigation or indemnification claims with our clients and other parties. In addition, any breach or alleged breach of our confidentiality agreements with our clients may result in termination of their engagements, resulting in associated loss of revenue and increased costs.
Our business relies on continuous access to content, which is increasingly generated digitally or via social media. If content providers interrupt continuous access, impose onerous terms for accessing content, refuse to do business with us or move their content behind digital paywalls without providing access to us, our future financial performance may be adversely affected. Such changes may have a material and adverse impact on our revenue, business, financial condition, and operations and could have an adverse effect on our future financial performance or position. We rely on third parties to license their technology and provide or make available certain data and other content for our information databases, our news monitoring service and our social media monitoring service.
Losing access to licensed technology and content, such as broadcast content, news outlets and social media platforms, could result in delays in the provision of our services until we develop, identify, license and integrate equivalent technology or content. These third parties may not renew agreements to provide licenses to us, or may increase the price they charge for their licenses.
Additionally, the quality of the technology content provided to us may not be acceptable to us and we may need to enter into agreements with additional third parties. Third-party licenses may not continue to be available to us on commercially reasonable or competitive terms, if at all. Any interruption or delay in the provision of our services could adversely affect our financial performance and ability to grow revenue, damage our business and adversely affect our results of operations by forcing customers to seek out other suppliers that can provide access to their desired licensed content. In the event we are unable to use such third-party technology or content or are unable to enter into agreements with third parties, we may not be successful in maintaining relationships with key customers and current customers may not renew their subscription agreements with us or continue purchasing solutions from us, and it may be difficult to acquire new customers which may have a material and adverse impact on our revenue, business, financial condition and operations.
We rely on third parties to perform certain functions, and our business could be adversely affected if these third parties fail to perform as expected. We rely on third parties for regulatory, data center, data storage, data content, clearing and other services. To the extent that any of our vendors or other third-party service providers experience difficulties, materially change their business relationship with us or are unable for any reason to perform their obligations, our business, reputation or our financial results may be materially adversely affected.
One of our competitive strengths is our strong reputation and brand name. We believe that developing and maintaining awareness of our brands and avoiding damage to our reputation is critical to our business. Successful promotion of our brands will depend largely on our ability to provide reliable and useful products and solutions. Various other issues may give rise to reputational risk, including issues relating to:
| our ability to maintain the security of our data and systems; |
| the quality and reliability of our technology platforms and systems; |
| the ability to fulfill our regulatory obligations; |
| the ability to execute our business plan, key initiatives or new business ventures; |
| the ability to keep up with changing customer demand; |
| the representation of our business in the media; |
| the accuracy of our financial statements and other financial and statistical information; |
| the accuracy of our financial guidance or other information provided to our investors; |
12
| the quality of our corporate governance structure; |
| the quality of our products and services; |
| the quality of our disclosure controls or internal controls over financial reporting, including any failures in supervision; |
| extreme price volatility on our markets; |
| any negative publicity surrounding our customers; and |
| any misconduct, fraudulent activity or theft by our employees or other persons formerly or currently associated with us. |
If we fail to successfully promote and maintain our brands and protect our reputation, or if we incur substantial expenses in an unsuccessful attempt to promote and maintain our brands, we may fail to attract new customers or retain our existing customers to the extent necessary to realize a sufficient return on our brand-building and brand-maintaining efforts, and our business could suffer.
In accordance with U.S. GAAP, we account for the completion of our acquisitions using the acquisition method of accounting. We allocate the total estimated purchase prices to net tangible assets, amortizable intangible assets and indefinite-lived intangible assets, and based on their fair values as of the date of completion of the acquisitions, recording the excess of the purchase price over those fair values as goodwill. Our financial results, including earnings per share, could be adversely affected by a number of financial adjustments required by U.S. GAAP. For example, we may have additional depreciation expense as a result of recording acquired tangible assets at fair value as compared to book value as recorded, or we may incur certain adjustments to reflect the financial condition and operating results under U.S. GAAP and in U.S. dollars.
Our business acquisitions typically result in the recording of goodwill and intangible assets, and the recorded values of those assets may become impaired in the future. As of December 31, 2017, goodwill totaled approximately $1,136.4 million and other intangible assets, net of accumulated amortization, totaled approximately $456.3 million. The determination of the value of such goodwill and intangible assets requires management to make estimates and assumptions that affect our consolidated financial statements.
We assess goodwill and intangible assets, as well as other long-lived assets, including equity and cost method investments, and property and equipment for impairment on an annual basis or more frequently if indicators of impairment arise. We estimate the fair value of such assets by assessing many factors, including historical performance, capital requirements and projected cash flows. Considerable management judgment is necessary to project future cash flows and evaluate the impact of expected operating and macroeconomic changes on these cash flows. Although the estimates and assumptions we use are consistent with our internal planning process, there are inherent uncertainties in these estimates.
In addition, we may experience future events that may result in asset impairments. Future disruptions to our business, prolonged economic weakness or significant declines in operating results at any of our reporting units or businesses may result in impairment charges to goodwill, intangible assets or other long-lived assets. A significant impairment charge in the future could have a material adverse effect on our operating results.
We have experienced, and expect to continue to experience, fluctuations in our quarterly revenues and results of operations. For example, we experience fluctuations in our revenue and earnings as we integrate new acquisitions and based on the seasonal impact of corporate reporting. This and other factors may contribute to fluctuations in our results of operations from quarter to quarter. A high percentage of our operating expenses, particularly personnel and rent, are relatively fixed in advance of any particular quarter. As a result,
13
unanticipated variations in our operating results may cause us to run our operations inefficiently over a period of time, which could have an adverse effect on our results of operations.
We are subject to various legal proceedings, governmental inquiries and claims that arise in the ordinary course of business and otherwise.
Any claims asserted against us, regardless of merit or eventual outcome, could harm our reputation and have an adverse impact on our reputation, brand and relationships with our customers and other third parties and could lead to additional related claims. Certain claims may seek injunctive relief and regulators, as part of settlements or otherwise, may seek to modify our products or services, which could disrupt the ordinary conduct of our business and operations, reduce our revenues or increase our cost of doing business. Any response to any such litigation or governmental investigation or claim may cause us to incur significant legal expenses. Substantial recovery against us or fines or penalties could have a material adverse impact on us, and unfavorable rulings, findings or recoveries in the other proceedings could have a material adverse impact on the operating results of the period in which the ruling or recovery occurs. See Business of Cision and Certain Information about Cision Legal Proceedings.
Although we maintain global general liability insurance, including coverage for errors and omissions and employment practices, this coverage may be inadequate, or may not be available in the future on acceptable terms, or at all. In addition, we cannot provide assurance that these policies will cover any claim against us for loss of data or other indirect or consequential damages and defending a suit, regardless of its merit, could be costly and divert managements attention.
To protect our intellectual property rights, we rely on a combination of trademark laws, copyright laws, patent laws, trade secret protection, confidentiality agreements and other contractual arrangements with our employees, affiliates, clients, strategic partners and others. The protective steps that we take may be inadequate to deter misappropriation of our proprietary information. Third parties may challenge, circumvent, infringe or misappropriate our intellectual property, or such intellectual property may not be sufficient to permit us to take advantage of current market trends or otherwise to provide competitive advantages, which could result in costly redesign efforts, discontinuance of service offerings or other competitive harm. For example, competitors may try to use brand names confusingly similar to ours for similar services in order to benefit from our brands value. Others, including our competitors, may independently develop similar technology, duplicate our services or design around our intellectual property and, in such cases, we could not assert our intellectual property rights against such parties. Further, our contractual arrangements may not effectively prevent disclosure of our confidential information or provide an adequate remedy in the event of unauthorized disclosure of our confidential information, and we may be unable to detect the unauthorized use of, or take appropriate steps to enforce, our intellectual property rights.
We have registered, or applied to register, our trademarks in the United States and in over 25 foreign jurisdictions. We also maintain copyright protection on our tangible materials and pursue patent protection for software products, inventions and other processes developed by us. We also hold a number of patents, patent applications and licenses in the United States and other foreign jurisdictions. However, we cannot guarantee that any of our pending patent applications will issue or be approved, and that our existing and future intellectual property rights will be sufficiently broad to protect our technology and proprietary information or provide us with any competitive advantages. The United States Patent and Trademark Office, or the USPTO, and various foreign governmental patent agencies require compliance with a number of procedural, documentary, fee payment and other similar provisions during the patent application process and after a patent has issued. There are situations in which noncompliance can result in abandonment or lapse of the patent or patent application, resulting in partial or complete loss of patent rights in the relevant jurisdiction. If this occurs, our competitors might be able to enter the market, which would have a material adverse effect on our
14
business. Effective trademark, copyright, patent and trade secret protection may not be available in every country in which we offer our services. In addition, many countries limit the enforceability of patents against third parties, including government agencies or government contractors. In these countries, patents may provide limited or no benefit. Further, intellectual property law, including statutory and case law, particularly in the United States, is constantly developing, and any changes in the law could make it harder for us to enforce our rights. Failure to protect our intellectual property adequately could harm our brand and affect our ability to compete effectively. Further, we may not always detect infringement of our intellectual property rights, and defending our intellectual property rights, even if successfully detected, prosecuted, enjoined, or remedied, could result in the expenditure of significant financial and managerial resources. An adverse determination of any litigation or defense proceedings could put our intellectual property at risk of being invalidated or interpreted narrowly and could put our related pending patent applications at risk of not issuing. Furthermore, because of the substantial amount of discovery required in connection with intellectual property litigation, there is a risk that some of our confidential or sensitive information could be compromised by disclosure in the event of litigation. In addition, during the course of litigation there could be public announcements of the results of hearings, motions or other interim proceedings or developments. If securities analysts or investors perceive these results to be negative, it could have a substantial adverse effect on the price of our common stock.
Moreover, a significant portion of our intellectual property has been acquired from one or more third parties. While we have conducted diligence with respect to such acquisitions, because we did not participate in the development or prosecution of much of the acquired intellectual property, we cannot guarantee that our diligence efforts identified and/or remedied all issues related to such intellectual property, including potential ownership errors, potential errors during prosecution of such intellectual property, and potential encumbrances that could limit our ability to enforce such intellectual property rights.
We may be subject to costly litigation if our services and technology are alleged to infringe upon or otherwise violate a third partys proprietary rights. Third parties may have, or may eventually be issued, patents that could be infringed by our products, services or technology. Because patent applications can take years to issue and are often afforded confidentiality for some period of time there may currently be pending applications, unknown to us, that later result in issued patents that could cover one or more of our products. Any of these third parties could make a claim of infringement against us with respect to our products, services or technology. We may also be obligated to indemnify our customers or business partners or pay substantial settlement costs, including royalty payments, in connection with any such claim or litigation and to obtain licenses, modify applications or refund fees, which could be costly. We have been and may also be in the future subject to claims by third parties for patent, copyright or trademark infringement, breach of license or violation of other third-party intellectual property rights.
Any intellectual property claims, with or without merit, could be expensive to litigate or settle and could divert management resources and attention. In a patent infringement claim against us, we may assert, as a defense, that we do not infringe the relevant patent claims, that the patent is invalid or both. The strength of our defenses will depend on the patents asserted, the interpretation of these patents, and our ability to invalidate the asserted patents. However, we could be unsuccessful in advancing non-infringement and/or invalidity arguments in our defense. In the United States, issued patents enjoy a presumption of validity, and the party challenging the validity of a patent claim must present clear and convincing evidence of invalidity, which is a high burden of proof. Conversely, the patent owner need only prove infringement by a preponderance of the evidence, which is a lower burden of proof. Successful challenges against us could require us to modify or discontinue our use of technology or business processes where such use is found to infringe or violate the rights of others, enter into costly settlement or license agreements, pay costly damage awards, face a temporary or permanent injunction prohibiting us from marketing or selling certain of our products or services or purchase licenses from third parties, any of which could adversely affect our business, financial condition and operating results.
15
Additionally, in recent years, individuals and groups have been purchasing intellectual property assets for the sole purpose of making claims of infringement or other violations and attempting to extract settlements from companies like ours. Even if we have an agreement for indemnification against costs associated with litigation, the indemnifying party, if any in such circumstances, may be unable to uphold its contractual obligations. If we cannot or do not license the infringed technology on reasonable terms or substitute similar technology from another source, our revenue and earnings could be adversely impacted.
Moreover, our intellectual property acquired from one or more third parties may have previously been the subject of one or more intellectual property infringement suits and/or allegations. While we have conducted diligence with respect to such acquisitions, we cannot guarantee that our diligence efforts identified and/or remedied all issues related to such intellectual property infringement suits and/or allegations. Moreover, we cannot guarantee that we understand and/or have complied with all obligations related to the settlement of such intellectual property suits and/or the resolution of such intellectual property allegations.
Over the past several years, acquisitions have been significant factors in our growth. Although we cannot predict our rate of growth as the result of acquisitions with complete accuracy, we believe that additional acquisitions and investments or entering into partnerships and joint ventures will be important to our growth strategy. Such transactions may be material in size and scope. There can be no assurances that we will be able to complete suitable acquisitions for a variety of reasons, including the identification of and competition for acquisition targets, the need for regulatory approvals, the inability of the parties to agree to the structure or purchase price of the transaction, competition from competitors interested in making similar acquisitions and our inability to finance the transaction on commercially acceptable terms.
Therefore, we cannot be sure that we will be able to complete future transactions on terms favorable to us.
Furthermore, any future acquisitions or investments in businesses or facilities could entail a number of additional risks, including:
| problems with effective integration of operations; |
| the inability to maintain key pre-acquisition business relationships; |
| increased operating costs; |
| the diversion of our management team from other operations; |
| problems with regulatory bodies; |
| declines in the value of investments; |
| exposure to unanticipated liabilities; |
| difficulties in realizing projected efficiencies, synergies and cost savings; and |
| changes in our credit rating and financing costs. |
As a global company, we, like other corporations, are subject to taxes at the U.S. federal, state and local levels, as well as in non-U.S. jurisdictions. Significant judgment is required to determine and estimate worldwide tax liabilities. Changes in tax laws, regulations or policies and the amount and composition of pre-tax income in countries with differing tax rates or valuation of our deferred tax assets and liabilities could result in us having to pay or accrue higher taxes, which would in turn reduce our net income.
We are subject to potential regular examination by the Internal Revenue Service and other tax authorities (for example, we are currently under audit in the United States for the tax period ended December 31, 2014), and from time to time we initiate amendments to previously filed tax returns. We regularly assess the likelihood of favorable or unfavorable outcomes resulting from these examinations and amendments to determine the
16
adequacy of our provision for income taxes, which requires estimates and judgments. Although we believe our tax estimates are reasonable, we cannot assure you that the tax authorities will agree with such estimates. We may have to engage in litigation to achieve the results reflected in the estimates, which may be time-consuming and expensive. We cannot assure you that we will be successful or that any final determination will not be materially different from the treatment reflected in our historical income tax provisions and accruals, which could materially and adversely affect our financial condition and results of operations.
In addition, some of our subsidiaries are subject to tax in the jurisdictions in which they are organized or operate. In computing our tax obligation in these jurisdictions, we take various tax positions. We cannot assure you that upon review of these positions the applicable authorities will agree with our positions. A successful challenge by a tax authority could result in additional tax imposed on our subsidiaries. Our non-U.S. businesses operate in various international markets, particularly emerging markets that are subject to greater political, economic and social uncertainties than developed countries. In certain of the countries in which we operate, tax authorities may exercise significant discretionary and arbitrary powers to make tax demands or decline to refund payments that may be due to us as per tax returns. As a result, applicable tax laws in jurisdictions where we do business could have a material adverse effect on our financial condition and results of operations.
On December 22, 2017, the Tax Cuts and Jobs Act of 2017 (the Act) was signed into law making significant changes to the Internal Revenue Code. Changes include, but are not limited to, a corporate tax rate decrease from 35% to 21% effective for tax years beginning after December 31, 2017, the transition of U.S international taxation from a worldwide tax system to a partial territorial system, a one-time transition tax on the mandatory deemed repatriation of cumulative foreign earnings as of December 31, 2017 and new limitations on the deductibility of interest. We have calculated our best estimate of the impact of the Act in our year end income tax provision in accordance with our understanding of the Act and guidance available as of the date of this filing and as a result have recorded $11.9 million as additional income tax expense in the fourth quarter of 2017, the period in which the legislation was enacted. This provisional amount relates to the remeasurement of U.S. deferred tax assets and liabilities based on the rates at which they are expected to reverse in the future, an amount for the change in the valuation allowance necessary for the deferred tax asset related to nondeductible interest and an amount related to the one-time transition tax on the mandatory deemed repatriation of foreign earnings . On December 22, 2017, Staff Accounting Bulletin No. 118 (SAB 118) was issued to address the application of U.S. GAAP in situations when a registrant does not have the necessary information available, prepared, or analyzed (including computations) in reasonable detail to complete the accounting for certain income tax effects of the Act. In accordance with SAB 118, we have determined that the deferred tax expense recorded in connection with the remeasurement of certain deferred tax assets and liabilities and the current tax expense recorded in connection with the transition tax on the mandatory deemed repatriation of foreign earnings are provisional amounts at December 31, 2017.
Additional work is necessary to do a more detailed analysis of historical foreign earnings as well as potential correlative adjustments.
A significant portion of our revenues are denominated in foreign currency. For the year ended December 31, 2017, approximately 35% of our revenues were denominated in foreign currencies. In addition, a significant portion of our expenses are incurred in the local currencies of the countries in which we operate, including British Pound, the Euro,
Swedish Krona and the Canadian Dollar. We have operations in the United States (our headquarters), Europe, the Americas and a number of other foreign countries. For financial reporting purposes, we translate all non-U.S. denominated transactions into U.S. dollars in accordance with U.S. GAAP. We therefore have significant exposure to exchange rate movements between the Pound, Euro, Kroner and Canadian Dollar and other foreign currencies towards the U.S. dollar.
17
Fluctuations in exchange rates also affect the value of funds held by our foreign subsidiaries. Significant inflation or disproportionate changes in foreign exchange rates with respect to one or more of these currencies could occur as a result of general economic conditions, acts of war or terrorism, changes in governmental monetary or tax policy or changes in local interest rates. These exchange rate differences will affect the translation of our non-U.S. results of operations and financial condition into U.S. dollars as part of the preparation of our consolidated financial statements.
U.S. GAAP is subject to interpretation by the Financial Accounting Standards Board (FASB), the American Institute of Certified Public Accountants, the U.S. Securities and Exchange Commission (the SEC) and various bodies formed to promulgate and interpret appropriate accounting principles. A change in these principles or interpretations, including changes related to revenue recognition, could have a significant effect on our reported financial results, and could affect the reporting of transactions completed before the announcement of a change.
A substantial portion of our solutions are sold pursuant to subscription agreements, and our customers have no obligation to renew these agreements. For the year ended December 31, 2017, subscription or recurring revenue streams represented approximately 83% of our pro forma revenues. We consider services recurrent if customers routinely purchase these services from us pursuant to negotiated rate card or similar arrangements, even if we do not have subscription agreements with them. Other companies that also derive revenue from subscription arrangements, including companies in our industry, may not consider revenue derived from rate cards or similar arrangements as recurring, and as a result such revenue measures may not be directly comparable to ours. Furthermore, we may not be able to consistently and accurately predict future renewal rates. Our subscription customers renewal rates may decline or fluctuate or our subscription customers may renew for fewer services or for less expensive services as a result of a number of factors, including their level of satisfaction with our solutions, budgetary or other concerns, and the availability and pricing of competing products. If large numbers of existing subscription customers do not renew these agreements, or renew these agreements on terms less favorable to us, and if we cannot replace or supplement those non-renewals with new subscription agreements generating the same or greater level of revenue, our business, financial condition and results of operations will be adversely affected.
We recognize revenue from our subscription customers over the terms of their subscription agreements. A significant portion of our quarterly revenue usually represents deferred revenue from subscription agreements entered into during previous quarters. As a result, a decline in new or renewed subscription agreements in any one quarter will not necessarily be fully reflected in the revenue for the corresponding quarter but will negatively affect our revenue in future quarters.
Additionally, the effect of significant downturns in sales and market acceptance of our solutions may not be fully reflected in our results of operations until future periods. Our model also makes it difficult for us to rapidly increase our subscription based revenue through additional sales in any period, as revenue from new customers must be recognized over the applicable subscription term.
18
Our ability to increase revenue and achieve profitability depends, in large part, on widespread acceptance of our cloud based platform by enterprises. As we target our sales efforts at these customers, we face greater costs, longer sales cycles and less predictability in completing some of our sales. As a result of the variability and length of the sales cycle,
we have limited ability to forecast the timing of sales. A delay in or failure to complete sales could harm our business and financial results, and could cause our financial results to vary significantly from period to period. Our sales cycle varies widely, reflecting differences in potential customers decision-making processes, procurement requirements and budget cycles, and is subject to significant risks over which we have little or no control, including:
| customers budgetary constraints and priorities, including with respect to resource allocation between PR and marketing and paid versus owned media; |
| the timing of customers budget cycles; |
| the need by some customers for lengthy evaluations prior to purchasing products; and |
| the length and timing of customers approval processes. |
Our typical direct sales cycles for more substantial enterprise customers can often be long, and we expect that this lengthy sales cycle may continue or could even increase as our products become more complex and we are asked to tailor our solutions to our enterprise customer needs. Longer sales cycles could cause our operating results and financial condition to suffer in a given period. If we cannot adequately scale our direct sales force, we will experience further delays in signing new customers, which could slow our revenue growth.
Market opportunity estimates and growth forecasts included in this Prospectus/Offer to Exchange are subject to significant uncertainty and are based on assumptions and estimates that may not prove to be accurate. Even if the market in which we compete meets the size estimates and growth forecasted in this Prospectus/Offer to Exchange, our business could fail to grow at similar rates, if at all.
For more information regarding the estimates of market opportunity and the forecasts of market growth included in this Prospectus/Offer to Exchange, see the section entitled Business Industry .
The success of our strategy is dependent, in part, on the success of our efforts to sell and cross-sell additional services, whether internally developed or acquired in an acquisition, to our existing customers. These customers might choose not to expand their use of or make additional purchases of our solutions or may choose to diversify the PR solution providers with which they do business. If we fail to generate additional business from our current customers, our revenue could grow at a slower rate or decrease. Our historical revenue growth rates are not indicative of future growth, and we may not achieve similar revenue growth rates in future periods. You should not rely on our revenue for any prior quarterly or annual periods as an indication of our future revenue or revenue growth. Our operating results may vary as a result of a number of factors, including our ability to execute on our business strategy and compete effectively for customers and business partners and other factors that are outside of our control. If we are unable to maintain consistent revenue or revenue growth, our share price could be volatile, and it could be difficult to achieve or maintain profitability.
19
We provide a portion of our services for specific projects that generate revenues that terminate on completion of a defined task. For the year ended December 31, 2017, approximately 3% of our revenue was related to project-based nonrecurring revenue activities. While we seek, wherever possible, on completion or termination of large projects, to counterbalance periodic declines in revenues with new arrangements to provide services to the same customer or others, our inability to obtain sufficient new projects to counterbalance any decreases in such work may adversely affect our future revenues and results of operations.
We rely on search engines to attract new customers, and many of our customers locate our websites by clicking through on search results displayed by search engines such as Google, Bing and Yahoo!. Search engines typically provide two types of search results, algorithmic and purchased listings. Algorithmic search results are determined and organized solely by automated criteria set by the search engine and a ranking level cannot be purchased. Advertisers can also pay search engines to place listings more prominently in search results in order to attract users to advertisers websites. We rely on both algorithmic and purchased listings to attract customers to our websites. Search engines revise their algorithms from time to time in an attempt to optimize their search result listings. If search engines on which we rely for algorithmic listings modify their algorithms, then our websites may not appear at all or may appear less prominently in search results, which could result in fewer customers clicking through to our websites, requiring us to resort to other potentially costly resources to advertise and market our services. If one or more search engines on which we rely for purchased listings modifies or terminates its relationship with us, our expenses could rise, or our revenue could decline and our business may suffer.
Additionally, the cost of purchased search listing advertising is rapidly increasing as demand for these channels grows, and further increases could greatly increase our expenses.
Moreover, our news distribution service depends upon the placement of our customers online press releases. If search engines on which we rely modify their algorithms or purposefully block our content, then information distributed via our news distribution service may not be displayed or may be displayed less prominently in search results, and as a result we could lose customers or fail to attract new customers and our results of operations could be adversely affected.
Internet service providers (ISPs) can block emails from reaching their users. The implementation of new or more restrictive policies by ISPs may make it more difficult to deliver our customers emails. If ISPs materially limit or halt the delivery of our customers emails, or if we fail to deliver our customers emails in a manner compatible with ISPs email handling, authentication technologies or other policies, then customers may cancel their accounts which could harm our business and financial performance.
We depend on email to market to and communicate with our customers, and our customers rely on email to communicate with journalists, social media influencers, and their customers and members. Various private entities attempt to regulate the use of email for commercial solicitation. These entities often advocate standards of conduct or practice that exceed legal requirements and classify certain email solicitations that comply with legal requirements as spam. Some of these entities maintain blacklists of companies and individuals, and the websites, ISPs and Internet protocol addresses associated with those entities or individuals. If a companys Internet protocol addresses are listed by a blacklisting entity, emails sent from those addresses may be blocked if they are sent to any Internet domain or Internet address that subscribes to
20
the blacklisting entitys service or purchases its blacklist. If our services are blacklisted, our customers may be unable to effectively use our services, and as a result we could lose customers or fail to attract new customers and our results of operations could be adversely affected.
We are subject to federal, state, and international laws relating to the collection, use, retention, security, and transfer of personal data. Laws and regulations governing the collection, use and disclosure of personal data and use of online analytics and tracking technologies are rapidly evolving globally. As a result, implementation standards and enforcement practices are likely to remain uncertain for the foreseeable future. We publicly post documentation regarding our practices concerning the processing, use, and disclosure of data. Any failure by us, our suppliers, or other parties with whom we do business to comply with this documentation or with other federal, state, or foreign regulations could result in proceedings against us by governmental entities or others. In many jurisdictions, enforcement actions and consequences for noncompliance are rising. In the United States, these include enforcement actions in response to rules and regulations promulgated under the authority of federal agencies and state attorneys general and legislatures and consumer protection agencies. In addition, privacy advocates and industry groups have regularly proposed, and may propose in the future, self-regulatory standards with which we must legally comply or that contractually apply to us, like the Payment Card Industry Data Security Standard, or PCI DSS. If we fail to follow these security standards, such as those set forth in the PCI DSS, even if no customer information is compromised, we may incur significant fines or experience a significant increase in costs.
Internationally, many jurisdictions in which we operate have established privacy legal framework with which we, our customers or our vendors must comply, including but not limited to the European Union, or EU. The EUs data protection landscape is currently unstable, resulting in possible significant operational costs for internal compliance and risk to our business. In addition, the EU has adopted the General Data Protection Regulation, or GDPR, which is scheduled to go into effect in May 2018 and contains numerous requirements and changes from existing EU law, including more robust obligations on data processors and heavier documentation requirements for data protection compliance programs by companies. Specifically, the GDPR will introduce numerous privacy-related changes for companies operating in the EU, including greater control for data subjects (e.g., the right to be forgotten), increased data portability for EU consumers, data breach notification requirements, and increased fines. In particular, under the GDPR, fines of up to 20 million euros or up to 4% of the annual global revenue of the noncompliant company, whichever is greater, could be imposed for violations of certain of the GDPRs requirements. The GDPR requirements apply not only to third-party transactions, but also to transfers of information between us and our subsidiaries, including employee information.
Changes in these laws and regulations, and self-regulatory frameworks may affect our ability to collect, use and share personal data, and to provide services to customers that rely on our ability to leverage data. Other proposed legislation could, if enacted, prohibit or limit the use of certain technologies that track individuals activities on web pages, in emails or on the Internet. In addition to government activity, privacy advocacy groups and the technology and marketing industries are considering various new, additional or different self-regulatory standards that may place additional burdens on us or our customers, which could reduce demand for our solutions. As a result of any continuing legislative initiatives and customer demands, we may have to modify our operations to enable us to continue to leverage personal data and other content. The cost of compliance with these laws and regulations is high and is likely to increase in the future. Any such modifications may result in increased expenses and operating complexity, and we may be unable to increase the rates we charge for our services sufficiently to offset these increases. Any failure on our part to comply with these laws, regulations and standards can result in negative publicity and diversion of management time and effort and may subject us to significant liabilities and other penalties.
Our cloud-based software may contain undetected errors or defects that may result in product failures, misleading reports or otherwise cause our solutions to fail to perform in accordance with customer
21
expectations. Because our customers use our solutions for important aspects of their business, any errors or defects in, or other performance problems with, our solutions could hurt our reputation and may damage our customers businesses. If that occurs, we could lose future sales, our existing subscription customers could elect to not renew or, in certain circumstances, terminate their agreements with us. Product performance problems could result in loss of market share, failure to achieve market acceptance and the diversion of development resources. If one or more of our solutions fail to perform or contain a technical defect, a customer may assert a claim against us for substantial damages, whether or not we are responsible for our solutions failure or defect. Product liability claims could require us to spend significant time and money in litigation or arbitration/dispute resolution or to pay significant settlements or damages.
Our news distribution service is a trusted information source, and our customers rely on our email services to communicate with journalists, social media influencers, and their customers and members. To the extent we were to distribute an inaccurate or fraudulent press release or our customers used our services to transmit negative messages or website links to harmful applications, reproduce and distribute copyrighted and trademarked material without permission,
or report inaccurate or fraudulent data or information, our reputation could be harmed, even though we are not responsible for the content distributed via our services.
We have incurred operating losses in the past and we may incur operating losses in the future. In 2017, we had operating income of $38.0 million. Prior to 2017, we had operating losses of $19.6 million in 2016 and $27.6 million in 2015. We expect our operating expenses to increase as we continue to expand our operations, and if our increased operating expenses exceed our revenue growth, we may not be able to generate operating income.
As of December 31, 2017, we had U.S. federal and state net operating loss carryforwards of $134.1 million. The federal and state net operating loss carryforwards will begin to expire, if not utilized, beginning in 2031. These net operating loss carryforwards could expire unused and be unavailable to offset future income tax liabilities. Under the newly enacted federal income tax law, federal net operating losses generated in 2018 and in future years may be carried forward indefinitely, but the deductibility of such federal net operating losses is limited. It is uncertain if and to what extent various states will conform to the newly enacted federal tax law. In addition, under Section 382 of the Internal Revenue Code of 1986, as amended (the Code), if a corporation undergoes an ownership change (generally defined as a greater than 50% change (by value) in its equity ownership over a three-year period), its ability to use its pre-change net operating loss carryforwards and other pre-change tax attributes to offset its post-change income may be limited. If we undergo an ownership change (including as a result of the exchange of Warrants or new Warrants for our Ordinary Shares), we may be limited in the portion of net operating loss carryforwards that we can use in the future to offset taxable income for U.S. federal and state income tax purposes and the utilization of other tax attributes to reduce our federal and state income tax expense.
Taxing jurisdictions, including state and local entities, have differing rules and regulations governing sales and use or other taxes, and these rules and regulations are subject to varying interpretations that may change over time. In particular, the applicability of sales taxes to our subscription services and e-commerce transactions in general in various jurisdictions is a complex and evolving issue. It is possible that we could face sales tax audits and an assertion that we should be collecting sales or other taxes on our services in jurisdictions where we have not historically done so and do not accrue for sales taxes. The imposition of Internet usage taxes or enhanced enforcement of sales tax laws could result in substantial tax liabilities for past sales or could have an adverse effect on our business, financial condition and results of operations.
22
The operations of our non-U.S. business are subject to the risk inherent in international operations. Our expansion into lower cost locations may increase operational risk. Some of these economies may be subject to greater political, economic and social uncertainties than countries with more developed institutional structures. Political, economic or social events or developments in one or more of these countries could adversely affect our operations and financial results.
We operate a global business. For the year ended December 31, 2017, approximately 35% of our revenue was derived from Europe (including the United Kingdom), Canada, Asia and Latin America. We are subject to certain adverse economic factors relating to overseas economies generally, including foreign currency fluctuation, inflation, external debt, a negative balance of trade and underemployment. Risks associated with our international business activities include:
| difficulties in managing international operations, including overcoming logistical and communications challenges; |
| local competition; |
| trade and tariff restrictions; |
| price or exchange controls; |
| currency control regulations; |
| foreign tax consequences; |
| labor disputes and related litigation and liability; |
| limitations on repatriation of earnings; |
| compliance with foreign laws and different legal standards; and |
| changing laws and regulations, occasionally with retroactive effect. |
The occurrence of any one of these risks could negatively affect our international operations and, consequently, our results of operations generally.
We are subject to U.S. export control and economic sanctions laws and regulations and other restrictions on international trade. As such, we are required to export our technology, products, and services in compliance with those laws and regulations. If we export our technology, products, or services, the exports may require authorizations, including a license, a license exception or other appropriate government authorization. Complying with export control and economic and trade sanctions regulations for a particular transaction may be time-consuming and may result in the delay or loss of sales opportunities. In addition, the United States and other governments and their agencies impose sanctions and embargoes on certain countries, their governments and designated parties, which may prohibit the export of certain technology, products, and services to such persons altogether.
We are also subject to the U.S. Foreign Corrupt Practices Act of 1977, as amended, the U.S. domestic bribery statute contained in 18 U.S.C. §201, the U.S. Travel Act, the USA PATRIOT Act, the United Kingdom Bribery Act 2010, the Proceeds of Crime Act 2002, and possibly other state and national anti-bribery and anti-money laundering laws in countries in which we conduct activities. Anti-corruption laws are interpreted broadly and prohibit companies and their employees, third-party intermediaries, and other associated persons from authorizing, promising, offering, providing, soliciting, or accepting directly or indirectly, improper payments or benefits to or from any person whether in the public or private sector. We have direct or indirect interactions with officials and employees of government agencies. We can be held liable for the corrupt or
23
other illegal activities of our employees, representatives, contractors, business partners, and agents, even if we do not explicitly authorize or have actual knowledge of such activities.
Any violation of the laws and regulations described above may result in substantial civil and criminal fines and penalties, imprisonment, the loss of export or import privileges, debarment, tax reassessments, breach of contract and fraud litigation, reputational harm, and other consequences.
Our customers may perform audits or require us to perform audits, provide audit reports or obtain certifications with respect to the controls and procedures that we use in the performance of services for such customers, especially when we process data or information belonging to them. Our ability to acquire new customers and retain existing customers may be adversely affected and our reputation could be harmed if we cannot obtain an appropriate certification or opinion with respect to our controls and procedures in connection with any such audit in a timely manner. Additionally, our profitability could suffer if our controls and procedures were to fail or to impair our customers ability to comply with their own internal control requirements.
We continually evaluate our various products and services in order to determine whether any should be discontinued or, to the extent possible, divested. We cannot guarantee that we have correctly forecasted, or will correctly forecast in the future, the right products or services to dispose of or discontinue, or that our decision to dispose of or discontinue various investments, products or services is prudent. There are no assurances that the discontinuance of various products or services will reduce our operating expenses or will not cause us to incur material charges with such a decision. The disposal or discontinuance of existing solutions presents various risks, including, but not limited to the inability to find a purchaser for a product or service or the purchase price obtained will not be equal to at least the book value of the net assets for the product or service, managing the expectations of, and maintaining good relations with, our customers who previously purchased discontinued solutions, which could prevent us from selling other products to them in the future. We may also incur other significant liabilities and costs associated with our disposal or discontinuance of solutions, including, but not limited to employee severance costs and excess facilities costs, all of which could have an adverse effect on our business, financial condition and results of operations.
Our success depends upon the continued services of our senior management and other key personnel who have substantial experience in the PR software and services industry and the markets in which we offer our services. In addition, our success depends in large part upon the reputation within the industry of our senior managers. Further, in order for us to continue to successfully compete and grow, we must attract, recruit, develop and retain personnel, including key executives of organizations we acquire, who will provide us with expertise across the entire spectrum of our intellectual capital needs. Our success also depends on the skill and experience of our sales force, which we must continuously work to maintain. While we have a number of key personnel who have substantial experience with our operations, we must also develop our personnel to provide succession plans capable of maintaining the continuity of our operations. The market for qualified personnel is competitive, and we may not succeed in recruiting additional personnel or may fail to effectively replace current personnel who depart with qualified or effective successors.
Failure to retain or attract key personnel could impede our ability to grow and could result in our inability to operate our business profitably. In addition, contractual obligations related to confidentiality, assignment of intellectual property rights, and non-solicitation may be ineffective or unenforceable and departing employees may share our proprietary information with competitors in ways that could adversely impact us, or seek to solicit customers or recruit our key personnel to competing businesses.
24
As of December 31, 2017, we had approximately 3,500 global employees, with approximately 1,400 employees located in the United States and 2,100 employees located internationally. In various countries, local law requires our participation in works councils, and we have approximately 500 employees working under collective bargaining agreements. While we have not experienced any material work stoppages at any of our facilities, any stoppage or slowdown could cause material interruptions in our business, and we cannot assure you that alternate qualified personnel would be available on a timely basis, or at all. As a result, labor disruptions at any of our locations could materially adversely affect our business, financial condition and results of operations.
Natural disasters or other catastrophic events may cause damage or disruption to our operations, our servers and data centers and the global economy, and thus could have a strong negative effect on us. Our business operations and our servers and data centers are subject to interruption by natural disasters, fire, power shortages, pandemics and other events beyond our control. Although we maintain crisis management and disaster response plans, such events could make it difficult or impossible for us to continue operations, and could decrease demand for our platform. Our primary data centers are located in Chicago, IL, Sterling, VA, Piscataway, NJ, Raleigh, NC, Paris, France and London, UK, making our business particularly susceptible to natural disasters in those areas as well as in areas where our third-party data centers are located. Any natural disaster affecting our data centers could have an adverse effect on our financial condition and operating results.
We conduct business in countries and regions that are vulnerable to disruptions from political uncertainty, political unrest or terrorist acts. Any damage or disruption from political uncertainty, political unrest or terrorist acts would damage our ability to provide services, in whole or in part, and/or otherwise damage our operations and could have an adverse effect on our business, financial condition or results of operations. Further, political tensions and escalation of hostilities could adversely affect our operations in these countries and therefore adversely affect our revenues and results of operations.
Terrorist attacks and other acts of violence or war could affect us or our clients by disrupting normal business practices for extended periods of time and reducing business confidence. In addition, acts of violence or war may make travel more difficult and may effectively curtail our ability to serve our clients needs, any of which could adversely affect our results of operations.
The volume of content from print news sources has declined in recent years, which has reduced the volume of print news stories delivered through our content offerings. This has largely been driven by a decline in print media readership which has in turn seen a reduction in media publisher revenue and journalist numbers associated with media such as print newspapers. If the volume of content continues to decline (e.g., because of further reductions in journalist numbers by print media publishers), and if we are unable to offset this decline with our current and/or future other software and services, our future financial performance could be adversely affected.
The proliferation of digital, free-to-access news content has led to the introduction of low-cost or free self-service media intelligence offerings. Moreover, our insights group provides human-generated media intelligence analysis and consultation to some of our larger customers. More efficient or cost-effective
25
technology that replaces the need for such human-generated analysis could have an adverse effect on our business. Our future financial performance could be affected by customers adopting these low-cost, self-service media intelligence platforms and technologies.
Future declarations of quarterly dividends and the establishment of future record and payment dates are subject to approval by the board of directors and subject to certain limitations set forth in the agreements governing our credit facilities. The boards determination to declare dividends will depend upon our profitability and financial condition, contractual restrictions, restrictions imposed by applicable law and other factors that the board deems relevant. Based on an evaluation of these factors, the board of directors may determine not to declare future dividends at all or to declare future dividends at a reduced amount. Accordingly, there can be no guarantee that we will pay future dividends to our shareholders.
Our corporate affairs are governed by our amended and restated memorandum and articles of association and by the Companies Law of the Cayman Islands (2018 Revision) (the Companies Law) and common law of the Cayman Islands.
The rights of shareholders to take legal action against our directors and us, actions by minority shareholders and the fiduciary responsibilities of our directors to us under Cayman Islands law are to a large extent governed by the common law of the Cayman Islands. The common law of the Cayman Islands is derived in part from comparatively limited judicial precedent in the Cayman Islands as well as from English common law, which has persuasive, but not binding, authority on a court in the Cayman Islands. The rights of our shareholders and the fiduciary responsibilities of our directors under Cayman Islands law are not as clearly established as they would be under statutes or judicial precedents in the United States. In particular, the Cayman Islands have a less exhaustive body of securities laws as compared to the United States.
In addition, Cayman Islands companies may not have standing to initiate a shareholder derivative action before the United States federal courts. As a result, our shareholders may have more difficulty in protecting their interests through actions against us or our officers, directors or major shareholders than would shareholders of a corporation incorporated in a jurisdiction in the United States.
We are a Cayman Islands company and a portion our assets are located outside of the United States. As a result, it may be difficult or impossible for you to bring an action against us in the United States in the event that you believe that your rights have been infringed under U.S. federal securities laws or otherwise. It may not be possible to enforce certain court judgments obtained in the United States against us (or our directors or officers) in the Cayman Islands. We have been advised that there is no statutory enforcement in the Cayman Islands of judgments obtained in United States courts, and such matters are governed by the common law of the Cayman Islands. Uncertainty exists as to whether the courts of the Cayman Islands would:
| recognize or enforce judgments of United States courts obtained against us or our directors or officers predicated upon the civil liabilities provisions of the securities laws of the United States or any state in the United States; or |
| entertain original actions brought in the Cayman Islands against us or our directors or officers predicated upon the securities laws of the United States or any state in the United States. |
We have been advised that the uncertainty with regard to Cayman Islands law relates to whether a judgment obtained from the United States courts under civil liability provisions of the securities laws will be determined by the courts of the Cayman Islands as penal or punitive in nature. If such a determination is made, the courts of the Cayman Islands will not recognize or enforce the judgment against a Cayman Islands company. Because the courts of the Cayman Islands have yet to rule on whether such judgments are penal or punitive in
26
nature, it is uncertain whether they would be enforceable in the Cayman Islands. We are further advised us that a final and conclusive judgment in the federal or state courts of the United States under which a sum of money is payable, other than a sum payable in respect of taxes, fines, penalties or similar charges, will ordinarily be recognized and enforced in the courts of the Cayman Islands without re-examination of the merits, at common law.
We rely on our customers to secure the rights to redistribute content over the Internet, and we do not screen the content that is distributed through our service. There is no assurance that our customers have licensed all rights necessary for distribution, including Internet distribution. Other parties may claim certain rights in the content of our customers. In the event that our customers do not have the necessary distribution rights related to content or otherwise distribute illegal content, although we have made efforts to limit our liability we may be required to cease distributing such content or subject to lawsuits and claims of damages for infringement of such rights. Any claims or investigations could adversely affect our business, financial condition and results of operations.
As of December 31, 2017, we had no outstanding borrowings and $1.3 million of outstanding letters of credit under our current revolving credit facility (the 2017 Revolving Credit Facility) and $1,332 million outstanding under our first lien term loan facility (the 2017 First Lien Term Credit Facility and together with the 2017 Revolving Credit Facility, the 2017 First Lien Credit Facility). Because borrowings under our 2017 Revolving Credit Facility bear interest at variable rates, any increase in interest rates on debt that we have not fixed using interest rate hedges will increase our interest expense, reduce our cash flow or increase the cost of future borrowings or refinancings. Our indebtedness could have important consequences to our investors, including, but not limited to:
| increasing vulnerability to, and reducing its flexibility to respond to, general adverse economic and industry conditions; |
| requiring the dedication of a substantial portion of cash flow from operations to the payment of principal of, and interest on, its indebtedness, thereby reducing the availability of such cash flow to fund working capital, capital expenditures, acquisitions, joint ventures or other general corporate purposes; |
| limiting flexibility in planning for, or reacting to, changes in its business and the competitive environment; and |
| limiting our ability to borrow additional funds and increasing the cost of any such borrowing. |
Other than variable rate debt, we believe our business has relatively large fixed costs and low variable costs, which magnifies the impact of revenue fluctuations on our operating results. As a result, a decline in our revenue may lead to a relatively larger impact on operating results. A substantial portion of our operating expenses will be related to personnel costs, regulation and corporate overhead, none of which can be adjusted quickly and some of which cannot be adjusted at all. Our operating expense levels will be based on our expectations for future revenue. If actual revenue is below managements expectations, or if our expenses increase before revenues do, both revenues less transaction-based expenses and operating results would be materially and adversely affected. Because of these factors, it is possible that our operating results or other operating metrics may fail to meet the expectations of stock market analysts and investors. If this happens, the market price of our Ordinary Shares may be adversely affected.
The credit agreement in respect of our 2017 First Lien Credit Facility provides that an event of default will occur upon specified change of control events, which include Cision ceasing to beneficially own directly or
27
indirectly all of the voting equity interests of certain credit parties thereunder. In addition, a change of control event occurs if any person or group beneficially owns directly or indirectly a majority of our voting equity interests (other than the Sponsor and certain other specified persons). Although we do not currently anticipate that any such person will beneficially own a majority of the Ordinary Shares prior to our amendment or refinancing of this indebtedness, no person is contractually obligated to retain the Ordinary Shares it holds. If we are unable to amend these agreements or refinance this indebtedness, we will be limited in our ability to issue additional equity to any person which would acquire a majority of Ordinary Shares following such issuance and will need to rely on other sources of financing, including additional borrowings.
We do not anticipate that our board of directors will declare dividends in the foreseeable future. If we decide to declare dividends in the future, as a holding company, we will require dividends and other payments from our subsidiaries to meet such cash requirements. Our credit agreements place certain contractual restrictions on our subsidiaries ability to make distributions to us. See Managements Discussion and Analysis of Financial Condition and Results of Operations Liquidity and Capital Resources Overview for a discussion of our credit facilities restrictions on our subsidiaries ability to make distributions to us. In addition, minimum capital requirements may indirectly restrict the amount of dividends paid upstream, and repatriations of cash from our subsidiaries may be subject to withholding, income and other taxes in various applicable jurisdictions. If our subsidiaries are unable to distribute cash to us and we are unable to pay dividends, our Ordinary Shares may become less attractive to investors and the price of our Ordinary Shares may become volatile.
The U.S. government, the Organisation for Economic Co-operation and Development and other governmental agencies in jurisdictions where we do business have had an extended focus on issues related to the taxation of multinational corporations. One example is in the area of base erosion and profit shifting, where payments are made between affiliates from a jurisdiction with high tax rates to a jurisdiction with lower tax rates. As a result, the tax laws in the countries in which we do business could change on a prospective or retroactive basis, and any such changes could adversely affect us.
The withdrawal of the U.K. from the European Union (commonly referred to as Brexit) may cause an increase in our taxes including withholding taxes on repatriation of cash from jurisdictions that are members of the European Union to or through any of our U.K. subsidiaries as a result of the U.K. no longer being entitled to benefits provided by the European Union directives.
Under Section 7874 of the Code, if, following an acquisition of a U.S. corporation by a foreign corporation, at least 80% of the acquiring foreign corporations stock by (vote and value) is considered to be held by former shareholders of the U.S. corporation by reason of holding stock of such U.S. corporation then the acquiring corporation could be treated as a U.S. corporation for U.S. federal tax purposes even though it is a corporation created and organized outside the United States.
In addition, following the acquisition of a U.S. corporation by a foreign corporation, Section 7874 of the Code can limit the ability of the acquired U.S. corporation and its U.S. affiliates to utilize U.S. tax attributes (including net operating losses and certain tax credits) to offset U.S. taxable income resulting from certain transactions if the shareholders of the acquired U.S. corporation hold at least 60% (but less than 80%), by either vote or value, of the shares of the foreign acquiring corporation by reason of holding shares in the U.S. corporation, and certain other conditions are met. The 2017 Tax Cuts and Jobs Act introduced an additional minimum tax under Section 59A of the Code imposed on certain base eroding payments that reduce gross receipts made to a surrogate foreign corporation under Section 7874 of the Code.
Because Cision is a non-U.S. corporation, Section 7874 of the Code and the regulations thereunder may apply with respect to potential future acquisitions of U.S. corporations by Cision. As a result, these rules may impose adverse consequences or apply limitations on our ability to engage in future acquisitions.
28
If 75% or more of our gross income in a taxable year, including our pro-rata share of the gross income of any company, U.S. or foreign, in which we are considered to own, directly or indirectly, 25% or more of the shares by value, is passive income, then we will be a passive foreign investment company, or PFIC, for U.S. federal income tax purposes.
Alternatively, we will be considered to be a PFIC if at least 50% of our assets in a taxable year, averaged over the year and ordinarily determined based on fair market value and including our pro-rata share of the assets of any company in which we are considered to own, directly or indirectly, 25% or more of the shares by value, are held for the production of, or produce, passive income. Once treated as a PFIC, for any taxable year, a foreign corporation will generally continue to be treated as a PFIC for all subsequent taxable years for any shareholder who owned shares of the foreign corporation when it was treated as a PFIC. If we were to be a PFIC, and a U.S. holder does not make an election to treat us as a qualified electing fund, or QEF, or a mark-to-market election, excess distributions to a U.S. holder, and any gain recognized by a U.S. holder on a disposition of our Ordinary Shares, would be taxed in an unfavorable way.
Among other consequences, our dividends, to the extent that they constituted excess distributions, would be taxed at the regular rates applicable to ordinary income, rather than the 20% maximum rate applicable to certain dividends received by an individual from a qualified foreign corporation, and certain interest charges may apply. In addition, gains on the sale of our Ordinary Shares would be treated in the same way as excess distributions.
The tests for determining PFIC status are applied annually and it is difficult to make accurate predictions of future income and assets, which are relevant to the determination of PFIC status. In addition, under the applicable statutory and regulatory provisions, it is unclear whether we would be permitted to use a gross loss from sales (sales less cost of goods sold) to offset our passive income in the calculation of gross income. Although we do not expect that we will be a PFIC in the future, in light of the periodic asset and income tests applicable in making this determination, no assurance can be given that we will not become a PFIC. If we do become a PFIC in the future, U.S. holders who hold Ordinary Shares during any period when we are a PFIC will be subject to the foregoing rules, even if we cease to be a PFIC, subject to exceptions for U.S. holders who made a timely QEF or mark-to-market election, or certain other elections. We do not currently intend to prepare or provide the information that would enable our shareholders to make a QEF election.
Accordingly, our shareholders are urged to consult their tax advisors regarding the application of the PFIC rules.
As a privately held company, we were not required to comply with certain corporate governance and financial reporting practices and policies required of a publicly traded company. As a publicly traded company, we incur significant legal, accounting and other expenses that we were not required to incur in the recent past, particularly after we are no longer an emerging growth company as defined under the Jumpstart Our Business Startups Act, as amended (the JOBS Act). In addition, new and changing laws, regulations and standards relating to corporate governance and public disclosure, including the Dodd Frank Wall Street Reform and Consumer Protection Act and the rules and regulations promulgated and to be promulgated thereunder, as well as under the Sarbanes-Oxley Act, the JOBS Act, and the rules and regulations of the SEC and national securities exchanges have created uncertainty for public companies and increased the costs and the time that our board of directors and management must devote to complying with these rules and regulations. We expect these rules and regulations to increase our legal and financial compliance costs and lead to a diversion of management time and attention from revenue generating activities.
Furthermore, the maintenance of the corporate infrastructure demanded of a public company may divert managements attention from implementing our growth strategy, which could prevent us from improving our business, results of operations and financial condition. As of December 31, 2017, our management has concluded that we did not maintain effective controls over the preparation and review of the income tax provision and related current and deferred income tax accounts. Specifically, a material weakness in the design
29
of our controls did not ensure that the information used to prepare the income tax provision and related current and deferred income tax accounts was complete and accurate. For more information about this material weakness, see the section entitled Managements discussion and analysis of financial condition and results of operations Material weakness and remediation. We have made, and will continue to make, enhancements to our internal controls and procedures for financial reporting and accounting systems to meet our reporting obligations as a publicly traded company. However, the measures we take may not be sufficient to satisfy our obligations as a publicly traded company.
For as long as we remain an emerging growth company as defined in the JOBS Act, we may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies. We may remain an emerging growth company until October 19, 2020 (the fifth anniversary of the consummation of our predecessors initial public offering) or until such earlier time that we have more than $1.07 billion in annual revenues, have more than $700.0 million in market value of our Ordinary Shares held by non-affiliates, or issue more than $1.0 billion of non-convertible debt securities over a three-year period. Further, there is no guarantee that the exemptions available to us under the JOBS Act will result in significant savings. To the extent we choose not to use exemptions from various reporting requirements under the JOBS Act, we will incur additional compliance costs, which may impact earnings.
We are an emerging growth company, as defined in the JOBS Act, and we may take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies including, but not limited to, not being required to obtain an assessment of the effectiveness of our internal controls over financial reporting from our independent registered public accounting firm pursuant to Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and shareholder approval of any golden parachute payments not previously approved. In addition, the JOBS Act provides that an emerging growth company can take advantage of an extended transition period for complying with new or revised accounting standards. This allows an emerging growth company to delay the adoption of these accounting standards until they would otherwise apply to private companies. We have elected to take advantage of such extended transition period.
We cannot predict if investors will find our Ordinary Shares less attractive because we rely on these exemptions. If some investors find our Ordinary Shares less attractive as a result, there may be a less active market for our Ordinary Shares and our share price may be more volatile.
If we fail to maintain effective internal controls and procedures and disclosure procedures and controls, we may be unable to provide financial information and required SEC reports that a U.S. publicly traded company is required to provide in a timely and reliable fashion. Any such delays or deficiencies could penalize us, including by limiting our ability to obtain financing, either in the public capital markets or from private sources and hurt our reputation and could thereby impede our ability to implement our growth strategy. In addition, any such delays or deficiencies could result in our failure to meet the requirements for listing of our Ordinary Shares on a national securities exchange.
The price of our Ordinary Shares may fluctuate due to a variety of factors, including:
| actual or anticipated fluctuations in our quarterly and annual results and those of other public companies in industry; |
| mergers and strategic alliances in the industry in which we operate; |
30
| market prices and conditions in the industry in which we operate; |
| changes in government regulation; |
| potential or actual military conflicts or acts of terrorism; |
| the failure of securities analysts to publish research about us, or shortfalls in our operating results compared to levels forecast by securities analysts; |
| announcements concerning us or our competitors; and |
| the general state of the securities markets. |
These market and industry factors may materially reduce the market price of our Ordinary Shares, regardless of our operating performance.
We currently expect that securities research analysts will establish and publish their own periodic projections for our business. These projections may vary widely and may not accurately predict the results we actually achieve. Our share price may decline if our actual results do not match the projections of these securities research analysts. Similarly, if one or more of the analysts who write reports on us downgrades our stock or publishes inaccurate or unfavorable research about our business, our share price could decline. If one or more of these analysts ceases coverage of us or fails to publish reports on us regularly, our share price or trading volume could decline. While we expect research analyst coverage, if no analysts commence coverage of us, the trading price and volume for our Ordinary Shares could be adversely affected.
We have the ability to redeem outstanding Warrants (other than the private Warrants) at any time after they become exercisable and prior to their expiration, at $0.01 per warrant, if the last reported sales price (or the closing bid price of our Ordinary Shares in the event the Ordinary Shares are not traded on any specific trading day) of the Ordinary Shares equals or exceeds $18.00 per share for any 20 trading days within a 30-trading day period ending on the third business day prior to the date we send proper notice of such redemption, provided that on the date we give notice of redemption and during the entire period thereafter until the time we redeem the Warrants, we have an effective registration statement under the Securities Act covering the Ordinary Shares issuable upon exercise of the Warrants and a current prospectus relating to them is available. If and when the Warrants become redeemable by us, we may exercise our redemption right even if we are unable to register or qualify the underlying securities for sale under all applicable state securities laws. Redemption of the outstanding Warrants could force a warrant holder: (i) to exercise Warrants and pay the exercise price therefore at a time when it may be disadvantageous for you to do so, (ii) to sell Warrants at the then-current market price when you might otherwise wish to hold your Warrants or (iii) to accept the nominal redemption price which, at the time the outstanding Warrants are called for redemption, will be substantially less than the market value of your Warrants.
We may issue an aggregate of 6,000,000 Ordinary Shares to Cision Owner upon achievement of milestone targets, of which 2,000,000 of such shares were issued to Cision Owner on November 3, 2017. Our issuance of additional Ordinary Shares or other equity securities of equal or senior rank would have the following effects:
| our existing shareholders proportionate ownership interest will decrease; |
| the amount of cash available per share, including for payment of dividends in the future, may decrease; |
31
| the relative voting strength of each previously outstanding common share may be diminished; and |
| the market price of our Ordinary Shares may decline. |
Our amended and restated memorandum and articles of association contain provisions to limit the ability of others to acquire control of our company or cause us to engage in change-of-control transactions, including, among other things:
| provisions that authorize our board of directors, without action by our shareholders, to issue additional Ordinary Shares and preferred shares with preferential rights determined by our board of directors; |
| provisions that permit only a majority of our board of directors, the chairman of our board of directors or, for so long as Cision Owner beneficially and its affiliates own at least 10% of our Ordinary Shares, Cision Owner to call shareholder meetings and therefore do not permit shareholders to call shareholder meetings; |
| provisions that impose advance notice requirements, minimum shareholding periods and ownership thresholds, and other requirements and limitations on the ability of shareholders to propose matters for consideration at shareholder meetings; provided, however, at any time when Cision Owner beneficially owns, in the aggregate, at least 5% of our Ordinary Shares, such advance notice procedure will not apply to it; and |
| a staggered board whereby our directors are divided into three classes, with each class subject to retirement and reelection once every three years on a rotating basis. |
These provisions could have the effect of depriving our shareholders of an opportunity to sell their shares at a premium over prevailing market prices by discouraging third parties from seeking to obtain control of our company in a tender offer or similar transaction. With our staggered board of directors, at least two annual meetings of shareholders will generally be required in order to effect a change in a majority of our directors. Our staggered board of directors can discourage proxy contests for the election of our directors and purchases of substantial blocks of our shares by making it more difficult for a potential acquirer to gain control of our board of directors in a relatively short period of time.
If we complete the Offer and Consent Solicitation and obtain the requisite approval of the Warrant Amendment by holders of the Warrants, the Company will have the right to require holders of all Warrants that remain outstanding after the expiration of the Offer to exchange each of their Warrants for 0.234 Ordinary Shares. This represents a ratio of Ordinary Shares per Warrant that is 10% less than the ratio applicable to the Offer. Although we intend to require an exchange of all remaining outstanding Warrants as a result of the approval of the Warrant Amendment, we would not be required to effect such an exchange and may defer doing so, if ever, until most economically advantageous to us.
Pursuant to the terms of the Warrant Agreement, the consent of holders of at least the majority of the outstanding Warrants is required to approve the Warrant Amendment. Therefore, one of the conditions to the adoption of the Warrant Amendment is the receipt of the consent of holders of at least the majority of the outstanding Warrants. The Capitol Sponsors and Cision Owner have advised us that they intend to tender all of the Private Warrants held by them in the Offer; however, none of these parties are under any contractual obligation to tender such Warrants, and there can be no assurance that they will do so. Collectively, the Capitol Sponsors and Cision Owner hold approximately 94.5% of the Private Warrants, representing approximately 31.8% of the total Warrants outstanding. If the Capitol Sponsors and Cision Owner tender all of the Private Warrants held by them in the Offer and the holders of approximately 26.7% of the remaining outstanding Warrants agree to tender (and the other conditions described herein are satisfied) then the Warrant
32
Amendment will be adopted. See the section of this Prospectus/Offer to Exchange entitled The Offer and Consent Solicitation Transactions and Agreements Concerning Our Securities. If adopted, we currently intend to require the conversion of all outstanding Warrants to Ordinary Shares as provided in the Warrant Amendment, which would result in the holders of any remaining outstanding Warrants receiving approximately 10% fewer shares than if they had tendered their Warrants in the Offer.
The exchange of the Warrants will result in the issuance of additional Ordinary Shares, although there can be no assurance that such warrant exchange will be completed or that all of the holders of the Warrants will elect to participate in the Offer. Any Warrants remaining outstanding after the exchange likely will be exercised only if the $11.50 per share exercise price is below the market price of our Ordinary Shares. We also intend to require an exchange of all remaining outstanding Warrants assuming the approval of the Warrant Amendment. To the extent such Warrants are exchanged following the approval of the Warrant Amendment or exercised, additional Ordinary Shares will be issued. These issuances of Ordinary Shares will result in dilution to our shareholders and increase the number of shares eligible for resale in the public market.
None of us, our affiliates, the dealer managers, the exchange agent or the information agent makes any recommendation as to whether you should exchange some or all of your Warrants or consent to the Warrant Amendment. We have not retained, and do not intend to retain, any unaffiliated representative to act on behalf of the Warrant holders for purposes of negotiating the Offer or Consent Solicitation or preparing a report concerning the fairness of the Offer or the Consent Solicitation. You must make your own independent decision regarding your participation in the Offer and the Consent Solicitation.
We can give no assurance as to the market price of our Ordinary Shares in the future. If you choose to tender some or all of your Warrants in the Offer, future events may cause an increase in the market price of our Ordinary Shares and Warrants, which may result in a lower value realized by participating in the Offer than you might have realized if you did not exchange your Warrants. Similarly, if you do not tender your Warrants in the Offer, there can be no assurance that you can sell your Warrants (or exercise them for Ordinary Shares) in the future at a higher value than would have been obtained by participating in the Offer. In addition, if the Warrant Amendment is adopted, you may receive fewer shares than if you had tendered your Warrants in the Offer. See The Warrant Amendment, if approved, will allow us to require that all outstanding Warrants be exchanged for Ordinary Shares. You should consult your own individual tax and/or financial advisor for assistance on how this may affect your individual situation.
The number of Ordinary Shares for each Warrant accepted for exchange is fixed at the number of shares specified on the cover of this Prospectus/Offer to Exchange and will fluctuate in value if there is any increase or decrease in the market price of our Ordinary Shares or the Warrants after the date of this Prospectus/Offer to Exchange. Therefore, the market price of the Ordinary Shares when we deliver Ordinary Shares in exchange for your Warrants could be less than the market price at the time you tender your Warrants. The market price of our Ordinary Shares could continue to fluctuate and be subject to volatility during the period of time between when we accept Warrants for exchange in the Offer and when we deliver Ordinary Shares in exchange for Warrants, or during any extension of the Offer Period.
It is unlikely that any Warrants will remain outstanding following the completion of the Offer and Consent Solicitation. See The Warrant Amendment, if approved, will allow us to require that all outstanding
33
Warrants be exchanged for Ordinary Shares at a ratio 10% lower than the ratio applicable to the Offer. However, if any unexchanged Warrants remain outstanding, then the ability to sell such Warrants may become more limited due to the reduction in the number of Warrants outstanding upon completion of the Offer and Consent Solicitation. A more limited trading market might adversely affect the liquidity, market price and price volatility of unexchanged Warrants. In addition, as discussed below, our Public Warrants may be removed from quotation on NYSE American. As a result, investors in our Public Warrants may find it more difficult to dispose of or obtain accurate quotations as to the market value of our Warrants, and the ability of our shareholders to sell our Public Warrants in the secondary market may be materially limited. If there continues to be a market for our unexchanged Warrants, these securities may trade at a discount to the price at which the securities would trade if the number outstanding were not reduced, depending on the market for similar securities and other factors.
It is unlikely that any Warrants will remain outstanding following the completion of the Offer and Consent Solicitation. See The Warrant Amendment, if approved, will allow us to require that all outstanding Warrants be exchanged for Ordinary Shares at a ratio that is 10% lower than the ratio applicable to the Offer. However, if any unexchanged Warrants remain outstanding following the completion of the Offer and Consent Solicitation, we cannot assure you that our Public Warrants will continue to be listed on NYSE American in the future. The NYSE may consider delisting the Public Warrants if it determines that the extent of public distribution or aggregate market value of the outstanding Warrants has become so reduced as to make further listing inadvisable, or if it otherwise determines continued listing is unwarranted.
If NYSE delists our Public Warrants from trading on NYSE American and we are not able to list our securities on another national securities exchange, our Public Warrants could be quoted on an over-the-counter market. However, even if this were to occur, holders of Public Warrants could face significant material adverse consequences, including:
| a limited availability of market quotations for the Public Warrants; |
| reduced liquidity for the Public Warrants; |
| a determination that our Public Warrants are a penny stock which will require brokers trading in our Warrants to adhere to more stringent rules and possibly result in a reduced level of trading activity in the secondary trading market for our Public Warrants; and |
| the risk that market makers that initially make a market in our unexchanged Public Warrants eventually cease to do so. |
34
Participation in the Offer and Consent Solicitation involves a number of risks, including, but not limited to, the risks identified in the section entitled Risk Factors. Warrant holders should carefully consider these risks and are urged to speak with their personal legal, financial, investment and/or tax advisor as necessary before deciding whether or not to participate in the Offer and Consent Solicitation. In addition, we strongly encourage you to read this Prospectus/Offer to Exchange in its entirety, and the publicly-filed information about us, before making a decision regarding the Offer and Consent Solicitation.
Until the Expiration Date, we are offering to holders of our Warrants the opportunity to receive 0.26 Ordinary Shares in exchange for each Warrant they hold. Holders of the Warrants tendered for exchange will not have to pay any of the exercise price for the tendered Warrants in order to receive Ordinary Shares in the exchange. Our obligation to complete the Offer is not conditioned on the receipt of a minimum number of tendered Warrants.
No fractional shares will be issued pursuant to the Offer. In lieu of issuing fractional shares, any holder of Warrants who would otherwise have been entitled to receive fractional shares pursuant to the Offer will, after aggregating all such fractional shares of such holder, be paid cash (without interest) in an amount equal to such fractional part of a share multiplied by the last sale price of our Ordinary Shares on the NYSE on the last trading day of the Offer Period.
As part of the Offer, we are also soliciting from the holders of the Warrants their consent to the amendment of the Warrant Agreement. If approved, the Warrant Amendment would permit the Company to require that all outstanding Warrants be converted into Ordinary Shares at a ratio of 0.234 Ordinary Shares per Warrant, which is a ratio 10% less than the ratio applicable to the Offer, which would permit us to eliminate all of the Warrants that remain outstanding after the Offer expires. A copy of the Warrant Amendment is attached hereto as Annex A. We urge that you carefully read the Warrant Amendment in its entirety. Pursuant to the terms of the Warrant Agreement, the consent of holders of at least a majority of the outstanding Warrants is required to approve the Warrant Amendment.
Holders who tender Warrants in the Offer will automatically be deemed, without any further action, to have given their consent to approval of the Warrant Amendment (effective upon our acceptance of the Warrants tendered). The consent to the Warrant Amendment is a part of the Letter of Transmittal and Consent relating to the Warrants.
You cannot tender any Warrants in the Offer without giving your consent to the Warrant Amendment. Thus, before deciding whether to tender any Warrants, you should be aware that a tender of Warrants may result in the approval of the Warrant Amendment.
The Offer and Consent Solicitation is subject to the terms and conditions contained in this Prospectus/Offer to Exchange and the Letter of Transmittal and Consent.
You may tender some or all of your Warrants into the Offer. If you elect to tender Warrants in response to the Offer and Consent Solicitation, please follow the instructions in this Prospectus/Offer to Exchange and the related documents, including the Letter of Transmittal and Consent.
If you tender Warrants, you may withdraw your tendered Warrants at any time before the Expiration Date and retain them on their current terms or amended terms if the Warrant Amendment is approved, by following the instructions herein. In addition, Warrants that are not accepted by us for exchange by May 29, 2018 may thereafter be withdrawn by you until such time as the Warrants are accepted by us for exchange.
We were incorporated in the Cayman Islands on March 9, 2017 in order to become the parent company of Canyon Holdings S.à r.l. in connection with the Business Combination with Capitol. On June 29, 2017, we consummated the Business Combination and, in connection therewith, became a successor issuer to Capitol by operation of Rule 12g-3(a) promulgated under the Exchange Act.
35
Our principal executive offices are located at 130 E. Randolph Street, 7 th Floor, Chicago, Illinois 60601, and our telephone number is (312) 922-2400. Our website address is www.cision.com . We had approximately 3,500 employees as of December 31, 2017. Information contained on our website is not a part of this Prospectus/Offer to Exchange. Our Ordinary Shares are listed on NYSE under the symbol Cision, and our Public Warrants are listed on NYSE American under the symbol CISN.WS.
The Public Warrants were issued in connection with the Capitol IPO and automatically converted into warrants to acquire Ordinary Shares of Cision upon the consummation of the Business Combination. Each Public Warrant entitles the holder to purchase one Ordinary Share for a purchase price of $11.50, subject to adjustments pursuant to the Warrant Agreement. The Public Warrants are listed on NYSE American under the symbol CISN.WS. As of April 13, 2018, 16,250,000 Public Warrants were outstanding. Pursuant to the Offer, we are offering up to an aggregate of 4,225,000 of our Ordinary Shares in exchange for the Public Warrants.
The Private Warrants were issued to the Capitol Sponsors in connection with the Capitol IPO and additional Private Warrants were issued to Cision Owner in connection with the consummation of the Business Combination. Each Private Warrant entitles the holder to purchase one Ordinary Share for a purchase price of $11.50, subject to adjustments pursuant to the Warrant Agreement. As of April 13, 2018, 8,250,000 Private Warrants were outstanding. Pursuant to the Offer, we are offering up to an aggregate of 2,145,000 of our Ordinary Shares in exchange for the Private Warrants.
The terms of the Private Warrants are identical to the Public Warrants, except that such Private Warrants are exercisable on a cashless basis and are not redeemable by us, in each case so long as they are still held by the initial holders or their affiliates.
The Offer and Consent Solicitation will expire on the Expiration Date, which is 11:59 p.m., Eastern Daylight Time, on May 15, 2018, or such later time and date to which we may extend. We expressly reserve the right, in our sole discretion, at any time or from time to time, to extend the period of time during which the Offer and Consent Solicitation is open. There can be no assurance that we will exercise our right to extend the Offer Period. During any extension, all Warrant holders who previously tendered Warrants will have a right to withdraw such previously tendered Warrants until the Expiration Date, as extended. If we extend the Offer Period, we will make a public announcement of such extension by no later than 9:00 a.m., Eastern Daylight Time, on the next business day following the Expiration Date as in effect immediately prior to such extension.
We may withdraw the Offer and Consent Solicitation only if the conditions to the Offer and Consent Solicitation are not satisfied or waived prior to the Expiration Date. Upon any such withdrawal, we are required by Rule 13e-4(f)(5) under the Exchange Act to promptly return the tendered Warrants. We will announce our decision to withdraw the Offer and Consent Solicitation by disseminating notice by public announcement or otherwise as permitted by applicable law.
At the expiration of the Offer Period, the current terms of the Warrants will continue to apply to any unexchanged Warrants, or the amended terms if the Warrant Amendment is approved, until the Warrants expire by their terms on June 29, 2023.
We reserve the right at any time or from time to time, to amend the Offer and Consent Solicitation, including by increasing or (if the conditions to the Offer are not satisfied) decreasing the exchange ratio of Ordinary Shares issued for every Warrant exchanged or by changing the terms of the Warrant Amendment.
If we make a material change in the terms of the Offer and Consent Solicitation or the information concerning the Offer and Consent Solicitation, or if we waive a material condition of the Offer and Consent Solicitation, we will extend the Offer and Consent Solicitation to the extent required by Rules 13e-4(d)(2) and 13e-4(e)(3) under the Exchange Act. These rules require that the minimum period during which an offer must remain open after material changes in the terms of the offer or information concerning the offer, other than a change
36
in price or a change in percentage of securities sought, will depend upon the facts and circumstances, including the relative materiality of the changed terms or information.
If we increase or decrease the exchange ratio of the Ordinary Shares issuable upon exchange of a Warrant, the amount of Warrants sought for tender or the dealer managers soliciting fee, and the Offer and Consent Solicitation is scheduled to expire at any time earlier than the end of the tenth business day from the date that we first publish, send or give notice of such an increase or decrease, then we will extend the Offer and Consent Solicitation until the expiration of that ten business day period.
Other material amendments to the Offer and Consent Solicitation may require us to extend the Offer and Consent Solicitation for a minimum of five business days, and we will need to amend this Registration Statement on Form S-4 of which this Prospectus/Offer to Exchange forms a part for any material changes in the facts set forth in this Registration Statement on Form S-4.
Our obligation to complete the Offer is not conditioned on the receipt of a minimum number of tendered Warrants. If you choose to participate in the Offer, you may tender less than all of your Warrants pursuant to the terms of the Offer. No fractional shares will be issued pursuant to the Offer. In lieu of issuing fractional shares, any holder of Warrants who would otherwise have been entitled to receive fractional shares pursuant to the Offer will, after aggregating all such fractional shares of such holder, be paid cash (without interest) in an amount equal to such fractional part of a share multiplied by the last sale price of our Ordinary Shares on the NYSE on the last trading day of the Offer Period.
The Offer and Consent Solicitation are conditioned upon the following:
| the registration statement, of which this document is a part, shall have become effective under the Securities Act, and shall not be the subject of any stop order or proceeding seeking a stop order; |
| no action or proceeding by any government or governmental, regulatory or administrative agency, authority or tribunal or any other person, domestic or foreign, shall have been threatened, instituted or pending before any court, authority, agency or tribunal that directly or indirectly challenges the making of the Offer, the tender of some or all of the Warrants pursuant to the Offer or otherwise relates in any manner to the Offer; |
| there shall not have been any action threatened, instituted, pending or taken, or approval withheld, or any statute, rule, regulation, judgment, order or injunction threatened, proposed, sought, promulgated, enacted, entered, amended, enforced or deemed to be applicable to the Offer or Consent Solicitation or us, by any court or any authority, agency or tribunal that, in our reasonable judgment, would or might, directly or indirectly, (i) make the acceptance for exchange of, or exchange for, some or all of the Warrants illegal or otherwise restrict or prohibit completion of the Offer or Consent Solicitation, or (ii) delay or restrict our ability, or render us unable, to accept for exchange or exchange some or all of the Warrants; and |
| there shall not have occurred any general suspension of, or limitation on prices for, trading in securities in U.S. securities or financial markets; any material adverse change in the price of our Ordinary Shares in U.S. securities or financial markets; a declaration of a banking moratorium or any suspension of payments in respect to banks in the United States; any limitation (whether or not mandatory) by any government or governmental, regulatory or administrative authority, agency or instrumentality, domestic or foreign, or other event that, in our reasonable judgment, would or would be reasonably likely to affect the extension of credit by banks or other lending institutions; or a commencement or significant worsening of a war or armed hostilities or other national or international calamity, including but not limited to, catastrophic terrorist attacks against the United States or its citizens. |
The Consent Solicitation is conditioned on our receiving the consent of holders of at least a majority of the outstanding Warrants (which is the minimum number required to amend the Warrant Agreement).
37
We will not complete the Offer and Consent Solicitation unless and until the registration statement described above is declared effective by the SEC. If the registration statement is not effective at the Expiration Date, we may, in our discretion, extend, suspend or cancel the Offer and Consent Solicitation, and will inform Warrant holders of such event. If we extend the Offer Period, we will make a public announcement of such extension and the new Expiration Date by no later than 9:00 a.m., Eastern Daylight Time, on the next business day following the Expiration Date as in effect immediately prior to such extension.
In addition, as to any Warrant holder, the Offer and Consent Solicitation is conditioned upon such Warrant holder desiring to tender Warrants in the Offer delivering to the exchange agent in a timely manner the holders Warrants to be tendered and any other required paperwork, all in accordance with the applicable procedures described in this Prospectus/Offer to Exchange and set forth in the Letter of Transmittal and Consent.
The foregoing conditions are solely for our benefit, and we may assert one or more of the conditions regardless of the circumstances giving rise to any such conditions. We may also, in our sole and absolute discretion, waive these conditions in whole or in part, subject to the potential requirement to disseminate additional information and extend the Offer Period. The determination by us as to whether any condition has been satisfied shall be conclusive and binding on all parties. The failure by us at any time to exercise any of the foregoing rights shall not be deemed a waiver of any such right, and each such right shall be deemed a continuing right which may be asserted at any time and from time to time prior to the Expiration Date.
We may withdraw the Offer and Consent Solicitation only if the conditions of the Offer and Consent Solicitation are not satisfied or waived prior to the Expiration Date. Promptly upon any such withdrawal, we will return the tendered Warrants (and the related consent to the Warrant Amendment will be revoked). We will announce our decision to withdraw the Offer and Consent Solicitation by disseminating notice by public announcement or otherwise as permitted by applicable law.
None of Cision, our affiliates, directors, officers or employees, or the information agent, the exchange agent or the dealer manager for the Offer and Consent Solicitation, is making any recommendations to any Warrant holder as to whether to exchange their Warrants and deliver their consent to the Warrant Amendment. Each Warrant holder must make its own decision as to whether to tender Warrants for exchange pursuant to the Offer and consent to the amendment of the Warrant Agreement pursuant to the Consent Solicitation.
Issuance of Ordinary Shares upon exchange of Warrants pursuant to the Offer and acceptance by us of Warrants for exchange pursuant to the Offer and providing your consent to the Warrant Amendment will be made only if Warrants are properly tendered pursuant to the procedures described below and set forth in the Letter of Transmittal and Consent. A tender of Warrants pursuant to such procedures, if and when accepted by us, will constitute a binding agreement between the tendering holder of Warrants and us upon the terms and subject to the conditions of the Offer and Consent Solicitation. The proper tender of your Warrants will constitute a consent to the Warrant Amendment with respect to each Warrant tendered.
A tender of Warrants made pursuant to any method of delivery set forth herein will also constitute an agreement and acknowledgement by the tendering Warrant holder that, among other things: (i) the Warrant holder agrees to exchange the tendered Warrants on the terms and conditions set forth in this Prospectus/Offer to Exchange and Letter of Transmittal and Consent, in each case as may be amended or supplemented prior to the Expiration Date; (ii) the Warrant holder consents to the Warrant Agreement; (iii) the Offer is discretionary and may be extended, modified, suspended or terminated by us as provided herein; (iv) such Warrant holder is voluntarily participating in the Offer; (v) the future value of our Warrants is unknown and cannot be predicted with certainty; and (vi) such Warrant holder has read this Prospectus/Offer to Exchange, Letter of Transmittal and Consent and Warrant Amendment.
For purposes of the tender procedures set forth below, the term registered holder means any person in whose name Warrants are registered on our books or who is listed as a participant in a clearing agencys security position listing with respect to the Warrants.
38
Persons whose Warrants are held through a direct or indirect participant of The Depository Trust Company (DTC), such as a broker, dealer, commercial bank, trust company or other financial intermediary, are not considered registered holders of those Warrants but are beneficial owners. Beneficial owners cannot directly tender Warrants for exchange pursuant to the Offer. Instead, a beneficial owner must instruct its broker, dealer, commercial bank, trust company or other financial intermediary to tender Warrants for exchange on behalf of the beneficial owner. See Required Communications by Beneficial Owners.
A registered holder of Warrants may tender Warrants for exchange using a Letter of Transmittal and Consent in the form provided by us with this Prospectus/Offer to Exchange. A Letter of Transmittal is to be used only if delivery of Warrants is to be made by book-entry transfer to the exchange agents account at DTC pursuant to the procedures set forth in Tendering Warrants Using Book-Entry Transfer; provided, however, that it is not necessary to execute and deliver a Letter of Transmittal and Consent if instructions with respect to the tender of such Warrants are transmitted through DTCs Automated Tender Offer Program (ATOP). If you are a registered holder of Warrants, unless you intend to tender those Warrants through ATOP, you should complete, execute and deliver a Letter of Transmittal and Consent to indicate the action you desire to take with respect to the Offer and Consent Solicitation.
In order for Warrants to be properly tendered for exchange pursuant to the Offer using a Letter of Transmittal and Consent, the registered holder of the Warrants being tendered must ensure that the exchange agent receives the following: (i) a properly completed and duly executed Letter of Transmittal and Consent, in accordance with the instructions of the Letter of Transmittal and Consent (including any required signature guarantees); (ii) delivery of the Warrants by book-entry transfer to the exchange agents account at DTC; and (iii) any other documents required by the Letter of Transmittal and Consent.
In the Letter of Transmittal and Consent, the tendering registered Warrant holder must set forth: (i) its name and address; (ii) the number of Warrants being tendered by the holder for exchange; and (iii) certain other information specified in the form of Letter of Transmittal and Consent.
In certain cases, all signatures on the Letter of Transmittal and Consent must be guaranteed by an Eligible Institution. See Signature Guarantees.
If the Letter of Transmittal and Consent is signed by someone other than the registered holder of the tendered Warrants (for example, if the registered holder has assigned the Warrants to a third-party), or if the Ordinary Shares to be issued upon exchange of the tendered Warrants are to be issued in a name other than that of the registered holder of the tendered Warrants, the tendered Warrants must be properly accompanied by appropriate assignment documents, in either case signed exactly as the name(s) of the registered holder(s) appear on the Warrants, with the signature(s) on the Warrants or assignment documents guaranteed by an Eligible Institution.
Any Warrants duly tendered and delivered as described above shall be automatically cancelled upon the issuance of Ordinary Shares in exchange for such Warrants as part of the completion of the Offer.
In certain cases, all signatures on the Letter of Transmittal and Consent must be guaranteed by an Eligible Institution. An Eligible Institution is a bank, broker dealer, credit union, savings association or other entity that is a member in good standing of the Securities Transfer Agents Medallion Program or a bank, broker, dealer, credit union, savings association or other entity which is an eligible guarantor institution, as that term is defined in Rule 17Ad-15 promulgated under the Exchange Act.
Signatures on the Letter of Transmittal and Consent need not be guaranteed by an Eligible Institution if (i) the Letter of Transmittal and Consent is signed by the registered holder of the Warrants tendered therewith exactly as the name of the registered holder appears on such Warrants and such holder has not completed the box entitled Special Issuance Instructions or the box entitled Special Delivery Instructions in the Letter of Transmittal and Consent; or (ii) such Warrants are tendered for the account of an Eligible Institution.
39
In all other cases, an Eligible Institution must guarantee all signatures on the Letter of Transmittal and Consent by completing and signing the table in the Letter of Transmittal and Consent entitled Guarantee of Signature(s).
Persons whose Warrants are held through a direct or indirect DTC participant, such as a broker, dealer, commercial bank, trust company or other financial intermediary, are not considered registered holders of those Warrants, but are beneficial owners, and must instruct the broker, dealer, commercial bank, trust company or other financial intermediary to tender Warrants on their behalf. Your broker, dealer, commercial bank, trust company or other financial intermediary should have provided you with an Instructions Form with this Prospectus/Offer to Exchange. The Instructions Form is also filed as an exhibit to the registration statement of which this Prospectus/Offer to Exchange forms a part. The Instructions Form may be used by you to instruct your broker or other custodian to tender and deliver Warrants on your behalf.
The exchange agent has established an account for the Warrants at DTC for purposes of the Offer and Consent Solicitation. Any financial institution that is a participant in DTCs system may make book-entry delivery of Warrants by causing DTC to transfer such Warrants into the exchange agents account in accordance with ATOP. However, even though delivery of Warrants may be effected through book-entry transfer into the exchange agents account at DTC, a properly completed and duly executed Letter of Transmittal and Consent (with any required signature guarantees), or an Agents Message as described in the next paragraph, and any other required documentation, must in any case also be transmitted to and received by the exchange agent at its address set forth in this Prospectus/Offer to Exchange prior to the Expiration Date, or the guaranteed delivery procedures described under Guaranteed Delivery Procedures must be followed.
DTC participants desiring to tender Warrants for exchange pursuant to the Offer may do so through ATOP, and in that case the participant need not complete, execute and deliver a Letter of Transmittal and Consent. DTC will verify the acceptance and execute a book-entry delivery of the tendered Warrants to the exchange agents account at DTC. DTC will then send an Agents Message to the exchange agent for acceptance. Delivery of the Agents Message by DTC will satisfy the terms of the Offer and Consent Solicitation as to execution and delivery of a Letter of Transmittal and Consent by the DTC participant identified in the Agents Message. The term Agents Message means a message, transmitted by DTC to, and received by, the exchange agent and forming a part of a Book-Entry Confirmation, which states that DTC has received an express acknowledgment from the participant in DTC tendering the Warrants for exchange that such participant has received and agrees to be bound by the terms of the Letter of Transmittal and Consent and that our company may enforce such agreement against the participant. Any DTC participant tendering by book-entry transfer must expressly acknowledge that it has received and agrees to be bound by the Letter of Transmittal and Consent and that the Letter of Transmittal and Consent may be enforced against it.
Any Warrants duly tendered and delivered as described above shall be automatically cancelled upon the issuance of Ordinary Shares in exchange for such Warrants as part of the completion of the Offer.
If a registered holder of Warrants desires to tender its Warrants for exchange pursuant to the Offer, but (i) the procedure for book-entry transfer cannot be completed on a timely basis, or (ii) time will not permit all required documents to reach the exchange agent prior to the Expiration Date, the holder can still tender its Warrants if all the following conditions are met:
| the tender is made by or through an Eligible Institution; |
| the exchange agent receives by hand, mail, overnight courier or facsimile transmission, prior to the Expiration Date, a properly completed and duly executed Notice of Guaranteed Delivery in the form we have provided with this Prospectus/Offer to Exchange, with signatures guaranteed by an Eligible Institution; and |
40
| a confirmation of a book-entry transfer into the exchange agents account at DTC of all Warrants delivered electronically, together with a properly completed and duly executed Letter of Transmittal and Consent with any required signature guarantees (or, in the case of a book-entry transfer, an Agents Message in accordance with ATOP), and any other documents required by the Letter of Transmittal and Consent, must be received by the exchange agent within two days that the NYSE is open for trading after the date the exchange agent receives such Notice of Guaranteed Delivery. |
In any case where the guaranteed delivery procedure is utilized for the tender of Warrants pursuant to the Offer, the issuance of Ordinary Shares for those Warrants tendered for exchange pursuant to the Offer and accepted pursuant to the Offer will be made only if the exchange agent has timely received the applicable foregoing items.
UNLESS THE GUARANTEED DELIVERY PROCEDURES DESCRIBED ABOVE ARE FOLLOWED, WARRANTS WILL BE PROPERLY TENDERED ONLY IF, BY THE EXPIRATION DATE, THE EXCHANGE AGENT RECEIVES SUCH WARRANTS BY BOOK-ENTRY TRANSFER, TOGETHER WITH A PROPERLY COMPLETED AND DULY EXECUTED LETTER OF TRANSMITTAL AND CONSENT OR AN AGENTS MESSAGE.
ALL DELIVERIES IN CONNECTION WITH THE OFFER AND CONSENT SOLICITATION, INCLUDING ANY LETTER OF TRANSMITTAL AND CONSENT AND THE TENDERED WARRANTS, MUST BE MADE TO THE EXCHANGE AGENT. NO DELIVERIES SHOULD BE MADE TO US. ANY DOCUMENTS DELIVERED TO US WILL NOT BE FORWARDED TO THE EXCHANGE AGENT AND THEREFORE WILL NOT BE DEEMED TO BE PROPERLY TENDERED. THE METHOD OF DELIVERY OF ALL REQUIRED DOCUMENTS IS AT THE OPTION AND RISK OF THE TENDERING WARRANT HOLDERS. IF DELIVERY IS BY MAIL, WE RECOMMEND REGISTERED MAIL WITH RETURN RECEIPT REQUESTED (PROPERLY INSURED). IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ENSURE TIMELY DELIVERY.
All questions as to the form of documents and the validity, eligibility (including time of receipt) and acceptance for exchange of any tender of Warrants will be determined by us, in our sole discretion, and our determination will be final and binding. We reserve the absolute right to reject any or all tenders of Warrants that we determine are not in proper form or reject tenders of Warrants that may, in the opinion of our counsel, be unlawful. We also reserve the absolute right to waive any defect or irregularity in any tender of any particular Warrant, whether or not similar defects or irregularities are waived in the case of other tendered Warrants. Neither we nor any other person will be under any duty to give notice of any defect or irregularity in tenders, nor shall any of us or them incur any liability for failure to give any such notice.
Tendering Warrant holders who tender Warrants directly to the exchange agent will not be obligated to pay any charges or expenses of the exchange agent, the dealer manager or any brokerage commissions. Beneficial owners who hold Warrants through a broker or bank should consult that institution as to whether or not such institution will charge the owner any service fees in connection with tendering Warrants on behalf of the owner pursuant to the Offer and Consent Solicitation.
We will pay all transfer taxes, if any, applicable to the transfer of Warrants to us in the Offer. If transfer taxes are imposed for any other reason, the amount of those transfer taxes, whether imposed on the registered holder or any other persons, will be payable by the tendering holder. Other reasons transfer taxes could be imposed include (i) if our Ordinary Shares are to be registered or issued in the name of any person other than the person signing the Letter of Transmittal and Consent, or (ii) if tendered Warrants are registered in the name of any person other than the person signing the Letter of Transmittal and Consent. If satisfactory evidence of payment of or exemption from those transfer taxes is not submitted with the Letter of Transmittal
41
and Consent, the amount of those transfer taxes will be billed directly to the tendering holder and/or withheld from any payment due with respect to the Warrants tendered by such holder.
By tendering Warrants for exchange, a holder will be deemed to have validly delivered its consent to the Warrant Amendment. Tenders of Warrants made pursuant to the Offer may be withdrawn at any time prior to the Expiration Date. Consents to the Warrant Amendment in connection with the Consent Solicitation may be revoked at any time before the Expiration Date by withdrawing the tender of your Warrants. A valid withdrawal of tendered Warrants before the Expiration Date will be deemed to be a concurrent revocation of the related consent to the Warrant Amendment. Tenders of Warrants and consent to the Warrant Amendment may not be withdrawn after the Expiration Date. If the Offer Period is extended, you may withdraw your tendered Warrants at any time until the expiration of such extended Offer Period. After the Offer Period expires, such tenders are irrevocable, provided, however, that Warrants that are not accepted by us for exchange on or prior to May 29, 2018 may thereafter be withdrawn by you until such time as the Warrants are accepted by us for exchange.
To be effective, a written notice of withdrawal must be timely received by the exchange agent at its address identified in this Prospectus/Offer to Exchange. Any notice of withdrawal must specify the name of the person who tendered the Warrants for which tenders are to be withdrawn and the number of Warrants to be withdrawn. If the Warrants to be withdrawn have been delivered to the exchange agent, a signed notice of withdrawal must be submitted prior to release of such Warrants. In addition, such notice must specify the name of the registered holder (if different from that of the tendering Warrant holder). A withdrawal may not be cancelled, and Warrants for which tenders are withdrawn will thereafter be deemed not validly tendered for purposes of the Offer and Consent Solicitation. However, Warrants for which tenders are withdrawn may be tendered again by following one of the procedures described above in the section entitled Procedure for Tendering Warrants for Exchange at any time prior to the Expiration Date.
A beneficial owner of Warrants desiring to withdraw tendered Warrants previously delivered through DTC should contact the DTC participant through which such owner holds its Warrants. In order to withdraw Warrants previously tendered, a DTC participant may, prior to the Expiration Date, withdraw its instruction by (i) withdrawing its acceptance through DTCs Participant Tender Offer Program (PTOP) function, or (ii) delivering to the exchange agent by mail, hand delivery or facsimile transmission, notice of withdrawal of such instruction. The notice of withdrawal must contain the name and number of the DTC participant. A withdrawal of an instruction must be executed by a DTC participant as such DTC participants name appears on its transmission through the PTOP function to which such withdrawal relates. If the tender being withdrawn was made through ATOP, it may only be withdrawn through PTOP, and not by hard copy delivery of withdrawal instructions. A DTC participant may withdraw a tendered Warrant only if such withdrawal complies with the provisions described in this paragraph.
A holder who tendered its Warrants other than through DTC should send written notice of withdrawal to the exchange agent specifying the name of the Warrant holder who tendered the Warrants being withdrawn. All signatures on a notice of withdrawal must be guaranteed by an Eligible Institution, as described above in the section entitled Procedure for Tendering Warrants for Exchange Signature Guarantees; provided, however, that signatures on the notice of withdrawal need not be guaranteed if the Warrants being withdrawn are held for the account of an Eligible Institution. Withdrawal of a prior Warrant tender will be effective upon receipt of the notice of withdrawal by the exchange agent. Selection of the method of notification is at the risk of the Warrant holder, and notice of withdrawal must be timely received by the exchange agent.
All questions as to the form and validity (including time of receipt) of any notice of withdrawal will be determined by us, in our sole discretion, which determination shall be final and binding. Neither we nor any other person will be under any duty to give notification of any defect or irregularity in any notice of withdrawal or incur any liability for failure to give any such notification.
Upon the terms and subject to the conditions of the Offer and Consent Solicitation, we will accept for exchange Warrants validly tendered until the Expiration Date, which is 11:59 p.m., Eastern Daylight Time, on May 15, 2018, or such later time and date to which we may extend. The Ordinary Shares to be issued upon
42
exchange of Warrants pursuant to the Offer, along with written notice from Exchange Agent confirming the balance of any Warrants not exchanged, will be delivered promptly following the Expiration Date. In all cases, Warrants will only be accepted for exchange pursuant to the Offer after timely receipt by the exchange agent of (i) book-entry delivery of the tendered Warrants, (ii) a properly completed and duly executed Letter of Transmittal and Consent, or compliance with ATOP where applicable, (iii) any other documentation required by the Letter of Transmittal and Consent, and (iv) any required signature guarantees.
For purposes of the Offer and Consent Solicitation, we will be deemed to have accepted for exchange Warrants that are validly tendered and for which tenders are not withdrawn, unless we give written notice to the Warrant holder of our non-acceptance.
We will announce the final results of the Offer and Consent Solicitation, including whether all of the conditions to the Offer and Consent Solicitation have been satisfied or waived and whether we will accept the tendered Warrants for exchange, as promptly as practicable following the end of the Offer Period. The announcement will be made by a press release and by amendment to the Schedule TO we file with the SEC in connection with the Offer and Consent Solicitation.
The Cision Board approved the Offer and Consent Solicitation on April 16, 2018. The purpose of the Offer and Consent Solicitation is to attempt to simplify our corporate structure and reduce the potential dilutive impact of the Warrants, thereby providing us with more flexibility for financing our operations in the future. The Warrants that are tendered for exchange pursuant to the Offer will be retired and cancelled automatically upon the issuance of Ordinary Shares in exchange for such Warrants pursuant to the Offer.
Other than as set forth under the sections entitled The Offer and Consent Solicitation Interests of Directors, Executive Officers and Others, The Offer and Consent Solicitation Transactions and Agreements Concerning Our Securities and Certain Relationships and Related Person Transactions, there are no present or proposed agreements, arrangements, understandings or relationships between us, and any of our directors, executive officers, affiliates or any other person relating, directly or indirectly, to the Offer and Consent Solicitation or to our securities that are the subject of the Offer and Consent Solicitation.
Except for the requirements of applicable federal and state securities laws, we know of no federal or state regulatory requirements to be complied with or federal or state regulatory approvals to be obtained by us in connection with the Offer and Consent Solicitation. There are no antitrust laws applicable to the Offer and Consent Solicitation. The margin requirements under Section 7 of the Exchange Act, and the related regulations thereunder, are inapplicable to the Offer and Consent Solicitation.
There are no pending legal proceedings relating to the Offer and Consent Solicitation.
We do not beneficially own any of the Warrants. All of our executive officers other than Yujie Chen hold equity interests in Cision Owner pursuant to the Cision Owner Partnership Agreement. These executive officers have neither a controlling interest in Cision Owner nor direct or indirect voting or dispositive power with respect to Ordinary Shares of Cision held of record by Cision Owner. See Management Executive Compensation Incentive Unit Awards.
43
The following table lists the Warrants beneficially owned by our directors, executive officers and other affiliates or related persons (all of which are Private Warrants) as of April 13, 2018:
|
|
|
||||||
Name |
Aggregate
Number of Warrants Beneficially Owned |
Percentage
of Warrants Beneficially Owned (1) |
||||||
Canyon Holdings (Cayman), L.P. (2) | 2,032,043 | 8.3 | % | |||||
Capitol Acquisition Management 3 LLC (3) | 4,324,307 | 17.7 | % | |||||
Capitol Acquisition Founder 3 LLC (4) | 1,441,436 | 5.9 | % |
(1) | Determined based on 24,500,000 Warrants, representing 16,250,000 Public Warrants and 8,250,000 Private Warrants outstanding as of April 13, 2018. |
(2) | Voting and dispositive power with respect to the Warrants held by Cision Owner is exercised by its general partner, Canyon Partners, Ltd., which is controlled by a majority vote of its ten-member board of directors (Canyon Board of Directors). GTCR Investment X AIV Ltd. (GTCR AIV) as the sole shareholder of Canyon Partners, Ltd. may be deemed to share voting and dispositive power over the Warrants held by Cision Owner. GTCR AIV is managed by a ten-member board of Directors (the AIV Board of Directors) comprised of Mark M. Anderson (one of our directors), Craig A. Bondy, Philip A. Canfield (one of our directors), Aaron D. Cohen, Sean L. Cunningham, David A. Donnini, Constantine A. Mihas, Collin E. Roche, Lawrence C. Fey IV and Benjamin J. Daverman. Each of the foregoing entities and the individual members of each of the Canyon Board of Directors and the AIV Board of Directors disclaim beneficial ownership of the Warrants held of record by Cision Owner except to the extent of his, her or its pecuniary interest. Messrs. Canfield and Anderson are Managing Directors of GTCR LLC, and Stephen P. Master (one of our directors) is a Vice President of GTCR LLC. Each of Messrs. Canfield, Anderson and Master disclaims beneficial ownership of any Warrants held by of Cision Owner or beneficially owned by Canyon Partners, Ltd. and GTCR AIV, except to the extent of his indirect pecuniary interest. |
(3) | Capitol Acquisition Management 3 LLC is controlled by Mark D. Ein (one of our directors). |
(4) | Capitol Acquisition Founder 3 LLC is controlled by L. Dyson Dryden (one of our directors). |
The Capitol Sponsors and Cision Owner have advised us that they intend to tender all of the Private Warrants held by them in the Offer; however, none of these parties are under any contractual obligation to tender such Warrants, and there can be no assurance that they will do so. Collectively, the Capitol Sponsors and Cision Owner hold approximately 94.5% of the Private Warrants, representing approximately 31.8% of the total Warrants outstanding. If the Capitol Sponsors and Cision Owner tender all of the Private Warrants held by them in the Offer and the holders of approximately 26.7% of the remaining outstanding Warrants agree to tender (and the other conditions described herein are satisfied) then the Warrant Amendment will be adopted. None of the holders of Private Warrants will receive any benefit by virtue of participation in the Offer that is not shared on a pro rata basis with holders of the Public Warrants exchanged pursuant to the Offer.
Capitols units commenced public trading upon consummation of its IPO on October 13, 2015, and its common stock and warrants commenced separate trading on December 7, 2015. Prior to the separation of Capitols units on December 7, 2015, there was no public market for its common stock.
Prior to the consummation of the Business Combination on June 29, 2017, Capitols common stock, warrants and units were each listed on the NASDAQ Capital Market under the symbols CLAC, CLACW and CLACU, respectively. On June 30, 2017, our Ordinary Shares and Public Warrants commenced trading on the New York Stock Exchange under the symbols CISN and CISN.WS, respectively.
44
The following table shows the high and low sale prices per share of Capitols common stock and warrants (for dates prior to June 30, 2017) or our Ordinary Shares and Public Warrants (for dates on or after June 30, 2017), as applicable, as reported on the Nasdaq Stock Market or New York Stock Exchange, respectively, for the periods indicated.
|
|
|
|
|
||||||||||||
Common stock/
ordinary shares |
Warrants | |||||||||||||||
High | Low | High | Low | |||||||||||||
First Quarter 2016 | $ | 9.75 | $ | 9.40 | $ | 0.65 | $ | 0.30 | ||||||||
Second Quarter 2016 | 9.80 | 9.62 | 0.40 | 0.32 | ||||||||||||
Third Quarter 2016 | 10.00 | 9.65 | 0.70 | 0.40 | ||||||||||||
Fourth Quarter 2016 | 10.00 | 9.80 | 0.87 | 0.63 | ||||||||||||
First Quarter 2017 | 10.60 | 9.93 | 1.92 | 0.70 | ||||||||||||
Second Quarter 2017 | 10.85 | 9.90 | 2.01 | 1.50 | ||||||||||||
Third Quarter 2017 | 13.36 | 10.00 | 2.99 | 1.86 | ||||||||||||
Fourth Quarter 2017 | 13.68 | 11.13 | 3.40 | 2.10 | ||||||||||||
First Quarter 2018 | 12.68 | 11.24 | 3.05 | 2.05 | ||||||||||||
Second Quarter 2018 (through April 13, 2018) | 12.38 | 11.16 | 2.60 | 2.11 |
As of April 13 2018, we had approximately 12 holders of record of our Ordinary Shares and 8 holders of record of our Warrants. These figures do not include the number of persons whose securities are held in nominee or street name accounts through brokers.
We have never declared or paid, and do not anticipate declaring or paying, any cash dividends on our Ordinary Shares in the foreseeable future. In addition, the terms of our credit facilities will include restrictions on our ability to issue dividends. See Managements discussion and analysis of financial condition and results of operations Liquidity and capital resources Overview for a discussion of our credit facilities restrictions on our subsidiaries ability to pay dividends or other payments to us.
Because this transaction is an offer to holders to exchange their existing Warrants for our Ordinary Shares, there is no source of funds or other cash consideration being paid by us to, or to us from, those tendering Warrant holders pursuant to the Offer, other than the amount of cash paid in lieu of a fractional share in the Offer. We estimate that the total amount of cash required to complete the transactions contemplated by the Offer and Consent Solicitation, including the payment of any fees, expenses and other related amounts incurred in connection with the transactions and the payment of cash in lieu of fractional shares will be approximately $1.1 million. We expect to have sufficient funds to complete the transactions contemplated by the Offer and Consent Solicitation and to pay fees, expenses and other related amounts from our cash on hand.
Continental Stock Transfer & Trust Company has been appointed the exchange agent for the Offer and Consent Solicitation. The Letter of Transmittal and Consent and all correspondence in connection with the Offer should be sent or delivered by each holder of the Warrants, or a beneficial owners custodian bank, depositary, broker, trust company or other nominee, to the exchange agent at the address and telephone numbers set forth on the back cover page of this Prospectus/Offer to Exchange. We will pay the exchange agent reasonable and customary fees for its services and will reimburse it for its reasonable, out-of-pocket expenses in connection therewith.
45
D.F. King & Co., Inc. has been appointed as the information agent for the Offer and Consent Solicitation, and will receive customary compensation for its services. Questions concerning tender procedures and requests for additional copies of this Prospectus/Offer to Exchange or the Letter of Transmittal and Consent should be directed to the information agent at the address and telephone numbers set forth on the back cover page of this Prospectus/Offer to Exchange.
We have retained Citigroup Global Markets Inc. to act as dealer manager in connection with the Offer and Consent Solicitation and will pay the dealer manager a customary fee as compensation for its services. We will also reimburse the dealer manager for certain expenses. The obligations of the dealer manager to perform this function are subject to certain conditions. We have agreed to indemnify the dealer manager against certain liabilities, including liabilities under the federal securities laws. Questions about the terms of the Offer or Consent Solicitation may be directed to the dealer manager at its address and telephone number set forth on the back cover page of this Prospectus/Offer to Exchange.
The dealer manager and its affiliates are full service financial institutions engaged in various activities, which may include sales and trading, commercial and investment banking, advisory, investment management, investment research, principal investment, hedging, market making, brokerage and other financial and non-financial activities and services. The dealer manager and its affiliates have provided, and may in the future provide, a variety of these services to us and to persons and entities with relationships with us, for which they have received or will receive customary fees and expenses.
In the ordinary course of their various business activities, the dealer manager and its affiliates, officers, directors and employees may purchase, sell or hold a broad array of investments and actively traded securities, derivatives, loans, commodities, currencies, credit default swaps and other financial instruments for their own account and for the accounts of their customers, and such investment and trading activities may involve or relate to assets, securities and/or instruments of us (directly, as collateral securing other obligations or otherwise) and/or persons and entities with relationships with us. The dealer manager and its affiliates may also communicate independent investment recommendations, market color or trading ideas and/or publish or express independent research views in respect of such assets, securities or instruments and may at any time hold, or recommend to clients that they should acquire, long and/or short positions in such assets, securities and instruments.
In the ordinary course of its business, the dealer manager or its affiliates may at any time hold long or short positions, and may trade for their own accounts or the accounts of customers, in securities of Cision, including Warrants, and, to the extent that the dealer manager or its affiliates own Warrants during the Offer and Consent Solicitation, they may tender such Warrants under the terms of the Offer and Consent Solicitation.
The expenses of soliciting tenders of the Warrants and the Consent Solicitation will be borne by us. The principal solicitations are being made by mail; however, additional solicitations may be made by facsimile transmission, telephone or in person by the dealer manager and the information agent, as well as by our officers and other employees and affiliates.
You will not be required to pay any fees or commissions to us, the dealer manager, the exchange agent or the information agent in connection with the Offer and Consent Solicitation. If your Warrants are held through a broker, dealer, commercial bank, trust company or other nominee that tenders your Warrants on your behalf, your broker or other nominee may charge you a commission or service fee for doing so. You should consult your broker, dealer, commercial bank, trust company or other nominee to determine whether any charges will apply.
Other than as set forth below and in the sections of this Prospectus/Offer to Exchange entitled Certain Relationships and Related Person Transactions and Description of Capital Stock, and as set forth in our
46
Amended and Restated Memorandum and Articles of Association, there are no agreements, arrangements or understandings between the Company, or any of our directors or executive officers, and any other person with respect to our securities that are the subject of the Offer and Consent Solicitation.
The Capitol Sponsors and Cision Owner have advised us that they intend to tender all of the Private Warrants held by them in the Offer; however, none of these parties are under any contractual obligation to tender such Warrants, and there can be no assurance that they will do so. Collectively, the Capitol Sponsors and Cision Owner hold approximately 94.5% of the Private Warrants, representing approximately 31.8% of the total Warrants outstanding. If the Capitol Sponsors and Cision Owner tender all of the Private Warrants held by them in the Offer and the holders of approximately 26.7% of the remaining outstanding Warrants agree to tender (and the other conditions described herein are satisfied) then the Warrant Amendment will be adopted. None of the holders of Private Warrants will receive any benefit by virtue of participation in the Offer that is not shared on a pro rata basis with holders of the Public Warrants exchanged pursuant to the Offer.
Except as set forth in the section of this Prospectus/Offer to Exchange entitled Certain Relationships and Related Person Transactions, neither we, nor any of our directors, executive officers or controlling persons, or any executive officers, directors, managers or partners of any of our controlling persons, has engaged in any transactions in our Warrants in the last 60 days.
Except as described in the sections of this Prospectus/Offer to Exchange entitled Risk Factors and The Offer and Consent Solicitation, neither the Company, nor any of its directors, executive officers, or controlling persons, or any executive officers, directors, managers or partners of its controlling persons, has any plans, proposals or negotiations that relate to or would result in:
| any extraordinary transaction, such as a merger, reorganization or liquidation, involving us or any of our subsidiaries; |
| any purchase, sale or transfer of a material amount of assets of us or any of our subsidiaries; |
| any material change in our present dividend rate or policy, or our indebtedness or capitalization; |
| except as described below, any change in our present board of directors or management, including, but not limited to, any plans or proposals to change the number or the term of directors or to fill any existing vacancies on the board or to change any material term of the employment contract of any executive officer; |
| any other material change in our corporate structure or business; |
| any class of our equity securities to be delisted from the NYSE (except to the extent the results of the Offer and Consent Solicitation impact the continued listing of the Public Warrants); |
| any class of our equity securities becoming eligible for termination of registration under section 12(g)(4) of the Exchange Act (except to the extent the results of the Offer and Consent Solicitation impact such eligibility with respect to the Public Warrants); |
| the suspension of our obligation to file reports under Section 15(d) of the Exchange Act; |
| the acquisition or disposition by any person of our securities; or |
| any changes in our Articles of Association or other governing instruments or other actions that could impede the acquisition of control of our company. |
The Public Warrants currently are registered under the Exchange Act. This registration may be terminated upon application by us to the SEC if there are fewer than 300 record holders of the Public Warrants. We currently do not intend to deregister the Public Warrants, if any, that remain outstanding after completion of the Offer and Consent Solicitation. Notwithstanding any termination of the registration of our Public Warrants, we will continue to be subject to the reporting requirements under the Exchange Act as a result of the continuing registration of our Ordinary Shares.
47
The Warrants are not currently reflected on our consolidated balance sheet. We will account for the exchange of Warrants as an ordinary share issuance for no additional value. The par value of each ordinary share issued in the Offer will be recorded as a credit to common stock and a debit to additional paid-in capital. Any cash paid in lieu of fractional shares will be recorded as a credit to cash and a debit to additional paid-in capital. The Offer will not modify the current accounting treatment for the un-exchanged warrants.
Holders of the Warrants do not have any appraisal or dissenters rights under applicable law in connection with the Offer and Consent Solicitation.
Subject to the limitations and qualifications stated herein, this discussion sets forth a summary of material U.S. federal income tax consequences of the receipt of Ordinary Shares in exchange for the Warrants pursuant to the Offer, the deemed exchange of Warrants not exchanged for Ordinary Shares in the Offer for new Warrants pursuant to the Warrant Amendment, and the ownership and disposition of Ordinary Shares. The discussion is based on the United States Internal Revenue Code of 1986, as amended, or the Code, its legislative history, existing and proposed regulations thereunder, published rulings and court decisions, all as currently in effect and all subject to change at any time, possibly with retroactive effect. We cannot assure you that a change in law will not alter significantly the tax consequences described in this summary. We have not sought and do not expect to seek any rulings from the U.S. Internal Revenue Service, or the IRS, regarding the matters discussed below, and as a result, there can be no assurance that the IRS or the courts will agree with any of the conclusions stated in this description. This description assumes that holders hold the Warrants, and will hold the Ordinary Shares received upon exchange of the Warrants, as capital assets (generally, property held for investment). This description does not address all of the tax consequences that might be relevant to a holders particular circumstances and does not address the tax consequences to any special class of holder, including without limitation, holders of (directly, indirectly or constructively) 10% or more of the Ordinary Shares, dealers in securities or currencies, banks, tax-exempt organizations, insurance companies, financial institutions, broker-dealers, regulated investment companies, real estate investment trusts, tax exempt organizations, traders in securities that elect the mark-to-market method of accounting for their securities holdings, persons that hold Ordinary Shares or Warrants that are a hedge or that are hedged against currency or interest rate risks or that are part of a straddle conversion or integrated transaction, persons holding Ordinary Shares through a bank, financial institution or other entity, or a branch thereof, located, organized or resident outside the United States, certain U.S. expatriates, partnerships or other entities classified as partnerships for U.S. federal income tax purposes, persons subject to special tax accounting rules as a result of any item of gross income with respect to Ordinary Shares being taken into account in an applicable financial statement, investment funds and their investors, and U.S. holders (as defined below) whose functional currency for U.S. federal income tax purposes is not the U.S. dollar.
If a partnership (or any other entity treated as a partnership for U.S. federal income tax purposes) holds Ordinary Shares or Warrants, the tax treatment of the partnership and a partner in such partnership generally will depend on the status of the partner and the nature of the activities of the partnership. A holder that is a partnership, and the partners in such partnerships, should consult its tax advisors regarding the tax consequences of the receipt of Ordinary Shares in the exchange, the deemed exchange of Warrants not exchanged for Ordinary Shares in the Offer for new Warrants pursuant to the Warrant Amendment, and the ownership and disposition of Ordinary Shares received in the exchange.
48
This description does not address the tax consequences arising under the laws of any foreign, state, or local tax jurisdiction. Moreover, except to the extent specifically set forth below, this description does not address the U.S. federal estate and gift tax, or alternative minimum tax, or other non-income tax consequences of the ownership and disposition of Ordinary Shares received upon exchange of the Warrants.
This description is for general information only and is not tax advice. It is not intended to constitute a complete description of all tax consequences for holders relating to the exchange of Warrants for our Ordinary Shares, the deemed exchange of Warrants not exchanged for Ordinary Shares in the Offer for new Warrants pursuant to the Warrant Amendment, or relating to the ownership and disposition of our Ordinary Shares. You are urged to consult with your tax advisor regarding the U.S. federal income tax consequences of the receipt of Ordinary Shares in exchange for the Warrants, the deemed exchange of Warrants not exchanged for Ordinary Shares in the Offer for new Warrants pursuant to the Warrant Amendment, and of the ownership and disposition of such Ordinary Shares, applicable in your particular situation, as well as any consequences under the U.S. federal estate or gift tax, the U.S. federal alternative minimum tax, or under the tax laws of any state, local, foreign, or other taxing jurisdiction.
Subject to the limitations stated above, the following description addresses certain material U.S. federal income tax consequences of the receipt of Ordinary Shares in exchange for the Warrants, the deemed exchange of Warrants not exchanged for Ordinary Shares in the Offer for new Warrants pursuant to the Warrant Amendment, and of the ownership and disposition of our Ordinary Shares, that are expected to apply if you are a U.S. holder of the Warrants or our Ordinary Shares. For this purpose, you are a U.S. holder if you are:
| an individual who is a citizen or resident of the United States; |
| a corporation (or other entity taxable as a corporation for U.S. federal income tax purposes) created or organized in or under the laws of the United States or any State thereof or the District of Columbia; |
| an estate the income of which is subject to U.S. federal income taxation regardless of its source; or |
| a trust (i) if a court within the United States is able to exercise primary supervision over the administration of the trust and one or more United States persons (as defined in Section 7701(a)(30) of the Code) have the authority to control all substantial decisions of the trust, or (ii) that has a valid election in effect under applicable U.S. Treasury Regulations to be treated as a U.S. person. |
Subject to the passive foreign investment company (PFIC) rules discussed below, for those holders of Warrants participating in the Offer and for any holders of Warrants subsequently exchanged for Ordinary Shares pursuant to the terms of the Warrant Amendment, we intend to treat your exchange of Warrants for our Ordinary Shares as a recapitalization within the meaning of Section 368(a)(1)(E) of the Code pursuant to which (i) you should not recognize any gain or loss on the exchange of Warrants for shares of our Ordinary Shares, (ii) your aggregate tax basis in the shares received in the exchange should equal your aggregate tax basis in your Warrants deemed to be surrendered in the exchange (except to the extent of any tax basis allocated to a fractional share for which a cash payment is received in connection with the Offer), and (iii) your holding period for the shares received in the exchange should include your holding period for the surrendered Warrants. Special tax basis and holding period rules apply to holders that acquired different blocks of Warrants at different prices or at different times. You should consult your tax advisor as to the applicability of these special rules to your particular circumstances. Any cash you receive in lieu of a fractional share of our Ordinary Shares pursuant to the Offer should generally result in gain or loss to you equal to the difference between the cash received and your tax basis in the fractional share. Because there is a lack of direct legal authority regarding the U.S. federal income tax consequences of the exchange of Warrants for our Ordinary Shares, there can be no assurance in this regard and alternative characterizations by the IRS or a court are possible, including ones that would require U.S. holders to recognize taxable income. If our treatment of the exchange of Warrants for our Ordinary Shares were successfully challenged by the IRS and
49
such exchange were not treated as a recapitalization for United States federal income tax purposes, exchanging U.S. holders may be subject to taxation in a manner analogous to the rules applicable to dispositions of Ordinary Shares described below under Tax Consequences to U.S. Holders Ownership and Disposition of Ordinary Shares and exchanging non-U.S. holders may be subject to taxation in a manner analogous to the rules applicable to dispositions of Ordinary Shares described below under Tax Consequences to Non-U.S. Holders Ownership and Disposition of Ordinary Shares.
Although we believe the exchange of Warrants for Ordinary Shares pursuant to the Offer is a value-for-value transaction, because of the uncertainty inherent in any valuation, there can be no assurance that the IRS or a court would agree. If the IRS or a court were to view the exchange pursuant to the Offer as the issuance of Ordinary Shares to an exchanging holder having a value in excess of the Warrants surrendered by such holder, such excess value could be viewed as a constructive dividend under Section 305 of the Code. Although not free from doubt, it is expected that such constructive dividend, if any, should be considered a dividend of common stock on common stock, which generally should be nontaxable.
If you exchange Warrants for our Ordinary Shares pursuant to the Offer, and if you hold five percent or more of our Ordinary Shares prior to the exchange, or if you hold Warrants and other securities of ours prior to the exchange with a tax basis of $1 million or more, you will be required to file with your U.S. federal income tax return for the year in which the exchange occurs a statement setting forth certain information relating to the exchange (including the fair market value, prior to the exchange, of the Warrants transferred in the exchange and your tax basis, prior to the exchange, in our Ordinary Shares or securities), and to maintain permanent records containing such information.
Although the issue is not free from doubt, we intend to treat all Warrants not exchanged for Ordinary Shares in the Offer as having been exchanged for new Warrants pursuant to the Warrant Amendment and to treat such deemed exchange as a recapitalization within the meaning of Section 368(a)(1)(E) of the Code, pursuant to which, subject to the PFIC rules discussed below, (i) you should not recognize any gain or loss on the deemed exchange of Warrants for new Warrants, (ii) your aggregate tax basis in the new Warrants deemed to be received in the exchange should equal your aggregate tax basis in your existing Warrants surrendered in the exchange, and (iii) your holding period for the new Warrants deemed to be received in the exchange should include your holding period for the surrendered Warrants. Special tax basis and holding period rules apply to holders that acquired different blocks of Warrants at different prices or at different times. You should consult your tax advisor as to the applicability of these special rules to your particular circumstances.
Because there is a lack of direct legal authority regarding the U.S. federal income tax consequences of the deemed exchange of Warrants for new Warrants pursuant to the Warrant Amendment, there can be no assurance in this regard and alternative characterizations by the IRS or a court are possible, including ones that would require U.S. holders to recognize taxable income. If our treatment of the deemed exchange of Warrants for new Warrants pursuant to the Warrant Amendment were successfully challenged by the IRS and such exchange were not treated as a recapitalization for United States federal income tax purposes, exchanging U.S. holders may be subject to taxation in a manner analogous to the rules applicable to dispositions of Ordinary Shares described below under Tax Consequences to U.S. Holders Ownership and Disposition of Ordinary Shares and exchanging non-U.S. holders may be subject to taxation in a manner analogous to the rules applicable to dispositions of Ordinary Shares described below under Tax Consequences to Non-U.S. Holders Ownership and Disposition of Ordinary Shares.
General . A foreign corporation will be treated as a passive foreign investment company, or PFIC, for U.S. federal income tax purposes for any taxable year if, applying applicable look-through rules, either:
| at least 75% of its gross income for such year is passive income; or |
| at least 50% of the value of its assets (determined based on a quarterly average) during such year is attributable to assets that produce or are held for the production of passive income. |
For these purposes, we will be treated as owning a proportionate share of the assets and earning a proportionate share of the income of any other corporation in which we own, directly or indirectly, at least
50
25% of the stock. Subject to various exceptions, passive income generally includes dividends, interest, royalties and rents (other than certain royalties and rents derived in the active conduct of a trade or business and not derived from a related person), and gains derived from the disposition of passive assets. Under proposed U.S. Treasury Regulations, the holder of an option to acquire stock in a PFIC is considered to be the owner of that stock.
Based on the value of our assets and the composition of our income and assets, we do not believe we were treated as a PFIC for U.S. federal income purposes for our taxable year ended December 31, 2017 and do not expect to be treated as a PFIC for the foreseeable future. However, the determination of PFIC status is based on an annual determination that cannot be made until the close of a taxable year, involves extensive factual investigation, including ascertaining the fair market value of all of our assets on a quarterly basis and the character of each item of income that we earn, and is subject to uncertainty in several respects. We must make a separate determination each year as to whether we are a PFIC. As a result, our PFIC status may change. Accordingly, we cannot assure you that we will not be treated as a PFIC for our current taxable year ending December 31, 2018, or for any future taxable year, or that the IRS will not take a contrary position.
If we are a PFIC for any taxable year during which you hold a Warrant or Ordinary Shares, we generally will continue to be treated as a PFIC for all succeeding years during which you hold a Warrant or Ordinary Shares. However, if we cease to be a PFIC, you may avoid some of the adverse effects of the PFIC regime by making a deemed sale election with respect to the Warrant or Ordinary Shares, as applicable.
Consequences if a PFIC . If we are determined to be a PFIC for any taxable year (or portion thereof) that is included in the holding period of a U.S. holder of our Ordinary Shares or Warrants, in the absence of a qualifying electing fund election (which, as noted below, will not be available to you), will be subject to special tax rules with respect to any excess distribution that you receive and any gain you realize from a sale or other disposition (including a pledge) of the Ordinary Shares or Warrants, unless you make a mark-to-market election as discussed below (which would apply only to Ordinary Shares). Distributions you receive in a taxable year that are greater than 125% of the average annual distributions you received during the shorter of the three preceding taxable years or your holding period for the Ordinary Shares will be treated as an excess distribution.
| the amount allocated to the U.S. holders taxable year in which the U.S. holder recognized gain or received the excess distribution, or to the period in the U.S. holders holding period before the first day of our first taxable year in which we are a PFIC, will be taxed as ordinary income; |
| the amount allocated to other taxable years (or portions thereof) of the U.S. holder and included in its holding period will be taxed at the highest tax rate in effect for that year and applicable to the U.S. holder; and |
| the interest charge generally applicable to underpayments of tax will be imposed in respect of the tax attributable to each such other taxable year of the U.S. holder. |
Under proposed U.S. Treasury Regulations, for purposes of the above rules (i) the exercise of a warrant to acquire stock in a PFIC is not treated as a disposition of PFIC stock and (ii) gain is not recognized on a disposition of PFIC stock that results from a nonrecognition transfer if in the transfer PFIC stock is exchanged for stock in the same or another corporation that is also a PFIC. However, (i) the exchange of Warrants for Ordinary Shares pursuant to the Offer or (ii) the deemed exchange of Warrants not exchanged for Ordinary Shares in the Offer for new Warrants pursuant to the Warrant Amendment would not be eligible for those rules if this were considered to be a taxable disposition of shares of PFIC stock. U.S. holders of Warrants should consult their tax advisors with respect to the application of these rules to the exercise or amendment of their Warrants if we are a PFIC.
QEF Election . In certain circumstances, a U.S. holder of shares in a PFIC may avoid the adverse tax consequences described above by making a qualified electing fund election to include in income its share of the corporations income on a current basis. However, you may make a qualified electing fund election with respect to your Ordinary Shares only if we furnish you annually with a PFIC annual information
51
statement as specified in the applicable U.S. Treasury Regulations. We currently do not intend to prepare or provide the information that would enable you to make a qualified electing fund election.
Mark-to-Market Election . Alternatively, a U.S. holder of marketable stock (as defined below) in a PFIC may make a mark-to-market election with respect to stock to elect out of the tax treatment discussed above under Consequences if a PFIC. If you make a valid mark-to-market election for your Ordinary Shares you will include in income each year an amount equal to the excess, if any, of the fair market value of the Ordinary Shares as of the close of your taxable year over your adjusted basis in such Ordinary Shares. You are allowed a deduction for the excess, if any, of the adjusted basis of the Ordinary Shares over their fair market value as of the close of the taxable year. However, deductions are allowable only to the extent of any net mark-to-market gains on the Ordinary Shares included in your income for prior taxable years. Amounts included in your income under a mark-to-market election, as well as gain on the actual sale or other disposition of the Ordinary Shares, are treated as ordinary income. Ordinary loss treatment also applies to the deductible portion of any mark-to-market loss on the Ordinary Shares, as well as to any loss realized on the actual sale or disposition of the Ordinary Shares, to the extent that the amount of such loss does not exceed the net mark-to-market gains previously included for such Ordinary Shares. Your basis in the ordinary shares will be adjusted to reflect any such income or loss amounts. If you make such an election, the tax rules that apply to distributions by corporations that are not PFICs would apply to distributions by us, except that the preferential tax rate discussed below under Ownership and Disposition of Ordinary Shares Dividends would not apply.
The mark-to-market election is available only for marketable stock, which is stock that is traded in other than de minimis quantities, or regularly traded, on at least 15 days during each calendar quarter on a qualified exchange or other market, as defined in applicable U.S. Treasury Regulations. Our Ordinary Shares are listed on the New York Stock Exchange, which is a qualified exchange or other market for these purposes. Consequently, as long as our Ordinary Shares are regularly traded, the mark-to-market election would be available to a holder of our Ordinary Shares if we become a PFIC. If any of our subsidiaries are or become PFICs, the mark-to-market election will not be available with respect to the shares of such subsidiaries that are treated as owned by you. Consequently, you could be subject to the PFIC rules with respect to income of the lower-tier PFICs the value of which already had been taken into account indirectly via mark-to-market adjustments.
Currently, a mark-to-market election may not be made with respect to warrants. U.S. holders should consult their tax advisors regarding the availability and tax consequences of a mark-to-market election under their particular circumstances.
Lower-Tier PFICs . Under attribution rules, if we are treated as a PFIC with respect to you for any taxable year, to the extent any of our subsidiaries are also PFICs, you will be deemed to own shares in such lower-tier PFICs that are directly or indirectly owned by us in the proportion that the value of the Ordinary Shares you own bears to the value of all of our Ordinary Shares, and you may be subject to the rules described in the preceding paragraphs with respect to the shares of such lower-tier PFICs you are deemed to own. We do not expect to provide to a U.S. holder the information that may be required to make or maintain a QEF election with respect to any lower-tier PFIC. Without such statements a U.S. holder would not be able to make a QEF election. In addition, a mark-to-market election is not available with respect to lower tier PFICs. U.S. holders are urged to consult their tax advisors regarding the tax issues raised by lower-tier PFICs.
Reporting . A U.S. holder that owns (or is deemed to own) shares in a PFIC during any taxable year of the U.S. holder, may have to file an IRS Form 8621 (whether or not a QEF or market-to-market election is made) and such other information as may be required by the U.S. Treasury Department. Failure to do so, if required, will extend the statute of limitations until such required information is furnished to the IRS.
The rules dealing with PFICs and with the QEF and mark-to-market elections are very complex and are affected by various factors in addition to those described above. Accordingly, U.S. holders should consult their tax advisors concerning the application of the PFIC rules to such securities under their particular circumstances.
52
Dividends . We do not anticipate paying dividends on our Ordinary Shares. Subject to the PFIC rules discussed above, distributions of cash or property that we pay on our Ordinary Shares will constitute dividends for U.S. federal income tax purposes to the extent paid from our current or accumulated earnings and profits (as determined under U.S. federal income tax principles) and will be includible in your gross income as ordinary dividend income when actually or constructively received by you. Distributions in excess of our current and accumulated earnings and profits will be treated first as a tax-free return of capital to the extent of your tax basis in our Ordinary Shares, and thereafter will be treated as capital gain from the sale or exchange of the Ordinary Shares. However, we may not calculate earnings and profits in accordance with U.S. federal tax principles. In that case, we intend to treat the full amount of any distribution by the Company to U.S. holders as a dividend for U.S. federal income tax purposes.
Dividends received by a non-corporate U.S. holder, including an individual, may qualify for the lower rates of tax applicable to qualified dividend income, provided that (1) our Ordinary Shares are readily tradable on an established securities market in the United States and (2) we are not a PFIC for our taxable year in which the dividend is paid and the preceding taxable year. Under a published IRS Notice, common or ordinary shares are considered to be readily tradable on an established securities market in the United States if they are listed on the New York Stock Exchange, as our Ordinary Shares are. Accordingly, subject to the PFIC rules discussed above (see Passive Foreign Investment Company Rules), dividends paid to a non-corporate U.S. holder with respect to Ordinary Shares for which the requisite holding period is satisfied should be eligible for the preferential tax rates applicable to qualified dividend income.
Even if dividends would otherwise be eligible for the preferential tax rates applicable to qualified dividend income, a non-corporate U.S. holder will not be eligible for the reduced rates of taxation if the non-corporate U.S. holder does not hold our Ordinary Shares for more than 60 days during the 121-day period beginning 60 days before the ex-dividend date or if the non-corporate U.S. holder elects to treat the dividend income as investment income pursuant to Section 163(d)(4) of the Code. In addition, the rate reduction will not apply to dividends of a qualified foreign corporation if the non-corporate U.S. holder receiving the dividend is obligated to make related payments with respect to positions in substantially similar or related property. You should consult your own tax advisors regarding the availability of the lower tax rates applicable to qualified dividend income for any dividends that we pay with respect to the Ordinary Shares, as well as the effect of any change in applicable law.
If you are a corporate U.S. holder, dividends you receive with respect to our Ordinary Shares will be taxable at regular rates and will not be eligible for the dividends received deduction generally allowed to domestic corporations in respect of dividends received from other domestic corporations.
Dividends will generally be treated as income from foreign sources for U.S. foreign tax credit purposes and will generally constitute passive category income. Depending on the U.S. holders individual facts and circumstances, a U.S. holder may be eligible, subject to a number of complex limitations, to claim a foreign tax credit not in excess of any applicable treaty rate in respect of any foreign withholding taxes imposed on dividends received on our Ordinary Shares. A U.S. holder who does not elect to claim a foreign tax credit for foreign tax withheld may instead claim a deduction, for U.S. federal income tax purposes, in respect of such withholding, but only for a year in which such U.S. holder elects to do so for all creditable foreign income taxes.
The rules governing the foreign tax credit are complex and the outcome of their application depends in large part on the U.S. holders individual facts and circumstances. Accordingly, U.S. holders are urged to consult their tax advisors regarding availability of the foreign tax credit under their particular circumstances.
Sale or Exchange . Subject to the PFIC discussion above, upon a sale or other taxable disposition of our Ordinary Shares, you generally will recognize capital gain or loss equal to the difference between (i) the amount of cash and the fair market value of any property you receive on the disposition and (ii) your adjusted tax basis for the Ordinary Shares. The capital gain or loss will be long-term capital gain or loss if you held the Ordinary Shares for more than one year. The deductibility of capital losses is subject to limitations. Any gain or loss that you recognize on a disposition of our Ordinary Shares generally will be treated as
53
U.S.-source income or loss for foreign tax credit limitation purposes. You should consult your own tax advisors regarding the proper treatment of gain or loss, as well as the availability of a foreign tax credit, in your particular circumstances.
A 3.8% Medicare contribution tax will generally apply to all or some portion of the net investment income of a U.S. holder who is an individual, estate or trust with adjusted gross income that exceeds a threshold amount. For these purposes, dividends received with respect to our Ordinary Shares, and gains or losses realized from the taxable disposition of our Ordinary Shares, will generally be taken into account in computing your net investment income. Each U.S. holder that is an individual, estate or trust should consult its own tax advisors regarding the effect, if any, of this tax provision on their ownership and disposition of Ordinary Shares.
Unless an exception applies, information reporting to the IRS generally will be required with respect to payments on Ordinary Shares and proceeds of the sale, exchange, redemption or other disposition of Ordinary Shares paid to U.S. holders, other than corporations and other exempt recipients. Backup withholding, currently at the rate of 24%, may apply to those payments if such a holder fails to provide an accurate taxpayer identification number to the paying agent and to certify that no loss of exemption from backup withholding has occurred. The amounts withheld under the backup withholding rules are not an additional tax and may be refunded, or credited against the holders U.S. federal income tax liability, if any, provided the required information is furnished to the IRS. In addition, certain U.S. holders who are individuals that hold certain foreign financial assets (which may include Ordinary Shares), or who have a beneficial interest in or signatory authority over certain foreign financial accounts, are required to report information relating to such assets or accounts, subject to certain exceptions. You should consult your own tax advisor regarding the application of the information reporting and backup withholding requirements to your particular situation.
U.S. holders who are individuals or certain entities generally will be required to report our name, address and such information relating to an interest in our Ordinary Shares as is necessary to identify the class or issue of which your Ordinary Shares are a part. These requirements are subject to exceptions, including an exception for Ordinary Shares held in accounts maintained by certain financial institutions and an exception applicable if the aggregate value of all specified foreign financial assets (as defined in the Code) does not exceed $50,000. U.S. holders should consult their tax advisors regarding the application of these information reporting rules.
Subject to the limitations stated above, the following description addresses certain material U.S. federal income tax consequences of the receipt of Ordinary Shares in exchange for the Warrants, the deemed exchange of Warrants not exchanged for Ordinary Shares in the Offer for new Warrants pursuant to the Warrant Amendment, and of the ownership and disposition of our Ordinary Shares, that are expected to apply if you are a non-U.S. holder of the Warrants or our Ordinary Shares. For this purpose, you are a non-U.S. holder if you are an individual, corporation, estate, or trust that is not a U.S. holder as defined above. Special rules may apply to certain non-U.S. holders such as controlled foreign corporations, passive foreign investment companies, individuals present in the United States for 183 days or more in the taxable year of disposition (but who are not U.S. residents) or, in certain circumstances, individuals who are former U.S. citizens or residents.
Your exchange of Warrants for our Ordinary Shares pursuant to the Offer, and the deemed exchange of Warrants not exchanged for Ordinary Shares in the Offer for new Warrants pursuant to the Warrant Amendment, should generally have the same tax consequences as described above for U.S. holders (other than for foreign tax credit purposes). Assuming you are not engaged the conduct of a trade or business within the U.S., capital gain or loss you recognize with respect to the receipt of cash in lieu of fractional shares should not be subject to U.S. federal income tax, and you should not be required to make any U.S. federal income tax filings solely on account of the exchange of Warrants for our Ordinary Shares or the receipt of cash in lieu of fractional Ordinary Shares.
54
Dividends . We do not anticipate paying dividends on our Ordinary Shares. Dividends (including constructive dividends) paid or deemed paid to a non-U.S. holder in respect to our Ordinary Shares generally will not be subject to U.S. federal income tax, unless the dividends are effectively connected with the non-U.S. holders conduct of a trade or business within the United States (and, if required by an applicable income tax treaty, are attributable to a permanent establishment or fixed base that such holder maintains in the United States).
Sale or Exchange . Subject to the discussion below regarding backup withholding, a non-U.S. holder generally will not be subject to U.S. federal income tax on any gain realized upon the sale or other disposition of our Ordinary Shares, unless:
| the gain is effectively connected with the non-U.S. holders conduct of a trade or business in the United States, and if required by an applicable income tax treaty, attributable to a fixed base or permanent establishment maintained by the non-U.S. holder in the United States; or |
| the non-U.S. holder is a nonresident alien individual present in the United States for 183 days or more during the taxable year of the disposition, and certain other requirements are met. |
Gain described in the first bullet point above will be subject to U.S. federal income tax on a net income basis at the regular graduated U.S. federal income tax rates in the same manner as if such holder were a resident of the United States. Gain described in the second bullet point above will be subject to U.S. federal income tax at a flat 30% rate (or such lower rate specified by an applicable income tax treaty), but may be offset by U.S. source capital losses (even though the individual is not considered a resident of the United States), provided that the non-U.S. holder has timely filed a U.S. federal income tax return with respect to such losses.
Dividends and gains that are effectively connected with the non-U.S. holders conduct of a trade or business in the United States (and, if required by an applicable income tax treaty, are attributable to a permanent establishment or fixed base in the United States) generally will be subject to U.S. federal income tax (but not the Medicare contribution tax) at the same regular U.S. federal income tax rates applicable to a comparable U.S. holder and, in the case of a non-U.S. holder that is a corporation for U.S. federal income tax purposes, may also be subject to an additional branch profits tax at a 30% rate or a lower applicable tax treaty rate.
In general, dividends you receive with respect to our Ordinary Shares, and any U.S. federal withholding tax withheld with respect to those dividends, are reported to the IRS and to you, regardless of whether withholding is reduced or eliminated by an applicable income tax treaty. Copies of this information reporting may also be provided under the provisions of a specific tax treaty, or under the provisions of a tax information exchange agreement, to the tax authorities in the country in which you reside or are established. Amounts you receive from of a sale or other disposition of our Ordinary Shares effected through the U.S. office of any broker (as defined in applicable U.S. Treasury Regulations) or from a sale or other disposition conducted outside the United States through certain U.S.-related brokers, are also reported to the IRS and to you.
You will generally be exempt from backup withholding on dividends and other amounts you receive with respect to our Ordinary Shares if you provide a certification (on an applicable IRS Form W-8) or proof of exempt status as described above with respect to U.S. federal income tax withholding. Any amounts withheld under the backup withholding rules from a payment will be allowed as a credit against your U.S. federal income tax liability and may entitle you to a refund, provided you timely furnish the required information or returns to the IRS.
55
The depositary and exchange agent for the Offer and Consent Solicitation is:
Continental Stock Transfer & Trust Company
1 State Street, 30
th
Floor
New York, NY 10004
Facsimile: (212) 616-7616
We have filed with the SEC a Tender Offer Statement on Schedule TO, of which this Prospectus/Offer to Exchange is a part. We recommend that Warrant holders review the Schedule TO, including the exhibits, and our other materials that have been filed with the SEC before making a decision on whether to accept the Offer and Consent Solicitation.
We will assess whether we are permitted to make the Offer and Consent Solicitation in all jurisdictions. If we determine that we are not legally able to make the Offer and Consent Solicitation in a particular jurisdiction, we will inform Warrant holders of this decision. The Offer and Consent Solicitation is not made to those holders who reside in any jurisdiction where the offer or solicitation would be unlawful.
Our board of directors recognizes that the decision to accept or reject the Offer and Consent Solicitation is an individual one that should be based on a variety of factors and Warrant holders should consult with personal advisors if they have questions about their financial or tax situation.
We are subject to the information requirements of the Exchange Act and in accordance therewith file and furnish reports and other information with the SEC. All reports and other documents we have filed or furnished with the SEC, including the registration statement on Form S-4 relating to the Offer and Consent Solicitation, or will file or furnish with the SEC in the future, can be accessed electronically on the SECs website at www.sec.gov .
If you have any questions regarding the Offer and Consent Solicitation or need assistance, you should contact the information agent for the Offer and Consent Solicitation. You may request additional copies of this document, the Letter of Transmittal and Consent or the Notice of Guaranteed Delivery from the information agent. All such questions or requests should be directed to:
D.F. King & Co., Inc.
48 Wall Street, 22
nd
Floor
New York, New York 10005
Banks and Brokers Call Collect: (212) 269-5550
All Others Call Toll-Free: (800) 967-4607
Email: cision@dfking.com
We will amend our offering materials, including this Prospectus/Offer to Exchange, to the extent required by applicable securities laws to disclose any material changes to information previously published, sent or given by us to Warrant holders in connection with the Offer and Consent Solicitation.
56
The following table sets forth selected historical financial information derived from (i) our audited financial statements included elsewhere in this Prospectus/Offer to Exchange as of December 31, 2017, 2016 and 2015 and for the years ended December 31, 2017, 2016 and 2015 (and for the period from April 14, 2014 (inception) through December 31, 2014) and (ii) our audited financial statements not included in this Prospectus/Offer to Exchange relating to our balance sheet data as of December 31, 2014. You should read the following selected financial data in conjunction with the sections entitled Managements Discussion and Analysis of Financial Condition and Results of Operations and the financial statements and the related notes appearing elsewhere in this Prospectus/Offer to Exchange and any applicable prospectus supplement.
|
|
|
|
|
||||||||||||
For the year ended December 31, |
Period from
April 14, 2014 (inception to December 31, 2014) |
|||||||||||||||
(in thousands except share and per share amounts) | 2017 | 2016 | 2015 | |||||||||||||
Statements of operations data:
|
||||||||||||||||
Revenue | $ | 631,637 | $ | 467,772 | $ | 333,958 | $ | 170,114 | ||||||||
Cost of revenue | 200,836 | 162,583 | 125,006 | 74,552 | ||||||||||||
Gross profit | 430,801 | 305,189 | 208,952 | 95,562 | ||||||||||||
Operating costs and expenses:
|
||||||||||||||||
Sales and marketing | 114,750 | 92,594 | 71,603 | 56,029 | ||||||||||||
Research and development | 22,102 | 19,445 | 16,604 | 5,657 | ||||||||||||
General and administrative | 166,759 | 135,737 | 88,448 | 112,722 | ||||||||||||
Amortization of intangible assets | 89,159 | 77,058 | 59,914 | 22,065 | ||||||||||||
Total operating costs and expenses | 392,770 | 324,834 | 236,569 | 196,473 | ||||||||||||
Operating income (loss) | 38,031 | (19,645 | ) | (27,617 | ) | (100,911 | ) | |||||||||
Non operating income (expense)
|
||||||||||||||||
Foreign exchange (losses) gains | (5,458 | ) | 6,299 | (10,886 | ) | (10,992 | ) | |||||||||
Interest and other income, net | 2,132 | 831 | 5,750 | 339 | ||||||||||||
Interest expense | (116,466 | ) | (117,997 | ) | (61,398 | ) | (28,408 | ) | ||||||||
Loss on extinguishment of debt | (51,872 | ) | (23,591 | ) | | | ||||||||||
Total non operating loss | (171,664 | ) | (134,458 | ) | (66,534 | ) | (39,061 | ) | ||||||||
Loss before income taxes | (133,633 | ) | (154,103 | ) | (94,151 | ) | (139,972 | ) | ||||||||
Benefit from income taxes | (10,591 | ) | (55,691 | ) | (3,607 | ) | (31,010 | ) | ||||||||
Net loss | $ | (123,042 | ) | (98,412 | ) | (90,544 | ) | $ | (108,962 | ) | ||||||
Net loss per share (basic and diluted) | $ | (1.63 | ) | $ | (3.47 | ) | $ | (3.23 | ) | |||||||
Statements of cash flow data:
|
||||||||||||||||
Net cash provided by (used in):
|
||||||||||||||||
Operating activities | $ | 68,848 | $ | 17,373 | $ | 22,422 | $ | (50,804 | ) | |||||||
Investing activities | (79,988 | ) | (819,416 | ) | (10,664 | ) | (771,555 | ) | ||||||||
Financing activities | 121,945 | 808,353 | (8,568 | ) | (851,819 | ) |
|
|
|
|
|
||||||||||||
As of December 31, | ||||||||||||||||
2017 | 2016 | 2015 | 2014 | |||||||||||||
Balance Sheet data:
|
||||||||||||||||
Cash and cash equivalents | $ | 148,654 | $ | 35,135 | $ | 30,606 | $ | 28,577 | ||||||||
Total assets | 1,935,358 | 1,787,068 | 918,930 | 1,037,261 | ||||||||||||
Total liabilities | 1,618,989 | 2,146,121 | 1,124,958 | 1,146,617 | ||||||||||||
Mandatory redeemable stockholders equity | | 701 | 649 | 5 | ||||||||||||
Total stockholders equity (deficit) | 316,369 | (359,754 | ) | (206,677 | ) | (110,818 | ) |
57
We are a leading global provider of PR software, media distribution, media intelligence and related professional services, as measured by revenue estimates from Burton-Taylor International Consulting LLC. Public relations and communications professionals use our products and services to help manage, execute and measure their strategic PR and communications programs. We believe that we are an industry-standard SaaS solution for PR and marketing professionals and are deeply embedded in industry workflow.
We deliver sophisticated, easy-to-use platform for communicators to reach relevant media influencers and craft compelling campaigns that impact customer behavior. With rich monitoring and analytics, Cision Communications CloudTM (C3), a cloud-based platform that integrates each of our point solutions into a single unified interface, arms brands with the insights they need to link their earned media to strategic business objectives, while aligning it with owned and paid channels. This platform enables companies and brands to build consistent, meaningful and enduring relationships with influencers and buyers in order to amplify their marketplace influence.
We have undergone a strategic transformation since GTCRs initial investment in 2014, evolving into a PR and marketing software leader through a series of complementary acquisitions. The acquisitions of Cision and Vocus, Inc. in 2014 and their subsequent merger established the foundation of the core media database, monitoring and analysis business. Over the 12 months following this initial merger, we acquired Discovery Group Holdings Ltd. to expand our global footprint and also completed acquisitions of Visible, Inc. and Viralheat, Inc. to enhance our social media functionality. The subsequent acquisition of PRN Group in 2016 added the depth and breadth of a global distribution network and making us, we believe, to be the only vendor with a comprehensive global solution for PR professionals. Following these acquisitions, in October 2016, we introduced our C3 platform. In the first quarter of 2017, we acquired Bulletin Intelligence, LLC, Bulletin News Network, LLC and Bulletin News Investment, LLC to expand our capability to provide expert-curated executive briefings for the Executive Office of the President and corporate C-Suite executives. In the second quarter of 2017, we acquired LArgus de la Presse, a Paris-based provider of media monitoring services to expand our media monitoring solutions and enhance our access to French media content. We acquired CEDROM-SNi Inc. in December 2017 and PRIME Research Group in January 2018 in order to further expand upon our media measurement and analysis services and improve our digital media monitoring solutions.
We provide our comprehensive solution principally through subscription contracts which are generally one year or longer, with different tiers of pricing depending on the level of functionality and customer support required. Our SaaS delivery model provides a stable recurring revenue base. In 2017, we generated $674 million of revenue, on a pro forma basis assuming a full year of Bulletin Intelligence, Argus and CEDROM revenues, and, on the same pro forma basis, approximately 83% of our revenue was generated by customers purchasing services on a subscription or recurring basis.
We consider services recurrent if customers routinely purchase these services from us pursuant to negotiated rate card or similar arrangements, even if we do not have subscription agreements with them. As of December 31, 2017, we had more than 75,000 customers, of which the top 25 customers only accounted for approximately 4% of 2017 revenues, on a pro forma basis assuming a full year of Bulletin Intelligence, Argus and CEDROM revenues.
PR professionals are responsible for critical corporate functions including communications and relations with media, government, consumers, industry and community stakeholders. The process of managing relationships and communications with journalists, analysts, public officials and other key influencers and audiences is vital to an organization achieving its corporate objectives and financial success. PR is top-of-mind for senior management executives and a key component of how companies manage and enhance their brands reputation through the media. The primary activities of in-house PR departments and PR agencies include:
| Creating and communicating news, feature articles and multimedia; |
| Distributing information to target audiences; |
58
| Planning, developing, managing and monitoring traditional and social media campaigns and implementing strategies to generate interest and popularity and influence brand reputation and sentiment; |
| Organizing events such as media visits, receptions and conferences; |
| Editing and producing journals, corporate identity programs, video and other presentations; and |
| Compiling reports on activities and campaign performance. |
Central to all PR activities is a distribution strategy, which determines how an organization delivers consistent and well executed communications to key constituents. The PR function is rapidly evolving with the proliferation of digital media, as PR professionals work to optimize communications across multiple online, mobile and social channels as well as traditional media outlets. In a multi-channel, data-driven environment, content can be distributed to a significantly larger and more targeted audience, increasing the importance of a broad and reliable distribution network and creating demand for integrated solutions that include distribution, targeting, monitoring and reporting. The importance of distribution to broader PR success was a driving force behind our decision to acquire PR Newswire, the worlds largest press release distribution network, as measured by revenue estimates from Burton-Taylor International Consulting LLC.
C3, our cloud-based software platform, delivers critical functionality across the entire earned media lifecycle. We believe that C3 is the first software solution that allows communications professionals to plan, execute and analyze PR campaigns in a fully integrated fashion. Given the recent launch of C3, the majority of our revenue today comes from customers who purchase only a subset of the capabilities we currently offer. As C3 continues to expand its capabilities and these customers are migrated onto the C3 platform, we will attempt to upsell additional capabilities. For example, a customer who previously used our prior monitoring technology to plan campaigns and monitor campaign results will now be a candidate to purchase press release distribution services, a capability that we obtained in 2016 through the PR Newswire acquisition. Customers who purchase the press release distribution service within C3 will have improved ability to measure the return on investment of specific campaign activities compared to customers who use other press release distribution services that cannot be accessed within the C3 platform.
59
For the year ended December 31, 2017, approximately 83% of our revenue was subscription-based or recurring, with only 17% being transactional. We consider services recurrent if customers routinely purchase these services from us pursuant to negotiated rate card or similar arrangements, even if we do not have subscription agreements with them. Recurring and transactional revenue is largely related to our press release distribution services a capability that we enhanced with the acquisition of PR Newswire in June 2016 and we are integrating into our broader platform. These services are increasingly sold on a subscription basis as part of C3.
Discovering and maintaining relationships with relevant journalists and other influencers who communicate an organizations message to the public are critical to any earned media strategy. We offer the largest database in the world, based on database revenue estimates from Burton-Taylor International Consulting LLC, with contacts for approximately 1.6 million journalists and other influencers across 200 countries, including over 300,000 digital influencers. The database is updated more than 20,000 times daily to provide the most accurate and timely information to PR and communications professionals.
Our media database is integrated with CRM tools and content generation and distribution features to give PR and communications professionals access to relevant influencers when planning a campaign as well as to schedule and record all interactions with contacts. Access to the database is offered both on a regional and on a global basis.
The distribution strategy of an earned media campaign determines how a company delivers consistent and well-executed communications to influencers across the media spectrum. In a multi-channel, data-driven environment, press releases and other content can be distributed to a significantly larger audience, increasing the importance of a broad and reliable distribution network. Our distribution product allows earned media professionals to execute campaigns and distribute corporate news, events information, content and multimedia through press releases, web and email. Compared to free, high volume channels such as social media and corporate newsrooms, we believe our distribution platform is an important way for brands to signal the relative importance of a message. This signaling mechanism is often the difference between a message becoming part of the noise or ending up in the hands of a key influencer. Brands compete for influencer attention with several thousand stories that are transmitted over the major distribution networks in a day, which compares favorably to competing with 500 million tweets per day on Twitter.
We believe we have the largest global distribution network of its kind in the world, based on distribution revenue estimates from Burton-Taylor International Consulting LLC. Our network reaches traditional and digital media in more than 170 countries in over 40 languages, including major media organizations, over 10,000 syndicated websites and over 900,000 contacts such as journalists, bloggers and social influencers. Our products enable communications professionals to distribute press releases and other content such as photos, videos, infographics, financial information and articles through web, wire and email. In addition, we offer around-the-clock editorial support for clients.
Our premium distribution product is PR Newswire. For more than 60 years, the PR Newswire offering has represented an industry standard for high-impact dissemination of critical news, financial releases and other
60
content and has customers spanning Fortune 2000 multinationals, small and medium businesses, public relations agencies and government entities.
Our premium PR Newswire offering is provided to customers globally, with international operations supporting these customers in Canada, Europe, the Middle East, Asia and Latin America. Additional premium offerings include a comprehensive suite of products and services for Investor Relations professionals, including distribution for earnings and other material news, webcasts and conference calls, IR website hosting, and virtual investor conferences.
We offer alternative distribution products, such as iReach, WebMax, and PRWeb to clients who seek a more economical option. These distribution products generally provide customers the ability to distribute shorter releases across a smaller network with web-focused delivery and search engine discovery.
We provide multimedia content and broadcast distribution services to customers under our MultiVu offering. These services include creative expertise and video production to help companies enhance their communications through webcasts and broadcasts. We also provide hosted, white-label web pages integrated into a customers website and managed on behalf of investor relations and public relations departments.
We provide marketing professionals with a software application that can be used to create, publish and distribute professional-quality e-mails. Under our iContact offering, we provide this cloud-based e-mail and social marketing software application that integrates with social media platforms and Salesforces Sales Cloud.
We enable PR and communications professionals to track the media coverage of their companies and brands, assess the impact of strategic initiatives and discover how influencers portray their content and gauge overall brand sentiment. Our products allow clients to monitor all forms of media, including global print, digital, social media, television and radio sources, and store articles, content and corporate news. Our media monitoring software tracks and monitors content on over 200,000 digital, print, social and broadcast sources in over 150 countries. We deliver over 2 million stories to our customers every day. Additionally, through the acquisition of Bulletin Intelligence, we have expanded our capability to provide expert-curated executive briefings to the Executive Office of the President and corporate C-Suite executives. With the additional acquisition of Argus, we expect to provide our existing global customer base with enhanced access to French media content, helping them understand and quantify the impact of their communications and media coverage in France.
We also offer tools to filter and automatically update relevant news sources and content to make monitoring an efficient aspect of customers overall PR strategies. The graphics below are examples of monitoring insights we provide to customers from their PR campaigns.
We provide functionality that enables our customers to assess media coverage by collecting and analyzing data and metrics configured to meet the needs of the client. Metrics on audience engagement, campaign reach and effectiveness, sentiment and competitive benchmarking allow PR and communications professionals to quantify campaign results of earned media strategies. Analysis also provides data-driven insights that inform the creation of future campaigns and marketing investment.
61
Our media analysis capabilities also include a robust technology-enabled service aimed at Global 2000 companies with complex PR strategies, as well as an automated self-serve module that can be configured by customers for high-level reporting needs. The charts below are examples of analysis insights we provide to customers from their PR campaigns.
As of December 31, 2017, we had a large and highly diversified customer base of more than 75,000 customers, spanning the Americas, Europe and Asia. Customers range from small businesses to large enterprises across a wide range of industries and also include a large number of PR agencies. Annual spend for these customers can range from hundreds of dollars for small businesses to several million for the largest customers.
Our customer base includes 92 of the worlds 100 most valuable brands, according to Forbes.com, 97 of the top 100 PR companies in the U.S. and 72 of the top 80 PR companies in the UK, as reported by PRWeek.
Select customers include McDonalds, Samsung, Edelman, Coca Cola, Google, and Nike. Our top 25 customers account for approximately 4% of 2017 revenues, on a pro forma basis assuming a full year of Bulletin Intelligence, Argus and CEDROM revenues.
Technology is key to our Communications Cloud strategy of creating a unique competitive advantage by offering what we believe to be the only globally accessible end-to-end PR workflow solution in the market. Our PR software platforms are built upon a highly scalable and flexible component or multi-tenant based infrastructures in a hybrid cloud environment, allowing us to provide a cost effective and secure offering. The platforms leverage proven delivery technologies along with leading big data and analytic offerings to create a competitive advantage. Our online infrastructure is geographically distributed across multiple public and private cloud locations to facilitate both resilience and performance.
We have an experienced and highly skilled technology team managing product development and IT operations. We utilize a modified agile development approach with a standard 2-week cadence but can accelerate or extend deployment timeframes as needed. This agile approach to development is partnered with an IT Infrastructure Library focused DevOps based approach to ensure that there are appropriate controls and a heightened focus on the customer experience.
We maintain a focus on continual improvement from both an IT performance and security perspective. For our critical systems and platforms, we have implemented initiatives and procedures that include:
| A technology risk framework that enables us to identify opportunities for improvement, emerging patterns, and other concerns so they can be understood, addressed and periodically re-reviewed. |
| A multi-pronged approach to security that includes awareness education, asset and data identification, protection, detection, response and remediation. |
| An architectural approach that puts security in the forefront for all new development initiatives to improve efficacy and reduce our longer-term security costs. |
We intend to extend these approaches to our other systems, platforms and acquisitions as appropriate.
62
Over the past two years, we have initiated several consolidation and integration initiatives aimed at simplifying and modernizing our critical infrastructures to increase flexibility, improve margins and further improve the customer experience. These initiatives include data center consolidations, infrastructure upgrades, management information software system enhancements and the deployment of enhanced global operating models across our operations.
We operate direct sales organizations throughout the United States and within each of our international markets. As of December 31, 2017, we had approximately 750 direct sales professionals. In the United States, we divide our direct sales professionals into two distinct go-to-market teams: new business teams and account management (renewal) teams.
Within each of the two go-to-market teams, U.S. direct sales professionals are further segmented into groups based upon customer size, including an enterprise group for large customers and agencies, a midmarket group for medium size customers and a small business group for small customers. Our U.S. new business sales teams source and develop new customer relationships. Our U.S. account management sales teams focus on maintaining customer relationships, increasing product penetration and ensuring contract renewals. In the United Kingdom and in several other larger international markets, our direct sales structure is similar to that in the United States. In our smaller international markets, there are sometimes unified direct sales structures without clear distinction between new business teams and account management teams.
Our marketing team focuses on attracting, acquiring and retaining customers through digital demand campaigns, brand building and showcases of customer success. With persona-based content aimed at communications professionals, the team delivers cross-channel campaigns that span paid search, email, web and customer events. Supporting our global sales team, marketing also develops messaging, product positioning, and tools to communicate the business value of our solutions. To establish the Communications Cloud category, marketing develops insightful thought leadership for our executives to disseminate through content marketing and keynote presentations. As of December 31, 2017, we had approximately 80 marketing professionals globally.
The communications software market is highly fragmented, highly competitive and rapidly evolving. Whereas we believe that our product suite provides a global end-to-end solution, other industry participants generally operate in select geographic regions or particular verticals including media monitoring and analysis or distribution. In media monitoring and analysis, industry participants include Meltwater, Kantar Media, Trendkite and iSentia. In distribution, industry participants include Business Wire, Nasdaq and The London Stock Exchange through its RNS service.
Key factors which impact competition in our industry include:
| Product features, effectiveness and reliability; |
| User interface and ease of use; |
| Media database breadth and quality; |
| Expertise of sales and after-market support organizations; |
| Measurement and attribution capabilities; |
| Breadth and depth of the distribution network; |
| Pace of innovation and product roadmap; |
| Strength of professional services organization; |
| Price of products and services; and |
| Scale and financial stability of the organization. |
63
Building and maintaining a strong corporate culture benefits both our customers and our employees and serves as the foundation for the successful execution of our strategy. As a result, our corporate culture is critical for our growth strategy.
As of December 31, 2017, we had approximately 3,500 global employees, with approximately 1,400 employees located in the U.S. and approximately 2,100 employees located internationally. We also engage temporary employees and consultants. None of our employees in the United States are members of a union; however, approximately 500 of our foreign employees are currently subject to collective bargaining agreements and/or are members of local work councils.
We consider relations with our employees to be very good.
We rely on a combination of patent, trademark, copyright and trade secret laws in the United States and other jurisdictions as well as confidentiality procedures and contractual provisions to protect our proprietary technology and our brand. We have registered, and applied for the registration of, U.S. and international trademarks, service marks and domain names.
Additionally, we have filed U.S. patent applications covering certain of our proprietary technology and own several issued patents. We also control access to software, documentation and other proprietary information and enter into confidentiality and proprietary rights agreements with substantially all of our employees, consultants and other third parties, pursuant to which such employees, consultants and other parties assign to us the intellectual property rights that they develop and agree to keep confidential our confidential and proprietary information.
We currently license content included in our cloud-based software from several providers pursuant to data reseller, data distribution and license agreements with these providers. These agreements provide us with content such as news coverage from print and Internet news sites, as well as contact information for journalists, analysts, public officials, media outlets and publicity opportunities. The licenses for this content are non-exclusive. The agreements vary in length, and generally renew automatically subject to certain cancellation provisions available to the parties. We do not believe that any of our content providers are single source suppliers, the loss of whom would substantially affect our business.
Our business involves the supply of copyrighted works of third parties, including publishers and broadcasters, which necessitates working closely with these copyright owners on clients behalf. Delivering content to clients typically requires copyright fees to be paid to copyright owners. We are typically able to pass these copyright fees directly through to clients.
We also contract with content providers for the rights to access and distribute paywalled or subscription-only content. As paywalled content becomes increasingly prevalent on publisher websites, we expect to continue negotiating access rights with key content providers.
If a claim is asserted that we have infringed the intellectual property rights of a third party, we may be required to seek licenses to that technology. In addition, we license third-party technologies that are incorporated into some elements of our services. Licenses from third parties may not continue to be available to us at a reasonable cost, or at all. Additionally, the steps we have taken to protect our intellectual property rights may not be adequate. Third parties may infringe or misappropriate our intellectual property rights or proprietary technology. Competitors may also independently develop technologies that are substantially equivalent or superior to the technologies we employ in our services.
Demand for our products and services fluctuates from month to month, with periods of greater demand corresponding to earnings release cycles of public companies and periods of lower demand corresponding to periods in which activity in the financial markets is reduced, such as during months with fewer business days and months with more holidays, due to the transactional component of our distribution business.
64
Our corporate headquarters is located in Chicago, Illinois and consists of approximately 46,000 square feet of leased space. We also lease approximately 13 other offices throughout the United States and approximately 34 offices in foreign countries where we operate.
Our current facilities meet our needs for our employee base and can accommodate our currently contemplated growth.
We believe that we will be able to obtain suitable additional facilities on commercially reasonable terms to meet any future needs.
From time to time, we are subject to litigation incidental to our business and to governmental investigations related to our products and services. We are not currently party to any legal proceedings or investigations that would reasonably be expected to have a material adverse effect on our business or financial condition. See Risk Factors We are the subject of continuing litigation and governmental inquiries.
65
You should read the following managements discussion and analysis together with Selected Consolidated Financial and Other Data and our audited financial statements and the related notes included elsewhere in this Prospectus/Offer to Exchange. This discussion contains forward-looking statements about our business, operations and industry that involve risks and uncertainties, such as statements regarding our plans, objectives, expectations and intentions. Our future results and financial condition may differ materially from those currently anticipated by us as a result of the factors described in the sections entitled Risk Factors and Cautionary Note Regarding Forward Looking Statements. Throughout this section, unless otherwise noted we, us and the Company refer to Cision and its consolidated subsidiaries. Certain amounts in this section may not foot due to rounding.
We are a leading global provider of PR software, media distribution, media intelligence and related professional services, as measured by revenue estimates from Burton-Taylor International Consulting LLC. Public relations and communications professionals use our products and services to help manage, execute, and measure their strategic public relations and communications programs. We believe we are an industry standard SaaS solution for PR and marketing professionals, and are deeply embedded in industry workflow. We deliver a sophisticated, easy-to-use platform for communicators to reach relevant media influencers and craft compelling campaigns that impact customer behavior. With rich monitoring and analytics, Cision Communications Cloud (C3), a cloud-based platform that integrates each of our point solutions into a single unified interface, arms brands with the insights they need to link their earned media to strategic business objectives, while aligning it with owned and paid channels. This platform enables companies and brands to build consistent, meaningful and enduring relationships with influencers and buyers in order to amplify their marketplace influence. We have more than 75,000 customers and an expansive global reach, spanning most major international markets around the globe including those outside of the United States such as Canada, China, India, EMEA, and Latin America, which, in aggregate, accounted for 35% of our 2017 revenue.
The merger and formation of Cision Ltd . On June 29, 2017, at an annual meeting of shareholders, the parties to the Agreement and Plan of Merger, dated as of March 19, 2017 and amended as of April 7, 2017, by and among Capitol Acquisition Corp. III, Capitol Acquisition Holding Company Ltd., renamed Cision Ltd. on June 29, 2017, Capitol Acquisition Merger Sub, Inc. (Merger Sub), Canyon Holdings (Cayman), L.P. and Canyon Holdings S.à r.l. (Cision Luxco) (the Merger Agreement), consummated (a) the contribution by Cision Owner of all of its share capital and convertible preferred equity certificates in Cision Luxco in exchange for shares and warrants of Cision and (b) the merger of Merger Sub with and into Capitol with Capitol being the surviving entity in the merger (together, the Transactions). At the annual meeting of shareholders on June 29, 2017, holders of 490,078 shares of Capitol common stock exercised their rights to convert those shares to cash at a conversion price of approximately $10.04 per share, or an aggregate of approximately $4.9 million. The per share conversion price of approximately $10.04 for holders of public shares electing conversion was paid out of Capitols trust account, which had a balance immediately prior to the Closing of approximately $326.3 million.
Of the remaining funds in the trust account: (i) approximately $16.2 million was used to pay Capitols transaction expenses and (ii) the balance of approximately $305.2 million was released to Cision to be used for working capital and general corporate purposes, including to pay down $294.0 million of Cisions second lien credit facility (the 2016 Second Lien Credit Facility), plus a 1% fee and interest. Immediately after giving effect to the Business Combination (including as a result of the conversions described above and certain forfeitures of Capitol common stock and warrants immediately prior to the closing), there were 120,512,402 Ordinary Shares and warrants to purchase 24,375,596 Ordinary Shares of Cision issued and outstanding. Upon the closing, Capitols common stock, warrants and units ceased trading, and Cisions Ordinary Shares and Warrants began trading on the NYSE and NYSE American, respectively, under the symbol CISN and CISN WS respectively.
66
Since January 1, 2015 through December 31, 2017, we have made the following acquisitions and divestitures:
Acquisition of Viralheat . On March 20, 2015, we acquired substantially all of the assets of Viralheat, Inc., a social media engagement platform for $4.5 million in cash.
Divestiture of Cision UK and Vocus UK . On June 24, 2015, we divested certain assets of our Cision UK and Vocus UK businesses for approximately $2.1 million in cash.
Acquisition of PR Newswire . On June 16, 2016, we acquired substantially all of the assets of PRN Group, a provider of premium wire distribution services for $813.3 million in cash and the issuance of Class A LP Units of Cision Owner with a value of $40.0 million.
Divestiture of Agility . On July 14, 2016, we divested certain assets related to our Agility business for approximately $4.3 million in cash. The Agility business was acquired in conjunction with our acquisition of PR Newswire.
Divestiture of Vintage . On March 10, 2017, we sold substantially all of the assets of our Vintage Corporate Filings business for approximately $26.6 million and received approximately $23.7 million in cash after escrow and expenses.
Acquisition of Bulletin Intelligence . On March 27, 2017, we acquired all of the outstanding membership interests of Bulletin Intelligence, LLC, Bulletin News Network, LLC and Bulletin News Investment, LLC, which has written the daily White House News Summary for the Executive Office of the President since 2001, and which also provides custom, expert-curated executive briefings to the CEOs and C-suites of many of the U.S. largest businesses, for $60.5 million in cash, issuance of 70,000 Class A LP units of Cision Owner, with a value of $5.2 million, and contingent consideration valued at $6.1 million.
Acquisition of Argus . On June 22, 2017, we acquired all of the outstanding shares of LArgus de la Presse, a Paris based provider of media monitoring solutions, for $6.8 million in cash paid at closing and up to $1.2 million to be paid in cash over the next four years.
Acquisition of CEDROM . On December 19, 2017, we acquired all of the outstanding shares of CEDROM-SNi Inc., a Montréal-based firm specializing in digital media monitoring, for CAD 33.1 million. At the date of acquisition, CEDROM had over 100 employees with offices in Montréal, Québec City, Ottawa, Toronto and Paris.
The results of operations of these acquired businesses and divestitures have been included in our financial statements since the applicable acquisition date or through the divestiture date. For more information regarding these transactions, see Note 3 to our consolidated financial statements included elsewhere in this Prospectus/Offer to Exchange.
Incremental Amendment to 2017 First Lien Credit Facility. On December 14, 2017, our wholly owned subsidiary, Canyon Valor Companies, Inc. (the Borrower), entered into an incremental facility amendment (the Incremental Amendment) to the 2017 First Lien Credit Facility. The Incremental Amendment provided for an incremental $75.0 million dollar-denominated term loan facility (the Incremental Facility). The proceeds from the Incremental Facility were used to fund the CEDROM and Prime acquisitions, the latter occurring in January 2018.
Acquisition of PRIME Research . On January 23, 2018, we acquired all of the membership interests of Prime, a leading global provider of media measurement and analysis services. The purchase price was approximately €75.7 million and consisted of approximately €56.8 million in cash consideration, the issuance of approximately 1.7 million Ordinary Shares valued at €16.4 million plus up to €2.5 million in Ordinary Shares to be issued 18 months after closing, subject to certain reductions in accordance with the purchase agreement. At the date of the acquisition, Prime had over 700 employees with offices in the Brazil, China, Germany, Switzerland, the United Kingdom, and the United States.
67
Repricing of our 2017 First Lien Credit Facility . On February 8, 2018, we repriced our $1,417 million First Lien Credit Facility. The repriced First Lien Credit Facility consisted of a $75.0 million revolving loan facility and a $1,342 million term loan facility. The term loan facility consisted of $1,032 million of US dollar borrowings and €249 million of Euro borrowings. The term loans and revolving borrowings were repriced at an interest rate of LIBOR plus 3.25% for US dollar borrowings and EURIBOR plus 3.50% for Euro borrowings.
We derive our revenue from subscription arrangements and related professional services in connection with our cloud based software and services offerings. We also derive revenues from news distribution services on both a subscription basis and separately from non-subscription arrangements. We recognize revenue when there is persuasive evidence of an arrangement, the service has been provided to the customer, the collection of the fee is probable and the amount of the fee to be paid by the customer is fixed or determinable.
Our separate units of accounting consist of subscription services, transactional services and professional services. The subscription services include access to our cloud-based software, hosting services, content and content updates and customer support. Our subscription agreements are typically one to three years in length and are non-cancelable, though customers have the right to terminate their agreements for cause if we materially breach our obligations under the agreement. Subscription agreements do not provide customers the right to take possession of the software at any time.
We do not charge customers an up-front fee for use of the technology. Implementation activities are insignificant and not subject to a separate fee. In certain cases, we charge annual membership fees which are recognized over the one-year membership period.
We also distribute individual news releases to thousands of distribution points on the Internet, which are then indexed by major search engines and also directly to journalists and other key constituents. Depending on the nature of the contract with the customer, we recognize revenue on a subscription basis over the term of the subscription, or on a per-transaction basis when the press releases are made available to the public.
Professional services include broadcast and webcast production. For these services, revenue is recognized when the specific performance is completed and evidence of customer acceptance is received.
When sold together, revenue from our different service offerings are accounted for separately as those services have value on a standalone basis and do not involve a significant degree of risk or unique acceptance criteria. We allocate revenue to each element in a multiple element arrangement based on a selling price hierarchy. The selling price for a deliverable is based on its vendor-specified objective evidence (VSOE), if available, third-party evidence (TPE), if VSOE is not available, or estimated selling price, if neither VSOE nor TPE is available. As we have been unable to establish VSOE or TPE for the elements of its arrangements due to factors such as a high number of varied service offerings sold on a subscription basis to differing customer concentrations as well as varied discounting practices and unobservable competitive data for similar services, we estimate selling prices by analyzing multiple factors such as historical pricing trends, customer renewal activity, and discounting practices. The volume of multiple element arrangements sold in which any element of the arrangement has a revenue attribution pattern different to the other elements was not significant for all periods presented.
Sales and other taxes collected from customers to be remitted to government authorities are excluded from revenues.
Cost of revenue . Cost of revenue consists primarily of compensation for training, editorial and support personnel, hosting and network infrastructure costs, royalty and license fees for content, press release distribution costs, third-party contractor fees, equipment and software maintenance costs, amortization of our proprietary database and purchased technology, amortization of capitalized software development costs and depreciation associated with computer equipment and software.
68
Sales and marketing expenses . Our sales and marketing expenses consist primarily of compensation for our sales and marketing personnel, related travel costs, sales commissions and incentives, marketing programs, promotional events, webinars and other brand building expenses.
Research and development . Our research and development expenses consist primarily of compensation for our software application development personnel and fees to third-party software development firms. Capitalized software development costs are amortized using the straight-line method over the useful life of the software, which is generally two years. All other research and developmental costs are expensed as incurred.
General and administrative expenses . Our general and administrative expenses consist primarily of compensation and related expenses for general corporate functions such as executive, legal, finance, human resources and administrative personnel, as well as costs for external legal, accounting and other professional services, acquisition and other related expenses, third-party payment processing and credit card fees, facilities rent and other corporate expenses.
Depreciation and amortization . Depreciation includes depreciation of property, equipment and software. Assets acquired under capital leases and leasehold improvements are amortized. Amortization of assets acquired under capital leases is included in depreciation and amortization expense. When assets are retired or otherwise disposed of, the asset and related accumulated depreciation are eliminated from the accounts and resulting gain or loss is recorded in the results of operations. Amortization of intangible assets consist primarily of the amortization of intangibles related to trade name, brand, and customer relationships acquired through our historical acquisitions.
In connection with any acquisition, we are required to recognize any assets acquired and liabilities assumed measured at fair value as of that date. With respect to determining fair value, the excess of the purchase price over these allocations will be assigned to goodwill, which is not amortized for accounting purposes but is subject to testing for impairment, at least annually, and whenever events or changes in circumstances indicate that the carrying amount of an asset may not be fully recoverable. The allocation of the purchase price of any assets acquired in an acquisition will result in increases in amortization expense relating to acquired intangible assets, because we will record the fair value of the acquired intangible assets. We amortize the intangible assets over their estimated useful lives.
We report in U.S. dollars, and the functional currency of our foreign operating subsidiaries is the local currency, including the British Pound, the Euro, the Swedish Krona and the Canadian Dollar. Many of these currencies have weakened significantly against the U.S. dollar since the end of 2014. Approximately 35% of our revenues are generated in non-U.S. dollar-denominated currencies. The financial statements of these subsidiaries are translated into U.S. dollars using exchange rates in effect at each balance sheet date for assets and liabilities and average exchange rates during the period for revenues and expenses. To the extent we experience significant currency fluctuations, our results of operations may be impacted.
Growth of our customer base is important to our continued revenue growth. With our recent acquisition history, we have the opportunity to expand our customer base and to use our new platforms for cross-selling opportunities. Our ability to execute on cross-selling strategies and successfully integrate our acquisitions will have an impact on our results.
We face intense price competition in all areas of our business. We have in the past lowered prices, and may need to do so in the future to attempt to gain or maintain market share. Additionally, we have also been, and may once again be, required to adjust pricing to respond to actions by competitors, which could adversely impact operating results.
69
As the needs of PR and communications professionals have evolved, we are increasingly distributing non-press release content over our network, including multimedia, infographics, white papers and other forms of brand-created content.
Companies are progressively more focused on earned media, and we believe we are well-positioned to take advantage of this structural shift in the market. Our results will be affected as the mix of content distributed over our network evolves and PR and communications professionals focus additional spend on earned media.
The switch to social channels as a companys preferred method to interface with clients and customers has fueled the demand for PR and communications skills and solutions worldwide. PR budgets are increasing as businesses lower paid marketing budgets and leverage the shift towards earned media by actively monitoring and engaging in conversations about their products and services online. To the extent this trend continues, our results of operations will be impacted by this evolution in spending practice.
We are focused on expanding market awareness of our cloud-based PR solutions. Although we have seen companies adopt our solutions, we expect further growth to coincide with the rapid increase of online content and influencers and new digital media channels. In response to this trend, we have transitioned from traditional print monitoring services to cloud based solutions capable of managing the entire lifecycle of a PR campaign.
This section includes a summary of our historical results of operations, followed by detailed comparisons of our results for (i) the years ended December 31, 2017 and 2016 and (ii) the years ended December 31, 2016 and 2015. We have derived this data from our consolidated financial statements included elsewhere in this Prospectus/Offer to Exchange and any applicable prospectus supplement.
The following table shows certain income statement data in thousands of dollars and percentages for the periods indicated:
|
|
|
|
|
|
|
||||||||||||||||||
Year ended
December 31, 2017 |
Year ended
December 31, 2016 |
Year ended
December 31, 2015 |
||||||||||||||||||||||
Revenue | $ | 631,637 | 100.0 | % | $ | 467,772 | 100.0 | % | $ | 333,958 | 100.0 | % | ||||||||||||
Cost of revenue | 200,836 | 31.8 | % | 162,583 | 34.8 | % | 125,006 | 37.4 | % | |||||||||||||||
Gross profit | 430,801 | 68.2 | % | 305,189 | 65.2 | % | 208,952 | 62.6 | % | |||||||||||||||
Operating costs and expenses:
|
||||||||||||||||||||||||
Sales and marketing | 114,750 | 18.2 | % | 92,594 | 19.8 | % | 71,603 | 21.4 | % | |||||||||||||||
Research and development | 22,102 | 3.5 | % | 19,445 | 4.2 | % | 16,604 | 5.0 | % | |||||||||||||||
General and administrative | 166,759 | 26.4 | % | 135,737 | 29.0 | % | 88,448 | 26.5 | % | |||||||||||||||
Amortization of intangibles | 89,159 | 14.1 | % | 77,058 | 16.5 | % | 59,914 | 17.9 | % | |||||||||||||||
Total operating costs and expenses | 392,770 | 62.2 | % | 324,834 | 69.4 | % | 236,569 | 70.8 | % | |||||||||||||||
Operating income (loss) | 38,031 | 6.0 | % | (19,645 | ) | (4.2 | )% | (27,617 | ) | (8.3 | )% | |||||||||||||
None operating income (expense):
|
||||||||||||||||||||||||
Foreign exchange (losses) gains | (5,458 | ) | (0.9 | )% | 6,299 | 1.3 | % | (10,886 | ) | (3.3 | )% | |||||||||||||
Interest and other income, net | 2,132 | 0.3 | % | 831 | 0.2 | % | 5,750 | 1.7 | % | |||||||||||||||
Interest expense | (116,466 | ) | (18.4 | )% | (117,997 | ) | (25.2 | )% | (61,398 | ) | (18.4 | )% | ||||||||||||
Loss on extinguishment of debt | (51,872 | ) | (8.2 | )% | (23,591 | ) | (5.0 | )% | | | ||||||||||||||
Total non operating loss | (171,664 | ) | (27.2 | )% | (134,458 | ) | (28.7 | )% | (66,534 | ) | (19.9 | )% | ||||||||||||
Loss before income taxes | (133,633 | ) | (21.2 | )% | (154,103 | ) | (32.9 | )% | (94,151 | ) | (28.2 | )% | ||||||||||||
Benefit from income taxes | (10,591 | ) | (1.7 | )% | (55,691 | ) | (11.9 | )% | (3,607 | ) | (1.1 | )% | ||||||||||||
Net Loss | $ | (123,042 | ) | (19.5 | )% | $ | (98,412 | ) | (21.0 | )% | $ | (90,544 | ) | (27.1 | )% |
70
The measures of revenue and Adjusted EBITDA discussed herein are the measures currently utilized by management to assess performance, and we disclose these measures to investors to provide them with a meaningful understanding of our companys performance. We are in the process of an operational, technological and financial integration effort for all recently combined businesses, particularly with respect to the acquisition of PR Newswire which was acquired in June 2016. One of our current objectives is to identify the most relevant key performance indicators to stakeholders for the fully integrated business. The determination as to when we will be able to identify these performance measures will be dependent on our ability to migrate customers from legacy platforms onto the C3 platform. When such integration and implementation is complete and such measures are available and utilized by management, these measures will be included in future disclosures to investors.
We define Adjusted EBITDA as net loss, determined in accordance with U.S. GAAP, for the period presented, before depreciation and amortization, interest expense and loss on extinguishment of debt, and income taxes, further adjusted to exclude the following items: (a) acquisition-related costs and expenses; (b) stock-based compensation; (c) deferred revenue reduction from purchase accounting; (d) gains or losses related to divested businesses or assets groups; (e) sponsor fees and expenses; and (f) unrealized (gain) or loss on foreign currency translation.
We believe Adjusted EBITDA, when considered along with other performance measures, is a useful measure as it reflects certain drivers of the business, such as sales growth and operating costs. We believe Adjusted EBITDA can be useful in providing an understanding of the underlying operating results and trends and an enhanced overall understanding of our financial performance and prospects for the future. While Adjusted EBITDA is not a recognized measure under U.S. GAAP, management uses this financial measure to evaluate and forecast business performance. Adjusted EBITDA is not intended to be a measure of liquidity or cash flows from operations or a measure comparable to net income as it does not take into account certain requirements, such as capital expenditures and related depreciation, principal and interest payments, and tax payments. Adjusted EBITDA is not a presentation made in accordance with U.S. GAAP, and our use of the term Adjusted EBITDA may vary from the use of similarly-titled measures by others in our industry due to the potential inconsistencies in the method of calculation and differences due to items subject to interpretation.
The presentation of non-U.S. GAAP financial information should not be considered in isolation or as a substitute for, or superior to, the financial information prepared and presented in accordance with U.S. GAAP. Investors should read this discussion and analysis of our financial condition and results of operations together with the consolidated financial statements and the related notes thereto also included within.
The following table outlines the reconciliation from net loss to Adjusted EBITDA for the years indicated:
|
|
|
|
|||||||||
Year ended
December 31, 2017 |
Year ended
December 31, 2016 |
Year ended
December 31, 2015 |
||||||||||
Net loss | $ | (123,042 | ) | $ | (98,412 | ) | $ | (90,544 | ) | |||
Depreciation and amortization | 139,474 | 126,983 | 104,038 | |||||||||
Interest expense and loss on extinguishment of debt | 168,338 | 141,588 | 61,398 | |||||||||
Income tax benefit | (10,591 | ) | (55,691 | ) | (3,607 | ) | ||||||
Acquisition-related costs and expenses | 42,235 | 45,006 | 28,010 | |||||||||
Stock based compensation | 4,138 | 5,302 | 5,294 | |||||||||
Deferred revenue reduction from purchase accounting | 1,448 | 1,168 | 10,933 | |||||||||
Gain on sale of businesses | (1,785 | ) | | (7,628 | ) | |||||||
Sponsor fees and expenses | 284 | 587 | 636 | |||||||||
Unrealized translation loss (gain) | 5,011 | (4,350 | ) | 10,359 | ||||||||
Adjusted EBITA | $ | 225,510 | $ | 162,181 | $ | 118,889 |
71
Revenue increased $163.9 million, or 35.0%, from $467.8 million for the year ended December 31, 2016 to $631.6 million for the year ended December 31, 2017. This increase was primarily driven by our acquisitions of PR Newswire, Argus, Bulletin and CEDROM, offset by net customer losses and the divestiture of our Vintage business. Revenue from PR Newswire, excluding Vintage, increased $145.8 million for the year ended December 31, 2017 primarily due to the recognition of a full year of activity for 2017 versus a partial year of activity for the year ended December 31, 2016.
Aggregate revenue from the acquisitions of Argus, Bulletin and CEDROM from the acquisition date of each entity through December 31, 2017 was $44.8 million. The revenue reduction due to our Vintage business, which was divested in March 2017, was approximately $9.0 million for the year ended December 31, 2017 compared to the year ended December 31, 2016. Revenues in our U.S. business, excluding revenue from PR Newswire, Bulletin and Vintage, declined from $199.8 million in the year ended December 31, 2016 to $181.9 million for the year ended December 31, 2017 due primarily to net customer losses, resulting in part from our increased focus on our core offerings and lower prices on certain renewed contracts resulting from price competition.
Cost of revenue increased $38.3 million, or 23.5%, from $162.6 million for the year ended December 31, 2016 to $200.8 million for the year ended December 31, 2017. This increase was primarily driven by our acquisitions of PR Newswire, Argus, Bulletin and CEDROM, offset by a reduction in our personnel costs, content acquisition costs, software maintenance costs, depreciation and amortization costs, and in outside services for hosting and professional services, totaling approximately $10.7 million. Cost of revenue from PR Newswire, excluding Vintage, increased $28.2 million for the year ended December 31, 2017 primarily due to the recognition of a full year of activity for 2017 versus a partial year of activity for the year ended December 31, 2016. Cost of revenue from the acquisitions of Argus, Bulletin and CEDROM from the acquisition date of each entity through December 31, 2017 was $27.4 million. Cost of revenue reduction attributed to our Vintage business, which was divested in March 2017, was $6.4 million for the year ended December 31, 2017.
Sales and marketing expenses increased $22.2 million, or 23.9%, from $92.6 million for the year ended December 31, 2016 to $114.8 million for the year ended December 31, 2017. This increase was primarily driven by our acquisitions of PR Newswire, Argus, Bulletin and CEDROM, offset by a reduction in our marketing costs that were primarily driven by a $2.3 million reduction in paid advertising costs. Sales and marketing expenses from PR Newswire, excluding Vintage, increased $20.6 million for the year ended December 31, 2017 primarily due to the recognition of a full year of activity for 2017 versus a partial year of activity for the year ended December 31, 2016. Sales and marketing expenses from the acquisitions of Argus, Bulletin and CEDROM from the acquisition date of each entity through December 31, 2017 was $5.6 million. Sales and marketing expenses attributed to our Vintage business, which was divested in March 2017, decreased $1.9 million for the year ended December 31, 2017.
Research and development expenses increased $2.7 million, or 13.7%, from $19.4 million for the year ended December 31, 2016 to $22.1 million for the year ended December 31, 2017. This increase was primarily driven by our acquisitions of PR Newswire, Argus and CEDROM, offset by a reduction in our personnel costs of $2.7 million resulting from our realization of integration cost synergies. Research and development expenses from PR Newswire increased $3.8 million for the year ended December 31, 2017 primarily due to the recognition of a full year of activity for 2017 versus a partial year of activity for the year ended December 31, 2016.
General and administrative expenses increased $31.0 million, or 22.9%, from $135.7 million for the year ended December 31, 2016 to $166.8 million for the year ended December 31, 2017. This increase was
72
primarily driven by our acquisitions of PR Newswire, Argus, Bulletin and CEDROM, offset by a $6.0 million reduction in our acquisition-related costs, a onetime contract settlement expense of $1.9 million in 2016 and the divestiture of our Vintage business. General and administrative expenses from PR Newswire, excluding Vintage, increased $28.4 million for the year ended December 31, 2017 primarily due to the recognition of a full year of activity for 2017 versus a partial year of activity for the year ended December 31, 2016. General and administrative expenses from the purchase of Argus, Bulletin and CEDROM from the acquisition date of each entity through December 31, 2017 was $10.8 million.
We incurred a $5.5 million foreign exchange loss for the year ended December 31, 2017 due to fluctuations in foreign exchange rates that impacted the carrying value of certain intercompany notes. We recognized a $6.3 million foreign exchange transaction gain for the year ended December 31, 2016 primarily due to the settlement in cash of an intercompany note involving one of our foreign subsidiaries that resulted in a $5.0 million gain.
We recognized $2.1 million of interest and other income, net for the year ended December 31, 2017, which was primarily the result of a $1.8 million gain recognized on the disposal of the Vintage business and $0.4 million in income from our earnings in an unconsolidated affiliate, offset by a $0.4 million reduction to an acquisition-related contingent liability.
Interest expense decreased approximately $1.5 million, or 1.3%, from $118.0 million for the year ended December 31, 2016 to $116.5 million for the year ended December 31, 2017. This decrease was primarily driven by the refinancing of our existing first lien credit facility (the 2016 First Lien Credit Facility) and the repayment of the 2016 Second Lien Credit Facility in August of 2017, which lowered our blended effective interest rate, and the use of cash from our merger with Capitol to lower our total outstanding debt balance, offset by a partial year of interest expense in the period ended December 31, 2016 related to the increase in our debt under the 2016 First Lien Credit Facility and the 2016 Second Lien Credit Facility (collectively, the 2016 Credit Facilities) that we entered into in connection with our acquisition of PR Newswire. Our loss on extinguishment of debt increased $28.3 million, or 119.9%, from $23.6 million for the year ended December 31, 2016 to $51.9 million for the year ended December 31, 2017. The $23.6 million loss on extinguishment of debt in 2016 was the result of our entering into the 2016 First Lien and Second Lien Credit Facilities in connection with our acquisition of PR Newswire that replaced our prior credit facilities. The $51.9 million loss on extinguishment of debt in 2017 was the result of our refinancing of the Companys 2016 First Lien and Second Lien Credit Facilities in August of 2017.
For the year ended December 31, 2017, we recorded a benefit from income taxes of $10.6 million, equivalent to an effective tax rate of 7.9%. Our benefit from income taxes and effective tax rate is impacted by such costs as disallowed interest expense, non-deductible acquisition and initial public offering costs, and stock compensation, in addition to changes in valuation allowance and tax law changes. For the year ended December 31, 2016, we recorded a benefit from income taxes of $55.7 million, equivalent to an effective tax rate of 36.1%.
Our effective tax rate deviates from the statutory Cayman income tax rate of 0% mainly due to the mix of foreign taxing jurisdictions in which we operate and where our foreign subsidiaries generate taxable income. In 2017, the effective tax rate decreased significantly compared to 2016 primarily due to the change in the U.S. tax law. In 2016, the effective tax rate increased significantly compared to 2015 due to the removal of the valuation allowance as a result of the PR Newswire acquisition. On December 22, 2017, the U.S. federal government enacted comprehensive tax legislation (the Tax Act), which significantly revises the U.S. corporate income tax law by, among other things, lowering the U.S. federal corporate income tax rate from 35% to 21%, implementing a partial territorial tax system, imposing a one-time transition tax on foreign unremitted earnings, and setting limitations on deductibility of certain costs (e.g. interest expense).
73
Other comprehensive income increased $97.7 million for the year ended December 31, 2017 to $38.8 million, from a comprehensive loss of $58.9 million for the year ended December 31, 2016. This increase was primarily the result of foreign currency translation gains that resulted from significant depreciation of the US dollar versus the British Pound that impacted the carrying value of intangibles and goodwill in our UK subsidiaries.
Revenue increased $133.8 million, or 40.1%, from $334.0 million for the year ended December 31, 2015 to $467.8 million for the year ended December 31, 2016. This increase was primarily driven by our acquisition of PR Newswire, offset by net customer losses, resulting in part from our increased focus on bundled solutions, the divestiture of our Cision UK and Vocus UK businesses, and a decline in the US dollar versus foreign currencies, principally the British Pound and the Euro.
Revenue from PR Newswire from the date of acquisition to December 31, 2016 was $165.1 million. Revenue, excluding PR Newswire, declined from $334.0 million in the year ended December 31, 2015 to $302.7 million for the year ended December 31, 2016. For the year ended December 31, 2015, our revenue included approximately $6.8 million, from our Cision UK and Vocus UK businesses that were divested during June 2015. The decline in the US dollar versus the British Pound, the Euro, and other foreign currencies in 2016 versus 2015 reduced revenues by approximately $9.0 million for the year ended December 31, 2016. Revenues in our U.S. business, excluding PR Newswire, declined from $218.6 million in the year ended December 31, 2015 to $199.8 million for the year ended December 31, 2016 due primarily to net customer losses, resulting in part from our increased focus on bundled solutions, and lowered prices on certain renewed contracts resulting from price competition.
Cost of revenue increased $37.6 million, or 30.1%, from $125.0 million for the year ended December 31, 2015 to $162.6 million for the year ended December 31, 2016. This increase was primarily driven by our acquisition of PR Newswire, offset by a reduction in our personnel costs resulting from our realization of integration cost synergies, a reduction in our content acquisition costs, a decline in the US dollar versus foreign currencies, principally the British Pound and the Euro, and the divestiture of our Cision UK and Vocus UK businesses. Cost of revenue from PR Newswire from the date of acquisition to December 31, 2016 was $50.5 million. For the year ended December 31, 2015, our cost of revenue included approximately $2.0 million, from our Cision UK and Vocus UK businesses that were divested during June 2015. The decline in the US dollar versus the British Pound, the Euro, and other foreign currencies in 2016 versus 2015 reduced our cost of revenue by approximately $3.9 million for the year ended December 31, 2016.
Sales and marketing expenses increased $21.0 million, or 29.3%, from $71.6 million for the year ended December 31, 2015 to $92.6 million for the year ended December 31, 2016. This increase was primarily driven by our acquisition of PR Newswire, offset by a reduction in our sales compensation costs resulting from our realization of integration cost synergies, a reduction in our marketing costs resulting in part from the consolidation third-party contracts and reduced paid advertising costs, a decline in the US dollar versus foreign currencies, including the British Pound and the Euro, and the divestiture of our Cision UK and Vocus UK businesses. Sales and marketing expenses from PR Newswire from the date of acquisition to December 31, 2016 were $28.5 million. Our sales compensation costs decreased by approximately $0.4 million in the year ended December 31, 2016 versus the year ended December 31, 2015. Our marketing expenses decreased by $1.1 million in the year ended December 31, 2016 versus the year ended December 31, 2015 due primarily to a reduction in paid advertising and other third-party marketing costs. For the year ended December 31, 2015, our sales and marketing expenses include approximately $2.4 million, from our Cision UK and Vocus UK businesses that were divested during June 2015. The decline in the US dollar versus the British Pound, the Euro, and other foreign currencies in 2016 versus 2015 reduced our sales and marketing expenses by approximately $1.1 million for the year ended December 31, 2016.
74
Research and development expenses increased $2.8 million, or 16.9%, from $16.6 million for the year ended December 31, 2015 to $19.4 million for the year ended December 31, 2016. This increase was primarily driven by our acquisition of PR Newswire, offset by a reduction in our research and development compensation costs resulting from the realization of certain planned integration synergies, and a decline in the US dollar versus foreign currencies, principally the British Pound and the Euro. Research and development expenses from PR Newswire from the date of acquisition to December 31, 2016 was $7.2 million. Our research and development compensation costs decreased by $4.5 million in the year ended December 31, 2016 versus the year ended December 31, 2015 due to lower overall headcount and a shift in the mix of capitalizable development work. The decline in the US dollar versus the British Pound, the Euro, and other foreign currencies in 2016 versus 2015 reduced our research and development expenses by approximately $0.5 million for the year ended December 31, 2016.
General and administrative expenses increased $47.3 million, or 53.5%, from $88.4 million for the year ended December 31, 2015 to $135.7 million for the year ended December 31, 2016. This increase was primarily driven by our acquisition of PR Newswire and an increase in our acquisition-related expenses, offset by a reduction in our general and administrative personnel costs, a decline in the US dollar versus foreign currencies, including principally the British Pound and the Euro, and the divestiture of our Cision UK and Vocus UK businesses. General and administrative expenses from PR Newswire from the date of acquisition to December 31, 2016 were $46.7 million. Our acquisition-related expenses increased by $13.2 million in the year ended December 31, 2016 versus the year ended December 31, 2015. Our general and administrative personnel costs decreased by $5.7 million in the year ended December 31, 2016 versus the year ended December 31, 2015 resulting from the elimination of a number of senior personnel roles that became redundant as a result of our acquisition. For the year ended December 31, 2015, our general and administrative expenses include approximately $1.6 million, from our Cision UK and Vocus UK businesses that were divested during June 2015. The decline in the US dollar versus the British Pound, the Euro, and other foreign currencies in 2016 versus 2015 reduced our general and administrative expenses by approximately $2.5 million for the year ended December 31, 2016.
We recognized a $6.3 million foreign exchange transaction gain for the year ended December 31, 2016 primarily due to the settlement in cash of an intercompany note involving one of our foreign subsidiaries that resulted in a $5.0 million gain.
We incurred a $10.9 million foreign exchange loss for the year ended December 31, 2015 due to fluctuations in foreign exchange rates that impacted the carrying value of certain intercompany notes.
We recognized a $4.7 million gain on the sale of our Cision UK and Vocus UK assets during the year ended December 31, 2015. No other activity was significant for all periods presented.
Interest expense and loss on extinguishment of debt increased $80.2 million, or 130.6%, from $61.4 million for the year ended December 31, 2015 to $141.6 million for the year ended December 31, 2016. This increase was primarily driven by the increase in our debt under the 2016 Credit Facilities that were entered into in connection with our acquisition of PR Newswire.
The benefit from income taxes was $55.7 million for the year ended December 31, 2016 versus a benefit from income taxes of $3.6 million for the year December 31, 2015. The benefit from income taxes for the year ended December 31, 2016 was primarily driven by the acquisition of PR Newswire, which resulted in a reduction of valuation allowances in the U.S. group due to the establishment of deferred tax liabilities in purchase accounting. The deferred tax liabilities established in purchase accounting increased goodwill rather than creating deferred tax expense. In addition, the Company determined that the deferred tax liabilities
75
established in purchase accounting supported the realization of deferred tax assets that existed on the date of the PR Newswire acquisition that previously required a valuation allowance.
Accordingly, the Company reduced its valuation allowance and recorded a deferred tax benefit.
Other comprehensive loss increased $49.8 million for the year ended December 31, 2016 to $58.9 million, from $9.1 million for the year ended December 31, 2015. This increase was primarily the result of foreign currency translation losses that resulted from significant depreciation of the US dollar versus the British Pound that impacted the carrying value of the intangibles and goodwill in the UK that resulted from our 2014 acquisition of Gorkana.
We fund our business primarily with cash generated from operations and from borrowings under our credit facilities. We use cash to satisfy our contractual obligations and to fund other non-contractual business needs.
Based on the terms of our credit facilities and our current operations and expectations for continued growth, we believe that our existing cash on hand and cash generated from operating activities, together with available borrowings under our 2017 First Lien Credit Facility, will be adequate to meet our current and expected operating, capital investment, acquisition financing and debt service obligations for the next twelve months, although no assurance can be given in this regard.
While we have a history of a negative working capital position, as calculated by subtracting current liabilities from current assets, substantially all of this negative balance is created by deferred revenue, which does not represent a liability that will be settled in cash.
In conjunction with our June 29, 2017 merger with Capitol, the Convertible Preferred Equity Certificates (CPECs) held by Cision Owner were converted to equity and so are no longer presented as a liability on the consolidated balance sheet at December 31, 2017. As of December 31, 2017, excluding both cash balances and deferred revenue, our current assets exceed our current liabilities by $6.9 million.
The 2017 First Lien Credit Facility requires quarterly principal repayments in the amount of $2.6 million per quarter and €0.6 million per quarter, which are insignificant compared to the cash we expect to generate from operations. The 2017 First Lien Credit Facility does not mature until 2023, and therefore is not considered to impact our liquidity needs over the next several years. We have been in compliance with all our applicable credit facility covenants through December 31, 2017.
Our cash flow from operations in all periods to date has been adversely impacted by the cash costs incurred to execute the strategic business combinations we have made, which include acquisition fees and expenses and integration costs required to achieve synergies. Acquisition-related costs and expenses for historical periods are reflected in the Net Loss to Adjusted EBITDA Reconciliation set forth under Operating Results. While the execution of these strategic business combinations use short-term operating cash, they are expected to generate significant long-term cost reductions, revenue synergies and substantial incremental operating cash flow, once fully integrated. We believe that this incremental cash flow will be substantial and will enable us to fund cash interest payments.
For the year ended December 31, 2017, net cash provided by operating activities was $68.7 million, which is after deducting the cash costs incurred to execute the strategic business combinations we made during the years ended December 31, 2016 and 2017. For the year ended December 31, 2017, excluding the impact of the acquisition of Bulletin Intelligence, the acquisition of Argus, the acquisition of CEDROM, and the disposition of Vintage, net cash used in investing activities was $25.1 million. For the year ended December 31, 2017, net cash provided by financing activities was $122.0 million, which included $305.2 million in proceeds received in conjunction with our merger with Capitol.
76
We do not currently expect to declare dividends in the foreseeable future. The declaration of dividends will be subject to our actual future earnings and capital requirements and to the discretion of our board of directors. Our board of directors may take into account such matters as general business conditions, our financial results, capital requirements, contractual, legal and regulatory restrictions and such other factors as our board of directors may deem relevant.
Our ability to pay cash dividends on our Ordinary Shares will be subject to our continued compliance with the terms of our Credit Facilities. Under our 2017 First Lien Credit Facility, our subsidiaries have restrictions on making cash dividends to us, subject to certain exceptions, including that our subsidiaries are permitted to declare and pay cash dividends:
| in any amount, so long as the total net leverage ratio under our 2017 First Lien Credit Facility would not exceed 3.75 to 1.00 after making such payment; |
| in an amount per annum not greater than 6.0% of (i) the market capitalization of our Ordinary Shares (based on the average closing price of our shares during the 30 trading days preceding the declaration of such payment) plus (ii) the $305.2 million in proceeds we received in our business combination with Capitol; |
| in an amount that does not exceed the sum of (i) $20.0 million, plus (ii) 50% of consolidated net income of our subsidiaries from January 1, 2016 to the end of the most recent quarter plus (iii) certain other amounts set forth in the definition of Available Amount in our 2017 First Lien Credit Facility (provided that we may only include the amounts of consolidated net income described in clause (ii) if our total net leverage ratio would not exceed 5.00 to 1.00 after making such payments); and |
| in an amount that does not exceed the total net proceeds we receive from any public or private offerings of our Ordinary Shares or similar equity interests. |
As of December 31, 2017, we had $148.7 million of cash and cash equivalents on hand, and we had aggregate unused availability of $73.7 million under our 2017 Revolving Credit Facility. Borrowings under this facility bear interest at a variable rate and are a significant source of our liquidity. Our liquidity needs, including our funding of acquisition activities, causes the aggregate amount of outstanding borrowings under our 2017 Revolving Credit Facility to fluctuate.
Accordingly, the amount of borrowing capacity available to us can fluctuate depending on operating cash flows, debt service requirements and acquisition and investment activity.
Our future financial and operating performance, ability to service or refinance our debt and ability to comply with covenants and restrictions contained in our credit agreements governing our credit facilities will be subject to future economic conditions and to financial, business and other factors, many of which are beyond our control and will be substantially dependent on the global economy, demand for our products and solutions and our ability to successfully implement our business strategies.
As of December 31, 2017, $49.2 million of cash and cash equivalents were held outside of the United States. We have not provided for income taxes on $42.0 million of undistributed earnings of our foreign subsidiaries, other than certain Canadian subsidiaries, as the earnings are considered permanently reinvested. Notwithstanding this, as part of the enactment of U.S. tax reform legislation, we have accrued a $5.5 million transition tax related to our Canadian subsidiaries. This amount includes an estimated $2.1 million of Canadian withholding taxes on the future repatriation of cash from Canada to the U.S. The U.S. does not currently have accumulated earnings and profits and the majority of the other foreign jurisdictions can distribute their earnings to us without significant additional taxation. Accordingly, we have determined that any deferred tax liability associated with a distribution of the undistributed earnings would be immaterial.
The following describes the components of our debt obligations as of December 31, 2017. In connection with the consummation of our merger with Capitol, in July 2017, we repaid $294.0 million of our 2016 Second Lien Credit Facility, plus a 1% fee and interest. For more information regarding these transactions, see Note 6 to our consolidated financial statements included elsewhere in this Prospectus/Offer to Exchange and any
77
applicable prospectus supplement. On August 4, 2017, we amended our 2016 First Lien Credit Facility and repaid in full the 2016 Second Lien Credit Facility, which is more fully discussed below.
On August 4, 2017, we entered into a refinancing amendment and incremental facility amendment to the 2016 First and Second Lien Credit Agreements, with Deutsche Bank AG, New York Branch, as administrative agent and collateral agent, and a syndicate of commercial lenders from time to time party thereto. The 2017 First Lien Credit Facility provided for a tranche of refinancing term loans which refinanced the term loans under our 2016 First Lien Credit Agreement in full and provided for additional term loans of $131.2 million. The 2017 First Lien Credit Facility, on the date of effectiveness, consisted of: (i) a revolving loan facility, which permits borrowings and letters of credit of up to $75.0 million, of which up to $25.0 million may be used or issued as standby and trade letters of credit; (ii) a $960.0 million Dollar-denominated term credit facility (the 2017 First Lien Dollar Term Credit Facility) and (iii) a €250.0 million Euro-denominated term credit facility (the 2017 First Lien Euro Term Credit Facility). We used the proceeds from the 2017 First Lien Term Credit Facility to repay all amounts then outstanding under our 2016 First Lien Credit Facility and all amounts outstanding under our 2016 Second Lien Credit Facility and pay all related fees and expenses. We retained remaining cash for general corporate purposes. We terminated the agreement governing the 2016 Second Lien Credit Facility in connection with effecting the 2017 First Lien Credit Facility.
On December 14, 2017, we entered into an incremental facility amendment to the 2017 First Lien Credit Facility. The Incremental Amendment provided for an incremental $75.0 million dollar-denominated term loan facility. The proceeds from the Incremental Facility were used to fund the CEDROM and Prime acquisitions. As of December 31, 2017, we had no outstanding borrowings and $1.3 million of outstanding letters of credit under our 2017 Revolving Credit Facility and $1,332 million outstanding under the 2017 First Lien Term Credit Facility.
On February 8, 2018, we repriced our $1,417 million First Lien Credit Facility (the Repricing). The repriced first lien credit agreement consisted of a $75.0 million revolving loan facility and a $1,342 million term loan facility. The term loan facility consisted of $1,032 million of US dollar borrowings and €249 million of Euro borrowings. The term loans and revolving borrowings were repriced at an interest rate of LIBOR plus 3.25% for dollar borrowings and EURIBOR plus 3.50% for Euro borrowings.
From time to time, we may incur incremental revolving facilities and incremental term loan facilities under the 2017 First Lien Credit Facility in amounts not to exceed $100.0 million plus additional amounts subject to compliance with certain leverage ratios as set forth in the 2017 First Lien Credit Facility and certain other amounts.
Interest is charged on U.S. dollar borrowings under our 2017 First Lien Credit Facility, at our option, at a rate based on (1) the adjusted LIBOR (a rate equal to the London interbank offered rate adjusted for statutory reserves) or (2) the alternate base rate (a rate that is highest of the (i) Deutsche Bank AG, New York Branchs prime lending rate, (ii) the overnight federal funds rate plus 50 basis points or (iii) the one-month adjusted LIBOR plus 1%), in each case, plus an applicable margin.
Following the Repricing, the margin applicable to U.S. dollar loans under the 2017 First Lien Dollar Term Credit Facility bearing interest at the alternate base rate is 2.25%; the margin applicable to loans under the 2017 First Lien Dollar Term Credit Facility bearing interest at the adjusted LIBOR is 3.25%.
Interest is charged on Euro borrowings under our 2017 First Lien Credit Facility at a rate based on the adjusted EURIBOR (a rate equal to the Euro interbank offered rate adjusted for statutory reserves), plus an applicable margin. Following the Repricing, the margin applicable to loans under the 2017 First Lien Euro Term Credit Facility bearing interest at the adjusted LIBOR is 3.50%.
Revolving borrowings in Canadian dollars bear interest at the adjusted Canadian dollar bankers acceptance rate plus an applicable margin. Following the Repricing, the margin applicable to loans under the 2017 Revolving Credit Facility bearing interest at the alternate base rate, the adjusted LIBOR, and the adjusted Euro interbank offered rate bear interest at rates of 2.25%, 3.25%, and 3.50%, respectively. As of
78
December 31, 2017, prior to our February 8, 2018 repricing, the applicable interest rate under the 2017 First Lien Dollar Term Credit Facility and the 2017 First Lien Euro Term Credit Facility was 5.94% and 4.25%, respectively.
We are obligated to make quarterly principal payments under the 2017 First Lien Dollar Term Credit Facility of $2.6 million (which amount may be reduced by the application of voluntary and mandatory prepayments pursuant to the terms of the 2017 First Lien Credit Facility), with the remaining balance due June 16, 2023. We are obligated to make quarterly principal payments under the 2017 First Lien Euro Term Credit Facility of €0.6 million (which amount may be reduced by the application of voluntary and mandatory prepayments pursuant to the terms of the 2017 First Lien Credit Facility), with the remaining balance due June 16, 2023. The maturity date of the 2017 Revolving Credit Facility is June 16, 2022.
We may also be required to make certain mandatory prepayments of the 2017 First Lien Term Credit Facility out of excess cash flow and upon the receipt of proceeds of asset sales and certain insurance proceeds (in each case, subject to certain minimum dollar thresholds and rights to reinvest the proceeds as set forth in the 2017 First Lien Credit Facility).
The obligations under the 2017 First Lien Credit Facility are secured by substantially all of the assets of Canyon Companies S.à.r.l. and each of its subsidiaries organized in the United States (or any state thereof), the United Kingdom, the Netherlands, Luxembourg, and Ireland, subject to certain exceptions.
The 2017 First Lien Credit Facility includes a springing financial covenant applicable solely to the 2017 Revolving Credit Facility that is tested at such time that 35% or more (excluding letters of credit that have been cash collateralized and letters of credit in an amount not to exceed $4.0 million) of the aggregate commitments under the 2017 Revolving Credit Facility is drawn and outstanding. Such springing financial covenant requires that, as of the last day of each fiscal quarter, the total net leverage ratio of Canyon Companies S.à.r.l. and its restricted subsidiaries under the 2017 First Lien Credit Facility cannot exceed the applicable ratio set forth in the 2017 First Lien Credit Facility for such quarter (subject to certain rights to cure any failure to meet such ratio as set forth in the 2017 First Lien Credit Facility). The 2017 First Lien Credit Facility is also subject to certain customary affirmative covenants and negative covenants. Under our 2017 First Lien Credit Facility, our subsidiaries have restrictions on making cash dividends to us, subject to certain exceptions, including that our subsidiaries are permitted to declare and pay cash dividends:
| in any amount, so long as the total net leverage ratio under our 2017 First Lien Credit Facility would not exceed 3.75 to 1.00 after making such payment; |
| in an amount per annum not greater than 6.0% of (i) the market capitalization of our Ordinary Shares (based on the average closing price of our shares during the 30 trading days preceding the declaration of such payment) plus (ii) the $305.2 million in proceeds we received in our business combination with Capitol; |
| in an amount that does not exceed the sum of (i) $20.0 million, plus (ii) 50% of consolidated net income of our subsidiaries from January 1, 2016 to the end of the most recent quarter plus (iii) certain other amounts set forth in the definition of Available Amount in our 2017 First Lien Credit Facility (provided that we may only include the amounts of consolidated net income described in clause (ii) if our total net leverage ratio would not exceed 5.00 to 1.00 after making such payment); and |
| in an amount that does not exceed the total net proceeds we receive from any public or private offerings of our Ordinary Shares or similar equity interests. |
Our 2017 First Lien Credit Facility provides that an event of default will occur upon specified change of control events.
Change in Control is defined to include, among other things, the acquisition of ownership, directly or indirectly, beneficially or of record, by any person or group, other than certain permitted holders (directly or indirectly, including through one or more holding companies), of voting equity interests representing 50% or more of the aggregate ordinary voting power represented by the issued and outstanding voting equity in Cision Ltd.
79
The following tables reflect the changes in cash flows for the comparative periods presented.
|
|
|
|
|||||||||
Year ended December 31, | ||||||||||||
(in thousands) | 2017 | 2016 | 2015 | |||||||||
Net cash provided by (used in)
|
||||||||||||
Operating activities | $ | 68,848 | $ | 17,373 | $ | 22,422 | ||||||
Investing activities | (79,988 | ) | (819,416 | ) | (10,664 | ) | ||||||
Financing activities | 121,945 | 808,353 | (8,568 | ) | ||||||||
Effect of exchange rate changes on cash and cash equivalents | 2,714 | (1,781 | ) | (1,161 | ) | |||||||
Net change in cash and cash equivalents | $ | 113,519 | $ | 4,529 | $ | 2,029 |
Net cash flows from operating activities consist of net income (loss) adjusted for non-cash items, such as: depreciation and amortization of property and equipment and intangible assets, non-cash interest charges, deferred income taxes, equity-based compensation and for changes in net working capital assets and liabilities. The impact of changes in deferred income taxes primarily relates to temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes.
Net cash provided by operating activities was $68.8 million for the year ended December 31, 2017. Net cash provided by operating activities for the year ended December 31, 2017 reflects operating profit of $38.0 million, adjusted for non-cash items and a $4.9 million increase in deferred revenue due to the timing of invoicing to our subscription customers, a $6.2 million decrease in accrued compensation and benefits due to the timing of payment of annual bonuses, and a $4.0 million decrease in accounts receivable, prepaid expenses and other assets.
Net cash provided by operating activities for the year ended December 31, 2016 was $17.4 million, which reflects a $7.4 million decrease in deferred revenue due to the timing of invoicing to our subscription customers, an $8.2 million increase in accrued compensation and benefits due to the timing of payment of annual bonuses, an increase in accounts receivable of $1.6 million due to the timing of cash collections from customers and a $4.2 million decrease in prepaid expenses and other assets.
Net cash provided by operating activities for the year ended December 31, 2015 was $22.4 million, which reflects a $5.3 million decrease in deferred revenue due to the timing of invoicing to our subscription customers, a $3.9 million decrease in accrued compensation and benefits due to the timing of payment of annual bonuses, and a $3.7 million decrease in prepaid expenses and other assets.
Net cash used in investing activities was $80.0 million for the year ended December 31, 2017 which reflects $78.5 million used for our acquisitions of Bulletin Intelligence, Argus and CEDROM, net of cash acquired. Net cash used in investing activities in 2017 also reflects capitalized software development costs of $15.0 million and purchases of property and equipment of $10.7 million, offset by approximately $23.7 million in cash we received for the sale of Vintage, after funds deposited in escrow and transaction expenses.
Net cash used in investing activities for the year ended December 31, 2016 was $819.4 million, which reflects the acquisition of PR Newswire in June 2016 for $804.2 million in cash, net of cash acquired and other consideration, capitalized software development costs of $11.7 million, purchases of property and equipment of $7.4 million, and proceeds from the sale of Agility PR of $4.0 million.
Net cash used in investing activities for the year ended December 31, 2015 was $10.7 million. This decrease was primarily attributable to the acquisition of Viralheat for $4.5 million, capitalized software development costs of $11.3 million, purchases of property and equipment of $5.2 million, offset by an increase in restricted cash changes of $8.3 million and $2.0 million of proceeds from the disposal of net assets of Cision UK Limited and Vocus UK Limited.
80
Net cash provided by financing activities was $121.9 million for the year ended December 31, 2017 which reflects net repayments of the revolving credit facility of $33.5 million, net repayments on the credit facility of $147.6 million, and $305.1 million in proceeds from the issuance of equity in connection with our merger with Capitol, offset by the $1.9 million payment due to Cision Owner.
Net cash provided by financing activities was $808.4 million for the year ended December 31, 2016 which reflects net proceeds from the revolving credit facility of $33.5 million, proceeds from the issuance of CPECs to Cision Owner of $136.0 million to fund our acquisition of PR Newswire in June of 2016.
Net cash used in financing activities in the year ended December 31, 2015 was $8.6 million, which reflects $2.4 million from the acquisition of a non-controlling interest, net repayments under our term credit facility of $5.9 million and repayments on our capital lease obligations of $0.3 million.
The following table sets forth our contractual obligations and commitments for the periods indicated as of December 31, 2017.
|
|
|
|
|
|
|||||||||||||||
Contractual obligations
(1)
(in thousands) |
Payments due by period | |||||||||||||||||||
Total |
Less than
1 year |
1 to 3 years | 3 to 5 years |
More than
5 years |
||||||||||||||||
2017 First Lien Credit Facility (2) | $ | 1,331,611 | $ | 13,349 | $ | 26,698 | $ | 26,698 | $ | 1,264,866 | ||||||||||
Operating Leases | 86,160 | 16,265 | 28,183 | 20,162 | 21,550 | |||||||||||||||
Purchase Obligations (3) | 9,611 | 7,104 | 2,507 | | | |||||||||||||||
Cash interest (4) | 432,874 | 74,054 | 145,880 | 142,686 | 70,254 |
(1) | As of December 31, 2017, we have recorded $3.7 million related to uncertain tax positions. Due to uncertainties in the timing of potential tax credits and the timing of any resolution, we are unable to make a reasonably reliable estimate as to the timing of the payments. As a result, these amounts have been omitted from the above table. |
(2) | Represents the principal amount of our long-term debt under our 2017 Credit Facilities and expected cash payments for interest thereunder based on the applicable interest rates and amounts outstanding as of December 31, 2017. |
(3) | Noncancelable contractual commitments, related to our service offerings. |
(4) | Interest on variable rate long-term debt obligations is calculated based on debt outstanding and interest rates in effect on December 31, 2017, taking into account scheduled maturities and amortizations. The applied interest rates for the 2017 First Lien Dollar Term Credit Facility and the 2017 First Lien Euro Term Credit Facility at December 31, 2017 are 5.94% and 4.25%, respectively. |
We do not have any off-balance sheet transactions or interests.
Critical accounting policies are defined as those that are reflective of significant judgments and uncertainties, and potentially result in materially different results under different assumptions and conditions. Our critical accounting policies are described below.
We incur software development costs related to its internal use software. Qualifying costs incurred during the application development stage are capitalized. These costs primarily consist of internal labor and third-party development costs and are amortized using the straight-line method over the estimated useful life of the software, which is generally two years. All other research and development costs are expensed as incurred. Costs to maintain and update the information database are expensed within cost of revenues as these expenses are incurred. For the years ended December 31, 2017, 2016 and 2015, we recorded amortization expense related to internal use software of $12.4 million, $12.6 million and $6.9 million, respectively.
81
Property, equipment and purchased software are stated at cost. Depreciation is computed using the straight-line method over the estimated useful lives of the assets as follows: three to five years for software and computer and office equipment and five to seven years for furniture and fixtures. Assets acquired under capital leases and leasehold improvements are amortized using the straight-line method over the shorter of the estimated useful lives of the assets or the terms of the leases. Amortization of assets acquired under capital leases is included in depreciation and amortization expense. Repairs and maintenance costs are charged to expense as incurred. When assets are retired or otherwise disposed of, the asset and related accumulated depreciation are eliminated from the accounts and any resulting gain or loss is recorded in the statements of net loss and total comprehensive loss.
Long-lived assets include property, equipment and software and intangible assets with finite lives. Intangible assets consist of customer relationships, trade names and purchased technology acquired in business combinations. Intangible assets are amortized using the accelerated method, which approximates the pattern of usage of the economic benefit of the asset, over their estimated useful lives ranging from two to twelve years. Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be fully recoverable. If an impairment indicator is present, we evaluate recoverability by a comparison of the carrying amount of the assets to future undiscounted net cash flows expected to be generated by the assets. If the assets are impaired, the impairment recognized is measured by the amount by which the carrying amount exceeds the estimated fair value of the assets. There were no significant impairment charges for long-lived assets for the years ended December 31, 2017, 2016 or 2015.
We regularly revisit our estimate of useful economic lives of long-lived assets and makes adjustments to those lives where appropriate.
We have completed a number of acquisitions of businesses during the years ended December 31, 2017, 2016 and 2015 that have resulted in the recording of goodwill and identifiable definite-lived intangible assets. We recognize all of the assets acquired and liabilities assumed at their fair values on the acquisition date. We use significant estimates and assumptions, including fair value estimates, as of the acquisition date using the income and cost approaches (or a combination thereof). Fair values are determined based on Level 3 inputs, including estimated future cash flows, discount rates, royalty rates, growth rates, sales projections, customer retention rates and terminal values, all of which require significant management judgement. We refine these estimates that are provisional, as necessary, during the measurement period. The measurement period is the period after the acquisition date, not to exceed one year, in which new information may be gathered about facts and circumstances that existed as of the acquisition date to adjust the provisional amounts recognized. Adjustments to assets and liabilities within the measurement period adjustments are recorded with a corresponding offset to goodwill. All other adjustments, including those after the conclusion of the measurement period, are recorded to the consolidated statements of net loss and comprehensive loss and to date have been immaterial. Acquisition-related costs are expensed as incurred separately from the acquisition and are included in general and administrative expenses in the statements of net loss and total comprehensive loss.
Goodwill represents the excess of the cost of an acquired entity over the net fair value of the identifiable assets acquired and liabilities assumed. Goodwill is not amortized, but rather is assessed for impairment at least annually. We perform our annual impairment assessment on October 1, or whenever events or circumstances indicate impairment may have occurred. On October 1, 2017, 2016 and 2015, we performed our annual goodwill impairment test based on the fair value of our reporting units. When assessing goodwill for impairment, we use an income approach based on discounted cash flows to determine the fair value of each reporting unit. Our cash flow assumptions consider historical and forecasted revenue, operating costs and other relevant factors which are consistent with the plans used to manage our operations.
82
The results of the annual goodwill impairment test performed on October 1, 2017 indicated that the estimated fair value of each reporting unit was, in all cases, at least 40% in excess of its carrying value. We concluded that the fair value of each of our reporting units exceeded its carrying amount and no impairment charge was recorded.
Employees of CNW Group Ltd. (CNW) participate in a defined benefit pension plan whereby pension expense is determined based on a number of actuarial assumptions, which are reviewed on an annual basis. The defined benefit plan has been closed to new participants since 2006. The employees and accompanying pension plan were inherited with the acquisition of PR Newswire on June 16, 2016. The purchase price of PR Newswire was allocated to the assets and obligations of the pension plan based on fair value at the acquisition date. These actuarial assumptions include discount rate, expected rate of return on plan assets, rate of salary increases and other factors.
The December 31, 2017 discount rate was based on bond yields as at December 15, 2017 and derived from the Mercer discount rate model. The Mercer discount rate model is based on actual AA corporate bond yield data for short term yields and extrapolated data for longer terms for which discount rates for sample plans of various durations are determined. The duration of pension plans obligations is calculated and the corresponding discount rate for that duration is obtained. The resulting discount rate is rounded to the nearest 10 basis points.
The expected rate of return on plan assets is based the median simulated investment return using estimated returns for each major asset class consistent with market conditions on the valuation date, the expected time horizon over which benefits are expected to be paid, and the target asset mix specified in the Plans investment policy. The expected rate of return also uses an implicit provision for expenses determined as the average rate of investment expenses paid from the fund in the recent past.
The unfunded status of the plan is recognized as a long-term liability in the consolidated balance sheets at December 31, 2017 and 2016, which is also the measurement date for the defined benefit pension plan for the CNW employees. For further information, see Note 8 of Notes to Consolidated Financial Statements. The actual and expected return on plan assets for 2017 and 2016 were as follows:
|
|
|
||||||
2017 | 2016 | |||||||
Discount Rate | 3.5 | % | 4.1 | % | ||||
Rate of compensation increase | 3.5 | % | 3.5 | % | ||||
Expected return on plan assets | 2.0 | % | 2.0 | % |
We derive our revenues from subscription arrangements and related professional services in connection with our cloud based software and services offerings. We also derive revenues from news distribution services on both a subscription basis and separately from non-subscription arrangements. We recognize revenue when there is persuasive evidence of an arrangement, the service has been provided to the customer, the collection of the fee is probable and the amount of the fee to be paid by the customer is fixed or determinable.
Our separate units of accounting consist of subscription services, transactional services and professional services. The subscription services include access to our cloud-based software, hosting services, content and content updates and customer support. Our subscription agreements are typically one to three years in length and are non-cancelable, though customers have the right to terminate their agreements for cause if we materially breach our obligations under the agreement. Subscription agreements do not provide customers the right to take possession of the software at any time.
We do not charge customers an up-front fee for use of the technology. Implementation activities are insignificant and are not subject to a separate fee. In certain cases, we charge annual membership fees to customers which are recognized ratably over the one-year membership period.
We also distribute individual news releases to thousands of distribution points on the Internet, which are then indexed by major search engines and also directly to journalists and other key constituents. Dependent on the
83
nature of the contract with the customer, we recognize revenue on subscription basis over the term of the subscription, or on a per-transaction basis when the press releases are made available to the public.
Professional services include broadcast and webcast production. For these services, revenue is recognized when the specific performance is completed and customer acceptance received.
When sold together, revenue from our different service offerings are accounted for separately as those services have value on a standalone basis and do not involve a significant degree of risk or unique acceptance criteria. We allocate revenue to each element in a multiple element arrangement based on a selling price hierarchy. The selling price for a deliverable is based on its VSOE, if available, TPE, if VSOE is not available, or estimated selling price, if neither VSOE nor TPE is available. As we have been unable to establish VSOE or TPE for the elements of its arrangements due to factors such as a high number of varied service offerings sold on a subscription basis to differing customer concentrations as well as varied discounting practices and unobservable competitive data for similar services, we estimate selling prices by analyzing multiple factors such as historical pricing trends, customer renewed activity, and discounting practices. The volume of multiple element arrangements sold by us in which any element of the arrangement has a revenue attribution pattern different to the other elements was not significant for all years presented.
Sales and other taxes collected from customers to be remitted to government authorities are excluded from revenues.
We recognize equity-based compensation costs on a straight-line basis over the requisite service period of the award, which is generally four years from the date of grant. As equity-based compensation expense recognized is based on awards ultimately expected to vest, such expense is reduced for estimated forfeitures.
We have determined that our Chief Executive Officer is the Chief Operating Decision Maker. Our Chief Executive Officer reviews financial information presented on both a consolidated basis and on a geographic regional basis. Since our inception, we have completed several significant acquisitions and have expended significant efforts in integrating these acquisitions into a single commercial software solution, available to all customers in all geographies. As a result of the long term qualitative and quantitative similar economic characteristics exhibited by the sale of a single product suite in all of our regions, we have determined that our operating segments meet the criteria to be aggregated into one reportable segment.
Income taxes are determined utilizing the asset and liability method whereby deferred tax assets and liabilities are recognized for deductible temporary differences between the respective reported amounts and tax bases of assets and liabilities, as well as for operating loss and tax-credit carryforwards. Net deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized.
Our estimates related to liabilities for uncertain tax positions require us to make judgments regarding the sustainability of each uncertain tax position based on its technical merits. If we determine it is more likely than not that a tax position will be sustained based on its technical merits, we record the impact of the position in our consolidated financial statements at the largest amount that is greater than fifty percent likely of being realized upon ultimate settlement. The estimates are updated at each reporting date based on the facts, circumstances and information available. We are also required to assess at each reporting date whether it is reasonably possible that any significant increases or decreases to its unrecognized tax benefits will occur during the next twelve months. We file income tax returns in the U.S. federal jurisdictions and various state and foreign jurisdictions and are subject to U.S. federal, state, and foreign tax examinations for years ranging from 2011 to 2016.
The recently enacted Tax Act contains several key tax provisions that affected us, including a reduction of the federal corporate income tax rate to 21% effective January 1, 2018, among others. We are required to recognize the effect of the tax law changes in the period of enactment, such as re-measuring our U.S. deferred
84
tax assets and liabilities. In December 2017, the SEC staff issued Staff Accounting Bulletin No. 118, Income Tax Accounting Implications of the 2017 Tax Cuts and Jobs Act , which allows us to record provisional amounts during a measurement period not to extend beyond one year of the enactment date. Since the Tax Act was passed late in the fourth quarter of 2017, and ongoing guidance and accounting interpretation are expected over the next 12 months, we consider the accounting of the deferred tax remeasurements, and other items to be incomplete. We expect to complete our analysis within the measurement period in accordance with SAB 118.
In August 2016, the FASB issued Accounting Standards Update (ASU) 2016-15 , Statement of Cash Flows (Topic 230) : Classification of Certain Cash Receipts and Cash Payments (a consensus of the Emerging Issues Task Force). The new guidance is intended to reduce diversity in practice in how certain transactions are classified in the statement of cash flows, including the presentation of debt prepayment or debt extinguishment costs as cash outflows for financing activities on the statement of cash flows. The standard was to become effective for us in the first quarter of fiscal year 2019; however, we elected to early adopt on a retrospective basis on July 1, 2017, resulting in classifying $19.4 million in payments of original issue discount upon debt extinguishment as a repayment of term loan facility, a financing outflow, as opposed to the prior treatment which was to classify these as an operating cash outflow on our consolidated statements of cash flows for the six months ended June 30, 2016. The resulting change increased cash provided by operating activities to $17.4 million and decreased cash provided by financing activities to $808.4 million for the year ended December 31, 2016.
In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606) . Topic 606 supersedes existing revenue recognition requirements in ASU Topic 605, Revenue Recognition , and requires the recognition of revenue when promised goods or services are transferred to customers in an amount that reflects the consideration to which the entity expects to be entitled to in exchange for those goods or services. The accounting for the recognition of costs related to obtaining customer contracts under Topic 606 is significantly different than current guidance, and Topic 606 will likely result in sales commissions and certain other costs capitalized, which will then be amortized over an estimated customer life. We will adopt this ASU effective for our fiscal year 2019 and using the permitted modified retrospective transition method. We are in the process of evaluating the impact of this ASU on our consolidated financial statements.
In February 2018, the FASB issued ASU 2018-02, Income Statement Reporting Comprehensive Income (Topic 220) Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income , which will allow a reclassification from accumulated other comprehensive income to retained earnings for the tax effects resulting from An Act to Provide for Reconciliation Pursuant to Titles II and V of the Concurrent Resolution on the Budget for Fiscal Year 2018 (the Act) that are stranded in accumulated other comprehensive income. This ASU also requires certain disclosures about stranded tax effects; however, it does not change the underlying guidance that requires that the effect of a change in tax laws or rates be included in income from continuing operations. This ASU is effective on January 1, 2019, with early adoption permitted. It must be applied either in the period of adoption or retrospectively to each period in which the effect of the change in the U.S. federal corporate income tax rate in the Act is recognized. We are in the process of evaluating the impact of this ASU on our consolidated financial statements.
In January 2017, the FASB issued ASU 2017-01, Business Combinations (Topic 805) Clarifying the Definition of a Business . The amendments in this update clarify the definition of a business with the objective of adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions or disposals of assets or businesses. The definition of a business affects many areas of accounting including acquisitions, disposals, goodwill, and consolidation. This ASU is effective for our fiscal year 2019 and interim periods within that year. We do not believe that the adoption of this standard will have a material effect on our consolidated financial statements.
In January 2017, the FASB issued ASU 2017-04, Intangibles Goodwill and Other (Topic 350) . The ASU eliminates Step 2 of the goodwill impairment test, which requires determining the fair value of assets acquired or liabilities assumed in a business combination. Under the amendments in this update, a goodwill impairment
85
test is performed by comparing the fair value of the reporting unit with its carrying amount. An entity should recognize an impairment charge for the amount by which the carrying amount exceeds the reporting units fair value; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. This ASU is effective for our fiscal year 2022, and interim periods within that year in the event that a goodwill impairment test is performed based on a triggering event prior to our October 1 annual impairment test. We do not believe that the adoption of this standard will have a material effect on our consolidated financial statements.
In November 2016, the FASB issued ASU 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash (a consensus of the Emerging Issues Task Force) , which requires restricted cash to be presented with cash and cash equivalents on the statement of cash flows and disclosure of how the statement of cash flows reconciles to the balance sheet if restricted cash is shown separately from cash and cash equivalents on the balance sheet. This ASU is effective for our fiscal year 2019, with early adoption permitted. We do not believe that the adoption of this standard will have a material effect on our consolidated financial statements.
In October 2016, the FASB issued ASU No. 2016-16, Income Taxes (Topic 740), Intra-Entity Transfers of Assets Other Than Inventory . The amendments of ASU No. 2016-16 were issued to improve the accounting for the income tax consequences of intra-entity transfers of assets other than inventory. Current GAAP prohibits the recognition of current and deferred income taxes for an intra-entity asset transfer until the asset has been sold to an outside party which has resulted in diversity in practice and increased complexity within financial reporting. The amendments of this ASU would require an entity to recognize the income tax consequences of an intra-entity transfer of an asset other than inventory when the transfer occurs and do not require new disclosure requirements. This ASU is effective for our fiscal year 2018, with early adoption permitted, and should be applied on a modified retrospective basis through a cumulative-effect adjustment directly to retained earnings as of the beginning of the period of adoption. We are in the process of evaluating the impact of this standard on our consolidated financial statements.
In March 2016, the FASB issued ASU 2016-09, Stock Compensation (Topic 718), Improvements to Employee Share-Based Payment Accounting . ASU 2016-09, which amends several aspects of accounting for employee share-based payment transactions including the accounting for income taxes, forfeitures, and statutory tax withholding requirements, as well as classification in the statement of cash flows. This ASU is effective for our fiscal year 2018. We do not believe the adoption of this standard will have a material effect on our consolidated financial statements.
In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842) . ASU 2016-02 requires lessees to recognize lease assets and lease liabilities on the balance sheet and requires expanded disclosures about leasing arrangements. This ASU is effective for our fiscal year 2020 and interim periods within 2021, with early adoption permitted. We are in the process of evaluating the impact of this standard on our consolidated financial statements.
In January 2016, the FASB issued ASU 2016-01, Financial Instruments: Recognition and Measurement of Financial Assets and Financial Liabilities . This change primarily affects the accounting for equity investments, financial liabilities under the fair value options and the presentation and disclosure requirements for financial instruments. This ASU is effective for our fiscal year 2019, with early adoption permitted for certain provisions for the new guidance. We do not believe that the adoption of this standard will have a material effect on our consolidated financial statements.
We have experienced in the past, and expect to continue to experience, seasonal fluctuations in our revenues as a result of press release cycles, primarily related to the release of public company operating results and other corporate news events.
While inflation may impact revenues and cost of services, the Company believes the effects of inflation, if any, on the results of operations and financial condition have not been significant. However, there can be no assurance that the results of operations and financial condition will not be materially impacted by inflation in the future.
86
We are exposed to market risks in the ordinary course of our business. These risks include interest rate risk and foreign exchange risk.
Our Credit Facilities bear interest at variable rates based on LIBOR plus a fixed margin. As of December 31, 2017, we had $1,332 million in outstanding borrowings under our Credit Facilities. At LIBOR rates below 3.0%, 100.0% of our outstanding borrowings bear interest at variable rates. Outstanding borrowings under our Credit Facilities are subject to a 1% LIBOR floor. As of December 31, 2017, the 3-month LIBOR rate was approximately 1.7%. A hypothetical 1% increase in the interest rate on our indebtedness as of December 31, 2017 would have increased our cash interest expense by approximately $13.3 million per annum.
The reporting currency for all periods presented is the U.S. dollar. The functional currency for our foreign operating subsidiaries is the local currency, including the British Pound, the Euro, the Swedish Krona and the Canadian Dollar.
These currencies all weakened significantly against the U.S. dollar. Approximately 35% of our revenues are generated in non-U.S. dollar-denominated currencies. The financial statements of these subsidiaries are translated into U.S. dollars using exchange rates in effect at each balance sheet date for assets and liabilities and average exchange rates during the period for revenues and expenses. The resulting translation adjustments are included in accumulated other comprehensive income (loss), a separate component of stockholders equity.
We maintain disclosure controls and procedures designed to provide reasonable assurance that information required to be disclosed in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SECs rules and forms and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.
Our management, including our Chief Executive Officer and Chief Financial Officer, conducted an evaluation of the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(f) of the Exchange Act) as of December 31, 2017. Management necessarily applied its judgment in assessing the costs and benefits of such controls and procedures, which by their nature, can provide only reasonable assurance regarding managements control objectives. Management does not expect that our disclosure controls and procedures will prevent or detect all errors and fraud. A control system, irrespective of how well it is designed and operated, can only provide reasonable assurance and cannot guarantee that it will succeed in its stated objectives.
Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that as of December 31, 2017, our disclosure controls and procedures were not effective because of the material weakness identified below.
As of December 31, 2017, our management has concluded that we did not maintain effective controls over the preparation and review of the income tax benefit and related current and deferred income tax accounts. Specifically, a deficiency in the design of our controls did not ensure that the information used to prepare the income tax benefit and related current and deferred income tax accounts was complete and accurate. This material weakness did not result in a material misstatement to our financial statements or disclosures, but did result in out-of-period adjustments in our benefit for income taxes and deferred tax liabilities that were individually, and in the aggregate, immaterial for the year ended December 31, 2017. We have determined that the deficiency could result in a misstatement of the benefit for income taxes and current and deferred income tax accounts that would result in a material misstatement of the annual or interim financial statements that would not be prevented or detected. Accordingly, our management has determined that this control deficiency represents a material weakness in internal control over financial reporting as of December 31, 2017.
87
In 2017, we began implementing procedures and controls designed to mitigate the material weakness in the design of our internal controls over financial reporting relating to income tax benefit and related current and deferred income tax.
Amongst other actions, we have begun development of comprehensive documentation of our internal controls and procedures, and are evaluating the design of our existing controls in line with the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control Integrated Framework. Our management intends to address any gaps in internal control requirements, include the material weakness stated above, in 2018.
88
The board of directors and executive officers of Cision is as follows:
|
|
|
||
Name | Age | Position | ||
Kevin Akeroyd | 49 | President, Chief Executive Officer and Director | ||
Jack Pearlstein | 54 | Executive Vice President and Chief Financial Officer | ||
Whitney Benner | 44 | Chief Human Resources Officer | ||
Yujie Chen | 47 | President, Asia-Pacific | ||
Robert Coppola | 47 | Chief Information Officer | ||
Jason Edelboim | 41 | President, Americas | ||
Chris Lynch | 34 | Chief Marketing Officer | ||
Rainer Mathes | 63 | President, Cision Insights | ||
Michael Piispanen | 51 | Chief Process and Operations Officer | ||
Abe Smith | 48 | President, EMEA | ||
Steve Solomon | 54 | Chief Accounting Officer | ||
Mark M. Anderson (2) (3) | 42 | Director and Chairman of the Board | ||
Philip A. Canfield (3) | 50 | Director | ||
L. Dyson Dryden (1) (2) | 42 | Director | ||
Mark D. Ein (1) (3) | 53 | Director and Vice-Chairman of the Board | ||
Stephen P. Master (2) | 34 | Director | ||
Stuart Yarbrough (1) | 67 | Director |
(1) | Member of the Audit Committee |
(2) | Member of the Corporate Governance and Nominating Committee |
(3) | Member of the Compensation Committee |
Kevin Akeroyd. Mr. Akeroyd has served as our Chief Executive Officer and President since August 2016. Mr. Akeroyd has over 25 years of experience in digital, social and mobile marketing globally. Previously, Mr. Akeroyd was General Manager and Senior Vice President at Oracle Marketing Cloud from September 2013 to August 2016. Mr. Akeroyd and Oracle created and led the Enterprise Marketing Platform category. Prior to Oracle, he held senior leadership positions at Badgeville from September 2011 to September 2013, Salesforce.com (Jigsaw/Data.com) from September 2007 to August 2011. Mr. Akeroyd holds a degree from the University of Washington, Michael G. Foster School of Business and attended the EPSO program at the Stanford University Graduate School of Business.
Jack Pearlstein. Mr. Pearlstein has served as our Chief Financial Officer since June 2014. Previously, from June 2009 to November 2013, he was Chief Financial Officer of Six3 Systems, Inc., a leading provider of software development, sensor development and signal processing services to the U.S. intelligence community. As a Chief Financial Officer, Mr. Pearlstein has led three different companies through their initial public offerings: AppNet from May 1999 to September 2000, DigitalNet from September 2001 to November 2004 and Solera from April 2006 to March 2009. Mr. Pearlstein is a CPA and received his Bachelor of Science in accounting from New York University. He also holds an MBA in finance from The George Washington University.
Whitney Benner. Ms. Benner has served as our Chief Human Resources Officer since June 2016. Ms. Benner is responsible for developing and executing human resources strategy in support of the overall business plan and strategic direction of the organization, specifically in the areas of succession planning, talent management, change management, organizational and performance management, training and development, and compensation. From June 2013 to June 2016, she was Senior Vice President of Human Resources for PR Newswire, where she set and implemented human resource strategy in support of the companys overall business objectives. Before Ms. Benner joined PR Newswire, she held human resources leadership roles at Medialink and MJI Broadcasting. Ms. Benner holds a Bachelors degree from Skidmore College.
89
Yujie Chen. Mr. Chen has served as our Asia Pacific President since June 2016. Mr. Chen joined PR Newswire in November 2003 and was promoted from Managing Director (China) to head PR Newswires business for the entire Asia-Pacific region in June 2013. Prior to PR Newswire, Mr. Chen worked in a number of media and publishing industry roles, including with CNBC Asia from June 2003 to November 2003, Deluxe Global Media from September 2001 to June 2003 and Beijing Television from February 1996 to August 1999. Chen holds an MBA degree from the Anderson School of Management at UCLA.
Robert Coppola. Mr. Coppola has served as our Chief Information Officer since July 2016. Mr. Coppola spent four years from June 2011 to September 2015 with McGraw-Hill Financial as the Chief Information and Technology Officer for S&P Capital IQ and S&P Dow Jones Indices, a leading provider of ratings, benchmarking and analytics in the global capital and commodity markets. There, he was responsible for driving the overarching technology strategy, architecture and development in addition to evolving multiple silo-based teams into one global operating team. He has also held leadership positions with Thomson Reuters from November 2003 to June 2011 and Bloomberg LP from September 1992 to November 2003. Mr. Coppola holds a Bachelors in Economics from Rutgers University.
Jason Edelboim. Mr. Edelboim has served as our President of the Americas since December 2016. Mr. Edelboim was named President of PR Newswire in June 2016, and prior to that was a Senior Vice President at PR Newswire from June 2013 to June 2016. Mr. Edelboim has over 15 years of experience at the intersection of media and technology. He previously worked at Bloomberg LP from 2003 to 2009 where he held progressing leadership roles within the companys Media Group. Mr. Edelboim holds an MBA from the Stern School of Business at New York University and a BA from Columbia University.
Chris Lynch. Mr. Lynch has served as our Chief Marketing Officer since November 2016. Mr. Lynch is responsible for our global marketing strategy, which includes communications, product and digital marketing. From January 2014 to October 2016, he ran product marketing and go-to-market strategy for Oracles Marketing Cloud business and also held leadership positions at Badgeville from February 2012 to January 2014 and TIBCO from June 2011 to January 2012. Mr. Lynch attended Northeastern University where he received his Bachelor of Arts in Journalism.
Rainer Mathes. Dr. Mathes has served as President of Cision Insights since January 2018. Cision Insights is dedicated to evaluating companywide campaign effectiveness through customized intelligence, reporting and industry expertise. Dr. Mathes founded PRIME Research in 1988 while holding research positions at the Institute of Media Studies at the University of Mainz and later at the Research Center for Surveys and Methodology in Mannheim. Dr. Mathes developed Prime into a global research organization with locations in Europe, the United States and Asia. Dr. Mathes was educated at the University of Mainz where he first finished his M.A. in Political Science, Communication Science and Linguistics in 1980 before achieving his Ph. D. in Political Science in 1986 and receiving the Johannes Gutenberg Award in the same year.
Michael Piispanen. Mr. Piispanen has served as our Chief Process and Operations Officer since March 2017. Mr. Piispanen leads the development, enhancement and optimization of business operations, program and project management, business process engineering and merger and acquisition activities. He also oversees business units across geographies to ensure the delivery of operational excellence and best-in-class execution to our global client base. Mr. Piispanen brings nearly 30 years of experience across consumer, software, FinTech, and pharmaceutical industries. Over the last 15 years, he served in a number of roles within Nasdaqs Corporate Solutions business. Mr. Piispanen holds an MBA from the F.W. Olin Graduate School of Business at Babson and a BS in Engineering from Worcester Polytechnic Institute.
Abe Smith. Mr. Smith has served as our President of EMEA since September 2017. Mr. Smith has spent the past 17 years with U.S.-based high growth, enterprise SaaS companies focusing on market transformation. Previously, Mr. Smith was Group Vice President of Emerging Markets for Oracle from June 2014 to August 2017. Prior to Oracle, Mr. Smith held senior leadership roles at Badgeville from September 2012 to May 2014 and Mindjet from June 2009 to August 2012. Additionally, from January 2007 to June 2009, Mr. Smith led the Emerging Markets for Cisco in the Unified Communications and Collaboration Group (WebEx). Mr. Smith graduated summa cum laude from the University of Massachusetts Amherst with a Bachelors degree in Political Science.
90
Steve Solomon. Mr. Solomon has served as our Chief Accounting Officer since June 2014. From June 2009 to June 2014, he was Corporate Controller of Six3 Systems, Inc., a leading provider of software development, sensor development and signal processing services to the US intelligence community. As a Corporate Controller, Mr. Solomon was at DigitalNet from October 2001 to January 2005 and helped the company through their initial public offering. Mr. Solomon is a CPA and received his Bachelor of Science in accounting from the University of Maryland.
Mark M. Anderson. Mr. Anderson joined GTCR in 2000 and is currently a Managing Director of the firm. He previously worked at Gracie Capital and at Bowles Hollowell Conner & Co. He holds an MBA from Harvard Business School and a BS from the McIntire School of Commerce at the University of Virginia. Mr. Anderson currently is a Director of Cision, Global Traffic Network, Beeline, Lytx, Rural Broadband Investments and XIFIN. In addition, Mr. Anderson was previously a Director of GTCRs past investments including CAMP Systems, Land Lease Group and Landmark Aviation, and was instrumental in other GTCR investments including Skylight Financial, Solera and Transaction Network Services. Mr. Anderson serves on the board of the Chicago Foundation for Education, a non-profit organization that seeks to improve the educational experience of Chicagos public school children.
We determined that Mr. Andersons directorship experience and experience advising similar companies qualifies him to serve as a director on Cisions board of directors.
Philip A. Canfield. Mr. Canfield is a Managing Director of private equity firm GTCR LLC and currently co-heads GTCRs Technology, Media and Telecommunications investment team. Mr. Canfield joined GTCR in 1992 and became a Principal in 1997. From 1990 to 1992, Mr. Canfield worked in the Corporate Finance Department at Kidder, Peabody and Company. Mr. Canfield has served as a Director of Zayo Group Holdings, Inc. since July 2012 and is the Chairman of its Nominating & Governance Committee. Mr. Canfield currently serves on several private company boards. He holds an M.B.A. from the University of Chicago and a B.B.A. in finance with High Honors from the Honors Business Program at the University of Texas.
We determined that Mr. Canfields extensive experience in corporate finance and in the telecommunications industry qualifies him to serve as a director on Cisions board of directors.
L. Dyson Dryden. Mr. Dryden is currently the President, Chief Financial Officer, and a Director of Capitol Investment Corp. IV, a blank check company formed for the purpose of effecting a business combination with another company. From July 2015 until it completed its business combination in June 2017, Mr. Dryden was the President, Chief Financial Officer, Treasurer, Secretary and a Director of Capitol Acquisition Corp. III. Since the closing of the business combination, Mr. Dryden has continued to serve as a director of Capitol Acquisition Corp. III (now known as Cision Ltd.). From March 2013 to July 2015, Mr. Dryden served as the Chief Financial Officer and a Director of Capitol II. Mr. Dryden has continued to serve as a director of Lindblad Expeditions since the closing of its business combination. Mr. Dryden is also the founder of Dryden Capital Management, LLC, a private investment firm that invests in and builds private companies, and has served as its President since March 2013. Mr. Dryden has also been Vice Chairman of CDS Logistics Management, Inc., one of the largest providers of home improvement product delivery services in the United States, since 2009. From August 2005 to February 2013, Mr. Dryden worked in Citigroups Investment Banking division in New York, most recently as a Managing Director where he led the coverage effort for a number of the firms Global Technology, Media and Telecommunications clients. From 2000 to 2005, Mr. Dryden held the titles of Associate and Vice President at Jefferies & Company, a middle market investment banking firm. From 1998 to 2000, Mr. Dryden worked in the investment banking group at BB&T Corporation. Mr. Dryden holds a B.S. in Business Administration with a dual concentration in finance and management from the University of Richmond.
We determined that Mr. Drydens corporate finance and public company experience qualifies him to serve as a director on Cisions board of directors.
Mark D. Ein. Mr. Ein currently is currently the Chairman, Chief Executive Officer and a Director of Capitol Investment Corp. IV, a blank check company formed for the purpose of effecting a business combination with another company. Mr. Ein is an investor, entrepreneur and philanthropist, who has created, acquired, invested
91
in and built a series of growth companies across a diverse set of industries over the course of his 25-year career. From July 2015 until June 2017, Mr. Ein was the Chairman of the Board, Chief Executive Officer, and a Director of Capitol III Acquisition Corp. III. Since the closing of the business combination, Mr. Ein has continued to serve as a director of Capitol Acquisition Corp. III (now known as Cision Ltd.). From August 2010 to July 2015, Mr. Ein was the Chairman of the Board, Chief Executive Officer, Treasurer and Secretary of Capitol II. Capitol II completed its business combination with Lindblad Expeditions, Inc. in July 2015. Since the closing of the business combination, Mr. Ein has continued to serve as the Chairman of the Board of Capitol II (and now post-merger Lindblad Expeditions Holdings, Inc.). From June 2007 to October 2009, Mr. Ein was the Chief Executive Officer and Director of Capitol I. Capitol I completed its business combination with Two Harbors Investment Corp., a Maryland real estate investment trust, in October 2009. From October 2009 to May 2015, Mr. Ein served as the Non-Executive Vice Chairman of Two Harbors board of directors. Mr. Ein is the Founder of Venturehouse Group, LLC, a holding company that creates, invests in and builds companies, and has served as its Chairman and Chief Executive Officer since 1999. Venturehouses portfolio includes or has included the seed investment in Matrics Technologies in August 2000 (sold to Symbol Technologies in September 2004), the lead investment in the buyout of Cibernet Corporation from the CTIA in March 2003 (sold to MACH S.à.r.l. in April 2007), the acquisition of VSGi from Net2000 Communications, and an early investment in XM Satellite Radio. He has also been the President of Leland Investments Inc., a private investment firm, since 2005. Mr. Ein is Co-Chairman of Kastle Holding Company LLC, which through its subsidiaries conducts the business of Kastle Systems, LLC, a provider of building and office security systems that was acquired in January 2007. An entity owned by Mr. Ein is also the majority owner and managing member of Kastle Holding Company LLC. In 2008, Mr. Ein founded and is the owner of the Washington Kastles, the World Team Tennis franchise in Washington, D.C., that has won the league championship six times in its nine years in the league. In March, 2017, Mr. Ein led the acquisition of World TeamTennis LLC, the professional team tennis league of which the Washington Kastles are a franchisee, from Billie Jean King and is now its Chairman. Previously in his career, Mr. Ein worked for The Carlyle Group, Brentwood Associates, and Goldman, Sachs & Co. Mr. Ein is the Chairman of the Board of VSGi, a provider of videoconferencing services. Mr. Ein is also the Chairman of the Board of the District of Columbia Public Education Fund and Vice President of the board of directors of the United States Tennis Association and a member of the boards of the District of Columbia College Access Program (DC-CAP) and the International Tennis Hall of Fame. He was appointed by Mayor Vincent Gray to be a member of the D.C. Tax Revision Commission and also serves on the Executive Committee of the Federal City Council. Mr. Ein received a B.S. in Economics with a concentration in Finance from the University of Pennsylvanias Wharton School of Finance and an M.B.A. from the Harvard Business School.
We determined that Mr. Eins public company experience, operational experience and his business contacts qualifies him to serve as a director on Cisions board of directors.
Stephen P. Master. Mr. Master joined GTCR in January 2008 and became a Vice President in September 2012. Prior to joining GTCR, Mr. Master worked as an Analyst in the Telecommunications and Mergers & Acquisitions groups at UBS Investment Bank from June 2006 to December 2007. He holds an MBA with honors from the University of Chicago and a BA summa cum laude from Northwestern University in mathematical methods in the social sciences and economics. He is currently a Director of Cision, Inteliquent, Beeline and Park Place and played an instrumental role in GTCRs investment in Landmark Aviation. He was previously a Director of Protection 1.
We determined that Mr. Masters experience in finance and in advising similar companies qualifies him to serve as a director on Cisions board of directors.
Stuart Yarbrough. Mr. Yarbroughs professional experience includes over 24 years in public accounting, primarily with Ernst & Young and BDO Seidman, LLP. Since June 2008, Mr. Yarbrough has been a private investor. From February 2007 through its final distributions during June 2008, Mr. Yarbrough served as the chief executive officer of 3Point Capital Partners, a private equity firm. From 1994 through February 2007, Mr. Yarbrough was a principal at CrossHill Financial Group Inc., a company he co-founded, which provided investment banking services and venture debt financing to growth companies. Mr. Yarbrough previously served on the board of directors of Solera Holdings, Inc. and DigitalNet Holdings, Inc., as well as several other public companies. Mr. Yarbrough has a B.A. in management sciences from Duke University.
92
We determined Mr. Yarbroughs extensive practical and management experience in public accounting and corporate finance, as well as leadership expertise through his directorship roles in public companies, including service on audit and other board of directors committees, qualifies him to serve as a director on Cisions board of directors.
The board is comprised of eight persons, including Messrs. Ein and Dryden and three persons designated by Cision Owner. Messrs. Anderson, Canfield and Master have been designated by Cision Owner as its three designees under the Nominating Agreement. There is one vacancy on the board.
There are no family relationships between any of Cisions executive officers and directors or director nominees.
The directors are divided into three (3) classes designated as Class I, Class II and Class III. At the 2018 annual general meeting of shareholders, the term of office of the Class I directors shall expire and Class I directors shall be elected for a full term of three (3) years. At the 2019 annual general meeting of shareholders, the term of office of the Class II directors shall expire and Class II directors shall be elected for a full term of three (3) years. At the 2020 annual general meeting of shareholders, the term of office of the Class III directors shall expire and Class III directors shall be elected for a full term of three (3) years. At each succeeding annual general meeting of shareholders, directors shall be elected for a full term of three (3) years to succeed the directors of the class whose terms expire at such annual general meeting.
Our directors are divided among the three classes as follows, in each case, until their successors are elected and qualified:
| Dyson Dryden and Stephen P. Master are Class I directors serving until the general meeting of shareholders to be held in 2018; |
| Stuart Yarbrough and Kevin Akeroyd are Class II directors serving until the general meeting to be held in 2019; and |
| Mark D. Ein, Mark M. Anderson and Philip A. Canfield will be Class III directors serving until the general meeting to be held in 2020. |
As a result of its Ordinary Shares being listed on the New York Stock Exchange, Cision adheres to the rules of such exchange in determining whether a director is independent. The board of directors of Cision has consulted, and will consult, with its counsel to ensure that the boards determinations are consistent with those rules and all relevant securities and other laws and regulations regarding the independence of directors. The New York Stock Exchange listing standards generally define an independent director as a person, other than an executive officer of a company or any other individual having a relationship which, in the opinion of the issuers board of directors, would interfere with the exercise of independent judgment in carrying out the responsibilities of a director. The parties have determined that Messrs. Anderson, Canfield, Ein, Dryden, Master and Yarbrough will be considered independent directors. Cisions independent directors will have regularly scheduled meetings at which only independent directors are present.
For purposes of New York Stock Exchange rules, we are a controlled company. Controlled companies under those rules are companies of which more than 50% of the voting power for the election of directors is held by an individual, a group or another company. Cision Owner controls more than 50% of the voting power of Cisions Ordinary Shares and has certain director nomination rights. Accordingly, it is anticipated that Cision will be eligible to, and the parties intend to, take advantage of certain exemptions from corporate governance requirements provided in the New York Stock Exchange rules. Specifically, as a controlled company, Cision is not be required to have (1) a majority of independent directors, (2) a Nominating and
93
Corporate Governance Committee composed entirely of independent directors, (3) a Compensation Committee composed entirely of independent directors or (4) an annual performance evaluation of the Nominating and Corporate Governance Committee and Compensation Committee. Cision may not have a majority of independent directors, its Compensation, Nominating and Corporate Governance Committee may not consist entirely of independent directors and such committees may not be subject to annual performance evaluations. Accordingly, you will not have the same protections afforded to shareholders of listed companies that are subject to all of the applicable corporate governance requirements. In the event that Cision ceases to be a controlled company, it will be required to comply with those requirements within specified transition periods.
The controlled company exemption does not modify the independence requirements for the audit committee, and Cision must comply with the requirements of the New York Stock Exchange rules with respect thereto.
Our board of directors oversees the risk management activities designed and implemented by our management. Our board of directors executes its oversight responsibility both directly and through its committees. Our board of directors also considers specific risk topics, including risks associated with our strategic initiatives, business plans and capital structure. Our management, including our executive officers, is primarily responsible for managing the risks associated with operation and business of the company and will provide appropriate updates to the board of directors and the audit committee. Our board of directors delegates to the audit committee oversight of its risk management process, and our other committees also consider risk as they perform their respective committee responsibilities. All committees report to the board of directors as appropriate, including when a matter rises to the level of material or enterprise risk.
Cision has established a separately standing audit committee, corporate governance and nominating committee and compensation committee.
Cision has established an audit committee comprised of independent directors. The audit committee consists of Stuart Yarbrough, Mark D. Ein and L. Dyson Dryden. Each of the member of the audit committee is independent under the applicable listing standards. The audit committee has a written charter. The purpose of the audit committee is, among other things, to appoint, retain, set compensation of, and supervise Cisions independent accountants, review the results and scope of the audit and other accounting related services and review Cisions accounting practices and systems of internal accounting and disclosure controls.
The audit committee is and at all times will be composed exclusively of independent directors, as defined for audit committee members under the New York Stock Exchange listing standards and the rules and regulations of the SEC, who are financially literate. Financially literate generally means being able to read and understand fundamental financial statements, including a companys balance sheet, income statement and cash flow statement. In addition, Cision is required to certify to the exchange that the committee has, and will continue to have, at least one member who has past employment experience in finance or accounting, requisite professional certification in accounting, or other comparable experience or background that results in the individuals financial sophistication.
Stuart Yarbrough serves as a financial expert on the Audit Committee.
Cision has established a corporate governance and nominating committee of the board of directors comprised of Mark M. Anderson, L. Dyson Dryden and Stephen P. Master. Each member of the corporate governance and nominating committee is independent under the applicable listing standards. The corporate governance and nominating committee has a written charter. The corporate governance and nominating committee is responsible for overseeing the selection of persons to be nominated to serve on Cisions board of directors.
94
The corporate governance and nominating committee considers persons identified by its members, management, stockholders, investment bankers and others. The guidelines for selecting nominees, which are specified in the corporate governance and nominating committee charter, generally provide that persons to be nominated:
| should have demonstrated notable or significant achievements in business, education or public service; |
| should possess the requisite intelligence, education and experience to make a significant contribution to the board of directors and bring a range of skills, diverse perspectives and backgrounds to its deliberations; and |
| should have the highest ethical standards, a strong sense of professionalism and intense dedication to serving the interests of the stockholders. |
The corporate governance and nominating committee considers a number of qualifications relating to management and leadership experience, background and integrity and professionalism in evaluating a persons candidacy for membership on the board of directors. The corporate governance and nominating committee may require certain skills or attributes, such as financial or accounting experience, to meet specific board needs that arise from time to time and will also consider the overall experience and makeup of its members to obtain a broad and diverse mix of board members. The corporate governance and nominating committee does not distinguish among nominees recommended by stockholders and other persons.
The board of directors of Cision has established a compensation committee consisting of independent directors. The Compensation Committee consists of Mark M. Anderson, Philip A. Canfield and Mark D. Ein. The compensation committee has a written charter. The purpose of the compensation committee will be to review and approve compensation paid to Cisions officers and directors and to administer Cisions incentive compensation plans, including authority to make and modify awards under such plans.
Any award made pursuant to an individual subject to the requirements of Section 16 of the Exchange Act must consist of a committee of two or more members of the board who are Section 162(m)(4)I of nonemployee directors as defined in Rule 16b-3(d)(1) under the Exchange Act.
Cision has adopted a Code of Ethics that applies to all of its employees, officers and directors. This includes Cisions principal executive officer, principal financial officer, and principal accounting officer or controller, or persons performing similar functions. The full text of Cisions Code of Ethics is posted on its website at www.cision.com . Cision intends to disclose on its website any future amendments of the Code of Ethics or waivers that exempt any principal executive officer, principal financial officer, principal accounting officer or controller, persons performing similar functions, or Cisions directors from provisions in the Code of Ethics.
None of the members of the compensation committee is currently, or has been at any time, one of Cisions officers or employees. None of Cisions executive officers currently serves, or has served during the last year, as a member of the board of directors or compensation committee of any entity that has one or more executive officers serving as a member of Cisions board of directors or compensation committee.
Cisions board of directors does not provide a process for shareholders or other interested parties to send communications to the board of directors because management believed that it was premature to develop such processes given the limited liquidity of Holdings Ordinary Shares at that time. However, management of Cision may establish a process for shareholder and interested party communications in the future.
The following section provides compensation information pursuant to the scaled disclosure rules applicable to emerging growth companies under the rules of the SEC.
95
Our Named Executive Officers for the year ended December 31, 2017 include Kevin Akeroyd, our Chief Executive Officer, and Whitney Benner and Jason Edelboim, our two most highly compensated executive officers who were serving as executive officers as of December 31, 2017 (collectively, the Named Executive Officers).
Our compensation policies and philosophies are designed to align compensation with business objectives and the creation of stockholder value, while also enabling us to attract, motivate and retain individuals who contribute to our long-term success. We believe our executive compensation program must be competitive in order to attract and retain executive officers. We seek to implement compensation policies and philosophies by linking a significant portion of executive officers cash compensation to performance objectives and have historically provided a portion of their compensation as long-term incentive compensation in the form of equity awards in Cision Owner.
To date, the compensation of our Named Executive Officers has consisted of a base salary, an annual cash incentive bonus, equity compensation in Cision Owner and health and welfare benefits. Pursuant to their employment agreements, the Named Executive Officers are also eligible to receive certain payments and benefits upon a termination of employment under certain circumstances. Each of our executive officers, along with certain other members of our management, have been given the opportunity to receive grants of equity in Cision Owner pursuant to the Cision Owner Partnership Agreement as further described below. GTCR established the Cision Owner Partnership Agreement to align the interests of our executive officers and management investors with those of our other equity investors and to encourage our executive officers and management investors to continue to operate the business in a manner that enhances our equity value.
Cision Owner has historically determined all of the components of compensation of our executive officers. As a publicly-traded company, our compensation committee is responsible for making compensation decisions and evaluating our compensation program as circumstances require. As part of our ongoing evaluation, it is expected that the compensation committee will apply Cisions policies and philosophies described above.
The following table presents summary information regarding the total compensation for the years ended December 31, 2017 and 2016 for the Named Executive Officers.
|
|
|
|
|
|
|
|
|||||||||||||||||||||
Name and Principal Position | Year |
Salary
($) |
Bonus
($) |
Stock
Awards ($) (1) |
Nonequity
Incentive Plan Compensation ($) |
All Other
Compensation ($) (2) |
Total
($) |
|||||||||||||||||||||
Kevin Akeroyd
Chief Executive Officer |
2017 | 475,000 | | | 311,838 | 9,628 | 796,466 | |||||||||||||||||||||
2016 | 197,954 | (3) | 370,000 | (4) | 3,478,790 | (5) | 98,959 | | 4,145,703 | |||||||||||||||||||
Whitney Benner
Chief Human Resources Officer |
2017 | 243,338 | 173,813 | (6) | | 63,900 | 8,736 | 489,786 | ||||||||||||||||||||
Jason Edelboim
President, Americas |
2017 | 315,000 | 680,912 | (6) | 528,449 | (7) | 103,477 | 5,861 | 1,633,699 |
(1) | Represents the grant date fair value of such awards as determined in accordance with ASC Topic 718. For a discussion of the assumptions underlying these amounts, see Note 7 to our audited financial statements for the year ended December 31, 2017 included elsewhere in this Prospectus/Offer to Purchase. |
(2) | Represents all other compensation paid to or earned by the Named Executive Officers. Other compensation includes group term life insurance contributions, matching 401k contributions and certain other fringe benefits. |
(3) | Represents salary from August 1, 2016, Mr. Akeroyds start date, to December 31, 2016. |
(4) | Represents a one-time cash signing bonus paid to Mr. Akeroyd. |
96
(5) | Consists of (i) 3,091,679 Class C Units with a grant date fair market value of $3,108,790 and (ii) 3,700 Class A Units with a grant date fair market value of $370,000 included as part of Mr. Akeroyds signing bonus. |
(6) | Represents a retention bonus paid in connection with our acquisition of PR Newswire. |
(7) | Consists of 82,500 stock options to acquire ordinary shares of Cision. |
The Named Executive Officers receive a base salary to compensate them for services rendered to our company. The base salary payable to each Named Executive Officer is intended to provide a fixed component of compensation reflecting the executives skill set, experience, position and responsibilities.
Pursuant to the terms of their employment agreements, our Named Executive Officers are eligible to receive cash bonuses based on their performance and the performance of the company and its subsidiaries. Although we do not have a formal plan in place, the board sets performance targets at the beginning of each fiscal year and communicates these targets to our Named Executive Officers. Each Named Executive Officers performance bonus for the year ended December 31, 2017 was determined based on achievement of Corporate and Global Revenue goals and EBITDA goals.
Prior to the formation of Cision, Cision Owner granted newly-hired Named Executive Officers an interest in Cision Owner by awarding Class C Units of Cision Owner (Class C Units) pursuant to Cision Owners Sixth Amended and Restated Agreement of Exempted Limited Partnership (the Cision Owner Partnership Agreement). The Class C Units were reserved for issuance by Cision Owner for incentive purposes at the discretion of the general partner of Cision Owner, subject to certain approvals.
Class C Units were awarded to the Named Executive Officers in 2016, 2015 and 2014 for no consideration and are subject to a participation threshold determined by the general partner of Cision Owner. The Class C Units are subject to the terms of the respective agreements with the executives, but generally vest over a four-year period in annual or quarterly increments following the date of grant, contingent on the individual continuing to provide services to the company. These awards have a fixed-dollar threshold as stated in the respective award agreements that provides the holder an interest only in the appreciation in value of the company over this stated amount (a Participation Threshold).
Upon termination of employment of the respective holder, the unvested Class C Units are forfeited and the vested Class C Units are subject to repurchase by Cision Owner at a price equal to the fair market value of the award on the date of repurchase.
We believe that overall business success creates meaningful value to both unit holders and, through their equity holdings, Cisions executives. The Class C Units are designed as profits interests within the meaning of Revenue Procedures 93 27 and 2001 43, and provide an immediate and significant alignment between our Named Executive Officers and Cisions business. Prior to the Business Combination, Cision Owner followed the practice of awarding Class C Units at or near the time of hire and when deemed appropriate to further demonstrate commitment and reinforcement of value creation. The number of Class C Units granted to each of Cisions Named Executive Officers was not determined pursuant to any formulaic equation or benchmarking to any peer groups; rather, the number of Class C Units was determined by the general partner of Cision Owner in its sole discretion, after taking into account discussions with the Cision management team and overall retention goals.
As profits interests, the Class C Units have no value for tax purposes on the date of grant, but instead are designed to gain value only after Cision Owner has realized a certain level of returns for the holders of its Class A Units (as defined in Cision Owner Partnership Agreement). Distributions will be made first to holders of Class A Units until those holders have received a full return on their capital contributions to Cision Owner plus a specified yield calculated in accordance with the Cision Owner Partnership Agreement. Once Class A Unit holders have received these amounts, the holders of Class C Units are generally entitled to participate in any distributions together with the holders of Cision Owners Class B Units (as defined in the
97
Cision Owner Partnership Agreement) in the proportions set forth in the Cision Owner Partnership Agreement, provided that no Class C Unit is entitled to any portion of a distribution until the Participation Threshold with respect to such unit has been realized. The threshold value of each Class C Unit is based on the liquidation value of the equity of Cision Owner at the date of the grant.
Our shareholders adopted and approved an omnibus incentive plan (the 2017 Omnibus Incentive Plan) in connection with the Business Combination. During the year ended December 31, 2017, Jason Edelboim was our only Named Executive Officer who received grants under the 2017 Omnibus Incentive Plan.
The following table summarizes, for each of the Named Executive Officers, the number of Class C Units of Cision Owner held as of December 31, 2017.
|
|
|
|
|
||||||||||||
Name and Principal Position |
# Shares or
Units of Stock that have not vested (#) (1) |
Market Value
# Share or Units of Stock that have not vested ($) (2) |
# Unearned
Shares, Units or Other Rights that have not vested (#) |
Payout Value of
Unearned Shares, Units or other Rights that have not vested ($) |
||||||||||||
Kevin Akeroyd,
CEO |
1,932,299 | (3) | 5,352,468 | | | |||||||||||
Whitney Benner
Chief Human Resources Officer |
168,750 | (4) | 467,438 | | | |||||||||||
Jason Edelboim
President, Americas |
168,750 | (4) | 467,438 | | |
(1) | Represents unvested Class C Units of Cision Owner. |
(2) | There is no established public trading market for the Class C Units of Cision Owner. The value of the Class C Units at December 31, 2016 was $2.77 per Class C Unit based on a valuation analysis of the Fair Market Value of such units. For each Named Executive Officer, the participation threshold at which such units will participate in distributions has not been deducted from the fair market value of the applicable units. Mr. Akeroyds participation threshold for all his Class C Units is $3.09. The participation threshold for all of the Class C Units held by Ms. Benner and Mr. Edelboim is $4.25. See Incentive Unit Awards above. These values may not reflect the value actually realized by the Named Executive Officers upon vesting. |
(3) | Mr. Akeroyds Class C Units vest over a four-year period at quarterly intervals beginning on September 30, 2016. |
(4) | Each of Ms. Benners and Mr. Edelboims Class C Units vest over a four-year period at yearly intervals beginning on June 30, 2017. |
98
The following table summarizes, for each of the Named Executive Officers, the number of Cision Ltd. equity awards held as of December 31, 2017.
|
|
|
|
|
|
|||||||||||||||
Name and Principal Position |
Number of
Securities Underlying Unexercised Options (#) Exercisable |
Number of
Securities Underlying Unexercised Options (#) Unexercisable |
Equity
Incentive Plan Awards: Number Of Securities Underlying Unexercised Unearned Options (#) |
Option
Exercise Price ($) |
Option
Expiration Date |
|||||||||||||||
Kevin Akeroyd,
CEO |
| | | | | |||||||||||||||
Whitney Benner
Chief Human Resources Officer |
| | | | | |||||||||||||||
Jason Edelboim
President, Americas |
| 82,500 | (1) | | $ | 12.78 |
September 22,
2027 |
(1) | Mr Edelboims options become exercisable in four equal annual installments beginning August 31, 2018. |
We maintain a tax-qualified defined contribution plan meeting the requirements of Section 401(k) of the Internal Revenue Code, commonly called a 401(k) plan, for substantially all of our U.S. employees through Fidelity. The 401(k) plan is available on the same terms to all of our U.S. employees, including the Named Executive Officers. Each participant can elect to contribute from 0% to 100% of his or her base salary to the 401(k) plan, subject to Internal Revenue Service and ERISA limitations. We also make matching 401(k) contributions up to a specified portion of each employees salary. The deferred amount is invested in accordance with the election of the participant in a variety of investment choices.
Each of the Named Executive Officers is a party to an employment agreement. Mr. Akeroyds employment agreement is between himself and Cision US Inc. (Cision US). Ms. Benners employment agreement is between herself and PR Newswire Association, LLC (PR Newswire). Mr. Edelboims employment agreement is between himself and PR Newswire. The following summary sets forth the material terms of the Named Executive Officers existing employment agreements.
The employment agreement with Kevin Akeroyd provides that Mr. Akeroyd will serve as the Chief Executive Officer of Cision US. The term of Mr. Akeroyds employment commenced on August 1, 2016 and will continue until (i) Mr. Akeroyds resignation, death or disability or (ii) Cision terminates his employment with or without Cause. On June 29, 2017, in connection with the consummation of the Business Combination, Cision US entered into an amended employment agreement with Mr. Akeroyd in order to remove Cision Owner as a party to Mr. Akeroyds employment agreement. The terms of Mr. Akeroyds employment were not substantially modified by such amendment. Mr. Akeroyds base salary is set at $475,000 per year and is subject to annual increase as approved by Cisions board of directors.
Subject to continued employment, Mr. Akeroyd will be eligible to receive an annual bonus in an amount up to 100% of his base salary, as determined by Cisions board of directors based upon Mr. Akeroyds performance and the performance of Cision, Cision US and the other subsidiaries of Cision relative to financial, operating and other objectives mutually agreed upon by Cisions board of directors and Mr. Akeroyd. In addition, Mr. Akeroyd is entitled to such other benefits as are approved by Cisions board of directors and made generally available to all senior management of Cision and Cision US.
99
If Mr. Akeroyds employment is terminated for any reason, Mr. Akeroyd is entitled to receive:
| any earned but unpaid portion of his base salary through the date of such termination, subject to withholding and other appropriate deductions; |
| reimbursement for expenses accrued during employment, subject to and in accordance with, Cision USs expense reimbursement policy; |
| any earned but unpaid annual bonus relating to any prior period; and |
| any vested benefits (including vacation) accrued through the date of such termination in accordance with applicable law or the governing agreement, plan or policy rules (together, the Akeroyd Accrued Obligations). |
If Mr. Akeroyds employment is terminated by resignation with Good Reason or by Cisions board of directors without Cause, then, in addition to the Akeroyd Accrued Obligations, during the 12-month period commencing on the date of termination (the Akeroyd Severance Period), (x) Cision US shall pay to Mr. Akeroyd an aggregate amount equal to 100% of his annual base salary, and (y) Cision US shall pay the premiums for Mr. Akeroyds continued coverage under Cision USs health benefit plan during the Akeroyd Severance Period (subject to certain limitations).
In the event of Mr. Akeroyds resignation, if at the time of such resignation Cision US had the right to terminate Mr. Akeroyds employment with Cause, then Cision US may elect to treat such resignation as a termination of Mr. Akeroyds employment by Cision US with Cause.
Mr. Akeroyds employment agreement also contains provisions relating to obligations to maintain confidentiality, ownership of property developed during employment, third-party information, use of information of prior employers and non-solicitation of Cision USs employees for a period of 12 months.
For purposes of Mr. Akeroyds employment agreement:
Cause means (i) (a) the conviction or plea of no contest for or indictment on a felony or a crime involving moral turpitude or (b) the commission of any other act or omission involving (x) dishonesty that is reasonably likely to materially and adversely affect Cision or any of its subsidiaries or (y) fraud, in either case, with respect to Parent, Cision US or any of their respective subsidiaries or any of their customers, vendors or employees, (ii) substantial and repeated failure to perform duties of the office held by Mr. Akeroyd as reasonably and expressly directed by Cisions board of directors, provided that Mr. Akeroyd shall have the opportunity to address Cisions board of directors before a termination pursuant to this clause (ii) becomes effective, (iii) gross negligence or willful misconduct with respect to the Cision, Cision US or any of their respective subsidiaries or any of their customers, vendors or employees, (iv) conduct which could reasonably be expected to bring Cision, Cision US or any of their respective subsidiaries into substantial public disgrace or disrepute, (v) any breach by Mr. Akeroyd of the confidentiality or non-solicitation provisions of his agreement and/or (vi) a failure to observe Cisions, Cision USs or any of their respective subsidiaries policies or standards regarding employment practices (including, without limitation, nondiscrimination and sexual harassment policies) as approved by Cisions board of directors from time to time.
Good Reason means (i) a material reduction in Mr. Akeroyds then effective annual base salary, (ii) a material diminution in Mr. Akeroyds title, (iii) the assignment of duties to Mr. Akeroyd materially inconsistent with his position or (iv) the relocation by Cision US of Mr. Akeroyds principal office to a location which is more than 50 miles outside of the San Jose metropolitan area, in each case, without the prior written consent of Mr. Akeroyd.
The employment agreement with Whitney Benner provides that Ms. Benner will serve as the Chief Human Resources Officer of PR Newswire. The term of Ms. Benners employment will continue until (i) Ms. Benners resignation (upon 30 days prior written notice to PR Newswire), death or disability or (ii) PR Newswire terminates her employment with or without Cause. On January 9, 2018, PR Newswire
100
entered into an amended employment agreement with Ms. Benner in order to remove Cision Owner as a party to Ms. Benners employment agreement. The terms of Ms. Benners employment were not substantially modified by such amendment.
For each fiscal year beginning in 2017, subject to continued employment through the last day of such fiscal year, Ms. Benner will be eligible to receive an annual bonus in an amount up to 40% of her base salary, as determined by PR Newswire based upon Ms. Benners performance and the performance of PR Newswire and its subsidiaries relative to financial, operating and other objectives set by PR Newswire. In addition, Ms. Benner is entitled to such other benefits as are approved by PR Newswire and made generally available to all senior management of PR Newswire.
If Ms. Benners employment is terminated for any reason, Ms. Benner is entitled to receive:
| any earned but unpaid portion of her base salary through the date of such termination, subject to withholding and other appropriate deductions; |
| reimbursement for reasonable and documents expenses accrued during employment, subject to and in accordance with, PR Newswires expense reimbursement policy; |
| any earned but unpaid annual bonus relating to any prior fiscal year; and |
| any vested benefits (including vacation, but excluding severance-type benefits) accrued through the date of such termination in accordance with applicable law or the governing agreement, plan or policy rules (together, the Benner Accrued Obligations). |
If Ms. Benners employment is terminated by PR Newswire without Cause, then, in addition to the Benner Accrued Obligations, (1) PR Newswire will give Ms. Benner three months prior notice of such termination, during which period Ms. Benner will assist as reasonably required by PR Newswire to transition her duties and train any successor, and during which period PR Newswire may, in its absolute discretion, (A) place Ms. Benner on garden leave and require Ms. Benner not to come into the office, or (B) elect to provide Ms. Benner payment of her base salary and premiums for continued coverage under PR Newswires health benefit plans in lieu of all or any portion of such three month notice period, which payment shall be made in installments on PR Newswires regular payroll dates unless otherwise agreed between Ms. Benner and PR Newswire and during which time no bonus eligibility will accrue; (2) during the nine month period commencing on the date of termination, PR Newswire shall continue to pay Ms. Benner at her base salary rate, payable in equal installments on PR Newswires regular salary payment dates as in effect on the date of the separation (the Benner Severance Payments and any period during which the Benner Severance Payments are payable, each a Benner Severance Period); and (3) PR Newswire shall pay the premiums for Ms. Benners continued coverage under PR Newswires health benefit plans during the Benner Severance Period (subject to certain limitations, the Benner Severance Benefits). In addition, PR Newswire shall have the option, by delivering written notice to Ms. Benner at least 60 days prior to the end of the then applicable Benner Severance Period, to extend the Benner Severance Period for up to two additional six month periods (i.e., through the 21 month anniversary of the date of separation) during which period PR Newswire shall continue to pay the Benner Severance Payments at the same annual rate (pro-rated as applicable) and provide the Benner Severance Benefits.
Ms. Benners employment agreement also contains provisions relating to obligations to maintain confidentiality, ownership of property developed during employment, third-party information and use of information of prior employers, as well as non-competition and non-solicitation covenants which remain in effect during the term of Ms. Benners employment plus either (i) the Benner Severance Period, if she is terminated without Cause, or (ii) the 12-month period immediately following Ms. Benners termination, if she is terminated under any other circumstance.
For purposes of Ms. Benners employment agreement:
Cause means (i) the commission of a felony or a crime involving moral turpitude or the commission of any other act or omission involving dishonesty or fraud with respect to PR Newswire, Cision or any of their respective subsidiaries or any of their customers, vendors or employees, (ii) substantial and repeated failure to perform duties of the office held by Ms. Benner as reasonably directed by an executive to whom Ms. Benner
101
directly or indirectly reports or by PR Newswire, (iii) gross negligence or willful misconduct with respect to PR Newswire, Cision or any of their respective subsidiaries or any of their customers, vendors or employees, (iv) conduct which could reasonably be expected to bring PR Newswire, Cision or any of their respective subsidiaries into substantial public disgrace or disrepute, (v) any breach by Ms. Benner of the confidentiality, non-competition or non-solicitation provisions of her agreement and/or (vi) a failure to observe policies or standards regarding employment practices (including, without limitation, nondiscrimination and sexual harassment policies) as approved by PR Newswire from time to time.
The employment agreement with Jason Edelboim provides that Mr. Edelboim will serve as the President, PRN Americas, of PR Newswire. The term of Mr. Edelboims employment will continue until (i) Mr. Edelboims resignation (upon 30 days prior written notice to PR Newswire), death or disability or (ii) PR Newswire terminates his employment with or without Cause. On October 3, 2017, PR Newswire entered into an amended employment agreement with Mr. Edelboim in order to remove Cision Owner as a party to Mr. Edelboims employment agreement. The terms of Mr. Edelboims employment were not substantially modified by such amendment.
For fiscal year 2016, subject in its entirety without pro-ration to continued employment through the last day of 2016, Mr. Edelboim was eligible for an annual bonus in an amount up $165,006. For each fiscal year beginning in 2017, subject to continued employment through the last day of such fiscal year, Mr. Edelboim will be eligible to receive an annual bonus in an amount up to 50% of his base salary, as determined by PR Newswire based upon Mr. Edelboims performance and the performance of PR Newswire and its subsidiaries relative to financial, operating and other objectives set by PR Newswire. On June 16, 2018 (the Retention Bonus Date), Mr. Edelboim will also receive (i) a one-time cash bonus in an amount of $150,000 (such bonus, the Time Based Component) and (ii) a one-time cash bonus in the amount of $150,000 (such amount, the Performance Based Component), in recognition of having achieved the management best case performance for revenue and EBITDA as disclosed to Cision US in connection with the sale of PR Newswire to Cision US; in each case subject to Mr. Edelboims continued employment with PR Newswire through and on the Retention Bonus Date. If PR Newswire terminates Mr. Edelboim without Cause prior to the Retention Bonus Date, Mr. Edelboim will receive (i) a pro-rated portion, to the extent earned, of the Time Based Component, and (ii) 100% of the Performance Based Component, in each case, as a lump sum payment payable within 30 days of such without Cause termination. In addition, Mr. Edelboim is entitled to such other benefits as are approved by PR Newswire and made generally available to all senior management of PR Newswire.
If Mr. Edelboims employment is terminated for any reason, Mr. Edelboim is entitled to receive:
| any earned but unpaid portion of his base salary through the date of such termination, subject to withholding and other appropriate deductions; |
| reimbursement for reasonable and documents expenses accrued during employment, subject to and in accordance with, PR Newswires expense reimbursement policy; |
| any earned but unpaid annual bonus relating to any prior fiscal year; and |
| any vested benefits (including vacation, but excluding severance-type benefits) accrued through the date of such termination in accordance with applicable law or the governing agreement, plan or policy rules (together, the Edelboim Accrued Obligations). |
If Mr. Edelboims employment is terminated by PR Newswire without Cause, then, in addition to the Edelboim Accrued Obligations, (1) PR Newswire will give Mr. Edelboim three months prior notice of such termination, during which period Mr. Edelboim will assist as reasonably required by PR Newswire to transition his duties and train any successor, and during which period (x) PR Newswire will continue to pay Mr. Edelboims base salary and premiums for continued coverage under PR Newswires health benefit plans (which payment shall be made in installments on PR Newswires regular payroll dates unless otherwise agreed between Mr. Edelboim and PR Newswire), (y) no bonus eligibility will accrue for the entire calendar year in which Mr. Edelboim has been terminated and (z) PR Newswire may, in its absolute discretion, place Mr. Edelboim on garden leave and require Mr. Edelboim not to come into the office; (2) during the nine
102
month period commencing on the date of termination, PR Newswire shall continue to pay Mr. Edelboim at his base salary rate, payable in equal installments on PR Newswires regular salary payment dates as in effect on the date of the separation (the Edelboim Severance Payments and any period during which the Edelboim Severance Payments are payable, each a Edelboim Severance Period); (3) PR Newswire shall pay the premiums for Mr. Edelboims continued coverage under PR Newswires health benefit plans during the Edelboim Severance Period (subject to certain limitations, the Edelboim Severance Benefits); and (4) PR Newswire shall provide reimbursement of Mr. Edelboims reasonable documented costs for outplacement, career search, executive coaching or similar services, comparable to what has been customarily provided to similarly situated executives of PR Newswire, and such reimbursement shall be made to Mr. Edelboim by PR Newswire within 30 days after presentation of such costs, in accordance with PR Newswires company policy, to PR Newswire. In addition, PR Newswire shall have the option, by delivering written notice to Mr. Edelboim at least 60 days prior to the end of the then applicable Edelboim Severance Period, to extend the Edelboim Severance Period for up to two additional six month periods (i.e., through the 21 month anniversary of the date of separation) during which period PR Newswire shall continue to pay the Edelboim Severance Payments at the same annual rate (pro-rated as applicable) and provide the Edelboim Severance Benefits.
Mr. Edelboims employment agreement also contains provisions relating to obligations to maintain confidentiality, ownership of property developed during employment, third-party information and use of information of prior employers, as well as non-competition and non-solicitation covenants which remain in effect during the term of Mr. Edelboims employment plus either (i) the Edelboim Severance Period, if he is terminated without Cause, or (ii) the 12-month period immediately following Mr. Edelboims termination if he is terminated under any other circumstance.
The definition of Cause in Mr. Edelboims employment agreement is substantially identical to the definition of Cause in Ms. Benners employment agreement, described above.
No directors received compensation for their services as director for the years ended December 31, 2017 or 2016.
103
The following description of the material terms of the share capital of Cision includes a summary of specified provisions of the charter documents of Cision in effect. This description is qualified by reference to Cisions charter documents as currently in effect, copies of which are attached to the registration statement of which this Prospectus/Offer to Exchange constitutes a part.
Cision is a Cayman Islands exempted company with limited liability. Its affairs are governed by its Amended and Restated Memorandum and Articles of Association (the Articles) and the Companies Law.
The authorized share capital of Cision is US$50,000 consisting of 480,000,000 Ordinary Shares, par value $0.0001 per share, and 20,000,000 preferred shares of par value US$0.0001 per share. As of April 13, there were 124,370,191 ordinary share issued and outstanding and no preferred shares have been issued or are outstanding.
Walkers, Cayman Islands counsel to Cision, has confirmed that all of the issued and outstanding Ordinary Shares of Cision are fully paid and non-assessable. Certificates representing the outstanding Ordinary Shares are generally not issued and legal title to the issued shares is recorded in registered form in the register of members. Holders of Ordinary Shares have no pre-emptive, subscription, redemption or conversion rights.
The board of directors of Cision may provide for other classes of shares, including series of preferred shares, out of the authorized but unissued share capital, which could be utilized for a variety of corporate purposes, including future offerings to raise capital for corporate purposes or for use in employee benefit plans. Such additional classes of shares shall have such voting powers (full or limited or without voting powers), designations, preferences and relative, participating, optional or other special rights and qualifications, limitations or restrictions thereof as may be determined by the board of directors. If any preferred shares are issued, the rights, preferences and privileges of holders of Ordinary Shares will be subject to, and may be adversely affected by, the rights of the holders of such preferred shares.
The holders of Ordinary Shares are entitled to such dividends as may be declared by the board of directors, subject to the Companies Law and the Articles. Dividends and other distributions on issued and outstanding Ordinary Shares may be paid out of the funds of Cision lawfully available for such purpose, subject to any preference of any outstanding preferred shares. Dividends and other distributions will be distributed among the holders of Ordinary Shares on a pro rata basis.
Each ordinary share entitles the holder to one vote on all matters upon which the Ordinary Shares are entitled to vote. Voting at any shareholders meeting is by show of hands, unless voting by way of poll demanded by the chairman of the board of directors or any shareholder present or voting by proxy.
A quorum required for a meeting of shareholders requires the presence in person or by proxy of persons holding in aggregate not less than a simple majority of all voting share capital of Cision in issue, provided that for so long as Cision is a Controlled Company within the meaning of the rules of the then Designated Stock Exchange, general meetings shall not be quorate unless Cision Owner is in attendance (provided that Cision Owner holds shares in Cision).
A special resolution will be required for important matters such as a merger or consolidation of Cision, change of name or making changes to the Articles or the voluntary winding up of Cision.
An ordinary resolution of the shareholders of Cision requires the affirmative vote of a simple majority of the votes cast at a quorate general meeting, while a special resolution requires the affirmative vote of no less than two-thirds of the votes cast at a quorate general meeting or, in each case, a unanimous resolution in writing.
104
The rights attached to any class of shares (unless otherwise provided by the terms of issue of that class), such as voting, dividends and the like, may be varied only with the sanction of a special resolution passed at a general meeting or by the written consent of the holders of two-thirds of the shares of that class or with the sanction of a resolution passed by a majority of not less than two thirds of the votes cast at a separate meeting of the holders of the shares of that class. The rights conferred upon the holders of the shares of any class shall not (unless otherwise provided by the terms of issue of that class) be deemed to be varied by the creation or issue of further shares ranking in priority to or pari passu with such previously existing shares.
Any shareholder may transfer all or any of his or her Ordinary Shares by an instrument of transfer in the usual or common form or any other form prescribed by the Designated Stock Exchange or as otherwise approved by the board of directors.
In addition, the Articles prohibit the transfer of shares in breach of the rules or regulations of the Designated Stock Exchange or any relevant securities laws (including the Exchange Act).
On a return of capital on winding up or otherwise (other than on conversion, redemption or purchase of Ordinary Shares), assets available for distribution among the holders of Ordinary Shares shall be distributed among the holders of the Ordinary Shares on a pro rata basis.
The management of Cision is vested in a board of directors. The Articles provide that there shall be a board of directors consisting of eight (8) directors, unless increased or decreased from time to time by the directors or by Cision in general meeting, provided that, for so long as Cision Owner has the right to nominate any director for election pursuant to the Articles, the size of the board of directors shall not be increased or decreased without the prior written consent of Cision Owner. The board consists of seven (7) directors and has one vacancy. So long as shares are listed on the Designated Stock Exchange, the board of directors shall include such number of independent directors as the relevant rules applicable to the listing of any shares on the Designated Stock Exchange require (subject to any applicable exceptions for Controlled Companies).
The directors are divided into three (3) classes designated as Class I, Class II and Class III, respectively. At the 2018 annual general meeting of shareholders, the term of office of the Class I directors shall expire and Class I directors shall be elected for a full term of three (3) years. At the 2019 annual general meeting of shareholders, the term of office of the Class II directors shall expire and Class II directors shall be elected for a full term of three (3) years. At the 2020 annual general meeting of shareholders, the term of office of the Class III directors shall expire and Class III directors shall be elected for a full term of three (3) years. At each succeeding annual general meeting of shareholders, directors shall be elected for a full term of three (3) years to succeed the directors of the class whose terms expire at such annual general meeting.
The directors of Cision have the power from time to time and at any time to appoint any person as a director to fill a casual vacancy on the board of directors or as an addition to the existing board of directors, subject to the remaining provisions of the Articles, the terms of the Nominating Agreement, applicable law and the listing rules of the Designated Stock Exchange; provided that, subject to the terms of the Nominating Agreement, any vacancy not filled by the directors may be filled by the shareholders by ordinary resolution at the next annual general meeting or extraordinary general meeting called for that purpose; provided further, that, subject to the terms of the Nominating Agreement, whenever the holders of any class or classes of share or series thereof are entitled to elect one or more directors by the provisions of the Articles, vacancies and newly created directorships of such class or classes or series may be filled by a majority of the directors elected by such class or classes or series thereof then in office, or by a sole remaining director so elected or by the holders of such class or classes of shares or series thereof in accordance with the Articles. Any director so appointed shall hold office until the expiration of the term of such class of directors or until his earlier death, resignation or removal.
105
A director may be removed from office by the shareholders by special resolution only for cause (as defined in the Articles); provided that, subject to certain limitations set forth in the Articles, (x) until the date of the 2020 annual general meeting of the shareholders (and not thereafter), any director may be removed with or without cause upon the affirmative vote of the Cision Owner if the Cision Owner and its affiliates beneficially own at least 50% of the issued Ordinary Shares and (y) any director who was nominated for election by the Cision Owner may be removed with or without cause upon the affirmative vote of the Cision Owner for so long as the Cision Owner has the right to nominate such director for election pursuant to the Articles.
A vacancy on the board of directors created by the removal of a director under the provisions of the Articles may be filled by the election or appointment by ordinary resolution at the general meeting at which such director is removed or by the affirmative vote of a simple majority of the remaining directors present and voting at a meeting of the directors.
The appointment and removal of directors is subject to the applicable rules of the Designated Stock Exchange and to the provisions of the Nominating Agreement.
The detailed procedures for the nomination of persons proposed to be elected as directors at any general meeting of Cision are set out in the Articles.
The Articles provide that the board of directors and officers shall be indemnified from and against all liability which they incur in execution of their duty in their respective offices, except liability incurred by reason of such directors or officers actual fraud or willful default.
106
Cision has adopted a Related Party Transactions policy that sets forth the manner in with Cision considers, evaluates and, where appropriate, conducts transactions with Related Parties, which are defined as: (a) each director or officer of Cision; (b) any nominee for election as a director of Cision; (c) any security holder who is known to Cision to own of record or beneficially more than five percent (5%) of any class of Cisions voting securities; and (d) any Immediate Family Member (as defined in Regulation S-K Item 404(a)) of any of the foregoing persons. For purposes of the Related Party Transactions policy, a Related Party Transaction means a transaction, arrangement or relationship (or any series of similar transactions, arrangements or relationships) in which Cision was, is or will be a participant and the amount involved will or may be expected to exceed $120,000 in any fiscal year, and in which any Related Party had, has or will have a direct or indirect material interest (including any transactions requiring disclosure under Item 404 of Regulation S-K promulgated under the Securities Exchange Act of 1934, as amended). Any director, nominee for election as a director or officer who intends to enter into a Related Party Transaction shall disclose that intention and all material facts with respect to such transaction to the Audit Committee, and any other employee of Cision who intends to cause Cision to enter into any Related Party Transaction shall disclose that intention and all material facts with respect to the transaction to his or her superior, who shall be responsible for seeing that such information is reported to the Audit Committee.
The Audit Committee reviews all Related Party Transactions and approves or disapproves such transactions in advance of such transaction being given effect (subject to any permissible delegation of authority). The Audit Committee may approve the Related Party Transaction only if the Audit Committee determines in good faith that, under all of the circumstances, the transaction is in the best interests of the Company and its shareholders. In connection with approving or ratifying a Related Party Transaction, the Audit Committee shall carefully and diligently consider all of the relevant facts and circumstances relating to whether the transaction is in the best interests of Cision, including consideration of the following factors: the position within or relationship of the Related Party with Cision; the materiality of the transaction to the Related Party and Cision, including the dollar value of the transaction, without regard to profit or loss; the business purpose for and reasonableness of the transaction (including the anticipated profit or loss from the transaction), taken in the context of the alternatives available to Cision for attaining the purposes of the transaction; whether the transaction is comparable to a transaction that could be available with an unrelated party, or is on terms that Cision offers generally to persons who are not Related Parties; whether the transaction is in the ordinary course of Cisions business and was proposed and considered in the ordinary course of business; the effect of the transaction on Cisions business and operations, including on Cisions internal control over financial reporting and system of disclosure controls or procedures; any additional conditions or controls (including reporting and review requirements) that should be applied to such transaction; whether the Related Party Transaction was initiated by Cision or the Related Party; the Related Partys interest in the Related Party Transaction; and any other information regarding the Related Party Transaction or the Related Party that would be material to investors in light of the circumstances of the particular transaction.
These procedures are intended to determine whether any Related Party Transaction impairs the independence of a director or presents a conflict of interest on the part of a directors, employee or officer.
On May 30, 2014, Canyon Valor Companies, Inc. (formerly GTCR Valor Companies, Inc.), a wholly owned indirect subsidiary of Cision (Cision Sub), entered into an Amended and Restated Professional Services Agreement (the Services Agreement) with Cision Owner, GTCR LLC and GTCR Management X LP (GTCR Management) pursuant to which Cision Sub agreed to engage GTCR Management as a financial and management consultant.
Under the terms of the Services Agreement, GTCR Management provides various services to Cision Owner and its subsidiaries, including Cision Sub, such as corporate strategy, budgeting of future corporate investments and acquisition and divestiture strategies.
GTCR Management is entitled to a placement fee in connection with any equity or debt financing of Cision Owner or any of its subsidiaries (regardless of whether such financing is provided by GTCR Management or
107
any of its affiliates), subject to certain exceptions. The Services Agreement also requires Cision Sub to pay an annual management fee to GTCR Management, unless such amounts are not permitted to be paid under the agreements governing Cisions 2016 First Lien Credit Facility and 2016 Second Lien Credit Facility, in which case such fees automatically accrue without interest for the benefit of GTCR Management, to be paid at such time as and to the extent that such fees are permitted to be paid under such credit facilities. Cision Sub is also required to reimburse GTCR Management for reasonable travel expenses, legal fees and other out-of-pocket fees and expenses incurred by GTCR Management or its affiliates in connection with the performance of its obligations under the Services Agreement. Cision Sub has also agreed to indemnify GTCR Management and its affiliates for any losses or liabilities they incur in connection with their performance under the Services Agreement, except to the extent resulting from GTCR Managements gross negligence or willful misconduct. Cision Sub paid fees and expense reimbursement to GTCR Management in an aggregate amount of $0.3 million, $0.6 million and $0.6 million in 2017, 2016 and 2015, respectively.
Cision and GTCR Management terminated the Services Agreement in connection with the consummation of the Business Combination.
Prior to the consummation of the Business Combination, Cision from time to time engaged in intercompany transactions with Cision Owner, including intercompany loans. In connection with the acquisition of Bulletin Intelligence, on March 24, 2017, in exchange for a note, Cision Owner issued $7.0 million of Units of Cision Owner to a subsidiary of Cision, which Units were used as consideration for the purchase of Bulletin Intelligence. The note was repaid to Cision Owner in connection with consummation of the Business Combination.
In connection with the acquisition of PR Newswire on June 16, 2016, Cision Owner loaned $195.9 million to Cision and issued $40.0 million of Units of Cision Owner to a subsidiary of Cision, which cash and Units were used to fund the PR Newswire acquisition. Cision Owner contributed these loans to Cision in exchange for CPECs, resulting in the cancellation of these loans.
From time to time prior to the consummation of the Business Combination, Cision also issued CPECs to Cision Owner in connection with capital contributions from Cision Owner to Cision.
See Convertible Preferred Equity Certificates of Cision (CPECs) and Note 2 to the Cisions audited financial statements included elsewhere in this Prospectus/Offer to Exchange for a description of the CPECs. In connection with the Business Combination, Cision Owner contributed the CPECs, along with its outstanding equity in Cision, to Cision.
Between April 2014 and July 2016, Cision Owner entered into 11 Subscription Agreements with Cision Luxco pursuant to which Cision Luxco issued and sold Convertible Preferred Equity Certificates (CPECs) to Cision Owner. The CPECs were redeemable at any time by Cision Luxco and matured 49 years from the date of issuance. In connection with the Business Combination, Cision Owner contributed the CPECs, along with its outstanding equity in Cision Luxco, to Cision.
In connection with the completion of Cisions acquisition of Gorkana on October 21, 2014, GTCR Canyon UK Investments Limited, a subsidiary of Cision, acquired Gorkana and issued promissory notes to the sellers of Gorkana, including to Jeremy Thompson, who served as our President, EMEA, until his separation on May 31, 2017. A portion of the notes were denominated in US dollars and a portion were denominated in pounds sterling. Notes in the amounts of $617,971 and £1,726,272 were issued to Mr. Thompson. The US dollar-denominated notes bore interest at a rate of 8% per annum and were payable on demand. The pounds sterling-denominated notes were secured by the value of a cash collateral account and bore interest equal to the interest paid on the underlying cash collateral account. Concurrently with the issuance of the notes, Mr. Thompson, Cision Owner and certain of its affiliates entered into a subscription agreement pursuant to which Mr. Thompson agreed to contribute the notes to Cision Luxco in exchange for equivalent notes issued by Cision Luxco (the Lux Notes).
108
On December 22, 2014, Cision Owner and Cision entered into an Investment Agreement with Mr. Thompson pursuant to which he agreed to contribute the Lux Notes to Cision in exchange for securities of Cision (the Cision Shares) and a portion in exchange for equivalent notes of Cision (the Cision Notes). On September 18, 2015, Cision Owner issued Units in Cision Owner (an aggregate deemed capital contribution of $662,939) to Mr. Thompson in exchange for the Cision Shares held by him. On December 21, 2015, Cision repaid the pounds sterling-denominated notes to Mr. Thompson in the amount of £1,726,272.
109
The following table sets forth information as of April 13, 2018 regarding the beneficial ownership of Cisions Ordinary Shares by:
| Each person known to be the beneficial owner of more than 5% of Cisions outstanding Ordinary Shares; |
| Each director and each of Cisions principal executive officers and two other most highly compensated executive officers (named executive officers); and |
| All current executive officers and directors as a group. |
Unless otherwise indicated, Cision believes that all persons named in the table have sole voting and investment power with respect to all Ordinary Shares beneficially owned by them.
|
|
|
||||||
Name and Address of Beneficial Owner (1) |
Amount and
Nature of Beneficial Ownership |
Approximate
Percentage of Outstanding Ordinary Shares (2) |
||||||
Directors and Executive Officers
|
||||||||
Kevin Akeroyd | | (3) | | |||||
Whitney Benner | | (3) | | |||||
Jason Edelboim | | (3) | | |||||
Mark D. Ein | 8,454,412 | (4) | 6.6 | % | ||||
L. Dyson Dryden | 2,818,137 | (5) | 2.2 | % | ||||
Stephen P. Master | (6) (7) | | ||||||
Stuart Yarbrough | | | ||||||
Mark M. Anderson | (6) (7) | | ||||||
Philip A. Canfield | (6) (7) | | ||||||
All directors and executive officers as a group (17 individuals) | 13,007,818 | (3) (8) | 10.0 | % | ||||
Five Percent Holders:
|
||||||||
Cision Owner | 80,370,050 | (6) | 63.6 | % | ||||
Capital Acquisition Management 3 LLC | 8,454,412 | (9) | 6.6 | % |
(1) | Unless otherwise indicated, the business address of each of the individuals is 130 East Randolph St., 7 th Floor, Chicago, IL 60601. |
(2) | The percentage of beneficial ownership of Cision is calculated based on 124,370,191 Ordinary Shares outstanding. The amount of beneficial ownership for each individual or entity includes shares of common stock issuable in respect of Private Warrants. Unless otherwise indicated, Cision believes that all persons named in the table have sole voting and investment power with respect to all Ordinary Shares beneficially owned by them as of the date indicated. |
(3) | All of our executive officers other than Yujie Chen hold equity interests in Cision Owner pursuant to the Cision Owner Partnership Agreement. These executive officers have neither a controlling interest in Cision Owner nor direct or indirect voting or dispositive power with respect to Ordinary Shares of Cision held of record by Cision Owner. See Management Executive Compensation Incentive Unit Awards. |
(4) | Represents shares held by Leland Investments Inc. (Leland), an entity controlled by Mr. Ein, and Capitol Acquisition Management 3 LLC, of which is the sole member. Includes 4,324,307 shares issuable upon exercise of Private Warrants. |
(5) | Represents shares held by Capitol Acquisition Founder 3 LLC, an entity controlled by Mr. Dryden. Includes 1,441,436 shares issuable upon exercise of private warrants. |
(6) | Includes 2,032,043 Ordinary Shares issuable upon exercise of private warrants. Voting and dispositive power with respect to the Ordinary Shares held by Cision Owner is exercised by its general partner, Canyon Partners, Ltd., which is controlled by a majority vote of its ten-member board of directors (Canyon Board of Directors). GTCR Investment X AIV Ltd. (GTCR AIV) as the sole shareholder |
110
of Canyon Partners, Ltd. may be deemed to share voting and dispositive power over the Ordinary Shares held by Cision Owner. GTCR AIV is managed by a ten-member board of Directors (the AIV Board of Directors) comprised of Mark M. Anderson, Craig A. Bondy, Philip A. Canfield, Aaron D. Cohen, Sean L. Cunningham, David A. Donnini, Constantine A. Mihas, Collin E. Roche, Lawrence C. Fey IV and Benjamin J. Daverman. Each of the foregoing entities and the individual members of each of the Canyon Board of Directors and the AIV Board of Directors disclaim beneficial ownership of the shares held of record by Cision Owner except to the extent of his, her or its pecuniary interest. The address for Cision Owner, Canyon Partners, Ltd. and GTCR AIV is c/o GTCR Golder Rauner II, LLC, 300 North LaSalle Street, Suite 5600, Chicago, Illinois 60654. |
(7) | Messrs. Canfield and Anderson are Managing Directors of GTCR LLC, and Mr. Master is a Vice President of GTCR LLC. Each of Messrs. Canfield, Anderson and Master disclaims beneficial ownership of any units of Cision Owner beneficially owned by Canyon Partners, Ltd. and GTCR AIV, except to the extent of his indirect pecuniary interest. |
(8) | Includes an aggregate of 5,765,743 Ordinary Shares issuable upon exercise of private warrants held by Messrs. Ein or Dryden. |
(9) | Includes (a) 4,118,240 Ordinary Shares and 4,324,307 shares issuable upon exercise of warrants held by Capitol Acquisition Management 3 LLC and (b) 11,865 shares held by Leland. |
111
The validity of the Ordinary Shares covered by this Prospectus/Offer to Exchange has been passed upon for us by Walkers, Cayman Islands.
The financial statements of Cision Ltd. and its subsidiaries as of December 31, 2017 and December 31, 2016 and for each of the three years in the period ended December 31, 2017 included in this Prospectus/Offer to Exchange have been so included in reliance on the report of PricewaterhouseCoopers LLP, an independent registered public accounting firm, given on the authority of said firm as experts in auditing and accounting.
The combined financial statements of PRN Group as of December 31, 2015 and 2014 and for each of the two years in the period ended December 31, 2015 and the combined financial statements of PRN Group as of December 31, 2014 and 2013 and for each of the two years in the period ended December 31, 2014 included in this Prospectus and Registration Statement, have been audited by Ernst & Young LLP, independent auditors, as set forth in their report appearing elsewhere herein, and are included in reliance upon such report given on the authority of such firm as experts in accounting and auditing.
The financial statements of Capitol as of December 31, 2016 and 2015 included in this Prospectus and Registration Statement have been audited by Marcum LLP, independent registered public accounting firm, as set forth in their report thereon appearing elsewhere herein, and are included in reliance on such report given on the authority of such firm as an expert in accounting and auditing.
We file annual, quarterly and current reports, proxy statements and other information with the SEC. This Prospectus/Offer to Exchange is part of a registration statement, but does not contain all of the information included in the registration statement or the exhibits. You may read and copy the registration statement and any other document that we file with the SEC at the SECs Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further information on the Public Reference Room. Our SEC filings are also available to the public on the internet at a website maintained by the SEC located at http://www.sec.gov .
We will provide, without charge, upon written request or oral request, a copy of any or all of the documents that are exhibits to the registration statement. Such requests should be directed to Cision Ltd. at 130 E Randolph Street, 7 th Floor, Chicago, Illinois 60601 or (312) 922-2400.
112
The following unaudited pro forma condensed combined income statement for the year ended December 31, 2017 combines the historical consolidated statement of operations of Cision Ltd. for the year ended December 31, 2017 with financial information of Capitol for the period from January 1, 2017 to June 29, 2017, the closing date of the Business Combination, giving effect to the Business Combination as if it had occurred on January 1, 2017.
The historical financial information of Cision was derived from the audited consolidated financial statements of Cision for the year ended December 31, 2017 included elsewhere in this Prospectus/Offer to Exchange. The historical financial information of Capitol was derived from financial information of Capitol for the period from January 1, 2017 to June 29, 2017 included elsewhere in this Prospectus/Offer to Exchange. This information should be read together with Cisions and Capitols financial statements and related notes, Managements Discussion and Analysis of Financial Condition and Results of Operations and other financial information included elsewhere in this Prospectus/Offer to Exchange.
Pursuant to the Merger Agreement, all of the share capital and CPECs in Cision Luxco were contributed to Holdings, in exchange for 82,100,000 ordinary shares of Holdings and 2,000,000 warrants to purchase ordinary shares of Holdings. Following the Contribution and Exchange, Merger Sub merged with and into Capitol, with Capitol surviving the Merger as a wholly-owned subsidiary of Holdings. In connection with the Business Combination, each outstanding share of common stock of Capitol was exchanged into a like number ordinary shares of Holdings. The outstanding warrants of Capitol, by their terms, automatically entitled the holders to purchase ordinary shares of Holdings upon consummation of the business combination. The Sponsors forfeited 1,600,000 shares of Capitols common stock and warrants to purchase 2,000,000 shares of Capitol common stock at the closing of the Business Combination.
The Merger Agreement contains a provision pursuant to which Holdings may issue up to 6,000,000 additional ordinary shares to Cision Owner, issued in 2,000,000 share increments, for the achievement of specified share price thresholds of $13.00, $16.00 and $19.00 between the closing date of the Business Combination and the fifth anniversary of the closing date of the Business Combination. The first such 2,000,000 ordinary share increment was issued to Cision Owner on November 3, 2017 in connection with the achievement of the $13.00 price threshold.
The Business Combination was accounted for as a reverse merger in accordance with U.S. GAAP. Under this method of accounting, Capitol was treated as the acquired company for financial reporting purposes. This determination was primarily based on Cision Luxco stockholders having a majority of the voting power of the combined company, Cision Luxco comprising the ongoing operations of the combined entity, Cision Luxco comprising a majority of the governing body of the combined company, and Cision Luxcos senior management comprising the senior management of the combined company. Accordingly, for accounting purposes, the Business Combination was treated as the equivalent of Cision Luxco issuing stock for the net assets of Capitol, accompanied by a recapitalization. The net assets of Capitol were stated at historical cost, with no goodwill or other intangible assets recorded. Operations prior to the Business Combination were those of Cision Luxco.
As the issuance of the 4,000,000 of additional ordinary shares to Cision Owner is contingent on the future performance of Holdings share price, they have been classified as an equity arrangement and therefore have not been recorded in the unaudited pro forma condensed combined financial statements.
113
The historical financial information has been adjusted to give pro forma effect to events that are related and/or directly attributable to the Business Combination, are factually supportable and, with respect to the pro forma statement of operations, are expected to have a continuing impact on the results of the combined company. The adjustments presented on the unaudited pro forma condensed combined financial statements have been identified and presented to provide relevant information necessary for an accurate understanding of the combined company upon consummation of the Business Combination.
The unaudited pro forma condensed combined financial information is for illustrative purposes only. The financial results may have been different had the companies always been combined. You should not rely on the unaudited pro forma condensed combined financial information as being indicative of the historical results that would have been achieved had the companies always been combined or the future results that the combined company will experience. Cision Luxco and Capitol have not had any historical relationship prior to the Business Combination. Accordingly, no pro forma adjustments were required to eliminate activities between the companies.
The unaudited pro forma condensed combined financial statements do not include pro forma adjustments for the acquisition of Bulletin Intelligence and the sale of the Vintage business by Cision Luxco in March 2017, or the acquisition of Argus, which occurred in the second quarter of 2017, as these transactions were not considered material to an understanding of Cision Luxco and a stockholders vote on the Business Combination.
The unaudited pro forma condensed combined financial information has been prepared on the basis that no Capitol stockholders exercised conversion rights with respect to their public shares upon the consummation of the Business Combination. In connection with the Business Combination, Holders of 490,078 shares of Capitol common stock sold in its initial public offering exercised their rights to convert those shares to cash at a conversion price of approximately $10.04 per share, or an aggregate of approximately $4.9 million; however, the impact of these conversions was considered immaterial to the calculation of unaudited pro forma condensed combined financial information.
Included in the shares outstanding and weighted average shares outstanding as presented in the pro forma condensed combined financial statements are an aggregate of 82,100,000 ordinary shares issued to Cision Owner.
As a result of the Business Combination, Cision Owner owned approximately 68% of Holdings ordinary shares outstanding immediately after the Business Combination, and the Capitol stockholders owed approximately 32% of Holdings outstanding ordinary shares, based on the number of Capitol common stock outstanding as of December 31, 2016 (in each case, not giving effect to any shares issuable to them upon exercise of their warrants).
The Business Combination resulted in the exchange of Class C Units by Cision Owner for vested and unvested common stock of Holdings. The recapitalization does not constitute a change in control of Cision and so there will be no change in the existing vesting schedules or value of the awards. Equity-based compensation expense will continue to be recognized in the post combination period, based on the corresponding remaining vesting periods. As a result, no adjustment has been made in the pro forma financial statements related to the continued recognition of equity based compensation expense related to the Class C Units.
114
|
|
|
|
|
||||||||||||
(A)
Cision |
(B)
Capitol |
Pro Forma
Adjustments |
Pro Forma
Income Statement |
|||||||||||||
Revenue | $ | 631,637 | $ | | $ | | $ | 631,637 | ||||||||
Cost of revenue | 200,836 | | | 200,836 | ||||||||||||
Gross Profit | 430,801 | | | 430,801 | ||||||||||||
Operating costs and expenses:
|
||||||||||||||||
Sales and marketing | 114,750 | | | 114,750 | ||||||||||||
Research and development | 22,102 | | | 22,102 | ||||||||||||
General and administrative | 166,759 | 4,565 | (13,482 | ) (4) | 157,842 | |||||||||||
Amortization of intangibles | 89,159 | | | 89,159 | ||||||||||||
Total operating costs and expenses | 392,770 | 4,565 | (13,482 | ) | 383,853 | |||||||||||
Operating loss | 38,031 | (4,565 | ) | 13,482 | 46,948 | |||||||||||
Other income (expense):
|
||||||||||||||||
Foreign exchange gains | (5,458 | ) | | | (5,458 | ) | ||||||||||
Interest income and other income (expense) | 2,132 | 800 | (800 | ) (1) | 2,132 | |||||||||||
Interest expense | (116,466 | ) | | 16,950 | (2) | (99,516 | ) | |||||||||
Loss on extinguishment of debt | (51,872 | ) | | | (51,872 | ) | ||||||||||
Loss before income taxes | (133,633 | ) | (3,765 | ) | 29,632 | (107,766 | ) | |||||||||
Provision for (benefit from) income taxes | (10,591 | ) | | (13,072 | ) (3) | (23,663 | ) | |||||||||
Net loss | $ | (123,042 | ) | $ | (3,765 | ) | $ | 42,704 | $ | (84,103 | ) | |||||
Weighted average shares outstanding, basic and diluted | 75,696,880 | 45,393,810 | (5) | 123,090,690 | ||||||||||||
Basic and diluted net loss per share | $ | (1.63 | ) | $ | (0.68 | ) |
(A) | Derived from the audited consolidated statements of operations of Cision for the year ended December 31, 2017. |
(B) | Derived from the unaudited financial information of Capitol for the period from January 1, 2017 to June 29, 2017, the closing date of the Business Combination. |
(1) | Represents an adjustment to eliminate interest income on marketable securities held in the trust account as of the beginning of the period, respectively. |
(2) | Represents an adjustment to eliminate interest expense on Cisions Second Lien Credit Facility repaid in part in connection with the Business Combination as of the beginning of the period. |
(3) | To record normalized blended statutory income tax benefit rate of 33.0% for pro forma financial presentation purposes less $11.9 million provisional tax expense for the recently enacted comprehensive tax legislation in the United States. |
(4) | Represents an adjustment to eliminate direct, incremental costs of the Business Combination, which are reflected in the historical financial statements of Cision Luxco in the amount of $9,255 as of December 31, 2017 and Capitol in the amount of $4,227 as of June 30, 2017. |
115
(5) | As the Business Combination is being reflected as if it had occurred at the beginning of the period presented, the calculation of weighted average shares outstanding for basic and diluted net loss per share assumes that the shares issuable relating to the Business Combination have been outstanding for the entire period presented. Weighted average common shares outstanding basic and diluted are calculated as follows: |
|
|
|||
Year Ended
December 31, 2017 |
||||
Capitol weighted average shares outstanding | 9,814,869 | |||
Capitol shares forfeited and cancelled | (1,600,000 | ) | ||
Capitol shares subject to conversion reclassified to equity | 30,775,821 | |||
Capitol shares issued in Transactions | 82,100,000 | |||
Weighted average shares outstanding | 121,090,690 | |||
Percent of shares owned by Cision holders | 68.3 | % | ||
Percent of shares owned by Capitol | 31.7 | % | ||
Weighted average shares calculation, basic and diluted
|
||||
Existing Cision holders | 82,100,000 | |||
Capitol holders | 38,990,690 | |||
Weighted average shares, basic and diluted | 121,090,690 |
The computation of diluted loss per share excludes (1) the effect of warrants to purchase 24,500,000 shares of Holdings common stock, and (2) an aggregate of 6,000,000 additional ordinary shares issuable to Cision Owner upon the achievement of specified share price thresholds because the inclusion of any of these would be anti-dilutive.
116
F-1
To the Board of Directors and Stockholders of Cision Ltd.:
We have audited the accompanying consolidated balance sheets of Cision Ltd. and its subsidiaries (the Company) as of December 31, 2017 and 2016, and the related consolidated statements of operations and comprehensive loss, mandatorily redeemable equity and stockholders equity (deficit) and of cash flows for each of the three years in the period ended December 31, 2017, including the related notes (collectively referred to as the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2017 and 2016, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2017 in conformity with accounting principles generally accepted in the United States of America.
As discussed in Note 2 to the consolidated financial statements, the Company changed the manner in which it accounts for debt prepayment and debt extinguishment costs in the statement of cash flows in 2017.
These consolidated financial statements are the responsibility of the Companys management. Our responsibility is to express an opinion on the Companys consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits of these consolidated financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Companys internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.
/s/ PricewaterhouseCoopers LLP
Baltimore, Maryland
March 13, 2018
We have served as the Companys auditor since 2014.
F-2
|
|
|
||||||
As of December 31, | ||||||||
2017 | 2016 | |||||||
Assets
|
||||||||
Current assets:
|
||||||||
Cash and cash equivalents | $ | 148,654 | $ | 35,135 | ||||
Restricted cash | 75 | 627 | ||||||
Accounts receivable, net | 113,008 | 87,605 | ||||||
Prepaid expenses and other current assets | 19,821 | 16,225 | ||||||
Total current assets | 281,558 | 139,592 | ||||||
Property and equipment, net | 53,578 | 47,947 | ||||||
Other intangible assets, net | 456,291 | 511,210 | ||||||
Goodwill | 1,136,403 | 1,079,518 | ||||||
Other assets | 7,528 | 8,801 | ||||||
Total assets | $ | 1,935,358 | $ | 1,787,068 | ||||
Liabilities, mandatorily redeemable equity and stockholders equity (deficit)
|
||||||||
Current liabilities:
|
||||||||
Current portion of long-term debt | $ | 13,349 | $ | 11,171 | ||||
Due to Cision Owner, Convertible Preferred Equity Certificates | | 443,102 | ||||||
Accounts payable | 13,327 | 8,723 | ||||||
Accrued compensation and benefits | 25,873 | 26,109 | ||||||
Other accrued expenses | 73,483 | 54,862 | ||||||
Current portion of deferred revenue | 140,351 | 119,600 | ||||||
Total current liabilities | 266,383 | 663,567 | ||||||
Long-term debt, net of current portion | 1,266,121 | 1,383,877 | ||||||
Deferred revenue, net of current portion | 1,412 | 961 | ||||||
Deferred tax liability | 62,617 | 83,209 | ||||||
Other liabilities | 22,456 | 14,507 | ||||||
Total liabilities | 1,618,989 | 2,146,121 | ||||||
Series A-1 and Series C-2 mandatorily redeemable stockholders equity, 5,498,688 shares authorized, issued and outstanding at December 31, 2016 | | 701 | ||||||
Commitments and contingencies (Note 13)
|
||||||||
Stockholders equity (deficit):
|
||||||||
Preferred stock, $0.0001 par value, 20,000,000 shares authorized; no shares issued and outstanding at December 31, 2017 and 2016 | | | ||||||
Common stock, $0.0001 par value, 480,000,000 shares authorized; 122,634,922 and 28,369,644 shares issued and outstanding at December 31, 2017 and 2016, respectively | 12 | 3 | ||||||
Additional paid-in capital | 771,813 | 11,448 | ||||||
Accumulated other comprehensive loss | (35,111 | ) | (73,902 | ) | ||||
Accumulated deficit | (420,345 | ) | (297,303 | ) | ||||
Total stockholders equity (deficit) | 316,369 | (359,754 | ) | |||||
Total liabilities, mandatorily redeemable equity and stockholders equity (deficit) | $ | 1,935,358 | $ | 1,787,068 |
The accompanying notes are an integral part of these consolidated financial statements.
F-3
|
|
|
|
|||||||||
For the years ended December 31, | ||||||||||||
2017 | 2016 | 2015 | ||||||||||
Revenue | $ | 631,637 | $ | 467,772 | $ | 333,958 | ||||||
Cost of revenue | 200,836 | 162,583 | 125,006 | |||||||||
Gross profit | 430,801 | 305,189 | 208,952 | |||||||||
Operating costs and expenses:
|
||||||||||||
Sales and marketing | 114,750 | 92,594 | 71,603 | |||||||||
Research and development | 22,102 | 19,445 | 16,604 | |||||||||
General and administrative | 166,759 | 135,737 | 88,448 | |||||||||
Amortization of intangible assets | 89,159 | 77,058 | 59,914 | |||||||||
Total operating costs and expenses | 392,770 | 324,834 | 236,569 | |||||||||
Operating income (loss) | 38,031 | (19,645 | ) | (27,617 | ) | |||||||
Non operating income (expense):
|
||||||||||||
Foreign exchange (losses) gains | (5,458 | ) | 6,299 | (10,886 | ) | |||||||
Interest and other income, net | 2,132 | 831 | 5,750 | |||||||||
Interest expense | (116,466 | ) | (117,997 | ) | (61,398 | ) | ||||||
Loss on extinguishment of debt | (51,872 | ) | (23,591 | ) | | |||||||
Total non operating loss | (171,664 | ) | (134,458 | ) | (66,534 | ) | ||||||
Loss before income taxes | (133,633 | ) | (154,103 | ) | (94,151 | ) | ||||||
Benefit from income taxes | (10,591 | ) | (55,691 | ) | (3,607 | ) | ||||||
Net loss | $ | (123,042 | ) | $ | (98,412 | ) | $ | (90,544 | ) | |||
Other comprehensive income (loss) foreign currency translation adjustments | 38,791 | (58,929 | ) | (9,085 | ) | |||||||
Comprehensive loss | $ | (84,251 | ) | $ | (157,341 | ) | $ | (99,629 | ) | |||
Net loss per share:
|
||||||||||||
Basic and diluted | $ | (1.63 | ) | $ | (3.47 | ) | $ | (3.23 | ) | |||
Weighted-average shares outstanding used in computing per share amounts:
|
||||||||||||
Basic and diluted | 75,696,880 | 28,369,644 | 28,029,023 |
The accompanying notes are an integral part of these consolidated financial statements.
F-4
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||
Mandatorily
redeemable equity |
Stockholders equity (deficit) | |||||||||||||||||||||||||||||||||||
Share capital |
Additional
paid-in capital |
Noncontrolling interest |
Accumulated
other comprehensive loss |
Accumulated deficit |
Total
stockholders equity (deficit) |
|||||||||||||||||||||||||||||||
Shares | $ | Shares | $ | |||||||||||||||||||||||||||||||||
Balances at December 31, 2014 | 5,498,688 | $ | 5 | 27,914,234 | $ | 3 | $ | 17 | $ | 2,411 | $ | (5,888 | ) | $ | (107,361 | ) | $ | (110,818 | ) | |||||||||||||||||
Acquisition of noncontrolling interest in Cision AB and subsidiaries | | | | | | (2,411 | ) | | | (2,411 | ) | |||||||||||||||||||||||||
Issuance of Class A-1 shares to Cision Owner | 6,448 | 644 | | | 887 | | | | 887 | |||||||||||||||||||||||||||
Issuance of equity | | | 455,410 | | | | | | | |||||||||||||||||||||||||||
Equity-based compensation expense | | | | | 5,294 | | | | 5,294 | |||||||||||||||||||||||||||
Net loss | | | | | | | | (90,544 | ) | (90,544 | ) | |||||||||||||||||||||||||
Foreign currency translation adjustments | | | | | | | (9,085 | ) | | (9,085 | ) | |||||||||||||||||||||||||
Balances at December 31, 2015 | 5,505,136 | $ | 649 | 28,369,644 | $ | 3 | $ | 6,198 | $ | | $ | (14,973 | ) | $ | (197,905 | ) | $ | (206,677 | ) | |||||||||||||||||
Non-cash capital contribution to Cision Owner (net) | | | | | | | | (986 | ) | (986 | ) | |||||||||||||||||||||||||
Accretion of Class A-1 shares to redemption value | | 52 | | | (52 | ) | | | | (52 | ) | |||||||||||||||||||||||||
Equity-based compensation expense | | | | | 5,302 | | | | 5,302 | |||||||||||||||||||||||||||
Net loss | | | | | | | | (98,412 | ) | (98,412 | ) | |||||||||||||||||||||||||
Foreign currency translation adjustments | | | | | | | (58,929 | ) | | (58,929 | ) | |||||||||||||||||||||||||
Balances at December 31, 2016 | 5,505,136 | $ | 701 | 28,369,644 | $ | 3 | $ | 11,448 | $ | | $ | (73,902 | ) | $ | (297,303 | ) | $ | (359,754 | ) | |||||||||||||||||
Accretion of Class A-1 shares to redemption value | | 13 | | | (13 | ) | | | | (13 | ) | |||||||||||||||||||||||||
Non-cash capital contribution from Cision Owner | (5,505,136 | ) | (714 | ) | | | 451,139 | | | | 451,139 | |||||||||||||||||||||||||
Merger and recapitalization | | | 92,142,758 | 9 | 305,101 | | | | 305,110 | |||||||||||||||||||||||||||
Issuance of holdback and earn-out shares | | | 2,122,520 | | | | | | | |||||||||||||||||||||||||||
Equity-based compensation expense | | | | | 4,138 | | | | 4,138 | |||||||||||||||||||||||||||
Net loss | | | | | | | | (123,042 | ) | (123,042 | ) | |||||||||||||||||||||||||
Foreign currency translation adjustments | | | | | | | 38,791 | | 38,791 | |||||||||||||||||||||||||||
Balances at December 31, 2017 | | $ | | 122,634,922 | $ | 12 | $ | 771,813 | $ | | $ | (35,111 | ) | $ | (420,345 | ) | $ | 316,369 |
The accompanying notes are an integral part of these consolidated financial statements.
F-5
|
|
|
|
|||||||||
For the years ended December 31, | ||||||||||||
2017 | 2016 | 2015 | ||||||||||
Cash flows from operating activities
|
||||||||||||
Net loss | $ | (123,042 | ) | $ | (98,412 | ) | $ | (90,544 | ) | |||
Adjustments to reconcile net loss to net cash provided by operating activities:
|
||||||||||||
Depreciation and amortization | 139,474 | 126,983 | 104,038 | |||||||||
Non-cash interest charges and amortization of debt discount and deferred financing costs | 63,262 | 34,439 | 9,869 | |||||||||
Non-cash yield on Convertible Preferred Equity Certificates | 2,292 | 13,080 | 2,583 | |||||||||
Equity-based compensation expense | 4,138 | 5,302 | 5,294 | |||||||||
Provision for doubtful accounts | 3,493 | 2,572 | 1,397 | |||||||||
Deferred income taxes | (23,278 | ) | (69,115 | ) | (14,637 | ) | ||||||
Unrealized currency translation losses (gains) | 5,011 | (4,350 | ) | 10,359 | ||||||||
Gain on sale of business | (1,785 | ) | | (4,700 | ) | |||||||
Other | (194 | ) | (234 | ) | 123 | |||||||
Changes in operating assets and liabilities, net of effect of acquisitions and disposals:
|
||||||||||||
Accounts receivable | (6,349 | ) | (1,547 | ) | 4,590 | |||||||
Prepaid expenses and other current assets | 1,579 | 4,227 | 3,705 | |||||||||
Other assets | 737 | 4,376 | 4,777 | |||||||||
Accounts payable | (3,831 | ) | (807 | ) | (1,582 | ) | ||||||
Accrued compensation and benefits | (6,235 | ) | 8,228 | (3,893 | ) | |||||||
Other accrued expenses | 4,068 | (1,564 | ) | (3,548 | ) | |||||||
Deferred revenue | 4,887 | (7,362 | ) | (5,342 | ) | |||||||
Other liabilities | 4,621 | 1,557 | (67 | ) | ||||||||
Net cash provided by operating activities | 68,848 | 17,373 | 22,422 | |||||||||
Cash flows from investing activities
|
||||||||||||
Purchases of property and equipment | (10,734 | ) | (7,382 | ) | (5,249 | ) | ||||||
Software development costs | (14,953 | ) | (11,738 | ) | (11,307 | ) | ||||||
Acquisitions of businesses, net of cash acquired of $12,354, $9,071 and, $0 | (78,528 | ) | (804,194 | ) | (4,500 | ) | ||||||
Proceeds from disposal of business | 23,675 | 3,998 | 2,089 | |||||||||
Change in restricted cash | 552 | (100 | ) | 8,303 | ||||||||
Net cash used in investing activities | (79,988 | ) | (819,416 | ) | (10,664 | ) |
The accompanying notes are an integral part of these consolidated financial statements.
F-6
|
|
|
|
|||||||||
For the years ended December 31, | ||||||||||||
2017 | 2016 | 2015 | ||||||||||
Cash flows from financing activities
|
||||||||||||
Proceeds from revolving credit facility | $ | 5,000 | $ | 33,475 | $ | | ||||||
Repayment of revolving credit facility | (38,475 | ) | | | ||||||||
Proceeds from issuance of Convertible Preferred Equity Certificates to Cision Owner | | 136,025 | 2,821 | |||||||||
Payment of amounts due to Cision Owner | (1,940 | ) | | (2,821 | ) | |||||||
Acquisition of noncontrolling interests | | | (2,411 | ) | ||||||||
Proceeds from term credit facility, net of debt discount of $10,466, $105,930 and $1,621 | 1,350,259 | 1,364,070 | 33,379 | |||||||||
Repayments of term credit facility | (1,497,838 | ) | (724,930 | ) | (39,320 | ) | ||||||
Payments of capital lease obligations | (171 | ) | (287 | ) | (301 | ) | ||||||
Proceeds from merger and recapitalization | 305,110 | | 85 | |||||||||
Net cash provided by (used in) financing activities | 121,945 | 808,353 | (8,568 | ) | ||||||||
Effect of exchange rate changes on cash and cash equivalents | 2,714 | (1,781 | ) | (1,161 | ) | |||||||
Increase in cash and cash equivalents | 113,519 | 4,529 | 2,029 | |||||||||
Cash and cash equivalents
|
||||||||||||
Beginning of year | 35,135 | 30,606 | 28,577 | |||||||||
End of year | $ | 148,654 | $ | 35,135 | $ | 30,606 | ||||||
Supplemental disclosure of cash flows information
|
||||||||||||
Cash paid during the year for:
|
||||||||||||
Interest | $ | 102,400 | $ | 94,615 | $ | 48,059 | ||||||
Income taxes | 10,250 | 5,582 | 4,680 | |||||||||
Supplemental non-cash information:
|
||||||||||||
Issuance of securities by Cision Owner in connection with acquisitions | 7,000 | 40,000 | | |||||||||
Non-cash contribution from Cision Owner in connection with merger | 451,139 | | |
The accompanying notes are an integral part of these consolidated financial statements.
F-7
Cision Ltd., a Cayman Islands company, and its subsidiaries (collectively, Cision, or the Company) is a leading global provider of cloud-based software, media intelligence and distribution services, and other related professional services to the marketing and public relations industry. Communications professionals use the Companys products and services to identify and connect with media influencers, manage industry relationships, create and distribute content, monitor media coverage, perform advanced analytics and measure the effectiveness of their campaigns. The Company has primary offices in Chicago, Illinois, Beltsville, Maryland, New York, New York, Cleveland, Ohio, and Albuquerque, New Mexico with additional offices in the United States, as well as China, Finland, France, Hong Kong, Germany, India, Indonesia, Malaysia, Norway, Portugal, Sweden, Taiwan and the United Kingdom.
On March 19, 2017, the Company entered into a definitive agreement (the Merger Agreement) with Capitol Acquisition Corp. III (NASDAQ: CLAC; Capitol), a public investment vehicle, whereby the parties agreed to merge, resulting in the Company becoming a publicly listed company. This merger closed on June 29, 2017 (Merger), which resulted in the following (the Transactions):
| Holders of 490,078 shares of Capitol common stock sold in its initial public offering exercised their rights to convert those shares to cash at a conversion price of approximately $10.04 per share, or an aggregate of approximately $4.9 million. The per share conversion price of approximately $10.04 for holders of public shares electing conversion was paid out of Capitols trust account, which had a balance immediately prior to the closing of approximately $326.3 million. |
| Of the remaining funds in the trust account: (i) approximately $16.2 million was used to pay Capitols transaction expenses and (ii) the balance of approximately $305.2 million was released to Cision to be used for working capital and general corporate purposes, including to pay down $294.0 million of the 2016 Second Lien Credit Facility, plus a 1% fee and interest. The debt repayment occurred in July 2017 (see Note 6). |
| Immediately after giving effect to the Transactions (including as a result of the conversions described above and certain forfeitures of Capitol common stock and warrants immediately prior to the closing), there were 120,512,402 ordinary shares and warrants to purchase 24,375,596 ordinary shares of Cision issued and outstanding. |
| Upon the closing, Capitols common stock, warrants and units ceased trading, and Cisions ordinary shares and warrants began trading on the NYSE and NYSE MKT, respectively, under the symbol CISN and CISN WS, respectively. |
| Upon the completion of the Transactions, Canyon Holdings (Cayman), L.P., (Cision Owner) an exempted limited partnership formed for the purpose of owning and acquiring Cision through a series of transactions, received 82,075,873 ordinary shares of the Company and 1,969,841 warrants to purchase ordinary shares of the Company, in exchange for all of the share capital and $450.5 million in Convertible Preferred Equity Certificates (CPECs) of Cision. Cision Owner also obtained the right to receive certain additional securities of the Company upon the occurrence of certain events. On August 8, 2017, in connection with the sponsor support agreement, the Company issued 122,520 holdback ordinary shares and 124,404 holdback warrants to purchase ordinary shares. In October 2017, as a result of the Companys share price meeting the Minimum Target per the Merger Agreement, the Company issued 2,000,000 earn-out shares to Cision Owner. |
| At the closing of the Transactions, Cision Owner held approximately 68% of the issued and outstanding ordinary shares of the Company and stockholders of Capitol held approximately 32% of the issued and outstanding shares of the Company. |
F-8
The Transactions were accounted for as a reverse merger in accordance with accounting principles generally accepted in the United States of America (GAAP). This determination was primarily based on Cision comprising the ongoing operations of the combined entity, Cisions senior management comprising the majority of the senior management of the combined company, and the prior shareholders of Cision having a majority of the voting power of the combined entity. Accordingly, the Transactions have been treated equivalent to Cision issuing stock for the net monetary assets of Capitol, accompanied by a recapitalization. The net assets of Capitol at the merger date have been stated at historical cost, with no goodwill or other intangible assets recorded. Operations prior to the Transactions in these financial statements are those of Cision. As a result, these financial statements represent the continuation of Cision Ltd. and the historical shareholders equity and earnings per share calculations of Cision prior to the Transactions have been retrospectively adjusted for the equivalent number of shares received by Cisions Owner, where applicable, pursuant to the Transactions. The accumulated deficit of Cision has been carried forward after the Transactions.
Cision Ltd., the parent company, has no independent operating activity or third-party assets and liabilities. Prior to the June 29, 2017 Transactions, earnings per share was calculated using the two-class method. On June 29, 2017, all outstanding classes of equity of Cision were contributed in exchange for 82,075,873 common shares. Immediately after the Transactions, 120,512,402 common shares were outstanding. Subsequent to the Merger, earnings per share will be calculated based on the weighted number of common shares then outstanding. As part of the Transactions, the historical number of outstanding common shares of Class B-1, Class C-1 and Class V, in aggregate, has been adjusted to 28,369,644 common shares, in order to retroactively reflect the Merger exchange ratio. Historical earnings per share also gives effect to this adjustment through June 29, 2017, the date of the Merger. This retroactive adjustment also eliminates the need for a two-class method earnings per share calculation.
The preparation of financial statements in conformity with GAAP requires management to make certain estimates and assumptions. On an on-going basis, the Company evaluates its estimates, including, but not limited to, those related to the allowance for doubtful accounts, software development costs, useful lives of property, equipment and internal use software, intangible assets and goodwill, contingent liabilities, and fair value of equity-based awards and income taxes. The Company bases its estimates on various assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities as well as the reported amounts of revenues and expenses during the period. Actual results could differ from these estimates.
The Company considers all highly liquid investments with original maturity dates of three months or less at the time of purchase to be cash equivalents. For all years reported the Company did not carry any investments with original maturity dates of longer than three months.
The Company measures certain financial assets and liabilities at fair value pursuant to a fair value hierarchy based on inputs to valuation techniques that are used to measure fair value that are either observable or unobservable. Observable inputs reflect assumptions market participants would use in pricing an asset or liability based on market data obtained from independent sources while unobservable inputs reflect a reporting entitys pricing based upon its own market assumptions. The fair value hierarchy consists of the following three levels:
Level 1 | Inputs are quoted prices in active markets for identical assets or liabilities. |
F-9
Level 2 | Inputs are quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable and market-corroborated inputs which are derived principally from or corroborated by observable market data. |
Level 3 | Inputs are derived from valuation techniques in which one or more significant inputs or value drivers are unobservable. Other than long-term debt and Convertible Preferred Equity Certificates due to Cision Owner at December 31, 2016, the Company had no financial assets or liabilities that were other than Level 1 at December 31, 2017 and 2016. |
Estimates are used to determine the amount of the allowance for doubtful accounts necessary to reduce accounts receivable to the estimated net realizable value. These estimates are made by analyzing the status of significant past-due receivables and by establishing provisions for estimated losses by analyzing current and historical bad debt trends. Actual collection experience has not varied significantly from prior estimates. The allowance for doubtful accounts at December 31, 2017 and 2016 was $5.3 million and $2.6 million, respectively.
The Company incurs software development costs related to its internal use software. Qualifying costs incurred during the application development stage are capitalized. These costs primarily consist of internal labor and third-party development costs and are amortized using the straight-line method over the estimated useful life of the software, which is generally two years. All other research and development costs are expensed as incurred. Costs to maintain and update the information database are expensed within cost of revenues as these expenses are incurred. For the years ended December 31, 2017, 2016 and 2015, the Company recorded amortization expense related to internal use software of $12.4 million, $12.6 million and $6.9 million, respectively, within cost of revenue in the statements of net loss and total comprehensive loss.
Property, equipment and purchased software are stated at cost. Depreciation is computed using the straight-line method over the estimated useful lives of the assets as follows: three to five years for software and computer and office equipment and five to seven years for furniture and fixtures. Assets acquired under capital leases and leasehold improvements are amortized using the straight-line method over the shorter of the estimated useful lives of the assets or the terms of the leases. Amortization of assets acquired under capital leases is included in depreciation and amortization expense. Repairs and maintenance costs are charged to expense as incurred. When assets are retired or otherwise disposed of, the asset and related accumulated depreciation are eliminated from the accounts and any resulting gain or loss is recorded in the results of operations.
Long-lived assets include property, equipment and software and intangible assets with finite lives. Intangible assets consist of customer relationships, trade names and purchased technology acquired in business combinations. Intangible assets are amortized using the straight-line method, which approximates the pattern of usage of the economic benefit of the asset, over their estimated useful lives ranging from two to twelve years. Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be fully recoverable. If an impairment indicator is present, the Company evaluates recoverability by a comparison of the carrying amount of the assets to future undiscounted net cash flows expected to be generated by the assets. If the assets are impaired, the impairment recognized is measured by the amount by which the carrying amount exceeds the estimated fair value of the assets. There were no significant impairment charges for long-lived assets for the years ended December 31, 2017, 2016 or 2015.
F-10
The Company regularly revisits its estimate of useful economic lives of long lived assets and makes adjustments to those lives where appropriate.
The Company has completed a number of acquisitions of businesses during the years ended December 31, 2017, 2016 and 2015 that have resulted in the recording of goodwill and identifiable definite-lived intangible assets. The Company recognizes all of the assets acquired and liabilities assumed at their fair values on the acquisition date. The Company uses significant estimates and assumptions, including fair value estimates, as of the acquisition date using the income and cost approaches (or a combination thereof). Fair values are determined based on Level 3 inputs, including estimated future cash flows, discount rates, royalty rates, growth rates, sales projections, customer retention rates and terminal values, all of which require significant management judgment. The Company refines these estimates that are provisional, as necessary, during the measurement period. The measurement period is the period after the acquisition date, not to exceed one year, in which new information may be gathered about facts and circumstances that existed as of the acquisition date to adjust the provisional amounts recognized. Adjustments to assets and liabilities within the measurement period are recorded with a corresponding offset to goodwill. All other adjustments, including those after the conclusion of the measurement period, are recorded to the consolidated statements of net loss and, to date, have been immaterial.
Acquisition-related costs are expensed as incurred separately from the acquisition and generally are included in general and administrative expenses in the statements of net loss and total comprehensive loss.
The Company amortizes costs to obtain financing over the term of the underlying obligation using either the effective interest method or the straight-line method, as appropriate. Debt discounts and deferred financing costs are netted from the carrying value of the debt and amortized over the term of the debt using the effective interest method. Deferred financing fees related to the Companys revolving debt facilities are included within other assets in the consolidated balance sheets. The amortization of deferred financing costs and debt discounts is included in interest expense in the accompanying consolidated statements of net loss and comprehensive loss.
Goodwill represents the excess of the cost of an acquired entity over the net fair value of the identifiable assets acquired and liabilities assumed. Goodwill is not amortized, but rather is assessed for impairment at least annually. The Company performs its annual impairment assessment on October 1, or whenever events or circumstances indicate impairment may have occurred. On October 1, 2017, 2016 and 2015, the Company performed its annual goodwill impairment assessment based on the fair value of each of the Companys reporting units. When assessing goodwill for impairment, the Company uses an income approach based on discounted cash flows to determine the fair value of its reporting unit. The Companys cash flow assumptions consider historical and forecasted revenue, operating costs and other relevant factors which are consistent with the plans used to manage the Companys operations.
The result of the most recent annual goodwill impairment test performed on October 1, 2017 indicated that the estimated fair value of each reporting unit was at least 40% in excess of its carrying value. Based on the results of the Companys goodwill impairment tests, there was no indication of impairment as of October 1, 2017, 2016 and 2015.
The reporting currency for all periods presented is the U.S. dollar. The functional currency for the Companys foreign operating subsidiaries is their local currency. The functional currency of the Company and substantially all of its non operating subsidiaries is the US dollar. The financial statements of these
F-11
subsidiaries are translated into U.S. dollars using exchange rates in effect at each balance sheet date for assets and liabilities and average exchange rates during the period for revenues and expenses. The resulting translation adjustments are included in accumulated other comprehensive income (loss), a separate component of stockholders deficit. Gains or losses, whether realized or unrealized due to transactions in foreign currencies and the remeasurement of certain intercompany balances, are included in the consolidated statements of net loss and total comprehensive loss.
Employees of CNW Group Ltd. (CNW) participate in a defined benefit pension plan whereby pension expense is determined based on a number of actuarial assumptions, which are reviewed on an annual basis. The defined benefit plan has been closed to new participants since 2006. The employees and accompanying pension plan were inherited with the acquisition of PRN Group (PR Newswire) on June 16, 2016. The purchase price of PR Newswire was allocated to the assets and obligations of the pension plan based on fair value at the acquisition date. These actuarial assumptions include discount rate, expected rate of return on plan assets, rate of salary increases and other factors. The unfunded status of the plan is recognized as a long-term liability in the consolidated balance sheets at December 31, 2017 and 2016, which is also the measurement date for the defined benefit pension plan for the CNW employees.
The Companys investment in an unconsolidated affiliate over which the Company has significant influence is accounted for under the equity method of accounting. The investment was acquired with the PR Newswire acquisition and the purchase price of PR Newswire was allocated to the investee based on its fair value as of the acquisition date. The Company records its share of the undistributed income or loss from this investment, which, to date, have been immaterial. The Company regularly reviews the carrying value of this investment for impairment using such information as forecasts, business plans and available financial statements of the investee. Since the PR Newswire acquisition, no impairment losses have been recognized. At December 31, 2017 and 2016, the investment in unconsolidated affiliate is $4.2 million and $5.6 million, respectively, which is included within other long-term assets in the consolidated balance sheets.
Comprehensive income (loss) includes the Companys net income (loss) and foreign currency translation adjustments. There are no other material components of comprehensive loss for the years ended December 31, 2017, 2016 and 2015.
The Company derives its revenues from subscription arrangements and related professional services in connection with the Companys cloud-based software and services offerings. The Company also derives revenues from news distribution services on both a subscription basis and separately from non-subscription arrangements. The Company recognizes revenue when there is persuasive evidence of an arrangement, the service has been provided to the customer, the collection of the fee is probable and the amount of the fee to be paid by the customer is fixed or determinable.
The Companys separate units of accounting consist of its subscription services, transactional services and professional services. The subscription services include access to the Companys cloud-based software, hosting services, content and content updates and customer support. The Companys subscription agreements are typically one to three years in length and are non-cancelable, though customers have the right to terminate their agreements for cause if the Company materially breaches its obligations under the agreement. Subscription agreements do not provide customers the right to take possession of the software at any time. The Company does not charge customers an up-front fee for use of the technology. Implementation activities are insignificant and are not subject to a separate fee. In certain cases, the Company charges annual membership fees to customers which are recognized ratably over the one-year membership period.
F-12
The Company also distributes individual news releases to thousands of distribution points on the Internet, which are then indexed by major search engines and also directly to journalists and other key constituents. Dependent on the nature of the contract with the customer, the Company recognizes revenue on subscription basis over the term of the subscription, or on a per-transaction basis when the press releases are made available to the public.
Professional services include broadcast and webcast production. For these services, revenue is recognized when the specific performance is completed and customer acceptance received.
When sold together, revenue from the Companys different service offerings are accounted for separately as those services have value on a standalone basis and do not involve a significant degree of risk or unique acceptance criteria. The Company allocates revenue to each element in a multiple element arrangement based on a selling price hierarchy. The selling price for a deliverable is based on its vendor-specific objective evidence (VSOE), if available, third-party evidence (TPE), if VSOE is not available, or estimated selling price, if neither VSOE nor TPE is available. As the Company has been unable to establish VSOE or TPE for the elements of its arrangements due to factors such as a high number of varied service offerings sold on a subscription basis to differing customer concentrations as well as varied discounting practices and unobservable competitive data for similar services, the Company estimates selling prices by analyzing multiple factors such as historical pricing trends, customer renewed activity, and discounting practices. The volume of multiple element arrangements sold by the Company in which any element of the arrangement has a revenue attribution pattern different to the other elements was not significant for all years presented.
Sales and other taxes collected from customers to be remitted to government authorities are excluded from revenues.
Deferred revenue consists of payments received from or billings to customers in advance of revenue recognition. Deferred revenue to be recognized in the succeeding twelve-month period is included in current deferred revenue with the remaining amounts included in noncurrent deferred revenue. Invoices issued in advance of the fulfillment of a deliverable or the start of the customers subscription term are typically not significant.
Sales commissions relate to the sale of subscription, transaction, and professional services agreements, and are expensed as incurred.
The Company expenses advertising costs as incurred. Advertising costs for the years ended December 31, 2017, 2016 and 2015 were approximately $5.9 million, $7.0 million and $8.9 million, respectively.
The Company recognizes equity-based compensation costs on a straight-line basis over the requisite service period of the award, which is generally four years from the date of grant. As equity-based compensation expense recognized is based on awards ultimately expected to vest, such expense is reduced for estimated forfeitures. Compensation expense for these equity-based awards is recognized by the Company, with an equal offsetting charge to Additional paid-in capital. Such compensation expense is reflected in the Companys financial results.
CPECs were held by Cision Owner and were presented as liabilities in the consolidated balance sheet at December 31, 2016. The CPECs were redeemable at any time by the Company and matured 49 years from
F-13
the date of issuance. In conjunction with the June 29, 2017 merger with Capitol, the CPECs were converted to equity and are no longer presented as a liability in the consolidated balance sheet as December 31, 2017.
The Company has determined that its Chief Executive Officer is the Chief Operating Decision Maker. The Companys Chief Executive Officer reviews financial information presented on both a consolidated basis and on a geographic regional basis. Since its inception, the Company has completed several significant acquisitions and has expended significant efforts in integrating these acquisitions into a single commercial software solution, available to all customers in all geographies. As a result of the long-term qualitative and quantitative similar economic characteristics exhibited by the sale of a single product suite in all the Companys regions, the Company has determined that its operating segments meet the criteria to be aggregated into one reportable segment.
Prior to the June 29, 2017 Transactions, net loss per share was calculated using the two-class method. On June 29, 2017, all outstanding classes of equity of Cision were contributed in exchange for 82,075,873 common shares. Immediately after the Transactions, 120,512,402 common shares were outstanding. Subsequent to the Merger, basic net loss per share is computed by dividing net loss by the weighted-average number of shares outstanding during the period. Diluted net loss per share equals basic loss per share due to losses incurred during the years ended December 31, 2017, 2016 and 2015.
Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash and cash equivalents, investments and accounts receivable. The Company generally maintains its cash and cash equivalents with various nationally recognized financial institutions. Customers are granted credit on an unsecured basis. Management monitors the creditworthiness of its customers and believes that it has adequately provided for any exposure to potential credit losses.
The Company provides cloud-based software, distribution services and related professional services to various customers across many industries. As of December 31, 2017 and 2016, no individual customer accounted for 10% or more of net accounts receivable. For the years ended December 31, 2017, 2016 and 2015, no individual customer accounted for 10% or more of revenue.
Income taxes are determined utilizing the asset and liability method whereby deferred tax assets and liabilities are recognized for deductible temporary differences between the respective reported amounts and tax bases of assets and liabilities, as well as for operating loss and tax-credit carryforwards. Net deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized.
The Companys estimates related to liabilities for uncertain tax positions require it to make judgments regarding the sustainability of each uncertain tax position based on its technical merits. If it determines it is more likely than not that a tax position will be sustained based on its technical merits, the Company records the impact of the position in its consolidated financial statements at the largest amount that is greater than fifty percent likely of being realized upon ultimate settlement. The estimates are updated at each reporting date based on the facts, circumstances and information available. The Company is also required to assess at each reporting date whether it is reasonably possible that any significant increases or decreases to its unrecognized tax benefits will occur during the next twelve months. The Company files income tax returns in the U.S. federal jurisdictions and various state and foreign jurisdictions and is subject to U.S. federal, state, and foreign tax examinations for years ranging from 2012 to 2017.
F-14
On December 22, 2017, the U.S. government enacted comprehensive tax legislation (the Tax Act), which contains several key tax provisions that affected the Company including a reduction of the federal corporate income tax rate to 21% effective January 1, 2018, among others. The Company has recognized the effect of the tax law changes in the fourth quarter of 2017, including the remeasurement of U.S. deferred tax assets and liabilities. In December 2017, the SEC staff issued Staff Accounting Bulletin No. 118, Income Tax Accounting Implications of the 2017 Tax Cuts and Jobs Act (SAB 118), which allows the Company to record provisional amounts during a measurement period not to extend beyond one year of the enactment date.
As long as the Company remains an Emerging Growth Company, the Company plans to adopt new accounting standards using the effective dates available for nonpublic entities.
In August 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2016-15 , Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments (a consensus of the Emerging Issues Task Force) . The new guidance is intended to reduce diversity in practice in how certain transactions are classified in the statement of cash flows, including the presentation of debt prepayment or debt extinguishment costs as cash outflows for financing activities on the statement of cash flows. The standard was effective for the Company in the first quarter of fiscal year 2019; however, the Company elected to early adopt on a retrospective basis on July 1, 2017, resulting in classifying $19.4 million in payments of original issue discount upon debt extinguishment as a repayment of term loan facility, a financing outflow, as opposed to the prior treatment which was to classify these as an operating cash outflow on the Companys consolidated statements of cash flows for the year ended December 31, 2016. The resulting change increased cash provided by operating activities to $17.4 million and decreased cash provided by financing activities to $808.4 million for year ended December 31, 2016.
In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606) . Topic 606 supersedes existing revenue recognition requirements in ASU Topic 605, Revenue Recognition , and requires the recognition of revenue when promised goods or services are transferred to customers in an amount that reflects the consideration to which the entity expects to be entitled to in exchange for those goods or services. The accounting for the recognition of costs related to obtaining customer contracts under Topic 606 is significantly different than current guidance, and Topic 606 will likely result in sales commissions and certain other costs capitalized, which will then be amortized over an estimated customer life. The Company will adopt this ASU effective for fiscal year 2019 using the modified retrospective transition method. The Company is in the process of evaluating the impact of this standard on its consolidated financial statements.
In February 2018, the FASB issued ASU 2018-02, Income Statement Reporting Comprehensive Income (Topic 220) Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income , which will allow a reclassification from accumulated other comprehensive income to retained earnings for the tax effects resulting from An Act to Provide for Reconciliation Pursuant to Titles II and V of the Concurrent Resolution on the Budget for Fiscal Year 2018 (the Act) that are stranded in accumulated other comprehensive income. This ASU also requires certain disclosures about stranded tax effects; however, it does not change the underlying guidance that requires that the effect of a change in tax laws or rates be included in income from continuing operations. This ASU is effective on January 1, 2019, with early adoption permitted. It must be applied either in the period of adoption or retrospectively to each period in which the effect of the change in the U.S. federal corporate income tax rate in the Act is recognized. The Company is in the process of evaluating the impact of this standard on its consolidated financial statements.
In January 2017, the FASB issued ASU 2017-01 , Business Combinations (Topic 805) Clarifying the Definition of a Business . The amendments in this update clarify the definition of a business with the objective of adding
F-15
guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions or disposals of assets or businesses. The definition of a business affects many areas of accounting including acquisitions, disposals, goodwill, and consolidation. This ASU is effective for the Companys fiscal year 2019 and interim periods within that year. The Company does not believe the adoption of this standard will have a material impact on its consolidated financial statements.
In January 2017, the FASB issued ASU 2017-04 , Intangibles-Goodwill and Other (Topic 350) . The ASU eliminates Step 2 of the goodwill impairment test, which requires determining the fair value of assets acquired or liabilities assumed in a business combination. Under the amendments in this update, a goodwill impairment test is performed by comparing the fair value of the reporting unit with its carrying amount. An entity should recognize an impairment charge for the amount by which the carrying amount exceeds the reporting units fair value; however, the loss recognized should not exceed the total amount of goodwill allocated to that reporting unit. This ASU is effective for the Companys fiscal year 2022 and interim periods within that year in the event that a goodwill impairment test is performed based on a triggering event prior to the Companys October 1 annual impairment test. The Company does not believe the adoption of this standard will have a material impact on its consolidated financial statements.
In November 2016, the FASB issued ASU 2016-18 , Statement of Cash Flows (Topic 230): Restricted Cash (a consensus of the Emerging Issues Task Force), which requires restricted cash to be presented with cash and cash equivalents on the statement of cash flows and disclosure of how the statement of cash flows reconciles to the balance sheet if restricted cash is shown separately from cash and cash equivalents on the balance sheet. This ASU is effective for the Companys fiscal year 2019, with early adoption permitted. The Company does not believe the adoption of this standard will have a material impact on its consolidated financial statements.
In October 2016, the FASB issued ASU No. 2016-16, Income Taxes (Topic 740), Intra-Entity Transfers of Assets Other Than Inventory . The amendments of ASU No. 2016-16 were issued to improve the accounting for the income tax consequences of intra-entity transfers of assets other than inventory. Current GAAP prohibits the recognition of current and deferred income taxes for an intra-entity asset transfer until the asset has been sold to an outside party which has resulted in diversity in practice and increased complexity within financial reporting. The amendments of this ASU would require an entity to recognize the income tax consequences of an intra-entity transfer of an asset other than inventory when the transfer occurs and do not require new disclosure requirements. This ASU is effective for the Companys fiscal year 2018, with early adoption permitted and should be applied on a modified retrospective basis through a cumulative-effect adjustment directly to retained earnings as of the beginning of the period of adoption. The Company is in the process of evaluating the impact of this standard on its consolidated financial statements.
In March 2016, the FASB issued ASU 2016-09 , Stock Compensation (Topic 718), Improvements to Employee Share-Based Payment Accounting. ASU 2016-09, which amends several aspects of accounting for employee share-based payment transactions including the accounting for income taxes, forfeitures, and statutory tax withholding requirements, as well as classification in the statement of cash flows. This ASU is effective for the Companys fiscal year 2018. The Company does not believe the adoption of this standard will have a material effect on its consolidated financial statements.
In February 2016, the FASB issued ASU 2016-02 , Leases (Topic 842) . ASU 2016-02 requires lessees to recognize lease assets and lease liabilities on the balance sheet and requires expanded disclosures about leasing arrangements. This ASU is effective for the Companys fiscal year 2020 and interim periods within 2021, with early adoption permitted. The Company is in the process of evaluating the impact of this standard on its consolidated financial statements.
In January 2016, the FASB issued ASU 2016-01, Financial Instruments: Recognition and Measurement of Financial Assets and Financial Liabilities . This change primarily affects the accounting for equity
F-16
investments, financial liabilities under the fair value options and the presentation and disclosure requirements for financial instruments. This ASU is effective for the Companys fiscal year 2019, with early adoption permitted for certain provisions for the new guidance. The Company does not believe the adoption of this standard will have a material impact on its consolidated financial statements.
On June 16, 2016, the Company acquired all of the assets of PR Newswire, a global leader in public relations and investor relations communications and related services from United Business Media, plc. The Company acquired PR Newswire to enhance its content distribution capabilities related to its public relations solution offerings. During the year ended December 31, 2016, the Company incurred acquisition-related transaction costs of $22.4 million, which are included in general and administrative expense in the consolidated statements of operations and comprehensive loss. The acquisition was accounted for under the purchase method of accounting. The operating results of PR Newswire are included in the accompanying consolidated financial statements from June 16, 2016.
The purchase price was $842.8 million and consisted of $813.3 million in cash and the issuance of $40.0 million of Class A LP Units of Cision Owner to the seller. CPECs of $40.0 million with a fair value of $29.5 million were issued by the Company to Cision Owner to record the transaction in these financial statements. The CPECs were immediately accreted to the carrying value following the issuance.
The PR Newswire purchase price was allocated to the tangible and identifiable intangible assets acquired and liabilities assumed based on their estimated fair values as of the acquisition date. The identifiable intangible assets include the value of the PR Newswire brand, customer relationships and purchased technology and are being amortized over five to seven years on an accelerated basis. The excess of the purchase price over the net tangible and identifiable intangible assets acquired was recorded as goodwill, which is not deductible for tax purposes. The Company recognized a deferred tax asset in the amount of $16.7 million relating to acquired net operating losses and disallowed interest carry forwards and established a deferred tax liability of $150.4 million relating to the step up in basis of identifiable intangibles. The following table summarizes the allocation of the purchase price paid by the Company to the fair value of the assets and liabilities acquired of PR Newswire on June 16, 2016:
|
|
|||
(in thousands) | ||||
Cash and cash equivalents | $ | 9,071 | ||
Accounts receivable, net | 42,869 | |||
Prepaid and other current assets | 18,430 | |||
Property, equipment and software, net | 18,917 | |||
Investment in unconsolidated affiliate | 5,376 | |||
Brand | 349,120 | |||
Customer relationships | 48,820 | |||
Purchased technology | 25,940 | |||
Goodwill | 537,218 | |||
Total assets acquired | 1,055,761 | |||
Accounts payable and accrued liabilities | (41,961 | ) | ||
Deferred revenue | (37,310 | ) | ||
Deferred taxes | (133,725 | ) | ||
Total liabilities assumed | (212,996 | ) | ||
Net assets acquired | $ | 842,765 |
F-17
During the year ended December 31, 2017, the Company made certain measurement period adjustments to the initial purchase price allocation resulting in an increase to deferred revenue of $3.3 million, a decrease in accounts payable and accrued liabilities of $2.6 million, and an increase in goodwill of $0.7 million.
In July 2016, the Company sold the net assets of its Agility PR workflow business for approximately $4.3 million. The transaction reduced goodwill by $2.0 million resulting in no gain or loss on the income statement. The assets of Agility have not been separately disclosed as held for sale in the acquisition balance sheet presented above due to immateriality.
The PR Newswire acquired entity contributed revenue of $165.1 million for the year ended December 31, 2016. Net loss from these acquisitions is impracticable to determine due to the extent of integration activities.
For all acquisitions made since Inception, the excess of the purchase price over the total net identifiable assets has been recorded as goodwill which is attributable primarily to synergies expected from the expanded technology and service capabilities from the integrated acquisitions as well as the value of the assembled workforce in accordance with generally accepted accounting principles. The Company did not record any in-process research and development intangible assets in connection with any acquisition to date. The purchase price allocation is complete for all acquisitions made since Inception and measurement period adjustments have not been material.
On March 10, 2017, the Company sold substantially all of the assets of its Vintage corporate filings business for approximately $26.6 million and received approximately $23.7 million in cash after escrow and expenses. The transaction resulted in a gain of approximately $1.8 million which was recorded as other income in the consolidated statements of operations and comprehensive loss. The Company was required to provide the purchaser with certain immaterial transition services through the end of 2017.
On March 27, 2017, the Company acquired all of the membership interests of Bulletin Intelligence, LLC, Bulletin News Network, LLC, and Bulletin News Investment, LLC (collectively, Bulletin Intelligence). The Company acquired Bulletin Intelligence to expand the Companys ability to deliver actionable intelligence to senior leadership teams. During the year ended December 31, 2017, the Company incurred acquisition-related transaction costs of $1.0 million, which are included in general and administrative expense in the consolidated statements of operations and comprehensive loss. The acquisition was accounted for under the purchase method of accounting. The operating results are included in the accompanying consolidated financial statements from March 27, 2017.
The purchase price was $71.8 million and consisted of $60.5 million in cash, the issuance of 70,000 Class A Shares by Cision Owner with a fair value of $5.2 million and contingent consideration valued at $6.1 million. The fair value of the contingent consideration was determined using a Monte Carlo simulation which utilized managements projections of Bulletin Intelligence revenues over the earn-out period, and is considered a Level 3 measurement. Changes in fair value subsequent to the acquisition date will be recognized in earnings each reporting period until the arrangement is settled. The Company is required to pay contingent consideration that can be earned during the years ending December 31, 2017 and December 31, 2018 for each year dependent on the achievement of financial targets as defined by the agreement with no cap. For the year ended December 31, 2017, the former owners of Bulletin Intelligence earned $2.9 million in relation to the earn out, which was paid subsequent to December 31, 2017. On the date of acquisition, the Company entered into a loan agreement with Cision Owner for $7.0 million and recorded a payable to Cision Owner of $7.0 million in the consolidated balance sheet, which was contributed in the quarter ended June 30, 2017. The $1.8 million difference between the fair value of the Class A Units and the amount due to Cision Owner has been recorded as interest expense.
F-18
The purchase price has been allocated to the assets acquired and liabilities assumed based on fair values as of the acquisition date.
The following table summarizes the allocation of the purchase price paid by the Company to the fair value of the assets and liabilities of Bulletin Intelligence acquired on March 27, 2017. The identifiable intangible assets include the trade name, customer relationships and purchased technology and are being amortized over four to ten years on an accelerated basis. The Company will complete the purchase price allocation during the three months ended March 31, 2018.
|
|
|||
(in thousands) | ||||
Cash and cash equivalents | $ | 11,457 | ||
Accounts receivable, net | 5,232 | |||
Prepaid and other assets | 216 | |||
Property, equipment and software, net | 704 | |||
Trade name | 1,070 | |||
Customer relationships | 28,870 | |||
Purchased technology | 9,510 | |||
Goodwill | 19,520 | |||
Total assets acquired | 76,579 | |||
Accounts payable and accrued liabilities | (3,481 | ) | ||
Deferred revenue | (1,271 | ) | ||
Total liabilities assumed | (4,752 | ) | ||
Net assets acquired | $ | 71,827 |
Goodwill will be deductible for tax purposes. The excess of the purchase price over the total net identifiable assets has been recorded as goodwill, which is attributable primarily to synergies expected from the expanded technology and service capabilities from the integrated business as well as the value of the assembled workforce.
On June 22, 2017, the Company acquired all of the outstanding shares of LArgus de la Presse (Argus), a Paris-based provider of media monitoring solutions, for €6.0 million (approximately $6.8 million) paid in cash at closing and up to €1.1 million (approximately $1.2 million) to be paid in cash over the next four years, subject to a working capital adjustment. The Company acquired Argus to deliver enhanced access to French media content, helping its global customer base understand and quantify the impact of their communications and media coverage in France.
During the year ended December 31, 2017, the Company incurred acquisition-related transaction costs of $0.9 million, which are included in general and administrative expense in the consolidated statements of net loss and total comprehensive loss. The acquisition was accounted for under the purchase method of accounting. The operating results are included in the accompanying consolidated financial statements from June 22, 2017.
The purchase price has been allocated to the assets acquired and liabilities assumed based on fair values as of the acquisition date.
The following table summarizes the allocation of the purchase price based on currently available information by the Company to the fair value of the assets and liabilities of Argus acquired on June 22, 2017. The amounts related to intangible assets shown below are subject to adjustment as additional information is obtained about the facts and circumstances that existed at the date of acquisition. The identifiable intangible assets include the trade name, customer relationships and purchased technology and are being amortized over
F-19
four to eight years on an accelerated basis. The Company expects to complete the purchase price allocation during the six months ended June 30, 2018.
|
|
|||
(in thousands) | ||||
Cash and cash equivalents | $ | 897 | ||
Accounts receivable, net | 12,543 | |||
Prepaid and other assets | 2,346 | |||
Property, equipment and software, net | 5,543 | |||
Trade name | 79 | |||
Customer relationships | 1,989 | |||
Purchased technology | 796 | |||
Goodwill | 5,092 | |||
Total assets acquired | 29,285 | |||
Accounts payable, accrued liabilities, and other liabilities | (16,610 | ) | ||
Deferred revenue | (4,627 | ) | ||
Total liabilities assumed | (21,237 | ) | ||
Net assets acquired | $ | 8,048 |
Goodwill is not deductible for tax purposes. The preliminary purchase price is subject to customary post-closing adjustments. The excess of the purchase price over the total net identifiable assets has been recorded as goodwill which is attributable primarily to synergies expected from the expanded technology and service capabilities from the integrated business as well as the value of the assembled workforce in accordance with GAAP.
On December 19, 2017, the Company acquired all of the outstanding shares of CEDROM, which is a Montréal-based provider of digital media monitoring solutions, for CAD 33.1 million (approximately $25.9 million) paid in cash at closing, subject to a working capital adjustment. The Company acquired CEDROM to enhance access to media content from print, radio, television, web, and social media to help customers understand and quantify the impact of their communications in Canada and France.
During the year ended December 31, 2017, the Company incurred acquisition-related transaction costs of $1.0 million, which are included in general and administrative expense in the consolidated statements of net loss and total comprehensive loss. The acquisition was accounted for under the purchase method of accounting. The operating results are included in the accompanying consolidated financial statements from December 19, 2017.
The purchase price has been preliminarily allocated to the assets acquired and liabilities assumed based on fair values as of the acquisition date.
F-20
The following table summarizes the preliminary allocation of the purchase price based on currently available information by the Company to the fair value of the assets and liabilities of CEDROM acquired on December 19, 2017. The amounts related to intangible assets shown below are preliminary and subject to adjustment as additional information is obtained about the facts and circumstances that existed at the date of acquisition. The identifiable intangible assets include the trade name, customer relationships and purchased technology and are being amortized over five to twelve years on an accelerated basis. The Company expects to complete the purchase price allocation during the six months ended June 30, 2018.
|
|
|||
(in thousands) | ||||
Cash and cash equivalents | $ | 2,394 | ||
Accounts receivable, net | 2,955 | |||
Prepaid and other assets | 1,749 | |||
Property, equipment and software, net | 1,256 | |||
Trade name | 1,061 | |||
Customer relationships | 3,517 | |||
Purchased technology | 7,765 | |||
Goodwill | 16,642 | |||
Total assets acquired | 37,339 | |||
Accounts payable, accrued liabilities, and other liabilities | (4,288 | ) | ||
Deferred revenue | (3,709 | ) | ||
Deferred taxes | (3,412 | ) | ||
Total liabilities assumed | (11,409 | ) | ||
Net assets acquired | $ | 25,930 |
Goodwill is not deductible for tax purposes. The preliminary purchase price is subject to customary post-closing adjustments. The excess of the purchase price over the total net identifiable assets has been recorded as goodwill which is attributable primarily to synergies expected from the expanded technology and service capabilities from the integrated business as well as the value of the assembled workforce in accordance with GAAP.
The acquired entities of Bulletin Intelligence, Argus, and CEDROM together contributed revenue of $44.8 million for the year ended December 31, 2017. The PR Newswire related activities contributed revenue of $165.1 million for the year ended December 31, 2016. Net loss from these acquisitions for the same periods is impracticable to determine due to the extent of integration activities.
The unaudited pro forma information below gives effect to the acquisitions of PR Newswire as if it occurred on January 1, 2015 and Bulletin Intelligence, Argus and CEDROM as if they had occurred as of January 1, 2016. The pro forma results presented below show the impact of the acquisitions and related costs as well as the increase in interest expense related to acquisition-related debt.
|
|
|
|
|||||||||
(in thousands except share and per share data) | 2017 | 2016 | 2015 | |||||||||
Revenue | $ | 673,566 | $ | 703,198 | $ | 657,267 | ||||||
Net loss | $ | (116,518 | ) | $ | (83,228 | ) | $ | (127,200 | ) | |||
Net loss per share basic and diluted | $ | (1.54 | ) | $ | (2.93 | ) | $ | (4.54 | ) |
F-21
Property, equipment and software consisted of the following at December 31, 2017 and 2016:
|
|
|
||||||
(in thousands) | 2017 | 2016 | ||||||
Purchased software, computer and office equipment | $ | 41,053 | $ | 32,282 | ||||
Furniture and fixtures | 4,992 | 3,557 | ||||||
Leasehold improvements | 25,983 | 23,149 | ||||||
Equipment under capital lease obligations | 1,059 | 1,034 | ||||||
Capitalized software development costs | 57,617 | 37,736 | ||||||
Property and equipment at cost | 130,704 | 97,758 | ||||||
Less: Accumulated depreciation and amortization | (77,126 | ) | (49,811 | ) | ||||
Property and equipment, net | $ | 53,578 | $ | 47,947 |
Depreciation and amortization expense of property equipment and software, including depreciation on equipment under capital leases, was $25.7 million, $25.0 million and $19.5 million for the years ended December 31, 2017, 2016 and 2015, respectively. Of this amount, $15.2 million, $15.7 million and $9.9 million is included in cost of revenue for the years ended December 31, 2017, 2016 and 2015, respectively, and $10.5 million, $9.3 million and $9.6 million is included in operating expense for the years ended December 31, 2017, 2016 and 2015, respectively, in the consolidated statements of net loss and total comprehensive loss.
Goodwill consisted of the following at December 31, 2017 and 2016:
|
|
|
||||||
(in thousands) | 2017 | 2016 | ||||||
Balances as of January 1 | $ | 1,079,518 | $ | 584,180 | ||||
Acquisition of PR Newswire | | 537,218 | ||||||
Disposition of Agility | | (1,992 | ) | |||||
Disposal of Vintage | (14,662 | ) | | |||||
Acquisition of Bulletin Intelligence | 19,520 | | ||||||
Acquisition of Argus | 5,092 | | ||||||
Adjustments of PR Newswire | 2,147 | | ||||||
Acquisition of CEDROM | 16,642 | | ||||||
Effects of foreign currency | 28,146 | (39,888 | ) | |||||
Balances as of December 31 | $ | 1,136,403 | $ | 1,079,518 |
F-22
Definite-lived intangible assets consisted of the following at December 31, 2017 and 2016:
|
|
|
|
|
||||||||||||
December 31, 2017 | ||||||||||||||||
(in thousands) |
Gross
carrying amount |
Foreign
currency translation |
Accumulated
amortization |
Net carrying
amount |
||||||||||||
Trade names and brand | $ | 370,435 | $ | (1,519 | ) | $ | (75,273 | ) | $ | 293,643 | ||||||
Customer relationships | 302,009 | (12,472 | ) | (168,460 | ) | 121,077 | ||||||||||
Purchased technology | 133,830 | (5,276 | ) | (86,983 | ) | 41,571 | ||||||||||
Balances at December 31, 2017 | $ | 806,274 | $ | (19,267 | ) | $ | (330,716 | ) | $ | 456,291 |
|
|
|
|
|
||||||||||||
December 31, 2016 | ||||||||||||||||
(in thousands) |
Gross
carrying amount |
Foreign
currency translation |
Accumulated
amortization |
Net carrying
amount |
||||||||||||
Trade names and brand | $ | 369,345 | $ | (9,877 | ) | $ | (30,551 | ) | $ | 328,917 | ||||||
Customer relationships | 270,495 | (29,898 | ) | (110,094 | ) | 130,503 | ||||||||||
Purchased technology | 120,007 | (12,213 | ) | (56,004 | ) | 51,790 | ||||||||||
Balances at December 31, 2016 | $ | 759,847 | $ | (51,988 | ) | $ | (196,649 | ) | $ | 511,210 |
Expense related to amortization of intangible assets for the years ended December 31, 2017, 2016 and 2015 was $113.8 million, $102.0 million and $84.6 million, respectively. Of this amount, $24.6 million, $24.9 million and $24.7 million is included in cost of revenue for the years ended December 31, 2017, 2016 and 2015, respectively, and $89.2 million, $77.1 million and $59.9 million is included in general and administrative expense for the years ended December 31, 2017, 2016 and 2015, respectively, in the consolidated statements of net loss and total comprehensive loss.
|
|
|||
Weighted-average useful life at December 31, 2017 | Years | |||
Trade names and brand | 12.8 | |||
Customer relationships | 5.9 | |||
Purchased technology | 3.9 |
Future expected amortization of intangible assets at December 31, 2017 is as follows:
|
|
|||
(in thousands) | ||||
Year ended December 31,
|
||||
2018 | $ | 100,222 | ||
2019 | 80,358 | |||
2020 | 58,332 | |||
2021 | 47,882 | |||
2022 | 36,162 | |||
Thereafter | 133,335 | |||
$ | 456,291 |
F-23
Debt consisted of the following at December 31, 2017 and 2016:
|
|
|
|
|||||||||
December 31, 2017 | ||||||||||||
(in thousands) | Short-term | Long-term | Total | |||||||||
2017 First Lien Credit Facility | $ | 13,349 | $ | 1,318,262 | $ | 1,331,611 | ||||||
Unamortized debt discount and issuance costs | | (52,141 | ) | (52,141 | ) | |||||||
Balances at December 31, 2017 | $ | 13,349 | $ | 1,266,121 | $ | 1,279,470 |
|
|
|
|
|||||||||
December 31, 2016 | ||||||||||||
(in thousands) | Short-term | Long-term | Total | |||||||||
2016 First Lien Credit Facility | $ | 11,000 | $ | 1,083,500 | $ | 1,094,500 | ||||||
2016 Second Lien Credit Facility | | 370,000 | 370,000 | |||||||||
2016 Revolving Credit Facility | | 33,475 | 33,475 | |||||||||
Unamortized debt discount and issuance costs | | (103,098 | ) | (103,098 | ) | |||||||
Total credit facilities | 11,000 | 1,383,877 | 1,394,877 | |||||||||
Capital lease obligations | 171 | | 171 | |||||||||
Balances at December 31, 2016 | $ | 11,171 | $ | 1,383,877 | $ | 1,395,048 |
On August 4, 2017, the Company entered into a refinancing amendment and incremental facility amendment (the 2017 First Lien Credit Facility) to the 2016 First Lien Credit Facility, with Deutsche Bank AG, New York Branch, as administrative agent and collateral agent, and a syndicate of commercial lenders. The 2017 First Lien Credit Facility provided for a tranche of refinancing term loans which refinanced the term loans under the 2016 First Lien Credit Facility in full and provided for additional term loans of $131.2 million. Upon effectiveness of the 2017 First Lien Credit Facility, the 2017 First Lien Credit Facility consists of:
(i) | a revolving credit facility, which permits borrowings and letters of credit of up to $75.0 million (the 2017 Revolving Credit Facility), of which up to $25.0 million may be used or issued as standby and trade letters of credit; |
(ii) | a $960.0 million Dollar-denominated term credit facility (the 2017 First Lien Dollar Term Credit Facility); and |
(iii) | a €250.0 million Euro-denominated term credit facility (the 2017 First Lien Euro Term Credit Facility) and, together with the 2017 First Lien Dollar Term Credit Facility, the 2017 First Lien Term Credit Facility and collectively with the 2017 Revolving Credit Facility, the 2017 First Lien Credit Facility). |
The Company used the proceeds from the 2017 First Lien Credit Facility to repay all amounts then outstanding under the 2016 First Lien Credit Facility, all amounts outstanding under the 2016 Second Lien Credit Facility, pay all related fees and expenses, and retained remaining cash for general corporate purposes. The Company terminated the 2016 Second Lien Credit Facility in connection with establishing the 2017 First Lien Credit Facility.
On December 14, 2017, the Company amended the 2017 First Lien Credit Facility to borrow an additional $75.0 million of 2017 First Lien Dollar Term Credit Facility. The Company will be using the money for future acquisitions.
The obligations under the 2017 First Lien Credit Facility are collaterized by substantially all of the assets of Cisions subsidiary, Canyon Companies S.à.r.l. and each of its subsidiaries organized in the United States (or any state thereof), the United Kingdom, the Netherlands, Luxembourg, and Ireland, subject to certain exceptions.
F-24
Interest is charged on U.S. dollar borrowings under the 2017 First Lien Credit Facility, at the Companys option, at a rate based on (1) the adjusted LIBOR (a rate equal to the London interbank offered rate adjusted for statutory reserves) or (2) the alternate base rate (a rate that is highest of the (i) Deutsche Bank AG, New York Branchs prime lending rate, (ii) the overnight federal funds rate plus 50 basis points or (iii) the one-month adjusted LIBOR plus 1%), in each case, plus an applicable margin.
The margin applicable to loans under the 2017 First Lien Dollar Term Credit Facility bearing interest at the alternate base rate is 3.25%; the margin applicable to loans under the 2017 First Lien Dollar Term Credit Facility bearing interest at the adjusted LIBOR is 4.25%, provided that each such rate is reduced by 25 basis points if the first lien net leverage ratio of Canyon Companies S.à.r.l. and its restricted subsidiaries under the 2017 First Lien Credit Facility is less than or equal to 4.00:1.00 at the end of the most recent fiscal quarter. Interest is charged on Euro borrowings under the 2017 First Lien Credit Facility at a rate based on the adjusted EURIBOR (a rate equal to the Euro interbank offered rate adjusted for statutory reserves), plus an applicable margin. The margin applicable to loans under the 2017 First Lien Euro Term Credit Facility bearing interest at the adjusted LIBOR is 4.25%, provided that each such rate is reduced by 25 basis points if the first lien net leverage ratio of Canyon Companies S.à.r.l. and its restricted subsidiaries under the 2017 First Lien Credit Facility is less than or equal to 4.00:1.00 at the end of the most recent fiscal quarter. As of December 31, 2017, the applicable interest rate under the 2017 First Lien Dollar Term Credit Facility and the 2017 First Lien Euro Term Credit Facility was 5.94% and 4.25%, respectively.
The margin applicable to loans under the 2017 Revolving Credit Facility bearing interest at the alternate base rate, the adjusted LIBOR, and the adjusted Euro interbank offered rate bear interest at rates of 3.00%, 4.00%, and 4.00% respectively; provided that each such rate is reduced by 25 basis points if the first lien net leverage ratio of Canyon Companies S.à.r.l. and its restricted subsidiaries under the 2017 First Lien Credit Facility is less than or equal to 4.00:1.00 at the end of the most recent fiscal quarter. The maturity dates of the 2017 Revolving Credit Facility and the 2017 First Lien Term Credit Facility are June 16, 2022 and June 16, 2023, respectively.
As of December 31, 2017, the Company had no outstanding borrowings and $1.3 million of outstanding letters of credit under the 2017 Revolving Credit Facility and $1,332 million outstanding under the 2017 First Lien Credit Facility.
The Company incurred approximately $10.0 million in financing costs in connection with the 2017 First Lien Credit Facility, of which $1.0 million was recorded as a loss on extinguishment of debt and the remaining $9.0 million was offset against the debt. All financing costs are being amortized using the effective interest method.
The Company began to make quarterly principal payments starting December 31, 2017 under each of the 2017 First Lien Dollar Term Credit Facility of $2.6 million and the 2017 First Lien Euro Term Credit Facility of €0.6 million (which amount may be reduced by the application of voluntary and mandatory prepayments pursuant to the terms of the 2017 First Lien Credit Facility), with the remaining balance due June 16, 2023.
The Company may also be required to make certain mandatory prepayments of the 2017 First Lien Credit Facility out of excess cash flow and upon the receipt of proceeds of asset sales and certain insurance proceeds (in each case, subject to certain minimum dollar thresholds and rights to reinvest the proceeds as set forth in the 2017 First Lien Credit Facility).
The 2017 First Lien Credit Facility includes a total net leverage financial maintenance covenant. Such covenant requires that, as of the last day of each fiscal quarter, the total net leverage ratio of Canyon Companies S.à.r.l. and its restricted subsidiaries under the 2017 First Lien Credit Facility cannot exceed the applicable ratio set forth in the 2017 First Lien Credit Facility for such quarter (subject to certain rights to cure any failure to meet such ratio as set forth in the 2017 First Lien Credit Facility). The 2017 First Lien Credit Facility is also subject to certain customary affirmative covenants and negative covenants. Under the
F-25
2017 First Lien Credit Facility, the Companys subsidiaries have restrictions on making cash dividends, subject to certain exceptions, including that the subsidiaries are permitted to declare and pay cash dividends: (a) in any amount, so long as the total net leverage ratio under the 2017 First Lien Credit Facility would not exceed 3.75 to 1.00 after making such payment; (b) in an amount per annum not greater than 6.0% of (i) the market capitalization of the Companys ordinary shares (based on the average closing price of its shares during the 30 trading days preceding the declaration of such payment) plus (ii) the $305.2 million in proceeds we received in the business combination with Capitol; (c) in an amount that does not exceed the sum of (i) $20.0 million, plus (ii) 50% of consolidated net income of the Companys subsidiaries from January 1, 2016 to the end of the most recent quarter plus (iii) certain other amounts set forth in the definition of Available Amount in the Companys 2017 First Lien Credit Facility (provided that it may only include the amounts of consolidated net income described in clause (ii) if the Companys total net leverage ratio would not exceed 5.00 to 1.00 after making such payment); and (d) in an amount that does not exceed the total net proceeds we receive from any public or private offerings of its ordinary shares or similar equity interests. As of December 31, 2017, the Company was in compliance with these covenants.
The 2017 First Lien Credit Facility provides that an event of default will occur upon specified change of control events. Change in Control is defined to include, among other things, the failure by Cision Owner, its affiliates and certain other Permitted Holders to beneficially own, directly or indirectly through one or more holding company parents of Cision, a majority of the voting equity of the borrower thereunder.
On June 16, 2016, in connection with the acquisition of PR Newswire, the Company entered into a $1,175 million credit agreement with Deutsche Bank AG, New York Branch, as administrative agent and collateral agent, and a syndicate of commercial lenders from time to time party thereto. The 2016 First Lien Credit Facility consisted of:
(i) | a revolving credit facility, which permitted borrowings and letters of credit up to $75.0 million (the 2016 Revolving Credit Facility), of which up to $25.0 million may be used or issued as standby and trade letters of credit; and |
(ii) | a $1,100 million term credit facility (the 2016 First Lien Term Credit Facility and, together with the 2016 Revolving Credit Facility, the 2016 First Lien Credit Facility). |
The Company used the proceeds from the 2016 First Lien Credit Facility, along with proceeds from the 2016 Second Lien Credit Facility, cash equity from the sponsor and cash from the balance sheet to consummate the acquisition of PR Newswire, refinance the existing debt and pay related fees and expenses.
Interest was charged on U.S. dollar borrowings under the 2016 First Lien Credit Facility, at the Companys option, at a rate based on (1) the adjusted LIBOR (a rate equal to the London interbank offered rate adjusted for statutory reserves, but which amount cannot be less than 1%) or (2) the alternate base rate (a rate that was highest of the (i) Deutsche Bank AG, New York Branchs prime lending rate, (ii) the overnight federal funds rate plus 50 basis points, (iii) the one-month adjusted LIBOR plus 1% or (iv) 2%), in each case, plus an applicable margin. The margin applicable to loans under the 2016 First Lien Credit Facility bearing interest at the alternate base rate was 5.00%; the margin applicable to loans under the 2016 First Lien Credit Facility bearing interest at the adjusted LIBOR was 6.00%. Revolving borrowings in Canadian dollars bear interest at the adjusted Canadian dollar bankers acceptance rate plus an applicable margin; revolving borrowings in Euro bear interest at the Euro interbank offered rate plus an applicable margin. The margin applicable to loans under the 2016 Revolving Facility bearing interest at the alternate base rate, the adjusted LIBOR, the adjusted Canadian dollar bankers acceptance rate and the adjusted Euro interbank offered rate bear interest at rates of 4.75%, 5.75%, 5.75% and 5.75%, respectively, provided that each such rate is reduced by 25 basis points if
F-26
the senior secured first lien net leverage ratio of Canyon Companies S.à.r.l. and its restricted subsidiaries under the 2016 First Lien Credit Facility is less than or equal to 3.50:1.00 at the end of the most recent fiscal quarter.
On March 17, 2017, the Company entered into an incremental amendment to the 2016 First Lien Credit Facility, which provided for an incremental borrowing of $30.0 million of incremental term loans, which term loans were fungible with the 2016 First Lien Term Credit Facility. The proceeds of the incremental facility were used to fund the acquisition of Bulletin Intelligence and related transactions, to pay certain fees, costs and other expenses in connection with the Bulletin Intelligence acquisition, for the incremental amendment and for general corporate purposes.
On August 4, 2017, the Company repaid all amounts outstanding under the 2016 First Lien Credit Facility. The repayment of the 2016 First Lien Credit Facility was evaluated as a debt modification versus an extinguishment under applicable guidance and as a result, the Company recorded a loss on extinguishment of debt of $22.6 million during the year ended December 31, 2017.
The Company incurred approximately $81.9 million in financing costs with the lenders in connection with the 2016 First Lien Credit Facility, which were offset against the debt. All financing costs were amortized using the effective interest method.
On June 16, 2016, in connection with the acquisition of PR Newswire, the Company entered into a second lien credit agreement with Deutsche Bank AG, New York Branch, as administrative agent and collateral agent, and a syndicate of commercial lenders from time to time party thereto. The second lien credit agreement consisted of a $370.0 million credit facility (2016 Second Lien Credit Facility). The Company used the proceeds from the 2016 Second Lien Credit Facility, along with proceeds from the 2016 First Lien Credit Facility, cash equity from the sponsor and cash from the balance sheet to consummate the acquisition of PR Newswire, refinance the existing debt and pay related fees and expenses.
Interest was charged on borrowings under the 2016 Second Lien Credit Facility, at the Companys option, at a rate based on (1) the adjusted LIBOR (a rate equal to the London interbank offered rate adjusted for statutory reserves, but which amount cannot be less than 1%) or (2) the alternate base rate (a rate that is highest of the (i) Deutsche Bank AG, New York Branchs prime lending rate, (ii) the overnight federal funds rate plus 50 basis points, (iii) the one-month adjusted LIBOR plus 1% or (iv) 2%), in each case, plus an applicable margin. The margin applicable to loans under the 2016 Second Lien Credit Facility bearing interest at the alternate base rate was 8.50%; the margin applicable to loans under the 2016 Second Lien Credit Facility bearing interest at the adjusted LIBOR was 9.50%.
The obligations under the 2016 Second Lien Credit Facility were secured by substantially all of the assets of Canyon Companies S.à.r.l. and each of its subsidiaries organized in the United States (or any state thereof), the United Kingdom, the Netherlands, Luxembourg, and Ireland, subject to certain exceptions. The liens granted to the lenders under the 2016 Second Lien Credit Facility were junior to the liens granted to the lenders under the 2016 First Lien Credit Facility pursuant to the terms of an intercreditor agreement.
The 2016 Second Lien Credit Facility included a total net leverage financial maintenance covenant. Such covenant required that, as of the last day of each fiscal quarter, the total net leverage ratio of Canyon Companies S.à.r.l. and its restricted subsidiaries under the 2016 Second Lien Credit Facility cannot exceed the applicable ratio set forth in the 2016 Second Lien Credit Facility for such quarter (subject to certain rights to cure any failure to meet such ratio as set forth in the 2016 Second Lien Credit Facility). The 2016 Second Lien Credit Facility was also subject to certain customary affirmative covenants and negative covenants. Under the 2016 Second Lien Credit Facility, the Companys subsidiaries had restrictions on making cash dividends, subject to certain exceptions, including that the subsidiaries were permitted to declare and pay cash dividends (x) in an amount that does not exceed the sum of (i) $57.5 million, plus (ii) the sum of the amount
F-27
(which amount shall not be less than zero) equal to 50% of consolidated net income of the subsidiaries from January 1, 2016 to the end of the most recent quarter subject to certain conditions, plus (iii) certain other amounts set forth in the definition of Available Amount in the 2016 Second Lien Credit Facility or (y) so long as the total net leverage ratio under the 2016 Second Lien Credit Facility does not exceed 3.75 to 1.00.
On July 7, 2017, in connection with the consummation of the Merger with Capitol, the Company repaid $294.0 million of the principal amount outstanding under the 2016 Second Lien Credit Facility, plus a 1% penalty and accrued interest. The Company concluded this resulted in an extinguishment of debt and recorded a loss of $22.5 million during the year ended December 31, 2017.
On August 4, 2017, the Company repaid all amounts outstanding under the 2016 Second Lien Credit Facility. The repayment of the 2016 Second Lien Credit Facility was evaluated as a debt modification versus an extinguishment under applicable guidance and as a result, the Company recorded a loss on extinguishment of debt of $5.7 million during the year ended December 31, 2017.
The Company incurred approximately $24.0 million in financing costs with the lenders in connection with the 2016 Second Lien Credit Facility, which were offset against the debt. All financing costs were amortized over the term of the second lien credit agreement.
The fair value of the Companys First Lien Credit Facility at December 31, 2017 and 2016 was $1,347 million and $1,082 million, respectively, and the fair value of the Companys 2016 Second Lien Credit Facility at December 31, 2016 was $364.9 million. The fair value of the Companys First and Second Lien debt was considered Level 2 in the fair value hierarchy. The fair value of other debt at both years approximated the carrying value.
Convertible Preferred Equity Certificate activity for the years ended December 31, 2017, 2016 and 2015 is as follows:
|
|
|||
(in thousands) | ||||
Balance at December 31, 2014 | $ | 259,093 | ||
Issued during 2015 | 2,821 | |||
Yield accreted for 2015 | 2,583 | |||
Balance at December 31, 2015 | 264,497 | |||
Issued during 2016 | 165,525 | |||
Yield accreted for 2016 | 13,934 | |||
Yield paid in 2016 | (854 | ) | ||
Balance at December 31, 2016 | 443,102 | |||
Issued during 2017 | 6,902 | |||
Yield accreted for 2017 | 3,978 | |||
Yield paid in 2017 | (3,557 | ) | ||
Converted to equity upon merger with Capitol | (450,425 | ) | ||
Balance at December 31, 2017 | $ | |
During the year ended December 31, 2016, CPECs with a contractual redemption value of $40.0 million were issued to Cision Owner in connection with the acquisition of PR Newswire, in exchange for the contribution by Cision Owner to the Company of a pro rata share of net assets in PR Newswire valued at $29.5 million. As the CPECs were contractually puttable by Cision Owner for cash at any time at their redemption value, the Company recorded an immediate non-cash accretion expense of $10.5 million.
CPECs were contributed as equity simultaneously with the closing of the Merger on June 29, 2017.
F-28
In January 2015, the Company entered into a $35.0 million note purchase agreement (the Note Purchase Agreement) with a commercial lender. The Note Purchase Agreement was paid in full in connection with the acquisition of PR Newswire in June 2016.
Interest was charged on borrowings under the Note Purchase Agreement at a rate of 11.75% per annum. Interest was due quarterly and paid with additional notes (PIK Interest). The outstanding balance of the Note Purchase agreement including the PIK Interest was $39.1 million as of December 31, 2015.
The Company incurred approximately $1.1 million in financing costs in connection with the Note Purchase Agreement, which were offset against the debt. In addition, the Company incurred approximately $0.6 million in other issuance costs, which are included as other assets on the accompanying consolidated balance sheet. All financing costs were amortized to interest expense over the term of the Note Purchase Agreement during the years ended December 31, 2015 and December 31, 2016. This Note was paid off in connection with the 2016 Credit Agreement. Total amounts repaid was approximately $41.2 million.
Future minimum principal payments of debt as of December 31, 2017 are as follows:
|
|
|||
(in thousands) | ||||
Year ended December 31,
|
||||
2018 | $ | 13,349 | ||
2019 | 13,349 | |||
2020 | 13,349 | |||
2021 | 13,349 | |||
2022 | 13,349 | |||
Thereafter | 1,264,866 | |||
$ | 1,331,611 |
Interest expense for the years ended December 31, 2017, 2016 and 2015 was as follows:
|
|
|
|
|||||||||
(in thousands) | 2017 | 2016 | 2015 | |||||||||
First Lien Credit Facility | $ | 74,833 | $ | 56,352 | $ | 30,499 | ||||||
Second Lien Credit Facility | 20,857 | 29,408 | 17,338 | |||||||||
Loan Authorization Agreement | | | 81 | |||||||||
Revolving Credit Facility | 1,397 | 1,198 | | |||||||||
Accretion of debt discount and deferred financing costs | 14,275 | 13,445 | 5,972 | |||||||||
Note Purchase Agreement | | 2,170 | 4,048 | |||||||||
Accretion of Convertible Preferred Equity Certificates due to Cision Owner | 1,838 | 10,500 | | |||||||||
Yield on Convertible Preferred Equity Certificates due to Cision Owner | 2,140 | 3,433 | 2,583 | |||||||||
Commitment fees and other | 1,126 | 1,491 | 877 | |||||||||
Total interest expense | $ | 116,466 | $ | 117,997 | $ | 61,398 |
F-29
The Company is authorized to issue 20,000,000 shares of preferred stock with a par value of $0.0001 per share with such designation, rights and preferences as may be determined from time to time by the Companys board of directors. As of December 31, 2017 and 2016, there are no shares of preferred stock issued or outstanding.
The Company is authorized to issue 480,000,000 shares of common stock with a par value of $0.0001 per share.
Prior to the Merger, Cision Owner issued equity units to employees for compensation purposes pursuant to the terms of its limited partnership agreement. Stock-based compensation was recorded based on the grant date fair values of these awards and will continue to be recorded until full vesting of these units has occurred. As a result of the consummation of the Merger, these outstanding units, held by Cision Owner, were converted into common stock of Cision. Any forfeitures of unvested units will be redistributed to existing unit holders and not returned to the Company. Equity awards to employees subsequent to the Merger will be made pursuant to the Companys 2017 Omnibus Incentive Plan described below.
Equity-based compensation is classified in the consolidated statements of operations in a manner consistent with the statements of operations classification of an employees salary and benefits as follows for continuing operations:
|
|
|
|
|||||||||
For the years ended December 31, | ||||||||||||
(in thousands) | 2017 | 2016 | 2015 | |||||||||
Cost of revenue | $ | 337 | $ | 277 | $ | 258 | ||||||
Selling and marketing | 280 | 255 | 228 | |||||||||
R&D | 319 | 551 | 457 | |||||||||
G&A | 3,202 | 4,219 | 4,351 | |||||||||
Total equity based compensation expense | $ | 4,138 | $ | 5,302 | $ | 5,294 |
In connection with the Transactions, the Company adopted the 2017 Omnibus Incentive Plan (the 2017 Plan) in June 2017. The 2017 Plan provides for grants of stock options, stock appreciation rights, restricted stock, other stock-based awards and other cash-based awards. Directors, officers and other employees of the Company and its subsidiaries, as well as others performing consulting or advisory services for the Company, are eligible for grants under the 2017 Plan.
The 2017 Plan reserves up to 6,100,000 ordinary shares of the Company for issuance in accordance with the plans terms, subject to certain adjustments. The purpose of the plan is to provide the Companys officers, directors, employees and consultants who, by their position, ability and diligence are able to make important contributions to the Companys growth and profitability, with an incentive to assist the Company in achieving its long-term corporate objectives, to attract and retain executive officers and other employees of outstanding competence and to provide such persons with an opportunity to acquire an equity interest in the Company.
F-30
The Company estimated the fair value of employee stock options using the Black-Scholes option pricing model. The fair values of stock options granted under the 2017 Plan were estimated using the following assumptions:
|
|
|||
Year ended
December 31, 2017 |
||||
Stock price volatility | 50 | % | ||
Expected term (years) | 6.3 | |||
Risk-free interest rate | 2.0 | % | ||
Dividend yield | 0 | % |
A summary of employee stock option activity for the year ended December 31, 2017 under the Companys 2017 Plan is presented below:
|
|
|
|
|
||||||||||||
Number of
options |
Weighted-
average exercise price per share |
Weighted-
average remaining contractual term |
Aggregate
intrinsic value |
|||||||||||||
Options outstanding as of December 31, 2016 | | $ | | | $ | | ||||||||||
Granted | 691,500 | 12.78 | 9.7 | |||||||||||||
Exercised | | | | |||||||||||||
Forfeited | | | | |||||||||||||
Options outstanding as of December 31, 2017 | 691,500 | $ | 12.78 | 9.7 | $ | |
The aggregate intrinsic value is calculated as the difference between the exercise price of the underlying stock option awards and the quoted closing price of the Companys common stock as of December 31, 2017.
A summary of restricted stock units activity for the year ended December 31, 2017 under the Companys 2017 Plan is presented below:
|
|
|
||||||
Number of shares
underlying stock awards |
Weighted-
average grant date fair value |
|||||||
Restricted stock units outstanding as of December 31, 2016 | | $ | | |||||
Granted | 34,945 | 12.40 | ||||||
Vested | | | ||||||
Forfeited | | | ||||||
Restricted stock units outstanding as of December 31, 2017 | 34,945 | $ | 12.40 |
As of December 31, 2017, the Company had $3.9 million of unrecognized compensation expense related to the unvested portion of outstanding stock options and restricted stock units expected to be recognized on a pro-rata straight-line basis over the weighted-average remaining service period.
The Company sponsors defined-contribution, profit-sharing and other benefit plans in the United States, Canada, the United Kingdom and France. Total expense for the plans for the years ended December 31, 2017, 2016 and 2015 related to defined contribution plans, were approximately $6.2 million, $4.4 million and $2.2 million, respectively.
F-31
Employees of CNW participate in a defined benefit pension plan component. The defined benefit plan has been closed to new participants since 2006. In addition, CNW maintains a non-registered defined benefit pension plan for a former executive, which provides benefits in excess of those payable from the registered defined benefit plan. The actuarial cost method used for the valuation of the defined benefit post-employment benefits is the present value of the benefits expected to be paid. CNWs contributions to defined contribution plans are expensed as incurred. The net periodic pension expense recognized for CNWs defined benefit plan for the year ended December 31, 2017 and for period since the date of acquisition of PR Newswire through December 31, 2016 was $0.7 million and $0.3 million, respectively.
The following table summarizes the benefit obligation, plan assets and the funded status of CNWs two defined benefit plans at December 31, 2017 and for the period since acquisition ending December 31, 2016 (in thousands):
|
|
|
||||||
(in thousands) | 2017 | 2016 | ||||||
Change in benefit obligation
|
||||||||
Benefit obligation balance at January 1, 2017 and June 16, 2016: | $ | 11,412 | $ | 11,758 | ||||
Service cost | 209 | 118 | ||||||
Interest cost | 475 | 219 | ||||||
Participant contributions | 29 | 22 | ||||||
Actuarial gain (loss) | 229 | (134 | ) | |||||
Benefits paid | (718 | ) | (185 | ) | ||||
Currency translation | 798 | (386 | ) | |||||
Benefit obligation balance at December 31, | $ | 12,434 | $ | 11,412 |
|
|
|
||||||
(in thousands) | 2017 | 2016 | ||||||
Change in plan assets
|
||||||||
Fair value of plan assets at January 1, 2017 and June 16, 2016: | $ | 8,937 | $ | 10,101 | ||||
Return on plan assets | 1,250 | (850 | ) | |||||
Employer contributions | 538 | 289 | ||||||
Participant contributions | 29 | 22 | ||||||
Benefits paid | (718 | ) | (185 | ) | ||||
Currency translation | 654 | (440 | ) | |||||
Fair value of plan assets at December 31, | $ | 10,690 | $ | 8,937 |
The amount recognized in the consolidated balance sheets as long-term pension obligation as of December 31, 2017 and 2016 was $1.8 million and $2.5 million, respectively. The amount of net actuarial gain (loss) recognized in other comprehensive loss for the period ended December 31, 2017 and 2016 was $1.8 million and $(0.5) million, respectively. Substantially all of the Plans assets consist primarily of a pooled fund, which is primarily invested in government and corporate bonds. They are valued using models with inputs including interest rate curves, credit spreads and volatilities. The inputs that are significant to valuation are generally observable and therefore the assets within the pooled fund have been classified as Level 2. The fair value reflects the proportionate share of the fair value of the investments held in the underlying pooled fund.
F-32
Weighted-average assumptions used to determine the benefit obligation reflected in the consolidated balance sheets and the net periodic pension cost in the consolidated statements of comprehensive loss were as follows:
|
|
|
||||||
2017 | 2016 | |||||||
Discount rate | 3.5 | % | 4.1 | % | ||||
Rate of compensation increase | 3.5 | % | 3.5 | % | ||||
Expected return on plan assets | 2.0 | % | 2.0 | % |
The following table summarizes the expected future cash flows of CNWs two defined benefit plans at December 31, 2017:
|
|
|||
(in thousands) | ||||
Projected company contributions for 2018 | $ | 675 | ||
Expected benefit payments for year ended December 31,
|
||||
2018 | $ | 430 | ||
2019 | 448 | |||
2020 | 441 | |||
2021 | 447 | |||
2022 | 444 | |||
Thereafter | 2,573 |
The long-term rates of return are determined based on the nature of each plans investments, an expectation for each plans investment strategies, historical rates of return and current economic forecasts, among other factors, and are evaluated annually and adjusted as necessary.
Pursuant to the acquisition of PR Newswire in June 2016, the Company became the owner of a 50% interest in a joint venture with ANP Pers Support B.V in ANP Pers Support v.o.f. (ANPps). This investment in an unconsolidated affiliate is accounted for by the equity method. For the years ended December 31, 2017 and 2016, the Companys allocation of net income from ANPps was $0.4 million and $0.2 million, respectively, and is included in earnings of unconsolidated affiliate in the consolidated statements of comprehensive loss.
Basic net loss per share is computed by dividing net loss by the weighted-average number of shares of common stock outstanding during the period as retroactively adjusted for the Merger (Note 1). For the years ended December 31, 2017, 2016 and 2015, the Company has excluded the potential effect of warrants to purchase shares of common stock totaling 989,980 shares, additional earn out shares, as described in Note 1, and the dilutive effect of stock options and restricted stock awards, as described in Note 7, in the calculation of diluted loss per share, as the effect would be anti-dilutive due to losses incurred. As a result, diluted loss per common share is the same as basic loss per common share for all periods presented below.
|
|
|
|
|||||||||
For the years ended December 31, | ||||||||||||
(in thousands except share and per share data) | 2017 | 2016 | 2015 | |||||||||
Numerator:
|
||||||||||||
Net loss | $ | (123,042 | ) | $ | (98,412 | ) | $ | (90,544 | ) | |||
Denominator:
|
||||||||||||
Weighted-average shares outstanding basic and diluted | 75,696,880 | 28,369,644 | 28,029,023 | |||||||||
Net loss per share basic and diluted | $ | (1.63 | ) | $ | (3.47 | ) | $ | (3.23 | ) |
F-33
For the years ended December 31, 2017, 2016 and 2015, the U.S. and foreign components of loss before income taxes were as follows:
|
|
|
|
|||||||||
(in thousands) | 2017 | 2016 | 2015 | |||||||||
U.S. | $ | (134,132 | ) | $ | (140,443 | ) | $ | (60,980 | ) | |||
Foreign | 499 | (13,660 | ) | (33,171 | ) | |||||||
Total loss before income taxes | $ | (133,633 | ) | $ | (154,103 | ) | $ | (94,151 | ) |
For the years ended December 31, 2017, 2016 and 2015, the benefit from income taxes consisted of the following:
|
|
|
|
|||||||||
(in thousands) | 2017 | 2016 | 2015 | |||||||||
Current expense
|
||||||||||||
Federal | $ | 2,052 | $ | 419 | $ | 570 | ||||||
State | 3,892 | 1,260 | 714 | |||||||||
Foreign | 8,406 | 9,123 | 3,128 | |||||||||
Total current expense | 14,350 | 10,802 | 4,412 | |||||||||
Deferred benefit
|
||||||||||||
Federal | (16,204 | ) | (54,550 | ) | (2,442 | ) | ||||||
State | (364 | ) | (5,805 | ) | 1,632 | |||||||
Foreign | (8,373 | ) | (6,138 | ) | (7,209 | ) | ||||||
Total deferred benefit | (24,941 | ) | (66,493 | ) | (8,019 | ) | ||||||
Total benefit from income taxes | $ | (10,591 | ) | $ | (55,691 | ) | $ | (3,607 | ) |
The Companys effective tax rate for the years ended December 31, 2017, 2016 and 2015 was a benefit of 7.9%, 36.1% and 3.8%, respectively. The Company is a Cayman entity with a 0% statutory tax rate with subsidiaries in various jurisdictions including the U.S., Canada, France, and the United Kingdom. The Companys effective tax rate differed from the Cayman statutory rate as a result of the foreign statutory rates in each of its subsidiaries, as well as certain nondeductible expenses, including transaction costs, interest expense and stock-based compensation. In addition, differences were caused by U.S. state income taxes, as well as the need for valuation allowance for certain U.S. and United Kingdom deferred tax assets.
For the years ended December 31, 2017, 2016 and 2015, the Companys effective tax rate was as follows:
|
|
|
|
|||||||||
2017
% |
2016
% |
2015
% |
||||||||||
Income tax at Cayman Islands statutory rate | 0.0 | 0.0 | 0.0 | |||||||||
State income taxes, net of U.S. federal benefit | (0.8 | ) | 1.9 | (2.2 | ) | |||||||
Expense from different foreign tax rates | 37.5 | 34.1 | 28.1 | |||||||||
Change in valuation allowance | (13.8 | ) | 10.2 | (17.2 | ) | |||||||
Nondeductible expenses | (4.8 | ) | (9.7 | ) | (5.2 | ) | ||||||
Tax Act | (8.9 | ) | | | ||||||||
Other | (1.3 | ) | (0.4 | ) | 0.3 | |||||||
Effective tax rate | 7.9 | % | 36.1 | % | 3.8 | % |
F-34
The Companys deferred tax components consisted of the following at December 31, 2017 and 2016:
|
|
|
||||||
(in thousands) | 2017 | 2016 | ||||||
Deferred tax assets
|
||||||||
Net operating loss carryforwards | $ | 41,303 | $ | 42,206 | ||||
Allowance for doubtful accounts | 915 | 2,043 | ||||||
Accrued expenses | 2,899 | 6,936 | ||||||
Deferred interest | 51,817 | 47,943 | ||||||
Deferred revenue | 2,537 | 2,526 | ||||||
Transaction costs | 2,218 | 3,215 | ||||||
Tax credits | 5,750 | 4,065 | ||||||
Other | 6,143 | 4,008 | ||||||
Total deferred tax assets | 113,582 | 112,942 | ||||||
Valuation allowance | (46,666 | ) | (3,437 | ) | ||||
Net deferred tax assets | 66,916 | 109,505 | ||||||
Deferred tax liabilities
|
||||||||
Capitalized software development costs | (4,410 | ) | (5,707 | ) | ||||
Fixed assets | (13 | ) | (3,075 | ) | ||||
Goodwill and intangible assets | (113,246 | ) | (182,251 | ) | ||||
Deferred financing costs | (10,304 | ) | | |||||
Other | (1,560 | ) | (1,681 | ) | ||||
Total deferred tax liabilities | (129,533 | ) | (192,714 | ) | ||||
Net deferred tax liability | $ | (62,617 | ) | $ | (83,209 | ) | ||
Disclosed as
|
||||||||
Deferred tax asset long-term | $ | | $ | | ||||
Deferred tax liability long-term | (62,617 | ) | (83,209 | ) | ||||
Net deferred tax liability long-term | $ | (62,617 | ) | $ | (83,209 | ) |
On December 22, 2017, the U.S. government enacted comprehensive tax legislation (the Tax Act), which significantly revises the ongoing U.S. corporate income tax law by lowering the U.S. federal corporate income tax rate from 35% to 21%, implementing a territorial tax system, imposing a one-time tax on foreign unremitted earnings and setting limitations on deductibility of certain costs (e.g., interest expense), among other things.
Due to the complexities involved in accounting for the recently enacted Tax Act, the U.S. Securities and Exchange Commission issued SAB 118, which requires that the Company include in its financial statements the reasonable estimate of the impact of the Tax Act to the extent such reasonable estimate has been determined. Accordingly, the Company recorded the following reasonable estimates of the tax impact in its consolidated financial statements as of and for the year ended December 31, 2017.
a) | A provisional tax expense of $5.5 million, including $2.1 million of associated withholding taxes, for the Tax Acts one-time transition tax on the Companys Canadian subsidiaries accumulated, unremitted earnings dating back to 1986. |
b) | A provisional tax expense of $6.4 million to the net change in deferred tax liabilities due to the reduction of the U.S. federal tax rate from 35% to 21% net of the additional valuation allowance required as a result of the new limitations on interest deductibility. |
F-35
The Tax Act also includes a provision to tax global intangible low-taxed income (GILTI) of foreign subsidiaries and a base erosion anti-abuse tax (BEAT) measure that taxes certain payments between a U.S. corporation and its subsidiaries. The Company will be subject to the GILTI and BEAT provisions effective beginning January 1, 2018 and is in the process of analyzing their effects, including how to account for the GILTI provision from an accounting policy standpoint.
The final impact on the Company from the Tax Acts transition tax legislation may differ from the aforementioned reasonable estimate due to the complexity of calculating and supporting with primary evidence such U.S. tax attributes as accumulated foreign earnings and profits and foreign tax paid, and other tax components involved in foreign tax credit calculations for prior years back to 1986. Such differences could be material, due to, among other things, changes in interpretations of the Tax Act, future legislative action to address questions that arise because of the Tax Act, changes in accounting standards for income taxes or related interpretations in response to the Tax Act, or any updates or changes to estimates the Company has utilized to calculate the transition taxs reasonable estimate.
Pursuant to SAB 118, the Company is allowed a measurement period of up to one year after the enactment date of the Tax Act to finalize the recording of the related tax impacts. Accordingly, the Company accrued the transition tax and to the net change in deferred tax liabilities including additional valuation allowance based on the reasonable estimate guidance. The Company will continue to refine its estimate of the impact of the U.S. Tax Act and will record any resulting tax adjustments during the year ended December 31, 2018. Additionally, the Company currently believes it will use its net operating loss carryforwards to offset the transition tax, exclusive of the Canadian withholding tax.
The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. The Company assessed the realizability of deferred tax assets and whether it is more likely than not that a portion, or all, of the deferred tax assets can be realized. Management considers the scheduled reversal of deferred tax liabilities and tax planning strategies in making this assessment. During 2015, management concluded that a valuation allowance was required for the U.S. Federal deferred tax assets, net of federal deferred tax liabilities excluding deferred tax liabilities relating to indefinite lived intangibles. In 2016, management concluded that the valuation allowance on the U.S. federal deferred tax assets was no longer required as a result of the deferred tax liabilities established in the acquisition of PR Newswire. The reversal of such deferred tax liabilities will allow for the realizability of the U.S. deferred tax assets. In 2017, management concluded that a valuation allowance of $26.8 million was required for U.S. federal interest expense carryforwards under Internal Revenue Code Section 163(j) and for $0.7 million of interest expense carryforwards under United Kingdom tax law. The remaining $19.2 million of the valuation allowance is for foreign net operating losses for entities that have cumulative losses.
At December 31, 2017, the Company has not provided for income taxes on $42.0 million of undistributed earnings of its foreign subsidiaries, other than certain Canadian subsidiaries, as the earnings are considered permanently reinvested. As part of the Tax Act (as discussed above), the U.S. Company accrued a $5.5 million transition tax related to its Canadian subsidiaries. This amount includes an estimated $2.1 million of Canadian withholding taxes on the future repatriation of cash from Canada to the U.S. The U.S. does not currently have accumulated earnings and profits and the majority of the other foreign jurisdictions can generally distribute their earnings to the Company without additional taxation. Accordingly, the Company has determined that the deferred tax liability associated with a distribution of the undistributed earnings would be immaterial.
As of December 31, 2017, the Company has net operating loss carryforwards for federal and state tax purposes of approximately $86.2 million and $47.9 million, respectively, which will expire between 2031 and 2036. The Company also has $1.4 million of federal and state tax credits that will expire at varying times between 2025 and 2033. The Company has $2.3 million of federal alternative minimum tax credits that it now
F-36
expects to have refunded over the next 4 years as a result of the Tax Act. The Company has foreign net operating losses of $79.6 million of which the majority do not expire.
Certain of the Companys federal and state NOL carryforwards are subject to annual limitations under Section 382 of Internal Revenue Code. Based on the purchase price for the U.S. companies, the limitations imposed under Section 382 will not preclude the Company from realizing these NOLs.
The following table presents changes in unrecognized tax benefits:
|
|
|
|
|||||||||
(in thousands) | 2017 | 2016 | 2015 | |||||||||
Beginning balance | $ | 2,944 | $ | 2,634 | $ | 2,224 | ||||||
Additions based on tax provisions related to the current year | 903 | 210 | 410 | |||||||||
Additions based on tax positions related to prior years | | 100 | | |||||||||
Reductions to tax positions of prior years | (111 | ) | | | ||||||||
Reductions for expiration of statute of limitations | | | | |||||||||
Settlements | | | | |||||||||
Ending balance | $ | 3,736 | $ | 2,944 | $ | 2,634 |
Company recognizes the effects of uncertain income tax positions only if those positions are more likely than not of being sustained. The Company has recorded a liability for uncertain tax positions associated primarily with tax credits and transfer pricing in the amount of $3.7 million and $2.9 million as of December 31, 2017 and 2016, respectively.
The Company does not expect unrecognized tax benefits to change significantly over the next twelve months, and the entire amount of unrecognized tax benefits, if recognized, would affect the effective tax rate. The Company recognizes interest and penalties related to uncertain tax positions in the consolidated financial statements as a component of the income tax provision, and has accrued $1.1 million for interest and penalties as of December 31, 2017. The current year reduction of $0.1 million is related to the rate reduction in the Tax Act. The Company files income tax returns in the U.S. and various states, the United Kingdom, Canada, France and other foreign jurisdictions and is subject to U.S. federal, state, and foreign tax examinations for years ranging from 2011 to 2017.
The Company is party to a professional services agreement with the majority owner of its parent. The Company incurred approximately $0.3 million for the year ended December 31, 2017 and $0.6 million for the years ended December 31, 2016 and December 31, 2015, included in general and administrative expenses. Upon consummation of the Merger on June 29, 2017, the professional services agreement terminated.
Certain transactions between the Company and Cision Owner have been described elsewhere in these consolidated financial statements.
The Company has various non-cancelable operating leases, primarily related to office real estate, that expire through 2035 and generally contain renewal options for up to five years. Lease incentives, payment escalations and rent holidays specified in the lease agreements are accrued or deferred as appropriate as a component of rent expense which is recognized on a straight-line basis over the terms of occupancy. As of December 31, 2017 and 2016, deferred rent of $10.2 million and $9.4 million, respectively, is included in other liabilities.
F-37
Future minimum lease payments under non-cancelable operating leases at December 31, 2017 are as follows:
|
|
|||
(in thousands) | Operating leases | |||
2018 | $ | 16,265 | ||
2019 | 15,045 | |||
2020 | 13,138 | |||
2021 | 10,307 | |||
2022 | 9,855 | |||
Thereafter | 21,550 | |||
Total future minimum payments | $ | 86,160 |
Rent expense was $16.8 million, $13.9 million and $9.4 million for the years ended December 31, 2017, 2016 and 2015, respectively.
The Company entered into agreements with various vendors in the ordinary course of business. As of December 31, 2017, the minimum required payments in future years under these arrangements are as follows:
|
|
|||
(in thousands) | Commitments | |||
Year ended December 31,
|
||||
2018 | $ | 7,104 | ||
2019 | 2,322 | |||
2020 | 185 | |||
2021 | | |||
2022 | | |||
Thereafter | | |||
$ | 9,611 |
As of December 31, 2017 and 2016, the Company had a total of $1.3 million and $1.1 million in letters of credit outstanding, respectively, for certain of its office spaces. These letters of credit do not require compensating balances and expire at various dates through March 2031.
The Company from time to time is subject to lawsuits, investigations and claims arising out of the ordinary course of business, including those related to commercial transactions, contracts, government regulation, and employment matters. In the opinion of management, based on all known facts, all such matters are either without merit or are of such kind, or involve such amounts that would not have a material effect on the financial position or results of operations of the Company if disposed of unfavorably.
The Company has determined that its Chief Executive Officer is the Chief Operating Decision Maker. The Companys Chief Executive Officer reviews financial information presented on both a consolidated basis and on a geographic regional basis. Since its inception, the Company has completed several significant acquisitions and has expended significant efforts to provide an integrated set of software and services to all customers in all geographies. As a result of the long-term qualitative and quantitative similar economic characteristics exhibited by the sale of an integrated set of products and services in all the Companys regions, the Company has determined that its operating segments meet the criteria to be aggregated into one reportable segment.
F-38
Geographical revenue information is based on revenue generated through the sale of products and services to customers located within the specified geography. Long-lived assets consist of property, plant and equipment. Property, plant and equipment information is based on the physical location of the assets at the end of each fiscal year.
Revenue by geography is based on the location of the subsidiary that executed the customer contract. The following table lists revenue for the years ended December 31, 2017, 2016 and 2015 by geographic region:
|
|
|
|
|||||||||
(in thousands) | 2017 | 2016 | 2015 | |||||||||
Revenue:
|
||||||||||||
Americas U.S. | $ | 410,621 | $ | 316,177 | $ | 218,628 | ||||||
Rest of Americas | 51,650 | 29,891 | 10,105 | |||||||||
EMEA | 144,127 | 110,225 | 105,225 | |||||||||
APAC | 25,239 | 11,479 | | |||||||||
$ | 631,637 | $ | 467,772 | $ | 333,958 |
The following table lists long-lived assets, net of amortization, as of December 31, 2017 and 2016 by geographic region:
|
|
|
||||||
(in thousands) | 2017 | 2016 | ||||||
Long-lived assets, net
|
||||||||
Americas U.S. | $ | 1,138,360 | $ | 1,188,000 | ||||
Rest of Americas | 145,837 | 115,223 | ||||||
EMEA | 336,937 | 313,373 | ||||||
APAC | 29,816 | 30,880 | ||||||
$ | 1,650,950 | $ | 1,647,476 |
On January 23, 2018, the Company completed its acquisition of PRIME Research (Prime). The purchase price was approximately €75.7 million ($93.3 million) and consisted of approximately €56.8 million in cash consideration, the issuance of approximately 1.7 million ordinary shares valued at €16.4 million plus up to €2.5 million in ordinary shares to be issued 18 months after closing, subject to certain reductions in accordance with the purchase agreement. At the date of the acquisition, Prime had over 700 employees with offices in Brazil, China, Germany, Switzerland, the United Kingdom, and the United States.
On February 8, 2018, the Company completed its debt repricing transaction on its 2017 First Lien Credit Facility and 2017 Revolver Credit Facility. The 2017 First Lien Credit Facility margins were lowered for the alternate base rate, LIBOR rate and EURIBOR rate by 1.00%, 1.00% and 0.75%, respectively. The 2017 Revolver Credit Facility margins were lowered for the alternate base rate, LIBOR rate and EURIBOR rate by 0.75%, 0.75% and 0.50%, respectively.
F-39
The allowance for doubtful accounts and deferred tax assets for the years ended December 31, 2017, 2016 and 2015 is as follows:
|
|
|
|
|
||||||||||||
(in thousands) |
Balance at
beginning of year |
Amounts charged to costs or
expense |
Additions (deductions) |
Balance at
end of year |
||||||||||||
Allowance for doubtful accounts:
|
||||||||||||||||
Year Ended December 31, 2015 | $ | 971 | $ | 1,397 | $ | (1,120 | ) | $ | 1,248 | |||||||
Year Ended December 31, 2016 | 1,248 | 2,572 | (1,215 | ) | 2,605 | |||||||||||
Year Ended December 31, 2017 | 2,605 | 3,493 | (796 | ) | 5,302 | |||||||||||
Allowance for deferred tax assets:
|
||||||||||||||||
Year Ended December 31, 2015 | $ | 12,648 | $ | 16,294 | $ | (9,925 | ) | $ | 19,017 | |||||||
Year Ended December 31, 2016 | 19,017 | (15,315 | ) | (265 | ) | 3,437 | ||||||||||
Year Ended December 31, 2017 | 3,437 | 34,770 | 8,459 | 46,666 |
The following presents quarterly financial data for the years ended December 31, 2017 and 2016:
|
|
|
|
|
||||||||||||
Year ended December 31, 2017 | ||||||||||||||||
(in thousands, except per share data) |
First
quarter |
Second
quarter |
Third
quarter |
Fourth
quarter |
||||||||||||
Revenue | $ | 145,818 | $ | 157,131 | $ | 159,729 | $ | 168,959 | ||||||||
Gross profit | 100,752 | 107,913 | 106,442 | 115,694 | ||||||||||||
Net loss | (22,993 | ) | (19,148 | ) | (46,409 | ) | (34,492 | ) | ||||||||
Loss per share:
|
||||||||||||||||
Basic and diluted | (0.82 | ) | (0.63 | ) | (0.38 | ) | (0.28 | ) |
|
|
|
|
|
||||||||||||
Year ended December 31, 2016 | ||||||||||||||||
(in thousands, except per share data) |
First
quarter |
Second
quarter |
Third
quarter |
Fourth
quarter |
||||||||||||
Revenue | $ | 77,704 | $ | 90,826 | $ | 150,778 | $ | 148,464 | ||||||||
Gross profit | 49,167 | 58,706 | 99,197 | 98,119 | ||||||||||||
Net loss | (14,146 | ) | (20,966 | ) | (39,539 | ) | (23,761 | ) | ||||||||
Loss per share:
|
||||||||||||||||
Basic and diluted | (0.50 | ) | (0.74 | ) | (1.39 | ) | (0.84 | ) |
F-40
To the Audit Committee of the
Board of Directors and Shareholders
of Capitol Acquisition Corp. III
We have audited the accompanying balance sheets of Capitol Acquisition Corp. III (the Company) as of December 31, 2016 and 2015, and the related statements of operations, changes in stockholders equity and cash flows for the year ended December 31, 2016 and for the period from July 13, 2015 (inception) through December 31, 2015. These financial statements are the responsibility of the Companys management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Companys internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Capitol Acquisition Corp. III, as of December 31, 2016 and 2015, and the results of its operations and its cash flows for the year ended December 31, 2016 and the period from July 13, 2015 (inception) through December 31, 2015 in conformity with accounting principles generally accepted in the United States of America.
/s/ Marcum LLP
Marcum
llp
New York, NY
March 10, 2017
F-41
|
|
|
||||||
December 31, 2016 | December 31, 2015 | |||||||
ASSETS
|
||||||||
Current assets
|
||||||||
Cash and cash equivalents | $ | 95,985 | $ | 857,325 | ||||
Cash and cash equivalents held in trust account, interest income available for taxes | 567,469 | | ||||||
Accrued interest receivable held in trust account | 165,126 | 25,377 | ||||||
Prepaid expenses | 30,525 | 17,800 | ||||||
Total current assets | 859,105 | 900,502 | ||||||
Cash and cash equivalents held in trust account, restricted | 325,000,000 | 325,000,000 | ||||||
Total assets | $ | 325,859,105 | $ | 325,900,502 | ||||
LIABILITIES AND STOCKHOLDERS EQUITY
|
||||||||
Current liabilities
|
||||||||
Accounts payable and accrued expenses | $ | 188,291 | $ | 76,454 | ||||
Long-term liabilities
|
||||||||
Notes payable to related parties | 500,000 | | ||||||
Deferred underwriting fee | 11,375,000 | 11,375,000 | ||||||
Total liabilities | 12,063,291 | 11,451,454 | ||||||
Commitments and Contingencies
|
||||||||
Common stock, subject to possible redemption, 30,810,131 and 30,944,905 shares at redemption value at December 31, 2016 and December 31, 2015 | 308,795,813 | 309,449,047 | ||||||
Stockholders equity:
|
||||||||
Preferred stock, $.0001 par value; 1,000,000 shares authorized; none issued and outstanding | | | ||||||
Common stock, $.0001 par value; 120,000,000 shares authorized; 9,814,869 and 9,680,095 shares issued and outstanding at December 31, 2016 and December 31, 2015, respectively | 981 | 969 | ||||||
Additional paid-in capital | 5,768,759 | 5,115,537 | ||||||
Accumulated deficit | (769,739 | ) | (116,505 | ) | ||||
Total stockholders equity | 5,000,001 | 5,000,001 | ||||||
Total liabilities and stockholders equity | $ | 325,859,105 | $ | 325,900,502 |
The accompanying notes are an integral part of these financial statements.
F-42
|
|
|
||||||
Year ended
December 31, 2016 |
Period from
July 13, 2015 (inception) through December 31, 2015 |
|||||||
Operating costs | $ | (1,491,184 | ) | $ | (141,984 | ) | ||
Loss from operations | (1,491,184 | ) | (141,984 | ) | ||||
Other income and expense:
|
||||||||
Interest income | 837,950 | 25,479 | ||||||
Net loss | $ | (653,234 | ) | $ | (116,505 | ) | ||
Weighted average number of shares outstanding, basic and diluted | 9,735,456 | 9,098,268 | ||||||
Basic and diluted net loss per share | $ | (0.07 | ) | $ | (0.01 | ) |
The accompanying notes are an integral part of these financial statements.
F-43
|
|
|
|
|
|
|||||||||||||||
Common Stock |
Additional
Paid-in Capital |
Accumulated
Deficit |
Total
Stockholders Equity |
|||||||||||||||||
Shares | Amount | |||||||||||||||||||
Common stock issued to initial stockholders | 10,062,500 | $ | 1,006 | $ | 23,994 | $ | | $ | 25,000 | |||||||||||
Contribution of sponsors shares for no consideration | (1,437,500 | ) | (143 | ) | 143 | | | |||||||||||||
Sale of 32,500,000 units, net underwriters discount and offering expenses | 32,500,000 | 3,250 | 306,287,303 | | 306,290,553 | |||||||||||||||
Proceeds from issuance of sponsors warrants, at $1 per warrant | | | 8,250,000 | | 8,250,000 | |||||||||||||||
Forfeiture of initial stockholders shares pursuant to partial exercise of underwriters overallotment | (500,000 | ) | (50 | ) | 50 | | | |||||||||||||
Shares subject to possible redemption | (30,944,905 | ) | (3,094 | ) | (309,445,953 | ) | | (309,449,047 | ) | |||||||||||
Net loss | | | | (116,505 | ) | (116,505 | ) | |||||||||||||
Balance, December 31, 2015 | 9,680,095 | 969 | 5,115,537 | (116,505 | ) | 5,000,001 | ||||||||||||||
Shares subject to possible redemption | 134,774 | 12 | 653,222 | | 653,234 | |||||||||||||||
Net Loss | | | | (653,234 | ) | (653,234 | ) | |||||||||||||
Balance, December 31, 2016 | 9,814,869 | $ | 981 | $ | 5,768,759 | $ | (769,739 | ) | $ | 5,000,001 |
The accompanying notes are an integral part of these financial statements.
F-44
|
|
|
||||||
Year Ended
December 31, 2016 |
For the
period from July 13, 2015 (inception) through December 31, 2015 |
|||||||
Cash Flows from Operating Activities:
|
||||||||
Net loss | $ | (653,234 | ) | $ | (116,505 | ) | ||
Adjustments to reconcile net loss to net cash used in operating activities:
|
||||||||
Cash held in trust account, interest income available for taxes | (691,951 | ) | | |||||
Accrued interest income | (139,749 | ) | (25,377 | ) | ||||
Changes in operational assets and liabilities:
|
||||||||
Prepaid expenses | (12,725 | ) | (17,800 | ) | ||||
Accounts payable and accrued expenses | 111,837 | 76,454 | ||||||
Net cash used in operating activities | (1,385,822 | ) | (83,228 | ) | ||||
Cash Flows from Investing Activities:
|
||||||||
Proceeds released from Trust | 124,482 | | ||||||
Cash held in Trust Activity | | (325,000,000 | ) | |||||
Net cash provided (used in) investment activities | 124,482 | (325,000,000 | ) | |||||
Cash Flows from Financing Activities:
|
||||||||
Proceeds from notes payable to related parties | 500,000 | 280,000 | ||||||
Repayments of notes payable to related parties | | (280,000 | ) | |||||
Proceeds from issuance of common stock to initial stockholders | | 25,000 | ||||||
Proceeds from sale of Units, net underwriter commissions paid | | 317,665,553 | ||||||
Proceeds from issuance of Sponsors warrants | | 8,250,000 | ||||||
Net cash provided by financing activities | 500,000 | 325,940,553 | ||||||
Net (Decrease) Increase in cash and cash equivalents | (761,340 | ) | 857,325 | |||||
Cash and cash equivalents, beginning of period | 857,325 | | ||||||
Cash and cash equivalents, end of period | $ | 95,985 | $ | 857,325 | ||||
Supplemental disclosure of non-cash investing and financing activities:
|
||||||||
Initial value of common stock subject to redemption | $ | | $ | 309,564,545 | ||||
Change in value of common stock subject to redemption | $ | (653,234 | ) | $ | (115,498 | ) | ||
Deferred underwriter fee | $ | | $ | 11,375,000 |
The accompanying notes are an integral part of these financial statements.
F-45
Capitol Acquisition Corp. III (the Company) was incorporated in Delaware on July 13, 2015 as a blank check company whose objective is to acquire, through a merger, share exchange, asset acquisition, stock purchase, recapitalization, reorganization or other similar business combination, one or more businesses or entities (a Business Combination).
All activity through December 31, 2016 relates to the Companys formation, initial public offering (Offering) and identifying and investigating prospective target businesses with which to consummate a Business Combination.
The registration statement for the Offering was declared effective on October 13, 2015. The Company consummated the Offering of 32,500,000 units on October 19, 2015, including the exercise of the over-allotment option to the extent of 2,500,000 units, generating gross proceeds of $325,000,000 and net proceeds of $317,665,553 after deducting $7,334,447 of transaction costs (up to an additional $11,375,000 of deferred underwriting expenses may be paid upon the completion of a Business Combination). The units sold pursuant to the Offering (Units) were sold at an offering price of $10.00 per Unit. In addition, the Company generated gross and net proceeds of $8,250,000 from the private placement (the Private Placement) of 8,250,000 warrants (Founders Warrants) at a price of $1.00 per warrant to Capitol Acquisition Management 3 LLC and Capitol Acquisition Founder LLC (collectively, the Sponsors), entities affiliated with the Companys executive officers, and the Companys directors.
The Companys management has broad discretion with respect to the specific application of the net proceeds of our Offering and the Founders Warrants, although substantially all of the net proceeds are intended to be applied generally toward consummating a Business Combination. There is no assurance that the Company will be able to effect a Business Combination successfully.
Upon the closing of the Offering, $325,000,000 ($10.00 per Unit sold in the Offering), including the proceeds of the private placement of the Founders Warrants was placed in a trust account (Trust Account) and may be invested in U.S. government securities within the meaning of Section 2(a)(16) of the Investment Company Act of 1940, as amended (the Investment Company Act), having a maturity of 180 days or less or in money market funds meeting certain conditions under Rule 2a-7 promulgated under the Investment Company Act until the earlier of (i) the consummation of the Companys first Business Combination and (ii) the Companys failure to consummate a Business Combination within the prescribed time. Placing funds in the Trust Account may not protect those funds from third party claims against the Company. Although the Company will seek to have all vendors, service providers, prospective target businesses or other entities it engages, execute agreements with the Company waiving any claim of any kind in or to any monies held in the Trust Account, there is no guarantee that such persons will execute such agreements. The Companys executive officers have agreed that they will be liable under certain circumstances to ensure that the proceeds in the Trust Account are not reduced by the claims of target businesses or vendors or other entities that are owed money by the Company for services rendered, contracted for or products sold to the Company. However, there can be no assurance that they will be able to satisfy those obligations should they arise.
The Company, after signing a definitive agreement for a Business Combination with a target business, is required to seek shareholder approval of such Business Combination at a meeting called for such purpose at which shareholders may seek to convert their shares into their pro rata share of the aggregate amount then on deposit in the Trust Account, less any taxes then due but not yet paid. Notwithstanding the foregoing, a public stockholder, together with any affiliate of his or any other person with whom he is acting in concert or as a group (as defined in Section 13(d)(3) of the Securities Exchange Act of 1934, as amended) will be restricted from seeking conversion rights with respect to 20% or more of the shares of common stock sold in the Offering without the Companys prior written consent. The Company will proceed with a Business Combination only if it has net tangible assets of at least $5 million upon consummation of the Business Combination and a majority of the outstanding shares of common stock of the Company voted are voted in favor of the Business Combination. In connection with any shareholder vote required to approve any Business
F-46
Combination, the Sponsors and any other initial shareholders of the Company (collectively, the Initial Stockholders) have agreed (i) to vote any of their respective shares in favor of the initial Business Combination and (ii) not to convert any of their respective shares.
Pursuant to the Companys Amended and Restated Certificate of Incorporation, if the Company is unable to complete its initial Business Combination by October 19, 2017, the Company will (i) cease all operations except for the purpose of winding up, (ii) as promptly as reasonably possible but not more than ten business days thereafter, redeem 100% of the outstanding public shares and (iii) as promptly as reasonably possible following such redemption, subject to the approval of the remaining holders of common stock and the Companys board of directors, dissolve and liquidate. If the Company is unable to consummate an initial Business Combination and is forced to redeem 100% of the outstanding Public Shares for a pro rata portion of the funds held in the Trust Account, each holder will receive a full pro rata portion of the amount then in the Trust Account, plus any pro rata interest earned on the funds held in the Trust Account and not released to the Company to pay any of its franchise and income taxes (less up to $100,000 of interest to pay dissolution expenses).
If the Company is unable to complete its initial business combination, the per-share conversion price for common stock would be $10.00, without taking into account any interest, if any, earned on the trust account. The proceeds deposited in the Trust Account could, however, become subject to claims of the Companys creditors that are in preference to the claims of the Companys stockholders. In addition, if the Company is forced to file a bankruptcy case or an involuntary bankruptcy case is filed against it that is not dismissed, the proceeds held in the Trust Account could be subject to applicable bankruptcy law, and may be included in its bankruptcy estate and subject to the claims of third parties with priority over the claims of the Companys common stockholders. Therefore, the actual per-share redemption price may be less than $10.00.
The Company is an emerging growth company as defined in the Jumpstart Our Business Startups Act of 2012 (the JOBS Act) and will remain such for up to five years. However, if the Companys non-convertible debt issued within a three-year period or the Companys total revenues exceed $1 billion or the market value of the Companys shares of common stock that are held by non-affiliates exceeds $700 million on the last day of the second fiscal quarter of any given fiscal year, the Company would cease to be an emerging growth company as of the following fiscal year. As an emerging growth company, the Company has elected, under Section 107(b) of the JOBS Act, to take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act of 1933, as amended, for complying with new or revised accounting standards.
The Company has experienced recurring net operating losses as well as negative cash flows from operations. The Companys main source of liquidity was from the Offering and the Private Placement proceeds, from which amounts have been used to fund the search for a prospective target business. On August 11, 2016, August 12, 2016 and August 15, 2016, the Companys officers and directors (or their affiliates) loaned the Company an aggregate of $500,000. The Company currently has a cash position of approximately $96,000. The Company also received new commitments (which commitments replaced and superseded certain prior commitments) from its Chief Executive Officer, Mark D. Ein, its President and Chief Financial Officer, L. Dyson Dryden, and its independent board members, Lawrence Calcano, Richard C. Donaldson and Piyush Sodha, to provide additional loans to the Company of up to $767,000 in the aggregate. On February 7, 2017, our officers and directors (or their affiliates) loaned us an aggregate of $450,000. The August 2016 loans and the February 2017 loans, as well as any future ones that may be made by the Companys officers and directors (or their affiliates), are, and will be, evidenced by notes and would either be repaid upon the consummation of a Business Combination or up to $1,500,000 of the notes may be converted into warrants. Based on the foregoing, the Company believes it has sufficient cash to meet its needs for the next twelve months.
F-47
The accompanying financial statements are presented in U.S. dollars in conformity with accounting principles generally accepted in the United States of America (GAAP) and pursuant to the rules and regulations of the Securities and Exchange Commission (SEC).
Financial instruments that potentially subject the Company to concentration of credit risk consist of cash accounts in a financial institution which, at times may exceed the federal depository insurance coverage of $250,000. The Company has not experienced losses on these accounts and management believes the Company is not exposed to significant risks on such accounts.
The Company considers all short-term investments with an original maturity of three months or less when purchased to be cash equivalents. The Company maintains its cash deposits with major financial institutions.
The amounts held in the Trust Account represent substantially all of the proceeds of the Initial Public Offering and are classified as restricted assets since such amounts can only be used by the Company in connection with the consummation of a Business Combination. As of December 31, 2016 and December 31, 2015, cash and cash equivalents (restricted) held in the Trust Account consisted of $325,000,000 in United States Treasury securities with an original maturity of three months or less. Cash and cash equivalents held in trust available for taxes consisted of $567,469 at December 31, 2016.
The fair value of the Companys assets and liabilities, which qualify as financial instruments under FASB ASC 820, Fair Value Measurements and Disclosures, approximates the carrying amounts represented in the balance sheet, primarily due to their short-term nature.
Offering costs consist principally of legal, accounting and underwriting costs incurred through the balance sheet date that are directly related to the Offering. Offering costs approximately to $18.7 million were charged to stockholders equity upon completion of the Offering.
The Company accounts for its common stock subject to possible conversion in accordance with the guidance enumerated in ASC 480 Distinguishing Liabilities from Equity. Common stock subject to mandatory conversion is classified as a liability instrument and is measured at fair value. Conditionally convertible common stock (including common stock that features cash conversion rights that are either within the control of the holder or subject to cash conversion upon the occurrence of uncertain events not solely within the Companys control) is classified as temporary equity. At all other times, common stock is classified as stockholders equity. The Companys common stock features certain cash conversion rights that are considered by the Company to be outside of the Companys control and subject to the occurrence of uncertain future events. Accordingly, at December 31, 2016 and December 31, 2015, the common stock subject to possible conversion is presented as temporary equity, outside of the stockholders equity section of the Companys balance sheet.
Loss per share is computed by dividing net loss by the weighted-average number of shares of common stock outstanding during the period, excluding shares of common stock subject to forfeiture (Note 5). Common
F-48
stock subject to possible redemption has been excluded from the calculation of basic loss per share since such shares, if redeemed, only participate in their pro rata share of the Trust Account earnings. The Company has not considered the effect of warrants to purchase shares of common stock in the calculation of diluted loss per share, since the exercise of the warrants is contingent upon the occurrence of future events. As a result, diluted loss per common share is the same as basic loss per common share for the period.
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of expenses during the reporting period. Actual results could differ from those estimates.
The Company accounts for income taxes under ASC 740 Income Taxes (ASC 740). ASC 740 requires the recognition of deferred tax assets and liabilities for both the expected impact of differences between the financial statement and tax basis of assets and liabilities and for the expected future tax benefit to be derived from tax loss and tax credit carry forwards. ASC 740 additionally requires a valuation allowance to be established when it is more likely than not that all or a portion of deferred tax assets will not be realized.
ASC 740 also clarifies the accounting for uncertainty in income taxes recognized in an enterprises financial statements and prescribes a recognition threshold and measurement process for financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. For those benefits to be recognized, a tax position must be more-likely-than-not to be sustained upon examination by taxing authorities. ASC 740 also provides guidance on de-recognition, classification, interest and penalties, accounting in interim period disclosure and transition. The Company is required to file income tax returns in the United States (federal) and in various state and local jurisdictions. Based on the Companys evaluation, it has been concluded that there are no significant uncertain tax positions requiring recognition in the Companys financial statements. Since the Company was incorporated on July 13, 2015, the evaluation was performed for the 2015 tax year. The Company believes that its income tax positions and deductions would be sustained on audit and does not anticipate any adjustments that would result in a material changes to its financial position.
The Companys policy for recording interest and penalties associated with audits is to record such expense as a component of income tax expense. There were no amounts accrued for penalties or interest as of or during the year ended December 31, 2016 or the period ended December 31, 2015. Management is currently unaware of any issues under review that could result in significant payments, accruals or material deviations from its position.
In August 2014, the FASB issued ASU 2014-15, Disclosure of Uncertainties about an Entitys Ability to continue as a Going Concern (ASU 2014-15). ASU 2014-15 provides guidance on managements responsibility in evaluating whether there is substantial doubt about a companys ability to continue as a going concern and about related footnote disclosures. For each reporting period, management will be required to evaluate whether there are conditions or events that raise substantial doubt about a companys ability to continue as a going concern within one year from the date the financial statements are issued. The amendments in ASU 2014-15 are effective for annual reporting periods ending after December 15, 2016, and for annual and interim periods thereafter. Early adoption is permitted. The Company has adopted the methodologies prescribed by ASU 2014-15. The adoption of ASU 2014-15 had no material effect on the Companys financial position or results of operations.
Management does not believe that any recently issued, but not yet effective, accounting standards if currently adopted would have a material effect on the accompanying financial statements.
F-49
Management of the Company evaluates events that have occurred after the balance sheet date of December 31, 2016 through the date which these financial statements were issued. Based upon the review, management noted that on February 7, 2017, the Company issued notes payable to its officers and directors (or their affiliates) which totaled $450,000. These notes do not bear interest, and are repayable upon the consummation of the Companys initial merger, capital stock exchange, asset acquisition, or other similar business combination. Upon consummation of a business combination, the note holders have the option to convert up to $1,500,000 of aggregate principal balances into warrants at a price of $1.00 per warrant. The terms of these warrants will be identical to those of the founders warrants.
On January 3, 2017, we received a notice from NASDAQ stating that we failed to hold an annual meeting of stockholders within 12 months after our fiscal year ended December 31, 2015, as required by NASDAQ Listing Rules 5620(a) and 5810(c)(2)(G). We submitted a plan to regain compliance pursuant to the procedures set forth in the NASDAQ Listing Rules on February 16, 2017. On March 2, 2017, NASDAQ approved our plan and indicated that we now have until June 29, 2017 to regain compliance with the aforementioned rules by holding an annual meeting of shareholders by such date. We intend to hold an annual meeting in connection with any proposed business combination we submit to stockholders for approval. Failure to hold an annual meeting by such date could result in the delisting of our securities from NASDAQ.
Other than the matter noted in the preceding two paragraphs, management did not identify any recognized or non-recognized subsequent events that would have required further adjustment or disclosure in the financial statements.
In connection with the Offering, on October 19, 2015, the Company sold 32,500,000 Units at $10.00 per Unit (including 2,500,000 Units subject to the underwriters over-allotment option. Each unit consists of one share of common stock in the Company and one half of one Warrant of the Company (Warrants). Each whole Warrant entitles the holder to purchase one share of common stock at a price of $11.50 commencing on the later of 30 days after the Companys completion of a Business Combination or October 19, 2016 and expiring five years from the completion of a Business Combination. The Company may redeem the Warrants at a price of $0.01 per Warrant upon 30 days notice, only in the event that the last sale price of the shares of common stock is at least $18.00 per share for any 20 trading days within a 30-trading day period ending on the third day prior to the date on which notice of redemption is given. If the Company redeems the Warrants as described above, management will have the option to require all holders that wish to exercise their Warrants to do so on a cashless basis. No warrants will be exercisable for cash unless the Company has an effective and current registration statement covering the shares of common stock issuable upon exercise of the Warrants and a current prospectus relating to such shares of common stock. Notwithstanding the foregoing, if a registration statement covering the shares of common stock issuable upon exercise of the Warrants is not effective within 90 days following the consummation of an initial Business Combination, Warrant holders may, until such time as there is an effective registration statement and during any period when the Company shall have failed to maintain an effective registration statement, exercise Warrants on a cashless basis pursuant to the exemption provided by Section 3(a)(9) of the Securities Act of 1933, as amended, provided that such exemption is available. If that exemption, or another exemption, is not available, holders will not be able to exercise their Warrants on a cashless basis. In accordance with the warrant agreement relating to the Warrants to be sold and issued in the Offering the Company is only required to use its best efforts to maintain the effectiveness of the registration statement covering the Warrants. The Company will have no obligation under any circumstances to net cash settle any Warrants.
Simultaneously with the consummation of the Offering, the Company consummated the Private Placement of 8,250,000 Founders Warrants at a price of $1.00 per warrant to the Sponsors. The Founders Warrants are
F-50
identical to the Warrants included in the Units sold in the Offering (including that the Company will have no obligation under any circumstances to net cash settle any Founderss Warrants) except that the Founders Warrants: (i) are not redeemable by the Company and (ii) may be exercised for cash or on a cashless basis, as described in the registration statement relating to the Offering, so long as they are held by the initial purchasers or any of their permitted transferees. Additionally, the purchasers have agreed not to transfer, assign or sell any of the Founders Warrants, including the common stock issuable upon exercise of the Founders Warrants (except to certain permitted transferees), until 30 days after the completion of the Companys initial Business Combination.
At December 31, 2016 and December 31, 2015, there were 24,500,000 Warrants outstanding, which include 8,250,000 Founders Warrants.
During August 2016, the Company issued notes payable to certain shareholders which totaled $500,000. These notes do not bear interest, and are repayable upon the consummation of the Companys initial merger, capital stock exchange, asset acquisition, or other similar business combination. Upon consummation of a business combination, the note holders have the option to convert their principal balances into warrants at a price of $1.00 per warrant. The terms of these warrants will be identical to those of the founders warrants.
The Company issued a $200,000 principal amount unsecured promissory note to an affiliate of the Companys chief executive officer on July 13, 2015. The note was non-interest bearing and payable on the earlier to occur of (i) August 1, 2016, (ii) the consummation of the Offering or (iii) the abandonment of the Offering. The note was repaid in full on the closing of the Offering, along with other short-term advances of $80,000.
The Company presently occupies office space provided by two affiliates of the Companys executive officers. Such affiliates have agreed that, until the Company consummates a Business Combination, they will make such office space, as well as certain office and secretarial services, available to the Company, as may be required by the Company from time to time. The Company will pay such affiliates an aggregate of $10,000 per month for such services.
The Initial Stockholders and the holders of the Founders Warrants (or underlying shares of common stock) will be entitled to registration rights with respect to their initial shares and the Founders Warrants (or underlying shares of common stock) pursuant to an agreement signed on the effective date of the Offering. The holders of the majority of the initial shares are entitled to demand that the Company register these shares at any time commencing three months prior to the first anniversary of the consummation of a Business Combination. The holders of the Founders Warrants (or underlying shares of common stock) are entitled to demand that the Company register these securities at any time after the Company consummates a Business Combination. In addition, the Initial Stockholders and holders of the Founders Warrants (or underlying shares of common stock) have certain piggy-back registration rights on registration statements filed after the Companys consummation of a Business Combination.
On October 13, 2015, the Company entered into an agreement with the underwriters of the Offering (Underwriting Agreement). Pursuant to the Underwriting Agreement, the Company paid an underwriting discount of 2.0% of the gross proceeds of the Offering as an underwriting discount. The Company also agreed to pay the underwriters in the Offering a deferred underwriting discount of 3.5% of the gross proceeds of the Offering (Deferred Commissions) which was placed in the Trust Account and is only payable upon completion of a Business Combination.
The Company entered into three consulting arrangements for services to help identify and introduce the Company to potential targets and provide assistance with due diligence, deal structuring, documentation and
F-51
obtaining stockholder approval for a business combination. These agreements provide for an aggregate annual fee of $550,000 and success fee of $1,125,000 upon the consummation of a business combination.
The Company is authorized to issue 1,000,000 shares of preferred stock with a par value of $0.0001 per share with such designation, rights and preferences as may be determined from time to time by the Companys board of directors.
As of December 31, 2016 and December 31, 2015, there are no shares of preferred stock issued or outstanding.
The Company is authorized to issue 120,000,000 shares of common stock with a par value of $0.0001 per share.
In connection with the organization of the Company, on July 13, 2015, a total of 10,062,500 shares of the Companys common stock were sold to the Sponsors at a price of approximately $0.0025 per share for an aggregate of $25,000. On October 13, 2015, the Sponsors contributed back to the Companys capital, for no additional consideration, an aggregate of 1,437,500 shares, leaving an aggregate of 8,625,000 shares outstanding. This number included an aggregate of 1,125,000 shares that were subject to forfeiture if the over-allotment option was not exercised in full by the underwriters. An aggregate of 500,000 shares were forfeited based on the amount of Units sold in the Offering pursuant to the over-allotment option.
On closing of the Offering, the shares were placed into an escrow account and will not be transferred, assigned, sold or released from escrow until one year after the date of the consummation of an initial Business Combination or earlier if, subsequent to an initial Business Combination, (i) the last sales price of the Companys common stock equals or exceeds $12.00 per share (as adjusted for stock splits, stock dividends, reorganizations and recapitalizations) for any 20 trading days within any 30-trading day period commencing at least 150 days after the initial Business Combination or (ii) the Company consummates a subsequent liquidation, merger, stock exchange or other similar transaction which results in all of the Companys stockholders having the right to exchange their shares of common stock for cash, securities or other property.
As of December 31, 2016 and December 31, 2015, 9,814,869 and 9,680,095 shares of common stock, respectively, were issued and outstanding, which excludes 30,810,131 and 30,944,905 shares subject to possible redemption, respectively.
For the year ended December 31, 2016 and the period from July 13, 2015 (inception) through December 31, 2015 there are no provisions for income taxes or corporate taxes payable due to the net operating losses incurred in each year.
Deferred income tax assets of $260,000 (2016) and $40,000 (2015) are primarily comprised of net operating loss carryforwards. The deferred tax benefits recorded in each year of $220,000 (2016) and $40,000 (2015) were offset by corresponding equal amounts of changes in the valuation allowance.
Deferred income taxes, if applicable, are provided for the differences between the basis of assets and liabilities for financial reporting and income tax purposes. A valuation allowance is established when necessary to reduce deferred tax assets to the amount expected to be realized. The Company has approximately $766,000 in net operating losses that expire through 2036 and if realized would have a tax benefit approximately $260,000. The Company has recorded a full valuation allowance against this deferred tax benefit since the
F-52
Company believes it is more likely than not to that the Company will not utilize the losses in the future, and accordingly it has not been recorded as a deferred tax asset.
A reconciliation of the provision for income taxes with the amounts computed by applying the statutory Federal income tax rate to income from continuing operations before provision for income taxes is as follows:
|
|
|
||||||
Year Ended
December 31, 2016 |
Period from
July 13, 2015 (inception) through December 31, 2015 |
|||||||
Tax provision at statutory rate | (34 | )% | (34 | )% | ||||
State and local taxes (net of federal tax benefit) | | | ||||||
Effect of valuation allowance on deferred tax asset | 34 | % | 34 | % | ||||
Effective tax rate | 0 | % | 0 | % |
Following is a summary of the quarterly results of operations for the year ended December 31, 2016.
|
|
|
|
|
||||||||||||
For the
three months ended March 31, 2016 |
For the
three months ended June 30, 2016 |
For the
three months ended September 30, 2016 |
For the three months ended December 31, 2016 | |||||||||||||
Operating costs | $ | (477,521 | ) | $ | (319,989 | ) | $ | (366,322 | ) | $ | (327,352 | ) | ||||
Loss from operations | $ | (477,521 | ) | $ | (319,989 | ) | $ | (366,322 | ) | $ | (327,352 | ) | ||||
Interest income | $ | 132,167 | $ | 225,337 | $ | 218,239 | $ | 262,207 | ||||||||
Net loss | $ | (345,354 | ) | $ | (94,652 | ) | $ | (148,083 | ) | $ | (65,145 | ) | ||||
Weighted average number of common shares outstanding, excluding shares subjected to possible conversions-basic and diluted | 9,680,095 | 9,729,607 | 9,748,052 | 9,783,543 | ||||||||||||
Basic and diluted net income (loss) per Share | $ | (0.04 | ) | $ | (0.01 | ) | $ | (0.02 | ) | $ | (0.01 | ) |
Following is a summary of the quarterly results of operations for the period from July 13, 2015 (inception) through ended December 31, 2015.
|
|
|
||||||
Period from
July 13, 2015 (inception) through September 30, 2015 |
For the
three months ended December 31, 2015 |
|||||||
Formation and operating costs | $ | (983 | ) | $ | (141,001 | ) | ||
Loss from operations | (983 | ) | (141,001 | ) | ||||
Interest income | | 25,479 | ||||||
Net loss | $ | (983 | ) | $ | (115,522 | ) | ||
Weighted average number of common shares outstanding, excluding shares subjected to possible conversions-basic and diluted | 8,750,000 | 8,433,123 | ||||||
Basic and diluted net income (loss) per Share | $ | | $ | (0.01 | ) |
F-53
|
|
|
||||||
As of December 31, 2015 |
As of
March 31, 2016 |
|||||||
ASSETS
|
||||||||
Current Assets
|
||||||||
Cash and Cash Equivalents | $ | 12,046 | $ | 6,508 | ||||
Accounts Receivable, net of allowance of $4,786 and $4,338 at December 31, 2015 and March 31, 2016, respectively. | 49,533 | 45,601 | ||||||
Due from Related Parties | 78,326 | 35,011 | ||||||
Loans to Related Parties | 166,804 | 48 | ||||||
Income Tax Receivable | 1,666 | 2,292 | ||||||
Deferred Income Taxes | 6,116 | 6,116 | ||||||
Other Receivables | 1,021 | 685 | ||||||
Prepaids and Other Current Assets | 4,772 | 8,997 | ||||||
Total Current Assets | 320,284 | 105,258 | ||||||
Property and Equipment, net | 12,481 | 11,979 | ||||||
Computer Software, net | 15,244 | 15,972 | ||||||
Intangibles, net | 1,513 | 1,629 | ||||||
Goodwill | 123,578 | 123,957 | ||||||
Investment in Unconsolidated Affiliate | 5,349 | 5,250 | ||||||
Deferred Income Taxes | 1,729 | 1,679 | ||||||
Other Assets | 5,086 | 4,235 | ||||||
TOTAL ASSETS | $ | 485,264 | $ | 269,959 | ||||
LIABILITIES
|
||||||||
Current Liabilities
|
||||||||
Accounts Payable and Accrued Liabilities | $ | 48,811 | $ | 41,725 | ||||
Deferred Revenue | 34,535 | 37,428 | ||||||
Due to Related Parties | 256,124 | 220,215 | ||||||
Loans from Related Parties | 688,490 | 659,157 | ||||||
Income Taxes Payable | 518 | 1,126 | ||||||
Other Current Liabilities | 438 | 558 | ||||||
Total Current Liabilities | 1,028,916 | 960,209 | ||||||
Deferred Income Taxes | 30,622 | 30,176 | ||||||
Pension Obligation | 1,504 | 1,885 | ||||||
Other Liabilities | 4,656 | 4,575 | ||||||
TOTAL LIABILITIES | 1,065,698 | 996,845 | ||||||
STOCKHOLDERS DEFICIT
|
||||||||
Capital | 288,199 | 203,484 | ||||||
Accumulated Deficit | (854,775 | ) | (917,668 | ) | ||||
Accumulated Other Comprehensive Loss | (13,858 | ) | (12,702 | ) | ||||
Total Stockholders Deficit | (580,434 | ) | (726,886 | ) | ||||
TOTAL LIABILITIES AND STOCKHOLDERS DEFICIT | $ | 485,264 | $ | 269,959 |
The accompanying unaudited Notes to Condensed Combined Financial Statements are an integral part of these statements
F-54
|
|
|
||||||
For the Three Months Ended, March 31, | ||||||||
2015 | 2016 | |||||||
Revenue | $ | 75,617 | $ | 76,401 | ||||
Operating Expenses | 20,057 | 19,250 | ||||||
Selling, General and Administrative Expenses | 40,987 | 39,754 | ||||||
Transaction Costs | | 759 | ||||||
Depreciation and Amortization | 2,980 | 3,043 | ||||||
Operating Costs | 64,024 | 62,806 | ||||||
Operating Income | 11,593 | 13,595 | ||||||
Interest Income | 19 | 19 | ||||||
Interest Income on Related Party Loans | 1,049 | 238 | ||||||
Interest Expense on Related Party Loans | (3,415 | ) | (4,051 | ) | ||||
Other Income on Related Party Agreement | 551 | | ||||||
Equity in Earnings of Unconsolidated Affiliate | 117 | 89 | ||||||
Income before Provision for Income Taxes | 9,914 | 9,891 | ||||||
Provision for Income Taxes | 3,816 | 3,601 | ||||||
Net Income | $ | 6,097 | $ | 6,289 |
The accompanying unaudited Notes to Condensed Combined Financial Statements are an integral part of these statements
F-55
|
|
|
||||||
For the Three Months Ended, March 31, | ||||||||
2015 | 2016 | |||||||
Net Income | $ | 6,097 | $ | 6,289 | ||||
Other Comprehensive (Loss) Income:
|
||||||||
Foreign Currency Translation | (4,193 | ) | 1,380 | |||||
Defined Benefit Plan Income, net of taxes | (54 | ) | (224 | ) | ||||
Comprehensive Income | $ | 1,851 | $ | 7,446 |
The accompanying unaudited Notes to Condensed Combined Financial Statements are an integral part of these statements
F-56
|
|
|
||||||
For the Three Months Ended, March 31, | ||||||||
2015 | 2016 | |||||||
Cash Flows from Operating Activities
|
||||||||
Net Income | $ | 6,097 | $ | 6,289 | ||||
Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities:
|
||||||||
Depreciation and Amortization | 2,980 | 3,043 | ||||||
Provision for Doubtful Accounts and Credit Memos | 337 | 110 | ||||||
Stock-Based Compensation Expense | 264 | 186 | ||||||
Provision for Deferred Taxes | 1,180 | (565 | ) | |||||
Taxes payable by Related Parties in Consolidated Filings | 2,997 | 2,979 | ||||||
Equity in Earnings of Unconsolidated Affiliate | (117 | ) | (89 | ) | ||||
Other
|
||||||||
Changes in Operating Assets and Liabilities
|
||||||||
Accounts Receivable | (2,973 | ) | 3,898 | |||||
Due from Related Parties Current | 2,840 | 593 | ||||||
Other Assets | (1,615 | ) | (3,342 | ) | ||||
Accounts Payables and Accrued Liabilities | (6,083 | ) | (6,962 | ) | ||||
Deferred Revenue | 3,125 | 3,045 | ||||||
Other Liabilities Current | 658 | 89 | ||||||
Income Tax Receivable and Payable | (1,218 | ) | 83 | |||||
Due to Related Parties Current | 10,476 | 2,334 | ||||||
Other Operating Assets and Liabilities | (2,024 | ) | (15 | ) | ||||
Net Cash Provided by Operating Activities | 16,924 | 11,676 | ||||||
Cash Flows from Investing Activities
|
||||||||
Purchases of Property and Equipment and Computer Software | (3,246 | ) | (2,762 | ) | ||||
Net Cash used in Investing Activities | (3,246 | ) | (2,762 | ) | ||||
Cash Flows from Financing Activities
|
||||||||
Dividends to Related Parties | | (918 | ) | |||||
Capital Contribution from Related Party | | 5,888 | ||||||
Loan Repayments to Related Parties | | (7,541 | ) | |||||
Loan Repayments from Related Parties | | 1,556 | ||||||
Advances to Related Parties | (15,476 | ) | (14,122 | ) | ||||
Net Cash Used in Financing Activities | (15,476 | ) | (15,137 | ) | ||||
Effect of Exchange Rate Changes on Cash | 1,395 | 685 | ||||||
Net Decrease in Cash and Cash Equivalents | (403 | ) | (5,538 | ) | ||||
Cash and Cash Equivalents
|
||||||||
Beginning of Period | 12,089 | 12,046 | ||||||
End of Period | $ | 11,686 | $ | 6,508 |
The accompanying unaudited Notes to Condensed Combined Financial Statements are an integral part of these statements
F-57
PRN Group (PRN or the Company) does business as PR Newswire, a global leader in public relations and investor relations communications and related products and services.
The Condensed Combined Financial Statements of the Company include the operations of the PRN Group businesses that are being carved-out for divestiture which include the PRN operations of PR Newswire Europe Ltd. and subsidiaries (Benelux Ltd., Newsdesk International Ltd., PR Newswire Disclose Ltd., OIT Ltd., PR Agency Ltd. and PR Newswire Gmbh), PR Newswire Ltda., NotilogPRN Argentina SA, PR Newswire S de RL de CV, PR Newswire Argentina SA, Hors Antenne Holding SAS and its subsidiary, Hors Antenne SAS, Cyperus SA, PR Newswire Asia Ltd., PRN Business Consulting Co Ltd., PRN Middle East Ltd., PRN India, PRNnet, PRN Delaware and subsidiaries (Virtual Press Office and PRN Holdings Inc. and its subsidiary CNW Group Ltd. and subsidiaries (Health Response Ltd., CCNW Quebec Inc., DNA 13 Inc. and DNA 13 (US) Inc.)), Communities Holdings and PR Newswire Association LLC and subsidiaries (MultiVu LLC and eWatch LLC). On October 1, 2014, MultiVu LLC was merged into PR Newswire Association LLC. The PRN Group businesses are all under the common control of UBM plc.
The accompanying condensed combined carve-out financial statements reflect the assets and liabilities, operating results, and cash flows of PRN. The Condensed Combined Financial Statements include certain expenses of UBM plc, which were allocated for certain functions, including general corporate expenses related to finance, legal, information technology, human resources, shared services, insurance, employee benefits and incentives, and stock-based compensation expense. These attributed expenses have been allocated to PRN on the basis of direct usage when identifiable, and for resources indirectly used by PRN, allocations were based on relative headcount, revenue, or other methodology, to reflect estimated usage by PRN. Management considers the allocation methodology and results to be reasonable for all periods presented. However, the financial information presented in these condensed combined carve-out financial statements may not reflect the combined financial position, operating results and cash flows of PRN had PRN been a separate stand-alone entity during the period presented. Actual costs that would have been incurred if PRN had been a stand-alone company would depend on multiple factors, including organizational structure and strategic decisions made in various areas.
The cash and cash equivalents held by UBM plc at the corporate level are not specifically identifiable to PRN, and therefore, were not allocated for any of the periods presented. Cash and cash equivalents in the accompanying Condensed Combined Balance Sheets primarily represent cash held locally by operations included in the condensed combined carve-out financial statements. UBM plc third-party debt, and the related interest expense has not been allocated for any of the periods presented as PRN was not the legal obligor of the debt and UBM plcs borrowings were not directly attributable to these operations.
The accompanying Condensed Combined Financial Statements have been derived from the consolidated financial statements and accounting records of UBM plc. These Condensed Combined Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP). These principles require the Company to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities, and the reported amounts of revenues and expenses. Significant estimates inherent in the preparation of the accompanying Condensed Combined Financial Statements include estimates regarding allowance for doubtful accounts and credit memos, potential outcome of uncertain tax positions, fair value of acquired assets and liabilities, fair value of equity-based compensation and pension benefit assumptions. Estimates are based on past experience and other considerations reasonable under the circumstances. Actual results could differ from those estimates. All intercompany balances and transactions between the operations of the carved-out businesses have been eliminated in the accompanying Condensed Combined Financial Statements. The income
F-58
tax amounts in the accompanying Condensed Combined Financial Statements have been calculated based on a separate return methodology and presented as if the Companys operations were separate taxpayers in the respective jurisdictions.
The accompanying condensed combined carve-out financial statements have been prepared to assist in UBM plcs divestiture of its PRN business and to demonstrate the historical results of operations, financial position, and cash flows of the PRN business that is being carved-out for the indicated periods under UBM plc management and do not include any accounts of entities that may be legally owned by any of the PRN entities but are not being included in any potential divestiture as they are not part of the PRN business.
Cash and cash equivalents include all highly-liquid investments with original maturities of three months or less, and the carrying amounts approximate fair value.
As more fully discussed in Note 6, Related Party Transactions, the Company has historically factored substantially all of its trade accounts receivable from its U.S. businesses to a subsidiary of UBM plc. On December 31, 2015, this arrangement was terminated and the Company purchased 100% of previously factored outstanding accounts receivable.
Trade accounts receivable are recorded at the invoiced amount and do not bear interest. For accounts receivable not subject to the factoring program as well as any accounts receivable not yet factored, the Company maintains an allowance for doubtful accounts for estimated losses that result from the failure or inability of our customers to make required payments. When determining the allowance, the Company considers the probability of recoverability of accounts receivable based on past experience, taking into account current collection trends as well as general economic factors. Credit risks are assessed based on historical write-offs, net of recoveries, as well as an analysis of the aged accounts receivable balances. Accounts receivable may be fully reserved when specific collection issues are known to exist, such as pending bankruptcy or catastrophes. Trade accounts receivable are uncollateralized and represent a large number of geographically dispersed debtors. As of March 31, 2016 there were no individual customers representing more than 10% of the Companys outstanding gross accounts receivable balance. During the quarter ended March 31, 2016 there were no customers that accounted for more than 10% of revenue. In determining sales credit allowances, the Company analyzes historical trends, customer-specific factors and current economic trends. The Company records an allowance based on this information, as appropriate.
Property and equipment is stated at cost, net of accumulated depreciation or amortization. Major renewals and improvements are capitalized, while replacements, maintenance, and repairs that do not improve or extend the lives of the respective assets are expensed as incurred. Property and equipment are depreciated using the straight-line method. Computer hardware and equipment is depreciated over a period of three to ten years. Leasehold improvements are amortized on a straight-line basis over the shorter of the term of the lease or the estimated useful life of the improvement. Buildings are depreciated over a period of 20 years.
The Company develops various computer software applications for internal use including systems which support our internal business services and processes, our financial and administrative systems and systems which we use to provide services to our customers.
F-59
The Company expenses costs as incurred during the preliminary development stage which includes conceptual formulation and review of alternatives. Once that stage is complete, the application development stage, which includes design, coding and testing, begins. Direct internal and external costs incurred during this stage are capitalized. Capitalization of costs ceases when the software is ready for its intended use and all substantial testing is completed. Upgrades and enhancements which provide added functionality are accounted for in the same manner. Maintenance costs incurred solely to extend the life of the software are expensed as incurred.
Computer software is amortized on a straight-line basis over a useful life of 3 to 5 years. Periodically, the Company reassesses the estimated useful lives of our computer software considering its overall technology strategy, the effects of obsolescence, technology, competition and other economic factors on the useful life of these assets.
The Company assesses impairment of long-lived assets pursuant with ASC 360 Property, Plant and Equipment. This includes determining if certain triggering events have occurred that could affect the value of an asset. The Company has not recorded any impairment charges related to long-lived assets.
Goodwill represents the excess of consideration paid over the fair value of net assets acquired in business combinations. Goodwill and other indefinite-lived intangible assets are not amortized but are tested at least annually for impairment. The Company completes its goodwill impairment testing annually at year end. Intangible assets that have finite useful lives are amortized over their useful lives on a straight-line basis, ranging from three to ten years. Amortizable intangible assets are tested for impairment utilizing an income approach based on undiscounted cash flows upon the occurrence of certain triggering events and, if impaired, are written down to fair value. The Company did not identify any such triggering events during the three-months ended March 31, 2016.
The Companys investment in an unconsolidated affiliate over which the Company has significant influence is accounted for under the equity method of accounting. The investment is carried at the cost of acquisition plus the Companys equity in undistributed income of the unconsolidated affiliate. The Company regularly reviews its equity method investment for impairment. The Company evaluates information such as budgets, business plans and financial statements of its equity method investee in determining whether an other-than-temporary decline in value exists. Factors indicative of an other-than-temporary decline include, among others, recurring operating losses. See Note 5, Investment in Unconsolidated Affiliate.
Fair value is the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value is estimated by applying the following hierarchy, which prioritizes the inputs used to measure fair value into three levels and bases the categorization within the hierarchy upon the lowest level of input that is available and significant to the fair value measurement:
Level 1 | Quoted prices in active markets for identical assets or liabilities. |
Level 2 | Observable inputs other than quoted prices in active markets for identical assets and liabilities, quoted prices for identical or similar assets or liabilities in inactive markets, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. |
Level 3 | Inputs that are generally unobservable and typically reflect managements estimate of assumptions that market participants would use in pricing the asset or liability. |
F-60
The carrying amounts for cash and cash equivalents, trade accounts receivable, accounts payable and accrued liabilities approximate fair value because of their short-term maturity. The carrying amount of certain pension assets are recorded as Level 2 assets.
Assets and liabilities of foreign affiliates with a functional currency other than the U.S. Dollar are translated into U.S. Dollars using year-end exchange rates, while results of operations are translated at average exchange rates for the year. The Companys foreign affiliates use the local currency as the functional currency. Foreign currency translation gains and losses are included as a component of Accumulated Other Comprehensive Income in the Condensed Combined Balance Sheets. The Company does not hedge foreign currency translation risk in the net assets and income reported from these sources.
Revenue is recognized when persuasive evidence of an arrangement exists, the contract fee is fixed or determinable, delivery or performance has occurred and collectability is reasonably assured. If at the outset of an arrangement, the Company determines that collectability is not reasonably assured, revenue is deferred until the earlier of when collectability becomes probable or the receipt of payment. The Company reports revenue net of sales and other taxes collected from our customers.
The Companys distribution services are sold either through fixed-term contracts whereby customers are allotted a predetermined number of service units or through contracts where customers order units as needed. For fixed-term contracts, revenue is recognized on a straight-line basis over the term of the contract. For contracts where customers order units as needed, revenue is recognized upon fulfillment of the customer order.
Certain of the Companys services such as broadcast and webcast production, translation services and EDGAR filing services require the Company to make a specific singular performance. For these services, revenue is recognized when the specific performance is completed. The Companys XBRL filing services are sold through contracts where the Company is obligated to make a certain number of filings on behalf of the customer with the U.S. Securities and Exchange Commission (the SEC). For this service, revenue is recognized as each filing is made by the Company.
Certain of the Companys services such as its workflow platform and its hosted microsites are sold through fixed-term contracts where the Company is obligated to make the services available to the customer over the contract term. Customers can access these services without limitation over the contact term. For these services, revenue is recognized on a straight-line basis over the contract term.
Deferred revenue consists of amounts billed in excess of revenue recognized on sales. Deferred revenue is included in current liabilities in the Condensed Combined Balance Sheets and is subsequently recognized as revenue in accordance with the Companys revenue recognition policies.
Certain of the Companys services are sold as multiple-element arrangements. Revenues subject to these arrangements represent less than 5% of total revenues for the quarter ended March 31, 2016. The Company evaluates each deliverable in an arrangement to determine whether it represents a separate unit of accounting. Most product and service deliverables qualify as separate units of accounting and can be sold stand-alone or in various combinations. A deliverable constitutes a separate unit of accounting when it has stand-alone value and there are no customer-negotiated refunds or return rights for the delivered items. If the arrangement includes a customer-negotiated refund or return right relative to the delivered items, and the delivery and performance of the undelivered item is considered probable and substantially in our control, the delivered item constitutes a separate unit of accounting. If the deliverable or a group of deliverables meet the separation
F-61
criteria, the total arrangement consideration is allocated to each unit of accounting based on its relative selling price. The amount of arrangement consideration that is allocated to a delivered unit of accounting is limited to the amount that is not contingent upon the delivery of another unit of accounting.
The Company determines the selling price for each deliverable using vendor-specific objective evidence (VSOE), if it exists, third-party evidence (TPE) if VSOE does not exist, or best estimated selling price (BESP) if neither VSOE nor TPE exist. Revenue allocated to each element is then recognized when the basic revenue recognition criteria are met for each element. The Company determines VSOE of a deliverable by monitoring the price at which the Company sells the deliverable on a stand-alone basis to a third party. In certain instances, the Company is not able to establish VSOE for all deliverables in an arrangement with multiple elements due to infrequent selling each element separately, not pricing products or services within a set range, or only having a limited sales history. Where the Company is unable to establish VSOE, the Company may use the price at which the Company or a third party sells a similar product to similarly situated customers on a stand-alone basis. When the Company is not able to establish selling prices by using VSOE or TPE, the Company establishes the BESP in its allocation of arrangement consideration. The objective of BESP is to determine the price at which the Company would transact a sale if the solution were sold on a stand-alone basis.
Operating expenses include the costs incurred in connection with the fulfillment of the Companys products and services and includes compensation and benefits for operational staff and costs of third-party service providers.
Transaction costs include professional fees incurred in connection with the planned divestiture of PRN.
For operating leases, minimum lease payments, including minimum scheduled rent increases, are recognized as rent expense on a straight-line basis over the applicable lease terms. The term used for straight-line rent expense is calculated initially from the date the Company obtains possession of the leased premises through the expected lease termination date.
Employees of CNW Group, Ltd. (CNW) participate in a defined benefit pension plan whereby pension expense is determined based on a number of actuarial assumptions, which are generally reviewed and determined on an annual basis. These assumptions include discount rates, expected rate of return on plan assets, rate of salary increase, mortality rates and other factors. The funded status of the plan is recognized on the Condensed Combined Balance Sheets. Prior service costs or credits and actuarial gains and losses beyond a 10% corridor are recognized in earnings based on the estimated future service period of the participants. The measurement date for the defined benefit plan for CNW employees is December 31.
Company employees participate in the UBM 2008 Executive Share Option Scheme under which they are granted stock options to purchase UBM plc stock and the UBM 2010 Executive Retention Plan, as amended in 2014, under which they are granted UBM plc restricted stock.
F-62
Under the provisions of ASC 718 Compensation-Stock Compensation, the Company recognizes share based compensation by estimating the fair value of each stock-based award at the date of grant. The stock-based compensation expense is recognized over the awards vesting period. In addition, the Company estimates future forfeitures in calculating the stock-based compensation expense as opposed to only recognizing these forfeitures and the corresponding reductions in expense as they occur.
For stock option awards, the fair value is estimated on the date of grant using the Black-Scholes option valuation model. The Black-Scholes option valuation model requires Company management to make assumptions about UBM plc stock price volatility, dividend yield, expected term of the stock option and risk-free interest rates. The expected stock price volatility assumption is derived from the historical volatility of UBM plc common stock. The expected dividend yield assumption is determined by dividing the anticipated annual dividend payment by the stock price on the date of grant. The expected term assumption is derived using a methodology that combines historical exercise data with hypothetical exercise data for unexercised stock options. The risk-free interest rate assumption corresponds to the expected term assumption of the stock option and is based on the UK Gilts yield in effect at the time of grant.
For restricted stock awards, which vest solely on service, the fair value is estimated by using the closing price of UBM plc common stock on the date of grant.
The Company provides for income taxes and the related accounts under the asset and liability method. Deferred tax assets and liabilities are determined based on the difference between the financial statement and tax bases of assets and liabilities using enacted tax rates expected to be in effect during the year in which the basis differences reverse. Valuation allowances are established when management determines it is more likely than not that some portion, or all, of the deferred tax assets will not be realized, which will be assessed on an on-going basis. In addition, income tax rules and regulations are subject to interpretation and the application of those rules and regulations require judgment by the Company and may be challenged by the taxation authorities. The Company follows ASC 740 Income Taxes , which requires the use of a two-step approach for recognizing and measuring tax benefits taken or expected to be taken in a tax return and disclosures regarding uncertainties in income tax positions. Only tax positions that meet the more likely than not recognition threshold are recognized.
Accumulated other comprehensive income includes foreign currency translation and amortization of amounts related to defined benefit plans.
In May 2014, the Financial Accounting Standards Board (FASB) ASU) No. 2014-09, Revenue from Contracts with Customers . ASU 2014-09 will eliminate transaction and industry-specific revenue recognition guidance under current GAAP and replace it with a principle-based approach for determining revenue recognition. ASU 2014-09 will require that companies recognize revenue based on the value of transferred goods or services as they occur in the contract. The ASU also will require additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments and assets recognized from costs incurred to obtain or fulfill a contract. In July 2015, the FASB voted to defer the effective date of ASU 2014-09 by one year to interim and annual reporting periods beginning after December 15, 2018. Entities can transition to the standard using either a full retrospective approach or a modified retrospective approach as of the date of adoption. Presently, the Company is assessing what effect the adoption of ASU 2014-09 will have on its Condensed Combined Financial Statements and accompanying notes.
F-63
In August 2014, the FASB issued Accounting Standards Update 2014-15, Presentation of Financial Statements Going Concern (ASU 2014-15). ASU 2014-15 requires that management evaluate at each annual and interim reporting period whether there is a substantial doubt about an entitys ability to continue as a going concern within one year of the date that the financial statements are issued. ASU 2014-15 will be effective for fiscal years and interim periods beginning after December 15, 2016 and early application is permitted. The Company does not expect that the application of ASU 2014-15 will have an impact on the Condensed Combined Financial Statements.
In January 2015, the FASB issued Accounting Standards Update 2015-01, Income Statement Extraordinary and Unusual Items ( Subtopic 225-20 ). The objective of this update is to simplify income statement presentation requirements by eliminating the concept of extraordinary items. Extraordinary items are events and transactions that are distinguished by their unusual nature and by the infrequency of their occurrence. The amendments in this update are effective for fiscal years, and interim periods within those fiscal years beginning after December 15, 2015. A reporting entity may apply the amendments prospectively. A reporting entity also may apply the amendments retrospectively to all prior periods presented in the financial statements. Early adoption is permitted provided that the guidance is applied from the beginning of the fiscal year of adoption. The Company will adopt this guidance effective January 1, 2016 and does not believe that it will have a material impact on the Companys Condensed Combined Financial Statements.
In November 2015, the FASB issued Accounting Standards Update 2015-17, Income Taxes Balance Sheet Classification of Deferred Taxes. ASU 2015-17 requires entities to present deferred tax assets and deferred tax liabilities as noncurrent in a classified balance sheet. The ASU 2015-17 is effective for annual periods beginning after December 15, 2017, and interim periods within annual periods beginning after December 15, 2018. Early adoption is permitted for all entities. The Company will adopt this guidance effective January 1, 2018.
In February 2016, the FASB issued Accounting Standards Update 2016-02, Leases (Topic 842). ASU 2016-02 supersedes the existing guidance for lease accounting, Leases (Topic 840) . ASU 2016-02 requires lessees to recognize a lease liability and a right-of-use asset for all leases. Lessor accounting remains largely unchanged. The amendments in ASU 2016-02 is effective for the Companys fiscal year 2020 and interim periods within 2021. Early adoption is permitted for all entities. ASU 2016-02 requires a modified retrospective approach for all leases existing at, or entered into after the date of initial adoption, with an option to elect to use certain transition relief. The Company is currently evaluating the impact of this new standard on its consolidated financial statements.
The Company evaluated subsequent events through May 10, 2017, the date the financial statements were available to be issued. All events that had a material impact on the Companys Condensed Combined Financial Statements are disclosed in the notes to the Condensed Combined Financial Statements.
The Company was acquired by Cision on June 16, 2016. In July 2016, the Company sold the net assets of its Agility PR workflow business for approximately $4.3 million. On March 10, 2017, Cision sold substantially all of the assets of its Vintage corporate filings business for approximately $26.0 million and received approximately $23.7 million in cash after escrow and expenses.
F-64
Goodwill as of March 31, 2016 and December 31, 2015 was $123,957 and $123,578, respectively. Changes in goodwill were entirely due to changes in foreign currency.
The following is a summary of intangibles, at cost less accumulated amortization:
|
|
|
||||||
As of
March 31, 2016 |
As of
December 31, 2015 |
|||||||
Intangible Assets
|
||||||||
Brands | $ | 9,243 | $ | 9,183 | ||||
Customer Lists | 4,558 | 4,444 | ||||||
Other | 2,129 | 2,061 | ||||||
15,930 | 15,688 | |||||||
Accumulated amortization
|
||||||||
Brands | (7,697 | ) | (7,756 | ) | ||||
Customer Lists | (4,558 | ) | (4,441 | ) | ||||
Other | (2,046 | ) | (1,978 | ) | ||||
(14,301 | ) | (14,175 | ) | |||||
Intangible Assets, net | $ | 1,629 | $ | 1,513 |
Intangible amortization expense for the quarters ended March 31, 2016 and March 31, 2015 were $216 and $261, respectively. The estimated annual aggregate amortization expense for the remainder of 2016 is expected to be $664 and for the next four succeeding fiscal years is expected to be $534, $207, $206, and $18, respectively.
The Companys investment in unconsolidated affiliated is accounted for by the equity method and consists of a 50% interest in a joint venture with ANP Pers Support B.V in ANP Pers Support v.o.f. (ANPps).
The Company had revenues of $264 and $274 for the quarters ended March 31, 2016 and March 31, 2015, respectively, for billings made to ANPps for international distribution services provided to ANPps. The Company incurred operating expense of $39 and $33 for the quarters ended March 31, 2016 and March 31, 2015, respectively, for billings from ANPps for distribution services provided by ANPps to the Company for the countries in which ANPps operates.
The Company has recorded taxes payable by UBM in consolidated tax fillings as deemed capital contributions of $2,979 for the quarter ended March 31, 2016 and $8,301 for the year ended December 31, 2015, respectively.
F-65
The following table displays the change in the components of accumulated other comprehensive income (loss), net of tax:
|
|
|
|
|||||||||
Cumulative
Translation Adjustment |
Defined Benefit
Plan Adjustment |
Total
Accumulated Other Comprehensive Income (Loss) |
||||||||||
Balance at January 1, 2016 | $ | (10,806 | ) | $ | (3,052 | ) | $ | (13,858 | ) | |||
Foreign Currency Translation | 1,380 | | 1,380 | |||||||||
Defined Benefit Plan Adjustment | | (224 | ) | (224 | ) | |||||||
Balance at March 31, 2016 | $ | (9,426 | ) | $ | (3,276 | ) | $ | (12,702 | ) |
Stock-based compensation expense for the quarters ended March 31, 2016 and March 31, 2015 were $186 and $264, respectively.
The Company has leases for office space in the U.S., Canada, Brazil, Great Britain, France, Sweden, Dubai, China, Hong Kong, India, Taiwan, Malaysia and Singapore which expire between 2016 and 2027. The following is a schedule of the future minimum rental payments under these leases:
|
|
|||
Nine months
ended December 31, |
||||
2016 | $ | 6,350 |
|
|
|||
Year ended
December 31, |
||||
2017 | $ | 6,873 | ||
2018 | $ | 5,217 | ||
2019 | $ | 4,966 | ||
2020 | $ | 4,905 | ||
Thereafter | $ | 13,781 |
Rent expense for the quarters ended March 31, 2016 and March 31, 2015 were $2,874 and $2,508, respectively.
The Company has unconditional purchase obligations relating to certain vendors that provide software and technology oriented services ranging from less than one year to five years. The following is a schedule, by year, of the future minimum payments under these obligations:
|
|
|||
Nine months
ended December 31, |
||||
2016 | $ | 6,892 |
|
|
|||
Year ended
December 31, |
||||
2017 | $ | 2,524 | ||
2018 | $ | 414 | ||
2019 | $ | 27 | ||
2020 | $ | 13 | ||
Thereafter | $ | |
F-66
The Company is named in various claims and legal actions in the normal course of its activities.
The Company believes that the outcome of such matters is not expected to have a material adverse effect on the Companys results of operations, financial position or cash flows.
In June 2014, the SEC commenced an inquiry concerning certain aspects of the Companys business that relate to the distribution of issuer press releases. The Company has been fully cooperative with the staff of the SEC Division of Enforcement in this ongoing inquiry. Although the Company cannot predict what the outcome of the inquiry will be, it may result in remedies which could include modifications to the Companys process for disseminating issuer press releases. Based on currently available information, the Company does not expect that the inquiry, or any resolution thereof, will have a material adverse effect on the Companys results of operations, financial position or cash flows.
F-67
The Board of Directors of UBM plc:
We have audited the accompanying combined financial statements of the PRN Group, which comprise the combined balance sheets as of December 31, 2015 and 2014, and the related combined statements of operations, comprehensive income, stockholders deficit and cash flows for the years then ended, and the related notes to the combined financial statements.
Management is responsible for the preparation and fair presentation of these financial statements in conformity with U.S. generally accepted accounting principles; this includes the design, implementation and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free of material misstatement, whether due to fraud or error.
Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditors judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entitys preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entitys internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
In our opinion, the combined financial statements referred to above present fairly, in all material respects, the combined financial position of the PRN Group at December 31, 2015 and 2014, and the combined results of its operations and its cash flows for the years then ended in conformity with U.S. generally accepted accounting principles.
/s/ Ernst & Young LLP
Iselin, NJ
April 12, 2016
F-68
|
|
|
||||||
As of December 31, | ||||||||
2015 | 2014 | |||||||
ASSETS
|
||||||||
Current Assets
|
||||||||
Cash and Cash Equivalents | $ | 12,046 | $ | 12,089 | ||||
Accounts Receivable, net of allowance of $4,786 and $3,928 at December 31, 2015 and December 31, 2014, respectively | 49,533 | 34,637 | ||||||
Due from Related Parties | 78,326 | 449,218 | ||||||
Loans to Related Parties | 166,804 | 176,115 | ||||||
Income Tax Receivable | 1,666 | 2,082 | ||||||
Deferred Income Taxes | 6,116 | 6,338 | ||||||
Other Receivables | 1,021 | 1,892 | ||||||
Prepaids and Other Current Assets | 4,772 | 3,250 | ||||||
Total Current Assets | 320,284 | 685,621 | ||||||
Property and Equipment, net of accumulated depreciation of $35,204 and $33,091 at December 31, 2015 and December 31, 2014, respectively | 12,481 | 10,587 | ||||||
Computer Software, net of accumulated amortization of $28,760 and $22,837 at December 31, 2015 and December 31, 2014, respectively | 15,244 | 13,789 | ||||||
Intangibles, net | 1,513 | 2,775 | ||||||
Goodwill | 123,578 | 126,288 | ||||||
Investment in Unconsolidated Affiliate | 5,349 | 5,550 | ||||||
Deferred Income Taxes | 1,729 | 2,218 | ||||||
Other Assets | 5,086 | 6,142 | ||||||
TOTAL ASSETS | $ | 485,264 | $ | 852,970 | ||||
LIABILITIES
|
||||||||
Current Liabilities
|
||||||||
Accounts Payable and Accrued Liabilities | $ | 48,811 | $ | 44,732 | ||||
Deferred Revenue | 34,535 | 31,710 | ||||||
Due to Related Parties | 256,124 | 237,800 | ||||||
Loans from Related Parties | 688,490 | 677,437 | ||||||
Income Taxes Payable | 518 | 421 | ||||||
Other Current Liabilities | 438 | 534 | ||||||
Total Current Liabilities | 1,028,916 | 992,634 | ||||||
Loan from Related Party | | 25,982 | ||||||
Deferred Income Taxes | 30,622 | 28,213 | ||||||
Pension Obligation | 1,504 | 2,504 | ||||||
Other Liabilities | 4,656 | 5,513 | ||||||
TOTAL LIABILITIES | 1,065,698 | 1,054,846 | ||||||
Commitments and Contingencies (Note 13)
|
||||||||
STOCKHOLDERS DEFICIT
|
||||||||
Capital | 288,199 | 278,633 | ||||||
Accumulated Deficit | (854,775 | ) | (475,519 | ) | ||||
Accumulated Other Comprehensive Loss | (13,858 | ) | (4,990 | ) | ||||
Total Stockholders Deficit | (580,434 | ) | (201,876 | ) | ||||
TOTAL LIABILITIES AND STOCKHOLDERS DEFICIT | $ | 485,264 | $ | 852,970 |
The accompanying notes are an integral part of the combined financial statements.
F-69
|
|
|
||||||
For the Years
Ended December 31, |
||||||||
2015 | 2014 | |||||||
Revenue | $ | 313,662 | $ | 322,693 | ||||
Operating Expenses | 84,297 | 85,391 | ||||||
Selling, General and Administrative Expenses | 160,890 | 165,119 | ||||||
Loss on Purchase of Previously Factored Accounts Receivable | 2,307 | | ||||||
Transaction Costs | 5,782 | | ||||||
Depreciation and Amortization | 11,399 | 9,861 | ||||||
Operating Costs | 264,675 | 260,371 | ||||||
Operating Income | 48,987 | 62,322 | ||||||
Interest Income | 150 | 155 | ||||||
Interest Income on Related Party Loans | 4,271 | 4,102 | ||||||
Interest Expense on Related Party Loans | (15,137 | ) | (13,941 | ) | ||||
Other Income on Related Party Agreement | 2,551 | 2,000 | ||||||
Equity in Earnings of Unconsolidated Affiliate | 419 | 470 | ||||||
Income before Provision for Income Taxes | 41,241 | 55,108 | ||||||
Provision for Income Taxes | 15,875 | 20,789 | ||||||
Net Income | $ | 25,366 | $ | 34,319 |
The accompanying notes are an integral part of the combined financial statements.
F-70
|
|
|
||||||
For the Years
Ended December 31, |
||||||||
2015 | 2014 | |||||||
Net Income | $ | 25,366 | $ | 34,319 | ||||
Other Comprehensive (Loss) Income:
|
||||||||
Foreign Currency Translation | (9,348 | ) | (9,361 | ) | ||||
Defined Benefit Plan Income (Expense), net of taxes of $170 and $28 for the years ended December 31, 2015 and 2014, respectively | 480 | (45 | ) | |||||
Comprehensive Income | $ | 16,498 | $ | 24,913 |
The accompanying notes are an integral part of the combined financial statements.
F-71
|
|
|
||||||
For the Years Ended
December 31, |
||||||||
2015 | 2014 | |||||||
Cash Flows from Operating Activities
|
||||||||
Net Income | $ | 25,366 | $ | 34,319 | ||||
Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities:
|
||||||||
Depreciation and Amortization | 11,399 | 9,861 | ||||||
Provision for Doubtful Accounts and Credit Memos | 2,474 | 1,338 | ||||||
Stock-Based Compensation Expense | 1,265 | 1,279 | ||||||
Provision for Deferred Taxes | 3,233 | 2,130 | ||||||
Taxes payable by Related Parties in Consolidated Filings | 8,301 | 15,349 | ||||||
Loss on Purchase of Previously Factored Accounts Receivable | 2,307 | | ||||||
Equity in Earnings of Unconsolidated Affiliate | (419 | ) | (470 | ) | ||||
Distribution of Earnings from Unconsolidated Affiliate | 421 | 496 | ||||||
Other | | 638 | ||||||
Changes in Operating Assets and Liabilities
|
||||||||
Accounts Receivable | (6,527 | ) | (1,058 | ) | ||||
Due from Related Parties Current | 5,586 | (3,462 | ) | |||||
Other Assets | (590 | ) | 481 | |||||
Accounts Payables and Accrued Liabilities | (205 | ) | 547 | |||||
Deferred Revenue | 3,554 | 4,027 | ||||||
Other Liabilities Current | (23 | ) | 280 | |||||
Income Tax Receivable and Payable | 269 | (1,581 | ) | |||||
Due to Related Parties Current | (9,463 | ) | (14,324 | ) | ||||
Other Operating Assets and Liabilities | (598 | ) | 1,744 | |||||
Net Cash Provided by Operating Activities | 46,350 | 51,594 | ||||||
Cash Flows from Investing Activities
|
||||||||
Purchases of Property and Equipment and Computer Software | (14,380 | ) | (10,981 | ) | ||||
Net Cash used in Investing Activities | (14,380 | ) | (10,981 | ) | ||||
Cash Flows from Financing Activities
|
||||||||
Dividends to Related Parties | (1,932 | ) | (911 | ) | ||||
Loans from Related Parties | 928 | 500 | ||||||
Loan Repayments to Related Parties | (9,450 | ) | (1,037 | ) | ||||
Loans to Related Parties | (6,207 | ) | (5,896 | ) | ||||
Loan Repayments from Related Parties | 9,330 | 1,348 | ||||||
Advances to Related Parties | (23,822 | ) | (31,792 | ) | ||||
Net Cash Used in Financing Activities | (31,153 | ) | (37,788 | ) | ||||
Effect of Exchange Rate Changes on Cash | (860 | ) | (805 | ) | ||||
Net (Decrease) Increase in Cash and Cash Equivalents | (43 | ) | 2,020 | |||||
Cash and Cash Equivalents
|
||||||||
Beginning of Year | 12,089 | 10,069 | ||||||
End of Year | $ | 12,046 | $ | 12,089 | ||||
Supplemental Disclosure of Cash Flow Information:
|
||||||||
Cash Paid for Interest | $ | 12,312 | $ | 13,679 | ||||
Cash Paid for Income Taxes | $ | 3,804 | $ | 5,174 |
The accompanying notes are an integral part of the combined financial statements.
F-72
|
|
|
|
|
||||||||||||
Capital |
Accumulated
Deficit |
Accumulated
Other Comprehensive Income (Loss) |
Total
Stockholders' Deficit |
|||||||||||||
Balance as of January 1, 2014 | $ | 262,005 | $ | (508,927 | ) | $ | 4,416 | $ | (242,506 | ) | ||||||
Net Income | | 34,319 | | 34,319 | ||||||||||||
Stock-Based Compensation | 1,279 | | | 1,279 | ||||||||||||
Defined Benefit Plan Adjustment | | | (45 | ) | (45 | ) | ||||||||||
Foreign Currency Translation | | | (9,361 | ) | (9,361 | ) | ||||||||||
Taxes payable by Related Parties in Consolidated Filings | 15,349 | | | 15,349 | ||||||||||||
Dividend to Related Party | | (911 | ) | | (911 | ) | ||||||||||
Balance as of December 31, 2014 | 278,633 | (475,519 | ) | (4,990 | ) | (201,876 | ) | |||||||||
Net Income | | 25,366 | | 25,366 | ||||||||||||
Stock-Based Compensation | 1,265 | | | 1,265 | ||||||||||||
Defined Benefit Plan Adjustment | | | 480 | 480 | ||||||||||||
Foreign Currency Translation | | | (9,348 | ) | (9,348 | ) | ||||||||||
Taxes payable by Related Parties in Consolidated Filings | 8,301 | | | 8,301 | ||||||||||||
Distribution of Due from Related Party Receivable to Related Parties | | (401,772 | ) | | (401,772 | ) | ||||||||||
Dividend to Related Party | | (2,850 | ) | | (2,850 | ) | ||||||||||
Balance as of December 31, 2015 | $ | 288,199 | $ | (854,775 | ) | $ | (13,858 | ) | $ | (580,434 | ) |
The accompanying notes are an integral part of the combined financial statements.
F-73
PRN Group (PRN or the Company) does business as PR Newswire, a global leader in public relations and investor relations communications and related products and services.
The Combined Financial Statements of the Company include the operations of the PRN Group businesses that are being carved-out for divestiture which include the PRN operations of PR Newswire Europe Ltd. and subsidiaries (Benelux Ltd., Newsdesk International Ltd., PR Newswire Disclose Ltd., OIT Ltd., PR Agency Ltd. and PR Newswire Gmbh), PR Newswire Ltda., NotilogPRN Argentina SA, PR Newswire S de RL de CV, PR Newswire Argentina SA, Hors Antenne Holding SAS and its subsidiary, Hors Antenne SAS, Cyperus SA, PR Newswire Asia Ltd., PRN Business Consulting Co Ltd., PRN Middle East Ltd., PRN India, PRNnet, PRN Delaware and subsidiaries (Virtual Press Office and PRN Holdings Inc. and its subsidiary CNW Group Ltd. and subsidiaries (Health Response Ltd., CCNW Quebec Inc., DNA 13 Inc. and DNA 13 (US) Inc.)), Communities Holdings and PR Newswire Association LLC and subsidiaries (MultiVu LLC and eWatch LLC). On October 1, 2014, MultiVu LLC was merged into PR Newswire Association LLC. The PRN Group businesses are all under the common control of UBM plc.
The accompanying combined carve-out financial statements reflect the assets and liabilities, operating results, and cash flows of PRN. The Combined Financial Statements include certain expenses of UBM plc, which were allocated for certain functions, including general corporate expenses related to finance, legal, information technology, human resources, shared services, insurance, employee benefits and incentives, and stock-based compensation expense. These attributed expenses have been allocated to PRN on the basis of direct usage when identifiable, and for resources indirectly used by PRN, allocations were based on relative headcount, revenue, or other methodology, to reflect estimated usage by PRN. Management considers the allocation methodology and results to be reasonable for all periods presented. However, the financial information presented in these combined carve-out financial statements may not reflect the combined financial position, operating results and cash flows of PRN had PRN been a separate stand-alone entity during the period presented. Actual costs that would have been incurred if PRN had been a stand-alone company would depend on multiple factors, including organizational structure and strategic decisions made in various areas.
The cash and cash equivalents held by UBM plc at the corporate level are not specifically identifiable to PRN, and therefore, were not allocated for any of the periods presented. Cash and cash equivalents in the accompanying Combined Balance Sheets primarily represent cash held locally by operations included in the combined carve-out financial statements. UBM plc third-party debt, and the related interest expense has not been allocated for any of the periods presented as PRN was not the legal obligor of the debt and UBM plcs borrowings were not directly attributable to these operations.
The accompanying Combined Financial Statements have been derived from the consolidated financial statements and accounting records of UBM plc. These Combined Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP). These principles require the Company to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities, and the reported amounts of revenues and expenses. Significant estimates inherent in the preparation of the accompanying Combined Financial Statements include estimates regarding allowance for doubtful accounts and credit memos, potential outcome of uncertain tax positions, fair value of acquired assets and liabilities, fair value of equity-based compensation and pension benefit assumptions. Estimates are based on past experience and other considerations reasonable under the circumstances. Actual results could differ from those estimates. All intercompany balances and transactions between the operations of the carved-out businesses have been eliminated in the accompanying Combined Financial Statements. The income tax amounts in the accompanying Combined Financial Statements have been calculated based on a separate return methodology and presented as if the Companys operations were separate taxpayers in the respective jurisdictions.
F-74
The accompanying combined carve-out financial statements have been prepared to assist in UBM plcs divestiture of its PRN business and to demonstrate the historical results of operations, financial position, and cash flows of the PRN business that is being carved-out for the indicated periods under UBM plc management and do not include any accounts of entities that may be legally owned by any of the PRN entities but are not being included in any potential divestiture as they are not part of the PRN business.
Cash and cash equivalents include all highly-liquid investments with original maturities of three months or less, and the carrying amounts approximate fair value.
As more fully discussed in Note 8, Related Party Transactions, the Company has historically factored substantially all of its trade accounts receivable from its U.S. businesses to a subsidiary of UBM plc. On December 31, 2015, this arrangement was terminated and the Company purchased 100% of previously factored outstanding accounts receivable.
Trade accounts receivable are recorded at the invoiced amount and do not bear interest. For accounts receivable not subject to the factoring program as well as any accounts receivable not yet factored, the Company maintains an allowance for doubtful accounts for estimated losses that result from the failure or inability of our customers to make required payments. When determining the allowance, the Company considers the probability of recoverability of accounts receivable based on past experience, taking into account current collection trends as well as general economic factors. Credit risks are assessed based on historical write-offs, net of recoveries, as well as an analysis of the aged accounts receivable balances. Accounts receivable may be fully reserved when specific collection issues are known to exist, such as pending bankruptcy or catastrophes. Trade accounts receivable are uncollateralized and represent a large number of geographically dispersed debtors. As of December 31, 2015 and December 31, 2014, there were no individual customers representing more than 10% of the Companys outstanding gross accounts receivable balance. During the years ended December 31, 2015 and December 31, 2014, there were no customers that accounted for more than 10% of revenue. In determining sales credit allowances, the Company analyzes historical trends, customer-specific factors and current economic trends. The Company records an allowance based on this information, as appropriate.
Property and equipment is stated at cost, net of accumulated depreciation or amortization. Major renewals and improvements are capitalized, while replacements, maintenance, and repairs that do not improve or extend the lives of the respective assets are expensed as incurred. Property and equipment are depreciated using the straight-line method. Computer hardware and equipment is depreciated over a period of three to ten years. Leasehold improvements are amortized on a straight-line basis over the shorter of the term of the lease or the estimated useful life of the improvement. Buildings are depreciated over a period of 20 years.
The Company develops various computer software applications for internal use including systems which support our internal business services and processes, our financial and administrative systems and systems which we use to provide services to our customers.
The Company expenses costs as incurred during the preliminary development stage which includes conceptual formulation and review of alternatives. Once that stage is complete, the application development stage, which
F-75
includes design, coding and testing, begins. Direct internal and external costs incurred during this stage are capitalized. Capitalization of costs ceases when the software is ready for its intended use and all substantial testing is completed. Upgrades and enhancements which provide added functionality are accounted for in the same manner. Maintenance costs incurred solely to extend the life of the software are expensed as incurred.
Computer software is amortized on a straight-line basis over a useful life of 3 to 5 years. Periodically, the Company reassesses the estimated useful lives of our computer software considering its overall technology strategy, the effects of obsolescence, technology, competition and other economic factors on the useful life of these assets.
The Company assesses impairment of long-lived assets pursuant with ASC 360 Property, Plant and Equipment. This includes determining if certain triggering events have occurred that could affect the value of an asset. The Company has not recorded any impairment charges related to long-lived assets.
Goodwill represents the excess of consideration paid over the fair value of net assets acquired in business combinations. Goodwill and other indefinite-lived intangible assets are not amortized but are tested at least annually for impairment. The Company has completed its annual goodwill impairment testing for 2015 and 2014, which did not result in any impairment. Intangible assets that have finite useful lives are amortized over their useful lives on a straight-line basis, ranging from three to ten years. Amortizable intangible assets are tested for impairment utilizing an income approach based on undiscounted cash flows upon the occurrence of certain triggering events and, if impaired, are written down to fair value. The Company did not identify any such triggering events during 2015 or 2014.
The Companys investment in an unconsolidated affiliate over which the Company has significant influence is accounted for under the equity method of accounting. The investment is carried at the cost of acquisition plus the Companys equity in undistributed income of the unconsolidated affiliate. The Company regularly reviews its equity method investment for impairment. The Company evaluates information such as budgets, business plans and financial statements of its equity method investee in determining whether an other-than-temporary decline in value exists. Factors indicative of an other-than-temporary decline include, among others, recurring operating losses. See Note 7, Investment in Unconsolidated Affiliate.
Fair value is the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value is estimated by applying the following hierarchy, which prioritizes the inputs used to measure fair value into three levels and bases the categorization within the hierarchy upon the lowest level of input that is available and significant to the fair value measurement:
Level 1 | Quoted prices in active markets for identical assets or liabilities. |
Level 2 | Observable inputs other than quoted prices in active markets for identical assets and liabilities, quoted prices for identical or similar assets or liabilities in inactive markets, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. |
Level 3 | Inputs that are generally unobservable and typically reflect managements estimate of assumptions that market participants would use in pricing the asset or liability. |
The carrying amounts for cash and cash equivalents, trade accounts receivable, accounts payable and accrued liabilities approximate fair value because of their short-term maturity. The carrying amount of certain pension assets are recorded as Level 2 assets (see Note 10).
F-76
Assets and liabilities of foreign affiliates with a functional currency other than the U.S. Dollar are translated into U.S. Dollars using year-end exchange rates, while results of operations are translated at average exchange rates for the year. The Companys foreign affiliates use the local currency as the functional currency. Foreign currency translation gains and losses are included as a component of Accumulated Other Comprehensive Income in the Combined Balance Sheets. The Company does not hedge foreign currency translation risk in the net assets and income reported from these sources.
Revenue is recognized when persuasive evidence of an arrangement exists, the contract fee is fixed or determinable, delivery or performance has occurred and collectability is reasonably assured. If at the outset of an arrangement, the Company determines that collectability is not reasonably assured, revenue is deferred until the earlier of when collectability becomes probable or the receipt of payment. The Company reports revenue net of sales and other taxes collected from our customers.
The Companys distribution services are sold either through fixed-term contracts whereby customers are allotted a predetermined number of service units or through contracts where customers order units as needed. For fixed-term contracts, revenue is recognized on a straight-line basis over the term of the contract. For contracts where customers order units as needed, revenue is recognized upon fulfillment of the customer order.
Certain of the Companys services such as broadcast and webcast production, translation services and EDGAR filing services require the Company to make a specific singular performance. For these services, revenue is recognized when the specific performance is completed.
The Companys XBRL filing services are sold through contracts where the Company is obligated to make a certain number of filings on behalf of the customer with the U.S. Securities and Exchange Commission (the SEC). For this service, revenue is recognized as each filing is made by the Company.
Certain of the Companys services such as its workflow platform and its hosted microsites are sold through fixed-term contracts where the Company is obligated to make the services available to the customer over the contract term. Customers can access these services without limitation over the contact term. For these services, revenue is recognized on a straight-line basis over the contract term.
Deferred revenue consists of amounts billed in excess of revenue recognized on sales. Deferred revenue is included in current liabilities in the Combined Balance Sheets and is subsequently recognized as revenue in accordance with the Companys revenue recognition policies.
Certain of the Companys services are sold as multiple-element arrangements. Revenues subject to these arrangements represent less than 5% of total revenues for the years ended December 31, 2015 and December 31, 2014, respectively. The Company evaluates each deliverable in an arrangement to determine whether it represents a separate unit of accounting. Most product and service deliverables qualify as separate units of accounting and can be sold stand-alone or in various combinations. A deliverable constitutes a separate unit of accounting when it has stand-alone value and there are no customer-negotiated refunds or return rights for the delivered items. If the arrangement includes a customer-negotiated refund or return right relative to the delivered items, and the delivery and performance of the undelivered item is considered probable and substantially in our control, the delivered item constitutes a separate unit of accounting. If the deliverable or a group of deliverables meet the separation criteria, the total arrangement consideration is allocated to each unit of accounting based on its relative selling price. The amount of arrangement consideration that is allocated to a delivered unit of accounting is limited to the amount that is not contingent upon the delivery of another unit of accounting.
F-77
The Company determines the selling price for each deliverable using vendor-specific objective evidence (VSOE), if it exists, third-party evidence (TPE) if VSOE does not exist, or best estimated selling price (BESP) if neither VSOE nor TPE exist. Revenue allocated to each element is then recognized when the basic revenue recognition criteria are met for each element. The Company determines VSOE of a deliverable by monitoring the price at which the Company sells the deliverable on a stand-alone basis to a third party. In certain instances, the Company is not able to establish VSOE for all deliverables in an arrangement with multiple elements due to infrequent selling each element separately, not pricing products or services within a set range, or only having a limited sales history. Where the Company is unable to establish VSOE, the Company may use the price at which the Company or a third party sells a similar product to similarly situated customers on a stand-alone basis. When the Company is not able to establish selling prices by using VSOE or TPE, the Company establishes the BESP in its allocation of arrangement consideration. The objective of BESP is to determine the price at which the Company would transact a sale if the solution were sold on a stand-alone basis.
Operating expenses include the costs incurred in connection with the fulfillment of the Companys products and services and includes compensation and benefits for operational staff and costs of third-party service providers.
Transaction costs include professional fees incurred in connection with the planned divestiture of PRN.
For operating leases, minimum lease payments, including minimum scheduled rent increases, are recognized as rent expense on a straight-line basis over the applicable lease terms. The term used for straight-line rent expense is calculated initially from the date the Company obtains possession of the leased premises through the expected lease termination date.
Employees of CNW Group, Ltd. (CNW) participate in a defined benefit pension plan whereby pension expense is determined based on a number of actuarial assumptions, which are generally reviewed and determined on an annual basis. These assumptions include discount rates, expected rate of return on plan assets, rate of salary increase, mortality rates and other factors. The funded status of the plan is recognized on the Combined Balance Sheets. Prior service costs or credits and actuarial gains and losses beyond a 10% corridor are recognized in earnings based on the estimated future service period of the participants. The measurement date for the defined benefit plan for CNW employees is December 31.
Company employees participate in the UBM 2008 Executive Share Option Scheme under which they are granted stock options to purchase UBM plc stock and the UBM 2010 Executive Retention Plan, as amended in 2014, under which they are granted UBM plc restricted stock.
Under the provisions of ASC 718 Compensation-Stock Compensation, the Company recognizes share based compensation by estimating the fair value of each stock-based award at the date of grant. The stock-based compensation expense is recognized over the awards vesting period. In addition, the Company estimates future forfeitures in calculating the stock-based compensation expense as opposed to only recognizing these forfeitures and the corresponding reductions in expense as they occur.
For stock option awards, the fair value is estimated on the date of grant using the Black-Scholes option valuation model. The Black-Scholes option valuation model requires Company management to make
F-78
assumptions about UBM plc stock price volatility, dividend yield, expected term of the stock option and risk-free interest rates. The expected stock price volatility assumption is derived from the historical volatility of UBM plc common stock. The expected dividend yield assumption is determined by dividing the anticipated annual dividend payment by the stock price on the date of grant. The expected term assumption is derived using a methodology that combines historical exercise data with hypothetical exercise data for unexercised stock options. The risk-free interest rate assumption corresponds to the expected term assumption of the stock option and is based on the UK Gilts yield in effect at the time of grant.
For restricted stock awards, which vest solely on service, the fair value is estimated by using the closing price of UBM plc common stock on the date of grant.
Stock-based compensation is described more fully in Note 11, Stock-Based Compensation.
The Company provides for income taxes and the related accounts under the asset and liability method. Deferred tax assets and liabilities are determined based on the difference between the financial statement and tax bases of assets and liabilities using enacted tax rates expected to be in effect during the year in which the basis differences reverse. Valuation allowances are established when management determines it is more likely than not that some portion, or all, of the deferred tax assets will not be realized, which will be assessed on an on-going basis. In addition, income tax rules and regulations are subject to interpretation and the application of those rules and regulations require judgment by the Company and may be challenged by the taxation authorities. The Company follows ASC 740 Income Taxes, which requires the use of a two-step approach for recognizing and measuring tax benefits taken or expected to be taken in a tax return and disclosures regarding uncertainties in income tax positions. Only tax positions that meet the more likely than not recognition threshold are recognized. Refer to Note 12, Income Taxes.
Accumulated other comprehensive income includes foreign currency translation and amortization of amounts related to defined benefit plans.
The Company evaluated subsequent events through April 12, 2016, the date the financial statements were available to be issued. All events that had a material impact on the Companys Combined Financial Statements are disclosed in the notes to the Combined Financial Statements.
On December 14, 2015, UBM plc announced that it has reached an agreement for the sale of the Company to Cision, a business controlled by GTCR Canyon Holdings (Cayman), LP. for $841 million. The agreement is subject to anti-trust clearance in the U.S. and is expected to be completed after March 31, 2016.
On January 22, 2016, the Company made a distribution of receivables from United Finance Ltd. and Aztecgem Ltd., which are UBM plc entities outside of PRN, of $157,030 to two separate UBM plc entities outside of PRN. The distribution was comprised of $148,836 of Loans to Related Parties ST and $8,194 of Due from Related Parties ST. The distribution immediately followed a restructuring and assignment of certain loans, payables and receivables between the Company and various UBM entities.
On January 22, 2016, the Company received a capital contribution of $5,740 from a UBM plc entity outside of PRN.
F-79
In May 2014, the Financial Accounting Standards Board (FASB) ASU) No. 2014-09, Revenue from Contracts with Customers. ASU 2014-09 will eliminate transaction and industry-specific revenue recognition guidance under current GAAP and replace it with a principle-based approach for determining revenue recognition. ASU 2014-09 will require that companies recognize revenue based on the value of transferred goods or services as they occur in the contract. The ASU also will require additional disclosure about the nature, amount, timing and uncertainty of revenue and cash flows arising from customer contracts, including significant judgments and changes in judgments and assets recognized from costs incurred to obtain or fulfill a contract. In July 2015, the FASB voted to defer the effective date of ASU 2014-09 by one year to interim and annual reporting periods beginning after December 15, 2018. Entities can transition to the standard using either a full retrospective approach or a modified retrospective approach as of the date of adoption. Presently, the Company is assessing what effect the adoption of ASU 2014-09 will have on its combined financial statements and accompanying notes.
In August 2014, the FASB issued Accounting Standards Update 2014-15, Presentation of Financial Statements-Going Concern (ASU 2014-15). ASU 2014-15 requires that management evaluate at each annual and interim reporting period whether there is a substantial doubt about an entitys ability to continue as a going concern within one year of the date that the financial statements are issued. ASU 2014-15 will be effective for fiscal years and interim periods beginning after December 15, 2016 and early application is permitted. The Company does not expect that the application of ASU 2014-15 will have an impact on the Combined Financial Statements.
In January 2015, the FASB issued Accounting Standards Update 2015-01, Income Statement Extraordinary and Unusual Items (Subtopic 225-20). The objective of this update is to simplify income statement presentation requirements by eliminating the concept of extraordinary items. Extraordinary items are events and transactions that are distinguished by their unusual nature and by the infrequency of their occurrence. The amendments in this update are effective for fiscal years, and interim periods within those fiscal years beginning after December 15, 2015. A reporting entity may apply the amendments prospectively. A reporting entity also may apply the amendments retrospectively to all prior periods presented in the financial statements. Early adoption is permitted provided that the guidance is applied from the beginning of the fiscal year of adoption. The Company will adopt this guidance effective January 1, 2016 and does not believe that it will have a material impact on the Companys Combined Financial Statements.
In November 2015, the FASB issued Accounting Standards Update 2015-17, Income Taxes Balance Sheet Classification of Deferred Taxes. ASU 2015-17 requires entities to present deferred tax assets and deferred tax liabilities as noncurrent in a classified balance sheet. The ASU 2015-17 is effective for annual periods beginning after December 15, 2017, and interim periods within annual periods beginning after December 15, 2018. Early adoption is permitted for all entities. The Company will adopt this guidance effective January 1, 2018.
In February 2016, the FASB issued Accounting Standards Update 2016-02, Leases (Topic 842). ASU 2016-02 supersedes the existing guidance for lease accounting, Leases (Topic 840). ASU 2016-02 requires lessees to recognize a lease liability and a right-of-use asset for all leases. Lessor accounting remains largely unchanged. The amendments in ASU 2016-02 is effective for the Companys fiscal year 2020 and interim periods within 2021. Early adoption is permitted for all entities. ASU 2016-02 requires a modified retrospective approach for all leases existing at, or entered into after the date of initial adoption, with an option to elect to use certain transition relief. The Company is currently evaluating the impact of this new standard on its consolidated financial statements.
F-80
The following is a summary of property and equipment, at cost less accumulated depreciation:
|
|
|
||||||
As of December 31, | ||||||||
2015 | 2014 | |||||||
Leasehold improvements and building | $ | 17,420 | $ | 16,404 | ||||
Computer hardware and equipment | 30,265 | 27,274 | ||||||
47,685 | 43,678 | |||||||
Less: accumulated depreciation | (35,204 | ) | (33,091 | ) | ||||
Total property and equipment, net | $ | 12,481 | $ | 10,587 |
Depreciation expense for the years ended December 31, 2015 and December 31, 2014 was $3,377 and $3,128, respectively.
The following is a summary of computer software, at cost less accumulated amortization:
|
|
|
||||||
As of December 31, | ||||||||
2015 | 2014 | |||||||
Software | $ | 44,004 | $ | 36,626 | ||||
Less: accumulated amortization | (28,760 | ) | (22,837 | ) | ||||
Total software, net | $ | 15,244 | $ | 13,789 |
Amortization expense for the years ended December 31, 2015 and December 31, 2014 was $6,987 and $5,232, respectively.
Goodwill as of December 31, 2015 and December 31, 2014 was $123,578 and $126,288, respectively. Changes in goodwill were entirely due to changes in foreign currency.
The following is a summary of intangibles, at cost less accumulated amortization:
|
|
|
||||||
As of December 31, | ||||||||
2015 | 2014 | |||||||
Intangible Assets
|
||||||||
Brands | $ | 9,183 | $ | 9,379 | ||||
Customer Lists | 4,444 | 4,826 | ||||||
Other | 2,061 | 2,287 | ||||||
15,688 | 16,492 | |||||||
Accumulated amortization
|
||||||||
Brands | (7,756 | ) | (6,906 | ) | ||||
Customer Lists | (4,441 | ) | (4,685 | ) | ||||
Other | (1,978 | ) | (2,126 | ) | ||||
(14,175 | ) | (13,717 | ) | |||||
Intangible Assets, net | $ | 1,513 | $ | 2,775 |
Intangible amortization expense for the years ended December 31, 2015, and December 31, 2014 was $1,035 and $1,501, respectively. The estimated annual aggregate amortization expense for the next five succeeding fiscal years is expected to be $745, $425, $165, $164, and $14, respectively.
F-81
The Companys investment in unconsolidated affiliated is accounted for by the equity method and consists of a 50% interest in a joint venture with ANP Pers Support B.V in ANP Pers Support v.o.f. (ANPps).
The Company had revenues of $1,110 and $1,645 for the years ended December 31, 2015 and December 31, 2014, respectively, for billings made to ANPps for international distribution services provided to ANPps. The Company incurred operating expense of $157 and $164 for the years ended December 31, 2015 and December 31, 2014, respectively, for billings from ANPps for distribution services provided by ANPps to the Company for the countries in which ANPps operates.
Due from Related Parties Current as of December 31, 2015 and December 31, 2014 was $78,326 and $449,218, respectively. Due from Related Parties Current arises principally from daily net cash advances made by the Company to UBM plc and its subsidiaries (UBM) as UBM maintains a zero balance cash concentration system in the U.S. and Europe and from revenue for providing services to UBM. In 2015, the Company made a distribution of a receivable from UBM Finance Inc. to UBM entities outside of PRN of $401,772, which decreased the Due from Related Parties Current balance.
Net cash advances to UBM for the year ended December 31, 2015 and December 31, 2014 were $38,004 and $43,231 respectively. Revenue from the sale of the Companys products and services provided to UBM for the year ended December 31, 2015 and December 31, 2014 were $1,111 and $1,100, respectively.
A summary of Loans to Related Parties Current is as follows:
|
|
|
|
|
||||||||||||
As of December 31, | ||||||||||||||||
PRN Affiliate | UBM Counterparty | 2015 | 2014 | Stated interest rate | ||||||||||||
PRN Europe Ltd. | Aztecgem Limited | $ | 144,426 | $ | 148,801 | British Pound Sterling LIBOR +2% | ||||||||||
Newsdesk International | United Finance Limited | 7,248 | 7,671 | non-interest bearing | ||||||||||||
OIT Ltd | United Finance Limited | 10,726 | 11,351 | non-interest bearing | ||||||||||||
CNW Group Ltd. | United Finance Ltd. | | 3,453 | Canadian Dollars LIBOR + 2% | ||||||||||||
PRN Europe Ltd. | UBMG Ltd | 2,350 | 2,617 | no interest charged | ||||||||||||
Various | Various | 2,054 | 2,222 | |||||||||||||
Loans to Related Parties Current | $ | 166,804 | $ | 176,115 |
Loans to Related Parties Current arise principally as the Company provides financing to UBM through formal loan agreements. Changes in 2015 resulted from loans of $6,207 made by the Company to UBM, loan repayments of $9,330 from UBM to the Company and foreign currency translation. Changes in 2014 resulted from loans of $5,896 made by the Company to UBM, loan repayments of $1,348 from UBM to the Company and foreign currency translation.
Due to Related Parties Current as of December 31, 2015 and December 31, 2014 was $256,124 and $237,800, respectively. Due to Related Parties Current arises principally from management fees charged to the Company by UBM, costs incurred by UBM on behalf of the Company, cash advances to the Company through the cash concentration system to allow for interest payments to UBM on loans payable by the Company to UBM (see Loans from Related Parties Current) and as of December 31, 2014, amounts collected from customers by the Company on behalf of UBM for Company accounts receivable factored to UBM. As of December 31, 2015, Due to Related Parties Current includes a dividend payable to UBM of $918 for a dividend declared in 2015 but not paid until 2016.
F-82
Management fees for the years ended December 31, 2015 and December 31, 2014 were $9,337 and $8,764, respectively, and relate to an allocation of corporate services such as accounting, treasury, information technology, legal, executive management and human resources provided by UBM to the Company.
Costs incurred by UBM on behalf of the Company for the years ended December 31, 2015 and December 31, 2014 were $2,838 and $3,312, respectively, and relate to business insurance, payroll services, audit fees and office rent primarily reflected in agreements between UBM and the respective vendors. In addition, benefit costs incurred by UBM on behalf of the Company for the years ended December 31, 2015 and December 31, 2014 were $10,422 and $9,830, respectively.
Cash advances by UBM to the Company for the year ended December 31, 2015 and December 31, 2014 were $14,182 and $11,439, respectively. Such cash advances are used by PRN Delaware, Inc. to pay interest expense on related party debt with UBM.
The Company has historically factored substantially all of its accounts receivable from its U.S. businesses to a subsidiary of UBM plc. at a discount of approximately 2% under a non-recourse arrangement. On December 31, 2015, this arrangement was terminated and the Company purchased 100% of previously factored accounts receivable outstanding at October 31, 2015 for $30,791, which resulted in a loss on purchase of $2,307. November 2015 and December 2015 accounts receivable was not factored by the Company.
The discount for the years ended December 31, 2015 and December 31, 2014 was $5,413 and $5,579, respectively. The discount is included in Selling, General and Administrative Expenses in the Combined Statements of Operations. In addition, UBM paid an annual fee to the Company in return for cash collection, cash application and record keeping services. This fee was $2,551 and $2,000 for the years ended December 31, 2015 and December 31, 2014, respectively. Such fee is included in Other Income in the Combined Statements of Operations.
A summary of Loans from Related Parties Short Term is as follows:
|
|
|
|
|
||||||||||||
As of December 31, | ||||||||||||||||
PRN Affiliate | USM Counterparty | 2015 | 2014 | Stated interest rate | ||||||||||||
PRN Delaware, Inc. | UBM Finance Sarl | $ | 327,098 | $ | 326,634 | 6 month U.S. Dollars LIBOR + 0.50% | ||||||||||
PRN Delaware, Inc. |
United BM (US)
Holdings Sarl |
300,000 | 300,000 | 6 month U.S. Dollars LIBOR + 2% | ||||||||||||
PRN Holdings USA Inc. | UBM Finance Inc. | 18,998 | 18,998 | U.S. Dollars LIBOR + 2% | ||||||||||||
CNW Group Ltd. | UBM Finance Sarl | 13,958 | | 7% | ||||||||||||
Hors Antenne Holdings |
UBM CP Holdings
No 4 Sarl |
5,750 | 7,359 | EURIBOR plus 2%% | ||||||||||||
PRN Benelux Ltd. | United Finance Limited | 6,270 | 6,944 | British Pound Sterling LIBOR + 0.5% | ||||||||||||
PRN Europe Ltd. | UBMG Holdings | 6,474 | 6,851 | non-interest bearing | ||||||||||||
PR Newswire Asia Ltd. | United Finance Ltd. | 3,805 | 4,482 | non-interest bearing | ||||||||||||
PRN Europe Ltd. | United Finance Limited | 3,133 | 3,470 | British Pound Sterling LIBOR +0.5% | ||||||||||||
PRN Europe Ltd. |
United Business
Information (UK) Ltd |
2,113 | 2,236 | non-interest bearing | ||||||||||||
Various | Various | 891 | 463 | |||||||||||||
Loans from Related Parties Current | $ | 688,490 | $ | 677,437 |
F-83
Loans from Related Parties Current arise principally as the Company has received financing from UBM from time to time. Changes in 2015 resulted from loans of $928 made by UBM to the Company, loan repayments of $9,450 from the Company to UBM, foreign currency translation and a reclassification of a non-current loan to short term. Changes in 2014 resulted from loans of $500 made by UBM to the Company, loan repayments of $1,037 from the Company to UBM and foreign currency translation.
Loan from Related Party Non-Current as of December 31, 2015 and December 31, 2014 was $0 and $25,982, respectively. Loan from Related Party Non-Current arose in connection with financing provided by UBM to the Company for the 2012 purchase by UBM of the non-controlling interest in CNW Group, Ltd. which is due on November 23, 2016. Changes in 2015 resulted from foreign currency translation and a reclassification of the loan to short term. Changes in 2014 were entirely due to foreign currency translation. The stated interest rate for this loan is 7%.
Interest income for all related party loans was $4,271 and $4,102 for the years ended December 31, 2015 and December 31, 2014, respectively. Interest expense for all related party loans was $15,137 and $13,941 for the years ended December 31, 2015 and December 31, 2014, respectively.
The Company has recorded taxes payable by UBM in consolidated tax fillings as deemed capital contributions of $8,301 and $15,349 for the years ended December 31, 2015 and December 31, 2014, respectively.
In 2015, the Company made a distribution of a receivable from UBM Finance Inc. to UBM entities outside of PRN of $401,772 and declared cash dividends to UBM of $2,850, of which $1,932 was paid in 2015 and $918 was paid in 2016.
The following table displays the change in the components of accumulated other comprehensive income (loss), net of tax:
|
|
|
|
|||||||||
Cumulative
Translation Adjustment |
Defined
Benefit Plan Adjustment |
Total
Accumulated Other Comprehensive Income (Loss) |
||||||||||
Balance at January 1, 2014 | $ | 7,903 | $ | (3,487 | ) | $ | 4,416 | |||||
Foreign Currency Translation | (9,361 | ) | | (9,361 | ) | |||||||
Defined Benefit Plan Adjustment | | (45 | ) | (45 | ) | |||||||
Balance at December 31, 2014 | (1,458 | ) | (3,532 | ) | (4,990 | ) | ||||||
Foreign Currency Translation | (9,348 | ) | | (9,348 | ) | |||||||
Defined Benefit Plan Adjustment | | 480 | 480 | |||||||||
Balance at December 31, 2015 | $ | (10,806 | ) | $ | (3,052 | ) | $ | (13,858 | ) |
F-84
PRNA employees participate in the UBM 401K savings plan. Under the plan, the Company contributes in cash based on a stated percentage of eligible employee contributions and based on a stated percentage of employee compensation, both subject to a specified ceiling. The expense recognized for the 401K savings plan in the years ended December 31, 2015 and December 31, 2014 was $2,934 and $2,628, respectively.
Certain executives of PRNA participate in a supplemental defined contribution plan. Under the plan the Company contributes in cash up to a set percentage of employee base salary based on the percentage of eligible employee base pay contributed by the employee. Amounts contributed are invested based on the investment choices by Wilmington Trust Company, the Companys appointed trustee. However, the Company is obligated to the employee based on the employees notional investment choice. The plan has been closed to new employees since 2010. As of December 31, 2015, all plan participants are 100% vested. Plan assets as of December 31, 2015 and December 31, 2014 were $4,618 and $5,630, respectively, and are reflected in Other Assets in the Combined Balance Sheets. Amounts due to employees as of December 31, 2015 and December 31, 2014 were $4,481 and $5,537, respectively, and are reflected in Accounts Payable and Accrued Liabilities in the Combined Balance Sheets. The expense recognized for this plan in the years ended December 31, 2015 and December 31, 2014 was $55 and $115, respectively.
Employees of CNW participate in a pension plan which has a defined benefit plan component and defined contribution plan component. CNW also maintains an unfunded defined contribution plan for certain former employees. The defined benefit plan has been closed to new participants since 2006. In addition, CNW maintains a non-registered defined benefit pension plan for a former executive, which provides benefits in excess of those payable from the registered defined benefit plan and the unfunded defined contribution plan.
The actuarial cost method used for the valuation of the defined benefit post-employment benefits is the present value of the benefits expected to be paid. CNWs contributions to defined contribution plans are expensed as incurred. The expense recognized for CNWs defined contribution plans in the years ended December 31, 2015 and December 31, 2014 was $285 and $303, respectively.
F-85
The following table summarizes changes in the benefit obligation, plan assets and the funded status of CNWs two defined benefit plans:
|
|
|
||||||
2015 | 2014 | |||||||
Change in benefit obligation
|
||||||||
Beginning benefit obligation balance | $ | 10,346 | $ | 10,066 | ||||
Service cost | 257 | 224 | ||||||
Interest cost | 438 | 521 | ||||||
Plan participants' contribution | 41 | 47 | ||||||
Actuarial (gain) loss | (694 | ) | 1,959 | |||||
Benefits paid | (597 | ) | (446 | ) | ||||
Currency translation | (52 | ) | (22 | ) | ||||
Ending benefit obligation | $ | 9,739 | $ | 12,349 | ||||
Ending accumulated benefit obligation | $ | 8,647 | $ | 10,931 | ||||
Change in plan assets
|
||||||||
Beginning fair value of plan assets | $ | 8,112 | $ | 7,326 | ||||
Return on plan assets | 119 | 1,848 | ||||||
Employer contributions | 631 | 907 | ||||||
Plan participants' contributions | 41 | 47 | ||||||
Benefits paid | (597 | ) | (446 | ) | ||||
Ending fair value of plan assets | $ | 8,306 | $ | 9,682 | ||||
Funded status | $ | 1,433 | $ | 2,667 |
The amount recognized in the Combined Balance Sheets as Pension Obligation as of December 31, 2015 and December 31, 2014 was $1,433 and $2,667, respectively. The amount of net actuarial loss recognized in accumulated other comprehensive (loss) income as of December 31, 2015 and December 31, 2014 was $2,628 and $4,220, respectively. The estimated amortization from accumulated comprehensive loss into net periodic benefit cost from actuarial losses for the years ended December 31, 2015 and December 31, 2014 was $187 and $233, respectively.
|
|
|
||||||
As of December 31, | ||||||||
2015 | 2014 | |||||||
Plans with projected benefit obligations in excess of plan assets
|
||||||||
Projected benefit obligation | $ | 9,739 | $ | 12,349 | ||||
Fair value of plan assets | 8,306 | 9,682 | ||||||
Total | $ | (1,433 | ) | $ | (2,667 | ) | ||
Plans with accumulated benefit obligations in excess of plan
|
||||||||
Accumulated benefit obligation | $ | 8,647 | $ | 10,931 | ||||
Fair value of plan assets | 8,306 | 9,682 | ||||||
Total | $ | (341 | ) | $ | (1,249 | ) |
F-86
The following table presents the plan assets by category:
|
|
|
||||||
As of December 31, | ||||||||
2015 | 2014 | |||||||
Debt instruments | $ | 8,306 | $ | 9,682 |
The following tables present the fair value hierarchy for pension assets measured at fair value on a recurring basis as of December 31, 2015 and December 31, 2014:
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||
As of December 31, 2015 | As of December 31, 2014 | |||||||||||||||||||||||||||||||
Level 1 | Level 2 | Level 3 | Total | Level 1 | Level 2 | Level 3 | Total | |||||||||||||||||||||||||
Debt instruments | $ | | $ | 8,306 | $ | | $ | 8,306 | $ | | $ | 9,682 | $ | | $ | 9,682 |
The pension assets consist primarily of a pooled fund, which is primarily invested in government and corporate bonds. They are valued using models with inputs including interest rate curves, credit spreads and volatilities. The inputs that are significant to valuation are generally observable and therefore the assets within the pooled fund have been classified as Level 2. The fair value reflects the proportionate share of the fair value of the investments held in the underlying pooled fund.
Components of net periodic benefit cost and other amounts recognized in Other Comprehensive Income (Loss) for the years ended December 31, 2015 and December 31, 2014 are as follows:
|
|
|
||||||
Years ended
December 31, |
||||||||
2015 | 2014 | |||||||
Net Periodic Benefit Cost:
|
||||||||
Service cost | $ | 257 | $ | 224 | ||||
Interest cost | 438 | 521 | ||||||
Expected return on plan assets | (177 | ) | (162 | ) | ||||
Amortization of prior service costs | | | ||||||
Amortization of net actuarial loss | 187 | 233 | ||||||
Amortization of transitional asset | (20 | ) | (23 | ) | ||||
Net Periodic Benefit Cost | $ | 685 | $ | 793 |
Other changes in plan assets and benefit obligations recognized in Other Comprehensive Income (Loss) for the years ended December 31, 2015 and December 31, 2014 were as follows:
|
|
|
||||||
Years ended December 31, | ||||||||
2015 | 2014 | |||||||
Actuarial (gain) loss | $ | (702 | ) | $ | 283 | |||
Amortization of net actuarial losses | (187 | ) | (233 | ) | ||||
Amortization of transitional asset | 20 | 23 | ||||||
Total recognized in other comprehensive (income) loss | (869 | ) | 73 | |||||
Total recognized in net periodic benefit cost and other
comprehensive (income) loss |
$ | (184 | ) | $ | 866 |
F-87
Weighted-average assumptions used to determine the benefit obligations reflected in the Combined Balance Sheets and the net benefit cost reflected in the Combined Statements of Operations were as follows:
|
|
|
||||||
Years ended December 31, | ||||||||
2015 | 2014 | |||||||
Discount rate | 4.40 | % | 4.00 | % | ||||
Rate of compensation increase | 3.50 | % | 3.50 | % | ||||
Rate of return on plan assets | 2.00 | % | 2.00 | % |
The long-term rates of return are determined based on the nature of each plans investments, an expectation for each plans investment strategies, historical rates of return and current economic forecasts, among other factors, and are evaluated annually and adjusted as necessary.
The CNW defined pension plan is funded via assets held in trust by Manulife and are invested in an ultra-long bond fund. This investment strategy is attempting to minimize interest rate risk in the funded position of the pension plan. The assets of the defined contribution component of the pension plan are selected by members. The other pension plans are unfunded.
The Company expects to make contributions of $494 to defined benefit plans during 2016. Total benefit payments expected to be paid from the plans are as follows:
|
|
|||
2016 | $ | 336 | ||
2017 | $ | 336 | ||
2018 | $ | 357 | ||
2019 | $ | 370 | ||
2020 | $ | 385 | ||
Next five years | $ | 2,045 |
Employees of PRNE based in the United Kingdom (U.K.) participate in a UBM sponsored pension plan which has a defined benefit and a defined contribution component. The defined benefit plan is closed to new members and currently has four participants who are employees of PRNE. The benefit accrues based on final salary and length of service. All PRNE employees in the U.K. are legally bound to enter the defined contribution plan but have an option to opt out after enrollment. The plan has three tiers. At the basic auto enroll level, employees contribute 2% of salary and the Company contributes 4%. At the Tier 1 level, employees contribute 3% of salary and the Company contributes 6%. At the Tier 2 level, employees contribute 4% of salary and the Company contributes 6%. Employees elect the tier at which they wish to contribute. For the years ended December 31, 2015 and December 31, 2014, the total pension plan expense was $640 and $585, respectively.
F-88
Stock option transactions under the UBM Executive Share Option Scheme for the years ended December 31, 2015 and December 31, 2014 are summarized as follows:
|
|
|
||||||
Number
of Options |
Weighted
Average Price |
|||||||
Outstanding at January 1, 2014 | 1,428,684 | $ | 9.37 | |||||
Granted | 346,000 | 11.66 | ||||||
Exercised | (122,666 | ) | 8.78 | |||||
Forfeited or expired | (148,013 | ) | 10.48 | |||||
December 2014 option grant | 435,951 | 7.49 | ||||||
Outstanding at December 31, 2014 | 1,939,956 | $ | 7.47 | |||||
Options Excercisable at December 31, 2014 | 801,107 | $ | 6.59 | |||||
Outstanding at January 1, 2015 | 1,939,956 | $ | 7.47 | |||||
Granted | 415,000 | 8.46 | ||||||
Exercised | (627,708 | ) | 6.23 | |||||
Forfeited or expired | (138,094 | ) | 8.36 | |||||
Outstanding at December 31, 2015 | 1,589,154 | $ | 7.88 | |||||
Options Excercisable at December 31, 2015 | 522,879 | $ | 7.15 |
Restricted stock activity during the years ended December 31, 2015 and December 31, 2014, respectively, were as follows:
|
|
|
||||||
Number
of Shares |
Weighted-
Average Grant-Date Fair Value per Share |
|||||||
Non-vested, as of January 1, 2014 | 67,507 | $ | 10.57 | |||||
Granted | 77,237 | 11.38 | ||||||
Vested | (9,071 | ) | 8.88 | |||||
Cancelled and forfeited | (11,459 | ) | 9.92 | |||||
December 2014 special grant | 40,004 | 7.34 | ||||||
Non-vested, as of December 31, 2014 | 164,218 | $ | 10.19 | |||||
Granted | 6,169 | 8.30 | ||||||
Vested | (3,389 | ) | 8.79 | |||||
Cancelled and forfeited | (53,962 | ) | 7.58 | |||||
Non-vested, as of December 31, 2015 | 113,036 | $ | 10.31 |
Stock options and restricted stock awards are typically granted with a three-year vesting period. In December 2014, UBM plc made a special grant of stock options and restricted stock to the Companys employees whereby approximately 0.29 stock options were awarded for every stock option held and approximately 0.29 shares of restricted stock were awarded for every share of restricted stock held. The vesting period for the special grant ranged from zero to 32 months. In connection with the special grant, the exercise price for existing stock options was adjusted such that the revised exercise price was discounted 22.4% from the original exercise price.
Stock-based compensation expense for the years ended December 31, 2015 and December 31, 2014 was $1,265 and $1,279, respectively, inclusive of $614 related to the December 2014 special grant and the related stock option repricing.
F-89
PRN Delaware, Inc. and its subsidiaries and PR Newswire Europe Ltd. and its subsidiaries are part of the consolidated tax filings of UBM in the U.S. and the United Kingdom. The Company files its own corporate tax returns in other jurisdictions including Canada, France, The Netherlands, China, Hong Kong, Brazil and Mexico. The Companys tax provision has been calculated as if the Company filed separate tax returns for PRN Delaware and PR Newswire Europe Ltd. in the U.S. and the United Kingdom.
The provision for income taxes for the years ended December 31, 2015 and December 31, 2014 is comprised of the following:
|
|
|
||||||
For the years ended
December 31, |
||||||||
2015 | 2014 | |||||||
Current Provision (Benefit)
|
||||||||
U.S. Federal | $ | 5,978 | $ | 9,935 | ||||
U.S. State and Local | 1,532 | 2,386 | ||||||
Foreign:
|
||||||||
Canada | 2,465 | 3,383 | ||||||
Europe and Middle East | 2,191 | 2,680 | ||||||
Latin America | 202 | (158 | ) | |||||
Asia | 274 | 433 | ||||||
Current Provision | 12,642 | 18,659 | ||||||
Deferred Provision (Benefit)
|
||||||||
U.S. | 2,923 | 2,490 | ||||||
Foreign: | 310 | (360 | ) | |||||
Deferred Provision | 3,233 | 2,130 | ||||||
Total Provision for Income Taxes | $ | 15,875 | $ | 20,789 |
The provision for income taxes differs from the amount computed by applying the U.S. statutory federal income tax rate of 35% to income before provision for income taxes due to state and local income taxes, foreign tax rate differentials on non-U.S. income, and non-deductible items such as meals and entertainment expenses.
As of December 31, 2015, the Company has non capital loss carry-forwards in Canada of approximately $4.8 million for tax purposes, which will be available to offset future taxable income. If not used, these carry-forwards will expire between 2028 and 2033. These losses are subject to a valuation allowance. In addition, there are approximately $0.9 million of investment tax credits in Canada. If not used, these credits will expire between 2024 and 2032.
F-90
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. The Companys deferred tax assets and liabilities are comprised of book-to-tax basis differences in fixed assets, intangibles, and non-deductible accruals and reserves. Deferred tax assets and liabilities as of December 31, 2015 and December 31, 2014 are comprised of the following:
|
|
|
||||||
As of December 31, | ||||||||
2015 | 2014 | |||||||
Deferred Tax Assets
|
||||||||
Current
|
||||||||
U.S. | $ | 6,116 | $ | 6,338 | ||||
Non-Current
|
||||||||
Canada | 3,612 | 4,988 | ||||||
Europe and Middle East | 337 | 331 | ||||||
Latin America | 183 | 167 | ||||||
Asia | 0 | 89 | ||||||
Valuation Allowance | (2,403 | ) | (3,357 | ) | ||||
Non-Current | 1,729 | 2,218 | ||||||
Deferred Tax Assets | 7,845 | 8,556 | ||||||
Deferred Tax Liabilities Non-Current
|
||||||||
U.S. | (30,622 | ) | (28,213 | ) | ||||
Deferred Tax Liabilities, net | $ | (22,777 | ) | $ | (19,657 | ) |
The Company follows guidance under U.S. GAAP for uncertain tax positions, which provides a comprehensive model for the recognition, measurement and disclosure in the financial statements of uncertain tax positions that the Company has taken or expects to take on an income tax return. There were no uncertain tax positions at December 31, 2015 and December 31, 2014.
The Companys share of undistributed earnings of foreign subsidiaries, amounting to approximately $15,608 and $8,677, is considered to be indefinitely reinvested at December 31, 2015 and December 31, 2014, respectively. Accordingly, no provision has been recorded for U.S. income taxes that might result from repatriation of these earnings.
The Company has leases for office space in the U.S., Canada, Brazil, Great Britain, France, Sweden, Dubai, China, Hong Kong, India, Taiwan, Malaysia and Singapore which expire between 2016 and 2027. The following is a schedule, by year, of the future minimum rental payments under these leases:
|
|
|||
Year ended December 31, | ||||
2016 | $ | 8,405 | ||
2017 | $ | 6,841 | ||
2018 | $ | 5,217 | ||
2019 | $ | 4,965 | ||
2020 | $ | 4,907 | ||
Thereafter | $ | 13,709 |
Rent expense for years ended December 31, 2015 and December 31, 2014 was $9,558 and $9,645, respectively.
F-91
The Company has unconditional purchase obligations relating to certain vendors that provide software and technology oriented services ranging from less than one year to five years. The following is a schedule, by year, of the future minimum payments under these obligations:
|
|
|||
Year ended December 31, | ||||
2016 | $ | 9,749 | ||
2017 | $ | 2,523 | ||
2018 | $ | 413 | ||
2019 | $ | 26 | ||
2020 | $ | 13 | ||
Thereafter | $ | |
The Company is named in various claims and legal actions in the normal course of its activities.
The Company believes that the outcome of such matters is not expected to have a material adverse effect on the Companys results of operations, financial position or cash flows.
In June 2014, the SEC commenced an inquiry concerning certain aspects of the Companys business that relate to the distribution of issuer press releases. The Company has been fully cooperative with the staff of the SEC Division of Enforcement in this ongoing inquiry. Although the Company cannot predict what the outcome of the inquiry will be, it may result in remedies which could include modifications to the Companys process for disseminating issuer press releases. Based on currently available information, the Company does not expect that the inquiry, or any resolution thereof, will have a material adverse effect on the Companys results of operations, financial position or cash flows.
F-92
The Board of Directors of UBM plc:
We have audited the accompanying combined financial statements of the PRN Group, which comprise the combined balance sheets as of December 31, 2014 and 2013, and the related combined statements of operations, comprehensive income, stockholders' deficit and cash flows for the years then ended, and the related notes to the combined financial statements.
Management is responsible for the preparation and fair presentation of these financial statements in conformity with U.S. generally accepted accounting principles; this includes the design, implementation and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free of material misstatement, whether due to fraud or error.
Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditors judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entitys preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
In our opinion, the combined financial statements referred to above present fairly, in all material respects, the combined financial position of the PRN Group at December 31, 2014 and 2013, and the combined results of its operations and its cash flows for the years then ended in conformity with U.S. generally accepted accounting principles.
/s/ Ernst & Young LLP
Iselin, NJ
October 21, 2015
F-93
|
|
|
||||||
As of December 31, | ||||||||
2014 | 2013 | |||||||
ASSETS
|
||||||||
Current Assets
|
||||||||
Cash and Cash Equivalents | $ | 12,089 | $ | 10,069 | ||||
Accounts Receivable, net of allowance of $3,928 and $4,078 at December 31, 2014 and 2013, respectively | 34,637 | 36,109 | ||||||
Due from Related Parties | 449,218 | 404,089 | ||||||
Loans to Related Parties | 176,115 | 178,687 | ||||||
Income Tax Receivable | 2,082 | 805 | ||||||
Deferred Income Taxes | 6,338 | 5,820 | ||||||
Other Receivables | 1,892 | 3,787 | ||||||
Prepaids and Other Current Assets | 3,250 | 3,255 | ||||||
Total Current Assets | 685,621 | 642,621 | ||||||
Property and Equipment, net of accumulated depreciation of $33,091 and $37,124 at December 31, 2014 and 2013, respectively | 10,587 | 11,880 | ||||||
Computer Software, net of accumulated amortization of $22,837 and $19,312 at December 31, 2014 and 2013, respectively | 13,789 | 10,666 | ||||||
Intangible Assets, net | 2,775 | 4,440 | ||||||
Goodwill | 126,288 | 128,442 | ||||||
Investment in Unconsolidated Affiliate | 5,550 | 5,816 | ||||||
Deferred Income Taxes | 2,218 | 1,992 | ||||||
Other Assets | 6,142 | 6,676 | ||||||
TOTAL ASSETS | $ | 852,970 | $ | 812,533 | ||||
LIABILITIES
|
||||||||
Current Liabilities
|
||||||||
Accounts Payable and Accrued Liabilities | $ | 44,732 | $ | 45,055 | ||||
Deferred Revenue | 31,710 | 28,345 | ||||||
Due to Related Parties | 237,800 | 237,649 | ||||||
Loans from Related Parties | 677,437 | 680,791 | ||||||
Income Taxes Payable | 421 | 398 | ||||||
Other Current Liabilities | 534 | 350 | ||||||
Total Current Liabilities | 992,634 | 992,588 | ||||||
Loan from Related Party | 25,982 | 28,320 | ||||||
Deferred Income Taxes | 28,213 | 25,204 | ||||||
Pension Obligation | 2,504 | 2,828 | ||||||
Other Liabilities | 5,513 | 6,099 | ||||||
TOTAL LIABILITIES | 1,054,846 | 1,055,039 | ||||||
Commitments and Contingencies (Note 13)
|
||||||||
STOCKHOLDERS' DEFICIT
|
||||||||
Capital | 278,633 | 262,005 | ||||||
Accumulated Deficit | (475,519 | ) | (508,927 | ) | ||||
Accumulated Other Comprehensive (Loss) Income | (4,990 | ) | 4,416 | |||||
Total Stockholders' Deficit | (201,876 | ) | (242,506 | ) | ||||
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT | $ | 852,970 | $ | 812,533 |
The accompanying notes are an integral part of the combined financial statements.
F-94
|
|
|
||||||||||
For the Years Ended
December 31, |
||||||||||||
2014 | 2013 | |||||||||||
Revenue | $ | 322,693 | $ | 315,883 | ||||||||
Operating Expenses | 85,391 | 87,338 | ||||||||||
Selling, General and Administrative Expenses | 165,119 | 169,091 | ||||||||||
Depreciation and Amortization | 9,861 | 12,888 | ||||||||||
Total Operating Costs | 260,371 | 269,317 | ||||||||||
Operating Income | 62,322 | 46,566 | ||||||||||
Interest Income | 155 | 26 | ||||||||||
Interest Income on Related Party Loans | 4,102 | 4,639 | ||||||||||
Interest Expense on Related Party Loans | (13,941 | ) | (15,433 | ) | ||||||||
Other Income on Related Party Agreement | 2,000 | 2,061 | ||||||||||
Equity in Earnings of Unconsolidated Affiliate | 470 | 685 | ||||||||||
Income before Provision for Income Taxes | 55,108 | 38,544 | ||||||||||
Provision for Income Taxes | 20,789 | 16,184 | ||||||||||
Net Income | $ | 34,319 | $ | 22,360 |
The accompanying notes are an integral part of the combined financial statements.
F-95
|
|
|
||||||
For the Years Ended
December 31, |
||||||||
2014 | 2013 | |||||||
Net Income | $ | 34,319 | $ | 22,360 | ||||
Other Comprehensive (Loss) Income:
|
||||||||
Foreign Currency Translation | (9,361 | ) | 4,977 | |||||
Defined Benefit Plan (Expense) Income, net of taxes of $28 and $(99) for the years ended December 31, 2014 and 2013, respectively | (45 | ) | 136 | |||||
Comprehensive Income | $ | 24,913 | $ | 27,473 |
The accompanying notes are an integral part of the combined financial statements.
F-96
|
|
|
||||||
For the Years Ended
December 31, |
||||||||
2014 | 2013 | |||||||
Cash Flows from Operating Activities
|
||||||||
Net Income | $ | 34,319 | $ | 22,360 | ||||
Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities:
|
||||||||
Depreciation and Amortization | 9,861 | 12,888 | ||||||
Provision for Doubtful Accounts and Credit Memos | 1,338 | 2,652 | ||||||
Stock-Based Compensation Expense | 1,279 | 650 | ||||||
Provision for Deferred Taxes | 2,130 | 1,984 | ||||||
Taxes payable by Related Parties in Consolidated Filings | 15,349 | 9,732 | ||||||
Equity in Earnings of Unconsolidated Affiliate | (470 | ) | (685 | ) | ||||
Distribution of Earnings from Unconsolidated Affiliate | 496 | 1,705 | ||||||
Other | 638 | 151 | ||||||
Changes in Operating Assets and Liabilities:
|
||||||||
Accounts Receivable | (1,058 | ) | (2,892 | ) | ||||
Due from Related Parties Current | (3,462 | ) | (3,052 | ) | ||||
Other Assets | 481 | (338 | ) | |||||
Accounts Payables and Accrued Liabilities | 547 | 4,224 | ||||||
Deferred Revenue | 4,027 | 724 | ||||||
Other Liabilities Current | 280 | (439 | ) | |||||
Income Tax Receivable and Payable | (1,581 | ) | (135 | ) | ||||
Due to Related Parties Current | (14,324 | ) | (9,822 | ) | ||||
Other Operating Assets and Liabilities | 1,744 | (851 | ) | |||||
Net Cash Provided by Operating Activities | 51,594 | 38,856 | ||||||
Cash Flows from Investing Activities
|
||||||||
Purchases of Property and Equipment and Computer Software | (10,981 | ) | (7,595 | ) | ||||
Earnout Payment for Acquisition | (166 | ) | ||||||
Net Cash Used in Investing Activities | (10,981 | ) | (7,761 | ) | ||||
Cash Flows from Financing Activities
|
||||||||
Dividend to Related Party | (911 | ) | | |||||
Loans from Related Parties | 500 | 301 | ||||||
Loan Repayments to Related Parties | (1,037 | ) | (1,462 | ) | ||||
Loans to Related Parties | (5,896 | ) | (2,321 | ) | ||||
Loan Repayments from Related Parties | 1,348 | 1,358 | ||||||
Advances to Related Parties | (31,792 | ) | (31,098 | ) | ||||
Net Cash Used in Financing Activities | (37,788 | ) | (33,222 | ) | ||||
Effect of Exchange Rate Changes on Cash | (805 | ) | 939 | |||||
Net Increase (Decrease) in Cash and Cash Equivalents | 2,020 | (1,188 | ) | |||||
Cash and Cash Equivalents
|
||||||||
Beginning of Year | 10,069 | 11,257 | ||||||
End of Year | $ | 12,089 | $ | 10,069 | ||||
Supplemental Disclosure of Cash Flow Information:
|
||||||||
Cash Paid for Interest | $ | 13,679 | $ | 14,120 | ||||
Cash Paid for Income Taxes | $ | 5,174 | $ | 5,915 |
The accompanying notes are an integral part of the combined financial statements.
F-97
|
|
|
|
|
||||||||||||
Capital |
Accumulated
Deficit |
Accumulated
Other Comprehensive (Loss) Income |
Total
Stockholders Deficit |
|||||||||||||
Balance as of January 1, 2013 | $ | 251,623 | $ | (531,287 | ) | $ | (697 | ) | $ | (280,361 | ) | |||||
Net Income | | 22,360 | | 22,360 | ||||||||||||
Stock-Based Compensation | 650 | | | 650 | ||||||||||||
Defined Benefit Plan Adjustment | | | 136 | 136 | ||||||||||||
Foreign Currency Translation | | | 4,977 | 4,977 | ||||||||||||
Taxes payable by Related Parties in Consolidated Filings | 9,732 | | | 9,732 | ||||||||||||
Balance as of December 31, 2013 | 262,005 | (508,927 | ) | 4,416 | (242,506 | ) | ||||||||||
Net Income | | 34,319 | | 34,319 | ||||||||||||
Stock-Based Compensation | 1,279 | | | 1,279 | ||||||||||||
Defined Benefit Plan Adjustment | | | (45 | ) | (45 | ) | ||||||||||
Foreign Currency Translation | | | (9,361 | ) | (9,361 | ) | ||||||||||
Taxes payable by Related Parties in Consolidated Filings | 15,349 | | | 15,349 | ||||||||||||
Dividend to UBM | | (911 | ) | | (911 | ) | ||||||||||
Balance as of December 31, 2014 | $ | 278,633 | $ | (475,519 | ) | $ | (4,990 | ) | $ | (201,876 | ) |
The accompanying notes are an integral part of the combined financial statements.
F-98
PRN Group (PRN or the Company) does business as PR Newswire, a global leader in public relations and investor relations communications and related products and services.
The Combined Financial Statements of the Company include the operations of the PRN Group businesses that are being carved-out for potential divestiture which include the PRN operations of PR Newswire Europe Ltd. and subsidiaries (Benelux Ltd., Newsdesk International Ltd., PR Newswire Disclose Ltd., OIT Ltd., PR Agency Ltd. and PR Newswire Gmbh), PR Newswire Ltda., NotilogPRN Argentina SA, PR Newswire S de RL de CV, PR Newswire Argentina SA, Hors Antenne Holding SAS and its subsidiary, Hors Antenne SAS, Cyperus SA, PR Newswire Asia Ltd., PRN Business Consulting Co Ltd., PRN Middle East Ltd., PRN India, PRNnet, PRN Delaware and subsidiaries (Virtual Press Office and PRN Holdings Inc. and its subsidiary CNW Group Ltd. and subsidiaries (Health Response Ltd., CCNW Quebec Inc., DNA 13 Inc. and DNA 13 (US) Inc.)), Communities Holdings and PR Newswire Association LLC and subsidiaries (MultiVu LLC and eWatch LLC).
The accompanying combined carve-out financial statements reflect the assets and liabilities, operating results, and cash flows of PRN. The Combined Financial Statements include certain expenses of UBM plc, which were allocated for certain functions, including general corporate expenses related to finance, legal, information technology, human resources, shared services, insurance, employee benefits and incentives, and stock-based compensation expense. These attributed expenses have been allocated to PRN on the basis of direct usage when identifiable, and for resources indirectly used by PRN, allocations were based on relative headcount, revenue, or other methodology, to reflect estimated usage by PRN. Management considers the allocation methodology and results to be reasonable for all periods presented. However, the financial information presented in these combined carve-out financial statements may not reflect the combined financial position, operating results and cash flows of PRN had PRN been a separate stand-alone entity during the period presented. Actual costs that would have been incurred if PRN had been a stand-alone company would depend on multiple factors, including organizational structure and strategic decisions made in various areas.
The cash and cash equivalents held by UBM plc at the corporate level are not specifically identifiable to PRN, and therefore, were not allocated for any of the periods presented. Cash and cash equivalents in the accompanying Combined Balance Sheets primarily represent cash held locally by operations included in the combined carve-out financial statements. UBM plc third-party debt, and the related interest expense has not been allocated for any of the periods presented as PRN was not the legal obligor of the debt and UBM plcs borrowings were not directly attributable to these operations.
The accompanying Combined Financial Statements have been derived from the consolidated financial statements and accounting records of UBM plc. These Combined Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP). These principles require the Company to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities, and the reported amounts of revenues and expenses. Significant estimates inherent in the preparation of the accompanying Combined Financial Statements include estimates regarding allowance for doubtful accounts and credit memos, potential outcome of uncertain tax positions, fair value of acquired assets and liabilities, fair value of equity-based compensation and pension benefit assumptions. Estimates are based on past experience and other considerations reasonable under the circumstances. Actual results could differ from those estimates. All intercompany balances and transactions between the operations of the carved-out businesses have been eliminated in the accompanying Combined Financial Statements. The income tax amounts in the accompanying Combined Financial Statements have been calculated based on a separate return methodology and presented as if the Companys operations were separate taxpayers in the respective jurisdictions.
F-99
The accompanying combined carve-out financial statements have been prepared to assist in UBM plcs potential divestiture of its PRN business and to demonstrate the historical results of operations, financial position, and cash flows of the PRN business that is being carved-out for the indicated periods under UBM plc management and do not include any accounts of entities that may be legally owned by any of the PRN entities but are not being included in any potential divestiture as they are not part of the PRN business.
Cash and cash equivalents include all highly-liquid investments with original maturities of three months or less, and the carrying amounts approximate fair value.
As more fully discussed in Note 8, Related Party Transactions, the Company factors substantially all of its accounts receivable from its U.S. businesses to a subsidiary of UBM plc. Trade accounts receivable are recorded at the invoiced amount and do not bear interest. For accounts receivable not subject to the factoring program as well as any accounts receivable not yet factored, the Company maintains an allowance for doubtful accounts for estimated losses that result from the failure or inability of our customers to make required payments. When determining the allowance, the Company considers the probability of recoverability of accounts receivable based on past experience, taking into account current collection trends as well as general economic factors. Credit risks are assessed based on historical write-offs, net of recoveries, as well as an analysis of the aged accounts receivable balances. Accounts receivable may be fully reserved when specific collection issues are known to exist, such as pending bankruptcy or catastrophes. Trade accounts receivable are uncollateralized and represent a large number of geographically dispersed debtors. As of December 31, 2014 and December 31, 2013, there were no individual customers representing more than 10% of the Companys outstanding gross accounts receivable balance. During the years ended December 31, 2014 and December 31, 2013, there were no customers that accounted for more than 10% of revenue. In determining sales credit allowances, the Company analyzes historical trends, customer-specific factors and current economic trends. The Company records an allowance based on this information, as appropriate.
Property and equipment is stated at cost, net of accumulated depreciation or amortization. Major renewals and improvements are capitalized, while replacements, maintenance, and repairs that do not improve or extend the lives of the respective assets are expensed as incurred. Property and equipment are depreciated using the straight-line method. Computer hardware and equipment is depreciated over a period of three to ten years. Leasehold improvements are amortized on a straight-line basis over the shorter of the term of the lease or the estimated useful life of the improvement. Buildings are depreciated over a period of 20 years.
The Company develops various computer software applications for internal use including systems which support our internal business services and processes, our financial and administrative systems and systems which we use to provide services to our customers.
The Company expenses costs as incurred during the preliminary development stage which includes conceptual formulation and review of alternatives. Once that stage is complete, the application development stage, which includes design, coding and testing, begins. Direct internal and external costs incurred during this stage are capitalized. Capitalization of costs cease when the software is ready for its intended use and all substantial testing is completed. Upgrades and enhancements which provide added functionality are accounted for in the same manner. Maintenance costs incurred solely to extend the life of the software are expensed as incurred.
F-100
Computer software is amortized on a straight-line basis over a useful life of 3 to 5 years. Periodically, the Company reassesses the estimated useful lives of our computer software considering its overall technology strategy, the effects of obsolescence, technology, competition and other economic factors on the useful life of these assets.
The Company assesses impairment of long-lived assets pursuant with ASC 360 Property, Plant and Equipment. This includes determining if certain triggering events have occurred that could affect the value of an asset. The Company has not recorded any impairment charges related to long-lived assets.
Goodwill represents the excess of consideration paid over the fair value of net assets acquired in business combinations. Goodwill and other indefinite-lived intangible assets are not amortized but are tested at least annually for impairment. The Company has completed its annual goodwill impairment testing for 2014 and 2013, which did not result in any impairment. Intangible assets that have finite useful lives are amortized over their useful lives on a straight-line basis, ranging from three to ten years. Amortizable intangible assets are tested for impairment utilizing an income approach based on undiscounted cash flows upon the occurrence of certain triggering events and, if impaired, are written down to fair value. The Company did not identify any such triggering events during 2014 or 2013.
The Companys investment in an unconsolidated affiliate over which the Company has significant influence is accounted for under the equity method of accounting. The investment is carried at the cost of acquisition plus the Companys equity in undistributed income of the unconsolidated affiliate. The Company regularly reviews its equity method investment for impairment. The Company evaluates information such as budgets, business plans and financial statements of its equity method investee in determining whether an other-than-temporary decline in value exists. Factors indicative of an other-than-temporary decline include, among others, recurring operating losses. See Note 7, Investment in Unconsolidated Affiliate.
Fair value is the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value is estimated by applying the following hierarchy, which prioritizes the inputs used to measure fair value into three levels and bases the categorization within the hierarchy upon the lowest level of input that is available and significant to the fair value measurement:
Level 1 | Quoted prices in active markets for identical assets or liabilities. |
Level 2 | Observable inputs other than quoted prices in active markets for identical assets and liabilities, quoted prices for identical or similar assets or liabilities in inactive markets, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. |
Level 3 | Inputs that are generally unobservable and typically reflect managements estimate of assumptions that market participants would use in pricing the asset or liability. |
The carrying amounts for cash and cash equivalents, trade accounts receivable, accounts payable and accrued liabilities approximate fair value because of their short-term maturity. The carrying amount of certain pension assets are recorded as Level 2 assets (see Note 10).
F-101
Assets and liabilities of foreign affiliates with a functional currency other than the U.S. Dollar are translated into U.S. Dollars using year-end exchange rates, while results of operations are translated at average exchange rates for the year. The Companys foreign affiliates use the local currency as the functional currency. Foreign currency translation gains and losses are included as a component of Accumulated Other Comprehensive Income in the Combined Balance Sheets. The Company does not hedge foreign currency translation risk in the net assets and income reported from these sources.
Revenue is recognized when persuasive evidence of an arrangement exists, the contract fee is fixed or determinable, delivery or performance has occurred and collectability is reasonably assured. If at the outset of an arrangement, the Company determines that collectability is not reasonably assured, revenue is deferred until the earlier of when collectability becomes probable or the receipt of payment. The Company reports revenue net of sales and other taxes collected from our customers.
The Companys distribution services are sold either through fixed-term contracts whereby customers are allotted a predetermined number of service units or through contracts where customers order units as needed. For fixed-term contracts, revenue is recognized on a straight-line basis over the term of the contract. For contracts where customers order units as needed, revenue is recognized upon fulfillment of the customer order.
Certain of the Companys services such as broadcast and webcast production, translation services and EDGAR filing services require the Company to make a specific singular performance. For these services, revenue is recognized when the specific performance is completed.
The Companys XBRL filing services are sold through contracts where the Company is obligated to make a certain number of filings on behalf of the customer with the U.S. Securities and Exchange Commission (the SEC). For this service, revenue is recognized as each filing is made by the Company.
Certain of the Companys services such as its workflow platform and its hosted microsites are sold through fixed-term contracts where the Company is obligated to make the services available to the customer over the contract term. Customers can access these services without limitation over the contact term. For these services, revenue is recognized on a straight-line basis over the contract term.
Deferred revenue consists of amounts billed in excess of revenue recognized on sales. Deferred revenue is included in current liabilities in the Combined Balance Sheets and is subsequently recognized as revenue in accordance with the Companys revenue recognition policies.
Certain of the Companys services are sold as multiple-element arrangements. Revenues subject to these arrangements represent less than 5% of total revenues for the years ended December 31, 2014 and December 31, 2013, respectively. The Company evaluates each deliverable in an arrangement to determine whether it represents a separate unit of accounting. Most product and service deliverables qualify as separate units of accounting and can be sold stand-alone or in various combinations. A deliverable constitutes a separate unit of accounting when it has stand-alone value and there are no customer-negotiated refunds or return rights for the delivered items. If the arrangement includes a customer-negotiated refund or return right relative to the delivered items, and the delivery and performance of the undelivered item is considered probable and substantially in our control, the delivered item constitutes a separate unit of accounting. If the deliverable or a group of deliverables meet the separation criteria, the total arrangement consideration is allocated to each unit of accounting based on its relative selling price. The amount of arrangement consideration that is allocated to a delivered unit of accounting is limited to the amount that is not contingent upon the delivery of another unit of accounting.
F-102
The Company determines the selling price for each deliverable using vendor-specific objective evidence (VSOE), if it exists, third-party evidence (TPE) if VSOE does not exist, or best estimated selling price (BESP) if neither VSOE nor TPE exist. Revenue allocated to each element is then recognized when the basic revenue recognition criteria are met for each element. The Company determines VSOE of a deliverable by monitoring the price at which the Company sells the deliverable on a stand-alone basis to a third party. In certain instances, the Company is not able to establish VSOE for all deliverables in an arrangement with multiple elements due to infrequent selling each element separately, not pricing products or services within a set range, or only having a limited sales history. Where the Company is unable to establish VSOE, the Company may use the price at which the Company or a third party sells a similar product to similarly situated customers on a stand-alone basis. When the Company is not able to establish selling prices by using VSOE or TPE, the Company establishes the BESP in its allocation of arrangement consideration. The objective of BESP is to determine the price at which the Company would transact a sale if the solution were sold on a stand-alone basis.
Operating expenses include the costs incurred in connection with the fulfillment of the Companys products and services and includes compensation and benefits for operational staff and costs of third-party service providers.
For operating leases, minimum lease payments, including minimum scheduled rent increases, are recognized as rent expense on a straight-line basis over the applicable lease terms. The term used for straight-line rent expense is calculated initially from the date the Company obtains possession of the leased premises through the expected lease termination date.
Employees of CNW Group, Ltd. (CNW) participate in a defined benefit pension plan whereby pension expense is determined based on a number of actuarial assumptions, which are generally reviewed and determined on an annual basis. These assumptions include discount rates, expected rate of return on plan assets, rate of salary increase, mortality rates and other factors. The funded status of the plan is recognized on the Combined Balance Sheets. Prior service costs or credits and actuarial gains and losses beyond a 10% corridor are recognized in earnings based on the estimated future service period of the participants. The measurement date for the defined benefit plan for CNW employees is December 31.
Company employees participate in the UBM 2008 Executive Share Option Scheme under which they are granted stock options to purchase UBM plc stock and the UBM 2010 Executive Retention Plan, as amended in 2014, under which they are granted UBM plc restricted stock.
Under the provisions of ASC 718 Compensation Stock Compensation, the Company recognizes share based compensation by estimating the fair value of each stock-based award at the date of grant. The stock-based compensation expense is recognized over the awards vesting period. In addition, the Company estimates future forfeitures in calculating the stock-based compensation expense as opposed to only recognizing these forfeitures and the corresponding reductions in expense as they occur.
For stock option awards, the fair value is estimated on the date of grant using the Black-Scholes option valuation model. The Black-Scholes option valuation model requires Company management to make assumptions about UBM plc stock price volatility, dividend yield, expected term of the stock option and risk-free interest rates. The expected stock price volatility assumption is derived from the historical volatility of
F-103
UBM plc common stock. The expected dividend yield assumption is determined by dividing the anticipated annual dividend payment by the stock price on the date of grant. The expected term assumption is derived using a methodology that combines historical exercise data with hypothetical exercise data for unexercised stock options. The risk-free interest rate assumption corresponds to the expected term assumption of the stock option and is based on the UK Gilts yield in effect at the time of grant.
For restricted stock awards, which vest solely on service, the fair value is estimated by using the closing price of UBM plc common stock on the date of grant.
Stock-based compensation is described more fully in Note 11, Stock-Based Compensation.
The Company provides for income taxes and the related accounts under the asset and liability method. Deferred tax assets and liabilities are determined based on the difference between the financial statement and tax bases of assets and liabilities using enacted tax rates expected to be in effect during the year in which the basis differences reverse. Valuation allowances are established when management determines it is more likely than not that some portion, or all, of the deferred tax assets will not be realized, which will be assessed on an on-going basis. In addition, income tax rules and regulations are subject to interpretation and the application of those rules and regulations require judgment by the Company and may be challenged by the taxation authorities. The Company follows ASC 740 Income Taxes, which requires the use of a two-step approach for recognizing and measuring tax benefits taken or expected to be taken in a tax return and disclosures regarding uncertainties in income tax positions. Only tax positions that meet the more likely than not recognition threshold are recognized. Refer to Note 12, Income Taxes.
Accumulated other comprehensive income includes foreign currency translation and amortization of amounts related to defined benefit plans.
The Company evaluated subsequent events through October 20, 2015, the date the financial statements were available to be issued. All events that had a material impact on the Companys Combined Financial Statements are disclosed in the notes to the Combined Financial Statements.
On September 23, 2015, UBM plc announced that it is in highly preliminary discussions with a number of parties about a potential sale of the Company.
In March 2014, the Emerging Issues Task Force (EITF) reached a final consensus on Issue 13-D, Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could be Achieved after the Requisite Service Period (EITF 13-D). Under EITF 13-D, a performance target that can be achieved after the requisite service period should be treated as a performance condition that affects vesting, rather than a condition that affects grant date fair value. Compensation cost is recognized over the requisite service period if it is probable that the performance condition will be achieved. If necessary, compensation cost is subsequently adjusted, to reflect those awards that ultimately vest. EITF 13-D will be effective, on a prospective basis, for the Company during its first quarter of 2016, with early adoption permitted. The adoption of this standard is not anticipated to have a material impact on the Companys Combined Financial Statements.
In May 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update 2014-09, Revenue from Contracts with Customers (Topic 606) (ASU 2014-09), which supersedes the
F-104
revenue recognition requirements in Accounting Standards Codification 605, Revenue Recognition. The new revenue recognition standard requires entities to recognize revenue in a way that depicts the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled to in exchange for those goods or services. This guidance will be effective beginning in fiscal year 2019 and early adoption is not permitted. The standard allows for either a full retrospective or a modified retrospective transition method. The Company is currently evaluating the effect that adopting this new accounting guidance will have on its Combined Financial Statements, as well as, which transition method it intends to use.
In August 2014, the FASB issued Accounting Standards Update 2014-15, Presentation of Financial Statements Going Concern (ASU 2014-15). ASU 2014-15 requires that management evaluate at each annual and interim reporting period whether there is a substantial doubt about an entitys ability to continue as a going concern within one year of the date that the financial statements are issued. ASU 2014-15 will be effective for fiscal years and interim periods beginning after December 15, 2016 and early application is permitted. The Company does not expect that the application of ASU 2014-15 will have an impact on the Combined Financial Statements.
In January 2015, the FASB issued Accounting Standards Update 2015-01, Income Statement Extraordinary and Unusual Items (Subtopic 225-20). The objective of this update is to simplify income statement presentation requirements by eliminating the concept of extraordinary items. Extraordinary items are events and transactions that are distinguished by their unusual nature and by the infrequency of their occurrence. The amendments in this update are effective for fiscal years, and interim periods within those fiscal years beginning after December 15, 2015. A reporting entity may apply the amendments prospectively. A reporting entity also may apply the amendments retrospectively to all prior periods presented in the financial statements. Early adoption is permitted provided that the guidance is applied from the beginning of the fiscal year of adoption. The Company will adopt this guidance effective January 1, 2016 and does not believe that it will have a material impact on the Companys Combined Financial Statements.
The following is a summary of property and equipment, at cost less accumulated depreciation:
|
|
|
||||||
As of December 31, | ||||||||
2014 | 2013 | |||||||
Leasehold improvements and building | $ | 16,404 | $ | 16,178 | ||||
Computer hardware and equipment | 27,274 | 32,826 | ||||||
43,678 | 49,004 | |||||||
Less: accumulated depreciation | (33,091 | ) | (37,124 | ) | ||||
Total property and equipment, net | $ | 10,587 | $ | 11,880 |
Depreciation expense for the years ended December 31, 2014 and December 31, 2013 was $3,128 and $3,545, respectively.
F-105
The following is a summary of computer software, at cost less accumulated mortization:
|
|
|
||||||
As of December 31, | ||||||||
2014 | 2013 | |||||||
Software | $ | 36,626 | $ | 29,978 | ||||
Less: accumulated amortization | (22,837 | ) | (19,312 | ) | ||||
Total software, net | $ | 13,789 | $ | 10,666 |
Amortization expense for the years ended December 31, 2014 and December 31, 2013 was $5,232 and $6,539, respectively.
Goodwill as of December 31, 2014 and December 31, 2013 was $126,288 and $128,442, respectively. Changes in goodwill were entirely due to changes in foreign currency.
The following is a summary of intangibles, at cost less accumulated amortization:
|
|
|
||||||
As of December 31, | ||||||||
2014 | 2013 | |||||||
Intangible Assets
|
||||||||
Brands | $ | 9,379 | $ | 9,586 | ||||
Customer Lists | 4,826 | 5,175 | ||||||
Other | 2,287 | 2,481 | ||||||
16,492 | 17,242 | |||||||
Accumulated amortization
|
||||||||
Brands | (6,906 | ) | (6,153 | ) | ||||
Customer Lists | (4,685 | ) | (4,493 | ) | ||||
Other | (2,126 | ) | (2,156 | ) | ||||
(13,717 | ) | (12,802 | ) | |||||
Intangible Assets, net | $ | 2,775 | $ | 4,440 |
Intangible amortization expense for the years ended December 31, 2014, and December 31, 2013 was $1,501 and $2,804, respectively. The estimated annual aggregate amortization expense for the next five succeeding fiscal years is expected to be $944, $831, $470, $171, and $169, respectively.
The Companys investment in unconsolidated affiliated is accounted for by the equity method and consists of a 50% interest in a joint venture with ANP Pers Support B.V. in ANP Pers Support v.o.f. (ANPps).
The Company had revenues of $1,645 and $1,410 for the years ended December 31, 2014 and December 31, 2013, respectively, for billings made to ANPps for international distribution services provided to ANPps. The Company incurred operating expense of $164 and $156 for the years ended December 31, 2014 and December 31, 2013, respectively, for billings from ANPps for distribution services provided by ANPps to the Company for the countries in which ANPps operates.
F-106
Due from Related Parties Current as of December 31, 2014 and December 31, 2013 was $449,218 and $404,089, respectively. Due from Related Parties Current arises principally from daily net cash advances made by the Company to UBM plc and its subsidiaries (UBM) as UBM plc maintains a zero balance cash concentration system in the U.S. and Europe and from revenue for providing services to UBM.
Net cash advances to UBM for the year ended December 31, 2014 and December 31, 2013 were $43,231 and $43,225 respectively. Revenue from the sale of the Companys products and services provided to UBM for the year ended December 31, 2014 and December 31, 2013 were $1,100 and $1,153, respectively.
A summary of Loans to Related Parties Current is as follows:
|
|
|
|
|
||||||||||||
PRN Affiliate | UBM Counterparty | As of December 31, | Stated interest rate | |||||||||||||
2014 | 2013 | |||||||||||||||
PRN Europe Ltd. | Aztecgem Limited | $ | 148,801 | $ | 154,034 | British Pound Sterling LIBOR +2% | ||||||||||
Newsdesk International | United Finance Limited | 7,671 | 8,150 | non-interest bearing | ||||||||||||
OIT Ltd | United Finance Limited | 11,351 | 12,060 | non-interest bearing | ||||||||||||
CNW Group Ltd. | United Finance Ltd. | 3,453 | | Canadian Dollars LIBOR + 2% | ||||||||||||
PRN Europe Ltd. | UBMG Ltd | 2,617 | 2,982 | no interest charged | ||||||||||||
Various | Various | 2,222 | 1,461 | |||||||||||||
Loans to Related Parties Current | $ | 176,115 | $ | 178,687 |
Loans to Related Parties Current arise principally as the Company provides financing to UBM through formal loan agreements. Changes in 2014 resulted from loans of $5,896 made by the Company to UBM, loan repayments of $1,348 from UBM to the Company and foreign currency translation. Changes in 2013 resulted from loans of $2,321 made by the Company to UBM, loan repayments of $1,358 from UBM to the Company and foreign currency translation.
Due to Related Parties Current as of December 31, 2014 and December 31, 2013 was $237,800 and $237,649, respectively. Due to Related Parties Current arises principally from management fees charged to the Company by UBM, costs incurred by UBM on behalf of the Company, cash advances to the Company through the cash concentration system to allow for interest payments to UBM on loans payable by the Company to UBM (see Loans from Related Parties Current) and amounts collected from customers by the Company on behalf of UBM for Company accounts receivable factored to UBM.
Management fees for the years ended December 31, 2014 and December 31, 2013 were $8,764 and $13,848, respectively, and relate to an allocation of corporate services such as accounting, treasury, information technology, legal, executive management and human resources provided by UBM to the Company.
Costs incurred by UBM on behalf of the Company for the years ended December 31, 2014 and December 31, 2013 were $1,969 and $1,690, respectively, and relate to business insurance, payroll services, audit fees and office rent primarily reflected in agreements between UBM and the respective vendors.
Cash advances by UBM to the Company for the year ended December 31, 2014 and December 31, 2013 were $11,439 and $12,127 respectively. Such cash advances are used by PRN Delaware, Inc. to pay interest expense on related party debt with UBM.
F-107
Each month UBM purchases substantially all of the prior months accounts receivable of its U.S. businesses, 15 days after month end at a discount of approximately 2% under a non-recourse arrangement. The discount for the years ended December 31, 2014 and December 31, 2013 was $5,579 and $5,839, respectively. The discount is included in Selling, General and Administrative Expenses in the Combined Statements of Operations. In addition, UBM pays an annual fee to the Company in return for cash collection, cash application and record keeping services. This fee was $2,000 and $2,061 for the years ended December 31, 2014 and December 31, 2013, respectively. Such fee is included in Other Income in the Combined Statements of Operations.
A summary of Loans from Related Parties Short Term is as follows:
|
|
|
|
|
||||||||||||
PRN Affiliate | UBM Counterparty | As of December 31, | Stated interest rate | |||||||||||||
2014 | 2013 | |||||||||||||||
PRN Delaware, Inc. | UBM Finance Sarl | $ | 326,634 | $ | 326,634 | 6 month U.S. Dollars LIBOR + 0.50% | ||||||||||
PRN Delaware, Inc. | United BM (US) Holdings Sarl | 300,000 | 300,000 | 6 month U.S. Dollars LIBOR + 2% | ||||||||||||
PRN Holdings USA Inc. | UBM Finance Inc. | 18,998 | 18,552 | U.S. Dollars LIBOR + 2% | ||||||||||||
Hors Antenne Holdings | UBM CP Holdings No 4 Sarl | 7,359 | 9,296 | EURIBOR plus 2% | ||||||||||||
PRN Benelux Ltd. | United Finance Limited | 6,944 | 7,849 | British Pound Sterling LIBOR +0.5% | ||||||||||||
PRN Europe Ltd. | UBMG Holdings | 6,851 | 7,279 | non-interest bearing | ||||||||||||
PR Newswire Asia Ltd. | United Finance Ltd. | 4,482 | 4,101 | non-interest bearing | ||||||||||||
PRN Europe Ltd. | United Finance Limited | 3,470 | 3,922 | British Pound Sterling LIBOR + 0.5% | ||||||||||||
PRN Europe Ltd. | United Business Information (UK) Ltd | 2,236 | 2,376 | non-interest bearing | ||||||||||||
Various | Various | 463 | 782 | |||||||||||||
Loans from Related Parties Current | $ | 677,437 | $ | 680,791 |
Loans from Related Parties Current arise principally as the Company has received financing from UBM from time to time. Changes in 2014 resulted from loans of $500 made by UBM to the Company, loan repayments of $1,037 from the Company to UBM and foreign currency translation. Changes in 2013 resulted from loans of $301 made by UBM to the Company, loan repayments of $1,462 from the Company to UBM and foreign currency translation.
Loan from Related Party Non-Current as of December 31, 2014 and December 31, 2013 was $25,982 and $28,320, respectively. Loan from Related Party Non-Current arose in connection with financing provided by UBM to the Company in connection with the 2012 purchase by UBM of the non-controlling interest in CNW Group, Ltd. Changes in 2014 and 2013 were entirely due to foreign currency translation. The stated interest rate for this loan is 7%.
Interest income for all related party loans was $4,102 and $4,639 for the years ended December 31, 2014 and December 31, 2013, respectively. Interest expense for all related party loans was $13,941 and $15,433 for the years ended December 31, 2014 and December 31, 2013, respectively.
F-108
The Company has recorded taxes payable by UBM in consolidated tax fillings as deemed capital contributions of $15,349 and $9,732 for the years ended December 31, 2014 and December 31, 2013, respectively.
The following table displays the change in the components of accumulated other comprehensive income (loss), net of tax:
|
|
|
|
|||||||||
Cumulative
Translation Adjustment |
Defined
Benefit Plan Adjustment |
Total
Accumulated Other Comprehensive (Loss) Income |
||||||||||
Balance at January 1, 2013 | $ | 2,926 | $ | (3,623 | ) | $ | (697 | ) | ||||
Foreign Currency Translation | 4,977 | | 4,977 | |||||||||
Defined Benefit Plan Adjustment | | 136 | 136 | |||||||||
Balance at December 31, 2013 | 7,903 | (3,487 | ) | 4,416 | ||||||||
Foreign Currency Translation | (9,361 | ) | | (9,361 | ) | |||||||
Defined Benefit Plan Adjustment | | (45 | ) | (45 | ) | |||||||
Balance at December 31, 2014 | $ | (1,458 | ) | $ | (3,532 | ) | $ | (4,990 | ) |
PRNA employees participate in the UBM 401K savings plan. Under the plan, the Company contributes in cash based on a stated percentage of eligible employee contributions and based on a stated percentage of employee compensation, both subject to a specified ceiling. The expense recognized for the 401K savings plan in the years ended December 31, 2014 and December 31, 2013 was $2,628 and $2,625, respectively.
Certain executives of PRNA participate in a supplemental defined contribution plan. Under the plan the Company contributes in cash up to a set percentage of employee base salary based on the percentage of eligible employee base pay contributed by the employee. Amounts contributed are invested based on the investment choices of Wilmington Trust Company, the Companys appointed trustee. However, the Company is obligated to the employee based on the employees notional investment choice. The plan has been closed to new employees since 2010. As of December 31, 2014, all but one of the plan participants are 100% vested. Plan assets as of December 31, 2014 and December 31, 2013 were $5,630 and $6,110, respectively, and are reflected in Other Assets in the Combined Balance Sheets. Amounts due to employees as of December 31, 2014 and December 31, 2013 were $5,537 and $6,138, respectively and are reflected in Accounts Payable and Accrued Liabilities in the Combined Balance Sheets. The expense recognized for this plan in the years ended December 31, 2014 and December 31, 2013 was $115 and $346, respectively.
Employees of CNW participate in a pension plan which has a defined benefit plan component and defined contribution plan component. CNW also maintains an unfunded defined contribution plan for certain former employees. The defined benefit plan has been closed to new participants since 2006. In addition, CNW maintains a non-registered defined benefit pension plan for a former executive, which provides benefits in excess of those payable from the registered defined benefit plan and the unfunded defined contribution plan.
F-109
The actuarial cost method used for the valuation of the defined benefit post-employment benefits is the present value of the benefits expected to be paid. CNWs contributions to defined contribution plans are expensed as incurred. The expense recognized for CNWs defined contribution plans in the years ended December 31, 2014 and December 31, 2013 was $303 and $320, respectively.
The following table summarizes changes in the benefit obligation, plan assets and the funded status of CNWs two defined benefit plans:
|
|
|
||||||
2014 | 2013 | |||||||
Change in benefit obligation
|
||||||||
Beginning benefit obligation balance | $ | 10,066 | $ | 11,639 | ||||
Service cost | 224 | 276 | ||||||
Interest cost | 521 | 443 | ||||||
Plan participants' contribution | 47 | 64 | ||||||
Actuarial loss (gain) | 1,959 | (1,183 | ) | |||||
Benefits paid | (446 | ) | (290 | ) | ||||
Currency translation | (22 | ) | 23 | |||||
Ending benefit obligation | $ | 12,349 | $ | 10,972 | ||||
Ending accumulated benefit obligation | $ | 10,931 | $ | 9,937 | ||||
Change in plan assets
|
||||||||
Beginning fair value of plan assets | $ | 7,326 | $ | 8,250 | ||||
Return on plan assets | 1,848 | (892 | ) | |||||
Employer contributions | 907 | 853 | ||||||
Plan participants' contributions | 47 | 64 | ||||||
Benefits paid | (446 | ) | (290 | ) | ||||
Ending fair value of plan assets | $ | 9,682 | $ | 7,985 | ||||
Funded status | $ | 2,667 | $ | 2,987 |
The amount recognized in the Combined Balance Sheets as Pension Obligation as of December 31, 2014 and December 31, 2013 was $2,667 and $2,987, respectively. The amount of net actuarial loss recognized in accumulated other comprehensive (loss) income as of December 31, 2014 and December 31, 2013 was $4,220 and $4,428, respectively. The estimated amortization from accumulated comprehensive loss into net periodic benefit cost from actuarial losses for the years ended December 31, 2014 and December 31, 2013 was $187 and $205, respectively.
|
|
|
||||||
As of December 31, | ||||||||
2014 | 2013 | |||||||
Plans with projected benefit obligations in excess of plan assets
|
||||||||
Projected benefit obligation | $ | 12,349 | $ | 10,972 | ||||
Fair value of plan assets | 9,682 | 7,985 | ||||||
Total | $ | (2,667 | ) | $ | (2,987 | ) | ||
Plans with accumulated benefit obligations in excess of plan
|
||||||||
Accumulated benefit obligation | $ | 10,931 | $ | 9,937 | ||||
Fair value of plan assets | 9,682 | 7,985 | ||||||
Total | $ | (1,249 | ) | $ | (1,952 | ) |
F-110
The following table presents the plan assets by category:
|
|
|
||||||
As of December 31, | ||||||||
2014 | 2013 | |||||||
Debt instruments | $ | 9,682 | $ | 7,985 |
The following tables present the fair value hierarchy for pension assets measured at fair value on a recurring basis as of December 31, 2014:
|
|
|
|
|
|
|
|
|
||||||||||||||||||||||||
As of December 31, 2014 | As of December 31, 2013 | |||||||||||||||||||||||||||||||
Level 1 | Level 2 | Level 3 | Total | Level 1 | Level 2 | Level 3 | Total | |||||||||||||||||||||||||
Debt instruments | $ | | $ | 9,682 | $ | | $ | 9,682 | $ | | $ | 7,985 | $ | | $ | 7,985 |
The pension assets consist primarily of a pooled fund, which is primarily invested in government and corporate bonds. They are valued using models with inputs including interest rate curves, credit spreads and volatilities. The inputs that are significant to valuation are generally observable and therefore the assets within the pooled fund have been classified as Level 2. The fair value reflects the proportionate share of the fair value of the investments held in the underlying pooled fund.
Components of net periodic benefit cost and other amounts recognized in Other Comprehensive Income (Loss) for the years ended December 31, 2014 and December 31, 2013 are as follows:
|
|
|
||||||
Years ended December 31, | ||||||||
2014 | 2013 | |||||||
Net Periodic Benefit Cost:
|
||||||||
Service cost | $ | 224 | $ | 276 | ||||
Interest cost | 521 | 443 | ||||||
Expected return on plan assets | (162 | ) | (266 | ) | ||||
Amortization of prior service costs | | | ||||||
Amortization of net actuarial loss | 233 | 236 | ||||||
Amortization of transitional asset | (23 | ) | (23 | ) | ||||
Net Periodic Benefit Cost | $ | 793 | $ | 666 |
Other changes in plan assets and benefit obligations recognized in Other Comprehensive Income (Loss) for the years ended December 31, 2014 and December 31, 2013 were as follows:
|
|
|
||||||
Years ended December 31, | ||||||||
2014 | 2013 | |||||||
Actuarial loss (gain) | $ | 283 | $ | (7 | ) | |||
Amortization of net actuarial losses | (187 | ) | (205 | ) | ||||
Amortization of transitional asset | (23 | ) | (23 | ) | ||||
Total recognized in other comprehensive income (loss) | 73 | (235 | ) | |||||
Total recognized in net periodic benefit cost and other comprehensive income (loss) | $ | 866 | $ | 431 |
F-111
Weighted-average assumptions used to determine the benefit obligations reflected in the Combined Balance Sheets and the net benefit cost reflected in the Combined Statements of Operations were as follows:
|
|
|
||||||
Years ended December 31, | ||||||||
2014 | 2013 | |||||||
Discount rate | 4.00 | % | 5.00 | % | ||||
Rate of compensation increase | 3.50 | % | 3.50 | % | ||||
Rate of return on plan assets | 2.00 | % | 3.25 | % |
The long-term rates of return are determined based on the nature of each plans investments, an expectation for each plans investment strategies, historical rates of return and current economic forecasts, among other factors, and are evaluated annually and adjusted as necessary.
The CNW defined pension plan is funded via assets held in trust by Manulife and are invested in an ultra-long bond fund. This investment strategy is attempting to minimize interest rate risk in the funded position of the pension plan. The assets of the defined contribution component of the pension plan are selected by members. The other pension plans are unfunded.
The Company expects to make contributions of $630 to defined benefit plans during 2015. Total benefit payments expected to be paid from the plans are as follows:
|
|
|||
2015 | $ | 546 | ||
2016 | $ | 432 | ||
2017 | $ | 432 | ||
2018 | $ | 457 | ||
2019 | $ | 473 | ||
Thereafter | $ | 7,503 |
Employees of PRNE based in the United Kingdom (U.K.) participate in a UBM sponsored pension plan which has a defined benefit and a defined contribution component. The defined benefit plan is closed to new members and currently has four participants who are employees of PRNE. The benefit accrues based on final salary and length of service. All PRNE employees in the U.K. are legally bound to enter the defined contribution plan but have an option to opt out after enrollment. The plan has three tiers. At the basic auto enroll level, employees contribute 2% of salary and the Company contributes 4%. At the Tier 1 level, employees contribute 3% of salary and the Company contributes 6%. At the Tier 2 level, employees contribute 4% of salary and the Company contributes 6%. Employees elect the tier at which they wish to contribute. For the years ended December 31, 2014 and December 31, 2013, the total pension plan expense was $585 and $462, respectively.
F-112
Stock option transactions under the UBM Executive Share Option Scheme for the years ended December 31,2014, and December 31, 2013 are summarized as follows:
|
|
|
||||||
Number
of Options |
Weighted
Average Price |
|||||||
Outstanding at December 31, 2012 | 1,387,571 | 8.71 | ||||||
Granted | 353,850 | 10.91 | ||||||
Exercised | (260,685 | ) | 7.81 | |||||
Forfeited or expired | (52,052 | ) | 9.77 | |||||
Outstanding at December 31, 2013 | 1,428,684 | $ | 9.37 | |||||
Options Excercisable at December 31, 2013 | 332,886 | $ | 8.39 | |||||
Outstanding at December 31, 2013 | 1,428,684 | 9.37 | ||||||
Granted | 346,000 | 11.66 | ||||||
Exercised | (122,666 | ) | 8.78 | |||||
Forfeited or expired | (148,013 | ) | 10.48 | |||||
December 2014 special grant | 435,951 | 7.49 | ||||||
Outstanding at December 31, 2014 | 1,939,956 | $ | 7.47 | |||||
Options Excercisable at December 31, 2014 | 801,107 | $ | 6.59 |
Restricted stock activity during the years ended December 31, 2014, and December 31, 2013, respectively, were as follows:
|
|
|
||||||
Number
of Shares |
Weighted-
Average Grant-Date Fair Value per Share |
|||||||
Non-vested, as of December 31, 2012 | 34,131 | $ | 8.24 | |||||
Granted | 52,376 | 10.91 | ||||||
Vested | (19,000 | ) | 7.35 | |||||
Cancelled and forfeited | | | ||||||
Non-vested, as of December 31, 2013 | 67,507 | $ | 10.57 | |||||
Granted | 30,363 | 9.77 | ||||||
Vested | (9,071 | ) | 10.16 | |||||
Cancelled and forfeited | (11,459 | ) | 9.92 | |||||
December 2014 special grant | 26,493 | 10.94 | ||||||
Non-vested, as of December 31, 2014 | 103,833 | $ | 10.91 |
Stock options and restricted stock awards are typically granted with a three-year vesting period. In December 2014, UBM plc made a special grant of stock options and restricted stock to the Companys employees whereby approximately 0.29 stock options were awarded for every stock option held and approximately 0.29 shares of restricted stock were awarded for every share of restricted stock held. The vesting period for the special grant ranged from zero to 32 months. In connection with the special grant, the exercise price for existing stock options was adjusted such that the revised exercise price was discounted 22.4% from the original exercise price.
F-113
Stock-based compensation expense for the years ended December 31, 2014 and December 31, 2013 was $1,279 and $650, respectively, inclusive of $614 related to the December 2014 special grant and the related stock option repricing.
PRN Delaware, Inc. and its subsidiaries and PR Newswire Europe Ltd. and its subsidiaries are part of the consolidated tax filings of UBM in the U.S. and the United Kingdom. The Company files its own corporate tax returns in other jurisdictions including Canada, France, The Netherlands, China, Hong Kong, Brazil and Mexico. The Companys tax provision has been calculated as if the Company filed separate tax returns for PRN Delaware and PR Newswire Europe Ltd. in the U.S. and the United Kingdom.
The provision for income taxes for the years ended December 31, 2014 and December 31, 2013 is comprised of the following:
|
|
|
||||||
For the years ended
December 31, |
||||||||
2014 | 2013 | |||||||
Current Provision (Benefit)
|
||||||||
U.S. Federal | $ | 9,935 | $ | 6,351 | ||||
U.S. State and Local | 2,386 | 2,327 | ||||||
Foreign:
|
||||||||
Canada | 3,383 | 3,682 | ||||||
Europe and Middle East | 2,680 | 1,866 | ||||||
Latin America | (158 | ) | 27 | |||||
Asia | 433 | (53 | ) | |||||
Current Provision | $ | 18,659 | $ | 14,200 | ||||
Deferred Provision (Benefit)
|
||||||||
U.S. | $ | 2,490 | $ | 1,966 | ||||
Canada | (360 | ) | 18 | |||||
Deferred Provision | $ | 2,130 | $ | 1,984 | ||||
Total Provision for Income Taxes | $ | 20,789 | $ | 16,184 |
The provision for income taxes differs from the amount computed by applying the U.S. statutory federal income tax rate of 35% to income before provision for income taxes due to state and local income taxes, foreign tax rate differentials on non-U.S. income, and non-deductible items such as meals and entertainment expenses.
As of December 31, 2014, the Company has non capital loss carry-forwards in Canada of approximately $8 million for tax purposes, which will be available to offset future taxable income. If not used, these carry-forwards will expire between 2028 and 2033. These losses are subject to a valuation allowance. In addition there are approximately $1.2 million of investment tax credits in Canada. If not used, these credits will expire between 2024 and 2032.
F-114
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. The Companys deferred tax assets and liabilities are comprised of book-to-tax basis differences in fixed assets, intangibles, and non-deductible accruals and reserves. Deferred tax assets and liabilities as of December 31, 2014 and December 31, 2013 are comprised of the following:
|
|
|
||||||
As of December 31, | ||||||||
2014 | 2013 | |||||||
Deferred Tax Assets
|
||||||||
Current
|
||||||||
U.S. | $ | 6,338 | $ | 5,820 | ||||
Non-Current
|
||||||||
Canada | 4,988 | 5,068 | ||||||
Europe and Middle East | 331 | 331 | ||||||
Latin America | 167 | 64 | ||||||
Asia | 89 | 289 | ||||||
Valuation Allowance | (3,357 | ) | (3,760 | ) | ||||
Non-Current | 2,218 | 1,992 | ||||||
Deferred Tax Assets | 8,556 | 7,812 | ||||||
Deferred Tax Liabilities Non-Current
|
||||||||
U.S. | (28,213 | ) | (25,204 | ) | ||||
Deferred Tax Liabilities, net | $ | (19,657 | ) | $ | (17,392 | ) |
The Company follows guidance under U.S. GAAP for uncertain tax positions, which provides a comprehensive model for the recognition, measurement and disclosure in the financial statements of uncertain tax positions that the Company has taken or expects to take on an income tax return. There were no uncertain tax positions at December 31, 2014 and December 31, 2013.
The Companys share of undistributed earnings of foreign subsidiaries, amounting to approximately $8,677 and $2,081, is considered to be indefinitely reinvested at December 31, 2014 and December 31, 2013, respectively. Accordingly, no provision has been recorded for U.S. income taxes that might result from repatriation of these earnings.
The Company has leases for office space in the U.S., Canada, Brazil, Great Britain, France, Sweden, Dubai, China, Hong Kong, India, Taiwan, Malaysia and Singapore which expire between 2015 and 2027. The following is a schedule, by year, of the future minimum rental payments under these leases:
|
|
|||
Year ended December 31, | ||||
2015 | $ | 8,079 | ||
2016 | $ | 6,539 | ||
2107 | $ | 5,840 | ||
2018 | $ | 4,048 | ||
2019 | $ | 3,941 | ||
Thereafter | $ | 13,744 |
Rent expense for years ended December 31, 2014 and December 31, 2013 was $9,645 and $9,009, respectively.
F-115
The Company has unconditional purchase obligations relating to certain vendors that provide software and technology oriented services ranging from less than one year to three years. The following is a schedule, by year, of the future minimum payments under these obligations:
|
|
|||
Year ended December 31, | ||||
2015 | $ | 7,337 | ||
2016 | $ | 2,175 | ||
2107 | $ | 972 | ||
2018 | $ | 18 | ||
2019 | $ | | ||
Thereafter | $ | |
The Company is named in various claims and legal actions in the normal course of its activities.
The Company believes that the outcome of such matters is not expected to have a material adverse effect on the Companys results of operations, financial position or cash flows.
The SEC has commenced an inquiry concerning certain aspects of the Companys business that relates to the distribution of issuer press releases. The Company has been fully cooperative with the staff of the SEC Division of Enforcement in this ongoing inquiry. Although the Company cannot predict what the outcome of the inquiry will be, it may result in remedies which could include modifications to the Companys process for disseminating issuer press releases. Based on currently available information, the Company does not expect that the inquiry, or any resolution thereof, will have a material adverse effect on the Companys results of operations, financial position or cash flows.
F-116
Annex A
This Amendment (this Amendment ) is made as of [], 2018 by and between Cision Ltd., an exempted company incorporated in the Cayman Islands (the Company ) and Continental Stock Transfer & Trust Company, a New York Corporation (the Warrant Agent ), and constitutes an amendment to that certain Amended and Restated Warrant Agreement, dated as of October 17, 2017 (the Existing Warrant Agreement), between the Company and the Warrant Agent. Capitalized terms used but not otherwise defined in this Amendment shall have the meanings given to such terms in the Existing Warrant Agreement.
WHEREAS, Section 9.8 of the Existing Warrant Agreement provides that the Company and the Warrant Agent may amend, subject to certain conditions provided therein, the Existing Warrant Agreement with the vote or written consent of the registered holders of the majority of the then outstanding Warrants;
WHEREAS, the Company desires to amend the Existing Warrant Agreement to provide the Company with the right to require the holders of the Warrants to exchange all of the outstanding Warrants for Ordinary Shares of the Company, on the terms and subject to the conditions set forth herein; and
WHEREAS, in the exchange offer and consent solicitation undertaken by the Company pursuant to the Registration Statement on Form S-4 filed with the Securities and Exchange Commission, the registered holders of more than a majority of the then outstanding Warrants consented to and approved this Amendment.
NOW, THEREFORE, in consideration of the mutual agreements contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, and intending to be legally bound hereby, the parties hereto agree to amend the Existing Warrant Agreement as set forth herein.
1. Amendment of Existing Warrant Agreement . The Existing Warrant Agreement is hereby amended by adding the new Section 6A thereto:
6A Mandatory Exchange .
6A.1 Company Election to Exchange . Notwithstanding any other provision in this Agreement to the contrary, all (and not less than all) of the outstanding Warrants may be exchanged, at the option of the Company, at any time while they are exercisable and prior to their expiration, at the office of the Warrant Agent, upon notice to the registered holders of the outstanding Warrants, as described in Section 6A.2 below, for Ordinary Shares, at the exchange rate of 0.234 Ordinary Shares for each Warrant held by the holder thereof (the Consideration ) (subject to equitable adjustment by the Company in the event of any stock splits, stock dividends, recapitalizations or similar transaction with respect to the Common Stock). In lieu of issuing fractional shares, any holder of Warrants who would otherwise have been entitled to receive fractional shares as Consideration will, after aggregating all such fractional shares of such holder, be paid in cash (without interest) in an amount equal to such fractional part of a share multiplied by []. 1
6A.2 Date Fixed for, and Notice of, Exchange . In the event that the Company elects to exchange all of the Warrants, the Company shall fix a date for the exchange (the Exchange Date ). Notice of exchange shall be mailed by first class mail, postage prepaid, by the Company not less than fifteen (15) days prior to the Exchange Date to the registered holders of the Warrants at their last addresses as they shall appear on the registration books. Any notice mailed in the manner herein provided shall be conclusively presumed to have been duly given whether or not the registered holder received such notice. The Company will make a public announcement of its election following the mailing of such notice.
1 | This will be the last sale price of the Companys Ordinary Shares on the NYSE on the last trading day of the Offer Period (as defined in the Registration Statement on Form S-4 filed with the SEC on April 17, 2018). |
A-1
6A.3 Exercise After Notice of Exchange . The Warrants may be exercised, for cash (or on a cashless basis in accordance with subsection 3.3.1(b) of this Agreement) at any time after notice of exchange shall have been given by the Company pursuant to Section 6A.2 hereof and prior to the Exchange Date. On and after the Exchange Date, the registered holder of the Warrants shall have no further rights except to receive, upon surrender of the Warrants, the Consideration.
2. Miscellaneous Provisions .
2.1 Severability . This Amendment shall be deemed severable, and the invalidity or unenforceability of any term or provision hereof shall not affect the validity or enforceability of this Amendment or of any other term or provision hereof. Furthermore, in lieu of any such invalid or unenforceable term or provision, the parties hereto intend that there shall be added as a part of this Amendment a provision as similar in terms to such invalid or unenforceable provision as may be possible and be valid and enforceable.
2.2 Applicable Law . The validity, interpretation and performance of this Amendment shall be governed in all respects by the laws of the State of New York, without giving effect to conflict of laws. The parties hereby agree that any action, proceeding or claim against it arising out of or relating in any way to this Amendment shall be brought and enforced in the courts of the State of New York or the United States District Court for the Southern District of New York, and irrevocably submits to such jurisdiction, which jurisdiction shall be exclusive. Each of the parties hereby waives any objection to such exclusive jurisdiction and that such courts represent an inconvenient forum.
2.3 Counterparts . This Amendment may be executed in any number of counterparts, and by facsimile or portable document format (pdf) transmission, and each of such counterparts shall for all purposes be deemed to be an original and all such counterparts shall together constitute but one and the same instrument.
2.4 Effect of Headings . The Section headings herein are for convenience only and are not part of this Amendment and shall not affect the interpretation thereof.
2.5 Entire Agreement . The Existing Warrant Agreement, as modified by this Amendment, constitutes the entire understanding of the parties and supersedes all prior agreements, understandings, arrangements, promises and commitments, whether written or oral, express or implied, relating to the subject matter hereof, and all such prior agreements, understandings, arrangements, promises and commitments are hereby canceled and terminated.
[Signatures follow on next page]
A-2
IN WITNESS WHEREOF, each of the parties has caused this Amendment to be duly executed as of the date first above written.
CISION LTD.
By: |
Name: Title: |
CONTINENTAL STOCK TRANSFER & TRUST COMPANY
as Warrant Agent
By: |
Name: Title: |
[Signature Page to Warrant Agreement Amendment]
The Exchange Agent for the Offer and the Consent Solicitation is:
By Mail
Continental Stock Transfer & Trust Company
Attn: Compliance Department
1 State Street, 30
th
Floor
New York, NY 10004
Any questions or requests for assistance may be directed to the dealer manager at the address and telephone number set forth below. Requests for additional copies of this Prospectus/Offer to Exchange and the Letter of Transmittal and Consent may be directed to the Information Agent. Beneficial owners may also contact their custodian for assistance concerning the Offer and Consent Solicitation.
The Information Agent for the Offer and Consent Solicitation is:
48 Wall Street, 22
nd
Floor
New York, New York 10005
Banks and Brokers Call Collect: (212) 269-5550
All Others Call Toll-Free: (800) 967-4607
Email: cision@dfking.com
The Dealer Manager for the Offer and the Consent Solicitation is:
388 Greenwich Street
New York, New York 10013
United States of America
Collect: (212) 723-6106
Toll-Free (800) 558-3745
Cayman Islands law does not limit the extent to which a companys memorandum and articles of association may provide for indemnification of officers and directors, except to the extent any such provision may be held by the Cayman Islands courts to be contrary to public policy, such as to provide indemnification against fraud or willful default or the consequences of committing a crime. The memorandum and articles of association of Cision provide for indemnification of our officers and directors to the maximum extent permitted by law, including for any liability incurred in their capacities as such, except through their own actual fraud, or willful default.
Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers or persons controlling us pursuant to the foregoing provisions, we have been informed that in the opinion of the SEC such indemnification is against public policy as expressed in the Securities Act and is theretofore unenforceable.
(a) Exhibits
Reference is made to the exhibit index preceding the signature page hereto, which exhibit index is hereby incorporated by reference herein.
(b) Financial Statement Schedules
See page F- 1 for an index of the financial statements included in this registration statement on Form S-4.
(a) | The undersigned Registrant hereby undertakes: |
(1) | To file, during any period during which offers or sales are being made, a post-effective amendment to this registration statement: |
(i) | to include any prospectus required by section 10(a)(3) of the Securities Act of 1933; |
(ii) | to reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with the Commission pursuant to Rule 424(b) (§230.424(b) of this chapter) if, in the aggregate, the changes in volume and price represent no more than 20% change in the maximum aggregate offering price set forth in the Calculation of Registration Fee table in the effective registration statement; and |
(iii) | to include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement. |
(2) | That, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. |
(3) | To remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering. |
II-1
(4) | That, for the purpose of determining liability under the Securities Act of 1933 to any purchaser, each prospectus filed pursuant to Rule 424(b) as part of a registration statement relating to an offering, other than registration statements relying on Rule 430B or other than prospectuses filed in reliance on Rule 430A, shall be deemed to be part of and included in the registration statement as of the date it is first used after effectiveness. Provided, however , that no statement made in a registration statement or prospectus that is part of the registration statement will, as to a purchaser with a time of contract of sale prior to such first use, supersede or modify any statement that was made in the registration statement or prospectus that was part of the registration statement or made in any such document immediately prior to such date of first use. |
(5) | That, for the purpose of determining liability of the registrant under the Securities Act of 1933 to any purchaser in the initial distribution of the securities, the undersigned registrant undertakes that in a primary offering of securities of the undersigned registrant pursuant to this registration statement, regardless of the underwriting method used to sell the securities to the purchaser, if the securities are offered or sold to such purchaser by means of any of the following communications, the undersigned registrant will be a seller to the purchaser and will be considered to offer or sell such securities to such purchaser: |
(i) | Any preliminary prospectus or prospectus of the undersigned registrant relating to the offering required to be filed pursuant to Rule 424; |
(ii) | Any free writing prospectus relating to the offering prepared by or on behalf of the undersigned registrant or used or referred to by the undersigned registrant; |
(iii) | The portion of any other free writing prospectus relating to the offering containing material information about the undersigned registrant or its securities provided by or on behalf of the undersigned registrant; and |
(iv) | Any other communication that is an offer in the offering made by the undersigned registrant to the purchaser. |
(b) | The undersigned registrant hereby undertakes to supply by means of a post-effective amendment all information concerning a transaction, and the company being acquired involved therein, that was not the subject of and included in the registration statement when it became effective. |
(c) | Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue. |
II-2
II-3
* | Filed by Capitol Acquisition Corp. III, the predecessor of Cision Ltd. |
| Indicates exhibits that constitute management contracts or compensatory plans or arrangements. |
II-4
Pursuant to the requirements of the Securities Act of 1933, as amended, the Registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in Beltsville, Maryland, on April 17, 2018.
CISION LTD.
By: |
/s/ Kevin Akeroyd
Name: Kevin Akeroyd Title: Chief Executive Officer (Principal Executive Officer) |
By: |
/s/ Jack Pearlstein
Name: Jack Pearlstein Title: Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer |
KNOW ALL BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Kevin Akeroyd, Jack Pearlstein and Kristie Scott or any of them, severally, as his attorney-in-fact and agent, with full power of substitution and resubstitution, for him and in his name, place, and stead, in any and all capacities, to sign any and all amendments to this registration statement, and to file the same with all exhibits hereto, and all other documents in connection herewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and any of them, full power and authority to do and perform each and every act and thing requisite or necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents, or any of them, or their substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, as amended, this Registration Statement has been signed by the following person in the capacities and on the dates indicated:
|
|
|
||
Signature | Title | Date | ||
/s/ Kevin Akeroyd
Kevin Akeroyd |
President, Chief Executive Officer and Director
(Principal Executive Officer) |
April 17, 2018 | ||
/s/ Jack Pearlstein
Jack Pearlstein |
Chief Financial Officer
(Principal Financial Officer; Principal Accounting Officer) |
April 17, 2018 | ||
/s/ Stuart J. Yarbrough
Stuart J. Yarbrough |
Director | April 17, 2018 | ||
/s/ Philip A. Canfield
Philip A. Canfield |
Director | April 17, 2018 | ||
/s/ Stephen P. Master
Stephen P. Master |
Director | April 17, 2018 | ||
/s/ Mark M. Anderson
Mark M. Anderson |
Director and Chairman of the Board | April 17, 2018 | ||
/s/ L. Dyson Dryden
L. Dyson Dryden |
Director | April 17, 2018 | ||
/s/ Mark D. Ein
Mark D. Ein |
Director and Vice Chairman of the Board | April 17, 2018 |
Pursuant to the requirements of the Securities Act of 1933, as amended, Cision Ltd. has duly caused this registration statement to be signed by the following duly authorized representative in the United States:
|
|
|
Date: April 17, 2018 |
By:
/s/ Kevin Akeroyd
|
Exhibit 5.1
Date: 17 April 2018 | Our Ref: RL/AB/144342 |
Cision Ltd. c/o Walkers Corporate Limited Cayman Corporate Centre 27 Hospital Road George Town Grand Cayman KY1-9008 Cayman Islands |
Dear Sirs
CISION LTD.
We have acted as Cayman Islands legal advisers to Cision Ltd. (the " Company ") and we have examined the Registration Statement on Form S-4 filed with the Securities and Exchange Commission (the " Commission" ) on 17 April 2018 (the " Registration Statement "). We refer to the Company’s (i) proposed offer to holders of its warrants (the " Warrants ") to acquire the ordinary shares of the Company, par value $0.0001 (" Ordinary Shares ") to exchange Warrants for 0.26 Ordinary Shares for each Warrant (together with any amendments, supplements or extensions thereof, the " Exchange Offer ") and (ii) solicitations of consents from the holders of Warrants to amend the Warrant Agreement (as defined in Schedule 1) that governs all of the Warrants to permit the Company to require that each outstanding Warrant be converted into 0.234 Ordinary Shares. The Ordinary Shares issuable upon exchange of the Warrants pursuant to the Exchange Offer are referred to herein as the " Shares ".
For the purposes of giving this opinion, we have examined and relied upon the originals or copies of the documents listed in Schedule 1.
In giving this opinion we have relied upon the assumptions set out in Schedule 2, which we have not independently verified.
We are Cayman Islands Attorneys at Law and express no opinion as to any laws other than the laws of the Cayman Islands in force and as interpreted at the date of this opinion. We have not, for the purposes of this opinion, made any investigation of the laws, rules or regulations of any other jurisdiction.
Based upon the foregoing examinations and assumptions and upon such searches as we have conducted and having regard to legal considerations which we consider relevant, and under the laws of the Cayman Islands, we give the following opinions in relation to the matters set out below.
1. | The Company is a limited liability exempted company duly incorporated, validly existing and, based solely upon receipt of the Certificate of Good Standing, in good standing under the laws of the Cayman Islands with full corporate power and authority to issue the Shares. |
Walkers
190 Elgin Avenue, George Town
Grand Cayman KY1-9001, Cayman Islands
T +1 345 949 0100 F +1 345 949 7886 www.walkersglobal.com
2. | The Shares have been duly authorised by all necessary corporate action of the Company and upon issue of the Shares (by the entry of the name of the registered owner thereof in the Register of Members of the Company confirming that such Shares have been issued credited as fully paid), delivery and payment therefor by the purchaser in accordance with the Memorandum and Articles of Association and in the manner contemplated by the Warrant Agreement, the Shares will have been duly authorised, validly allotted and issued, fully paid and non-assessable (meaning that no additional sums may be levied on the holder thereof by the Company). |
This opinion is limited to the matters referred to herein and shall not be construed as extending to any other matter or document not referred to herein. This opinion is given solely for your benefit and the benefit of your legal advisers acting in that capacity in relation to this transaction and may not be relied upon by any other person, other than persons entitled to rely upon it pursuant to the provisions of the U.S. Securities Act of 1933, as amended, without our prior written consent.
This opinion shall be construed in accordance with the laws of the Cayman Islands.
We consent to the use of this opinion as an exhibit to the Registration Statement and further consent to all references to us in the Registration Statement and any amendments thereto.
Yours faithfully
/s/ Walkers
WALKERS
SCHEDULE 1
LIST OF DOCUMENTS EXAMINED
1. | the Certificate of Incorporation dated 9 March 2017; |
2. | the Certificate of Incorporation on Change of Name dated 29 June 2017; |
3. | copies of the Register of Members and the Register of Warrantholders provided to us by the Company's registrar on 16 April 2018; |
4. | the Amended and Restated Memorandum and Articles of Association adopted on 29 June 2017 (the " Memorandum and Articles of Association ") copies of which have been provided to us by its registered office in the Cayman Islands; |
(collectively, the " Company Records ");
5. | a Certificate of Good Standing dated 16 April 2018 in respect of the Company issued by the Registrar of Companies (the " Certificate of Good Standing "); |
6. | copies of the executed written resolutions of all the directors of the Company dated 16 April 2018 (collectively the " Resolutions "); |
7. | the Registration Statement; and |
8. | the Amended and Restated Warrant Agreement, dated as of 17 October 2017 between the Company and Continental Stock Transfer & Trust Company (the " Warrant Agreement "). |
SCHEDULE 2
Assumptions
This opinion is given based upon the following assumptions:
1. | The originals of all documents examined in connection with this opinion are authentic. The signatures, initials and seals on the documents reviewed are genuine and are those of a person or persons given power to execute the documents under the Resolutions (as defined in Schedule 1). All documents purporting to be sealed have been so sealed. All copies are complete and conform to their originals. The Memorandum and Articles of Association are the memorandum and articles of association of the Company in force on the date of the issuance of the Shares. |
2. | We have relied upon the statements and representations of directors, officers and other representatives of the Company as to factual matters. |
3. | The Company will receive consideration in money or money’s worth for each Share when issued in an amount not being less than the stated par or nominal value of each Share. |
4. | There are no provisions of the laws of any jurisdiction outside the Cayman Islands which would be contravened by the allotment and issue of the Shares and, insofar as any obligation expressed to be incurred under any of the documents is to be performed in or is otherwise subject to the laws of any jurisdiction outside the Cayman Islands, its performance will not be illegal by virtue of the laws of that jurisdiction. |
5. | The Company Records are complete and accurate. |
6. | The Resolutions remain in full force and effect and have not been revoked or varied. |
7. | The Warrant Agreement has been duly authorised, executed and delivered by or on behalf of all relevant parties and is legal, valid, binding and enforceable against all relevant parties in accordance with its terms under all relevant laws. |
8. | All preconditions to the issue of the Shares under the Warrant Agreement will be satisfied or duly waived prior to the issue of the Shares and there will be no breach of the terms of the Warrant Agreement. |
Exhibit 8.1
|
||
To
Call Writer Directly:
|
300 North LaSalle Chicago, IL 60654
(312) 862-2000
www.kirkland.com
|
Facsimile:
|
April 17, 2018
Cision Ltd. 130 E. Randolph St. 7th Floor Chicago, Illinois 60601 |
Ladies and Gentlemen:
We have acted as counsel to Cision Ltd., a Cayman Islands exempted company (the “ Company ”) and we have examined the Registration Statement on Form S-4 filed with the Securities and Exchange Commission on 17 April 2018 (the “ Registration Statement ”). We refer to the Company’s (i) proposed offer to holders of its warrants (the “ Warrants ”) to acquire the ordinary shares of the Company, par value $0.0001 (“ Ordinary Shares ”) to exchange Warrants for 0.26 Ordinary Shares for each Warrant (together with any amendments, supplements or extensions thereof, the “ Exchange Offer ”) and (ii) solicitations of consents from the holders of Warrants to amend the Amended and Restated Warrant Agreement, dated as of 17 October 2017 between the Company and Continental Stock Transfer & Trust Company that governs all of the Warrants to permit the Company to require that each outstanding Warrant be converted into 0.234 Ordinary Shares. References in this opinion to the Registration Statement include the prospectus describing the Exchange Offer forming a part of the Registration Statement (the “ Prospectus ”).
In connection with the preparation of this opinion, we have examined and with your consent relied upon (without any independent investigation or review thereof) the Registration Statement (including all exhibits and schedules thereto) and such other instruments and documents related to the formation, organization and operation of the Company or to the consummation of the Exchange Offer and the transactions contemplated thereby as we have deemed necessary or appropriate.
Beijing Boston Hong Kong Houston London Los Angeles Munich New York Palo Alto San Francisco Shanghai Washington, D.C.
|
Cision Ltd.
April 17, 2018
Page 2
Assumptions and Representations
In connection with rendering this opinion, we have assumed or obtained representations (and, with your consent, are relying thereon, without any independent investigation or review thereof, although we are not aware of any material facts or circumstances contrary to or inconsistent therewith) that:
1. All information contained in each of the documents we have examined and relied upon in connection with the preparation of this opinion is accurate and completely describes all material facts relevant to our opinion, all copies are accurate and all signatures are genuine. We have also assumed that there has been due execution and delivery of all documents where due execution and delivery are prerequisites to the effectiveness thereof.
2. All representations, warranties, and statements made or agreed to by the Company and by its management, employees, officers, directors, and stockholders in connection with the Exchange Offer, including, but not limited to, those set forth in the Registration Statement are, or will be, true, complete and accurate at all relevant times.
3. The Exchange Offer will be consummated as described in the Registration Statement.
Opinion — U.S. Federal Income Tax Consequences
Based upon and subject to the foregoing and consideration of applicable law, we are of the opinion that, subject to the assumptions and limitations set forth therein, the discussion in the Prospectus under the caption “The Offer -- Material U.S. Federal Income Tax Consequences” accurately summarize the matters described therein in all material respects. The foregoing opinion is based upon the Internal Revenue Code of 1986, as amended, Treasury Regulations (including proposed Regulations and temporary Regulations) promulgated thereunder, rulings, official pronouncements and judicial decisions, all as in effect on the date hereof and all of which are subject to change, possibly with retroactive effect. Our opinion is not binding on the United States Internal Revenue Service or any court and there is no assurance or guarantee that the United States Internal Revenue Service or a court will agree with our conclusions.
Cision Ltd.
April 17, 2018
Page 3
We express no opinion as to any tax laws other than the federal income tax laws of the United States and do not undertake to advise you as to any changes in such federal tax law after the date hereof that may affect our opinion. We caution that to the extent any of the representations, warranties, covenants and assumptions material to our opinion and upon which we have relied are not complete, are inaccurate or are not complied with in all material respects, our opinion as set forth above could be adversely affected. Further, this opinion is solely for your benefit and shall not inure to the benefit of any other person, including without limitation any successor or assign of yours, whether by operation of law or otherwise, and is not to be used or relied upon for any other purpose except in connection with the Exchange Offer without our express written permission. Notwithstanding the aforesaid, you may release a copy of this opinion (a) to the extent required by any applicable law or regulation; (b) to any regulatory authority having jurisdiction over you; (c) in connection with any actual or potential dispute or claim to which you are a party relating to the Exchange Offer; (d) to any rating agency, in its capacity as provider of a rating in respect of the Company or any securities issued by it, or (e) to your auditors, professional advisors, employees, officers and any of your affiliates, in each case of clauses (a) through (e) above, for the purposes of information only on the strict understanding that we assume no duty or liability whatsoever to any such recipient enumerated in clauses (a) through (e) as a result thereof or otherwise .
This opinion has been provided for your use in connection with the Registration Statement. We hereby consent to the use of the opinion letter as an exhibit to the Registration Statement and to the use of our name in “The Offer -- Material U.S. Federal Income Tax Consequences” section of the Registration Statement. In giving the consent, we do not thereby admit that we are an “expert” within the meaning of the Securities Act of 1933, as amended.
Sincerely, | |
/s/ Kirkland & Ellis LLP | |
Kirkland & Ellis LLP |
Exhibit 10.14
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this “ Agreement ”) is made as of January 9, 2018, by and between PR Newswire Association, LLC, a Delaware limited liability company (“ Employer ”), and Whitney Benner (“ Executive ”).
Employer, Executive, and the Partnership are party to a Senior Management Agreement, dated September 29, 2016 (the “ Original Senior Management Agreement ”), and concurrently with entering into this Agreement, the Partnership and Executive are amending and restating the Original Senior Management Agreement (the “ A&R Senior Management Agreement ”) to remove Employer as a party and to remove the employment-related provisions as provided therein;
In conjunction with the execution of the A&R Senior Management Agreement, Employer and Executive mutually desire to enter into an agreement containing the terms and conditions pursuant to which Employer will continue to employ Executive.
In consideration of the mutual covenants contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties to this Agreement hereby agree as follows:
1. Employment . The terms of this Agreement are intended by the parties hereto to be the final expression of their agreement with respect to the employment of Executive by Employer, and this Agreement supersedes that certain Employment Agreement by and between Executive and the Employer dated as of June 1, 2014, (the “Existing Agreement”), which is hereby terminated and which will have no further force or effect, and any and all prior understandings and agreements between Executive and Employer regarding Executive’s employment with Employer, whether written or oral; provided, that Executive’s Project Piccadilly Incentive Letter, dated May 6, 2015 and amended on August 3, 2015, shall remain in full force and effect. Executive’s only entitlements or rights under the Existing Agreement will be Executive’s accrued and unpaid salary since the Employer’s last payroll date. Employer agrees to continue to employ Executive, and Executive accepts such continued employment, for the period beginning on the date hereof and ending upon his or her separation pursuant to Section 1(c) hereof (the “Employment Period”). Such continued employment shall be deemed a continuation of the employment of Executive by Employer pursuant to the Original Senior Management Agreement, and the transition of such employment from the Original Senior Management Agreement to this Agreement shall not be deemed a Separation.
(a) Position and Duties . During the Employment Period, Executive shall serve as the Chief Human Resources Officer of Employer and shall report to the Chief Executive Officer of Employer (the “ CEO ”) or his designee, and Executive shall devote his or her best efforts and his or her full business time and attention to the business and affairs of Employer and its Subsidiaries and Affiliates; provided that Executive shall be permitted, with the prior written consent of the CEO (which consent shall not be unreasonably withheld), to engage in civic, charitable and other non-profit activities that do not interfere with Executive’s employment and other duties or obligations to the Employer, its Subsidiaries and Affiliates.
(b) Salary, Bonuses and Benefits . During the Employment Period, Employer will pay Executive a base salary at the same rate as in effect on the date hereof in accordance with the terms set forth in the Original Senior Management Agreement (the applicable base salary, as may be adjusted pursuant hereto, the “ Annual Base Salary ”). For fiscal year 2016, Executive shall be eligible for an annual bonus in an amount up to $139,050.00 (subject to Executive’s continued employment through the last day of 2016). For each fiscal year beginning in 2017 and ending during the Employment Period in which Executive remains employed through the last day of such fiscal year, Executive shall be eligible for an annual bonus in an amount up to 40% of Executive’s Annual Base Salary (the “ Target Bonus ”). Each annual bonus shall be determined by Employer based upon the performance of Executive and the achievement by Employer and its Subsidiaries of financial, operating and other objectives set by Employer. Each annual bonus shall be paid in the fiscal year following the fiscal year to which the bonus relates. In addition, during the Employment Period, Executive will be entitled to such other benefits as are approved by Employer and made generally available to all senior management of Employer.
(c) Separation . The Employment Period will continue until (i) Executive’s resignation upon 30 days’ prior written notice to Employer, death or Disability or (ii) the Employer terminates Executive’s employment with or without Cause. Upon the termination of Executive’s employment for any reason, Executive (or, in the event of Executive’s death, Executive’s estate) shall be entitled to receive (A) any earned but unpaid Annual Base Salary through the date of such termination, subject to withholding and other appropriate deductions, (B) reimbursement for reasonable and documented expenses accrued during employment, subject to and in accordance with, Employer’s expense reimbursement policy, (C) any earned but unpaid annual bonus relating to any prior fiscal year, and (D) any vested benefits (including vacation, but excluding severance-type benefits) accrued through the date of such termination in accordance with applicable law or the governing agreement, plan or policy rules (clauses (A) through (D), collectively, the “ Accrued Obligations ”). If Executive’s employment is terminated by the Employer without Cause pursuant to clause (ii) above, then, in addition to the Accrued Obligations, (1) Employer will give Executive three months prior notice of such termination, during which period Executive will assist as reasonably required by Employer to transition his duties and train any successor, and during which period Employer may, in its absolute discretion, (A) place Executive on garden leave and require Executive not to come into the office, or (B) elect to provide Executive payment of Executive’s Annual Base Salary and premiums for continued coverage under the health benefit plans of Employer in lieu of all or any portion of such three-month notice period, which payment shall be made in installments on Employer’s regular payroll dates unless otherwise agreed between Executive and Employer and during which time no bonus eligibility will accrue; (2) during the nine-month period commencing on the date of termination, Employer shall continue to pay Executive at his or her rate of Annual Base Salary, payable in equal installments on Employer’s regular salary payment dates as in effect on the date of the Separation (the “ Severance Payments ” and any period during which the Severance Payments are payable, each a “ Severance Period ”); and (3) during the Severance Period, Employer shall pay the premiums for Executive’s continued coverage under the health benefit plans of Employer (the “ Severance Benefits ”); provided , however , that Employer shall not have any obligation to pay such premiums if as a consequence Employer would be subject to any excise tax under Section 4980D of the Code or other penalty or liability pursuant to the provisions of the Patient Protection and Affordable Care Act of 2010 (as amended from time to time), and Executive’s health benefit coverage from Employer during the Severance Period shall run concurrent with the health continuation coverage period mandated by Section 4980B of the Code; provided , further , however , that at any time that Employer is providing the Severance Benefits, if Employer modifies the health and welfare benefits being provided to employees of a position comparable to Executive at the time of such termination, then Employer shall provide such revised or modified benefits to Executive and his or her family. In addition, Employer shall have the option, by delivering written notice to Executive at least 60 days prior to the end of the then-applicable Severance Period, to extend the Severance Period for up to two additional six-month periods (i.e., through the 21-month anniversary of the date of Separation) during which period the Employer shall continue to pay Executive’s Severance Payments to Executive at the same annual rate (pro rated as applicable) and provide the Severance Benefits. Notwithstanding anything herein to the contrary, (I) Executive shall not be entitled to receive any portion of the Severance Payments unless Executive has executed and delivered to Employer a general release in form and substance satisfactory to Employer (a “ Release ”) in accordance with Section 1(d)(vii) (and such release is in full force and effect and has not been revoked), and (II) Executive shall be entitled to receive the Severance Payments only so long as Executive has not breached any of the provisions of such general release or Section 2 or Section 3 hereof. Following a Separation for any reason, Executive shall not be entitled to any further payments from Employer, the Parent or their respective Affiliates in respect of his or her employment with any of them, nor shall they have any further liability to Executive in respect thereof, except as expressly set forth in this Section 1 .
2 |
(d) Code Section 409A .
(i) The intent of the parties is that payments and benefits under this Agreement comply with or otherwise be exempt from Section 409A of the Code and the regulations and guidance promulgated thereunder (collectively “ Code Section 409A ”) and, accordingly, to the maximum extent permitted, this Agreement shall be interpreted to be either exempt from or in compliance therewith. In no event shall Employer or the Parent be liable for any additional tax, interest or penalty that may be imposed on the Executive by Code Section 409A or damages for failing to comply with Code Section 409A.
(ii) Notwithstanding any other payment schedule provided herein to the contrary, if the Executive is deemed on the date of termination to be a “specified employee” within the meaning of that term under Code Section 409A(a)(2)(B), then any payment under Section 1 hereof that is considered deferred compensation under Code Section 409A payable on account of a “separation from service” shall not be made until the date which is the earlier of (A) the expiration of the six (6)-month period measured from the date of such “separation from service” of Executive, and (B) the date of Executive’s death (the “ Delay Period ”) to the extent required under Code Section 409A. Upon the expiration of the Delay Period, all payments delayed pursuant to this Section 1(d) shall be paid to the Executive in a lump sum, and all remaining payments due under this Agreement shall be paid or provided in accordance with the normal payment dates specified for them herein.
3 |
(iii) A termination of employment shall not be deemed to have occurred for purposes of any provision of this Agreement providing for the payment of any amounts or benefits that constitute “nonqualified deferred compensation” (within the meaning of Code Section 409A) upon or following a termination of employment unless such termination is also a “separation from service” within the meaning of Code Section 409A and, for purposes of any such provision of this Agreement, references to a “termination,” “termination of employment” or like terms shall mean “separation from service.”
(iv) For purposes of Code Section 409A, Executive’s right to receive any installment payment pursuant to this Agreement shall be treated as a right to receive a series of separate and distinct payments.
(v) Notwithstanding any other provision to the contrary, in no event shall any payment under this Agreement that constitutes “nonqualified deferred compensation” (within the meaning of Code Section 409A) be subject to offset by any other amount unless otherwise permitted by Code Section 409A.
(vi) To the extent that any reimbursement of expenses or in-kind benefits constitute “nonqualified deferred compensation” (within the meaning of Code Section 409A), such reimbursement shall be provided no later than December 31 of the year following the year in which the expense was incurred, the amount of any expenses reimbursed or in-kind benefits provided in one year shall not affect the amount eligible for reimbursement or in-kind benefits provided in any subsequent year (other than an arrangement providing for the reimbursement of medical expenses referred to in Section 105(b) of the Code), and Executive’s right to such payments or reimbursement of any such expenses shall not be subject to liquidation or exchange for any other benefit.
(vii) Notwithstanding anything to the contrary in this Agreement, to the extent that any payments of “nonqualified deferred compensation” (within the meaning of Code Section 409A) due under this Agreement as a result of Executive’s termination of employment are subject to Executive’s execution and delivery of a Release, (A) Employer shall deliver the Release to Executive within ten days following the date of Executive’s termination of employment, (B) provided Employer timely complies with its obligation under clause (A), if the Executive fails to execute the Release on or prior to the Release Expiration Date (as defined below) or timely revokes his or her acceptance of the Release thereafter, he or she shall not be entitled to any payments or benefits otherwise conditioned on the Release, and (C) in any case where the date of termination of employment and the Release Expiration Date fall in two separate taxable years, any payments required to be made to Executive that are conditioned on the Release and are treated as “nonqualified deferred compensation” (within the meaning of Code Section 409A) shall be made in the later taxable year. For purposes of this Section 1(d)(vii) “ Release Expiration Date ” shall mean the date that is 31 days following the date of Executive’s termination of employment, or, in the event that Executive’s termination of employment is “in connection with an exit incentive or other employment termination program” (as such phrase is defined in the Age Discrimination in Employment Act of 1967), the date that is 55 days following the date of Executive’s termination of employment. To the extent that any payments of nonqualified deferred compensation (within the meaning of Code Section 409A) due under this Agreement as a result of Executive’s termination of employment are delayed pursuant to this Section 1(d)(vii) , such amounts shall be paid in a lump sum on the first payroll date following the date that Executive executes and does not revoke the Release (and the applicable revocation period has expired) or, in the case of any payments subject to clause (C) of this Section 1(d)(vii) , on the first payroll period to occur in the subsequent taxable year, if later.
4 |
2. Confidential Information .
(a) Obligation to Maintain Confidentiality . Executive acknowledges that the information, observations and data (including trade secrets) obtained by him or her during the course of his or her employment with Employer concerning the business or affairs of Employer, the Parent, and their respective Subsidiaries and Affiliates (“ Confidential Information ”) are the property of Employer, the Parent or such Subsidiaries and Affiliates, including information concerning acquisition opportunities in or reasonably related to Employer’s and the Parent’s business or industry of which Executive becomes aware during the Employment Period. Therefore, Executive agrees that he or she will not disclose to any unauthorized Person or use for his or her own account any Confidential Information without the Board’s written consent, unless and to the extent that the Confidential Information, (i) becomes generally known to and available for use by the public other than as a result of Executive’s acts or omissions to act or (ii) is required to be disclosed pursuant to any applicable law or court order. Executive shall deliver to Employer at a Separation, or at any other time Employer may reasonably request, all memoranda, notes, plans, records, reports, computer tapes, printouts and software and other documents and data (and copies thereof) relating to the Confidential Information, Work Product (as defined below) or the business of Employer, the Parent and their respective Subsidiaries and Affiliates (including, without limitation, all acquisition prospects, lists and contact information) which he or she may then possess or have under his or her control.
(b) Ownership of Property . Executive acknowledges that all discoveries, concepts, ideas, inventions, innovations, improvements, developments, methods, processes, programs, designs, analyses, drawings, reports, patent applications, copyrightable work and mask work (whether or not including any confidential information) and all registrations or applications related thereto, all other proprietary information and all similar or related information (whether or not patentable) that relate to Employer’s, the Parent’s or any of their respective Subsidiaries’ or Affiliates’ actual or anticipated business, research and development, or existing or future products or services and that are conceived, developed, contributed to, made, or reduced to practice by Executive (either solely or jointly with others) while employed by Employer, the Parent or any of their respective Subsidiaries or Affiliates (including any of the foregoing that constitutes any proprietary information or records) (“ Work Product ”) belong to Employer, the Parent or such Subsidiary or Affiliate, and Executive hereby assigns, and agrees to assign, all of the above Work Product to Employer, the Parent or to such Subsidiary or Affiliate. Any copyrightable work prepared in whole or in part by Executive in the course of his or her work for any of the foregoing entities shall be deemed a “work made for hire” under the copyright laws, and Employer, the Parent or such Subsidiary or Affiliate shall own all rights therein. To the extent that any such copyrightable work is not a “work made for hire,” Executive hereby assigns and agrees to assign to Employer, the Parent or such Subsidiary or Affiliate all right, title, and interest, including without limitation, copyright in and to such copyrightable work. Executive shall promptly disclose such Work Product and copyrightable work to the Board and perform all actions reasonably requested by the Board (whether during or after the Employment Period) to establish and confirm Employer’s, the Parent’s or such Subsidiary’s or Affiliate’s ownership (including, without limitation, assignments, consents, powers of attorney, and other instruments).
5 |
(c) Third Party Information . Executive understands that Employer, the Parent and their respective Subsidiaries and Affiliates will receive from third parties confidential or proprietary information (“ Third Party Information ”) subject to a duty on Employer’s, the Parent’s and their respective Subsidiaries and Affiliates’ part to maintain the confidentiality of such information and to use it only for certain limited purposes. During the Employment Period and thereafter, and without in any way limiting the provisions of Section 2(a) above, Executive will hold Third Party Information in the strictest confidence and will not disclose to anyone (other than personnel and consultants of Employer, the Parent or their respective Subsidiaries and Affiliates who need to know such information in connection with their work for Employer, the Parent or their respective Subsidiaries and Affiliates) or use, except in connection with his or her work for Employer, the Parent or their respective Subsidiaries and Affiliates, Third Party Information unless expressly authorized by the Board in writing.
(d) Use of Information of Prior Employers . During the Employment Period, Executive will not improperly use or disclose any confidential information or trade secrets, if any, of any former employers or any other Person to whom Executive has an obligation of confidentiality, and will not bring onto the premises of Employer, the Parent or any of their respective Subsidiaries or Affiliates any unpublished documents or any property belonging to any former employer or any other Person to whom Executive has an obligation of confidentiality unless consented to in writing by the former employer or Person. Executive will use in the performance of his or her duties only information which is (i) generally known and used by persons with training and experience comparable to Executive’s and which is (x) common knowledge in the industry or (y) otherwise legally in the public domain, (ii) otherwise provided or developed by Employer, the Parent or any of their respective Subsidiaries or Affiliates or (iii) in the case of materials, property or information belonging to any former employer or other Person to whom Executive has an obligation of confidentiality, approved for such use in writing by such former employer or Person. In furtherance of the foregoing, pursuant to the execution of the Original Senior Management Agreement, Executive executed and delivered to Employer a certificate in the form of Exhibit F attached to the Original Senior Management Agreement.
(e) Continuation of Terms . Notwithstanding anything in this Agreement to the contrary, the parties hereto expressly acknowledge and agree that the terms, conditions, obligations and covenants set forth in this Section 2 are a continuation without interruption, lapse, reprieve, gap or modification of any kind of the terms, conditions, obligations and covenants set forth in Section 7 of the Original Senior Management Agreement.
3. Noncompetition and Nonsolicitation . Executive acknowledges that in the course of his or her employment with Employer he or she will become familiar with Employer’s, the Partner’s and their respective Subsidiaries’ trade secrets and with other confidential information concerning Employer, the Partner and such Subsidiaries and that his or her services will be of special, unique and extraordinary value to Employer, the Partner and such Subsidiaries. Therefore, Executive agrees that:
6 |
(a) Noncompetition . During the Restricted Period, Executive shall not, directly or indirectly, own, manage, control, participate in, consult with, render services for, or in any manner engage in any business which competes anywhere in the United States with any of the businesses of the Employer, the Partner or any of their respective Subsidiaries or competing with any other business for which Employer, the Partner or any of their respective Subsidiaries has engaged in discussions or has requested and received information relating to the acquisition of such business by Employer, the Partner or any of their respective Subsidiaries within the eighteen-month period immediately preceding the Separation. Nothing herein shall prohibit Executive from being a passive owner of not more than 2% of the outstanding stock of any class of a corporation that is publicly traded, so long as Executive has no active participation in the business of such corporation.
(b) Nonsolicitation . During the Restricted Period, Executive shall not directly or indirectly through another entity (i) induce or attempt to induce any employee of Employer, the Partner or any of their respective Subsidiaries to leave the employ of Employer, the Partner or such Subsidiary, or in any way interfere with the relationship between Employer, the Partner or any of their respective Subsidiaries and any employee thereof, (ii) hire any employee of Employer, the Partner or any of their respective Subsidiaries or hire any former employee of Employer, the Partner or any of their respective Subsidiaries within 12 months after such person ceased to be an employee of Employer, the Partner or any of their respective Subsidiaries, (iii) induce or attempt to induce any customer, supplier, licensee or other business relation of Employer, the Partner or any of their respective Subsidiaries to cease doing business with Employer, the Partner or such Subsidiary or in any way interfere with the relationship between any such customer, supplier, licensee or business relation and Employer, the Partner or any such Subsidiary or (iv) directly or indirectly acquire or attempt to acquire an interest in any business relating to the business of Employer, the Partner or any of their respective Subsidiaries and with which Employer, the Partner or any of their respective Subsidiaries has engaged in discussions or has requested and received information relating to the acquisition of such business by Employer, the Partner or any of their respective Subsidiaries at any time within the eighteen-month period immediately preceding a Separation.
(c) Nondisparagement . Executive shall not, directly or indirectly through any other Person, make any public statement that is intended to or could reasonably be expected to disparage the Employer, the Partner or any of their respective Subsidiaries, Affiliates or businesses, products, services, equityholders, directors, managers, officers or employees.
(d) Enforcement . If, at the time of enforcement of Section 2 or this Section 3 , a court holds that the restrictions stated herein are unreasonable under circumstances then existing, the parties hereto agree that the maximum duration, scope or geographical area reasonable under such circumstances shall be substituted for the stated period, scope or area and that the court shall be allowed to revise the restrictions contained herein to cover the maximum duration, scope and area permitted by law. Because Executive’s services are unique and because Executive has access to confidential information, the parties hereto agree that money damages would be an inadequate remedy for any breach of this Agreement. Therefore, in the event a breach or threatened breach of this Agreement, Employer and/or its respective successors or assigns may, in addition to other rights and remedies existing in their favor, apply to any court of competent jurisdiction for specific performance and/or injunctive or other relief in order to enforce, or prevent any violations of, the provisions hereof (without posting a bond or other security). In the event that Executive breaches any provision of this Section 3 , then the Restricted Period shall be extended for a period of time equal to the period of time during which such breach occurred and, in the event that Employer or any of its Subsidiaries is required to seek relief from such breach in any court, then the Restricted Period shall be extended for a period of time equal to the pendency of such proceedings, including all appeals.
7 |
(e) Additional Acknowledgments . Executive acknowledges that the provisions of this Section 3 are in consideration of: (i) employment with Employer, (ii) the issuance of the Executive Securities by the Partnership pursuant to the Original Senior Management Agreement and (iii) additional good and valuable consideration as set forth in this Agreement. In addition, Executive agrees and acknowledges that the restrictions contained in Section 2 and this Section 3 do not preclude Executive from earning a livelihood, nor do they unreasonably impose limitations on Executive’s ability to earn a living. In addition, Executive acknowledges (x) that the business of Employer, the Parent and their respective Subsidiaries will be conducted throughout the United States and other jurisdictions where Employer, the Parent or any of their respective Subsidiaries conduct business during the Employment Period, (y) notwithstanding the state of organization or principal office of Employer, the Parent or any of their respective Subsidiaries, or any of their respective executives or employees (including the Executive), it is expected that Employer, the Parent and their respective Subsidiaries will have business activities and have valuable business relationships within its industry throughout the United States and other jurisdictions where Employer, the Parent or any of their respective Subsidiaries conduct business during the Employment Period, and (z) as part of his or her responsibilities, Executive may be traveling throughout the United States and other jurisdictions where Employer, the Parent or any of their respective Subsidiaries conduct business during the Employment Period in furtherance of Employer’s business and its relationships. Executive agrees and acknowledges that the potential harm to Employer, the Parent and their respective Subsidiaries of the non-enforcement of any provision of Section 2 or this Section 3 outweighs any potential harm to Executive of its enforcement by injunction or otherwise. Executive acknowledges that he or she has carefully read this Agreement and consulted with legal counsel of his or her choosing regarding its contents, has given careful consideration to the restraints imposed upon Executive by this Agreement and is in full accord as to their necessity for the reasonable and proper protection of confidential and proprietary information of Employer, the Parent and their respective Subsidiaries now existing or to be developed in the future. Executive expressly acknowledges and agrees that each and every restraint imposed by this Agreement is reasonable with respect to subject matter, time period and geographical area.
4. Definitions .
“ Affiliate ” means, with respect to any Person, (i) any other Person controlling, controlled by or under common control with such particular Person, where “control” means the possession, directly or indirectly, of the power to direct the management and policies of a Person whether through the ownership of voting securities, by contract, or otherwise, and (ii) if such Person is a partnership, any partner thereof.
8 |
“ Board ” means the board of directors of Parent.
“ Cause ” means (i) the commission of a felony or a crime involving moral turpitude or the commission of any other act or omission involving dishonesty or fraud with respect to Employer, the Parent or any of their respective Subsidiaries or any of their customers, vendors or employees, (ii) substantial and repeated failure to perform duties of the office held by Executive as reasonably directed by an executive to whom Executive directly or indirectly reports or by Employer, (iii) gross negligence or willful misconduct with respect to Employer, the Parent or any of their respective Subsidiaries or any of their customers, vendors or employees, (iv) conduct which could reasonably be expected to bring Employer, the Parent or any of their respective Subsidiaries into substantial public disgrace or disrepute, (v) any breach by Executive of Section 2 or Section 3 of this Agreement and/or (vi) a failure to observe policies or standards regarding employment practices (including, without limitation, nondiscrimination and sexual harassment policies) as approved by Employer from time to time.
“ Disability ” means the disability of Executive caused by any physical or mental injury, illness or incapacity as a result of which Executive is, or is reasonably expected to be, unable to effectively perform the essential functions of Executive’s duties for a continuous period of more than 120 days or for 180 days (whether or not continuous) within a 365 day period, as determined by the Board in good faith.
“ Parent ” means Cision Ltd., a Cayman Islands public company, or in the event that Employer is no longer a Subsidiary of Cision Ltd., the Employer’s direct parent company.
“ Partnership ” means Canyon Holdings (Cayman), L.P., a Cayman Islands exempted limited partnership.
“ Person ” means an individual, a partnership, a limited liability company, a corporation, an association, a joint stock company, a trust, a joint venture, an unincorporated organization, investment fund, any other business entity and a governmental entity or any department, agency or political subdivision thereof.
“ Restricted Period ” means the Employment Period plus either (i) the Severance Period, if Executive’s employment is terminated without Cause pursuant to clause 1(c)(ii) above, after giving effect to extension of the Severance Period in accordance with Section 1(c) or (ii) the 12-month period immediately following the Employment Period if Executive’s employment is terminated under any other circumstances.
“ Separation ” means Executive ceasing to be employed by the Parent, Employer and their Subsidiaries for any reason.
9 |
“ Subsidiary ” means, with respect to any Person, any corporation, limited liability company, partnership, association, or business entity of which (i) if a corporation, a majority of the total voting power of shares of stock entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers, or trustees thereof is at the time owned or controlled, directly or indirectly, by that Person or one or more of the other Subsidiaries of that Person or a combination thereof, or (ii) if a limited liability company, partnership, association, or other business entity (other than a corporation), a majority of partnership or other similar ownership interest thereof is at the time owned or controlled, directly or indirectly, by that Person or one or more Subsidiaries of that Person or a combination thereof. For purposes hereof, a Person or Persons shall be deemed to have a majority ownership interest in a limited liability company, partnership, association, or other business entity (other than a corporation) if such Person or Persons shall be allocated a majority of limited liability company, partnership, association, or other business entity gains or losses or shall be or control any managing director or general partner of such limited liability company, partnership, association, or other business entity. For purposes hereof, references to a “ Subsidiary ” of any Person shall be given effect only at such times that such Person has one or more Subsidiaries, and, unless otherwise indicated, the term “ Subsidiary ” refers to a Subsidiary of the Parent.
5. Notices . All notices, demands or other communications to be given or delivered under or by reason of the provisions of this Agreement shall be in writing and shall be deemed to have been given when (i) delivered personally to the recipient, (ii) sent to the recipient by reputable express courier service (charges prepaid), (iii) mailed to the recipient by certified or registered mail, return receipt requested and postage prepaid, or (iv) telecopied to the recipient (with hard copy sent to the recipient by reputable overnight courier service (charges prepaid) that same day) if telecopied before 5:00 p.m. Chicago, Illinois time on a business day, and otherwise on the next business day. Such notices, demands and other communications shall be sent to the parties at the addresses indicated below:
If to the Parent or Employer :
Cision US, Inc.
130 East Randolph St. 7th Floor
Chicago, IL 60601
Facsimile: (301) 459-2827
Email: jack.pearlstein@cision.com
Attention: Jack Pearlstein
with a copy to :
Kirkland & Ellis LLP
300 North LaSalle
Chicago, IL 60654
Facsimile: (312) 862-2200
Attention: Stephen L. Ritchie, P.C.
Mark A. Fennell, P.C.
If to Executive :
Whitney Benner
261 Monmouth Blvd.
Oceanport, NJ 07757
or such other address or to the attention of such other Person as the recipient party shall have specified by prior written notice to the sending party.
10 |
6. General Provisions .
(a) Severability . Whenever possible, each provision of this Agreement will be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement is held to be invalid, illegal or unenforceable in any respect under any applicable law or rule in any jurisdiction, such invalidity, illegality or unenforceability will not affect any other provision or any other jurisdiction, but this Agreement will be reformed, construed and enforced in such jurisdiction as if such invalid, illegal or unenforceable provision had never been contained herein.
(b) Complete Agreement . This Agreement, those documents expressly referred to herein and other documents of even date herewith embody the complete agreement and understanding among the parties and supersede and preempt any prior understandings, agreements or representations by or among the parties, written or oral, which may have related to the subject matter hereof in any way, provided , that any other confidentiality non-competition, or non-solicitation obligations of Executive with the Parent, Employer, or their respective Affiliates shall not be so superseded or preempted.
(c) No Strict Construction; Descriptive Headings; Interpretation . The language used in this Agreement shall be deemed to be the language chosen by the parties hereto to express their mutual intent, and no rule of strict construction shall be applied against any party. The descriptive headings of this Agreement are inserted for convenience only and do not constitute a section of this Agreement. The use of the word “including” in this Agreement shall be by way of example rather than by limitation. Any reference in this Agreement to the “judgment” or “discretion” of a party shall mean the sole judgment or discretion of such party.
(d) Counterparts . This Agreement may be executed in separate counterparts (including by means of facsimile), each of which is deemed to be an original and all of which taken together constitute one and the same agreement.
(e) Successors and Assigns . Except as otherwise provided herein, this Agreement shall bind and inure to the benefit of and be enforceable by Executive, Employer, and their respective successors and assigns; provided that the rights and obligations of Executive under this Agreement shall not be assigned or delegated.
(f) Choice of Law . The laws of the State of Delaware will govern all questions concerning the relative rights of the Employer and Executive and all other questions concerning the construction, validity and interpretation of this Agreement and the exhibits hereto, without giving effect to any choice of law or conflict of law provision or rule (whether of the State of Delaware or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of Delaware.
11 |
(g) Jurisdiction; Venue; Service of Process . Each party hereto agrees that it may bring any action between the parties hereto arising out of or related to this Agreement in the Court of Chancery of the State of Delaware (the “ Court of Chancery ”) or, to the extent the Court of Chancery does not have subject matter jurisdiction, the United States District Court for the District of Delaware and the appellate courts having jurisdiction of appeals in such courts (the “ Delaware Federal Court ”) or, to the extent neither the Court of Chancery nor the Delaware Federal Court has subject matter jurisdiction, the Superior Court of the State of Delaware (collectively, the “ Chosen Courts ”), and, solely with respect to any such action (i) irrevocably submits to the non-exclusive jurisdiction of the Chosen Courts, (ii) waives any objection to laying venue in any such action in the Chosen Courts, (iii) waives any objection that the Chosen Courts are an inconvenient forum or do not have jurisdiction over any party hereto and (iv) agrees that service of process upon such party in any such action shall be effective if notice is given in accordance with Section 5 .
(h) MUTUAL WAIVER OF JURY TRIAL . BECAUSE DISPUTES ARISING IN CONNECTION WITH COMPLEX TRANSACTIONS ARE MOST QUICKLY AND ECONOMICALLY RESOLVED BY AN EXPERIENCED AND EXPERT PERSON AND THE PARTIES HERETO WISH APPLICABLE STATE AND FEDERAL LAWS TO APPLY (RATHER THAN ARBITRATION RULES), THE PARTIES HERETO DESIRE THAT THEIR DISPUTES BE RESOLVED BY A JUDGE APPLYING SUCH APPLICABLE LAWS. THEREFORE, TO ACHIEVE THE BEST COMBINATION OF THE BENEFITS OF THE JUDICIAL SYSTEM AND OF ARBITRATION, EACH PARTY TO THIS AGREEMENT HEREBY WAIVES ALL RIGHTS TO TRIAL BY JURY IN ANY ACTION, SUIT, OR PROCEEDING BROUGHT TO RESOLVE ANY DISPUTE BETWEEN OR AMONG ANY OF THE PARTIES HERETO, WHETHER ARISING IN CONTRACT, TORT, OR OTHERWISE, ARISING OUT OF, CONNECTED WITH, RELATED OR INCIDENTAL TO THIS AGREEMENT, THE TRANSACTIONS CONTEMPLATED HEREBY AND/OR THE RELATIONSHIP ESTABLISHED AMONG THE PARTIES HEREUNDER.
(i) Executive’s Cooperation . During the Employment Period and thereafter, Executive shall cooperate with Employer and its Subsidiaries and Affiliates in any disputes with third parties, internal investigation or administrative, regulatory or judicial proceeding as reasonably requested by Employer (including, without limitation, Executive being available to Employer upon reasonable notice for interviews and factual investigations, appearing at Employer’s reasonable request to give testimony without requiring service of a subpoena or other legal process, volunteering to Employer all pertinent information and turning over to Employer all relevant documents which are or may come into Executive’s possession, all at times and on schedules that are reasonably consistent with Executive’s other permitted activities and commitments). In the event Employer requires Executive’s cooperation in accordance with this paragraph after the Employment Period, Employer shall reimburse Executive for reasonable travel expenses (including lodging and meals, upon submission of receipts).
(j) Remedies . Each of the parties to this Agreement will be entitled to enforce its rights under this Agreement specifically, to recover damages and costs (including attorney’s fees) caused by any breach of any provision of this Agreement and to exercise all other rights existing in its favor. The parties hereto agree and acknowledge that money damages may not be an adequate remedy for any breach of the provisions of this Agreement and that any party may in its sole discretion apply to any court of law or equity of competent jurisdiction (without posting any bond or deposit) for specific performance and/or other injunctive relief in order to enforce or prevent any violations of the provisions of this Agreement. Notwithstanding anything to the contrary herein, nothing in this Agreement prevents the Executive from filing any administrative charge or participating in any administrative investigation or proceeding with respect to which the right to file or participate cannot be waived under applicable law.
12 |
(k) Amendment and Waiver . The provisions of this Agreement may be amended and waived only with the prior written consent of Employer, the Parent, and Executive.
(l) Insurance . Employer, at its discretion, may apply for and procure in its own name and for its own benefit life and/or disability insurance on Executive in any amount or amounts considered available. Executive agrees to cooperate in any medical or other examination, supply any information, and to execute and deliver any applications or other instruments in writing as may be reasonably necessary to obtain and constitute such insurance. Executive hereby represents that Executive has no reason to believe that Executive’s life is not insurable at rates now prevailing for healthy individuals of Executive’s age.
(m) Business Days . If any time period for giving notice or taking action hereunder expires on a day which is a Saturday, Sunday or holiday in the state in which Employer’s chief executive office is located, the time period shall be automatically extended to the business day immediately following such Saturday, Sunday or holiday.
(n) Indemnification and Reimbursement of Payments on Behalf of Executive . Employer, the Parent and their respective Subsidiaries shall be entitled to deduct or withhold from any amounts owing from Employer, the Parent or any of their respective Subsidiaries to Executive (including withholding shares or other equity securities in the case of issuances of equity by Employer, the Parent or any of their respective Subsidiaries) any federal, state, local or foreign withholding taxes, excise taxes, or employment taxes (“ Taxes ”) imposed with respect to Executive’s compensation or other payments from Employer, the Parent or any of their respective Subsidiaries, including, without limitation, wages, bonuses, distributions, the receipt or exercise of equity options and/or the receipt or vesting of restricted equity. In the event any such deductions or withholdings are not made, Executive shall indemnify the Employer, the Parent and each of their respective Subsidiaries for any amounts paid with respect to any such Taxes, together with any interest, penalties and related expenses thereto.
(o) Termination . This Agreement (except for the provisions of Sections 1(a) , 1(b) and 1(c) ) shall survive a Separation and shall remain in full force and effect after such Separation.
(p) Electronic Delivery . This Agreement, the agreements referred to herein, and each other agreement or instrument entered into in connection herewith or therewith or contemplated hereby or thereby, and any amendments hereto or thereto, to the extent signed and delivered by means of a photographic, photostatic, facsimile, portable document format (.pdf), or similar reproduction of such signed writing using a facsimile machine or electronic mail shall be treated in all manner and respects as an original agreement or instrument and shall be considered to have the same binding legal effect as if it were the original signed version thereof delivered in person. At the request of any party hereto or to any such agreement or instrument, each other party hereto or thereto shall re-execute original forms thereof and deliver them to all other parties. No party hereto or to any such agreement or instrument shall raise the use of a facsimile machine or electronic mail to deliver a signature or the fact that any signature or agreement or instrument was transmitted or communicated through the use of a facsimile machine or electronic mail as a defense to the formation or enforceability of a contract and each such party forever waives any such defense.
13 |
(q) No Third-Party Beneficiaries . Except as expressly provided herein, no term or provision of this Agreement is intended to be, or shall be, for the benefit of any Person not a party hereto, and no such other Person shall have any right or cause of action hereunder.
(r) Representations . Executive represents and warrants to Employer that (i) this Agreement constitutes the legal, valid and binding obligation of Executive, enforceable in accordance with its terms, and the execution, delivery and performance of this Agreement by Executive does not and will not conflict with, violate or cause a breach of any agreement, contract or instrument to which Executive is a party or any judgment, order or decree to which Executive is subject, and (ii) other than the A&R Senior Management Agreement, Executive is neither party to, nor bound by, any other employment agreement, consulting agreement, noncompete agreement, non-solicitation agreement or confidentiality agreement or any other agreement which could impair or interfere with Executive’s obligations hereunder.
* * * * * * *
14 |
IN WITNESS WHEREOF, the parties hereto have executed this Employment Agreement as of the date first written above.
CISION US, INC. | ||
By: | /s/ Jack Pearlstein | |
Name: | Jack Pearlstein | |
Its: | Chief Financial Officer |
EXECUTIVE | |
/s/ Whitney Benner | |
Whitney Benner |
Exhibit 10.15
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this “ Agreement ”) is made as of October 3, 2017, by and between PR Newswire Association, LLC, a Delaware limited liability company (“ Employer ”), and Jason Edelboim (“ Executive ”),
Employer, Executive, and the Partnership are party to a Senior Management Agreement, dated September 23, 2016 (the “ Original Senior Management Agreement ”), and concurrently with entering into this Agreement, the Partnership and Executive are amending and restating the Original Senior Management Agreement (the “ A&R Senior Management Agreement ”) to remove Employer as a party and to remove the employment-related provisions as provided therein;
In conjunction with the execution of the A&R Senior Management Agreement, Employer and Executive mutually desire to enter into an agreement containing the terms and conditions pursuant to which Employer will continue to employ Executive.
In consideration of the mutual covenants contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties to this Agreement hereby agree as follows:
1. Employment . The terms of this Agreement are intended by the parties hereto to be the final expression of their agreement with respect to the employment of Executive by Employer, and this Agreement supersedes that certain Employment Agreement by and between Executive and the Employer dated as of June 1, 2014, (the “Existing Agreement”), which is hereby terminated and which will have no further force or effect, and any and all prior understandings and agreements between Executive and Employer regarding Executive’s employment with Employer, whether written or oral; provided, that Executive’s Project Piccadilly Incentive Letter, dated April 16, 2015 and amended on August 3, 2015, shall remain in full force and effect. Executive’s only entitlements or rights under the Existing Agreement will be Executive’s accrued and unpaid salary since the Employer’s last payroll date. Employer agrees to continue to employ Executive, and Executive accepts such continued employment, for the period beginning on the date hereof and ending upon his or her separation pursuant to Section 1(d) hereof (the “Employment Period”). Such continued employment shall be deemed a continuation of the employment of Executive by Employer pursuant to the Original Senior Management Agreement, and the transition of such employment from the Original Senior Management Agreement to this Agreement shall not be deemed a Separation.
(a) Position and Duties , During the Employment Period, Executive shall serve as the President, PRN Americas, of Employer and shall report to the Chief Executive Officer of Employer (the “CEO”) or his designee, and Executive shall devote his or her best efforts and his or her full business time and attention to the business and affairs of Employer and its Subsidiaries and Affiliates; provided that Executive shall be permitted, with the prior written consent of the CEO (which consent shall not be unreasonably withheld), to engage in civic, charitable and other non-profit activities that do not interfere with Executive’s employment and other duties or obligations to the Employer, its Subsidiaries and Affiliates.
(b) Salary, Bonuses and Benefits . During the Employment Period, Employer will pay Executive a base salary at the same rate as in effect on the date hereof in accordance with the terms set forth in the Original Senior Management Agreement (the applicable base salary, as may be adjusted pursuant hereto, the “ Annual Base Salary ”). For fiscal year 2016, Executive shall be eligible for an annual bonus in an amount up to $165,006.00 (subject in its entirety without pro-ration to Executive’s continued employment through the last day of 2016, and if such bonus becomes payable, such bonus will be paid on or before April 30, 2017). For each fiscal year beginning in 2017 and ending during the Employment Period in which Executive remains employed through the last day of such fiscal year, Executive shall be eligible for an annual bonus in an amount up to 50% of Executive’s Annual Base Salary (the “ Target Bonus ”), and if any Target Bonus becomes payable, such Target Bonus will be paid on or before April 30 of the year following the year for which such Target Bonus is earned. Each annual bonus shall be determined by Employer based upon the performance of Executive and the achievement by Employer and its Subsidiaries of financial, operating and other objectives set by Employer. Each annual bonus shall be paid in the fiscal year following the fiscal year to which the bonus relates. In addition, during the Employment Period, Executive will be entitled to such other benefits as are approved by Employer and made generally available to all senior management of Employer.
(c) Retention Bonus . On June 16, 2018 (the “ Retention Bonus Date ”) Executive will receive:
(i) a one-time cash bonus in an amount of $150,000.00 (such bonus, the “ Time-Based Component ”): and (ii) a one-time cash bonus in the amount of $150,000 (such amount, the “ Performance-Based Component ”), in recognition of having achieved the management best-case performance for revenue and EBITDA as disclosed to Cision US, Inc, (“Cision”) in connection with the sale of Employer to Cision;
in each case subject to Executive’s continued employment with Employer through and on such date, If Employer terminates Executive without Cause prior to the Retention Bonus Date, Executive will receive (i) a pro-rated portion, to the extent earned, of the Time-Based Component, and (ii) 100% of the Performance-Based Component, in each case, as a lump-sum payment payable within 30 days of such without-Cause termination.
2 |
(d) Separation . The Employment Period will continue until (i) Executive’s resignation upon 30 days’ prior written notice to Employer, death or Disability or (ii) the Employer terminates Executive’s employment with or without Cause. Upon the termination of Executive’s employment for any reason, Executive (or, in the event of Executive’s death, Executive’s estate) shall be entitled to receive (A) any earned but unpaid Annual Base Salary through the date of such termination, subject to withholding and other appropriate deductions, (B) reimbursement for reasonable and documented expenses accrued during employment, subject to and in accordance with, Employer’s expense reimbursement policy, (C) any earned but unpaid annual bonus relating to any prior fiscal year, and (D) any vested benefits (including vacation, but excluding severance-type benefits) accrued through the date of such termination in accordance with applicable law or the governing agreement, plan or policy rales (clauses (A) through (D), collectively, the “ Accrued Obligations ”). If Executive’s employment is terminated by the Employer without Cause pursuant to clause (ii) above, then, in addition to the Accrued Obligations, (1) Employer will give Executive three months prior notice of such termination, during which period Executive will assist as reasonably required by Employer to transition his duties and train any successor, and during which period, (x) Employer will continue to pay Executive’s Annual Base Salary and premiums for continued coverage under the health benefit plans of Employer (which payment shall be made in installments on Employer’s regular payroll dates unless otherwise agreed between Executive and Employer), (y) no bonus eligibility will accrue for the entire calendar year in which Executive has been terminated and (z) Employer may, in its absolute discretion, place Executive on garden leave and require Executive not to come into the office; (2) during the nine-month period commencing on the date of termination, Employer shall continue to pay Executive at his or her rate of Annual Base Salary, payable in equal installments on Employer’s regular salary payment dates as in effect on the date of the Separation (the “ Severance Payments ” and any period during which the Severance Payments are payable, each a “ Severance Period ”); (3) during the Severance Period, Employer shall pay the premiums for Executive’s continued coverage under the health benefit plans of Employer (the “ Severance Benefits ”); provided , however , that Employer shall not have any obligation to pay such premiums if as a consequence Employer would be subject to any excise tax under Section 4980D of the Code or other penalty or liability pursuant to the provisions of the Patient Protection and Affordable Care Act of 2010 (as amended from time to time), and Executive’s health benefit coverage from Employer during the Severance Period shall run concurrent with the health continuation coverage period mandated by Section 4980B of the Code; provided , further , however , that at any time that Employer is providing the Severance Benefits, if Employer modifies the health and welfare benefits being provided to employees of a position comparable to Executive at the time of such termination, then Employer shall provide such revised or modified benefits to Executive and his or her family; and (4) Employer shall provide reimbursement of Executive’s reasonable documented costs for outplacement, career search, executive coaching or similar services, comparable to what has been customarily provided to similarly situated executives of the Employer, and such reimbursement shall be made to Executive by Employer within 30 days after presentation of such costs, in accordance with Employer’s company policy, to Employer. In addition, Employer shall have the option, by delivering written notice to Executive at least 60 days prior to the end of the then-applicable Severance Period, to extend the Severance Period for up to two additional six-month periods ( i.e ., through the 21-month anniversary of the date of Separation) during which period the Employer shall continue to pay Executive’s Severance Payments to Executive at the same annual rate (pro rated as applicable) and provide the Severance Benefits. Notwithstanding anything herein to the contrary, (I) Executive shall not be entitled to receive any portion of the Severance Payments unless Executive has executed and delivered to Employer a general release in form and substance satisfactory to Employer (a “ Release ”) in accordance with Section 1(e)(vii) (and such release is in full force and effect and has not been revoked), and (II) Executive shall be entitled to receive the Severance Payments only so long as Executive has not breached any of the provisions of such general release or Section 2 or Section 3 hereof, Following a Separation for any reason, Executive shall not be entitled to any further payments from Employer, the Parent or their respective Affiliates in respect of his or her employment with any of them, nor shall they have any further liability to Executive in respect thereof, except as expressly set forth in this Section 1 .
(e) Code Section 409A.
3 |
(i) The intent of the parties is that payments and benefits under this Agreement comply with or otherwise be exempt from Section 409A of the Code and the regulations and guidance promulgated thereunder (collectively “ Code Section 409A ”) and, accordingly, to the maximum extent permitted, this Agreement shall be interpreted to be either exempt from or in compliance therewith. In no event shall Employer or the Parent be liable for any additional tax, interest or penalty that may be imposed on Executive by Code Section 409A or damages for failing to comply with Code Section 409A.
(ii) Notwithstanding any other payment schedule provided herein to the contrary, if the Executive is deemed on the date of termination to be a “specified employee” within the meaning of that term under Code Section 409A(a)(2)(B), then any payment under Section 1 hereof that is considered deferred compensation under Code Section 409A payable on account of a “separation from service” shall not be made until the date which is the earlier of (A) the expiration of the six (6)-month period measured from the date of such “separation from service” of Executive, and (B) the date of Executive’s death (the “ Delay Period ”) to the extent required under Code Section 409A. Upon the expiration of the Delay Period, all payments delayed pursuant to this Section 1(e) shall be paid to the Executive in a lump sum, and all remaining payments due under this Agreement shall be paid or provided in accordance with the normal payment dates specified for them herein.
(iii) A termination of employment shall not be deemed to have occurred for purposes of any provision of this Agreement providing for the payment of any amounts or benefits that constitute “nonqualified deferred compensation” (within the meaning of Code Section 409A) upon or following a termination of employment unless such termination is also a “separation from service” within the meaning of Code Section 409A and, for purposes of any such provision of this Agreement, references to a “termination,” “termination of employment” or like terms shall mean “separation from service,”
(iv) For purposes of Code Section 409A, Executive’s right to receive any installment payment pursuant to this Agreement shall be treated as a right to receive a series of separate and distinct payments.
(v) Notwithstanding any other provision to the contrary, in no event shall any payment under this Agreement that constitutes “nonqualified deferred compensation” (within the meaning of Code Section 409A) be subject to offset by any other amount unless otherwise permitted by Code Section 409A.
(vi) To the extent that any reimbursement of expenses or in-kind benefits constitute “nonqualified deferred compensation” (within the meaning of Code Section 409A), such reimbursement shall be provided no later than December 31 of the year following the year in which the expense was incurred, the amount of any expenses reimbursed or in-kind benefits provided in one year shall not affect the amount eligible for reimbursement or in-kind benefits provided in any subsequent year (other than an arrangement providing for the reimbursement of medical expenses referred to in Section 105(b) of the Code), and Executive’s right to such payments or reimbursement of any such expenses shall not be subject to liquidation or exchange for any other benefit.
4 |
(vii) Notwithstanding anything to the contrary in this Agreement, to the extent that any payments of “nonqualified deferred compensation” (within the meaning of Code Section 409A) due under this Agreement as a result of Executive’s termination of employment are subject to Executive’s execution and delivery of a Release, (A) Employer shall deliver the Release to Executive within ten days following the date of Executive’s termination of employment, (B) provided Employer timely complies with its obligation under clause (A), if Executive fails to execute the Release on or prior to the Release Expiration Date (as defined below) or timely revokes his or her acceptance of the Release thereafter, he or she shall not be entitled to any payments or benefits otherwise conditioned on the Release, and (C) in any case where the date of termination of employment and the Release Expiration Date fall in two separate taxable years, any payments required to be made to Executive that are conditioned on the Release and are treated as “nonqualified deferred compensation” (within the meaning of Code Section 409A) shall be made in the later taxable year. For purposes of this Section 1(e)(vii) “ Release Expiration Date ” shall mean the date that is 31 days following the date of Executive’s termination of employment, or, in the event that Executive’s termination of employment is “in connection with an exit incentive or other employment termination program” (as such phrase is defined in the Age Discrimination in Employment Act of 1967), the date that is 55 days following the date of Executive’s termination of employment. To the extent that any payments of nonqualified deferred compensation (within the meaning of Code Section 409A) due under this Agreement as a result of Executive’s termination of employment are delayed pursuant to this Section 1(e)(vii) , such amounts shall be paid in a lump sum on the first payroll date following the date that Executive executes and does not revoke the Release (and the applicable revocation period has expired) or, in the case of any payments subject to clause (C) of this Section 1(e)(vii) , on the first payroll period to occur in the subsequent taxable year, if later.
2. Confidential Information .
(a) Obligation to Maintain Confidentiality . Executive acknowledges that the information, observations and data (including trade secrets) obtained by him or her during the course of his or her employment with Employer concerning the business or affairs of Employer, the Parent, and their respective Subsidiaries and Affiliates (“ Confidential Information ” - ) are the property of Employer, the Parent or such Subsidiaries and Affiliates, including information concerning acquisition opportunities in or reasonably related to Employer’s and the Parent’s business or industry of which Executive becomes aware during the Employment Period. Therefore, Executive agrees that he or she will not disclose to any unauthorized Person or use for his or her own account any Confidential Information without the Board’s written consent, unless and to the extent that the Confidential Information, (i) becomes generally known to and available for use by the public other than as a result of Executive’s acts or omissions to act or (ii) is required to be disclosed pursuant to any applicable law or court order. Executive shall deliver to Employer at a Separation, or at any other time Employer may reasonably request, all memoranda, notes, plans, records, reports, computer tapes, printouts and software and other documents and data (and copies thereof) relating to the Confidential Information, Work Product (as defined below) or the business of Employer, the Parent and their respective Subsidiaries and Affiliates (including, without limitation, all acquisition prospects, lists and contact information) which he or she may then possess or have under his or her control.
5 |
(b) Ownership of Property . Executive acknowledges that all discoveries, concepts, ideas, inventions, innovations, improvements, developments, methods, processes, programs, designs, analyses, drawings, reports, patent applications, copyrightable work and mask work (whether or not including any confidential information) and all registrations or applications related thereto, all other proprietary information and all similar or related information (whether or not patentable) that relate to Employer’s, the Parent’s or any of their respective Subsidiaries’ or Affiliates’ actual or anticipated business, research and development, or existing or future products or services and that are conceived, developed, contributed to, made, or reduced to practice by Executive (either solely or jointly with others) while employed by Employer, the Parent or any of their respective Subsidiaries or Affiliates (including any of the foregoing that constitutes any proprietary information or records) (“ Work Product ”) belong to Employer, the Parent or such Subsidiary or Affiliate, and Executive hereby assigns, and agrees to assign, all of the above Work Product to Employer, the Parent or to such Subsidiary or Affiliate. Any copyrightable work prepared in whole or in part by Executive in the course of his or her work for any of the foregoing entities shall be deemed a “work made for hire” under the copyright laws, and Employer, the Parent or such Subsidiary or Affiliate shall own all rights therein. To the extent that any such copyrightable work is not a “work made for hire,” Executive hereby assigns and agrees to assign to Employer, the Parent or such Subsidiary or Affiliate all right, title, and interest, including without limitation, copyright in and to such copyrightable work. Executive shall promptly disclose such Work Product and copyrightable work to the Board and perform all actions reasonably requested by the Board (whether during or after the Employment Period) to establish and confirm Employer’s, the Parent’s or such Subsidiary’s or Affiliate’s ownership (including, without limitation, assignments, consents, powers of attorney, and other instruments).
(c) Third Party Information . Executive understands that Employer, the Parent and their respective Subsidiaries and Affiliates will receive from third parties confidential or proprietary information (“ Third Party Information ”) subject to a duty on Employer’s, the Parent’s and their respective Subsidiaries and Affiliates’ part to maintain the confidentiality of such information and to use it only for certain limited purposes. During the Employment Period and thereafter, and without in any way limiting the provisions of Section 2(a) above, Executive will hold Third Party Information in the strictest confidence and will not disclose to anyone (other than personnel and consultants of Employer, the Parent or their respective Subsidiaries and Affiliates who need to know such information in connection with their work for Employer, the Parent or their respective Subsidiaries and Affiliates) or use, except in connection with his or her work for Employer, the Parent or their respective Subsidiaries and Affiliates, Third Party Information unless expressly authorized by the Board in writing.
6 |
(d) Use of Information of Prior Employers . During the Employment Period, Executive will not improperly use or disclose any confidential information or trade secrets, if any, of any former employers or any other Person to whom Executive has an obligation of confidentiality, and will not bring onto the premises of Employer, the Parent or any of their respective Subsidiaries or Affiliates any unpublished documents or any property belonging to any former employer or any other Person to whom Executive has an obligation of confidentiality unless consented to in writing by the former employer or Person, Executive will use in the performance of his or her duties only information which is (i) generally known and used by persons with training and experience comparable to Executive’s and which is (x) common knowledge in the industry or (y) otherwise legally in the public domain, (ii) otherwise provided or developed by Employer, the Parent or any of their respective Subsidiaries or Affiliates or (iii) in the case of materials, property or information belonging to any former employer or other Person to whom Executive has an obligation of confidentiality, approved for such use in writing by such former employer or Person, In furtherance of the foregoing, pursuant to the execution of the Original Senior Management Agreement, Executive executed and delivered to Employer a certificate in the form of Exhibit F attached to the Original Senior Management Agreement.
(e) Continuation of Terms . Notwithstanding anything in this Agreement to the contrary, the parties hereto expressly acknowledge and agree that the terms, conditions, obligations and covenants set forth in this Section 2 are a continuation without interruption, lapse, reprieve, gap or modification of any kind of the terms, conditions, obligations and covenants set forth in Section 7 of the Original Senior Management Agreement.
3. Noncompetition and Nonsolicitation . Executive acknowledges that in the course of his or her employment with Employer he or she will become familiar with Employer’s, the Parent’s and their respective Subsidiaries’ trade secrets and with other confidential information concerning Employer, the Parent and such Subsidiaries and that his or her services will be of special, unique and extraordinary value to Employer, the Parent and such Subsidiaries. Therefore, Executive agrees that:
(a) Noncompetition . During the Restricted Period, Executive shall not, directly or indirectly, own, manage, control, participate in, consult with, render services for, or in any manner engage in any business which competes anywhere in the United States with any of the businesses of the Employer, the Parent or any of their respective Subsidiaries or competing with any other business for which Employer, the Parent or any of their respective Subsidiaries has engaged in discussions or has requested and received information relating to the acquisition of such business by Employer, the Parent or any of their respective Subsidiaries within the eighteen-month period immediately preceding the Separation, Nothing herein shall prohibit Executive from being a passive owner of not more than 2% of the outstanding stock of any class of a corporation that is publicly traded, so long as Executive has no active participation in the business of such corporation.
(b) Nonsolicitation . During the Restricted Period, Executive shall not directly or indirectly through another entity (i) induce or attempt to induce any employee of Employer, the Parent or any of their respective Subsidiaries to leave the employ of Employer, the Parent or such Subsidiary, or in any way interfere with the relationship between Employer, the Parent or any of their respective Subsidiaries and any employee thereof, (ii) hire any employee of Employer, the Parent or any of their respective Subsidiaries or hire any former employee of Employer, the Parent or any of their respective Subsidiaries within 12 months after such person ceased to be an employee of Employer, the Parent or any of their respective Subsidiaries, (iii) induce or attempt to induce any customer, supplier, licensee or other business relation of Employer, the Parent or any of their respective Subsidiaries to cease doing business with Employer, the Parent or such Subsidiary or in any way interfere with the relationship between any such customer, supplier, licensee or business relation and Employer, the Parent or any such Subsidiary or (iv) directly or indirectly acquire or attempt to acquire an interest in any business relating to the business of Employer, the Parent or any of their respective Subsidiaries and with which Employer, the Parent or any of their respective Subsidiaries has engaged in discussions or has requested and received information relating to the acquisition of such business by Employer, the Parent or any of their respective Subsidiaries at any time within the eighteen-month period immediately preceding a Separation.
7 |
(c) Nondisparagement . Executive shall not, directly or indirectly through any other Person, make any public statement that is intended to or could reasonably be expected to disparage the Employer, the Parent or any of their respective Subsidiaries, Affiliates or businesses, products, services, equityholders, directors, managers, officers or employees.
(d) Enforcement . If, at the time of enforcement of Section 2 or this Section 3 . a court holds that the restrictions stated herein are unreasonable under circumstances then existing, the parties hereto agree that the maximum duration, scope or geographical area reasonable under such circumstances shall be substituted for the stated period, scope or area and that the court shall be allowed to revise the restrictions contained herein to cover the maximum duration, scope and area permitted by law. Because Executive’s services are unique and because Executive has access to confidential information, the parties hereto agree that money damages would be an inadequate remedy for any breach of this Agreement. Therefore, in the event a breach or threatened breach of this Agreement, Employer, and/or their respective successors or assigns may, in addition to other rights and remedies existing in their favor, apply to any court of competent jurisdiction for specific performance and/or injunctive or other relief in order to enforce, or prevent any violations of, the provisions hereof (without posting a bond or other security). In the event that Executive breaches any provision of this Section 3 , then the Restricted Period shall be extended for a period of time equal to the period of time during which such breach occurred and, in the event that Employer or any of its Subsidiaries is required to seek relief from such breach in any court, then the Restricted Period shall be extended for a period of time equal to the pendency of such proceedings, including all appeals.
(e) Additional Acknowledgments , Executive acknowledges that the provisions of this Section 3 are in consideration of: (i) employment with Employer, (ii) the issuance of the Executive Securities by the Partnership pursuant to the Original Senior Management Agreement and (iii) additional good and valuable consideration as set forth in this Agreement. In addition, Executive agrees and acknowledges that the restrictions contained in Section 2 and this Section 3 do not preclude Executive from earning a livelihood, nor do they unreasonably impose limitations on Executive’s ability to earn a living. In addition, Executive acknowledges (x) that the business of Employer, the Parent and their respective ‘ Subsidiaries will be conducted throughout the United States and other jurisdictions where Employer, the Parent or any of their respective Subsidiaries conduct business during the Employment Period, (y) notwithstanding the state of organization or principal office of Employer, the Parent or any of their respective Subsidiaries, or any of their respective executives or employees (including the Executive), it is expected that Employer, the Parent and their respective Subsidiaries will have business activities and have valuable business relationships within its industry throughout the United States and other jurisdictions where Employer, the Parent or any of their respective Subsidiaries conduct business during the Employment Period, and (z) as part of his or her responsibilities, Executive may be traveling throughout the United States and other jurisdictions where Employer, the Parent or any of their respective Subsidiaries conduct business during the Employment Period in furtherance of Employer’s business and its relationships, Executive agrees and acknowledges that the potential harm to Employer, the Parent and their respective Subsidiaries of the non-enforcement of any provision of Section 2 or this Section 3 outweighs any potential harm to Executive of its enforcement by injunction or otherwise, Executive acknowledges that he or she has carefully read this Agreement and consulted with legal counsel of his or her choosing regarding its contents, has given careful consideration to the restraints imposed upon Executive by this Agreement and is in full accord as to their necessity for the reasonable and proper protection of confidential and proprietary information of Employer, the Parent and their respective Subsidiaries now existing or to be developed in the future. Executive expressly acknowledges and agrees that each and every restraint imposed by this Agreement is reasonable with respect to subject matter, time period and geographical area.
8 |
4. Definitions .
“ Affiliate ” means, with respect to any Person, (i) any other Person controlling, controlled by or under common control with such particular Person, where “control” means the possession, directly or indirectly, of the power to direct the management and policies of a Person whether through the ownership of voting securities, by contract, or otherwise, and (ii) if such Person is a partnership, any partner thereof.
“ Board ” means the board of directors of Parent.
“ Cause ” means (i) the commission of a felony or a crime involving moral turpitude or the commission of any other act or omission involving dishonesty or fraud with respect to Employer, the Parent or any of their respective Subsidiaries or any of their customers, vendors or employees, (ii) substantial and repeated failure to perform duties of the office held by Executive as reasonably directed by an executive to whom Executive directly or indirectly reports or by Employer, (iii) gross negligence or willful misconduct with respect to Employer, the Parent or any of their respective Subsidiaries or any of their customers, vendors or employees, (iv) conduct which could reasonably be expected to bring Employer, the Parent or any of their respective Subsidiaries into substantial public disgrace or disrepute, (v) any breach by Executive of Section 2 or Section 3 of this Agreement and/or (vi) a failure to observe policies or standards regarding employment practices (including, without limitation, nondiscrimination and sexual harassment policies) as approved by Employer from time to time.
“ Disability ” means the disability of Executive caused by any physical or mental injury, illness or incapacity as a result of which Executive is, or is reasonably expected to be, unable to effectively perform the essential functions of Executive’s duties for a continuous period of more than 120 days or for 180 days (whether or not continuous) within a 365 day period, as determined by the Board in good faith.
“ Parent ” means Cision Ltd., a Cayman Islands public company, or in the event that Employer is no longer a Subsidiary of Cision Ltd., the Employer’s direct parent company.
9 |
“ Partnership ” means Canyon Holdings (Cayman), L.P., a Cayman Islands exempted limited partnership.
“ Person ” means an individual, a partnership, a limited liability company, a corporation, an association, a joint stock company, a trust, a joint venture, an unincorporated organization, investment fund, any other business entity and a governmental entity or any department, agency or political subdivision thereof.
“ Restricted Period ” means the Employment Period plus either (i) the Severance Period, if Executive’s employment is terminated without Cause pursuant to Section 1(d) above, after giving effect to extension of the Severance Period in accordance with Section 1(d) , or (ii) the 12-month period immediately following the Employment Period if Executive’s employment is terminated under any other circumstances.
“ Separation ” means Executive ceasing to be employed by the Parent, Employer and their Subsidiaries for any reason.
“ Subsidiary ” means, with respect to any Person, any corporation, limited liability company, partnership, association, or business entity of which (i) if a corporation, a majority of the total voting power of shares of stock entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers, or trustees thereof is at the time owned or controlled, directly or indirectly, by that Person or one or more of the other Subsidiaries of that Person or a combination thereof, or (ii) if a limited liability company, partnership, association, or other business entity (other than a corporation), a majority of partnership or other similar ownership interest thereof is at the time owned or controlled, directly or indirectly, by that Person or one or more Subsidiaries of that Person or a combination thereof. For purposes hereof, a Person or Persons shall be deemed to have a majority ownership interest in a limited liability company, partnership, association, or other business entity (other than a corporation) if such Person or Persons shall be allocated a majority of limited liability company, partnership, association, or other business entity gains or losses or shall be or control any managing director or general partner of such limited liability company, partnership, association, or other business entity, For purposes hereof, references to a “ Subsidiary ” of any Person shall be given effect only at such times that such Person has one or more Subsidiaries, and, unless otherwise indicated, the term “ Subsidiary ” refers to a Subsidiary of the Parent.
5. Notices . All notices, demands or other communications to be given or delivered under or by reason of the provisions of this Agreement shall be in writing and shall be deemed to have been given when (i) delivered personally to the recipient, (ii) sent to the recipient by reputable express courier service (charges prepaid), (iii) mailed to the recipient by certified or registered mail, return receipt requested and postage prepaid, or (iv) telecopied to the recipient (with hard copy sent to the recipient by reputable overnight courier service (charges prepaid) that same day) if telecopied before 5:00 p.m. Chicago, Illinois time on a business day, and otherwise on the next business day. Such notices, demands and other communications shall be sent to the parties at the addresses indicated below:
10 |
If to the Parent or Employer :
Cision US, Inc.
130 East Randolph St. 7th Floor
Chicago, IL 60601
Facsimile: (301) 459-2827
Email: jack.pearlstein@cision.com
Attention: Jack Pearlstein
with a copy to :
Kirkland & Ellis LLP
300 North LaSalle
Chicago, IL 60654
Facsimile: (312) 862-2200
Attention: Stephen L. Ritchie, P.C.
Mark A. Fennell, P.C.
If to Executive :
Jason Edelboim
820 West End Avenue
Apartment 16A
New York NY 10025
or such other address or to the attention of such other Person as the recipient party shall have specified by prior written notice to the sending party.
6. General Provisions .
(a) Severability . Whenever possible, each provision of this Agreement will be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement is held to be invalid, illegal or unenforceable in any respect under any applicable law or rule in any jurisdiction, such invalidity, illegality or unenforceability will not affect any other provision or any other jurisdiction, but this Agreement will be reformed, construed and enforced in such jurisdiction as if such invalid, illegal or unenforceable provision had never been contained herein.
(b) Complete Agreement . This Agreement, those documents expressly referred to herein and other documents of even date herewith embody the complete agreement and understanding among the parties and supersede and preempt any prior understandings, agreements or representations by or among the parties, written or oral, which may have related to the subject matter hereof in any way, provided , that any other confidentiality non-competition, or non-solicitation obligations of Executive with the Parent, Employer, or their respective Affiliates shall not be so superseded or preempted.
11 |
(c) No Strict Construction; Descriptive Headings; Interpretation . The language used in this Agreement shall be deemed to be the language chosen by the parties hereto to express their mutual intent, and no rule of strict construction shall be applied against any party. The descriptive headings of this Agreement are inserted for convenience only and do not constitute a section of this Agreement. The use of the word “including” in this Agreement shall be by way of example rather than by limitation. Any reference in this Agreement to the “judgment” or “discretion” of a party shall mean the sole judgment or discretion of such party.
(d) Counterparts . This Agreement may be executed in separate counterparts (including by means of facsimile), each of which is deemed to be an original and all of which taken together constitute one and the same agreement.
(e) Successors and Assigns . Except as otherwise provided herein, this Agreement shall bind and inure to the benefit of and be enforceable by Executive, Employer, and their respective successors and assigns; provided that the rights and obligations of Executive under this Agreement shall not be assigned or delegated.
(f) Choice of Law . The laws of the State of Delaware will govern all questions concerning the relative rights of the Employer and Executive and all other questions concerning the construction, validity and interpretation of this Agreement and the exhibits hereto, without giving effect to any choice of law or conflict of law provision or rule (whether of the State of Delaware or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of Delaware.
(g) Jurisdiction; Venue; Service of Process . Each party hereto agrees that it may bring any action between the parties hereto arising out of or related to this Agreement in the Court of Chancery of the State of Delaware (the “ Court of Chancery ”) or, to the extent the Court of Chancery does not have subject matter jurisdiction, the United States District Court for the District of Delaware and the appellate courts having jurisdiction of appeals in such courts (the “ Delaware Federal Court ”) or, to the extent neither the Court of Chancery nor the Delaware Federal Court has subject matter jurisdiction, the Superior Court of the State of Delaware (collectively, the “ Chosen Courts ”), and, solely with respect to any such action (i) irrevocably submits to the non-exclusive jurisdiction of the Chosen Courts, (ii) waives any objection to laying venue in any such action in the Chosen Courts, (iii) waives any objection that the Chosen Courts are an inconvenient forum or do not have jurisdiction over any party hereto and (iv) agrees that service of process upon such party in any such action shall be effective if notice is given in accordance with Section 5 .
(h) MUTUAL WAIVER OF JURY TRIAL . BECAUSE DISPUTES ARISING IN CONNECTION WITH COMPLEX TRANSACTIONS ARE MOST QUICKLY AND ECONOMICALLY RESOLVED BY AN EXPERIENCED AND EXPERT PERSON AND THE PARTIES HERETO WISH APPLICABLE STATE AND FEDERAL LAWS TO APPLY (RATHER THAN ARBITRATION RULES), THE PARTIES HERETO DESIRE THAT THEIR DISPUTES BE RESOLVED BY A JUDGE APPLYING SUCH APPLICABLE LAWS. THEREFORE, TO ACHIEVE THE BEST COMBINATION OF THE BENEFITS OF THE JUDICIAL SYSTEM AND OF ARBITRATION, EACH PARTY TO THIS AGREEMENT HEREBY WAIVES ALL RIGHTS TO TRIAL BY JURY IN ANY ACTION, SUIT, OR PROCEEDING BROUGHT TO RESOLVE ANY DISPUTE BETWEEN OR AMONG ANY OF THE PARTIES HERETO, WHETHER ARISING IN CONTRACT, TORT, OR OTHERWISE, ARISING OUT OF, CONNECTED WITH, RELATED OR INCIDENTAL TO THIS AGREEMENT, THE TRANSACTIONS CONTEMPLATED HEREBY AND/OR THE RELATIONSHIP ESTABLISHED AMONG THE PARTIES HEREUNDER.
12 |
(i) Executive’s Cooperation . During the Employment Period and thereafter, Executive shall cooperate with Employer and its Subsidiaries and Affiliates in any disputes with third parties, internal investigation or administrative, regulatory or judicial proceeding as reasonably requested by Employer (including, without limitation, Executive being available to Employer upon reasonable notice for interviews and factual investigations, appearing at Employer’s reasonable request to give testimony without requiring service of a subpoena or other legal process, volunteering to Employer all pertinent information and turning over to Employer all relevant documents which are or may come into Executive’s possession, all at times and on schedules that are reasonably consistent with Executive’s other permitted activities and commitments). In the event Employer requires Executive’s cooperation in accordance with this paragraph after the Employment Period, Employer shall reimburse Executive for reasonable travel expenses (including lodging and meals, upon submission of receipts).
(j) Remedies . Each of the parties to this Agreement will be entitled to enforce its rights under this Agreement specifically, to recover damages and costs (including attorney’s fees) caused by any breach of any provision of this Agreement and to exercise all other rights existing in its favor. The parties hereto agree and acknowledge that money damages may not be an adequate remedy for any breach of the provisions of this Agreement and that any party may in its sole discretion apply to any court of law or equity of competent jurisdiction (without posting any bond or deposit) for specific performance and/or other injunctive relief in order to enforce or prevent any violations of the provisions of this Agreement. Notwithstanding anything to the contrary herein, nothing in this Agreement prevents the Executive from filing any administrative charge or participating in any administrative investigation or proceeding with respect to which the right to file or participate cannot be waived under applicable law.
(k) Amendment and Waiver . The provisions of this Agreement may be amended and waived only with the prior written consent of Employer, the Parent, and Executive.
(l) Insurance . Employer, at its discretion, may apply for and procure in its own name and for its own benefit life and/or disability insurance on Executive in any amount or amounts considered available. Executive agrees to cooperate in any medical or other examination, supply any information, and to execute and deliver any applications or other instruments in writing as may be reasonably necessary to obtain and constitute such insurance, Executive hereby represents that Executive has no reason to believe that Executive’s life is not insurable at rates now prevailing for healthy individuals of Executive’s age.
(m) Business Days . If any time period for giving notice or taking action hereunder expires on a day which is a Saturday, Sunday or holiday in the state in which Employer’s chief executive office is located, the time period shall be automatically extended to the business day immediately following such Saturday, Sunday or holiday.
13 |
(n) Indemnification and Reimbursement of Payments on Behalf of Executive . Employer, the Parent and their respective Subsidiaries shall be entitled to deduct or withhold from any amounts owing from Employer, the Parent or any of their respective Subsidiaries to Executive (including withholding shares or other equity securities in the case of issuances of equity by Employer, the Parent or any of their respective Subsidiaries) any federal, state, local or foreign withholding taxes, excise taxes, or employment taxes (“ Taxes ”) imposed with respect to Executive’s compensation or other payments from Employer, the Parent or any of their respective Subsidiaries, including, without limitation, wages, bonuses, distributions, the receipt or exercise of equity options and/or the receipt or vesting of restricted equity. In the event any such deductions or withholdings are not made, Executive shall indemnify the Employer, the Parent and each of their respective Subsidiaries for any amounts paid with respect to any such Taxes, together with any interest, penalties and related expenses thereto.
(o) Termination . This Agreement (except for the provisions of Sections 1(a) , 1(b) and 1(c) ) shall survive a Separation and shall remain in full force and effect after such Separation.
(p) Electronic Delivery . This Agreement, the agreements referred to herein, and each other agreement or instrument entered into in connection herewith or therewith or contemplated hereby or thereby, and any amendments hereto or thereto, to the extent signed and delivered by means of a photographic, photostatic, facsimile, portable document format (.pdf), or similar reproduction of such signed writing using a facsimile machine or electronic mail shall be treated in all manner and respects as an original agreement or instrument and shall be considered to have the same binding legal effect as if it were the original signed version thereof delivered in person. At the request of any party hereto or to any such agreement or instrument, each other party hereto or thereto shall re-execute original forms thereof and deliver them to all other parties. No party hereto or to any such agreement or instrument shall raise the use of a facsimile machine or electronic mail to deliver a signature or the fact that any signature or agreement or instrument was transmitted or communicated through the use of a facsimile machine or electronic mail as a defense to the formation or enforceability of a contract and each such party forever waives any such defense.
(q) No Third-Party Beneficiaries . Except as expressly provided herein, no term or provision of this Agreement is intended to be, or shall be, for the benefit of any Person not a party hereto, and no such other Person shall have any right or cause of action hereunder.
(r) Representations . Executive represents and warrants to Employer that (i) this Agreement constitutes the legal, valid and binding obligation of Executive, enforceable in accordance with its terms, and the execution, delivery and performance of this Agreement by Executive does not and will not conflict with, violate or cause a breach of any agreement, contract or instrument to which Executive is a party or any judgment, order or decree to which Executive is subject, and (ii) other than the A&R Senior Management Agreement, Executive is neither party to, nor bound by, any other employment agreement, consulting agreement, noncompete agreement, non-solicitation agreement or confidentiality agreement or any other agreement which could impair or interfere with Executive’s obligations hereunder.
* * * * * * *
14 |
IN WITNESS WHEREOF, the parties hereto have executed this Employment Agreement as of the date first above written,
CISION US, INC. | ||
By: | /s/ Jack Pearlstein | |
Name: | Jack Pearlstein | |
Its: | Chief Financial Officer |
EXECUTIVE | |
/s/ Jason Edelboim | |
Jason Edelboim |
15 |
Exhibit 10.22
Cision Ltd.
Dealer Manager and Solicitation Agent Agreement
New York, New York
April 17, 2018
Citigroup Global Markets Inc.,
as Dealer Manager
c/o Citigroup Global Markets Inc.
388 Greenwich Street
New York, New York 10013
Ladies and Gentlemen:
Cision Ltd., a Cayman Islands exempted company (the “ Company ” or “ we ”), plans to make offers (each such offer as described in the Prospectus (as defined below), together with the related Consent Solicitation (as defined below), an “ Exchange Offer ,” and collectively, the “ Exchange Offers ”), for any and all of its outstanding warrants (as set forth in the Prospectus) (the “ Warrants ”) in exchange for consideration consisting of 0.26 ordinary shares, par value $0.0001 per share (the “ Ordinary Shares ”), for each Warrant tendered, on the terms and subject to the conditions set forth in the Offering Documents (as defined below). Certain terms used herein are defined in Section 21 hereof.
Concurrently with making the offers to exchange described in the preceding paragraph, the Company plans to solicit consents (the “ Consents ”) from the holders of Warrants (each as described in the Offering Documents, a “ Consent Solicitation ,” and collectively, the “ Consent Solicitations ”) to certain amendments to the terms of the Warrants. Subject to the terms and conditions set forth in the Offering Documents, if Consents are received from the holders of at least a majority of the outstanding Warrants, the proposed amendments (the “ Amendments ”) shall be adopted as to the Warrants.
Any reference herein to the Pre-Effective Registration Statement, the Registration Statement, the Preliminary Prospectus or the Prospectus shall be deemed to refer to and include the documents incorporated by reference therein, which were filed under the Exchange Act on or before the filing of the Pre-Effective Registration Statement, the Effective Date or the issue date of the Preliminary Prospectus or the Prospectus, as the case may be; and any reference herein to the terms “amend,” “amendment” or “supplement” with respect to the Pre-Effective Registration Statement, the Registration Statement, the Preliminary Prospectus or the Prospectus shall be deemed to refer to and include the filing of any document under the Exchange Act after the initial filing of the Pre-Effective Registration Statement, the Effective Date or the issue date of the Preliminary Prospectus or the Prospectus, as the case may be, deemed to be incorporated therein by reference.
1. Appointment as Dealer Manager and Solicitation Agent .
(a) Citigroup Global Markets Inc. (“ Citi ”) will act as the exclusive dealer manager and solicitation agent for the Exchange Offers and the Consent Solicitations (the “ Dealer Manager ” or “ you ”) in accordance with your customary practices, including without limitation to use commercially reasonable efforts to solicit tenders pursuant to the Exchange Offers, the solicitation of Consents pursuant to the Consent Solicitations and assisting in the distribution of the Offering Documents and to perform such services as are customarily performed by investment banking firms acting as dealer managers and solicitation agents of exchange offers of like nature.
(b) You agree that all actions taken by you as Dealer Manager have complied and will comply in all material respects with all applicable laws, regulations and rules of the United States, including, without limitation, the applicable rules and regulations of the registered national securities exchanges of which you are a member and of FINRA.
(c) The Dealer Manager, in its sole discretion, may continue to own or dispose of, in any manner it may elect, any Warrants it may beneficially own at the date hereof or hereafter acquire, in any such case, subject to applicable law. The Dealer Manager has no obligation to the Company, pursuant to this Agreement or otherwise, to tender or refrain from tendering Warrants beneficially owned by it in any Exchange Offer (or to deliver Consents in any related Consent Solicitation). The Dealer Manager acknowledges and agrees that if any Exchange Offer is not consummated for any reason, the Company shall have no obligation, pursuant to this Agreement or otherwise, to acquire any Warrants from the Dealer Manager or otherwise to hold the Dealer Manager harmless with respect to any losses it may incur in connection with the resale to any third parties of any Warrants.
(d) The Company agrees that it will not file, use or publish any material in connection with the Exchange Offers, use the name Citi, Citigroup Global Markets Inc. or refer to you or your relationship with the Company, without your prior written consent to the form of such use or reference. There shall be no fee for any such permitted use or reference other than as set forth herein.
2. Compensation . The Company shall pay to you in respect of your services as Dealer Manager the fee set forth in the attached Schedule A (the “ Fee ”). The Company shall also promptly reimburse you, without regard to consummation of the Exchange Offers, for your reasonable out-of-pocket expenses in preparing for and performing your functions as Dealer Manager, including the reasonable fees, costs and out-of-pocket expenses of your counsels for their representation of you in connection therewith, not exceeding in the case of such counsels’ fees, costs and out-of-pocket expenses, $150,000.
3. Representations and Warranties . The Company represents and warrants to and agrees with you as set forth below in this Section 3:
(a) Form S-4. The Company has prepared and filed with the Commission the Pre-Effective Registration Statement on Form S-4, including a related Preliminary Prospectus, for registration under the Securities Act of the Ordinary Shares in connection with the Exchange Offer. The Pre-Effective Registration Statement will have been declared effective by the Commission prior to the Expiration Date and any request on the part of the Commission or any other federal, state or local or other governmental or regulatory agency, authority or instrumentality or court or arbitrator for the amending or supplementing of the Offering Documents or for additional information has been complied with. As filed, the Prospectus shall contain all information required by the Securities Act and the Exchange Act and the rules and regulations of the Commission thereunder. The Company meets the conditions for the use of Form S-4 with respect to the Pre-Effective Registration Statement and the Registration Statement in connection with the Exchange Offer as contemplated by this Agreement.
(b) Pre-Effective Registration Statement, Registration Statement, Preliminary Prospectus and Prospectus. (i) The Pre-Effective Registration Statement and any amendment thereto, as of the Commencement Date, the Registration Statement, as of the Effective Date, the Expiration Date and the Exchange Date, and the Preliminary Prospectus and any amendments and supplements thereto, as of its date, the Commencement Date and the Exchange Date, comply, and will comply, in all material respects with the Securities Act and the Exchange Act and the rules and regulations of the Commission thereunder (including Rule 13e-4 and Rule 14e under the Exchange Act), (ii) the Prospectus (together with any supplement and amendment thereto), as of the date it is first filed in accordance with Rule 424(b) under the Securities Act (if it is so filed) and the Exchange Date, will comply, in all material respects with the Securities Act and the Exchange Act and the rules and regulations of the Commission thereunder (including Rule 13e-4 and Rule 14e under the Exchange Act), (iii) the Pre-Effective Registration Statement and any amendment thereto as of the Commencement Date, and the Registration Statement, as of the Effective Date, the Expiration Date and the Exchange Date, did not contain, and will not contain, any untrue statement of a material fact and did not omit, and will not omit, to state a material fact required to be stated therein or necessary to make the statements therein not misleading, (iv) the Preliminary Prospectus as of its date did not contain any untrue statement of a material fact and did not omit to state a material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading and (v) the Prospectus (together with any supplement or amendment thereto), as of the date it is first filed in accordance with Rule 424(b) (if required), the Expiration Date and the Exchange Date, will not contain any untrue statement of a material fact and will not omit to state a material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; provided, however , that the Company makes no representations or warranties as to the information contained in or omitted from the Pre-Effective Registration Statement, the Registration Statement, any Preliminary Prospectus or the Prospectus (or any supplement or amendment thereto) in reliance upon and in conformity with information furnished to the Company in writing by or on behalf of the Dealer Manager expressly for inclusion therein (the “ Dealer Manager Information ”), it being understood that the Dealer Manager Information shall include only the name and the contact information of the Dealer Manager.
(c) Documents Incorporated by Reference. The documents incorporated by reference in the Registration Statement and the Prospectus and the Schedule TO, when they became effective or were filed with the Commission, as the case may be, conformed in all material respects to the requirements of the Securities Act or the Exchange Act, as applicable, and the rules and regulations of the Commission thereunder, and none of such documents contained an untrue statement of a material fact or omitted to state a material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; and any further documents so filed and incorporated by reference in the Prospectus, when such documents become effective or are filed with the Commission, as the case may be, will conform in all material respects to the requirements of the Securities Act or the Exchange Act, as applicable, and the rules and regulations of the Commission thereunder and will not contain an untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; provided , however , that this representation and warranty shall not apply to any statements or omissions made in reliance upon and in conformity with the Dealer Manager Information.
(d) Schedule TO. (i) on the Commencement Date, the Company will duly file with the Commission the Schedule TO pursuant to Rule 13e-4 promulgated by the Commission under the Exchange Act, a copy of which Schedule TO (including the documents required by Item 12 thereof to be filed as exhibits thereto) in the form in which it is to be so filed has been or will be furnished to the Dealer Manager; (ii) any amendments to the Schedule TO and the final form of all such documents filed with the Commission or published, sent, or given to holders of Warrants will be furnished to you prior to any such amendment, filing, publication, or distribution; (iii) the Schedule TO as so filed and as amended or supplemented from time to time will comply in all material respects with the provisions of the Exchange Act and the rules and regulations thereunder; and (iv) the Schedule TO as filed or as amended or supplemented from time to time will not contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements made therein, in light of the circumstances under which they are made, not misleading, except that the Company makes no representation or warranty with respect to any statement contained in, or any matter omitted from, the Schedule TO and in conformity with the Dealer Manager Information.
(e) Rule 165 Material. The Rule 165 Material when filed with the Commission complied or will comply in all material respects with the applicable requirements of the Securities Act; and no Rule 165 Material, at the time of first use, when taken together with each Preliminary Prospectus and the Prospectus, as then amended or supplemented, contained or will contain any untrue statement of a material fact or omitted or will omit to state a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; provided, however, that this representation and warranty shall not apply to any statements or omissions in the Rule 165 Material made in reliance upon and in conformity with the Dealer Manager Information.
(f) No Stop Orders . No stop order suspending the effectiveness of the Registration Statement has been issued by the Commission.
(g) Emerging Growth Company . As of the date hereof, the Company is an “emerging growth company,” as defined in Section 2(a) of the Securities Act (an “ Emerging Growth Company ”).
(h) Testing-the-Waters Materials. The Company (i) has not alone engaged in any Testing-the-Waters Communications and (ii) has not authorized anyone to engage in Testing-the-Waters Communications. The Company has not distributed or approved for distribution any Written Testing-the-Waters Communications. “ Written Testing-the-Waters Communication ” means any Testing-the-Waters Communication that is a written communication within the meaning of Rule 405 under the Securities Act.
(i) Financial Statements. The financial statements (including the related notes thereto) of the Company and its consolidated subsidiaries included in the Pre-Effective Registration Statement, the Registration Statement, the Preliminary Prospectus and the Prospectus comply in all material respects with the applicable requirements of the Securities Act and the Exchange Act, as applicable, and present fairly in all material respects the financial position of the Company and its consolidated subsidiaries as of the dates indicated and the results of their operations and the changes in their cash flows for the periods specified; such financial statements have been prepared in conformity with generally accepted accounting principles (“ GAAP ”) in the United States applied on a consistent basis throughout the periods covered thereby, and any supporting schedules included in the Pre-Effective Registration Statement, the Registration Statement, the Preliminary Prospectus and the Prospectus present fairly in all material respects the information required to be stated therein; and the other financial information included in the Pre-Effective Registration Statement, the Registration Statement, the Preliminary Prospectus and the Prospectus has been derived from the accounting records of the Company and its consolidated subsidiaries and presents fairly in all material respects the information shown thereby; and the pro forma financial information and the related notes thereto included in the Pre-Effective Registration Statement, the Registration Statement, the Preliminary Prospectus and the Prospectus have been prepared in all material respects in accordance with the applicable requirements of the Securities Act and the Exchange Act, as applicable, and the assumptions underlying such pro forma financial information are reasonable and are set forth in the Pre-Effective Registration Statement, the Registration Statement, the Preliminary Prospectus and the Prospectus.
(j) No Material Adverse Change. Since the date of the most recent financial statements of the Company included in the Pre-Effective Registration Statement, the Registration Statement, the Preliminary Prospectus and the Prospectus, (i) there has not been any change in the share capital (other than the issuance of Ordinary Shares upon exercise of stock options and warrants described as outstanding in, and the grant of options and awards under existing equity incentive plans described in, the Pre-Effective Registration Statement, the Registration Statement, the Preliminary Prospectus and the Prospectus), short-term debt or long-term debt of the Company or any of its subsidiaries, or any dividend or distribution of any kind declared, set aside for payment, paid or made by the Company on any class of shares or capital stock, or any material adverse change, or any development that would reasonably be expected to cause a material adverse change, in or affecting the business, properties, management, financial position, shareholders’ equity, results of operations or prospects of the Company and its subsidiaries taken as a whole; (ii) neither the Company nor any of its subsidiaries has entered into any transaction or agreement (whether or not in the ordinary course of business) that is material to the Company and its subsidiaries taken as a whole or incurred any liability or obligation, direct or contingent, that is material to the Company and its subsidiaries taken as a whole; and (iii) neither the Company nor any of its subsidiaries has sustained any loss or interference with its business that is material to the Company and its subsidiaries taken as a whole and that is either from fire, explosion, flood or other calamity, whether or not covered by insurance, or from any labor disturbance or dispute or any action, order or decree of any court or arbitrator or governmental or regulatory authority, except in each case as otherwise disclosed in the Pre-Effective Registration Statement, the Registration Statement, the Preliminary Prospectus and the Prospectus.
(k) Organization and Good Standing. The Company and each of its subsidiaries have been duly incorporated or organized and are validly existing and in good standing under the laws of their respective jurisdictions of incorporation or organization, are duly qualified to do business and are in good standing in each jurisdiction in which their respective ownership or lease of property or the conduct of their respective businesses requires such qualification, and have all power and authority necessary to own or hold their respective properties and to conduct the businesses in which they are engaged, except where the failure to be so qualified or in good standing or have such power or authority would not, individually or in the aggregate, have a material adverse effect on the business, properties, management, financial position, shareholders’ equity, results of operations or prospects of the Company and its subsidiaries taken as a whole or on the performance by the Company of its obligations under this Agreement (a “ Material Adverse Effect ”). The Company does not own or control, directly or indirectly, any corporation, association or other entity other than the subsidiaries listed in Exhibit 21 to the Registration Statement. The subsidiaries listed in Schedule 3 to this Agreement are the only significant subsidiaries of the Company.
(l) Capitalization. The Company has an authorized capitalization as set forth in the Pre-Effective Registration Statement, the Registration Statement, the Preliminary Prospectus and the Prospectus under the heading “Capitalization”; all the outstanding shares of the Company have been duly and validly authorized and issued and are fully paid and non-assessable and are not subject to any pre-emptive or similar rights; except as described in or expressly contemplated by the Preliminary Prospectus and the Prospectus, there are no outstanding rights (including, without limitation, pre-emptive rights), warrants or options to acquire, or instruments convertible into or exchangeable for, any shares or other equity interest in the Company or any of its subsidiaries, or any contract, commitment, agreement, understanding or arrangement of any kind relating to the issuance of any shares of the Company or any such subsidiary, any such convertible or exchangeable securities or any such rights, warrants or options; the share capital of the Company conforms in all material respects to the description thereof contained in the Pre-Effective Registration Statement, the Registration Statement, the Preliminary Prospectus and the Prospectus; and all the outstanding shares or other equity interests of each subsidiary owned, directly or indirectly, by the Company have been duly and validly authorized and issued, are fully paid and non-assessable (except, in the case of any foreign subsidiary, for directors’ qualifying shares) and are owned directly or indirectly by the Company, free and clear of any lien, charge, encumbrance, security interest, restriction on voting or transfer or any other claim of any third party other than as described in the Pre-Effective Registration Statement, the Registration Statement, the Preliminary Prospectus and the Prospectus, including liens, encumbrances and restrictions imposed in connection with or permitted under the debt described under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Debt Obligations.” The Ordinary Shares to be issued in exchange for the Warrants as contemplated by the Offering Documents have been duly authorized for issuance and sale by the Company, and, when issued and delivered as contemplated therein, will be duly and validly issued, fully paid and nonassessable; neither the filing of the Registration Statement nor the issuance of the Ordinary Shares as contemplated by the Offering Documents will give rise to any preemptive or similar rights, other than those which have been waived or satisfied.
(m) Required Filings . The Company has filed with the Commission pursuant to Rule 13e-4(c)(1) under the Exchange Act (or Rule 425 under the Securities Act) or otherwise all written communications made by the Company or any affiliate of the Company in connection with or relating to the Exchange Offer or the Consent Solicitation that are required to be filed with the Commission, in each case on the date of their first use.
(n) Compliance. The Company has complied in all material respects with the Securities Act and the Exchange Act and the rules and regulations of the Commission thereunder in connection with the Exchange Offer, the Consent Solicitation, the Offering Documents and the transactions contemplated hereby and thereby. The Company is subject to and in full compliance with the reporting requirements of Section 13 or Section 15(d) of the Exchange Act. The Company has not received from the Commission any written comments, questions or requests for modification of disclosure in respect of any reports filed with the Commission pursuant to the Exchange Act, except for comments, questions or requests (i) that have been satisfied by the provision of supplemental information to the staff of the Commission, or (ii) in respect of which the Company has agreed with the staff of the Commission to make a prospective change in future reports filed by it with the Commission pursuant to the Exchange Act, of which agreement the Dealer Manager and its counsel have been made aware.
(o) Stock Options. With respect to the stock options (the “ Stock Options ”) granted pursuant to the stock-based compensation plans of the Company and its subsidiaries (the “ Company Stock Plans ”), (i) each Stock Option intended to qualify as an “incentive stock option” under Section 422 of the Code so qualifies, (ii) each grant of a Stock Option was duly authorized no later than the date on which the grant of such Stock Option was by its terms to be effective by all necessary corporate action, including, as applicable, approval by the board of directors of the Company (or a duly constituted and authorized committee thereof) and any required shareholder approval by the necessary number of votes or written consents, and the award agreement governing such grant (if any) was duly executed and delivered by each party thereto, (iii) each such grant was made in accordance with the terms of the Company Stock Plans, the Exchange Act and all other applicable laws and regulatory rules or requirements, including the rules of the New York Stock Exchange and any other exchange on which Company securities are traded, and (iv) each such grant was properly accounted for in accordance with GAAP in the financial statements (including the related notes) of the Company and disclosed in the Company’s filings with the Commission in accordance with the Exchange Act and all other applicable laws. The Company has not knowingly granted, and there is no and has been no policy or practice of the Company of granting, Stock Options prior to, or otherwise coordinating the grant of Stock Options with, the release or other public announcement of material information regarding the Company or its subsidiaries or their results of operations or prospects.
(p) Due Authorization. The Company has full right, power and authority to execute and deliver this Agreement and to perform its obligations hereunder; and all action required to be taken for the due and proper authorization, execution and delivery by it of this Agreement and the consummation by it of the transactions contemplated hereby has been duly and validly taken.
(q) Dealer Manager and Solicitation Agent Agreement. This Agreement has been duly authorized, executed and delivered by the Company.
(r) No Violation or Default. Neither the Company nor any of its subsidiaries is (i) in violation of its charter or by-laws or similar organizational documents; (ii) in default, and no event has occurred that, with notice or lapse of time or both, would constitute such a default, in the due performance or observance of any term, covenant or condition contained in any indenture, mortgage, deed of trust, loan agreement or other agreement or instrument to which the Company or any of its subsidiaries is a party or by which the Company or any of its subsidiaries is bound or to which any property or asset of the Company or any of its subsidiaries is subject; or (iii) in violation of any law or statute or any judgment, order, rule or regulation of any court or arbitrator or governmental or regulatory authority, except, in the case of clauses (ii) and (iii) above, for any such default or violation that would not, individually or in the aggregate, have a Material Adverse Effect.
(s) No Conflicts. The execution, delivery and performance by the Company of this Agreement, the conduct and consummation of the Exchange Offers and the consummation by the Company of any other transactions contemplated by this Agreement or the Preliminary Prospectus and the Prospectus will not (i) conflict with or result in a breach or violation of any of the terms or provisions of, or constitute a default under, result in the termination, modification or acceleration of, or result in the creation or imposition of any lien, charge or encumbrance upon any property, right or asset of the Company or any of its subsidiaries pursuant to, any indenture, mortgage, deed of trust, loan agreement or other agreement or instrument to which the Company or any of its subsidiaries is a party or by which the Company or any of its subsidiaries is bound or to which any property, right or asset of the Company or any of its subsidiaries is subject, (ii) result in any violation of the provisions of the charter or by-laws or similar organizational documents of the Company or any of its subsidiaries or (iii) result in the violation of any law or statute applicable to the Company or any of its subsidiaries or any judgment, order, rule or regulation of any court or arbitrator or governmental or regulatory authority having authority over the Company or any of its subsidiaries, except, in the case of clauses (i) and (iii) above, for any such conflict, breach, violation, default, lien, charge or encumbrance that would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.
(t) No Consents Required. No consent, approval, authorization, order, registration or qualification of or with any court or arbitrator or governmental or regulatory authority having authority over the Company is required for the execution, delivery and performance by the Company of this Agreement, and the consummation by the Company of the transactions contemplated by this Agreement, except for the registration of the Ordinary Shares and the Warrants under the Securities Act and such consents, approvals, authorizations, orders and registrations or qualifications as may be required by the Financial Industry Regulatory Authority, Inc. (“ FINRA ”) and under applicable state securities laws in connection with the Exchange Offer and Consent Solicitation.
(u) Legal Proceedings. Except as described in the Pre-Effective Registration Statement, the Registration Statement, the Preliminary Prospectus and the Prospectus, there are no legal, governmental or regulatory investigations, actions, demands, claims, suits, arbitrations, inquiries or proceedings (“ Actions ”) pending to which the Company or any of its subsidiaries is or would reasonably be expected to become a party or to which any property of the Company or any of its subsidiaries is or would reasonably be expected to become the subject that, individually or in the aggregate, if determined adversely to the Company or any of its subsidiaries, could reasonably be expected to have a Material Adverse Effect; no such Actions are threatened or, to the knowledge of the Company, contemplated by any governmental or regulatory authority or threatened by others; and (i) there are no current or pending Actions that are required under the Securities Act to be described in the Pre-Effective Registration Statement, the Registration Statement, the Preliminary Prospectus or the Prospectus that are not so described in the Pre-Effective Registration Statement, the Registration Statement, the Preliminary Prospectus and the Prospectus and (ii) there are no statutes, regulations or contracts or other documents that are required under the Securities Act to be filed as exhibits to the Pre-Effective Registration Statement or Registration Statement or described in the Pre-Effective Registration Statement, the Registration Statement, the Preliminary Prospectus or the Prospectus that are not so filed as exhibits to the Pre-Effective Registration Statement and Registration Statement or described in the Pre-Effective Registration Statement, the Registration Statement, the Preliminary Prospectus and the Prospectus.
(v) Independent Accountants. PricewaterhouseCoopers LLP, who has certified certain financial statements of the Company and its subsidiaries, Ernst & Young LLP, who has certified certain financial statements of Vocus, Inc. and PRN Group, and Marcum LLP, who has certified certain financial statements of Capitol Acquisition Corp. III, is each an independent registered public accounting firm with respect to the Company and its subsidiaries within the applicable rules and regulations adopted by the Commission and the Public Company Accounting Oversight Board (United States) and as required by the Securities Act.
(w) Title to Real and Personal Property. The Company and its subsidiaries have good and marketable title in fee simple to, or have valid rights to lease or otherwise use, all items of real and personal property that are material to the respective businesses of the Company and its subsidiaries, in each case free and clear of all liens, encumbrances, claims and defects and imperfections of title except those that (i) do not materially interfere with the use made and proposed to be made of such property by the Company and its subsidiaries or (ii) would not reasonably be expected, individually or in the aggregate, to have a Material Adverse Effect.
(x) Intellectual Property. Except as would not reasonably be expected to have a Material Adverse Effect: (i) the Company and its subsidiaries own or have the right to use all patents, patent applications, trademarks, service marks, trade names, trademark registrations, service mark registrations, domain names and other source indicators, copyrights and copyrightable works, know-how, trade secrets, systems, procedures, proprietary or confidential information and similar rights (collectively, “ Intellectual Property ”) used in the conduct of their respective businesses; (ii) the Company and its subsidiaries’ conduct of their respective businesses does not infringe, misappropriate or otherwise violate any Intellectual Property of any person; (iii) the Company and its subsidiaries have not received any written notice of any claim relating to Intellectual Property; and (iv) to the knowledge of the Company and any Guarantor, the Intellectual Property of the Company and their subsidiaries is not being infringed, misappropriated or otherwise violated by any person.
(y) Data Privacy. The Company and its subsidiaries have operated their business in material compliance with all applicable privacy, data security and data protection laws and regulations applicable to the receipt, collection, handling, processing, sharing, transfer, usage, disclosure and storage of personally identifiable information, financial and other highly confidential information and data that the Company or its subsidiaries receive, collect, handle, process, share, transfer, use, disclose, or store in the operation of their respective businesses (collectively, “ Personal and Device Data ”), except where any failures to comply would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. Except as would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect, the Company and its subsidiaries have, and are in compliance with their, policies and procedures designed to ensure the Company and its subsidiaries comply in all material respects with such privacy, data security and data protection laws. To the knowledge of the Company, the Company has not experienced any security incident that has resulted in unauthorized third-party acquisition of, or access to, Personal and Device Data, except where any such incidents would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.
(z) No Undisclosed Relationships. No relationship, direct or indirect, exists between or among the Company or any of its subsidiaries, on the one hand, and the directors, officers, shareholders or other affiliates of the Company or any of its subsidiaries, on the other, that is required by the Securities Act to be described in each of the Pre-Effective Registration Statement, the Registration Statement, the Preliminary Prospectus and the Prospectus and that is not so described in such documents.
(aa) Investment Company Act. The Company is not, and after giving effect to the consummation of the Exchange Offer or the Consent Solicitation will not be, required to register as an “investment company” or an entity “controlled” by an “investment company” within the meaning of the Investment Company Act of 1940, as amended, and the rules and regulations of the Commission thereunder (collectively, the “ Investment Company Act ”).
(bb) Taxes. The Company and its subsidiaries have paid all federal, state, local and foreign taxes and filed all tax returns required to be paid or filed through the date hereof; and except as otherwise disclosed in each of the Pre-Effective Registration Statement, the Registration Statement, the Preliminary Prospectus and the Prospectus, there is no tax deficiency that has been, or would reasonably be expected to be, asserted against the Company or any of its subsidiaries or any of their respective properties or assets, except, in each case, as would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.
(cc) Licenses and Permits. The Company and its subsidiaries possess all licenses, sub-licenses, certificates, permits and other authorizations issued by, and have made all declarations and filings with, the appropriate federal, state, local or foreign governmental or regulatory authorities that are necessary for the ownership or lease of their respective properties or the conduct of their respective businesses as described in each of the Pre-Effective Registration Statement, the Registration Statement, the Preliminary Prospectus and the Prospectus, except where the failure to possess or make the same would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect; and except as described in each of the Pre-Effective Registration Statement, the Registration Statement, the Preliminary Prospectus and the Prospectus, neither the Company nor any of its subsidiaries has received notice of any revocation or modification of any such license, sub-license, certificate, permit or authorization or has any reason to believe that any such license, sub-license, certificate, permit or authorization will not be renewed in the ordinary course.
(dd) No Labor Disputes. No labor disturbance by or dispute with employees of the Company or any of its subsidiaries exists or, to the knowledge of the Company, is contemplated or threatened, and the Company is not aware of any existing or imminent labor disturbance by, or dispute with, the employees of any of its or its subsidiaries’ principal suppliers, contractors or customers, except as would not have a Material Adverse Effect.
(ee) Certain Environmental Matters . (i) The Company and its subsidiaries (x) are in compliance with all, and have not violated any, applicable federal, state, local and foreign laws (including common law), rules, regulations, requirements, decisions, judgments, decrees, orders and other legally enforceable requirements relating to pollution or the protection of human health or safety, the environment, natural resources, hazardous or toxic substances or wastes, pollutants or contaminants (collectively, “ Environmental Laws ”); (y) have received and are in compliance with all, and have not violated any, permits, licenses, certificates or other authorizations or approvals required of them under any Environmental Laws to conduct their respective businesses; and (z) have not received notice of any actual or potential liability or obligation under or relating to, or any actual or potential violation of, any Environmental Laws, including for the investigation or remediation of any disposal or release of hazardous or toxic substances or wastes, pollutants or contaminants, and have no knowledge of any event or condition that would reasonably be expected to result in any such notice, and (ii) there are no costs or liabilities associated with Environmental Laws of or relating to the Company or its subsidiaries, except in the case of each of (i) and (ii) above, for any such matter as would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect; and (iii) except as described in each of the Preliminary Prospectus and the Prospectus, (x) there is no proceeding that is pending, or that is known to be contemplated, against the Company or any of its subsidiaries under any Environmental Laws in which a governmental entity is also a party, other than such proceeding regarding which it is reasonably believed no monetary sanctions of $100,000 or more will be imposed, (y) the Company and its subsidiaries are not aware of any facts or issues regarding compliance with Environmental Laws, or liabilities or other obligations under Environmental Laws or concerning hazardous or toxic substances or wastes, pollutants or contaminants, that could reasonably be expected to have a material effect on the capital expenditures, earnings or competitive position of the Company and its subsidiaries, and (z) none of the Company or its subsidiaries anticipates material capital expenditures relating to any Environmental Laws.
(ff) Compliance with ERISA . (i) Each employee benefit plan, within the meaning of Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended (“ ERISA ”), for which the Company or any member of its “ Controlled Group ” (defined as any entity, whether or not incorporated, that is under common control with the Company within the meaning of Section 4001(a)(14) of ERISA or any entity that would be regarded as a single employer with the Company under Section 414(b),(c),(m) or (o) of the Internal Revenue Code of 1986, as amended (the “ Code ”)) would have any liability (each, a “ Plan ”) has been maintained in compliance with its terms and the requirements of any applicable statutes, orders, rules and regulations, including but not limited to ERISA and the Code; (ii) no prohibited transaction, within the meaning of Section 406 of ERISA or Section 4975 of the Code, has occurred with respect to any Plan, excluding transactions effected pursuant to a statutory or administrative exemption; (iii) for each Plan that is subject to the funding rules of Section 412 of the Code or Section 302 of ERISA, no Plan has failed (whether or not waived), or is reasonably expected to fail, to satisfy the minimum funding standards (within the meaning of Section 302 of ERISA or Section 412 of the Code) applicable to such Plan; (iv) no Plan is, or is reasonably expected to be, in “at risk status” (within the meaning of Section 303(i) of ERISA) and no Plan that is a “multiemployer plan” within the meaning of Section 4001(a)(3) of ERISA is in “endangered status” or “critical status” (within the meaning of Sections 304 and 305 of ERISA) (v) the fair market value of the assets of each Plan exceeds the present value of all benefits accrued under such Plan (determined based on those assumptions used to fund such Plan); (vi) no “reportable event” (within the meaning of Section 4043(c) of ERISA and the regulations promulgated thereunder) has occurred or is reasonably expected to occur; (vii) each Plan that is intended to be qualified under Section 401(a) of the Code is so qualified, and nothing has occurred, whether by action or by failure to act, which would cause the loss of such qualification; (viii) neither the Company nor any member of the Controlled Group has incurred, nor reasonably expects to incur, any liability under Title IV of ERISA (other than contributions to the Plan or premiums to the Pension Benefit Guarantee Corporation, in the ordinary course and without default) in respect of a Plan (including a “multiemployer plan” within the meaning of Section 4001(a)(3) of ERISA); and (ix) none of the following events has occurred or is reasonably likely to occur: (A) a material increase in the aggregate amount of contributions required to be made to all Plans by the Company or its Controlled Group affiliates in the current fiscal year of the Company and its Controlled Group affiliates compared to the amount of such contributions made in the Company’s and its Controlled Group affiliates’ most recently completed fiscal year; or (B) a material increase in the Company and its subsidiaries’ “accumulated post-retirement benefit obligations” (within the meaning of Accounting Standards Codification Topic 715-60) compared to the amount of such obligations in the Company and its subsidiaries’ most recently completed fiscal year, except in each case with respect to the events or conditions set forth in (i) through (ix) hereof, as would not, individually or in the aggregate, have a Material Adverse Effect.
(gg) Disclosure Controls . The Company and its subsidiaries maintain an effective system of “disclosure controls and procedures” (as defined in Rule 13a-15(e) of the Exchange Act) that complies with the requirements of the Exchange Act and that has been designed to ensure that information required to be disclosed by the Company in reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Commission’s rules and forms, including controls and procedures designed to ensure that such information is accumulated and communicated to the Company’s management as appropriate to allow timely decisions regarding required disclosure. The Company and its subsidiaries have carried out evaluations of the effectiveness of their disclosure controls and procedures as required by Rule 13a-15 of the Exchange Act.
(hh) Accounting Controls. The Company and its subsidiaries maintain systems of “internal control over financial reporting” (as defined in Rule 13a-15(f) of the Exchange Act) that comply with the requirements of the Exchange Act and have been designed by, or under the supervision of, their respective principal executive and principal financial officers, or persons performing similar functions, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP. The Company and its subsidiaries maintain internal accounting controls sufficient to provide reasonable assurance that (i) transactions are executed in accordance with management’s general or specific authorizations; (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with GAAP and to maintain asset accountability; (iii) access to assets is permitted only in accordance with management’s general or specific authorization; (iv) the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences and (v) interactive data in eXtensible Business Reporting Language included in the Pre-Effective Registration Statement, the Registration Statement, the Preliminary Prospectus and the Prospectus fairly presents the information called for in all material respects and is prepared in accordance with the Commission’s rules and guidelines applicable thereto. Based on the Company’s most recent evaluation of its internal controls over financial reporting pursuant to Rule 13a-15(c) of the Exchange Act, except as disclosed in the Pre-Effective Registration Statement, the Registration Statement, the Preliminary Prospectus and the Prospectus, there are no material weaknesses in the Company’s internal controls. The Company’s auditors and the Audit Committee of the Board of Directors of the Company have been advised of: (i) all significant deficiencies and material weaknesses in the design or operation of internal controls over financial reporting which have adversely affected or are reasonably likely to adversely affect the Company’s ability to record, process, summarize and report financial information; and (ii) any fraud, whether or not material, that involves management or other employees who have a significant role in the Company’s internal controls over financial reporting.
(ii) eXtensible Business Reporting Language . The interactive data in eXtensible Business Reporting Language included or incorporated by reference in the Registration Statement fairly presents the information called for in all material respects and has been prepared in accordance with the Commission’s rules and guidelines applicable thereto.
(jj) Insurance. The Company and its subsidiaries have insurance covering their respective properties, operations, personnel and businesses, including business interruption insurance, which insurance is in amounts and insures against such losses and risks as are generally deemed adequate to protect the Company and its subsidiaries and their respective businesses; and neither the Company nor any of its subsidiaries has (i) received written notice from any insurer or agent of such insurer that capital improvements or other expenditures are required or necessary to be made in order to continue such insurance or (ii) any reason to believe that it will not be able to renew its existing insurance coverage as and when such coverage expires or to obtain similar coverage at reasonable cost from similar insurers as may be necessary to continue its business.
(kk) No Unlawful Payments. Neither the Company nor any of its subsidiaries, nor any director, officer or employee of the Company or any of its subsidiaries nor, to the knowledge of the Company, any agent, affiliate or other person acting on behalf of the Company or any of its subsidiaries has (i) used any corporate funds for any unlawful contribution, gift, entertainment or other unlawful expense relating to political activity; (ii) made or taken an act in furtherance of an offer, promise or authorization of any direct or indirect unlawful payment or benefit to any foreign or domestic government official or employee, including of any government-owned or controlled entity or of a public international organization, or any person acting in an official capacity for or on behalf of any of the foregoing, or any political party or party official or candidate for political office; (iii) violated or is in violation of any provision of the Foreign Corrupt Practices Act of 1977, as amended, or any applicable law or regulation implementing the OECD Convention on Combating Bribery of Foreign Public Officials in International Business Transactions, or committed an offence under the Bribery Act 2010 of the United Kingdom, or any other applicable anti-bribery or anti-corruption law; or (iv) made, offered, agreed, requested or taken an act in furtherance of any unlawful bribe or other unlawful benefit, including, without limitation, any rebate, payoff, influence payment, kickback or other unlawful or improper payment or benefit. The Company and its subsidiaries have instituted, maintain and enforce, and will continue to maintain and enforce policies and procedures designed to promote and ensure compliance with all applicable anti-bribery and anti-corruption laws.
(ll) Compliance with Anti-Money Laundering Laws . The operations of the Company and its subsidiaries are and have been conducted at all times in compliance with applicable financial recordkeeping and reporting requirements, including those of the Currency and Foreign Transactions Reporting Act of 1970, as amended, the applicable money laundering statutes of all jurisdictions where the Company or any of its subsidiaries conducts business, the rules and regulations thereunder and any related or similar rules, regulations or guidelines, issued, administered or enforced by any governmental agency (collectively, the “ Anti-Money Laundering Laws ”), and no action, suit or proceeding by or before any court or governmental agency, authority or body or any arbitrator involving the Company or any of its subsidiaries with respect to the Anti-Money Laundering Laws is pending or, to the knowledge of the Company, threatened.
(mm) No Conflicts with Sanctions Laws. Neither the Company nor any of its subsidiaries, directors, officers or employees, nor, to the knowledge of the Company, any agent, affiliate or person acting on behalf of the Company or any of its subsidiaries is currently the subject or the target of any sanctions administered or enforced by the U.S. government (including, without limitation, the Office of Foreign Assets Control of the U.S. Department of the Treasury or the U.S. Department of State and including, without limitation, the designation as a “specially designated national” or “blocked person”), the United Nations Security Council, the European Union, Her Majesty’s Treasury or other relevant sanctions authority (collectively, “ Sanctions ”), nor is the Company, any of its subsidiaries located, organized or resident in a country or territory that is the subject or target of Sanctions, including, without limitation, Cuba, Iran, North Korea, Syria and Crimea (each, a “ Sanctioned Country ”). For the past five years, the Company and its subsidiaries have not knowingly engaged in and are not now knowingly engaged in any dealings or transactions with any person that at the time of the dealing or transaction is or was the subject or the target of Sanctions or with any Sanctioned Country.
(nn) No Restrictions on Subsidiaries . Except as described in the Pre-Effective Registration Statement, the Registration Statement, the Preliminary Prospectus and the Prospectus, no subsidiary of the Company is currently prohibited, directly or indirectly, under any agreement or other instrument to which it is a party or is subject, from paying any dividends to the Company, from making any other distribution on such subsidiary’s capital stock or similar ownership interest, from repaying to the Company any loans or advances to such subsidiary from the Company or from transferring any of such subsidiary’s properties or assets to the Company or any other subsidiary of the Company.
(oo) No Solicitation. The Company has not paid or agreed to pay to any person any compensation for (i) soliciting another to purchase any of its securities or (ii) soliciting tenders or Consents by holders of Warrants pursuant to the Exchange Offers (except as contemplated in this Agreement).
(pp) No Registration Rights . Except as described in the Pre-Effective Registration Statement, the Registration Statement, the Preliminary Prospectus and the Prospectus, no person has the right to require the Company or any of its subsidiaries to register any securities for sale under the Securities Act by reason of the filing of the Pre-Effective Registration Statement or the Registration Statement with the Commission.
(qq) No Stabilization. The Company has not taken, directly or indirectly, any action designed to or that could reasonably be expected to cause or result in any stabilization or manipulation of the price of any security of the Company to facilitate the Exchange Offers.
(rr) Forward-Looking Statements. No forward-looking statement (within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act) included in any of the Pre-Effective Registration Statement, the Registration Statement, the Preliminary Prospectus or the Prospectus has been made or reaffirmed without a reasonable basis or has been disclosed other than in good faith.
(ss) Statistical and Market Data. Nothing has come to the attention of the Company that has caused the Company to believe that the statistical and market-related data included in each of the Pre-Effective Registration Statement, the Registration Statement, the Preliminary Prospectus and the Prospectus is not based on or derived from sources that are reliable and accurate in all material respects.
(tt) Sarbanes-Oxley Act . There is and has been no failure on the part of the Company or any of the Company’s directors or officers, in their capacities as such, to comply with any provision of the Sarbanes-Oxley Act of 2002, as amended and the rules and regulations promulgated in connection therewith, including Section 402 related to loans and Sections 302 and 906 related to certifications.
(uu) Registration Fees . The Company has paid the registration fee for Registration Statement pursuant to Rule 456(a) under the Securities Act or will pay such fee within the time period required by such rule and in any event prior to the Exchange Date.
(vv) No Ratings. There are (and prior to the Exchange Date, will be) no debt securities or preferred stock issued or guaranteed by the Company or any of its subsidiaries that are rated by a “nationally recognized statistical rating organization”, as such term is defined under Section 3(a)(62) under the Exchange Act.
(ww) Stamp Taxes . Except for any net income, capital gains or franchise taxes imposed on the Dealer Manager by the Cayman Islands or any political subdivision or taxing authority thereof or therein as a result of any present or former connection (other than any connection resulting from the transactions contemplated by this Agreement) between the Dealer Manager and the jurisdiction imposing such tax, no stamp duties or other issuance or transfer taxes are payable by or on behalf of the Dealer Manager in the Cayman Islands, the United States or any political subdivision or taxing authority thereof solely in connection with (A) the execution, delivery and performance of this Agreement, or (B) the issuance and delivery of the Ordinary Shares in the Exchange Offers in the manner contemplated by this Agreement and the Prospectus.
(xx) No Immunity . Neither the Company nor any of its subsidiaries or their properties or assets has immunity under the Cayman Islands, U.S. federal or New York state law from any legal action, suit or proceeding, from the giving of any relief in any such legal action, suit or proceeding, from set-off or counterclaim, from the jurisdiction of any Cayman Islands, U.S. federal or New York state court, from service of process, attachment upon or prior to judgment, or attachment in aid of execution of judgment, or from execution of a judgment, or other legal process or proceeding for the giving of any relief or for the enforcement of a judgment, in any such court with respect to their respective obligations, liabilities or any other matter under or arising out of or in connection herewith; and, to the extent that the Company or any of its subsidiaries or any of its properties, assets or revenues may have or may hereafter become entitled to any such right of immunity in any such court in which proceedings arising out of, or relating to the transactions contemplated by this Agreement, may at any time be commenced, the Company has, pursuant to Section 18(d) of this Agreement, waived, and it will waive, or will cause its subsidiaries to waive, such right to the extent permitted by law.
(yy) Enforcement of Foreign Judgments . A judgment obtained in a U.S. federal or New York state court located in the State of New York will be recognized and enforced in the courts of the Cayman Islands without any re-examination of the merits at common law, by an action commenced on the foreign judgment in the Grand Court of the Cayman Islands, where the judgment: (i) is final and conclusive, (ii) is one in respect of which the foreign court had jurisdiction over the defendant according to Cayman Islands conflict of law rules; (iii) is either for a liquidated sum not in respect of penalties or taxes or a fine or similar fiscal or revenue obligations or, in certain circumstances, for in personam non-money relief, and (iv) was neither obtained in a manner, nor is of a kind enforcement of which is contrary to natural justice or the public policy of the Cayman Islands.
(zz) Valid Choice of Law . The choice of laws of the State of New York as the governing law of this Agreement is a valid choice of law under the laws of the Cayman Islands and will be honored by the courts of the Cayman Islands, subject to the restrictions described under the caption “Risk Factors—Certain judgments obtained against us by our shareholders may not be enforceable” in the Pre-Effective Registration Statement, the Registration Statement, the Preliminary Prospectus and the Prospectus. The Company has the power to submit, and pursuant to Section 18(e) of this Agreement, has legally, validly, effectively and irrevocably submitted, to the personal jurisdiction of each New York state and United States federal court sitting in the City of New York and has validly and irrevocably waived any objection to the laying of venue of any suit, action or proceeding brought in such court.
(aaa) Indemnification and Contribution . The indemnification and contribution provisions set forth in Section 7 hereof do not contravene Cayman Islands law or public policy.
(bbb) Passive Foreign Investment Company . Subject to the qualifications, limitations, exceptions and assumptions set forth in the Preliminary Prospectus and the Prospectus, the Company does not believe that it was a passive foreign investment company, as defined in section 1297 of the Internal Revenue Code of 1986, as amended, in any tax year ended on or before December 31, 2017.
(ccc) Dividends . Except as disclosed in Pre-Effective Registration Statement, the Registration Statement, the Preliminary Prospectus and the Prospectus, no approvals are currently required in the Cayman Islands in order for the Company to pay dividends or other distributions declared by the Company to the holders of Ordinary Shares. Under current laws and regulations of the Cayman Islands and any political subdivision thereof, any amount payable with respect to the Ordinary Shares upon liquidation of the Company or upon redemption thereof and dividends and other distributions declared and payable on the share capital of the Company may be paid by the Company in United States dollars or euros and freely transferred out of the Cayman Islands, and no such payments made to the holders thereof or therein who are non-residents of the Cayman Islands will be subject to income, withholding or other taxes under laws and regulations of the Cayman Islands or any political subdivision or taxing authority thereof or therein and without the necessity of obtaining any governmental authorization in the Cayman Islands or any political subdivision or taxing authority thereof or therein.
(ddd) Legality . The legality, validity, enforceability or admissibility into evidence of any of the Pre-Effective Registration Statement, the Registration Statement, the Preliminary Prospectus and the Prospectus, this Agreement, the Warrants or the Ordinary Shares in any jurisdiction in which the Company is organized or does business is not dependent upon such document being submitted into, filed or recorded with any court or other authority in any such jurisdiction on or before the date hereof or that any tax, imposition or charge be paid in any such jurisdiction on or in respect of any such document.
(eee) Legal Action . Holders of the Warrants and the Ordinary Shares and the Dealer Manager are each entitled to sue as plaintiff in the court of the jurisdiction of formation and domicile of the Company for the enforcement of their respective rights under this Agreement and the Ordinary Shares and such access to such courts will not be subject to any conditions which are not applicable to residents of such jurisdiction or a company incorporated in such jurisdiction except that plaintiffs not residing in the Cayman Islands may be required to guarantee payment of a possible order for payment of costs or damages at the request of the defendant.
(fff) Any certificate signed by any officer of the Company and delivered to the Dealer Manager or counsel for the Dealer Manager in connection with the Exchange Offers shall be deemed a representation and warranty by the Company as to matters covered thereby to the Dealer Manager.
4. Representations, Warranties and Agreements of the Dealer Manager . The Dealer Manager hereby represents, warrants and agrees that the Dealer Manager will not (1) cause to be disseminated to holders, dealers or the public any written material for or in connection with the Exchange Offer or Consent Solicitation other than one or more of the Offering Documents, or (2) make any public oral communications relating to the Exchange Offer or the Consent Solicitation that have not been previously approved by the Company except as contemplated in the penultimate sentence of Section 6 of this Agreement .
5. Agreements . The Company agrees with the Dealer Manager that:
(a) The Company will furnish to the Dealer Manager and to counsel for the Dealer Manager, without charge, during the period beginning on the Commencement Date and continuing to and including the Exchange Date, copies of the Offering Documents and any amendments and supplements thereto in such quantities as the Dealer Manager may reasonably request.
(b) Prior to the termination of the Exchange Offer and the Consent Solicitation, the Company will not file any amendment to the Pre-Effective Registration Statement or the Registration Statement or supplement to the Preliminary Prospectus or the Prospectus (other than an amendment or supplement as a result of filings by the Company under the Exchange Act of documents incorporated by reference therein) unless the Company has furnished the Dealer Manager a copy of such proposed amendment or supplement, as applicable, for its review prior to filing and will not file any such proposed amendment or supplement to which the Dealer Manager reasonably objects. Subject to the foregoing sentence, if the Registration Statement has become or becomes effective, or filing of the Preliminary Prospectus or the Prospectus is otherwise required under the Securities Act or the Exchange Act and the rules and regulations of the Commission thereunder, the Company will cause the Preliminary Prospectus or the Prospectus, properly completed, and any supplement thereto to be filed with the Commission pursuant to the applicable paragraph of Rule 424(b) or in an amendment to the Registration Statement, whichever is applicable, within the time period prescribed. The Company will promptly advise the Dealer Manager (i) when the Registration Statement, and any amendment thereto, shall have become effective, (ii) when the Preliminary Prospectus or the Prospectus, and any supplement thereto or any document incorporated therein, shall have been filed (if required) with the Commission, (iii) when, prior to termination of the Exchange Offer and the Consent Solicitation, any amendment to the Registration Statement shall have been filed or become effective, (iv) of any request by the Commission or its staff for any amendment of the Pre-Effective Registration Statement or the Registration Statement or supplement to the Preliminary Prospectus or the Prospectus or for any additional information, (v) the issuance by the Commission of any stop order or of any order preventing or suspending the use of the Preliminary Prospectus or the Prospectus, or the initiation or threatening of any proceeding for any such purpose, and (vi) of the receipt by the Company of any notification with respect to the suspension of the qualification of the Ordinary Shares for sale in any jurisdiction within the United States or the initiation or threatening of any proceeding for such purpose. In the event of the issuance of any such stop order or of any such order preventing or suspending the use of the Preliminary Prospectus or the Prospectus, the Company will use its reasonable best efforts to obtain its withdrawal. The Company agrees to use its reasonable best efforts to cause the Registration Statement to become effective as soon as practicable and as much in advance of the Expiration Date as practicable.
(c) The Company will comply with the Securities Act and the Exchange Act and the rules and regulations of the Commission thereunder so as to permit the completion of the distribution of the Ordinary Shares issued in the Exchange Offer and Consent Solicitation, as contemplated by this Agreement, the Registration Statement and the Prospectus. If, at any time when a prospectus relating to the Exchange Offer or Consent Solicitation is required to be delivered under the Securities Act or the Exchange Act and the rules and regulations of the Commission thereunder, any event occurs as a result of which the Offering Documents, as then amended or supplemented, would include any untrue statement of a material fact or omit to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, or if it should be necessary to amend or supplement the Offering Documents to comply with applicable law, the Company will promptly: (i) (i) notify the Dealer Manager of any such event or non-compliance at which time the Dealer Manager shall be entitled to cease soliciting tenders until such time as the Company has complied with clause (iii) of this sentence; (ii) subject to the requirements of the first sentence of the above paragraph (b), prepare an amendment or supplement that will correct such statement or omission or effect such compliance; and (iii) supply any such amendment or supplement to the Dealer Manager and counsel for the Dealer Manager without charge in such quantities as the Dealer Manager may reasonably request. The Company will also promptly inform the Dealer Manager of any litigation or administrative action with respect to the Exchange Offers.
(d) The Company agrees to advise the Dealer Manager promptly of (i) any proposal by the Company to withdraw, rescind or modify the Offering Documents or to withdraw, rescind or terminate the Exchange Offer or the Consent Solicitation or the exercise by the Company of any right not to exchange the Warrants pursuant to the Exchange Offer or the Consent Solicitation, (ii) its awareness of the issuance of a stop order suspending the effectiveness of the Registration Statement or of any notice objecting to its use by the Commission or any other regulatory authority, or the institution or threatening of any proceedings for that purpose (and will promptly furnish the Dealer Manager with a copy of any such order), (iii) its awareness of the occurrence of any development that could reasonably be expected to result in a Material Adverse Change relating to or affecting the Exchange Offer or the Consent Solicitation and (iv) any other non-privileged information relating to the Exchange Offer, the Consent Solicitation, the Offering Documents or this Agreement which the Dealer Manager may from time to time reasonably request.
(e) The Company will make generally available to its security holders and the Dealer Manager as soon as practicable an earning statement that satisfies the provisions of Section 11(a) of the Securities Act and Rule 158 of the Commission promulgated thereunder covering a period of at least twelve months beginning with the first fiscal quarter of the Company occurring after the “effective date” (as defined in Rule 158) of the Registration Statement.
(f) The Company will arrange, if necessary, for the qualification of the Ordinary Shares for offer or sale in connection with the Exchange Offers under the laws of such jurisdictions as the Dealer Manager may designate and will maintain such qualifications in effect so long as required for such offer or sale; provided that in no event shall the Company be obligated to qualify to do business in any jurisdiction in which it is not now so qualified or to take any action that would subject it to service of process in suits, other than those arising out of the offering or sale of the Ordinary Shares in connection with the Exchange Offers, in any jurisdiction in which it is not now so subject. The Company will promptly advise the Dealer Manager of the receipt by the Company of any notification with respect to the suspension of the qualification of the Ordinary Shares for sale in any jurisdiction or the initiation or threatening of any proceeding for such purpose.
(g) The Company will cause all Warrants accepted in the Exchange Offers to be cancelled.
(h) The Company will cooperate with the Dealer Manager to permit the Ordinary Shares to be eligible for clearance and settlement through The Depository Trust Company.
(i) The Company agrees not to exchange any Warrants during the period beginning on the Commencement Date and ending on the Exchange Date except pursuant to and in accordance with the Exchange Offer, the Consent Solicitation or as otherwise agreed to in writing by the parties hereto and permitted under applicable laws and regulations.
(j) None of the Company, its Affiliates or any person acting on its or their behalf will take, directly or indirectly, any action that is designed to cause or result, or which might reasonably be expected to cause or result, under the Exchange Act or otherwise, in stabilization or manipulation of the price of any security of the Company to facilitate the sale of the Ordinary Shares or the tender of Warrants in the Exchange Offers.
(k) The Company has arranged for D.F. King & Co., Inc. to serve as Information Agent and for Continental Stock Transfer & Trust Company to serve as Exchange Agent and authorizes the Dealer Manager to communicate with each of the Information Agent and the Exchange Agent to facilitate the Exchange Offer and the Consent Solicitation.
(l) The Company will comply in all material respects with the Securities Act and the Exchange Act and the rules and regulations of the Commission thereunder, including Rule 13e-4 and Rule 14e-1 under the Exchange Act (including taking the actions necessary to ensure that the procedural requirements of Rule 14e-1 are satisfied), in connection with the Exchange Offer, the Consent Solicitation, the Offering Documents and the transactions contemplated hereby and thereby. The Company will file with the Commission pursuant to Rule 13e-4(c)(1) under the Exchange Act (or Rule 425 under the Securities Act) or otherwise all written communications made by the Company or any affiliate of the Company in connection with or relating to the Exchange Offer or the Consent Solicitation that are required to be filed with the Commission, in each case on the date of their first use.
(m) The Company agrees to pay the costs and expenses relating to the transactions contemplated hereunder, including without limitation the following: (i) the preparation of this Agreement, the issuance of the Ordinary Shares and the fees of the Information Agent and any exchange agent; (ii) the preparation, printing or reproduction of the Offering Documents and each amendment or supplement thereto; (iii) the printing (or reproduction) and delivery (including postage, air freight charges and charges for counting and packaging) of such copies of the Offering Documents (and all amendments or supplements thereto) as may, in each case, be reasonably requested for use in connection with the Exchange Offers; (iv) the preparation, printing, authentication, issuance and delivery of certificates for the Ordinary Shares, including any stamp or transfer taxes in connection with the original issuance and sale of the Ordinary Shares; (v) the printing (or reproduction) and delivery of this Agreement, any blue sky memorandum and all other agreements or documents printed (or reproduced) and delivered in connection with the Exchange Offers; (vi) any registration or qualification of the Ordinary Shares for offer and sale under the blue sky laws of the several states or any non-U.S. jurisdiction (including filing fees and the reasonable fees and expenses of counsel for the Dealer Manager relating to such registration and qualification); (vii) transportation and other expenses incurred by or on behalf of Company representatives in connection with presentations to prospective participants in the Exchange Offers; (viii) the fees and expenses of the Company’s accountants and the fees and expenses of counsel (including local and special counsel) for the Company; (ix) fees and expenses incurred in connection with listing the Ordinary Shares on the New York Stock Exchange; and (x) all other costs and expenses incident to the performance by the Company of its obligations hereunder and in connection with the Exchange Offers.
(n) The Company will promptly notify the Dealer Manager if the Company ceases to be an Emerging Growth Company at any time prior to the Exchange Date.
(o) The Company will indemnify and hold harmless the Dealer Manager against any documentary, stamp, registration or similar issuance tax, including any interest and penalties, on the issuance of the Ordinary Shares by the Company in the Exchange Offers and on the execution and delivery of this Agreement. All indemnity payments to be made by the Company hereunder in respect of this Section 5(p) shall be made without withholding or deduction for or on account of any present or future Cayman Islands taxes, duties or governmental shares whatsoever unless the Company is compelled by law to deduct or with-hold such taxes, duties or charges. In that event, except for any net income, capital gains or franchise taxes imposed on the Dealer Manager by the Cayman Islands or the United States or any political subdivision of taxing authority thereof or therein as a result of any present or former connection (other than any connection resulting from the transactions contemplated by this Agreement) between the Dealer Manager and the jurisdiction imposing such withholding or deductions, the Company shall pay such additional amounts as may be necessary in order to ensure that the net amounts received after such withholding or deductions shall equal the amounts that would have been received if no withholding or deduction has been made.
6. Conditions to the Obligations of the Dealer Manager . The obligations of the Dealer Manager under this Agreement shall be subject to the accuracy of the representations and warranties on the part of the Company contained herein at the Commencement Date, any date on which Offering Documents are distributed to holders of the Warrants, the Effective Date, the Expiration Date and the Exchange Date, to the accuracy of the statements of the Company made in any certificates pursuant to the provisions hereof, to the performance by the Company of its obligations hereunder and to the following additional conditions:
(a) The Registration Statement shall have become effective on or prior to the Expiration Date.
(b) As of the Exchange Date, no stop order suspending the effectiveness of the Registration Statement or any notice objecting to its use shall have been issued and no proceedings for that purpose shall have been instituted or, to the knowledge of the Company, threatened by the Commission; and the Prospectus shall have been timely filed with the Commission under the Securities Act; and all requests by the Commission for additional information shall have been complied with to the reasonable satisfaction of the Dealer Manager.
(c) At the Commencement Date and the Exchange Date, the Company shall have requested and caused the following opinions to have been furnished to the Dealer Manager, in each case addressed to, and in form and substance satisfactory to, the Dealer Manager:
(i) an opinion and negative assurance letter of Kirkland & Ellis LLP, counsel to the Company, dated the Commencement Date or Exchange Date, as applicable, in form and substance reasonably satisfactory to the Dealer Manager.
(ii) (1) an opinion of Walkers, Cayman Islands counsel to the Company, dated the Commencement Date or Exchange Date, as applicable, in form and substance reasonably satisfactory to the Dealer Manager.
(d) At the Commencement Date and the Exchange Date, the Dealer Manager shall have received from Cooley LLP, counsel for the Dealer Manager, such opinion and negative assurance letter, in each case addressed to the Dealer Manager with respect to the Exchange Offers, as the Dealer Manager may reasonably require, and the Company shall have furnished to such counsel such documents as they request for the purposes of enabling them to pass upon such matters.
(e) At the Exchange Date, the Company shall have furnished to the Dealer Manager a certificate of the Company, signed by the Chairman of the Board or the President and the principal financial or accounting officer of the Company, dated as of the Exchange Date, to the effect that the signers of such certificate have carefully examined the Offering Documents, any amendment or supplement to the Offering Documents and this Agreement and that:
(i) the representations and warranties of the Company in this Agreement are true and correct as of the Exchange Date with the same effect as if made on the Exchange Date, and the Company has complied with all the agreements and satisfied all the conditions on its part to be performed or satisfied hereunder at or prior to the Exchange Date;
(ii) no stop order suspending the effectiveness of the Registration Statement has been issued and no proceedings for that purpose have been instituted or threatened by the Commission; and
(iii) since the date of the most recent financial statements included or incorporated by reference in the Offering Documents (exclusive of any amendment or supplement thereto), there has been no Material Adverse Change, except as set forth in or contemplated in the Offering Documents (exclusive of any amendment or supplement thereto).
(f) At each of the Commencement Date and the Exchange Date, the Company shall have requested and caused Pricewaterhouse Coopers LLP to furnish to the Dealer Manager letters, dated respectively as of the Commencement Date and the Exchange Date, in form and substance reasonably satisfactory to the Dealer Manager. At each of the Commencement Date and the Exchange Date, the Company shall have furnished to the Dealer Manager a certificate, dated respectively as of the Commencement Date and the Exchange Date, and addressed to the Dealer Manager, of its chief financial officer with respect to certain financial data contained in the Preliminary Prospectus and the Prospectus, providing “management comfort” with respect to such information, in form and substance reasonably satisfactory to the Dealer Manager.
(g) Subsequent to the Commencement Date or, if earlier, the dates as of which information is given in the Offering Documents (exclusive of any amendment or supplement thereto), there shall not have been (i) any change or decrease specified in the letters referred to in paragraph (f) of this Section 6 or (ii) any change, or any development involving a prospective change, in or affecting the condition (financial or otherwise), prospects, earnings, business or properties the Company and its subsidiaries, taken as a whole, whether or not arising from transactions in the ordinary course of business, except as set forth in or contemplated in the Offering Documents (exclusive of any amendment or supplement thereto), the effect of which, in any case referred to in clause (i) or (ii) above, is, in the reasonable judgment of the Dealer Manager, so material and adverse as to make it impractical or inadvisable to market or deliver the Ordinary Shares or solicit tenders of Warrants as contemplated by the Offering Documents (exclusive of any amendment or supplement thereto).
(i) Prior to the Exchange Date, the Company shall have obtained all consents, approvals, authorizations and orders of, and shall have duly made all registrations, qualifications and filing with, any court or regulatory authority or other governmental agency or instrumentality required in connection with the making and consummation of the Exchange Offers and the execution, delivery and performance of this Agreement.
(j) Prior to the Exchange Date, the Company shall have delivered to the Dealer Manager and its counsel such further information, certificates and documents as they may reasonably request.
(k) Prior to the Exchange Date, the Ordinary Shares shall have been approved for listing, subject to notice of issuance, on the New York Stock Exchange.
If (i) any of the conditions specified in this Section 6 shall not have been fulfilled when and as provided in this Agreement, or (ii) any of the opinions and certificates mentioned above or elsewhere in this Agreement shall not be reasonably satisfactory in form and substance to the Dealer Manager and its counsel, this Agreement and all obligations of the Dealer Manager hereunder may be cancelled by the Dealer Manager at, or at any time prior to, the Exchange Date. In such event, the Dealer Managers shall be entitled to publicly disclose the cancellation of its participation in the Exchange Offer via press release, subject to prior notification of the Company. Notice of such cancellation shall be given to the Company in writing or by telephone or facsimile confirmed in writing.
7. Indemnification and Contribution .
(a) The Company agrees to indemnify and hold harmless the Dealer Manager, the directors, officers, employees and agents of the Dealer Manager and each person who controls the Dealer Manager within the meaning of either the Securities Act or the Exchange Act against any and all losses, claims, damages or liabilities, joint or several, to which the Dealer Manager may become subject under the Securities Act, the Exchange Act or other federal, state or foreign statutory law or regulation, at common law or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) relate to, arise out of, or are based upon (1) any untrue statement or alleged untrue statement of a material fact contained in the Offering Documents (or in any amendment or supplement thereto) or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, (2) the Company’s failure to make or consummate the Exchange Offers or the withdrawal, rescission, termination, amendment or extension of the Exchange Offers or any failure on the Company’s part to comply with the terms and conditions contained in the Offering Documents, (3) any action or failure to act by the Company or its respective directors, officers, agents or employees or by any indemnified party at the request or with the consent of the Company, or (4) otherwise related to or arising out of the Dealer Manager’s engagement hereunder or any transaction or conduct in connection therewith, except that this clause (4) shall not apply with respect to the portion of any losses that are finally judicially determined to have resulted primarily from the gross negligence or willful misconduct of such indemnified party, and in the case of clause (1), (2) or (3) of this sentence, the Company agrees to reimburse each such indemnified party, as incurred, for any legal or other expenses reasonably incurred by it in connection with investigating or defending any such loss, claim, damage, liability or action; provided , however , that the Company will not be liable in any such case to the extent that any such loss, claim, damage or liability arises out of or is based upon any such untrue statement or alleged untrue statement or omission or alleged omission made in the Offering Documents, or in any amendment thereof or supplement thereto, in reliance upon and in conformity with the Dealer Manager Information. This indemnity agreement will be in addition to any liability that the Company may otherwise have.
(b) The Dealer Manager agrees to indemnify and hold harmless the Company, each of its directors and officers, and each person who controls the Company within the meaning of the Securities Act or the Exchange Act to the same extent as the foregoing indemnity from the Company to the Dealer Manager, but only with reference to the Dealer Manager Information. This indemnity agreement will be in addition to any liability that the Dealer Manager may otherwise have.
(c) Promptly after receipt by an indemnified party under this Section 7 of notice of the commencement of any action, such indemnified party will, if a claim in respect thereof is to be made against the indemnifying party under this Section 7, notify the indemnifying party in writing of the commencement thereof; but the failure so to notify the indemnifying party (i) will not relieve it from liability under paragraph (a) or (b) above unless and to the extent it did not otherwise learn of such action and such failure results in the forfeiture by the indemnifying party of substantial rights and defenses and (ii) will not, in any event, relieve the indemnifying party from any obligations to any indemnified party other than the indemnification obligation provided in paragraph (a) or (b) above. The indemnifying party shall be entitled to appoint counsel (including local counsel) of the indemnifying party’s choice at the indemnifying party’s expense to represent the indemnified party in any action for which indemnification is sought (in which case the indemnifying party shall not thereafter be responsible for the fees and expenses of any separate counsel, other than local counsel if not appointed by the indemnifying party, retained by the indemnified party or parties except as set forth below); provided , however , that such counsel shall be satisfactory to the indemnified party. Notwithstanding the indemnifying party’s election to appoint counsel (including local counsel) to represent the indemnified party in an action, the indemnified party shall have the right to employ separate counsel (including local counsel), and the indemnifying party shall bear the reasonable fees, costs and expenses of such separate counsel if (i) the use of counsel chosen by the indemnifying party to represent the indemnified party would present such counsel with a conflict of interest; (ii) the actual or potential defendants in, or targets of, any such action include both the indemnified party and the indemnifying party and the indemnified party shall have reasonably concluded that there may be legal defenses available to it and/or other indemnified parties that are different from or additional to those available to the indemnifying party; (iii) the indemnifying party shall not have employed counsel satisfactory to the indemnified party to represent the indemnified party within a reasonable time after notice of the institution of such action; or (iv) the indemnifying party shall authorize the indemnified party to employ separate counsel at the expense of the indemnifying party. An indemnifying party will not, without the prior written consent of the indemnified parties, settle or compromise or consent to the entry of any judgment with respect to any pending or threatened claim, action, suit or proceeding in respect of which indemnification or contribution may be sought hereunder (whether or not the indemnified parties are actual or potential parties to such claim or action) unless such settlement, compromise or consent includes an unconditional release of each indemnified party from all liability arising out of such claim, action, suit or proceeding.
(d) In the event that the indemnity provided in paragraph (a) or (b) of this Section 7 is unavailable to or insufficient to hold harmless an indemnified party for any reason, the Company and the Dealer Manager agree to contribute to the aggregate losses, claims, damages and liabilities (including legal or other expenses reasonably incurred in connection with investigating or defending same) (collectively, the “ Losses ”) to which the Company and the Dealer Manager may be subject in such proportion as is appropriate to reflect the relative benefits received by the Dealer Manager on the one hand and the Company on the other from the Exchange Offers. If the allocation provided by the immediately preceding sentence is unavailable for any reason, the Company and the Dealer Manager shall contribute in such proportion as is appropriate to reflect not only such relative benefits but also the relative fault of the Company on the one hand and of the Dealer Manager on the other in connection with the statements, omissions, actions or failure to act that resulted in such Losses, as well as any other relevant equitable considerations. The relative benefits received by the Company on the one hand and the Dealer Manager on the other shall be deemed to be in the same proportion as the total value paid or proposed to be paid to holders of Warrants pursuant to the Exchange Offer and the Consent Solicitation (whether or not consummated) bears to the fees actually received by the Dealer Manager pursuant to Section 2 hereof (exclusive of amounts paid for reimbursement of expenses or paid under this Agreement). For purposes of the preceding sentence, the total value paid or proposed to be paid to holders of Warrants pursuant to the Exchange Offer and the Consent Solicitation shall equal (i) if the Exchange Offer or the Consent Solicitation is consummated, the total market value of the Ordinary Shares (as of the Expiration Date) issued, and the cash consideration paid, in the Exchange Offer and the Consent Solicitation, or (ii) if the Exchange Offer and the Consent Solicitation is not consummated, the total market value (as of the date when the Exchange Offer is terminated or otherwise withdrawn by the Company) of the Ordinary Shares issuable, and the cash consideration payable, in the Exchange Offer and the Consent Solicitation, based on the maximum number of Warrants that could be exchanged in the Exchange Offer and the Consent Solicitation as described in the Preliminary Prospectus Supplement or Prospectus immediately before the termination or withdrawal of the Exchange Offer and the Consent Solicitation. Relative fault shall be determined by reference to, among other things, whether any untrue or any alleged untrue statement of a material fact or the omission or alleged omission to state a material fact or any other alleged conduct relates to information provided by the Company or other conduct by the Company on the one hand or the Dealer Manager on the other, the intent of the parties and their relative knowledge, access to information and opportunity to correct or prevent such untrue statement or omission. The Company and the Dealer Manager agree that it would not be just and equitable if contribution were determined by pro rata allocation or any other method of allocation that does not take account of the equitable considerations referred to above. Notwithstanding anything to the contrary above (other than with respect to uncovered losses), in no event shall Citi be responsible under this paragraph for any amounts in excess of the amount of the compensation actually paid by the Company to Citi in connection with the engagement (exclusive of amounts paid for reimbursement of expenses under the Agreement, including this Section 7, and amounts paid under this Section 7). Notwithstanding the provisions of this paragraph (d), no person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. For purposes of this Section 7, each person who controls the Dealer Manager within the meaning of either the Securities Act or the Exchange Act and each director, officer, employee and agent of the Dealer Manager shall have the same rights to contribution as such Dealer Manager, and each person who controls the Company within the meaning of either the Securities Act or the Exchange Act and each officer and director of the Company shall have the same rights to contribution as the Company, subject in each case to the applicable terms and conditions of this paragraph (d).
8. Non-Disclosure . The Company shall not disclose the provisions of this Agreement to any other person without the prior written consent of the Dealer Manager, unless the Company reasonably determines that the failure to make such disclosure would violate applicable law.
9. Certain Acknowledgments . The Company understands that you and your affiliates (together, the “ Group ”) are engaged in a wide range of financial services and businesses (including investment management, financing, securities trading, corporate and investment banking and research). Members of the Group and businesses within the Group generally act independently of each other, both for their own account and for the account of clients. Accordingly, there may be situations where parts of the Group and/or their clients either now have or may in the future have interests, or take actions, that may conflict with our interests. For example, the Group may, in the ordinary course of business, engage in trading in financial products or undertake other investment businesses for their own account or on behalf of other clients, including, but not limited to, trading in or holding long, short or derivative positions in securities, loans or other financial products of the Company or other entities connected with the Exchange Offers.
In recognition of the foregoing, the Company agrees that the Group is not required to restrict its activities as a result of this engagement, and that the Group may undertake any business activity without further consultation with or notification to the Company. Neither this Agreement, the receipt by the Group of confidential information nor any other matter shall give rise to any fiduciary, equitable or contractual duties (including without limitation any duty of trust or confidence) that would prevent or restrict the Group from acting on behalf of other customers or for its own account. Furthermore, the Company agrees that neither the Group nor any member or business of the Group is under a duty to disclose to the Company or use on behalf of the Company any information whatsoever about or derived from those activities or to account for any revenue or profits obtained in connection with such activities. However, consistent with the Group’s long-standing policy to hold in confidence the affairs of its customers, the Group will not use confidential information obtained from the Company except in connection with its services to, and its relationship with the Company.
The Company hereby acknowledges that you are acting as principal and not as a fiduciary of the Company and the Company’s engagement of you in connection with the transactions contemplated herein is as an independent contractor, on an arms-length basis under this Agreement with duties solely to the Company, and not in any other capacity including as a fiduciary. Neither this Agreement, your performance hereunder nor any previous or existing relationship between the Company and any member of or business within the Group will be deemed to create any fiduciary relationship. Neither this engagement, nor the delivery of any advice in connection with this engagement, is intended to confer rights upon any persons not a party hereto (including security holders, employees or creditors of the Company) as against the Group or their respective directors, officers, agents and employees. Furthermore, the Company agrees that it is solely responsible for making its own judgments in connection with the transactions contemplated herein (irrespective of whether any member of or business within the Group has advised or is currently advising the Company on related or other matters).
10. Termination; Representations, Acknowledgments and Indemnities to Survive .
(a) Subject to clause (c) below, this Agreement may be terminated by the Company, at any time upon notice to the Dealer Manager, if (i) at any time prior to the Exchange Date, the Exchange Offer and the Consent Solicitation is terminated or withdrawn by the Company for any reason, or (ii) the Dealer Manager does not comply in all material respects with any material covenant in Section 1.
(b) Subject to clause (c) below, this Agreement may be terminated by the Dealer Manager, at any time upon notice to the Company, if (i) at any time prior to the Exchange Date, the Exchange Offer and the Consent Solicitation is terminated or withdrawn by the Company for any reason, (ii) the Company does not comply in all material respects with any covenant specified in Section 1, (iii) the Company shall publish, send or otherwise distribute any amendment or supplement to the Offering Documents to which the Dealer Manager shall reasonably object or which shall be reasonably disapproved by the counsel to the Dealer Manager or (iv) the Dealer Manager cancels the Agreement pursuant to Section 6.
(c) The respective agreements, representations, warranties, acknowledgments, indemnities and other statements of the Company or its officers and of the Dealer Manager set forth in or made pursuant to this Agreement will remain in full force and effect, regardless of any investigation made by or on behalf of the Dealer Manager or the Company or any of the officers, directors or controlling person of the Company, and will survive delivery of and payment for the Ordinary Shares. The provisions of Section 2, Section 5(m), Section 5(p), Section 7, and Section 17 hereof, and this Section 9(c), shall survive the termination or cancellation of this Agreement.
11. Compliance with USA Patriot Act . In accordance with the requirements of the USA Patriot Act (Title III of Pub. L. 107-56 (signed into law October 26, 2001)), the Dealer Manager is required to obtain, verify and record information that identifies its clients, including the Company, which information may include the name and address of its clients, as well as other information that will allow the Dealer Manager to properly identify its clients.
12. Notices . All communications hereunder will be in writing and effective only on receipt, and, if sent to the Dealer Manager, will be mailed or delivered to Citigroup Global Markets Inc. at 388 Greenwich Street, 7 th Floor, New York, New York 10013, Attention: Liability Management Group: +1 (347) 767-2785, Email: ny.liabilitymanagement@citi.com; or, if sent to the Company, will be mailed or delivered to 130 E. Randolph Street, 7th Floor, Chicago, Illinois 60601, Attention: Chief Financial Officer, Email: jack.pearlstein@cision.com.
13. Successors . This Agreement will inure to the benefit of and be binding upon the parties hereto and their respective successors and the officers and directors and controlling persons referred to in Section 7 hereof, and, except as expressly set forth in Section 5(h) hereof, no other person will have any right or obligation hereunder.
14. Submission to Jurisdiction . The Company hereby submits to the exclusive jurisdiction of the U.S. federal and New York state courts in the Borough of Manhattan in The City of New York in any suit or proceeding arising out of or relating to this Agreement or the transactions contemplated hereby. The Company waives any objection which it may now or hereafter have to the laying of venue of any such suit or proceeding in such courts. The Company agrees that final judgment in any such suit, action or proceeding brought in such court shall be conclusive and binding upon the Company and may be enforced in any court to the jurisdiction of which the Company is subject by a suit upon such judgment. The Company irrevocably appoints Cision US Inc., located at 130 East Randolph Street, 7th Floor, Chicago, IL 60601, as its authorized agent upon which process may be served in any such suit or proceeding, and the Company agrees that service of process upon such authorized agent, and written notice of such service to the Company by the person serving the same to the address provided in this Section 14, shall be deemed in every respect effective service of process upon the Company in any such suit or proceeding. The Company hereby represents and warrants that such authorized agent has accepted such appointment and has agreed to act as such authorized agent for service of process. The Company further agrees to take any and all action as may be necessary to maintain such designation and appointment of such authorized agent in full force and effect for a period of seven years from the date of this Agreement.
15. Applicable Law . This Agreement will be governed by and construed in accordance with the laws of the State of New York applicable to contracts made and to be performed within the State of New York.
16. Waiver of Jury Trial . Each of the parties hereto hereby waives any right to trial by jury in any suit or proceeding arising out of or relating to this Agreement.
17. Judgment Currency . The Company agrees to indemnify the Dealer Manager, its directors, officers, affiliates and each person, if any, who controls the Dealer Manager within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act, against any loss incurred by the Dealer Manager as a result of any judgment or order being given or made for any amount due hereunder and such judgment or order being expressed and paid in a currency (the “ judgment currency ”) other than U.S. dollars and as a result of any variation as between (i) the rate of exchange at which the U.S. dollar amount is converted into the judgment currency for the purpose of such judgment or order, and (ii) the rate of exchange at which such indemnified person is able to purchase U.S. dollars with the amount of the judgment currency actually received by the indemnified person. The foregoing indemnity shall constitute a separate and independent obligation of the Company and shall continue in full force and effect notwithstanding any such judgment or order as aforesaid. The term “rate of exchange” shall include any premiums and costs of exchange payable in connection with the purchase of, or conversion into, the relevant currency.
18. Waiver of Immunity . To the extent that the Company has or hereafter may acquire any immunity (sovereign or otherwise) from jurisdiction of any court of (i) the Cayman Islands, or any political subdivision thereof, (ii) the United States or the State of New York, (iii) any jurisdiction in which it owns or leases property or assets or from any legal process (whether through service of notice, attachment prior to judgment, attachment in aid of execution, execution, set-off or otherwise) with respect to themselves or their respective property and assets or this Agreement, the Company hereby irrevocably waives such immunity in respect of its obligations under this Agreement to the fullest extent permitted by applicable law.
19. Counterparts . This Agreement may be signed in one or more counterparts, each of which shall constitute an original and all of which together shall constitute one and the same instrument.
20. Headings . The section headings used herein are for convenience only and shall not affect the construction hereof.
21. Definitions . The following terms, when used in this Agreement, shall have the meanings indicated.
“ Affiliate ” shall have the meaning specified in Rule 501(b) of Regulation D.
“ Business Day ” shall mean any day other than a Saturday, a Sunday or a legal holiday or a day on which banking institutions or trust companies are authorized or obligated by law to close in The City of New York.
“ Commencement Date ” shall mean the date of commencement (as defined in Rule 13e-4 under the Exchange Act) of the Exchange Offer.
“ Commission ” shall mean the U.S. Securities and Exchange Commission.
“ Effective Date ” shall mean the time the Registration Statement is declared effective under the Securities Act.
“ Exchange Act ” shall mean the U.S. Securities Exchange Act of 1934, as amended, and the rules and regulations of the Commission promulgated thereunder.
“ Exchange Date ” shall mean the date on which the Company issues the Ordinary Shares in exchange for the Warrants pursuant to the Exchange Offer.
“ Expiration Date ” shall mean 11:59 p.m., Eastern Daylight Time on May 15, 2018, as may be extended by the Company in its sole discretion.
“ FINRA ” shall mean the Financial Industry Regulatory Authority, Inc.
“ Information Agent ” shall mean D.F. King & Co., Inc.
“ Material Adverse Change ” shall mean, with respect to the Company, any change that is materially adverse to the condition (financial or otherwise), prospects, earnings, business or properties of the Company and its subsidiaries, taken as a whole, whether or not arising from transactions in the ordinary course of business.
“ Offering Documents ” shall mean the Pre-Effective Registration Statement, the Registration Statement, the Preliminary Prospectus, the Prospectus, the accompanying letter of transmittal and consent, the Schedule TO, the Rule 165 Material, the notice of guaranteed delivery, and all other documents filed or to be filed with any federal, state or local government or regulatory agency or authority in connection with the Exchange Offer or the Consent Solicitation, each as prepared or approved by the Company.
“ Pre-Effective Registration Statement ” shall mean the registration statement, filed by the Company with the Commission registering the Exchange Offer under the Securities Act, including exhibits thereto and any documents incorporated by reference therein or deemed part of such registration statement pursuant to Rule 430C under the Securities Act, in the form in which it is initially filed with the Commission.
“ Preliminary Prospectus ” shall mean the preliminary prospectus that is used prior to the filing of the Prospectus, as amended or supplemented from time to time, including any documents incorporated in the Preliminary Prospectus by reference.
“ Prospectus ” shall mean the final prospectus included in the Registration Statement (including any documents incorporated in the Prospectus by reference), except that if the final prospectus furnished to the Dealer Manager for use in connection with the Exchange Offer differs from the prospectus set forth in the Registration Statement (whether or not such prospectus is required to be filed pursuant to Rule 424(b) under the Securities Act), the term “ Prospectus ” shall refer to the final prospectus furnished to the Dealer Manager for such use.
“ Registration Statement ” shall mean the registration statement filed by the Company with the Commission registering the Exchange Offer under the Securities Act, including exhibits thereto and any documents incorporated by reference therein or deemed part of such registration statement pursuant to Rule 430C under the Securities Act, in the form in which it becomes effective and, in the event of any amendment or supplement thereto or the filing of any abbreviated registration statement pursuant to Rule 462(b) under the Securities Act relating thereto after the effective date of such registration statement, shall also mean such registration statement as so amended or supplemented, together with any such abbreviated registration statement.
“ Rule 165 Material ” shall mean any written communication made in connection with or relating to the Exchange Offer in reliance on Rule 165 of the Securities Act, and filed by the Company with the Commission pursuant to Rule 425 under the Securities Act.
“ Schedule TO ” shall mean the tender offer statement filed with the Commission on Schedule TO, including any documents incorporated by reference therein, with respect to the Exchange Offer, including any amendment or supplement thereto.
“ Securities Act ” shall mean the U.S. Securities Act of 1933, as amended, and the rules and regulations of the Commission promulgated thereunder.
“ U.S. ” or the “ United States ” shall mean the United States of America.
If the foregoing is in accordance with your understanding of our agreement, please sign and return to us the enclosed duplicate hereof, whereupon this Agreement and your acceptance shall represent a binding agreement between the Company and the Dealer Manager.
Very truly yours, | ||
CISION LTD. | ||
By | /s/ Jack Pearlstein | |
Name: Jack Pearlstein | ||
Title: Chief Financial Officer |
The foregoing Agreement is hereby
confirmed and accepted as of the
date first above written:
CITIGROUP GLOBAL MARKETS INC.
By /s/ Steven Pearlman
Name: Steven Pearlman
Title: Managing Director
Schedule B
Significant Subsidiaries
Canyon Holdings S.à r.l.
Canyon Investments S.à r.l.
Canyon Companies S.à r.l.
Canyon Group S.à r.l.
Canyon UK Americas Limited
Canyon Valor Holdings, Inc.
Canyon Valor Companies, Inc.
Cision US Inc.
PRN Delaware, Inc.
PR Newswire Association LLC
CNW Group Ltd
Canyon UK Investments Ltd
Vocus International B.V.
PWW International Ltd
Exhibit 23.1
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We hereby consent to the use in this Registration Statement on Form S-4 of Cision Ltd. of our report dated March 13, 2018 relating to the financial statements of Cision Ltd., which appears in this Registration Statement. We also consent to the reference to us under the heading “Experts” in such Registration Statement.
/s/ PricewaterhouseCoopers LLP
Baltimore, Maryland
April 17, 2018
Exhibit 23.2
Consent of Independent Auditors
We consent to the reference to our firm under the caption “Experts” and to the use of our reports dated October 21, 2015 and April 12, 2016, relating to the combined financial statements of PRN Group, included in the Registration Statement (Form S-4 No. 333-0000) and related Prospectus of Cision, Ltd. for the registration of 6,150,000 shares of its common stock relating to the Offer to Exchange Warrants to Acquire Ordinary Shares of Cision Ltd. for Ordinary Shares of Cision Ltd. and Consent Solicitation.
/s/ Ernst & Young LLP
Iselin, NJ
April 17, 2018
Exhibit 23.3
Independent Registered Public Accounting Firm’s Consent
We consent to the inclusion in this Registration Statement of Cision Ltd. on Form S-4 of our report dated March 10, 2017, with respect to our audits of the financial statements of Capitol Acquisition Corp. III as of December 31, 2016 and 2015 and for the year ended December 31, 2016 and for the period from July 13, 2015 (inception) through December 31, 2015, which report appears in the Prospectus, which is part of this Registration Statement. We were dismissed as auditors on June 29, 2017 and, accordingly, we have not performed any audit or review procedure with respect to any financial statements appearing in such Prospectus for the periods after the date of our dismissal. We also consent to the reference to our Firm under the heading “Experts” in such Prospectus.
/s/ Marcum llp
Marcum llp
New York, NY
April 16, 2018
| | THE OFFER AND CONSENT SOLICITATION (AS DEFINED BELOW) AND WITHDRAWAL RIGHTS WILL EXPIRE AT 11:59 P.M., EASTERN DAYLIGHT TIME, ON MAY 15, 2018, OR SUCH LATER TIME AND DATE TO WHICH WE MAY EXTEND. WARRANTS OF THE COMPANY TENDERED PURSUANT TO THE OFFER AND CONSENT SOLICITATION MAY BE WITHDRAWN PRIOR TO THE EXPIRATION DATE (AS DEFINED BELOW). CONSENTS MAY BE REVOKED ONLY BY WITHDRAWING THE RELATED WARRANTS AND THE WITHDRAWAL OF ANY WARRANTS WILL AUTOMATICALLY CONSTITUTE A REVOCATION OF THE RELATED CONSENTS. | | |
|
By First Class Mail:
One State Street Plaza, 30 th Floor New York, NY 10004 Attn: Corporate Actions Department |
| |
By Overnight or Hand Delivery:
One State Street Plaza, 30 th Floor New York, NY 10004 Attn: Corporate Actions Department |
|
|
Name(s) and Address(es)
of Registered Holder(s) of Warrants |
| |
Number of
Warrants Tendered |
|
| | | | Total: | |
|
☐
CHECK HERE IF THE WARRANTS LISTED ABOVE ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER MADE TO THE ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH DTC AND COMPLETE THE FOLLOWING (FOR USE BY ELIGIBLE INSTITUTIONS ONLY):
|
|
|
Name of Tendering Institution:
|
| | | |
|
| Account Number: | | | | |
|
| Transaction Code Number: | | | | |
|
| |
SPECIAL ISSUANCE INSTRUCTIONS
(SEE INSTRUCTIONS, INCLUDING INSTRUCTIONS 3, 4 AND 5) |
| | ||||||
| | To be completed ONLY if the Ordinary Shares issued pursuant to the Offer and Consent Solicitation in exchange for Warrants tendered hereby and any Warrants delivered to the Exchange Agent herewith but not tendered and exchanged pursuant to the Offer and Consent Solicitation, are to be issued in the name of someone other than the undersigned. Issue all such Ordinary Shares and untendered Warrants to: | | | ||||||
| | Name: | | | | | | | | |
| | Address: | | | | | | | | |
| |
(PLEASE PRINT OR TYPE)
(INCLUDE ZIP CODE) (TAX IDENTIFICATION OR SOCIAL SECURITY NUMBER) |
| |
| |
IMPORTANT: PLEASE SIGN HERE
(SEE INSTRUCTIONS AND ALSO COMPLETE ACCOMPANYING IRS FORM W-9 OR APPROPRIATE IRS FORM W-8) |
| | ||||||
| | By completing, executing and delivering this Letter of Transmittal and Consent, the undersigned hereby tenders the Warrants indicated in the table above entitled “Description of Warrants Tendered.” | | | ||||||
| |
SIGNATURES REQUIRED
Signature(s) of Registered Holder(s) of Warrants |
| | ||||||
| | X | | | ||||||
| | X | | | | |||||
| | Date: | | | | | | |||
| | (The above lines must be signed by the registered holder(s) of Warrants as the name(s) appear(s) on the Warrants or on a security position listing, or by person(s) authorized to become registered holder(s) by a properly completed assignment from the registered holder(s), a copy of which must be transmitted with this Letter of Transmittal and Consent. If Warrants to which this Letter of Transmittal and Consent relates are held of record by two or more joint holders, then all such holders must sign this Letter of Transmittal and Consent. If signature is by a trustee, executor, administrator, guardian, attorney-in-fact, officer of a corporation, or other person acting in a fiduciary or representative capacity, then such person must set forth his or her full title below and, unless waived by the Company, submit evidence satisfactory to the Company of such person’s authority so to act. See Instruction 3 regarding the completion and execution of this Letter of Transmittal and Consent.) | | | ||||||
| | Name: | | | | | | |||
| | Capacity: | | | | | | |||
| | Address: | | | | | | |||
| | Area Code and Telephone Number: | | | ||||||
| |
(PLEASE PRINT OR TYPE)
(INCLUDE ZIP CODE) |
| |
| |
GUARANTEE OF SIGNATURE(S) (IF REQUIRED)
(SEE INSTRUCTIONS, INCLUDING INSTRUCTION 4) |
| |
| |
Certain signatures must be guaranteed by Eligible Institution.
Signature(s) guaranteed by an Eligible Institution: |
| |
| |
Authorized Signature
|
| |
| |
Title
|
| |
| |
Name of Firm
|
| |
| |
Address, Including Zip Code
|
| |
| |
Area Code and Telephone Number
|
| |
| |
Date: __________________
|
| |
| |
The Information Agent for the Offer and Consent Solicitation is:
|
| |
| |
D.F. King & Co., Inc.
48 Wall Street, 22nd Floor New York, New York 10005 Banks and Brokers Call Collect: (212) 269-5550 All Others Call Toll-Free: (800) 967-4607 Email: cision@dfking.com |
| |
Name(s) and Address(es) of Registered Holder(s) of Warrants
|
| | | | |
Number of Warrants Tendered
|
|
| | |
Total:
|
| | ||
|
|
| Name of Tendering Institution: | | |
|
|
| Account Number: | | |
|
|
|
Signature(s) of Warrant Holder(s)
|
| | | |
|
Name(s) of Warrant Holder(s) (Please Print)
|
| | ||
|
Address
|
| | ||
|
City, State, Zip Code
|
| | ||
|
Telephone Number
|
| | ||
|
Date
|
| |
|
Authorized Signature
|
| | | |
|
Name (Please Print)
|
| | | |
|
Title
|
| | | |
|
Name of Firm (must be an Eligible Institution as defined in this Notice of Guaranteed Delivery)
|
| | | |
|
Address
|
| | | |
|
City, State, Zip Code
|
| | | |
|
Telephone Number
|
| | | |
|
Date
|
| | | |
|
Authorized Signature
|
| | | |
|
Name (Please Print)
|
| | | |
|
Title
|
| | | |
|
Name of Firm
|
| | | |
|
Address
|
| | | |
|
City, State, Zip Code
|
| | | |
|
Telephone Number
|
| | | |
|
Date
|
| | | |
| | THE OFFER AND CONSENT SOLICITATION (AS DEFINED BELOW) AND WITHDRAWAL RIGHTS WILL EXPIRE AT 11:59 P.M., EASTERN DAYLIGHT TIME, ON MAY 15, 2018, OR SUCH LATER TIME AND DATE TO WHICH WE MAY EXTEND. WARRANTS OF THE COMPANY TENDERED PURSUANT TO THE OFFER AND CONSENT SOLICITATION MAY BE WITHDRAWN PRIOR TO THE EXPIRATION DATE (AS DEFINED BELOW). CONSENTS MAY BE REVOKED ONLY BY WITHDRAWING THE RELATED WARRANTS AND THE WITHDRAWAL OF ANY WARRANTS WILL AUTOMATICALLY CONSTITUTE A REVOCATION OF THE RELATED CONSENTS. | | |
| | THE OFFER AND CONSENT SOLICITATION (AS DEFINED BELOW) AND WITHDRAWAL RIGHTS WILL EXPIRE AT 11:59 P.M., EASTERN DAYLIGHT TIME, ON MAY 15, 2018, OR SUCH LATER TIME AND DATE TO WHICH WE MAY EXTEND. WARRANTS OF THE COMPANY TENDERED PURSUANT TO THE OFFER AND CONSENT SOLICITATION MAY BE WITHDRAWN PRIOR TO THE EXPIRATION DATE (AS DEFINED BELOW). CONSENTS MAY BE REVOKED ONLY BY WITHDRAWING THE RELATED WARRANTS AND THE WITHDRAWAL OF ANY WARRANTS WILL AUTOMATICALLY CONSTITUTE A REVOCATION OF THE RELATED CONSENTS. | | |