hip digitalbelow is an excerpt of the hip deal. recall that from june 10 to dec 31, hip has a mighty incentive to beat $8.5 million in revenues, as they get 50% of every dollar above that...also the period from june 10, 2015 to march 31, 2016 has share-based incentives as well...
On June 10, 2015, the Company completed the acquisition (the “Hip Acquisition”) of all the issued and outstanding shares of Hip Digital Media Inc., (“Hip Digital”) via a merger of a newly-incorporated subsidiary of Snipp (“Merger Sub”) and Hip Digital as set out in the Merger Agreement (the "Merger Agreement") with Hip Digital dated May 31, 2015, and as amended on June 8, 2015. On closing, the Company is to make a payment of $100 and issue 3,789,906 common shares of Snipp to Hip Digital shareholders.
In addition, the Company will issue to Hip Digital shareholders up to a maximum of 6,737,610 performance shares of Snipp (the “Performance Shares”), subject to Hip-Digital meeting certain financial targets during the period beginning on June 10, 2015 and ending on March 31, 2016 (the “Performance Period”). If Hip Digital revenue during the Performance Period is below the financial targets as indicated in the Merger Agreement, the amount of Performance Shares issuable will be adjusted proportionately downwards. An earn-out payment (the “Earn -Out Payment”) may be made to the HipDigital shareholders based on the financial performance of Hip Digital during the period beginning on June 10, 2015 and ending on December 31, 2015 (the “Earn-Out Period”) if Hip Digital revenue during the Earn-Out Period is greater than $8.5 million. The Merger Agreement provides that Snipp will pay the Hip Digital shareholders, in cash, 50% of every dollar of actual total revenue that is above $8.5 million during the Earn-Out Period. No Earn-Out Payment will be made unless actual total revenue is greater than $8.5 million and there will be no cap on the Earn-Out Payment.
Further, Snipp, Hip Digital and an advisor of Hip Digital (the “Advisor”) entered into a settlement agreement (the “Advisory Settlement Agreement”) that provides for the issuance of 456,066 common shares of Snipp the Advisor in satisfaction of $300,000 owing from Hip Digital to the Advisor. The issuance of these 456,066 shares is also tied to the same financial targets as the Performance Shares and may be adjusted proportionately downwards as per the terms and conditions disclosed above.
In addition, in order to reward and incentivize certain key employees and service providers of Hip Digital (the “Bonus Grantees”), the Company may issue up to 1,938,279 common shares of Snipp, subject to the terms of a bonus grant agreement. The Performance Shares and shares to be issued to the Advisor are re-valued using the Company’s closing share price at each reporting period end with fluctuations in share price resulting in adjustments to the acquisition consideration payable in equity. These fair value changes are recognized through profit and loss.