ZAGG Inc (NASDAQ:ZAGG) Files An 8-K Entry into a Material Definitive Agreement
Item 1.01

Entry into a Material Definitive Agreement.

The information set forth under Item 2.01 of this Current Report on Form 8-K with respect to the Purchase Agreement (as defined herein) is hereby incorporated into this Item 1.01 by reference.

On January 3, 2019 (the “Acquisition Date”), ZAGG Inc, a Delaware corporation (the “Company”); ZAGG Hampton LLC, a Delaware limited liability company and wholly owned subsidiary of the Company (the “Purchaser”); Halo2Cloud, LLC, a Delaware

limited liability company (“HALO”) which owns all of the outstanding equity interests of Halo Holdings USA, LLC, a Delaware limited liability company, Halo Holdings International Cooperatief U.A., a Dutch cooperative, and Halo International SEZC LTD., a Cayman Islands exempted company; each of the members of HALO (collectively, the “Sellers”); and Patrick Keenan, as Sellers’ representative, entered into the Membership Interest Purchase Agreement (the “Purchase Agreement”), to which Purchaser acquired from Sellers all of the issued and outstanding limited liability company membership interests in HALO for $43.0 million (the “Purchase Price”). At the closing of the transaction, the Company delivered to Sellers a cash payment of approximately $19.3 million (the “Closing Cash Payment”). Such Closing Cash Payment represented the total closing cash consideration payable under the Purchase Agreement net of certain HALO indebtedness and transaction expenses paid at closing, and less a $9.0 million cash holdback retained by the Company (the “Cash Holdback Amount”), comprised of a $4.0 million indemnity holdback amount (the “Indemnity Holdback Amount”), and a $5.0 million holdback, the release of which is contingent on HALO’s 2019 performance (the “Performance Holdback Amount”). In addition to the Closing Cash Payment, the Company issued to Sellers, subject to a twelve (12) month lock-up, 1,457,627 shares of the Company’s common stock, par value of $0.001 per share (“Common Stock Consideration”), valued at the average closing price of the Company’s common stock on NASDAQ for the twenty (20) consecutive trading days ending December 28, 2018, for total Common Stock Consideration of approximately $13.9 million.

The Purchase Price is subject to adjustment within ninety (90) days of the Acquisition Date based upon the final determination of HALO’s (i) working capital, (ii) indebtedness and (iii) Sellers’ transaction expenses as set forth in the Purchase Agreement. If aggregate negative adjustments to the Purchase Price exceed $0.1 million, the adjustments will be applied against the Indemnity Holdback Amount and, if necessary, the Performance Holdback Amount.

The Purchase Agreement contains customary representations, warranties and covenants and indemnification provisions whereby the Company has agreed to indemnify Sellers, subject to certain limitations, for certain losses, liabilities and damages. In addition, Sellers have agreed to indemnify the Company, subject to certain limitations, for certain losses, liabilities and damages. Subject to certain exclusions, neither Sellers nor the Company will be liable for losses until the aggregate amount of such losses exceeds $0.3 million Additionally, subject to certain exceptions, neither Sellers nor the Company will be liable for losses in excess of $4.5 million. The Indemnity Holdback Amount will be retained by the Company for eighteen (18) months following the Acquisition Date as a source of funding for Sellers’ indemnification obligations under the Purchase Agreement.

As noted above, under the Purchase Agreement, Sellers are also entitled to all or a portion of the Performance Holdback Amount (the “Additional Payment”) based on HALO’s Adjusted EBITDA (as defined in the Purchase Agreement) during the calculation period beginning January 1, 2019 and ending December 31, 2019 (the “Calculation Period”). Specifically, if HALO achieves the target Adjusted EBITDA set forth in the Purchase Agreement for the Calculation Period (the “Adjusted EBITDA Target”), Sellers are entitled to receive an Additional Payment equal to the Performance Holdback Amount. If, however, HALO’s Adjusted EBITDA for the Calculation Period is less than the Adjusted EBITDA Target, the Additional Payment would equal the Performance Holdback Amount reduced by the amount by which the Adjusted EBITDA Target exceeds HALO’s Adjusted EBITDA for the Calculation Period. Purchaser must prepare and deliver the Additional Payment calculation to Sellers’ representative by March 15, 2020, and Sellers’ representative has thirty (30) days following the receipt of such Additional Payment calculation to review and dispute the same in accordance with the procedures set forth in the Purchase Agreement. Once the Additional Payment calculation becomes final under the terms of the Purchase Agreement, the Company has five (5) days to remit the Additional Payment to Sellers.

A copy of the Purchase Agreement is filed herewith as Exhibit 2.1. The foregoing description of the Purchase Agreement does not purport to be complete and is qualified in its entirety by reference to the full text of the Purchase Agreement, which is incorporated herein by reference. The Purchase Agreement has been attached to provide investors with information regarding its terms. It is not intended to provide any other factual information about any of the parties to the Purchase Agreement. In particular, the representations and warranties contained in the Purchase Agreement were made only for the purposes of the Purchase Agreement as of specific dates and were qualified by disclosures between the parties and a contractual standard of materiality that is different from those generally applicable to stockholders, among other limitations. The representations and warranties were made for the purposes of allocating contractual risk between the parties to the Purchase Agreement and should not be relied upon as a disclosure of factual information relating to any of the parties to the Purchase Agreement.

The Company financed the Closing Cash Payment using a portion of its existing cash balance and borrowings under its existing credit facility with KeyBank National Association, ZB, N.A., and MUFG Union Bank, N.A.

On January 3, 2019, the Company issued a press release announcing the acquisition of H and related information. A copy of the press release is attached hereto as Exhibit 99.1.

The disclosure under Item 2.01 of this Current Report on Form 8-K relating to the issuance of the Common Stock Consideration under the terms of the Purchase Agreement is incorporated herein by reference. Any Common Stock Consideration will be issued to an exemption from registration provided by Section 4(a)(2) of the Securities Act of 1933, as amended (the “Securities Act”), and Rule 506(b) of Regulation D promulgated thereunder.

ZAGG Inc Exhibit
EX-2.1 2 a20190103haloagreement.htm EXHIBIT 2.1 DocumentEXECUTION MEMBERSHIP INTEREST PURCHASE AGREEMENTTHIS MEMBERSHIP INTEREST PURCHASE AGREEMENT (this “Agreement”) dated as of January 3,…
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About ZAGG Inc (NASDAQ:ZAGG)

ZAGG Inc (ZAGG) designs, produces and distributes professional product solutions for mobile devices, including screen protection (glass and film), keyboards for tablet computers and mobile devices, keyboard cases, earbuds, mobile power solutions, cables, and cases under the ZAGG and InvisibleShield brands. In addition, the Company designs, produces and distributes earbuds, headphones, mobile power solutions, Bluetooth speakers, cases and cables for mobile devices under the iFrogz brand in the fashion and youth oriented lifestyle sector. The Company designs product solutions for users of mobile devices, and sells these products to consumers through global distribution partners and online. The Company offers products for various market segments of handheld electronic devices, including smartphones, tablets, notebook computers, laptops, gaming devices, global positioning system (GPS) devices, watch faces, and similar devices and surfaces.