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Xactly Investors Say New Disclosures End Vista Sale Suits

03 August 2017

Investors in sales incentive software provider Xactly Corp. agreed Wednesday to end a pair of proposed class actions in California federal court over financial filings related to the company’s $564 million acquisition by Vista Equity Partners, saying recent additional disclosures by Xactly resolved their claims.

The proposed classes, led individually by shareholders Stephen DePalo and Robert Berg, said they came to an agreement with Xactly, its board and Vista to voluntarily dismiss their complaints, which accused the seller of submitting a proxy statement to the U.S. Securities and Exchange Commission with misleading or omitted information regarding details of employment negotiations and financial metrics, among other things. DePalo and Berg said a July 20 agreement led Xactly to make its supplemental disclosures, which addressed the shareholders’ concerns and mooted their lawsuits.

Both DePalo and Berg said their counsel reserve the right to pursue attorneys’ fees and expenses and will ask the court to intervene if they can’t negotiate a resolution.

The investors noted that the stipulation is not admission of wrongdoing by any of the defendants, or that the supplemental disclosures were material. They also said Xactly, its board and Vista can object to any attorneys’ fees requested for the shareholders’ counsel.

Berg was the first shareholder to sue, on June 30, over the June 16 proxy statement’s alleged misrepresentations. Announced in late May, the proposed deal would see Vista pay $15.65 per share in cash per Xactly share, a 17 percent premium on its share price at the time.

Among other things, Berg’s complaint said the filing failed to disclose details surrounding employment negotiations with Xactly managers and argued that financial adviser J.P. Morgan Securities LLC omitted relevant information in its analyses, and in relation to its compensation.

Berg also said the deal between Vista and Xactly contained provisions intended to block other prospective Xactly buyers, such as restrictions on soliciting other offers, and an $18.5 million payment to Vista if Xactly backed out of the transaction.

DePalo filed his own lawsuit on July 6, echoing many of Berg’s allegations and adding more detail to the events surrounding the transaction. DePalo said the proxy statement relied on non-generally accepted accounting principles without providing comparable GAAP metrics when discussing earnings before interest, tax, depreciation and amortization, and unlevered free cash flow.

Additionally, DePalo said the statement describes several confidentiality agreements Xactly struck with possible merger partners including Vista but does not adequately disclose their details. The investors sought to block the shareholder vote in order to gain more information.

The supplemental disclosure was filed on July 20, and the shareholder vote took place July 28, according to the stipulated dismissal.

Counsel for the parties did not respond Thursday to requests for comment.

The shareholders are represented by Rosemary M. Rivas, Donald J. Enright and Elizabeth K. Tripodi of Levi & Korsinsky LLP.

Xactly and the board are represented by Catherine Moreno of Wilson Sonsini Goodrich & Rosati PC.

Vista is represented by Matthew Solum of Kirkland & Ellis LLP.

The cases are DePalo v. Xactly Corporation et al, case number 5:17-cv-03838 and Berg v. Xactly Corporation, et al., Case No. 4:17-cv-03783 both in the U.S. District Court for the Northern District of California.

Matthew Solum, P.C.

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